GLG Life Tech Corporation Announces FY 08 Q4 and Fiscal Year Results

GLG Life Tech Corporation (CA:GLG: news , chart , profile ) ("GLG" or the "Company"), a vertically integrated leader in the agricultural and industrial development of rebiana including R&D, stevia plant growth, high purity extraction, marketing and distribution, announces financial results for the fourth quarter and fiscal year ended December 31, 2008.

The Company has focused on expanding its production capacity during 2008 to meet the expected and contracted requirements of its customers and to address the growth in stevia demand that the Company expects from the opening of additional markets during 2008 including the United States, Australia and New Zealand. Stevia was approved by FSANZ, (Food Standards Australia New Zealand) in October 2008 and in December 2008 the U.S. FDA issued letters of "no objection" to two companies who self-affirmed a highly purified form of stevia extract as Generally Recognized as Safe (GRAS). GLG increased capacity at its Runde facility in Qingdao (Shandong province, China) as well as focused on the completion of two new leaf processing plants in the Anhui and Jiangsu provinces of China during the year. GLG has also focused on labor recruitment for its new facilities and reached an employee headcount level of 808 at year-end 2008 in comparison to 215 at year-end 2007.

2008 Business Highlights
New Markets Opened Up for Stevia as a Food Ingredient: On December 17, 2008, the FDA confirmed that it had no objection to the conclusion of an independent expert panel which reviewed research of rebiana and concluded that it is generally recognized as safe for use (GRAS) as a general purpose sweetener, including for use in food and beverages. This allows the use of rebiana as a food and beverage ingredient in the United States. New Zealand and Australia also approved stevia for use as a food ingredient in October of 2008.

Renewable Ten Year Strategic Alliance and Supply Agreement with Major Customer Signed: In April 2008, the Company signed a renewable ten-year strategic alliance and supply contract with Cargill, of Wayzata, MN, for the supply of high-grade stevia extract as amended on August 8, 2008.

GLG-Weider Sweet Naturals (SN) Venture Established for Sale and Distribution of High Grade Stevia Extracts: GLG and Weider Global Nutrition LLC ("Weider") signed an agreement in September 2008 to establish a new venture focused on the sale and distribution of consumer and industrial stevia products. SN is now active in 17 countries pursuing sales opportunities.

High Grade Stevia Production Line Completed: GLG completed a 1,000 metric ton (MT) high grade stevia line in 2008, a 400% increase in high grade stevia extract capacity. This facility is also capable of 500 MT of rebiana production.

New Leaf Processing Plants Completed; Commencement of Operations in January 2009: The Company completed two new stevia leaf processing plants and have confirmed an 80% further increase in capacity over what was originally planned. The two facilities have added 36,000 MT of leaf processing capacity or a 720% increase.

Self-Affirmed GRAS Status Achieved: In December, 2008, GLG declared self-affirmation of GRAS status (generally recognized as safe) for its 97% pure Rebaudioside A material which is sold under the trade name Rebpure(TM) and is also known generically as rebiana.

New High Rebaudioside A (RA) Stevia Seed and Seedling Strains Developed: Six new high yielding Rebaudioside A (RA) stevia seed strains with an RA content on average in excess of 70% were developed in 2008.

GLG: Well Positioned for 2009 Expected Stevia Market Growth
As a result of GLG's significant efforts to increase capacity during 2008 for the production of high grade stevia and rebiana products, the Company is well positioned to benefit from expected growth in the global marketplace as a result of regulatory changes that allow for the use of high grade stevia extracts in food and beverages.

Revenues: Consolidated revenues for the year ending December 31, 2008 were $9.9 million, an increase of 8% over $9.2 million in revenue for 2007. Stevia revenue accounted for the entire $9.9 million for the full year in 2008, an increase of 21% over $8.2 in 2007. The 2007 revenue figure also includes $1 million in procurement revenue. Revenues for the full year landed close to the low end of the Company's revised guidance estimate of $10 to $12 million for the full year as announced on November 15, 2008.

