GLG
      Life Tech Corporation Management’s Discussion &
    Analysis
                  December
      31
                    2009[Dated:
      March 31, 2010]








Management’s
Discussion and Analysis





This
Management’s Discussion and Analysis (“MD&A”) of GLG Life Tech Corporation
is dated March 31, 2010, which is the date of filing of this
document.  It provides a review of the three and twelve months ended
December 31, 2009 relative to the comparable periods of 2008.  The
three month period represents the fourth quarter of the Company’s 2009 fiscal
year.





This
MD&A relates to the consolidated financial condition and results of
operations of GLG Life Tech Corporation (“we,” “us,” “our,” “GLG” or the
“Company”) together with GLG’s subsidiaries in the People’s Republic of China
(“China”) and other jurisdictions. As used herein, the word “Company” means, as
the context requires, GLG and its subsidiaries. The common shares of GLG are
listed on the Toronto Stock Exchange (the “Exchange”) under the symbol “GLG” and
on the NASDAQ Global Market under the symbol “GLGL”. Except where otherwise
indicated, all financial information reflected herein is expressed in Canadian
dollars and determined on the basis of Canadian generally accepted accounting
principles (“Canadian GAAP”). This MD&A should be read in conjunction with
the consolidated annual financial statements of GLG for the year ended December
31, 2009, and notes thereto. Additional information relating to GLG Life Tech
Corporation including GLG’s Annual Information Form can be found on GLG’s web
site at www.glglifetech.com or on the SEDAR web site for Canadian regulatory
filings at www.sedar.com.





The
preparation of the consolidated financial statements in conformity with Canadian
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
liabilities at the date of the consolidated interim financial statements and the
reported amounts of revenue and expenses during the reporting period. GLG bases
its estimates on historical experience, current trends and various other
assumptions that are believed to be reasonable under the circumstances. Actual
results could differ from those estimates.  Historical results of
operations and trends that may be inferred from the following discussions and
analysis may not necessarily indicate future results from
operations.





Historical
results of operations and trends that may be inferred from the following
discussions and analysis may not necessarily indicate future results from
operations.





GLG has
issued guidance on and reports on certain non-GAAP measures that are used by
management to evaluate the Company’s performance. Because non-GAAP measures do
not have a standardized meaning, securities regulations require that non-GAAP
measures be clearly defined and qualified, and reconciled with their nearest
GAAP measure.  Where non-GAAP measures are reported, GLG has provided
the definition and reconciliation to their nearest GAAP measure in section
“NON-GAAP Financial Measures”.


Page
2 of 41


Forward-Looking
Statements




Certain
statements in this MD&A constitute “forward-looking statements”. Such
forward-looking statements include, without limitation, statements evaluating
the market, potential demand for stevia and general economic conditions and
discussing future-oriented costs and expenditures.  Often, but not
always, forward-looking statements can be identified by the use of words such as
“plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”,
“estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or
“believes” or variations of such words and phrases or words and phrases that
state or indicate that certain actions, events or results “may”, “could”,
“would”, “might” or “will” be taken, occur or be achieved.




While the
Company has based these forward-looking statements on its current expectations
about future events, the statements are not guarantees of the Company’s future
performance and are subject to risks, uncertainties, assumptions and other
factors which could cause actual results to differ materially from future
results expressed or implied by such forward-looking statements.  Such
factors include amongst others the effects of general economic conditions,
changing foreign exchange rates and actions by government authorities,
uncertainties associated with legal proceedings and negotiations, industry
supply levels, competitive pricing pressures and misjudgements in the course of
preparing forward-looking statements.  Specific reference is made to
the risks described herein under the heading “Risks Related to the Company’s
Business” and “Risks Associated with Doing Business in the People’s Republic of
China” for a discussion of these and other sources of factors underlying
forward-looking statements and those additional risks set forth under the
heading “Risk Factors” in the Company’s Annual Information Form for the
financial year ended December 31, 2009.  In light of these factors,
the forward-looking events discussed in this MD&A might not
occur.




Further,
although the Company has attempted to identify factors that could cause actual
actions, events or results to differ materially from those described in
forward-looking statements, there may be other factors that cause actions,
events or results not to be as anticipated, estimated or
intended.  The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.




As there
can be no assurance that forward-looking statements will prove to be accurate,
as actual results and future events could differ materially from those
anticipated in such statements, readers should not place undue reliance on
forward-looking statements.




Financial
outlook information contained in this MD&A about prospective results of
operations, capital expenditures or financial position is based on assumptions
about future events, including economic conditions and proposed courses of
action, based on management’s assessment of the relevant information as of the
date hereof.  Such financial outlook information should not be used
for purposes other than those for which it is disclosed herein.




Page
3 of 41


Overview




We are a
leading producer of high quality stevia extract.  Stevia extracts,
such as Rebaudioside A (or Reb A), are used as all natural, zero-calorie
sweeteners in food and beverages. Our revenue is derived primarily through the
sale of high-grade stevia extract to the food and beverage industry. We conduct
our stevia development, refining, processing and manufacturing operations
through our five wholly-owned subsidiaries in China.  Our operations
in China include four processing factories, stevia growing areas across eight
provinces, four research and development centers engaged in the development of
high-yielding stevia seeds and seedlings.  Our processing facilities
have a combined annual throughput of 41,000 metric tons of stevia leaf and 1,500
metric tons of rebiana.




Our
revenues were $41.9 million for the twelve months ended December 31, 2009 and
$9.9 million and for 2008. Our net income was $0.8 million for thetwelve
months ended December 31, 2009.  We had a net loss of
$10.6 million for 2008 and net income of $0.4 million for
2007.




Factors Affecting the
Company’s Results of Operations




The
Company’s operating results are primarily affected by the following
factors:




·
            Relationship
      with Primary Customer.  The Company derives a majority of
      its revenue from Cargill, its largest customer.  The Company
      currently has a Strategic Alliance Agreement with Cargill pursuant to
      which it will provide at least 80% of Cargill’s global stevia extract
      requirements for the ten year period beginning October 1,
      2008.  For the years ended December 31, 2009 and 2008, this
      customer accounted for 90% and 77%, respectively, of the Company’s
      revenue.  The Company’s ability to maintain and enhance its
      relationship with this important customer, while developing and enhancing
      its relationships with other customers, is a significant factor affecting
      the Company’s results of
operations.




·
            Consumer
      Demand.  The Company believes that consumer demand for
      food and beverage products and tabletop sweeteners produced with stevia
      extracts will continue to expand.  The Company believes rebiana,
      which is extracted from stevia leaf, is positioned to become a leading
      high-intensity sweetener because it has zero calories, is 100% natural, is
      200-300 times sweeter than sugar and does not have the perception of
      potential health risks that may be associated with artificial sweeteners.
      Additionally, the Company believes that consumer acceptance of stevia will
      increase in connection with regulatory approval in the U.S. and elsewhere.
      The Company’s results of operations will be affected by consumer
      acceptance of, and demand for, rebiana-sweetened products and the
      Company’s ability to increase its production capacity in order to meet any
      increased demand.




·
            Price of
      Stevia Extract.  The Company believes that it will be
      able to maintain a low cost of production of high-grade stevia extract
      through process innovation and vertical integration (from seedling
      development to high-grade stevia extract production).  By
      maintaining a low cost of production, the Company believes it will be able
      to reduce the price it charges for high-grade stevia extract, thereby
      strengthening the competitive position of high-grade stevia extract
      relative to other high-intensity sweeteners and
  sugar.


Page
4 of 41




·
            Raw
      Material Supply and Prices; Cost of Sales.The price that the
      Company must pay for stevia leaf and the quality of such stevia leaf
      affects the Company’s results of operations.  The cost and
      quality of stevia leaf available is driven primarily by the rebaudioside A
      content contained in stevia leaf and the quality of the stevia harvested
      during a particular growing period. The key factors driving the Company’s
      cost of sales include the cost of stevia leaf, stevia leaf quality,
      salaries and wages of the Company’s manufacturing labour, manufacturing
      overhead such as supplies, power and water used in the production of the
      Company’s high-grade stevia extract, and depreciation of the Company’s
      high-grade stevia extract processing
plants.




Unfavourable
changes in any of these general conditions could negatively affect the Company’s
ability to grow, source, produce, process and sell stevia and otherwise
materially and adversely affect the Company’s results of
operations.




Adoption
of New Accounting Policies




Effective
January 1, 2009, we 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
our consolidated financial position or results of operations.




Effective
January 1, 2009, we adopted the Emerging Issues Committee (“EIC”) Abstract
EIC-173, “Credit Risk and the Fair Value of Financial Assets and Financial
Liabilities,” issued by CICA.  This standard requires us to consider
our own credit risk as well as the credit risk of 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 our financial assets or liabilities.




In
September 2009, the Company adopted the amendments to CICA Handbook Section 3862
"Financial Instruments - Disclosure", 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 adoption of the amended standard did not have a material impact on the
Company’s disclosures.




Critical Accounting
Estimates and Assumptions




The
preparation of financial statements in conformity with generally accepted
accounting principles requires the appropriate application of certain accounting
policies, many of which require us to make estimates and assumptions about
future events and their impact on amounts reported in our financial statements,
including our statement of operations, balance sheet, cash flow and related
notes. Since future events and their impact cannot be determined with certainty,
the actual results will inevitably differ from our estimates. Such differences
could be material to our financial statements.




We
believe that our application of accounting policies, and the estimates
inherently required therein, are reasonable. Our accounting policies and
estimates are periodically re-evaluated, and adjustments are made when facts and
circumstances dictate a change. Historically, we have found our application of
accounting policies to be appropriate, and actual results have not differed
materially from those determined using necessary estimates.


Page
5 of 41




Our
accounting policies are more fully described in the notes to our financial
statements. In reading our financial statements, you should be aware of the
factors and trends that our management believes are important in understanding
our financial performance.




Inventory
policy


We
measure our inventory at the lower of cost or net realizable value (“NRV”) with
respect to raw materials, finished goods and work-in-progress.  NRV
for finished goods and work-in-progress 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.




Provisions
for excess, obsolete or slow moving inventory are recorded after periodic
evaluation of historical sales, current economic trends, forecasted sales,
estimated product lifecycles and estimated inventory levels. The accounting
estimate related to valuation of inventories is considered a critical accounting
estimate because it is susceptible to changes from period-to-period due to
purchasing practices, accuracy of sales and production forecasts, introduction
of new products, product lifecycles, product support, exchange rates, sales
prices new competitive entrants and foreign regulations governing food safety.
If actual results differ from our estimates, a reduction to the carrying value
of inventory may be required, which will result in inventory write-offs and a
decrease to gross margins.




Stock-based
compensation




Our
accounting estimate related to stock-based compensation is considered a critical
accounting estimate because estimates are made in calculating compensation
expense including expected option lives, forfeiture rates and expected
volatility. The fair market value of our common stock on the date of each option
grant was determined based on the closing price of common stock on the grant
date.  Expected option lives are estimated using vesting terms and
contractual lives. Expected forfeiture rates and volatility are calculated using
historical information. Actual option lives and forfeiture rates may be
different from estimates and may result in potential future adjustments which
would impact the amount of stock-based compensation expense recorded in a
particular period.


Income
taxes


We
recognize future income tax assets when it is more likely than not that the
future income tax assets will be realized. This assumption is based on
management's best estimate of future circumstances and events. If these
estimates and assumptions are changed in the future, the value of the future
income tax assets could be reduced or increased, resulting in an income tax
expense or recovery. We re-evaluate our future income tax assets on a regular
basis.




Recognition
and impairment of goodwill and intangibles




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.  We performed our
last goodwill impairment test on December 31, 2009.


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6 of 41




Property,
plant and equipment and long-lived 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.


We
evaluate the recoverability of long-lived assets and asset groups whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. When such a situation occurs, the estimated undiscounted future
cash flows anticipated to be generated during the remaining life of the asset or
asset group are compared to its net carrying value. When the net carrying amount
of the asset or asset group is less than the undiscounted future cash flows, an
impairment loss is recognized to the extent by which the carrying amount of long
lived assets or asset group exceeds its fair value.




Management’s
estimates of product prices, foreign exchange, production levels and operating
costs are subject to risk and uncertainties that may affect the determination of
the recoverability of the long-lived asset groups. It is possible that material
changes could occur that may adversely affect management’s
estimates.




