An anonymous director reports

GLG LIFE TECH CORPORATION ANNOUNCES 2013 THIRD QUARTER RESULTS

GLG Life Tech Corp. is releasing its financial results for the nine months ended Sept. 30, 2013. The complete set of interim financial statements, and management discussion and analysis, are available on SEDAR and on the company's website.

Revenue for the quarter grew to $5.2-million, a 48-per-cent improvement over the second quarter. Revenue for the nine months ended Sept. 30, 2013, was $11.9-million, 12 per cent lower than the prior period, the decline resulting from the company's change in business focus to international customers and recurring revenue from a focus on selling large amounts of stevia extract to other stevia providers in 2012. During the nine-month period, international sales have grown by 217 per cent compared with the equivalent period in 2012.

The company's quarterly net loss of $14.3-million and nine-month net loss of $24.4-million are increased over $12.0-million in the prior period in 2012 (19-per-cent increase) and $22.5-million (9-per-cent increase) in the first nine months of 2012. These net losses include inventory impairment charges of $8.6-million and capacity charges of $1.5-million during the third quarter and inventory impairment charges of $8.6-million, and capacity charges of $4.8-million for the nine-month period. While the capacity charges negatively affect gross margins and current profitability, with the growth in the stevia market worldwide GLG anticipates that its ability to produce 1,500 tonnes of high-purity stevia products will enhance the company's attractiveness as a large-scale producer as stevia becomes a mainstream product. The inventory impairment charge reflects a technical obsolescence provision.

The company continues to make progress in developing its business with COFCO in China. There are three main healthy food and beverage formulation projects under way pursuant to the company's previously announced strategic collaboration for the Chinese market with COFCO Nutrition and Health Research Institute Co. Ltd. (COFCO NHRI), a 100-per-cent-owned subsidiary of China National Cereals, Oils, and Foodstuff Corporation (COFCO). Projects include dairy products for the COFCO Mengniu dairy subsidiary, and food and beverage products for COFCO's China foods subsidiary. The objective of these formulation projects is to create reduced-calorie healthier products for COFCO subsidiaries and introduce products into the China market. The two parties are also assessing some of GLG's existing stevia sweetened products for distribution in China, including tabletop. Lastly, the two parties are in discussions on advancing the China sugar reserve healthy sugar project. Given the market coverage afforded by the COFCO collaboration, the company sold its interest in its consumer products subsidiary during the third quarter.

Net cash from operating activities during the quarter was $900,000, a $2.0-million improvement from cash used in operations of $1.1-million in the prior period. Cash increased by $1.5-million during the nine-month period to $4.6-million. Working capital declined over the quarter, driven by loans reclassified as current ($9.6-million) and inventory impairment charges ($8.6-million). Working capital year to date has improved to a deficit of $19.2-million as at Sept. 30, 2013, compared with a working capital deficit of $33.9-million as at Dec. 31, 2012.

                                        RESULTS FROM OPERATIONS
                (in thousands of Canadian dollars, except per-share amounts and as indicated)

                                                         Three months ended             Nine months ended
                                                                   Sept. 30,                     Sept. 30,
                                                            2013       2012               2013       2012

Revenue                                                   $5,196     $5,537            $11,884    $12,862
Cost of sales                                             $6,858     $8,001            $15,448    $16,470
Percentage of revenue                                       132%       145%               130%       128%
Gross profit (loss)                                      $(1,662)   $(2,464)           $(3,564)   $(3,608)
Percentage of revenue                                       (32%)      (45%)              (30%)      (28%)
Expenses                                                  $1,842     $2,056             $7,112     $7,007
Percentage of revenue                                        35%        37%                60%        54%
(Loss) from operations                                   $(3,503)   $(4,520)          $(10,677)  $(10,616)
Percentage of revenue                                       (67%)      (82%)              (90%)      (83%)
Other income (expenses)                                 $(10,834)   $(7,513)          $(13,669)   $(9,699)
Percentage of revenue                                      (209%)     (136%)             (115%)      (75%)
Net (loss) before income taxes and 
non-controlling interests                               $(14,338)  $(12,034)          $(24,346)  $(20,315)
Percentage of revenue                                      (276%)     (217%)             (205%)     (158%)
Net (loss) after income taxes and 
non-controlling interests                               $(14,338)  $(12,034)          $(24,347)  $(20,318)
Percentage of revenue                                      (276%)     (217%)             (205%)     (158%)
Net (loss) from discontinued operations                   $1,857      $(983)            $1,348    $(2,713)
(Loss) per share (basic and diluted)                      $(0.43)    $(0.37)            $(0.74)    $(0.62)
Total comprehensive (loss)                              $(14,298)  $(14,636)          $(20,210)  $(26,430)
Percentage of revenue                                      (275%)     (264%)             (170%)     (206%)