EBITDA: The Company's EBITDA for 2008 was ($1.0) million against revised EBITDA guidance issued in November 2008 of ($0.2) on revenues of approximately $10 million or a variance of ($0.8 million).
Contributors to the negative performance to revised EBITDA guidance were:

(1) no revenue was accrued in its procurement business in 2008 given
uncertainty surrounding the collection of 2007 amounts owed (Impact
on consolidated gross margin on 2008 EBITDA performance:
$0.4 million)

(2) lower gross profit margin (excluding depreciation) in the fourth
quarter than expected on stevia revenues (Impact on 2008 EBITDA
performance: $0.2 million)

(3) higher SG&A incurred in the fourth quarter with actual commencement
of Mingguang and Dongtai facility operations delayed until first
quarter 2009 (Impact on 2008 EBITDA performance: $0.2 million)

CAPEX: GLG's capital expenditures in 2008 were $57.8 million for 2008 versus $6.5 million in 2007. This result is within the Company's revised guidance issued on November 15, 2008 which indicated capital expenditures would be between $55-60 million for the full year. The Mingguang and Dongtai leaf processing facilities began production on January 6, 2009. Management expects production to ramp-up over the first quarter in 2009 before the Company will significantly benefit from the new leaf processing capacity and reduce its year-end order backlog. This is due to three factors a) traditional impact of Chinese New Year holiday where GLG's facilities are shut down for approximately three weeks b) expected ramp-up time associated with new facilities and c) each new facility underwent a food safety audit. These audits were conducted starting in January and all facilities were certified ready to deliver product in mid-March 2009.

Gross Profit
Gross profit for the year ending December 31, 2008 was $2.3 million, a decrease of 12% over $2.7 million in gross profit for 2007. Gross profit reflects both margins from GLG stevia operations as well margin from procurement revenues related to the YHT chain stores business in 2007. The reduction in gross profit can be attributed to there being no YHT related revenue in 2008 as compared to 2007 where revenue from the procurement business segment contributed a gross profit of $0.8 million. Gross profit from the stevia business segment was $2.3 million in 2008 an increase of 27% relative to the gross profit for stevia of $1.8 million in 2007. The increase in stevia gross profit was driven by increased stevia sales in 2008 as compared to 2007. The gross profit margin on stevia sales for 2008 was 24% compared to 22.4% gross profit margin achieved on stevia sales in 2007.

Gross profit for the fourth quarter ending December 31, 2008 was $0.9 million, an increase of 5% over $0.89 million in gross profit for Q4 2007. Gross profit reflects both margins from GLG stevia operations as well as margin from procurement revenues related to the YHT chain store business in 2007. The main driver for the increase in gross profit for the fourth quarter 2008 compared with the fourth quarter of 2007 was higher stevia sales. Gross profit for the fourth quarter 2008 for stevia revenue grew 61% over gross profit generated on stevia revenue for the same period in 2007.

General and administration expenses include sales, general and administration costs (SG&A), depreciation and amortization expenses on non-manufacturing fixed assets and stock based compensation.

Sales, General, and Administration (SG&A) Expenses
SG&A expenses for the twelve months ended December 31, 2008 were $5.1 million an increase of $3.5 million or 222% over the same period for 2007 ($1.6 million). The key expense categories that increased were professional fees, salaries, consulting fees, office, travel and rental which accounted for 89% of the year over year increase. GLG employee count at year end 2008 was 808, a 276% increase of 591 people over year end 2007 (215). The majority of this headcount is based in China and work in production. GLG hosted an extensive recruiting and training program to hire employees in advance of beginning operations at the Mingguang and Dongtai facilities. As a result the salary costs associated with the Mingguang and Dongtai production employees are reflected in the SG&A expenses rather than production costs during 2008. As the new facilities begin production in 2009, a large proportion of these costs will be reflected in cost of sales or inventory. Approximately 38% or $0.8 million of the salaries, office and rental expenses during 2008 were either one-time in nature, pre-production expense related or salary related costs for production staff at the new subsidiaries (total of these three SG&A categories was $2.2 million). There were additional start-up related expenses in China and Canada in office, rental and business tax and licenses associated with the initial set-up of the new facilities in China as well as the new GLG-Weider venture established to handle sales and distribution of stevia extract products.