Corporate
Developments for the Year Ended December 31, 2009




New Stevia Leaf Processing
Facilities Operational In First Quarter 2009




On
January 6, 2009, the Company announced that it had commenced initial operations
at its two new stevia processing facilities in the cities of Mingguang (Anhui
Province) and Dongtai (Jiangsu Province), China where the Company’s major stevia
leaf growing areas are located.  The facilities each have a capacity
of 18,000 MT of throughput per year and increase the Company’s total raw leaf
processing capacity from an existing 5,000 MT to 41,000 MT, an increase of 720%.
Production at these two new facilities ramped up over the first quarter as they
completed extensive food safety audits which were all completed by mid-March
2009.




Subsequent
to completion of the food safety audits, the processing of intermediate grade
stevia extract (RA 60) has progressed and the performance of the new facilities
and new technologies have exceeded management’s expectations with respect the
decreased cycle time to produce stevia extract and the reduction in water
required during the processing of stevia extract.  Extract production
is now benefiting significantly from the new stevia leaf processing
facilities.




The plan
to increase high grade stevia capacity was announced by the Company on January
14, 2009.  The addition of increased high grade stevia capacity will
allow the new leaf processing facilities to run at higher
capacity.  The first phase of the new high grade stevia capacity was
completed in December 2009 and is expected to facilitate increased throughput of
high grade stevia extract and rebiana products.




Page
7 of 41


New Rebiana Facility
Completed in December 2009 at Runhao Subsidiary




On
January 14, 2009, the Company announced plans to build a new 2,000 metric ton
rebiana facility.  In May 2009, the Company entered into a long term
investment agreement with the Qingdao Export Refine Management Committee for
this new facility (the “Investment Agreement”).  In May 2009 the
Company established a new subsidiary called Qingdao Runhao Stevia High Tech
Company Limited (“Runhao”) for the purpose of processing intermediate stevia
extract into rebiana and other high grade stevia extract products. Runhao was
incorporated in China and is a 100% owned wholly-owned foreign enterprise under
Chinese law.




Pursuant
to the Investment Agreement, a total area of 1,300 mu of land (approximately 214
acres) has been made available to Runhao at a discount of approximately 80% from
estimated market value. The local government is responsible for making the land
ready for use, the construction of a four lane road to service the facility and
for assisting Runhao to obtain all necessary permits.  The investment
agreement calls for GLG to invest US$ 30 million in registered capital in Runhao
within two years of the subsidiary being established.  GLG has met
this investment milestone as of December 31, 2009.




In
December 2009, the Company announced that it had completed construction of its
newest facility located in the city of Qingdao, China. The facility will add an
additional 1,000 metric ton of RebpureTM (RA97
or rebiana) refining capacity per annum and enhance GLG’s capability to meet
growing market demand for high quality stevia products.  The facility
has one million square feet of space available for processing lines. The Runhao
facility has been constructed following food grade "Good Manufacturing Practice"
(GMP) standards and key components are being constructed following
pharmaceutical grade GMP standards.  The facility’s, location in close
proximity to Qingdao enables easy access to ship, air, and rail for product
movement, increased capacity for secondary processing, and positions the Company
to further meet current and anticipated demand.




Trial
runs have begun at the facility in December and line auditing commenced in the
first quarter of 2010.   It is expected that the new facility
will come fully online during the first quarter of 2010 and will triple GLG’s
current RebpureTM RA97
processing capabilities.


2009 Stevia Leaf Crop in
China


The
Company worked actively with the local Chinese governments in its three
exclusive growing areas during the twelve months of 2009 to facilitate its 2009
stevia crop.  Key activities included preparation of proprietary
seedlings for the 2009 crop, the recruitment of farmers in cooperation with
local governments to grow stevia using GLG’s proprietary seedlings, and the
planting of seedlings for the 2009 stevia crop.




As GLG’s
gross profit margin is significantly influenced by the quality of the stevia
leaf crop harvested in any given year, GLG’s strategy to improve gross margin is
to increase the amount of proprietary GLG high Rebaudioside A seedlings into
each year’s crop and follow quality standards for crop purchase to minimize the
amount of moisture and foreign material in the leaf purchased.




GLG
commenced its 2009 stevia leaf purchase program late in July,
2009.   For the leaf purchase in 2009 GLG saw improvements in the
quality of the leaf purchased in terms of lower foreign material and moisture
content compared to the harvest in 2008, reflecting the success of its education
program with local farmers on acceptable foreign material and moisture
content.  GLG has also been successful in increasing the amount of
proprietary leaf that it has purchased from contracted farmers this
year.  This year marks the first harvest of its proprietary leaf of
approximately 60% rebaudioside A content.




Page
8 of 41




2009 Harvest of Proprietary
Seed




In
December 2009 the Company announced that its stevia seed propagation program had
achieved a result from this program expected to provide material savings for the
Company into future production costs. The GLG Huinong One proprietary strain has
shown commercial viability in the field as a direct seed plant and is expected
to enable the Company, in 2010, to generate up to an estimated 40,000 metric
tons (“MT”) of GLG proprietary stevia leaf grown directly from seeds without the
use of greenhouses and seedlings as an intermediary step.  This
development enables the Company to eliminate spending long months growing
seedlings in greenhouses which must then be uprooted, transported, and replanted
into the field. The elimination of the greenhouse step is expected to also save
time and labor for the farmers with whom GLG partners.




The GLG
Huinong One proprietary strain contains significantly higher Rebaudioside A
content, generates higher yields, and is also more disease resistant than the
China common market leaf. The Company has been increasingly introducing its
proprietary stevia strains into the Company’s exclusive growing areas. In 2010,
the Company expects to have the ability to harvest 100% of its own proprietary
leaf which is expected to lead to greater processing efficiencies due to greater
leaf yields and resulting lower production costs.




New Purchase Order from
Cargill Received During the Second Quarter




On May 5,
2009, GLG announced that it has received an initial order from Cargill valued at
US$ 40.5 million for the delivery of high grade stevia extract beginning October
2009. Further, GLG agrees to make additional product available to Cargill during
the next 18 months for a possible increase in the order size.




GLG Direct Sales
Team




Through
the Company’s recently-established U.S. subsidiary, GLG Life Tech U.S., Inc.,
the Company employs sales professionals to manage and develop relationships with
large customers and potential customers in the food and beverage
industry.  On October 14, 2009, the Company announced the hiring of
three new vice presidents to head up these efforts.  These individuals
bring in excess of 60 years’ combined experience in the food and beverage
industry, involving experience with multinational food, beverage and sweetener
companies including the Dr. Pepper Snapple Group, PepsiCo, Monsanto, NutraSweet,
Kraft and Proctor & Gamble.




During
the last two years, GLG’s production capacity has been utilized primarily for
delivering high quality stevia products to its strategic partner, Cargill. With
the addition of 1,000 metric tons of RA97 capacity in December 2009, GLG is
in discussions with a number of large multinational companies for the sale of
its high grade stevia products, including rebiana.  The Company’s new
sales and marketing executives will focus on developing business with those
companies.





GLG Completed Initial Public
Offering On NASDAQ Raising US$ 31.7 Million


Effective
November 5, 2009 the Company completed a four-for-one consolidation of its
common shares in conjunction with its offering and on November 20, 2009,
commenced trading on the NASDAQ Global Market under the symbol "GLGL". GLG's
common shares are dual listed on the Toronto Stock Exchange and the NASDAQ
Global Market.


Page
9 of 41





On
November 25, 2009, the Company completed a public offering consisting of
3,625,000 common shares at a public offering price of US$7.60 per share for
aggregate gross proceeds of $28.9 million (US$ 27.5 million). The underwriters
of the equity offering purchased an additional 543,750 common shares from the
Company at the public offering price of US$7.60 per share for gross proceeds of
$4.3 million (US$ 4.1) million in connection with the closing of the full amount
of the underwriters’ over-allotment option. This brought the total gross
proceeds raised from the public offering to $33.2 (US$31.7
million).





GLG used
the net proceeds of $29.5 million from the offering primarily for registered
capital payments for the Company's Runhao subsidiary, debt repayment, working
capital requirements and for other general corporate
purposes.





New Loan Facility Arranged
in China





On June
25, 2009, GLG announced that the Company has arranged an additional credit
facility of RMB 250 million with the Agricultural Bank of China.  At
current exchange rates, these credit lines will provide GLG approximately $37.4
million in capital. The term of this credit facility varies from one to three
years for amounts drawn down and is open for use by all GLG Chinese subsidiaries
as needed. Interest rates are to be set on each draw down of the facility based
on the prevailing market rates.




Enterprise Income Tax
Exemption Received From Central China Government for Key GLG
Subsidiary




GLG was
informed on October 21, 2009 by the State Tax Bureau of Anhui Province in China
that its 100% owned subsidiary – Chuzhou Runhai Stevia High Tech Company Limited
(“Runhai”) – would receive an enterprise income tax exemption for its RA 60
product generated by that subsidiary.  RA 60 products are recognized
as primary outputs of Agricultural Products by the Ministry of Finance and State
Administration of Taxation, and are subject to preferential policies under
China’s Enterprise Income Tax.  As RA 60 is the only product produced
by Runhai, this exemption is expected to result in zero enterprise income tax
payable by Runhai.  Runhai would otherwise be subject to a 25%
corporate income tax rate in China.  The Company has also filed for a
similar exemption for its Dongtai subsidiary, which also produces RA
60.




Letter of Intent Signed With
Government of Paraguay




In the
third quarter, the Company also announced that it signed a non-binding Letter of
Intent (“LOI”) with the Paraguayan Export and Investment Promotion Agency
(“REDIEX”) to enter negotiations for the development of stevia growth and
production in Paraguay and to create a mutually beneficial business relationship
for economic development in the country related to the growth and production of
stevia.




The LOI
is part of the Company’s global strategy to diversify its stevia growth and
production operations into geographies outside of China. Objectives within the
LOI include:




1.
              To
      develop agribusiness contracts with stevia farmers for the growth and
      harvest of GLG patented stevia seed
strains;





2.
              To
      develop a joint research and development program focusing on new and
      improved stevia plant strains as well as the continual development of
      advanced cultivation techniques for high Rebaudioside A (RA) yielding
      stevia plants; and


Page
10 of 41





3.
              To
      construct a stevia processing facility for the purpose of producing stevia
      extract products to be sold within the South American marketplace as well
      as for export to other
regions.





Each
party has agreed to certain responsibilities to further these objectives and has
initiated action immediately upon signing.





Weider Global
Nutrition’s("WGN")Legal Proceedings Against
the CompanyDismissed


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




Page
11 of 41





Results
from Operations




The
following results from operations have been derived from and should be read in
conjunction with the Company’s consolidated annual consolidated financial
statements for the periods ended December 31, 2009 and
2008.   Certain prior year’s figures have been reclassified to
conform to the current financial statement presentation.