Revenue

Revenue for the three months ended Sept. 30, 2013, was $5.2-million, a decrease of 6 per cent compared with $5.5-million in revenue for the same period last year. The total revenue was composed of $5.2-million for stevia sales and nil for discontinued operations.

Revenue for the nine months ended Sept. 30, 2013, was $11.9-million, a decrease of 8 per cent compared with $12.9-million in revenue for the same period last year.

Stevia business

Stevia sales of $5.2-million for the three months ended Sept. 30, 2013, were decreased by 8 per cent, compared with the stevia sales of $5.7-million in the prior period. This 8-per-cent decrease in sales comparing the third quarter in 2013, to the third quarter in 2012, was driven by lower volumes of stevia extract sales to other stevia providers. In the third quarter of 2012, the company needed to focus on reducing its inventory to meet short term obligations and aggressively sold off some of its inventories to other stevia providers in order to accomplish this. The company has focused in 2013 on building its international customer base and sales to these customers have increased 111 per cent during the three months ended Sept. 30, 2013, compared with the prior period. The company has pro-actively made a change in business focus toward international customers that buy stevia on a recurring basis compared with the sales of large quantities of stevia extracts to other stevia providers that purchase large quantities less frequently. International sales activity has also increased following the resumption of the company's shares trading on the Toronto Stock Exchange. The company will continue to focus on increasing its international customer business and also plans to continue to sell stevia extracts to other stevia providers. Pricing on its high-purity stevia extracts was flat compared with the pricing for the same period in 2012. Pricing for low-purity stevia extracts was stable to slightly lower in the third quarter 2013, compared with the same period in 2012.

Stevia sales of $11.9-million for the nine months ended Sept. 30, 2013, were decreased by 8 per cent, compared with the stevia sales of $13.0-million in the prior period. The 8-per-cent decrease in sales comparing the nine months of 2013, to the nine months in 2012, was driven by a change in business focus toward international customers that buy stevia on a recurring basis, compared with the sales of large quantities of stevia extracts to other stevia providers that purchase large quantities less frequently.

Discontinued operations

The company's consumer products business had sales of nil in the third quarter of 2013, compared with $100,000 in the comparative period. This represents a 100-per-cent decrease compared with the sales in the previous period.

Cost of sales

Cost of sales for the three months ended Sept. 30, 2013, was $6.9-million, compared with $8.0-million for the same period last year or a decrease of 14 per cent. Cost of sales as a percentage of revenues was 132 per cent, compared with 142 per cent in the prior period, a decrease of 10 per cent. This was composed of $6.9-million for the stevia business and nil for the discontinued operations. The cost of sales for the stevia business as a percentage of revenue was higher in the current period compared with prior year due to the higher impact of capacity charges representing 22 per cent of cost of sales in the current period compared with 19 per cent in the prior period. These capacity charges ordinarily would flow to inventory; however, only two of GLG's manufacturing facilities were operating during the third quarter.

Cost of sales for the nine months ended Sept. 30, 2013, was $15.4-million, compared with $16.5-million for the same period last year or a decrease of 6 per cent. Cost of sales as a percentage of revenues was 130 per cent compared with 127 per cent in the prior period, an increase of 3 per cent. This was composed of $15.4-million for the stevia business and nil for the discontinued operations. The cost of sales for the stevia business as a percentage of revenue was higher in the current period compared with prior year due to the higher impact of capacity charges representing 31 per cent of cost of sales in the current period compared with 28 per cent in the prior period. These charges ordinarily would flow to inventory; however, only two of GLG's manufacturing facilities were operating during the nine months of the year.