The SG&A increase for the fourth quarter 2008 over the fourth quarter 2007 was $1.4 million or a 246% increase. Salaries, consulting fees and office expenses accounted for 82% of this increase over the fourth quarter in 2007. The SG&A increase for the fourth quarter 2008 over the third quarter 2008 was $0.5 million or a 32% increase. This increase was driven primarily by increases in start-up related costs of the new facilities in China including office set-up and pre-production expenses associated with plant testing as well as expenses associated with the GLG-Weider venture. GLG increased its employee base to 808 as of December 31, 2008 from the end of the third quarter 2008 levels of 543, reflecting a 49% increase. A large proportion of the employee additions have been in advance of the start-up of the production needs of the new Greenfield facilities. As a result, certain salary and salary related costs for new production employees that appear in the fourth quarter SG&A costs will move to direct production costs once these new facilities are up and running. Salary costs were up $0.3 million and office costs we up $0.2 million over the third quarter 2008 as GLG prepared for the new facilities coming into operation.

Stock Based Compensation Expense
Stock based compensation was $1.3 million for 2008 compared with zero in 2007. An amended stock compensation plan was approved by shareholders at the Company's 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 1,474,480 compensation securities including both options and restricted shares. 84% of these grants have three year vesting and performance criteria requirements to be fully earned by the recipients. The majority of 2008 stock compensation expenses were recognized in the fourth quarter 2008 since the full year's performance against compensation plan targets was not known until year-end.

G&A Depreciation and Amortization
G&A related depreciation and amortization expenses for the twelve months ended 2008 was $0.8 million, an increase of 5100% over $0.01 million for the year ended 2007. The main driver for the increase in amortization is related to the intangible patent amortization at the beginning of 2008 from the acquisition of Agricultural High Tech Developments Limited. The increase in amortization expense for the fourth quarter was impacted for the same reason.

YHT Chain Stores Business Update
Since its inception as a public company in 2005, the Company has been engaged in the distribution of stevia and other nutritional health products produced or sourced by or on behalf of the Company in China through Shandong Yong He Tang Health Products Chain Stores Limited ("YHT"). The Company extended loans to YHT in 2005 and 2006 to support the growth of the chain stores' marketing efforts. The loans are not secured and were valued at $2,290,002 (US$1,870,000) at December 31, 2008. As at December 31, 2008, the Company's accounts receivable and interest receivable included $199,320 and $622,029, respectively, owing from YHT.

During 2008, the Company reduced its involvement with YHT and on September 8, 2008 entered into a Heads of Agreement with YHT. In accordance with the Heads of Agreement, which is non-binding, the Company will convert all amounts owing from YHT into a passive equity investment. As part of this agreement, the Company has extended the due date of the loans to June 2009. The Company believes that these changes will allow GLG to focus exclusively on the development of its stevia business.

As the Heads of Agreement is non-binding and due to the uncertainty associated with the collectability of amounts owed by YHT and entering into a definitive binding agreement, the Company has recorded an allowance of $3,111,350 against the loans, interest and accounts receivable. The allowance has been recorded as part of other expenses in the consolidated statement of operations. The Company has not recognized any revenue from its contract with YHT in 2008 and as a result, procurement revenues in 2008 were $nil versus 2007 revenues of $1.0 million.

Other expense for the twelve months ended December 31, 2008 was $7.2 million, a 459% increase compared to other expenses of $1.3 million for the comparable period in 2007. There were two items that contributed 82% to the other expense for 2008; (1) unrealized foreign exchange loss on US dollar denominated liabilities that GLG was holding at year-end ($2.8 million) and (2) the provision that GLG has taken on the amounts due from YHT ($3.1 million). Both of these items are non-cash expenses. With respect to the US dollar denominated liability, GLG has a customer order denominated in US dollars matched against this liability so the real foreign exchange risk has been managed. Interest expenses of $2.0 million for the 2008 twelve month period were generated by (1) the convertible debenture, (2) interest on the US$7 million advances from customer, and (3) the US$20 million advances from a customer. The US$7 million customer prepayment was paid off as of November 30, 2008. As GLG ships product to this customer in 2009, the US$20 million customer prepayment balance and interest expense will also decrease.
Other Income (expenses) for the fourth quarter 2008 was $6.1 million, an increase of 1168% over the fourth quarter 2007 Other Expense of $0.5 million and was impacted by the same items as described for the twelve months period.