In
      thousands
                      Canadian
      Dollars,
                      except
      per share
                      amounts
                    
                    Fourth
                      quarter
                      2009
                    
                    
                    Fourth
                      quarter
                      2008
                    
                    
                    %
                      Change
                    
                    
                    Twelve
                      months
                      2009
                    
                    
                    Twelve
                      months
                      2008
                    
                    
                    %
                      ChangeRevenue
                    
                    $
                    13,264
                    
                    
                    $
                    4,657
                    
                    
                    
                    185
                    %
                    
                    $
                    41,884
                    
                    
                    $
                    9,891
                    
                    
                    
                    323
                    %Cost
      of Sales
                    
                    $
                    8,327
                    
                    
                    $
                    3,718
                    
                    
                    
                    124
                    %
                    
                    $
                    29,790
                    
                    
                    $
                    7,560
                    
                    
                    
                    294
                    %%
      of Revenue
                    
                    
                    63
                    %
                    
                    
                    80
                    %
                    
                    
                    (17
                    )%
                    
                    
                    71
                    %
                    
                    
                    76
                    %
                    
                    
                    (5
                    )%Gross
      Profit
                    
                    $
                    4,938
                    
                    
                    $
                    939
                    
                    
                    
                    426
                    %
                    
                    $
                    12,094
                    
                    
                    $
                    2,331
                    
                    
                    
                    419
                    %%
      of Revenue
                    
                    
                    37
                    %
                    
                    
                    20
                    %
                    
                    
                    17
                    %
                    
                    
                    29
                    %
                    
                    
                    24
                    %
                    
                    
                    5
                    %General
      and Administration Expenses
                    
                    $
                    3,548
                    
                    
                    $
                    3,389
                    
                    
                    
                    5
                    %
                    
                    $
                    11,720
                    
                    
                    $
                    7,217
                    
                    
                    
                    62
                    %%
      of Revenue
                    
                    
                    27
                    %
                    
                    
                    73
                    %
                    
                    
                    (46
                    )%
                    
                    
                    28
                    %
                    
                    
                    73
                    %
                    
                    
                    (45
                    )%Income
      (Loss) from Operations
                    
                    $
                    1,389
                    
                    
                    $
                    (2,450
                    )
                    
                    
                    157
                    %
                    
                    $
                    374
                    
                    
                    $
                    (4,886
                    )
                    
                    
                    108
                    %%
      of Revenue
                    
                    
                    10
                    %
                    
                    
                    (53
                    )%
                    
                    
                    63
                    %
                    
                    
                    1
                    %
                    
                    
                    (49
                    )%
                    
                    
                    50
                    %Other
      Income (Expenses)
                    
                    $
                    (1,317
                    )
                    
                    $
                    (6,146
                    )
                    
                    
                    (79
                    )%
                    
                    $
                    (3
                    )
                    
                    $
                    (7,216
                    )
                    
                    
                    (100
                    )%%
      of Revenue
                    
                    
                    (10
                    )%
                    
                    
                    (132
                    )%
                    
                    
                    122
                    %
                    
                    
                    0
                    %
                    
                    
                    (73
                    )%
                    
                    
                    73
                    %Net
      Income (Loss) before Income Taxes and Non-Controlling
      Interests
                    
                    $
                    72
                    
                    
                    $
                    (8,596
                    )
                    
                    
                    (101
                    )%
                    
                    $
                    371
                    
                    
                    $
                    (12,103
                    )
                    
                    
                    (103
                    )%%
      of Revenue
                    
                    
                    1
                    %
                    
                    
                    (185
                    )%
                    
                    
                    186
                    %
                    
                    
                    1
                    %
                    
                    
                    (122
                    )%
                    
                    
                    123
                    %Net
      Income (Loss)
                    
                    $
                    488
                    
                    
                    $
                    (7,115
                    )
                    
                    
                    (107
                    )%
                    
                    $
                    758
                    
                    
                    $
                    (10,607
                    )
                    
                    
                    (107
                    )%Net
      Income (Loss) per share (Basic)
                    
                    $
                    0.02
                    
                    
                    $
                    (0.40
                    )
                    
                    
                    (106
                    )%
                    
                    $
                    0.04
                    
                    
                    $
                    (0.60
                    )
                    
                    
                    (106
                    )%Net
      Income (Loss) per share (Diluted)
                    
                    $
                    0.02
                    
                    
                    $
                    (0.40
                    )
                    
                    
                    (106
                    )%
                    
                    $
                    0.04
                    
                    
                    $
                    (0.60
                    )
                    
                    
                    (106
                    )%Depreciation
      and Amortization
                    
                    $
                    2,258
                    
                    
                    
                    1,142
                    
                    
                    
                    90
                    %
                    
                    $
                    6,385
                    
                    
                    $
                    2,540
                    
                    
                    
                    151
                    %%
      of Revenue
                    
                    
                    16
                    %
                    
                    
                    25
                    %
                    
                    
                    (9
                    )%
                    
                    
                    15
                    %
                    
                    
                    26
                    %
                    
                    
                    (10
                    )%Total
      Comprehensive (Loss) Income
                    
                    $
                    (1,341
                    )
                    
                    $
                    7,001
                    
                    
                    
                    (119
                    )%
                    
                    $
                    (13,551
                    )
                    
                    $
                    (11,397
                    )
                    
                    
                    (219
                    )%%
      of Revenue
                    
                    
                    (10
                    )%
                    
                    
                    150
                    %
                    
                    
                    (160
                    )%
                    
                    
                    (32
                    )%
                    
                    
                    (115
                    )%
                    
                    
                    83
                    %EBITDA
      (1)
                    
                    $
                    4,586
                    
                    
                    $
                    (77
                    )
                    
                    
                    (6055
                    )%
                    
                    $
                    10,450
                    
                    
                    $
                    (1,032
                    )
                    
                    
                    (1112
                    )%%
      of Revenue
                    
                    
                    35
                    %
                    
                    
                    (2
                    )%
                    
                    
                    37
                    %
                    
                    
                    25
                    %
                    
                    
                    (10
                    )%
                    
                    
                    35
                    %




Page
12 of 41


Revenue




Revenue
for the twelve months ended December 31, 2009, which were derived entirely from
stevia sales, was $ 41.9 million, an increase of 323% over $9.9 million in
revenue for the comparable period in 2008.  Revenue for the fourth
quarter ended December 31, 2009 was $13.3 million, an increase of 185% over $4.7
million in revenue for the fourth quarter in 2008.  The increase in
stevia revenues was driven by:




(1)
            New
      production capacity coming on line at GLG’s plants at Mingguang and
      Dongtai during the first quarter of 2009, which materially improved the
      Company’s production throughput of final product from 5,000 metric tons
      per year to 41,000 metric tons;




(2)
            Higher
      demand and purchase orders for the Company’s high grade stevia extract
      products in 2009 versus 2008; and




(3)
            Greater
      shipments of higher value stevia extract against existing purchase orders
      than in the comparable period.




Inventory
increased from $33.1 million as at December 31, 2008 to $41.1 million as at
December 31, 2009.  The key drivers for the net changes in inventory
at the end of December were: (a) the decrease in raw materials inventories to
develop finished product to meet current customer orders; (b) the increase in
work in progress inventories to meet 2009 customer order commitments; (c) the
increase in by-product inventories available for further processing into
finished products; and (d) the increase in finished product inventories to meet
current customer orders.




Cost
of Sales




Cost of
sales for the twelve months ended December 31, 2009 were $ 29.8 million, an
increase of 294% over $7.6 million in cost of sales for the comparable period in
2008.  The increase in cost of sales year over year was driven
by:




(1)
            New
      production capacity coming on line at GLG’s plants at Mingguang and
      Dongtai during the first quarter which materially improved the Company’s
      production throughput of final product.  During the quarter the
      Company was not operating at full capacity at these facilities and there
      are resulting higher fixed costs charged against cost of sales which has
      decreased gross profit margin.




(2)
            Larger
      shipments of higher value stevia extract than in the comparable period
      against existing purchase orders also increased the cost of sales for the
      12 month and 3 month periods.


Page
13 of 41




(3)
            There
      were also higher costs experienced at the start-up of these new
      facilities.  The Company has seen production costs at its new
      facilities consistently decline during the third and fourth quarter
      relative to the start-up period during the first quarter of 2009, as
      production management improved its efficiencies throughout the
      year.


The key
components of stevia cost of sales in include:




a. stevia
leaf;




b.
salaries and wages of manufacturing labour;




c.
manufacturing overhead used in the production of stevia extract, including
supplies, power and water;




d.
depreciation and capacity utilization of the stevia extract processing
plants.




The key
factors that impact stevia cost of sales and gross profit percentages in each
period include:




a.
            The
      price paid for stevia leaf and the stevia leaf quality, which is impacted
      by crop quality for a particular year/period.  This is the most
      important factor that will impact the gross profit of GLG’s stevia
      business;




b.
            The
      price per kilogram for which the extract is
  sold;




c.
            The
      sale of by-products (also known as co-products).  There were a
      limited number of co-product sales during the year due to the focus on
      production of high grade stevia and limited production capacity to further
      process our by-products.   Sales of by-products have
      historically increased the overall gross profit of the stevia
      business.  With the addition of increased finished goods
      production facilities at Runhao, GLG expects to be able to process these
      by-products into additional finished products such as high purity RA and
      STV extracts as well as other finished
  products.;




d.
            Other
      factors which also impact stevia cost of sales to a lesser degree
      include:




-
            salaries
      and wages of manufacturing labour;


-
            water
      and power consumption;


-
            manufacturing
      overhead used in the production of stevia extract, including supplies,
      power and water;


-
            net
      VAT paid on export sales.




GLG’s
stevia business is affected by seasonality.  The harvest of the stevia
leaves typically occurs starting at the end of the July and continues through
the fall of each year.  GLG’s operations in China are also impacted by
Chinese New Year celebrations during the month of January or February each year,
during which many businesses close down operations for approximately two
weeks.  GLG’s production year runs October 1 through September 30 each
year.  Accordingly, inventory levels are typically higher in the
fourth quarter until raw material is converted into finished products and
shipped to customers.




Cost of
sales for the three months ended December 31, 2009 were $ 8.3 million, or 63% of
revenue, an increase of 124% over $3.7 million, or 80% of revenue for the
comparable period in 2008.


Page
14 of 41




The main
drivers for the decrease in cost of sales as a percentage of revenue for the
fiscal year and the fourth quarter 2009 compared with fiscal 2008 and the fourth
quarter of 2008 was due to the following factors:




(1)
            Use
      of higher quality leaf starting late in the third quarter and throughout
      the fourth quarter from the new 2009 stevia leaf harvest  which
      improved extraction and processing yields.   The higher
      quality stevia leaf benefit came from two
areas:




a.
            Use
      of new proprietary leaf (second generation leaf strain) that contains
      approximately 60% rebaudioside A relative to the second generation of leaf
      harvested in 2009 which contained approximately 40-45% rebaudioside
      A.


b.
            Improvements
      in the quality of stevia leaf purchased by tighter procurement standards
      of lower foreign material and moisture
content.




(2)
            Higher
      volume of high grade stevia extract production during the 2009 fiscal year
      relative to fiscal 2008 and better economies of scale experienced for
      labour and plant utilization.




Gross
Profit




Gross
profit for the twelve months period ending December 31, 2009 was $12.1 million,
an increase of 419% over $2.3 million in gross profit for the comparable period
in 2008.  The absolute increase in gross profit can be attributed to
increased stevia sales.  The gross profit margin for the twelve months
period ended December 31, 2009 was 29% compared to 24% gross profit margin
achieved on sales for the comparable period in 2008.   The gross
profit margin increase was driven by the same factors that decreased cost of
sales for the three and twelve month periods.




Gross
profit for the three months ended December 31, 2009 was $4.9 million, an
increase of 426% over $0.9 million in gross profit for the fourth quarter of
2008.  The gross profit margin for the three months ended December 31,
2009 was 37% compared to 20% gross profit margin achieved on sales for the
comparable period in 2008. The increase in gross profit for the fourth quarter
of 2009 compared with the fourth quarter of 2008 was driven by the same factors
that decreased cost of sales for the three month period in 2009.