Stevia business

For the three months ended Sept. 30, 2013, the cost of sales related to the stevia business was $6.9-million, compared with $8.0-million in cost of sales for the same period last year ($1.1-million or 14-per-cent decrease). Cost of sales for stevia as a percentage of revenues was 132 per cent, compared with 142 per cent in the prior period, a decrease of 10 per cent. The cost of sales for the stevia business as a percentage of revenue was higher in the current period compared with the prior year due to the higher impact of capacity charges representing 22 per cent of cost of sales in the current period compared with 19 per cent in the prior period. Cost of goods sold exceed revenues generated due to the capacity charges to the cost of goods sold that would ordinarily would flow to inventory. Two of GLG's manufacturing facilities were operating during the third quarter and capacity charges of $1.5-million were charged to cost of sales, compared with $1.5-million charged to cost of sales in 2012.

For the nine months ended Sept. 30, 2013, the cost of sales related to the stevia business was $15.4-million, compared with $16.5-million in cost of sales for the same period last year ($1.1-million or 6-per-cent decrease). Cost of sales for stevia as a percentage of revenues was 130 per cent, compared with 127 per cent in the prior period, an increase of 3 per cent. The cost of sales for the stevia business as a percentage of revenue was higher in the current period compared with the prior year due to the higher impact of capacity charges representing 31 per cent of cost of sales in the current period, compared with 28 per cent in the prior period. Cost of goods sold exceed revenues generated due to the capacity charges to the cost of goods sold that would ordinarily would flow to inventory. Two of GLG's manufacturing facilities were operating during the period and capacity charges of $4.8-million were charged to cost of sales, compared with $4.6-million charged to cost of sales in 2012.

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

• Capacity use of stevia manufacturing plants;
• The price paid for stevia leaf and the stevia leaf quality, which is impacted by crop quality for a particular year/period and the price per kilogram for which the extract is sold; these are the most important factors that will impact the gross profit of GLG's stevia business;
• Salaries and wages of manufacturing labour.

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

• Water and power consumption;
• Manufacturing overhead used in the production of stevia extract, including supplies, power and water;
• Net VAT paid on export sales;
• Exchange rate changes;
• Depreciation and capacity use of the stevia extract processing plants;
• Depreciation of intangible assets related to intellectual property.

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 from Oct. 1 to Sept. 30 each year.

Discontinued operations

For the three months ended Sept. 30, 2013, cost of sales related to the discontinued operations was nil, compared with $100,000 for the prior period. Discontinued operations costs of goods sold includes costs associated with bottling the beverage products, supplies and ingredients used to manufacture the beverages, and shipping the products to the different distribution channels.

For the nine months ended Sept. 30, 2013, cost of sales related to the discontinued operations was nil, compared with $600,000 for the prior period.

Gross profit (loss)

Gross loss for the three months ended Sept. 30, 2013, was $1.7-million, a decrease of 29 per cent over $2.5-million in gross loss for the comparable period in 2012. The gross profit margin for the three-month period ended Sept. 30, 2013, for the company as a whole was a negative 32 per cent, compared with a negative 45 per cent for the three months ended Sept. 30, 2012, or a decrease of 13 per cent from the previous year. On a disaggregated basis, stevia products had a gross margin of negative 32 per cent and the discontinued operations had a gross margin of 0 per cent. The gross margin in stevia products was significantly impacted by the capacity and other fixed charges to the cost of goods sold. These capacity charges ordinarily would ordinarily flow to inventory; however, only one of GLG's manufacturing facilities was operating during the quarter and capacity charges of approximately $1.5-million were incurred.

Gross loss for the nine months ended Sept. 30, 2013, was $3.6-million, a decrease of 2 per cent over $3.6-million in gross loss for the comparable period in 2012. The gross profit margin for the nine-month period ended Sept. 30, 2013, for the company as a whole was a negative 30 per cent, compared with a negative 28 per cent for the nine months ended Sept. 30, 2012, or an increase of 2 per cent from the previous year. On a disaggregated basis, stevia products had a gross margin of negative 30 per cent and the discontinued operations had a gross margin of 80 per cent. The gross margin in stevia products was significantly impacted by the capacity and other fixed charges to the cost of goods sold. These capacity charges ordinarily would ordinarily flow to inventory; however, only one of GLG's manufacturing facilities was operating during the quarter and capacity charges of approximately $4.6-million were incurred.