Cash and cash equivalents decreased by $20.9 million from the balance of December 31, 2007. Working capital decreased by $32.4 million from the year-end 2007 position. The working capital decrease can be attributed to a net decrease in cash for the year of $21 million used to fund P&E expenditures and a net increase in accounts payable related to PP&E expenditures of $12.7 million. Total liabilities include Advances from Customer in the amount of $24.5 million which was used to fund the purchase of stevia leaf in 2008 in order to fulfill the customer's 2008/09 order. The increase in total equity since December 31, 2007 reflects the exercise of $12.5 million in warrants on January 30, 2008, the exercise of 208,067 stock options in the second quarter, the conversion of the $6 million convertible debenture at the end of the second quarter and an additional $5 million of warrants exercised in August 2008.

Cash used by operating activities was $10.2 million in the fourth quarter and $19.8 million for the twelve months ended December 31, 2008, compared to $7.9 million used in the fourth quarter of 2007 and 10.1 million used during 2007. The biggest use for non-cash working capital in the quarter and for fiscal 2008 was the purchase of raw materials for GLG's upcoming 2009 stevia production year and prepayments to suppliers for equipment for its new facilities in Mingguang and Dongtai. Stevia leaf purchases occurs each year in the third and fourth quarters and the leaf purchases are used during GLG's production year which runs October through September of each year.

Cash used by investing activities was $10.6 million in the fourth quarter and $42.5 million for the twelve months ended December 31, 2008, compared to $5.3 million and $6.6 million in the same periods in 2007. The majority of the cash outflow was to finance the construction in progress in Dongtai and Mingguang for the new Greenfield stevia leaf processing plants.

Cash generated by financing activities was $10.6 million in the fourth quarter and $38.3 million for the twelve months ended December 31, 2008, compared to $32.2 million and $44.4 million in the same periods in 2007. The key item attributing to the increase in cash generated by financing activities during the quarter came from a net increase in short term bank loans of $8.4 million from two banks in China that the Company had established credit facilities with in 2008.

Market and Operations 2009 Outlook
The Company expects the market for its stevia products to be stronger in 2009 compared to demand seen in 2008. This expectation is driven by positive regulatory changes in several markets around the world for the allowance of stevia as an ingredient in food and beverages. Previously many markets allowed it only as a dietary supplement. The leading market development was made in the United States where high purity Rebaudioside A stevia extract achieved GRAS status (generally recognized as safe). Several important product launches containing stevia were made by industry leaders in the US at the end of 2008 and during the first quarter of 2009 which the Company expects will lend to a general increase in demand for stevia. GLG's strategic alliance partner Cargill successfully launched a tabletop sweetener (TRUVIA(TM)) in July 2008 using rebiana (rebaudioside A 97%). The Coca-Cola Company launched Sprite Green(TM), Odwalla juices and Vitaminwater10 using rebiana late in the fourth quarter of 2008 and during the first quarter of 2009. PepsiCo also launched a series of beverages sweetened with high purity Rebaudioside A including Trop50 and Sobe Lifewaters. The Company expects numerous new product launches in 2009 based on feedback received from customers and new prospects. The current economic recession has the potential to impact the Company's financial results negatively if food and beverage companies reduce or delay plans to launch new stevia based products.