General
and Administration Expenses




In
      thousands
                      Canadian
      $
                    
                    Fourth
                      quarter
                      2009
                    
                    
                    Fourth
                      quarter
                      2008
                    
                    
                    %Change
                    
                    
                    Twelve
                      months
                      2009
                    
                    
                    Twelve
                      months
                      2008
                    
                    
                    %ChangeGeneral
      and Administration Expenses
                    
                    $
                    3,548
                    
                    
                    $
                    3,389
                    
                    
                    
                    5
                    %
                    
                    $
                    11,720
                    
                    
                    $
                    7,217
                    
                    
                    
                    62
                    %%
      of Revenue
                    
                    
                    27
                    %
                    
                    
                    73
                    %
                    
                    
                    (46
                    )%
                    
                    
                    28
                    %
                    
                    
                    73
                    %
                    
                    
                    (45
                    )%




Page
15 of 41




General
and administration (“G&A”) expenses include sales, general and
administration costs (“SG&A”), stock based compensation and depreciation and
amortization expenses on G&A fixed assets. A breakdown of G&A expenses
into these three components is presented below:




In
      thousands Canadian $
                                  
                                  Fourth
                                    quarter
                                    2009
                                  
                                  
                                  Fourth
                                    quarter
                                    2008
                                  
                                  
                                  %
                                    Change
                                  
                                  
                                  Twelve
                                    months
                                    2009
                                  
                                  
                                  Twelve
                                    months
                                    2008
                                  
                                  
                                  %ChangeSG&A
                                  
                                  $
                                  2,402
                                  
                                  
                                  $
                                  1,940
                                  
                                  
                                  
                                  24
                                  %
                                  
                                  $
                                  7,832
                                  
                                  
                                  $
                                  5,120
                                  
                                  
                                  
                                  53
                                  %Stock-
      Based Compensation
                                  
                                  $
                                  754
                                  
                                  
                                  $
                                  1,229
                                  
                                  
                                  
                                  (39
                                  )%
                                  
                                  $
                                  2,479
                                  
                                  
                                  $
                                  1,321
                                  
                                  
                                  
                                  88
                                  %G&A  Amortization
      and Depreciation
                                  
                                  $
                                  392
                                  
                                  
                                  $
                                  220
                                  
                                  
                                  
                                  78
                                  %
                                  
                                  $
                                  1,409
                                  
                                  
                                  $
                                  776
                                  
                                  
                                  
                                  82
                                  %Total
      G&A Expenses
                                  
                                  $
                                  3,548
                                  
                                  
                                  $
                                  3,389
                                  
                                  
                                  
                                  5
                                  %
                                  
                                  $
                                  11,720
                                  
                                  
                                  $
                                  7,217
                                  
                                  
                                  
                                  62
                                  %%
      of Revenue
                                  
                                  
                                  27
                                  %
                                  
                                  
                                  73
                                  %
                                  
                                  
                                  (46
                                  )%
                                  
                                  
                                  28
                                  %
                                  
                                  
                                  73
                                  %
                                  
                                  
                                  (45
                                  )%




SG&A
expenses for the twelve months ended December 31, 2009 were $7.8 million, an
increase of $2.7 million or 53% over the same period for 2008 of $5.1
million.  The key expense categories that increased were salaries,
consulting fees, office and travel.  GLG’s employee count at the end
of December 31, 2009 was 1,411, a 74% increase of 808 people over year end
2008.  Approximately 75% of employees work in the production function
of the Company.




SG&A
expenses for the three months ended December 31, 2009 were $2.4 million which is
an increase of $0.5 million or 24% over the same period for 2008.  The
key expense categories that increased were salaries, consulting fees, office and
travel.




Stock-based
compensation was $0.8 million for the fourth quarter of 2009 compared with $1.2
million in the fourth quarter of 2008.  GLG had an amended stock
compensation plan approved by its shareholders at its annual general meeting in
June 2008.  Under the amended plan, the number of common shares
available for issue is 10% of the issued and outstanding common
shares.  Prior to 2008, the Company had not granted stock options
since 2005. Grants made during 2008 were 368,619 compensation securities
including both options and restricted shares.  84% of these grants
have three year vesting and performance criteria set by the Compensation
Committee of the Board in order to be fully earned by the
recipients.   Additional grants were made by the Board of
Directors during the second quarter and fourth quarter of 2009.  These
amounted to, 393,750 compensation securities in total including both options and
restricted shares.  81% of these grants have three year vesting and
performance criteria requirements set by the Compensation Committee of the Board
in order to be fully earned by the recipients.




G&A
related depreciation and amortization expenses for the three months ended
December 31, 2009 was $0.4 million, an increase of 78% over $0.2 million for the
comparable period in 2008.   The main driver for the increase in
amortization is related to the amortization of G&A related assets in China
at GLG’s Runhai and Runyang subsidiaries which came into operation in the first
quarter of 2009.




Page
16 of 41




Other
Income (Expenses)




In
      thousands
                      Canadian
      $
                    
                    Fourth
                      quarter
                      2009
                    
                    
                    Fourth
                      quarter
                      2008
                    
                    
                    %
                      Change
                    
                    
                    Twelve
                      months
                      2009
                    
                    
                    Twelve
                      months
                      2008
                    
                    
                    %ChangeOther
      Income (Expenses)
                    
                    $
                    (1,317
                    )
                    
                    $
                    (6,146
                    )
                    
                    
                    (79
                    )%
                    
                    $
                    (3
                    )
                    
                    $
                    (7,216
                    )
                    
                    
                    (100
                    )%%
      of Revenue
                    
                    
                    (10
                    )%
                    
                    
                    (132
                    )%
                    
                    
                    122
                    %
                    
                    
                    0
                    %
                    
                    
                    (73
                    )%
                    
                    
                    73
                    %




Other
expenses for the twelve months ended December 31, 2009 was $0.03 million, a 100%
decrease compared to other expenses of $7.2 million for the comparable period in
2008.  There were two items that contributed the majority to the other
loss for the twelve months ended December 31, 2009: (1) foreign exchanges gains
on US dollar-denominated liabilities that GLG was holding during the period
($2.6 million); and (2) interest expenses ($2.7 million).  Interest
expenses for the twelve months period ended December 31, 2009 were mainly
related to (1) a US$ 20 million advances from a customer which was fully repaid
in November 2009 and (2) the Company’s bank loans in China.




Other
expenses for the three months ended December 31, 2009 was $1.3 million, a
decrease of 79% over other expenses of $6.1 million for the comparable period in
2008 and was impacted by the same items as described for the twelve months
period.




Foreign
Exchange Gains (Losses)




GLG
reports in Canadian dollars but earns most of its revenues in US dollars and
incurs most of its expenses in Chinese Yuan (“RMB”).  Impacts of the
appreciation of the Chinese Yuan against the Canadian dollar are shown
separately in Accumulated Other Comprehensive income (“AOCI”) on the Balance
Sheet.  As of December 31, 2009, the exchange rate for RMB per
Canadian dollar was 6.5232, an appreciation of 17% from the exchange rate on
December 31, 2008 (5.5710).  The balance of the AOCI was $6.4 million
on December 31, 2009 compared to balance of $20.7 million as at December 31,
2008.




The
exchange rate fluctuations of the US dollar and the Canadian dollar had a
significant impact on foreign exchanges gains reflected on the twelve month
income statement in 2009. The table below shows the change in the Canadian
dollar relative to the US dollar from year-end 2008 to December 31,
2009.  For the fiscal year 2009, GLG recognized $2.6 million of
foreign currency gains mainly attributable to the increase in the Canadian
dollar relative to the US dollar.  Since December 31, 2008, the
Canadian dollar has appreciated 12.2% against the USD for the period ended
December 31, 2009.   The depreciation of the US dollar relative
to the Canadian dollar had an impact on the fourth quarter and twelve month
revenue results as the majority of GLG’s revenues for the period were based on
US dollar contracts (see Outlook section for additional
discussion).  Since the Chinese Yuan effectively remained flat to the
US dollar, there was no additional material profit and loss impacts on the
expenses incurred during the twelve months of 2009.




Impacts
of the appreciation of the Chinese Yuan against the Canadian dollar are shown
separately under the Accumulated Other Comprehensive Income account on the
Balance Sheet.  The following table presents the exchange rate
movement for the Canadian dollar relative to the US dollar and RMB as shown
below.


Page
17 of 41




Exchange
                        rates
      - Noon
                        (as
      compared
                        to
      the
                        Canadian
                        Dollar)
                      
                      2006
                        December
                        31
                      
                      
                      2007
                        December
                        31
                      
                      
                      2008
                        December
                        31
                      
                      
                      2009
                        March
                        31
                      
                      
                      2009
                        June
                        30
                      
                      
                      2009
                        September
                        30
                      
                      
                      2009
                        December
                        31U.S.
      Dollars
                      
                      
                      0.8581
                      
                      
                      
                      1.0120
                      
                      
                      
                      0.8166
                      
                      
                      
                      0.7928
                      
                      
                      
                      0.8602
                      
                      
                      
                      0.9327
                      
                      
                      
                      0.9515Chinese
      Yuan
                      
                      
                      6.6845
                      
                      
                      
                      7.3910
                      
                      
                      
                      5.5710
                      
                      
                      
                      5.4230
                      
                      
                      
                      5.8754
                      
                      
                      
                      6.3694
                      
                      
                      
                      6.5232




The
following table presents the exchange rate movement for RMB relative to the US
dollar as shown below.  The US dollar was essentially flat against the
RMB at the end of the fourth quarter of 2009 compared to December 31,
2008.




Exchange
                        rates
                      
                      2006
                        December
                        31
                      
                      
                      2007
                        December
                        31
                      
                      
                      2008
                        December
                        31
                      
                      
                      2009
                        March
                        31
                      
                      
                      2009
                        June
                        30
                      
                      
                      2009
                        September
                        30
                      
                      
                      2009
                        December
                        31Chinese
      Yuan
                      
                      
                      7.8175
                      
                      
                      
                      7.3141
                      
                      
                      
                      6.8223
                      
                      
                      
                      6.8456
                      
                      
                      
                      6.8448
                      
                      
                      
                      6.8376
                      
                      
                      
                      6.8270




Net
Income (Loss)




In
      thousands Canadian
                        Dollars
                      
                      Fourth
                        quarter
                        2009
                      
                      
                      Fourth
                        quarter
                        2008
                      
                      
                      %
      Change
                      
                      
                      Twelve
                        months
                        2009
                      
                      
                      Twelve
                        months
                        2008
                      
                      
                      %
      ChangeNet
      Income (loss)
                      
                      $
                      488
                      
                      
                      $
                      (7,115
                      )
                      
                      
                      (107
                      )%
                      
                      $
                      758
                      
                      
                      $
                      (10,607
                      )
                      
                      
                      (107
                      )%




The basic
income per share was $0.02 for the three months ending December 31, 2009
compared with a loss per share of ($0.40) for the comparable period in
2008.  Net income improved to $0.5 million for the three months period
ending December 31, 2009 in comparison to the loss of $7.1 million for the
fourth quarter 2008.  This $7.6 million improvement was driven mainly by:
(1) higher gross profit margin from increased production at GLG’s new facilities
in Mingguang and Dongtai ($4.0 million), (2) foreign exchange gains driven by an
appreciation of the Canadian dollar relative to US dollar in the fourth quarter
($2.3 million improvement); and (3) a reduction in one time provisions ($3.1
million) which were offset by an increase in G&A expenses ($0.2 million) a
net interest expenses increase ($0.4 million) and a net reduction in income tax
recoveries ($1.0 million).




The basic
income per share was $0.04 for the twelve months ending December 31, 2009
compared with a loss per share of ($0.60) for 2008. The twelve month net income
for the period ending December 31, 2009 improved by $11.4 million compared to
the same period in 2008.  This improvement was driven by (1) higher
revenues and gross profit margin from increased production at its new facilities
in Mingguang and Dongtai ($9.8 million); (2) foreign exchange gains driven by an
appreciation of the Canadian dollar relative to US dollar during 2009 ($5.5
million improvement) and (3) a reduction in one time provisions ($3.1 million)
which were offset by an increase in G&A expenses ($4.5 million), a net
interest and donation expenses increase ($1.4 million) and (4) a decrease of
income tax recoveries of $1.2 million.


Page
18 of 41




Comprehensive
Income




In
      thousands Canadian $
                              
                              Fourth
                                quarter
                                2009
                              
                              
                              Fourth
                                quarter
                                2008
                              
                              
                              %
                                Change
                              
                              
                              Twelve
                                months
                                2009
                              
                              
                              Twelve
                                months
                                2008
                              
                              
                              %
                                ChangeNet
      Income (Loss)
                              
                              $
                              488
                              
                              
                              $
                              (7,115
                              )
                              
                              
                              (107
                              )%
                              
                              $
                              758
                              
                              
                              $
                              (10,607
                              )
                              
                              
                              (107
                              )%Other
      Comprehensive (Loss) Income
                              
                              $
                              (1,829
                              )
                              
                              $
                              14,116
                              
                              
                              
                              (87
                              )%
                              
                              $
                              (14,309
                              )
                              
                              $
                              22,004
                              
                              
                              
                              (165
                              )%Total
      Comprehensive (Loss) Income
                              
                              $
                              (1,341
                              )
                              
                              $
                              7,001
                              
                              
                              
                              (119
                              )%
                              
                              $
                              (
      13,551
                              )
                              
                              $
                              11,397
                              
                              
                              
                              (219
                              )%




The
Company recorded total comprehensive loss of $13.5 million for the twelve months
of 2009, comprising $ 0.8 million of net income and $14.3 million of other
comprehensive loss.  The Company recorded a total comprehensive loss
of $1.3 million for the three months ended December 31, 2009, comprised
of  $0.5 million in net income and $1.8 million in other comprehensive
loss.