Stevia business

The decrease in gross loss for the stevia business for the third quarter of 2013, compared with the third quarter of 2012, can be attributed to the factors detailed in the cost of sales and revenues section. Gross loss for the third quarter 2013, as a percentage of revenue, was 32 per cent, compared with 45 per cent for the previous period.

The increase in gross loss for the stevia business for the nine months of 2013, compared with the nine months of 2012, can be attributed to the factors detailed in the cost of sales and revenues section. Gross loss for the nine-month period ended Sept. 30, 2013, as a percentage of revenues was 30 per cent, compared with 28 per cent for the previous period.

Discontinued operations

For the discontinued operations the gross profit was nil or 0 per cent of revenues for the third quarter of 2013, compared with negative $100,000 or negative 16 per cent for the comparable period. For the discontinued operations the gross profit was $100,000 or 80 per cent of revenues for the nine months of 2013, compared with negative $100,000 or negative 21 per cent for the comparable period.

Selling, general and administration expenses

G&A for the stevia business for the three months ended Sept. 30, 2013, was $1.3-million, compared with $1.7-million in the same period in 2012, or $400,000 decrease year over year. G&A for the stevia business for the nine months ended Sept. 30, 2013, was $5.8-million, compared with $5.3-million in the same period in 2012, or a $700,000 decrease year over year.

Stock-based compensation was $300,000 for the three months ended Sept. 30, 2013, compared with $300,000 in the same quarter of 2012. The number of common shares available for issue under the stock compensation plan is 10 per cent of the issued and outstanding common shares. During the quarter, compensation from vesting stock-based compensation awards was recognized, due to previously granted options and restricted shares. Stock-based compensation was $800,000 for the nine months ended Sept. 30, 2013, compared with $1.4-million in the same period of 2012.

G&A-related depreciation and amortization expenses for the three months ended Sept. 30, 2013, were $200,000, compared with $100,000 for the prior year. G&A-related depreciation and amortization expenses for the nine months ended Sept. 30, 2013, were $500,000, compared with the $300,000 for the prior year.

Other expenses

Other expenses for the three months ended Sept. 30, 2013, was $10.8-million, a $3.3-million increase compared with $7.5-million for the same period in 2012. During the three months ended Sept. 30, 2013, the company took an impairment charge on inventory of $8.6-million. Other expenses for the nine months ended Sept. 30, 2013, was $13.7-million, a $4.0-million increase compared with $9.7-million for the same period in 2012.

During the three-month period ending Sept. 30, 2013, the company recorded an inventory impairment charge of $8.6-million ($4.9-million in 2012) as an obsolescence provision. During the nine-month period ending Sept. 30, 2012, the company recorded an inventory impairment charge of $8.6-million ($4.9-million in 2012) as an obsolescence provision.

Net (loss) attributable to the company

For the three months ended Sept. 30, 2013, the company had a net loss attributable to the company of $14.3-million, an increase of $2.2-million over the comparable period in 2012 ($12.1-million loss). The increase in net loss was driven by a decrease in gross loss of $700,000 and a decrease in G&A expenses of $300,000. These items were offset by an increase in other expenses of $3.2-million.

For the nine months ended Sept. 30, 2013, the company had a net loss attributable to the company of $24.3-million, an increase of $3.9-million over the comparable period in 2012 ($20.4-million loss). The increase in net loss was driven by an increase in other expenses of $3.7-million, an increase in gross loss of $100,000 and an increase in G&A expenses of $100,000.

Liquidity and capital resources

The company continues to progress with the following measures to manage cash flow of the company:

• Paying down short-term loans and refinancing short-term loans into loans with longer maturities and refinancing with longer-term debt with its chairman;
• Rreducing accounts payable and negotiating with creditors extended payment terms, working closely with the banks to manage their loans;
• Reducing operating expenditures, including general and administrative expenses, and production-related expenses.

We seek Safe Harbor.