Revenue and EBITDA - 2009 Outlook
The Company's stevia operations are expected to account for 100% of revenue growth in 2009. This growth will be based on delivery against existing customer orders for 2009 as well as expected new orders for the 2009/2010 delivery period. 2009 revenue is expected to be significantly weighted towards the second half of 2009. This expectation is driven by the following:
a) The Company has approximately US$30 million under contract for delivery in 2009 as of the date of the MD&A. This would equate to CDN$37.5 million using an average exchange rate assumption of $1.25 per $US for 2009 (Source: RBC Economic and Financial Outlook March 2009).
b) There was limited production and shipments in the first quarter due to plant commissioning activities and the customary plant shut down in February for Chinese New Year celebrations.
c) The new facilities in Dongtai and Mingguang underwent food safety audits which were completed mid-March. These new facilities are ramping up their production levels and commencing customer shipments. (see also capital expenditures section).
d) New customer contracts are expected to be closed during 2009. Delivery against these contracts is expected to begin in the third and fourth quarters to meet the remaining $12.5 million (US$10 million) in revenue expected to be delivered during 2009 and in order to meet the lower end of revenue guidance.
e) The Company expects to generate positive EBITDA starting in the second quarter of 2009 based on sufficient revenue being generated to cover cash related operating expenses.

Capital Expenditures - 2009 Outlook
Capital expenditures are anticipated to be approximately $17 to $20 million and include amounts required to complete the Mingguang and Dongtai facilities as well as a new 2,000 MT rebiana facility. The Company expects to able to fund these capital expenditures through its new and existing banking arrangements in China.

A further $20 million in capital expenditures may be incurred to expand the Mingguang and Dongtai processing facilities in order to add additional leaf processing capacity during 2009. These capacity upgrades would be initiated by growth in the stevia market and customer contract requirements.

Restatement of Previous Interim Financial Statements
The Company intends to refile its 2008 interim financial statements and management discussion and analyses based on certain decisions reached on its 2008 year-end financial statements that have impacted its previously filed interim 2008 financial statements. The items that will be restated in the interim financials for the first, second and third quarters are:

Procurement and Interest Revenue - A decision at year-end was made not
to accrue any revenue from the Company's YHT contract or interest on
loans due from YHT for 2008 which decreased revenue previously
recognized for the first, second and third quarters. The total amount
of revenue to be restated is $437,971 and the total amount of interest
revenue to be restated is $90,163.

Interest Expense - A decision at year-end was made to restate the fair
value of the warrants associated with the $6 million convertible
debenture which increased interest expense for the first and second
quarters. The total amount of expense to be restated is $789,063.

Property, Plant and Equipment (PP&E) - A decision at year-end was made
to restate the fair value of the warrants associated with the $6 million
convertible debenture which increased PP&E for the first and second
quarters. The total amount of PP&E to be restated is $594,071 and the
total amount of amortization expense within G&A expense to be restated
is $23,613.

General and Administration Expense - A decision at year-end to correct
an invoice related to the prior period was made resulting in a decrease
to general and administration expense for the first, second and third
quarters. The total amount of G&A to be restated is $146,250.

Future Income Taxes and Intangible Assets - Due a temporary difference
on the value for tax purposes and the value for accounting purposes, a
future income tax liability of $3,887,060 and an increase to the
intangible assets were recognized on the December 31, 2007 Balance

Management's Discussion and Analysis containing a complete review of financial results as well as financial statements and the Annual Information Form will be available on the Company's website at or on SEDAR at

About GLG Life Tech Corporation
GLG Life Tech Corporation is a global leader in the supply of high purity stevia, an all natural, zero-calorie sweetener used in food and beverages. Company operations cover each step in the stevia supply chain including non-GMO stevia seed breeding, natural propagation, stevia leaf growth and harvest, proprietary extraction and refining, marketing and distribution of finished product. GLG's advanced technology and extraction technique make it the world's leading producer of rebiana RA 97 stevia extract. Please visit for further information.

Forward-looking statements: Forward-looking statements: Certain statements in this press release constitute "forward-looking statements". Such forward-looking statements include, without limitation, statements evaluating the market for stevia, the Company's production capacity, demand for stevia and the Company's stevia based products and general economic conditions. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include operational risks, 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 other risks and uncertainties disclosed under the heading "Risk Factors" in our Annual Information Form in respect of our year-ended December 31, 2008 and the risk factors in our Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2008, both of which are available on SEDAR at The Company's forward-looking statements reflect the beliefs, opinions and projections on the date the statements are made. The Company assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change, except as required by law. Financial outlook information contained in this press release 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.

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