The other
comprehensive loss was solely made up of the currency translation adjustments
recorded on the revaluation of the Company’s investments in self-sustaining
Chinese subsidiaries due to the strengthening of the Canadian dollar against the
Renminbi (RMB) during the fourth quarter.  This loss is held in
accumulated other comprehensive income (loss) until it is realized, at which
time it is included in net income.




NON-GAAP
Financial Measures




Earnings
Before Interest Taxes and Depreciation (“EBITDA”)




EBITDA
for the quarter ended December 31, 2009 was $4.6 million, compared to negative
$0.1 million in EBITDA for the comparable period in 2008.  The main
drivers for the increase in EBITDA for the three months ended December 31, 2009
compared to the corresponding period 2008 is attributable to (1) higher stevia
revenue and gross profit for the fourth quarter 2009 as compared to the fourth
quarter of 2008, (2) reduction in one-time start up related costs and (3)
transfer of production staff costs from general and administrative costs to
production costs with the start-up of operations at the Company’s new facilities
in Mingguang and Dongtai.




EBITDA
for the twelve months ended December 31, 2009 was $10.5 million, an increase of
1112% over negative $1.0 million in EBITDA for the comparable period in
2008.


Page
19 of 41




The
following table provides reconciliation to Canadian GAAP net
income.




In
      thousands Canadian Dollars
                    
                    Fourth
                      quarter
                      2009
                    
                    
                    Fourth
                      quarter
                      2008
                    
                    
                    Twelve
                      months
                      2009
                    
                    
                    Twelve
                      months
                      2008Income
      (Loss) Before Income Taxes and Non-Controlling Interests
                    
                    $
                    72
                    
                    
                    $
                    (8,596
                    )
                    
                    $
                    371
                    
                    
                    $
                    (12,103
                    )Add:Non-Controlling
      Interest
                    
                    $
                    22
                    
                    
                    $
                    53
                    
                    
                    $
                    144
                    
                    
                    $
                    68Depreciation
      and Amortization
                    
                    $
                    2,258
                    
                    
                    $
                    1,142
                    
                    
                    $
                    6,385
                    
                    
                    $
                    2,540Net
      Interest Expense
                    
                    $
                    899
                    
                    
                    $
                    139
                    
                    
                    $
                    3,709
                    
                    
                    $
                    1,188Foreign
      Exchange Loss (Gain)
                    
                    
                    581
                    
                    
                    $
                    2,845
                    
                    
                    $
                    (2,638
                    )
                    
                    $
                    2,843Non-Cash
      Share Compensation Expense
                    
                    $
                    754
                    
                    
                    $
                    1,229
                    
                    
                    $
                    2,479
                    
                    
                    $
                    1,321YHT
      Provision
                    
                    
                    -
                    
                    
                    $
                    3,111
                    
                    
                    
                    -
                    
                    
                    $
                    3,111EBITDA
                    
                    $
                    4,586
                    
                    
                    $
                    (77
                    )
                    
                    $
                    10,450
                    
                    
                    $
                    (1,032
                    )%
      Revenue
                    
                    
                    35
                    %
                    
                    
                    (2
                    )%
                    
                    
                    25
                    %
                    
                    
                    (10
                    )%




Selected
Annual Information




In
      thousands Canadian Dollars
                    
                    2009
                    
                    
                    2008
                    
                    
                    2007Revenues
                    
                    $
                    41,884
                    
                    
                    $
                    9,891
                    
                    
                    $
                    9,157Gross
      Profit
                    
                    $
                    12,094
                    
                    
                    $
                    2,331
                    
                    
                    $
                    2,657Net
      Income (Loss)
                    
                    $
                    758
                    
                    
                    $
                    (10,606
                    )
                    
                    $
                    369EBITDA
      (1)
                    
                    $
                    10,450
                    
                    
                    $
                    (1,032
                    )
                    
                    $
                    1,548Earnings
      (Loss) Per Share
                    
                    $
                    0.04
                    
                    
                    $
                    (0.60
                    )
                    
                    $
                    0.05Diluted
      Earnings Per share
                    
                    $
                    0.04
                    
                    
                    $
                    (0.15
                    )
                    
                    $
                    0.02Total
      Assets
                    
                    $
                    229,586
                    
                    
                    $
                    174,669
                    
                    
                    $
                    94,129Total
      Liabilities
                    
                    $
                    84,743
                    
                    
                    $
                    57,364
                    
                    
                    $
                    17,230Total
      Shareholders’ Equity
                    
                    $
                    144,819
                    
                    
                    $
                    116,829
                    
                    
                    $
                    76,898Employees
                    
                    
                    1,411
                    
                    
                    
                    808
                    
                    
                    
                    215


(1)
            EBITDA
      is defined in the section Non-GAAP Financial Measures along with the
      details of the calculation.




GLG’s
business focus has changed significantly since its inception in June 2005 with
the acquisition of Runde in December 2006.  This acquisition provided
GLG’s first production facilities to participate in the stevia extracting and
refining industry.




GLG’s
revenue mix changed significantly in 2007 with the change in business strategy
to focus on the stevia industry opportunity rather than its initial focus on
sales of health products through the YHT chain store channel, interests in
sports nutrition, research, preventative health software, and medical
clinics.  Revenues in 2007 from its stevia extract business accounted
for 89% of annual revenues.  Revenues in 2008 and 2009 from the stevia
extract business accounted for 100%.


Page
20 of 41




The other
major change in direction of GLG’s business occurred in 2007 when it signed a
renewable 5 year agreement with its major customer.  This agreement
formed the basis upon which GLG began to expand its production capacity starting
in 2007 with the Runde high grade stevia production line project.




Further
important trends have been the continued progress with regulatory bodies in
various countries who have now endorsed or approved stevia as a food ingredient
such as the US and Australia and New Zealand.  Progress is also being
made in Europe with Switzerland and France taking the lead in approval for
stevia.  Regulatory approval of stevia as a food ingredient beyond its
historical place as a dietary supplement in some of these key markets has the
potential to develop the size of the stevia market.




Within
the context of a growing global market for stevia as an all natural zero calorie
sweetener and contacted and forecast demand from its customers, GLG focused on
further expanding its plant capacity in 2008 and 2009.  As a result
during 2008 and 2009, the Company focused on developing its production capacity
and employee base to significantly increase its production capacity and stevia
agricultural base.  This strategy was the key drive that drove a net
loss in 2008 compared to 2007 and 2006.  With the material increase in
revenues and gross profit in 2009, the Company has turned its financial
performance into positive net income and positive EBITDA.




Summary
Quarterly Results




The
selected consolidated information below has been gathered from GLG’s quarterly
consolidated financial statements for the previous eight quarterly
periods:




In
      thousands Canadian dollars, except per share amounts2009
                    Q4
                  
                  
                  
                  2009
                    Q3
                  
                  
                  
                  2009
                    Q2
                  
                  
                  
                  2009
                    Q1
                  
                  
                  
                  2008
                    Q4
                  
                  
                  
                  2008
                    Q3
                  
                  
                  
                  2008
                    Q2
                  
                  
                  
                  2008
                    Q1Revenue
                  
                  $
                  13,264
                  
                  
                  $
                  14,814
                  
                  
                  $
                  10,805
                  
                  
                  $
                  3,001
                  
                  
                  $
                  4,657
                  
                  
                  $
                  3,302
                  
                  
                  $
                  1,092
                  
                  
                  $
                  841Gross
      Profit
                  
                  $
                  4,938
                  
                  
                  $
                  4,095
                  
                  
                  $
                  1,642
                  
                  
                  $
                  1,419
                  
                  
                  $
                  939
                  
                  
                  $
                  832
                  
                  
                  $
                  293
                  
                  
                  $
                  268Gross
      Profit %
                  
                  
                  37
                  %
                  
                  
                  28
                  %
                  
                  
                  15
                  %
                  
                  
                  47
                  %
                  
                  
                  20
                  %
                  
                  
                  25
                  %
                  
                  
                  27
                  %
                  
                  
                  32
                  %Net
      Income (Loss)
                  
                  $
                  488
                  
                  
                  $
                  1,399
                  
                  
                  $
                  371
                  
                  
                  $
                  (1,500
                  )
                  
                  $
                  (7,115
                  )
                  
                  
                  (952
                  )
                  
                  $
                  (1,606
                  )
                  
                  $
                  (934
                  )Basic
      Income (Loss)  Per Share (1)
                  
                  $
                  0.02
                  
                  
                  $
                  0.07
                  
                  
                  $
                  0.02
                  
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.40
                  )
                  
                  $
                  (0.06
                  )
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.04
                  )Diluted
      Income (Loss) Per Share (1)
                  
                  $
                  0.02
                  
                  
                  $
                  0.06
                  
                  
                  $
                  0.02
                  
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.40
                  )
                  
                  $
                  (0.06
                  )
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.04
                  )EBITDA
      (2)
                  
                  $
                  4,586
                  
                  
                  $
                  3,917
                  
                  
                  $
                  1,677
                  
                  
                  $
                  270
                  
                  
                  $
                  (77
                  )
                  
                  $
                  (123
                  )
                  
                  $
                  (481
                  )
                  
                  $
                  (350
                  )




Page
21 of 41




1.
            Restated
      for the periods Q1 2008 through Q3 20009 to reflect the 4:1 share
      consolidation that took place on November 5,
  2009.


2.
            EBITDA
      is defined in the section Non-GAAP Financial Measures along with the
      details of the calculation.  EBITDA does come directly from the
      financial statements and its calculation is defined
  above.




Note: 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.




Quarterly
Net Income (Loss)




The basic
income per share was $0.02 for the three months ending December 31, 2009
compared with a loss per share of ($0.40) for the comparable period in
2008.
Net income improved to $0.5 million for the three months period ending December
31, 2009 in comparison to the loss of $7.1 million for the fourth quarter
2008.
This $7.6 million improvement was driven mainly by (1) higher gross profit
margin from increased production at GLG’s new facilities in Mingguang and
Dongtai ($4.0 million), (2) foreign exchange gains driven by an appreciation of
the Canadian dollar relative to US dollar in the fourth quarter ($2.3 million
improvement) and (3) a reduction in one time provisions ($3.1 million) which
were offset by an increase in G&A expenses ($0.2 million) a net interest
expenses increase ($0.4 million) and a net reduction in income tax recoveries
($1.0 million).




Net
income for the third quarter 2009 was $1.4 million, versus a loss of $1.0
million in the third quarter of 2008.  This $2.4 million improvement
was driven by (1) higher gross profit margin from increased production at GLG’s
new facilities in Mingguang and Dongtai ($3.3 million) and (2) foreign exchange
gains driven by an appreciation of the Canadian dollar relative to US dollar in
the fourth quarter ($1.9 million) which were offset by an increase in G&A
expenses ($1.2 million), a net interest expenses increase ($0.7 million) and a
net increase in income taxes ($0.8 million).




Net
income for the second quarter 2009 was $0.4 million, versus a loss of $1.6
million in the second quarter of 2008 or a $2.0 million decrease in
loss.  The decreased loss was driven by an improvement in gross profit
margin in the second quarter of 2009 by $1.3 million, and an increase in other
income of $1.8 million, which was offset by an increase in SG&A of $1.2
million.


Net loss
for the first quarter 2009 was $1.5 million, compared to a loss of $7.1 million
in the fourth quarter of 2008 or a $5.6 million decrease in loss.  The
decreased loss was attributable to an improvement in gross profit margin in the
first quarter of 2009 by $0.5 million, a decrease in stock based compensation
expenses of $0.7 million, decreased foreign exchange losses of $2.1 million, and
a decrease in provisions on loans of $3.1 million, and were offset by a decrease
in income tax recoveries of $0.7 million.


The net
losses for the first through fourth quarters in 2008 were driven by the
Company’s strategy to expand the scale of its stevia business in 2008 to meet
increased customer demand and industry growth.  The Company invested
in new facilities and expanded its staff during 2008 which contributed to the
majority of the losses for the quarters.




The net
losses for the third and fourth quarter 2007 were driven by the interest expense
of the convertible debenture.


Page
22 of 41




Quarterly
Basic and Diluted Earnings (Loss) per Share




The basic
earnings per share were $0.02 for the fourth quarter 2009 compared with $0.07
for the basic earnings per share for the third quarter of 2009.  The
decline in earnings per share for the fourth quarter compared to the third
quarter of 2009 can be attributed to: (1) increased number of shares in the
fourth quarter due to the NASDAQ public offering of 3.2 million common shares
completed in November 2009 ($0.01 per share impact on Q4 EPS result), and (2) a
decrease in the fourth quarter net income compared to the third quarter of $0.9
million ($0.04 per share decline in Q4 EPS).




The
decrease of $0.9 million in the fourth quarter net income compared to the third
quarter can be accounted for as follow: (1) higher gross profit in the fourth
quarter ($0.8 million improvement) relative to the third quarter; (2) a higher
income tax recovery recognized in the fourth quarter ($1.2 million improvement)
relative to the third quarter; and (3) a decrease in interest expense of $0.2
million, which was offset by: (1) a decrease in foreign exchange gains ($2.5
million reduction) relative to the third quarter; and (2) an increase in
SG&A expense of $0.6 million in the fourth quarter relative to the third
quarter.




The basic
and diluted earnings per share were $0.07 for the third quarter 2009 compared
with $0.02 for the basic and diluted earnings per share for the second quarter
of 2009.  The improvement in earnings per share for the third quarter
compared to the second quarter of 2009 can be attributed to high gross profit
which was driven by higher revenues and higher other income generated in the
fourth quarter relative to the second quarter.




The basic
earnings and diluted earnings per share were $0.02 for the second quarter 2009
compared with basic and diluted loss of $0.08 per shares for the first quarter
of 2009.  The improvement in earnings per share for the second quarter
compared to the first quarter of 2009 can be attributed to higher gross profit
which was driven by higher revenues and higher other income generated in the
second quarter relative to the first quarter.




The basic
loss per share and diluted loss per share were $0.08 for the first quarter 2009
compared with $0.40 for the fourth quarter of 2008.  The fourth
quarter loss per share was driven by increased stock based compensation,
unrealized foreign currency losses and a provision on amounts owed to the
Company by YHT.




Capital
Expenditures




In
      thousands
                      Canadian
      Dollars
                    
                    Fourth
                      quarter
                      2009
                    
                    
                    Fourth
                      quarter
                      2008
                    
                    
                    %
                      Change
                    
                    
                    Twelve
                      months
                      2009
                    
                    
                    Twelve
                      months
                      2008
                    
                    
                    %
                      ChangeCapital
      Expenditures
                    
                    $
                    16,653
                    
                    
                    $
                    25,796
                    
                    
                    
                    (35
                    )%
                    
                    $
                    40,875
                    
                    
                    $
                    57,790
                    
                    
                    
                    (29
                    )%




GLG’s
capital expenditures of $16.7 million for the fourth quarter of 2009 reflected a
decrease of 35% in comparison to $25.8 million in the fourth quarter of
2008.   The fourth quarter capital expenditures were primarily
incurred for the Company’s new rebiana facility in Qingdao that was completed
during the fourth quarter.  The Company also constructed two other
administrative buildings at its Runde and Bengbu subsidiaries as well commenced
construction of additional water treatment facilities at one of its primary
processing plants.


Page
23 of 41




Capital
expenditures for the twelve months ended December 31, 2009 were $40.9 million,
which was comprised of $34.8 million of cash flow used by investing activities,
plus an increase of $8.1 million in accounts payable related to the purchase of
PP&E, and a net decrease of $2.1 million of equipment in year-end prepaid
expenses.




GLG’s
capital expenditures for the twelve months ended December 31, 2009 of $40.9
million reflected a decrease of 29% in comparison to $57.8 million for the
comparable period in 2008.  Approximately 23% of these capital
expenditures were incurred in the first quarter of 2009, driven by the
completion of the leaf processing facilities by the Runhai (Mingguang) and
Runyang (Dongtai) subsidiaries (approximately $9 million).




The
majority of the balance of 2009 capital expenditures was incurred in the set-up
and construction of the Company’s new rebiana facility in Qingdao (approximately
$28.5 million or 71% of capex total spend).  The majority of the
remaining 6% of capex for 2009 was incurred for the construction of two
administrative buildings in the fourth quarter and the commencement of a new
waste water treatment project at its Runyang facility.




Key
Capital Projects for 2009




GLG
      Subsidiary
                                  
                                  Capital
      Project
                                  
                                  Location
                                  
                                  Completion
                                    DateQingdao
      Runhao Stevia High Tech Company,
Ltd.  (“Runhao”)
                                  
                                  1,000
      MT RA 97
                                  
                                  Qingdao,
      Shandong Province
                                  
                                  December,
      2009




Status of
Project: 1000 MT high grade stevia initial phase has been
completed.  This project included two lines each capable of producing
500 metric tons of RA 97 per annum.  This project also completed the
infrastructure necessary to support 3,000 MT of RA 97 production including gas
and electric infrastructure, underground pipe lines and road infrastructure.
Warehousing space for 10,000 MT RA 97 was also completed as part of this project
in 2009.  The buildings constructed have one million square feet of
space and has been constructed on 62 acres of land.  An additional 65
acres has been reserved for future expansion.  The new rebiana
facility has been constructed following food grade "Good Manufacturing Practice"
(GMP) standards and key components are being constructed following
pharmaceutical grade GMP standards.  Initial test runs had commenced
during the month of December 2009.  This facility is near completion
of a third party audit in order achieve GMP certification and other important
certifications such as ISO9000.




This
project expenditure was approximately $6.5 million higher than announced during
the third quarter outlook.  The higher capex was used to increase the
initial warehousing infrastructure to 10,000 MT capacity and gas and electric
infrastructure to 3,000 MT capacity.


Page
24 of 41




GLG
      Subsidiary
                                
                                Capital
      Project
                                
                                Location
                                
                                Completion
                                  DateDongtai
      Runyang Stevia High Tech Co. Ltd. (“Runyang”)
                                
                                18,000
      MT Leaf Capacity Primary Processing Facility
                                
                                Dongtai,
      Jiangsu Province
                                
                                Construction
      completed in December,
2008




Status of
Project:   Final
phases of infrastructure testing completed in February 2009 and Administration
building completed in the first quarter of 2009.




GLG
      Subsidiary
                                
                                Capital
      Project
                                
                                Location
                                
                                Completion
                                  DateChuzhou
      Runhai Stevia High Tech Co., Ltd. (“Runhai”)
                                
                                18,000
      MT Leaf Capacity Primary Processing Facility
                                
                                Mingguang,
      Anhui Province
                                
                                Construction
      completed in December,
2008




Status of
Project:  Final phases of infrastructure testing completed in
March 2009.




The
following table presents the current capacity levels for GLG’s facilities as of
the date of the MD&A compared to year-end 2008.




Production
      Capacity
                          (Metric
      Tons per Annum)
                        
                        December
      31, 2009
                        
                        
                        December
      31, 2008Leaf
      Processing
                        
                        
                        41,000
                        
                        
                        
                        5,000Intermediate
      Powder (RA 60)
                        
                        
                        4,000
                        
                        
                        
                        500High
      Grade Stevia (RA 80)
                        
                        
                        3,000
                        
                        
                        
                        1,000Rebiana
      (RA 97)
                        
                        
                        1,500
                        
                        
                        
                        500




Liquidity
and Capital Resources




In
      thousands Canadian dollars
                        
                        December
      31, 2009
                        
                        
                        December
      31, 2008Cash
      and Cash Equivalents
                        
                        $
                        16,018
                        
                        
                        $
                        7,363Working
      Capital
                        
                        $
                        6,381
                        
                        
                        $
                        (2,562
                        )Total
      Assets
                        
                        $
                        229,586
                        
                        
                        $
                        174,361Total
      Liabilities
                        
                        $
                        84,743
                        
                        
                        $
                        57,364Advances
      from Customers
                        
                        
                        -
                        
                        
                        $
                        24,492Loans
      Payable (< 1year)
                        
                        $
                        44,560
                        
                        
                        $
                        10,232Loans
      Payable (> 1 year)
                        
                        $
                        13,797
                        
                        
                        
                        -Total
      Equity
                        
                        $
                        144,819
                        
                        
                        $
                        116,829




Page
25 of 41


Three
Month Period Ending December 31, 2009




Cash
generated by operating activities before changes in non-cash working capital was
$3.5 million in the fourth quarter of 2009 compared to $0.1 million generated in
the fourth quarter of 2008.   This increase in cash generated by
operating activities can be attributed to the higher cash generated by
operations, as shipments of stevia increased significantly over the comparable
period in 2008.




Non-cash
working capital items used $18.0 million of cash in the fourth quarter of 2009
relative to $10.7 million non-cash working capital used in the 2008 comparable
period.  The biggest uses for non-cash working capital in the fourth
quarter were driven by inventory production that increased the refundable value
added tax accounts in China ($0.7 million), an increase in inventory ($15.2
million), an increase in accounts receivable ($4.7 million), and a decrease in
accounts payable ($1.9 million), which were offset by an decrease in prepaid
expenses ($3.7 million) and an increase in interest payable ($0.8
million).   The biggest use for non-cash working capital in the
quarter was the purchase of raw materials for GLG’s upcoming 2010 stevia
production year.  A large portion of the stevia leaf purchases occur
each year in the third and fourth quarters and the leaf purchases are used
during GLG’s production year which runs October through September for GLG’s
production year.




Cash used by investing
activities was $12.6 million during the fourth quarter of 2009, compared
to $10.2 million in the same period in 2008.  These capital
expenditures were primarily for GLG’s new rebiana facility in Qingdao and
PP&E purchases for the new Runhao rebiana facility that was completed during
the fourth quarter of 2009.




Cash generated by financing
activities was $33.1 million in the fourth quarter of 2009 compared to
$3.1 million in the same period in 2008.  The key item that generated
the increase in cash generated by financing activities during the fourth quarter
came from the Company’s NASDAQ equity offering in November 2009 which raised net
proceeds of $29.5 million.  The main use of proceeds from this equity
offering was to meet the Company’s Runhao Investment Agreement requirements
through registered capital payments into China of $25.5 million.  Once
these registered capital funds were deposited in China, they were further used
to repay $13.9 million of short term loans in China and to pay $11 million of
Runhao’s capital expenditures during the fourth quarter.  The balance
of the use of proceeds ($4 million) was used for corporate working capital
purposes during the fourth quarter.




Prior to
completing the NASDAQ equity offering, the Company increased its short term bank
loans in China by $19.6 million to finance stevia leaf purchases. In addition,
the Company increased its related party loans by $0.6 million to finance
corporate working capital.  Additionally $3.2 million of advances from
customers had been repaid during the fourth quarter through shipments of product
to this customer.


Twelve
Month Period Ending December 31, 2009


Cash
generated by operating activities before changes in non-cash working capital
items was $6.2 million in the twelve months of 2009, compared to $1.0 million
cash used in operating activities in the comparable period of 2008. This
increase in cash generated by operating activities can be attributed to the
higher cash generated by operations, as shipments of stevia increased
significantly over the comparable period in 2008.


Page
26 of 41




Non-cash
working capital items used $23.4 million of cash in 2009.  The biggest
uses for non-cash working capital (adjusted for foreign currency impacts) in the
twelve month period were driven by asset construction and inventory production
that increased the refundable value added tax accounts in China ($4.0 million),
an increase in inventory ($13.2 million), an increase in accounts receivable
($3.4 million), an increase in prepaid expenses ($2.4 million), a decrease in
interest payable ($0.1 million), and a decrease in deferred revenue ($2.0
million) which were offset by an increase in accounts payable ($1.7
million).   A large portion of the stevia leaf purchases occur
each year in the third and fourth quarters and the leaf purchases are used
during GLG’s production year which runs October through September for GLG’s
production year.




Cash used by investing
activities was $34.4 million in the twelve months of 2009, compared to
$42.5 million in the same period in 2008.    Approximately
23% of these capital expenditures were incurred in the first quarter of 2009
driven by the completion of the leaf processing facilities by the Runhai
(Mingguang) and Runyang (Dongtai) subsidiaries.   The majority of
the remaining 77% of capital expenditures incurred during the twelve months of
the fiscal year were incurred in the set-up and construction of the Company’s
new rebiana facility.




Cash generated by financing
activities was $60.2 million in the twelve months of 2009 compared to
$38.3 million in the same period in 2008.  The key items that
generated the increase in cash generated by financing activities during the
twelve months came from (1) an increase in new short term and long term bank
loans in China to $58.1 million, (2) shareholder loans of $7.7 million, (3) net
cash proceeds from an equity offering on NASDAQ of $30.0 million and (4)
proceeds from the exercise of employee stock options of $0.3
million.  This cash generation was offset by the repayment of advances
from customers of $22.0 million and short term bank loans of $13.9
million.




The $58.1
million of bank loans includes an increase in long term bank loans of $13.8
million.  Each year GLG will be increasing its short term bank loans
in the third and fourth quarter as it raises capital to finance leaf
purchases.  The advance from a customer in 2008 was used to finance
leaf purchases in the summer and fall of 2008 whereas the Company has taken out
short term loans in China to finance leaf purchases in the summer and fall of
2009.




Financial
Resources




Cash and
cash equivalents increased by $8.6 million during the twelve months of
2009.  Working capital increased by $8.9 million from the year-end
2008 position.   The working capital increase can be attributed
to a net increase in short term liabilities during the twelve months of $15.3
million compared to the net increase in current assets of $24.2 million during
the same period.  The increase in current liabilities during the
twelve months of 2009 was driven by a number of factors.  The net
increase in short term loans during the twelve month period was $27.1 million,
an increase in accounts payable of $8.2 million, and loans from related parties
increased by $7.2 million which were offset by a repayment of advances due to
customers of $24.5 million, a decrease in interest payable of $0.8 million, and
a decrease in deferred revenue of $2.0 million.  The factors that
increased the current assets by $24.2 million include the net increase in cash
of $8.2 million (increase in cash and cash equivalents by $8.6 million and
decrease in short term investment by $0.4 million), an increase in taxes
receivable of $3.6 million, an increase in inventory of $8.1 million, and an
increase in accounts receivable of $3.0 million.


Page
27 of 41




The
Company’s working capital and working capital requirements fluctuate from
quarter to quarter depending on, among other factors, the annual stevia harvest
in China (third and fourth quarter each year), the production output along with
the amount of sales conducted during the period.  The value of raw
material in inventory is the highest in the fourth quarter due to the fact that
the Company purchases leaf during the third and fourth quarter for the entire
production year which runs October through September each year.  The
Company’s principal working capital needs include accounts receivable, taxes
receivable, inventory, prepaid expenses, and other current assets, and accounts
payable and interest payable.




The
Company had $16 million of cash and cash equivalents as at December 31,
2009.  The Company had also successfully negotiated a new loan with
the Construction Bank of China for approximately $9.2 million in January
2010.    Over the course of the ensuing year, $36.8 million
in short term loans in China will mature and the Company expects it will be able
to renew these loan facilities for another term when they come
due.  The Company successfully renewed several loans during 2009 and
expects to continue to be able to renew these short term loans in
2010.




The
Company’s preliminary capital expenditure estimate for 2010 is $10 to $15
million (see 2010 Outlook section for further details). The Company plans to
finance these investment needs with cash on hand, cash from operations and
credit available from banks in China.    The Company also
believes that it has the ability to access additional debt or equity financing
that would be required to finance the 2010 capital
expenditures.  However, if such debt facilities or equity financing is
not available on terms that are acceptable to the Company, the Company may be
required to curtail its intended initiatives and transactions, which may result
in incurring certain costs associated therewith.




Balance
Sheet




In
comparison to December 31, 2008, the total assets increased by $55.2 million
which was split by an increase in current assets of $24.2 million and an
increase in fixed and other long term assets of $31.0 million.  The
increase in fixed assets reflects the increased investments made during the
twelve months of fiscal 2009 in completion of the Mingguang and Dongtai stevia
extract facilities and the investment in the rebiana facility constructed in
Qingdao.  With respect to the plant property values on the balance
sheet, the strengthening of the Canadian Dollar versus the RMB resulted in the
conversion of the balance sheets of foreign subsidiaries at lower rates, thus
decreasing the Canadian dollar value of balance sheet items. In
comparison to December 31, 2008, the current liabilities increased by a $15.3
million driven by the net increase in short term loans of $27.1 million, an
increase in accounts payable of $8.2 million and loans from related parties
increased by $7.2 million which were offset by a repayment of advances due to
customers of $24.5 million, a decrease in interest payable of $0.8 million, and
a decrease in deferred revenue of $2.0 million.


Shareholders’
equity increased by $28 million which was driven by the NASDAQ initial public
offering in the fourth quarter of 2009 raising net proceeds of $29.5 million,
the issuance of the final tranche of shares for the AHTD acquisition of $8.3
million, $2.6 million in stock based compensation awards for the year, net
income for the period of $0.8 million, the exercise of stock options of $0.3
million, income tax recovery related to share issuance costs of $ 1.0 million,
which was offset by a decline in the accumulated other comprehensive income
account of $14.3 million.   With respect to the decline in the
other comprehensive income account, the strengthening of the Canadian Dollar
versus the RMB resulted in the conversion of the balance sheets of
self-sustaining foreign subsidiaries at lower rates.


Page
28 of 41




Advances
from Customers and Interest Payable




In July
2008, the Company negotiated a new customer prepayment for the amount of US$20
million (CDN$25.2 million) during the fourth quarter of 2008 for the delivery of
high grade stevia extract for the period October 1, 2008 through December 31,
2009.  The US$20 million was received in July 2008 and this prepayment
bears an interest cost of LIBOR plus 6% during the term of this prepayment
financing.  The Company will deliver product against this obligation
over the period October 1, 2008 through September 30, 2009.   The
prepayment and accrued interest will be repaid by way of the sale of stevia
extracts to the Strategic Customer.  Interest at LIBOR + 6% is charged
per annum.  The prepayment was collateralized by a general security
agreement over all assets of the Company. This prepayment was fully paid off in
the fourth quarter of 2009 compared to a balance of $24.5 million or US$20.0
million as at December 31, 2008.




The
Company has used its banking facilities in China to finance leaf purchases going
forward and secured funds through its relationships with the Agriculture Bank of
China and the Construction Bank of China in 2009.




As at
December 31, 2009 we accrued interest payable of $9,675 on short term borrowing
from a private lender, $63,863 on loans from banking facilities in China and
interest payable of $195,374 on loan from a related party (see Related Parties
Transactions and Balances).




China
Lines of Credit and Short Term Loans




During
the fourth quarter of 2009, the Company repaid the following loans from some of
the proceeds raised from its equity issuance in November 2009:




·
            A
      loan of $6.2 million (RMB 37 million), which was obtained from Dongtai
      Rural Credit Union, bore interest of 6.66% per annum and matured on
      November 20, 2009.


·
            A
      loan of $8.4 million (RMB 50 million), which was obtained from
      Construction Bank of China, bore interest of 5.31% per annum and matured
      on December 25, 2009.




During
2009, the Company obtained or renewed the following short term loans in China to
finance its expansion and operations:




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




Page
29 of 41


Additionally,
the Company also obtained a loan for $US 500,000 for corporate working capital
purposes in October 2009 from a Private Individual.  The interest rate
on this loan is 8% per annum and is due in October 2010.




During
2009, the Company obtained or renewed the following long term loans to finance
its expansion and operations:




Loan
      amount in
                                            C$
                                          
                                          Loan
      amount in
                                            RMB
                                          
                                          Maturity
      Date
                                          
                                          Interest
                                            rateper
                                            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


All the
loans are secured by the Company’s subsidiaries with a total carrying value of
$118,836,040.  Two pieces of land of two subsidiaries were also used
as collateral for the above facilities.




Contractual
Obligations




(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.




(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.
      However, we continue to enjoy the benefit of the exclusive growing area
      and have received verbal assurances from the government of Juancheng
      County that this will not be affected by us not establishing a stevia
      processing facility within the timeframe set out in the investment
      agreement.




(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.


Page
30 of 41




A
summary of the Company’s contractual obligations with defined payment dates is
presented below.


In
      thousands of
                            Canadian
      Dollars
                          
                          2010
                          
                          
                          2011
                          
                          
                          2012
                          
                          
                          2013
                          
                          
                          2014
                          
                          
                          Thereafter,
                          
                          
                          TotalOperating
      Leases
                          
                          $
                          180
                          
                          
                          $
                          153
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          242
                          
                          
                          $
                          575Capital
      Expenditure Commitments
                          
                          $
                          1,400
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          1,400Total
                          
                          $
                          1,580
                          
                          
                          $
                          153
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          242
                          
                          
                          $
                          1,975




Capital
Structure




Outstanding
Share Data as at March 31, 2010




SharesCommon
      Shares Issued March 31, 2010
                            
                            
                            25,417,723Reserved
      For IssuanceStock
      Options
                            
                            
                            1,253,783Reserved
      for Issuance – Other
                            
                            
                            62,500Total
      Reserved for Issuance
                            
                            
                            1,316,283Fully
      Diluted Shares
                            
                            
                            26,734,006




China
laws require all wholly foreign-owned enterprises to set aside 10% of retained
earnings as a general reserve fund for employee benefits every year until such a
fund has reached 50% of the Company's registered capital. The reserve funds are
established for covering corporate obligations in the event of business
liquidation.  The reserve funds are recorded as part of retained
earnings (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. The total reserve of
the Company at December 31, 2009 is $0.5 million (December 31, 2008 - $0.3
million).  This reserve fund applies to all of GLG’s China based
subsidiaries.  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.




Off-Balance
Sheet Arrangements




The
Company had no off-balance sheet arrangements.




Transactions
with Related Parties




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:




Page
31 of 41




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.




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
                                            inUS$
                                          
                                          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
32 of 41


2010
Outlook




Market
and Operations 2010 Outlook




Our key
operational objectives for 2010 are to:




1.
            Generate
      sales growth from our direct sales force in key international
      markets;




2.
            Commence
      operation of new Runhao facilities to increase production capacity and
      revenues;




3.
            Harvest
      enough proprietary leaf in 2010 harvest to satisfy 100% of our production
      requirements with our proprietary
leaf;




4.
            Organize
      stevia growers in partnership with local governments in China to meet
      expected 2010 stevia demand;




5.
            Continue
      to develop additional leaf growing areas;
and




6.
            Continue
      R&D program for high RA yielding seeds and seedlings, process
      innovation and product use
formulations.




Revenue
2010 Outlook




The
market for stevia in key markets such as the United States showed strong growth
in 2009.    According to an August 2009 report published by
Mintel International Group Ltd. entitled Stevia and other Natural Sweeteners,
over 115 new food and beverage products containing stevia were launched in the
United States in the first seven months of 2009 by leading global food and
beverage companies such as The Coca Cola Company, Cargill, PepsiCo and Merisant
Company.  We believe that these product launches, coupled with underlying
trends and key market drivers, present favorable conditions for stevia’s wider
global acceptance and continued growth in 2010.




According
to Mintel’s August 2009 report, United States retail sales of products
containing stevia topped $100 million in 2009, including tabletop sweeteners and
food and beverage products, and they could reach US$2 billion by the end of
2011.  We believe growing consumer preference for all-natural products,
together with increasing rates of obesity and diabetes, have created significant
demand for an all-natural, zero-calorie sweetener alternative.  In 2009,
Coca-Cola and PepsiCo launched stevia-sweetened versions of their Vitamin Water
and SoBe enhanced water drinks, as well as other products. Kraft, the largest
United States food company, and Hansen, the beverage company, have also launched
TruviaTM-sweetened
drink products. Beverage companies have also been combining stevia with sugar in
low-calorie products, such as PepsiCo’s Trop 50 orange juice, Coke’s Sprite
Green and Kraft’s Nature’s Splash powdered drinks.   In 2010, we have
seen major new launches of products sweetened with stevia.  Coke has
recently launched Vitamin Water ZeroTM, Kraft
has launched Crystal Light Pure FitnessTM product
sweetened with TruviaTM and
Breyers launched its YoCrunch® 100 calorie yogurt pack product sweetened with
TruviaTM.




We
believe stevia extracts such as rebiana are positioned to become leading
high-intensity sweeteners as a result of their appealing profile:




·
            zero
      calories;


·
            100%
      natural and thus perceived as healthier than artificial
      sweeteners;


·
            remain
      stable under heat and thus can be utilized in processed
    foods;


Page
33 of 41




·
            200
      to 300 times sweeter than sugar;
and


·
            measure
      zero on the glycemic index, which is important in the diabetic market and
      benefits from growing consumer understanding of the value of a low
      glycemic diet.




Our
strategic alliance partner Cargill has recently reported that it has captured 8%
of the alternate sweetener market in the United States since it launched its
TruviaTM
tabletop product against the likes of Splenda, Sweet’N Lo and Equal. 
Outside of Coke and Pepsi’s use of TruviaTM and
Purevia in their beverages, TruviaTMhas
been the stevia sweetener for the majority of new product launches in the United
States since late 2008.  Additionally, Cargill has announced that it
currently has over 100 stevia-related projects underway with its
customers.




We
believe that China presents another key market opportunity for our high-grade
stevia products.  China currently faces a shortfall of sugar production and
in 2009 imported over 1.5 million metric tons of sugar worth approximately
US$1.1 billion.  This sugar shortage is expected to grow as the population
continues to grow and per capita sugar consumption increases.  We believe
that this sugar supply shortfall creates a market opportunity for stevia-based
sweeteners and are actively developing this market opportunity. We believe that
we are well-positioned to develop this market opportunity because of our
relationships with Chinese provincial and central government
agencies.




GLG is
also actively working on opportunities in other markets such as Japan,
Australia, India and a number of countries in South America.




Key Assumptions in Our
Revenue Outlook




1.
            Foreign exchange rate
      assumptions




We
      have planned our revenue outlook assuming that the Canadian dollar will be
      at par with the United States dollar for 2010. This assumption is based on
      our review of key exchange rate forecasts from TD, CIBC and RBC.  Any
      material change to this assumption could cause our revenue to be lower
      than expected.




We
      have also assumed a 5% appreciation of RMB against the United States
      dollar in 2010.  Any material change to this assumption could cause
      our revenue to be lower than
expected.




2.
            Continued product
      launches in key markets




Our
      revenue growth outlook is dependent on continued product launches in key
      markets including the United States, China, Japan, India and several South
      American countries.  Any material change to this assumption could
      cause our revenue to be lower than
expected.




3.
            Continued positive
      customer acceptance to new stevia sweetened
  products




Mintel’s
      2009 study on Stevia in the United States market indicated initial
      positive response by consumers to the new products launched sweetened by
      stevia as well as the successful sales penetration key tabletop products
      such as TruviaTM
      have achieved since their launch.  We have assumed continued positive
      response by consumers to products sweetened with stevia. Any material
      change to this assumption could cause our revenue to be lower than
      expected.


Page
34 of 41




4.
            Continued price
      reductions on stevia extracts expected throughout
    2010




We
      expect continued price reductions for finished high purity stevia extracts
      driven by cost efficiencies achieved by key industry players and have
      factored such price decreases into our revenue outlook.  Any material
      change to this assumption could cause our revenue to be lower than
      expected.




5.
            Significant weighting
      of 2010 revenues in Q3 and Q4 mirroring 2009 revenue
      profile




We
      expect to generate 70 to 75% of our 2010 revenue in the third and fourth
      quarters of 2010.  The first quarter will reflect the annual impact
      of Chinese New Year on our production, as well as the impact of additional
      maintenance work conducted at our production facilities (approximately 3
      weeks production capacity).  Runhao was undergoing its GMP
      certifications and audits during the first quarter of 2010 and is not
      expected to contribute significantly to finished
  product.




EBITDA
2010 Outlook




Our
expectation for EBITDA margin (percentage of revenues) for 2010 is 24 to 26% EBITDA margin on full year
revenues.




Additional
to the importance of achieving the revenue targets above, the EBITDA margin
outlook for 2010 is dependent upon several key assumptions:




1.
            We
      will use 100% of its proprietary leaf starting late in the third quarter
      of 2010.  Any material change to this assumption could cause our
      EBITDA to be lower than expected.




2.
            Leaf
      prices remain stable around 2009 levels. Any material change to this
      assumption could cause our EBITDA to be lower than
    expected.




3.
            SG&A
      (excluding stock-based compensation and G&A amortization) stays within
      the range of $8 to $10 million. Any material change to this assumption
      could cause our EBITDA to be lower than
  expected.




Capital
Expenditures - 2010 Outlook




We expect
to undertake some key capital projects in 2010 including the completion of our
water treatment upgrade program and a new R&D innovation centre.  The
R&D innovation centre has the potential for government funding in China and
we are currently pursuing such support.  This new centre will focus on
R&D across all aspects of the stevia supply chain, including agriculture,
extract processing, finished product production and product formulation
innovation.




Our
outlook for 2010 is:




In
      Canadian Dollars
                                        
                                        2009
      Actual
                                        
                                        2010
      EstimateRevenue
                                        
                                        $
                                        41.9
      million
                                        
                                        $
                                        70
      to 80 millionEBITDA
                                        
                                        $
                                        10.5
      million
                                        
                                        $
                                        17
      to 21 millionCapital
      Expenditures (Capex)
                                        
                                        $
                                        40.8
      million
                                        
                                        $
                                        10
      to 15
million




Page
35 of 41


Financial
and Other Instruments




The
Company’s financial instruments comprise cash and cash equivalents and
restricted cash, classified as “held‐for‐trading”, accounts receivable and
certain other assets that are financial instruments, classified as “loans and
receivables”, and short term loans, accounts payable, interest payable, advance
from customer, due to related party, and non- current bank loan, classified as
“other financial liabilities”.


The
Company currently does not have any hedge instruments.




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




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.




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.




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.


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36 of 41




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.




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.




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).




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.




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).




Recent
Accounting Pronouncements




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


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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 will evaluate the impact on this new
section when applicable.




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. The Company will evaluate the
impact on this new section when applicable.




International
Financial Reporting Standards ("IFRS")




On
February 13, 2008, the CICA Accounting Standard Board confirmed that the use of
International Financial Reporting Standards ("IFRS") will be required, for
fiscal years beginning on or after January 1, 2011, for publicly accountable
profit-oriented enterprises. After that date, IFRS will replace Canadian GAAP
for those enterprises. Changing from current Canadian GAAP to IFRS will be a
significant undertaking that may materially affect the Company’s reported
financial position and results of operations.




The
Accounting Standards Board of the Canadian Institute of Chartered Accountants
requires all publicly accountable enterprises to report under International
Financial Reporting Standards (IFRS) for the years beginning on or after January
1, 2011. However, National Instrument 52-107 allows foreign issuers, as defined
by the Securities and Exchange Commission (SEC), such as GLG, to file with
Canadian securities regulators financial statements prepared in accordance with
U.S. GAAP. As such, the Company has decided not to report under IFRS by 2011 and
will report under U.S. GAAP as of January 1, 2011.




In August
2008, the SEC issued a roadmap for the potential convergence to IFRS for U.S.
issuers and foreign issuers. The proposal stipulates that the SEC will decide in
2011 whether to move forward with the convergence to IFRS with the transition
beginning in 2014. Should the SEC adopt such a proposal, the Company will
convert its reporting to IFRS at such time.




Disclosure
Controls and Internal Controls over Financial Reporting




The
Company’s disclosure controls and procedures were designed to provide reasonable
assurance that material information relating to the Company, including its
consolidated subsidiaries, is made known to management in a timely manner so
that information required to be disclosed by the Company under securities
legislation is recorded, processed, summarized and reported within the time
periods specified in applicable securities legislation.


Page
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The Company’s management, under the
direction and supervision of the Chief Executive Officer and Chief Financial
Officer, are also responsible for establishing and maintaining internal control
over financial reporting. These controls are designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with Canadian
GAAP),
including a reconciliation of net loss to US Generally Accepted Accounting
Principles (US GAAP).




There
have been no changes in the Company’s internal control over financial reporting
for the quarter ended December 31, 2009 that have materially affected, or are
reasonably likely to materially affect, its internal control over financial
reporting.




The
Company’s disclosure controls and procedures were designed to provide reasonable
assurance that material information relating to the Company, including its
consolidated subsidiaries, is made known to management in a timely manner so
that information required to be disclosed by the Company under securities
legislation is recorded, processed, summarized and reported within the time
periods specified in applicable securities legislation. In
March 2008, the Company has adopted a Corporate Disclosure Policy.  A
Disclosure Committee has been established to oversee the Corporate
Disclosures.  The Policy has been communicated to management and was
implemented accordingly.




The
Company’s management, under the direction and supervision of the Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s internal control over financial reporting as at December 31, 2009, and
has concluded, based on its evaluation, that certain controls within its ICFR
were not effective for the year ended December 31, 2009.




The
Company did not have sufficient accounting documentation, policies, procedures
or segregation of duties for certain transaction
cycles.  Specifically, the Company did not have a significant number
of staff in China that possesses an understanding of Canadian public capital
market requirements and Canadian GAAP.




The
Company began addressing these issues in 2008 and continued throughout 2009. The
Company added additional financial staff at the Company’s head office to oversee
the financial reporting and consulted with tax advisors on various tax issues as
well as hired accountants in China who have had knowledge of Chinese GAAP and
internal control over financial reporting to help address some of the issue
related to having limited personnel in China who have public company reporting
experience.




Management
has initiated an assessment of the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2010, based on the criteria
set forth in the “Internal Control – Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). 
The objective of this assessment will be to determine whether the Company’s
internal control over financial reporting is effective as of December 31,
2010.




As part
of this assessment, management will document its internal controls, evaluate
their design and then test their effectiveness at both the entity level and the
business process level.  This evaluation will be performed in conjunction
with the Company`s external auditors who will also provide an opinion on the
effectiveness of the Company`s internal control over financial reporting as of
December 31, 2010.  This assessment process will satisfy the requirements
of the Sarbanes Oxley Act of 2002 (“SOX”) as well as the
requirements of National Instrument 52-109.


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It should
be noted that while the officers of the Company have certified the Company’s
Year-end Filings, they do not expect that the disclosure controls and procedures
or internal controls over financial reporting will prevent all errors and
fraud.  A control system, no matter how well conceived or implemented, can
only provide reasonable, not absolute, assurance that the objectives of the
control system are met.




Risks
Related to the Company’s Business




This
section describes the material risks affecting the Company’s business, financial
condition, operating results and prospects.  A prospective investor
should carefully consider the risk factors set out below and consult with his,
hers or its investment and professional advisors before making an investment
decision.  There may be other risks and uncertainties that are not
known to the Company or that the Company currently believes are not material,
but which also may have a material adverse effect on the Company’s business,
financial condition, operating results or prospects.  In that case,
the trading price of the common shares could decline substantially, and
investors may lose all or part of the value of the common shares held by
them.




There are
a number of risk factors that could materially affect the business of GLG, which
include but are not limited to the risk factors set out below.  The
Company has been structured to minimize these risks as best
possible.   More details about the following risk factors can be
found in the Company’s Annual Information Form filed on SEDAR at www.sedar.com.




·
            Intellectual
      Property Infringement


·
            Product
      Liability Costs


·
            Manufacturing
      Risk


·
            Inventory
      Risk


·
            Customer
      Concentration Risk


·
            Competition


·
            Government
      Regulations


·
            Consumer
      Perception of Products


·
            Changing
      Consumer Preferences


·
            Market
      Acceptance


·
            Dependence
      on Key Personnel


·
            Volatility
      of Share Prices




Risks
Associated with Doing Business in the People’s Republic of China




The
Company faces the following additional risk factors that are unique to it doing
business in China.  More details about the following risk factors can
be found in the Company’s Annual Information Form.




·
            Government
      Involvement


·
            Changes
      in the Laws and Regulations in the People’s Republic of
    China


·
            The
      Chinese Legal and Accounting System


·
            Currency
      Controls


·
            Additional
      Compliance Costs in the People’s Republic of
  China


Page
40 of 41




·
            Difficulties
      Establishing Adequate Management, Legal and Financial Controls in the
      People’s Republic of China


·
            Capital
      Outflow Policies in the People’s Republic of
  China


·
            Jurisdictional
      and Enforcement Issues


·
            Political
      System in the People’s Republic of
China




Additional
Information




Additional
information relating to the Company is available on its website (www.glglifetech.com),
in its Annual Information Form available on SEDAR
(www.sedar.com).


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