Mr. Simon Springett reports

GLG LIFE TECH CORPORATION REPORTS 2020 FIRST QUARTER FINANCIAL RESULTS

GLG Life Tech Corp. has provided its financial results for the three ended March 31, 2020. The complete set of financial statements and management discussion and analysis are available on SEDAR and on the company's website.

Financial summary

The company reported revenues of $2.6-million in the first quarter of 2020, a $500,000 improvement compared with the first quarter of 2019 ($2.0-million). The company also reported an increase of eight percentage points in gross profit margin for the first quarter 2020 (12 per cent), relative to the same period in 2019 (4 per cent).

The improvement in gross profit margin was driven by a change in mix of products sold, with a greater percentage of sales of higher-margin stevia products, and improvements in cost management and production efficiency, as well as a decrease in idle capacity charges in the first quarter of 2020 compared with the first quarter of 2019.

The company continues to closely manage its selling, general and administrative expenses, resulting in a $600,000 reduction in G&A expenses for the first quarter of 2020 ($1.3-million) relative to the first quarter of 2018.

For the three months ended March 31, 2020, the company had a net loss attributable to the company's shareholders of $8.7-million, an increase of $3.9-million or 81 per cent over the comparable period in 2019 ($4.8-million). The increase in net loss was primarily driven by changes in foreign exchange rates. The company reported a net loss per share of 23 cents for the first quarter of 2020, compared with 12 cents for the first quarter of 2019.

Corporate developments

Resignation and replacement of chief financial officer

Mr. Finnsson, the company's CFO since March of 2019, has tendered his resignation, for personal reasons, effective June 30, 2020. Management thanks Mr. Finnsson for his service. The company has appointed Edward Wang, the company's current controller, as acting chief financial officer.

Issuance and revocation of management cease trade order

Due to a previously announced delay in filing of the company's 2019 year-end financial statements and related documents, such delay arising from the impact of COVID-19 on the company's ability to timely complete the filing, on May 15, 2020, the company announced that it had applied for and been issued a management cease trade order (MCTO) by the relevant securities commissions. Shortly after completing the filing, the MCTO was revoked on June 8, 2020.

Company outlook

One of the most critical items that management has focused on and continues to focus on is the development and implementation of plans to stem the losses that the company has suffered in recent years and to ameliorate the company's financial position. As a result of those sustained losses, the company lacks the cash necessary to fully finance the business operations and its strategic product initiatives. The company is managing its cash flows carefully to mitigate risk of insolvency. Management has been successful in improving the company's cash outlook in recent quarters. Nevertheless, without an infusion of cash in the months ahead, the company may not be able to realize its strategic plans and could eventually cease to be a going concern.

To address that cash need, management has negotiated a $1-million revolving loan facility with a related party for working capital purposes in 2020. Management has also prioritized the sale of its idle assets either to generate cash, significantly improve the company's balance sheet, or both. Management expects that it will close on the sale of its idle Qingdao Runhao secondary purification facility in the third quarter of 2020, although there is uncertainty as to that timing as well as to the final closing of the deal. Upon closing, management expects that the company will extinguish a significant portion of the debt held by China Cinda Assets Management (which owns 98 per cent of the company's Chinese bank debt) and a related party. Management is also evaluating options for the sale of its idle Runyang primary processing facility in Jiangsu province to further address its cash needs and balance sheet.

Another factor contributing to the company's financial situation is the competitive price pressure in the stevia market over the last year that has reduced mainstream Reb A products (such as Reb A 80 and Reb A 97) to the lowest price levels in years. While these products have historically formed the core of the company's product sales, the margins on sales of these products have grown increasingly slim. To address this, the company is taking a three-pronged approach.

First, the company has taken decisive steps to reduce its SG&A costs as well as its production costs. Its North American operations have already reduced SG&A costs and the company is in the process of eliminating non-essential costs in its Chinese operations. For the last several years, the company's production capacity has been far greater than its projected order levels as it had sought rapid increases in orders for Reb A products. The company's goal is now to right-size its Chinese operations -- to optimize its staffing and production planning to meet the company's projected production requirements while retaining the ability to accommodate growth in future order volumes. Management expects that this will enable the company to sell its goods at more competitive and/or more profitable prices to secure additional order volumes and/or retain additional margin.

Second, the company is increasing its focus on specialty stevia products, relative to its Reb A products. These specialty products are more differentiated than Reb A products and can bring more revenue opportunities and more meaningful margin contributions to the company's bottom line. The company is also progressing well on implementing a new line of business in the sweetener space distinct from its bulk stevia sales that has the potential to significantly increase the company's revenues and margins.

Third, the company is exploring options to enter the CBD (cannabidiol) market, where it could leverage its production expertise and equipment toward an investment that would jump-start its ability to quickly begin producing high-quality low-cost CBD products. The company has also entered into a distributorship agreement with East West Pharma Group for the distribution of its high-quality cannabidiol products and continues to explore other complementary opportunities in the cannabis extract market. While the company does not expect to begin any CBD operations or sales in the first half of 2020, it is anticipating revenues and margins in the second half of 2020 and beyond.

While the company continues to face substantial risks and 2020 remains a pivotal year for the company, management remains optimistic about the future opportunities for the company. With the expected land sale heading toward closing, right-sizing efforts under way, the optimization of production efficiencies, costs and planning, and the company's refocused product strategies, management is proceeding down the best available path to increased financial stability and profitability.

Selected financials

As noted above, the complete set of financial statements and management discussion and analysis for the three months ended March 31, 2020, are available on SEDAR and on the company's website.

Results from operations

The following results from operations have been derived from and should be read in conjunction with the company's annual consolidated financial statements for 2019 and the condensed interim consolidated financial statements for the three-month period ended March 31, 2020.

                                         HIGHLIGHTS
                    (in thousands of dollars, except per-share amounts)

                                                                Three months ended March 31,
                                                                      2020             2019

Revenue                                                         $    2,565        $   2,023
Cost of sales                                                   $   (2,254)       $  (1,946)
% of revenue                                                           (88%)            (96%)
Gross profit (loss)                                             $      311        $      77
% of revenue                                                            12%               4%
Expenses                                                        $   (1,627)       $  (2,267)
% of revenue                                                           (63%)           (112%)
(Loss) from operations                                          $   (1,316)       $  (2,190)
% of revenue                                                           (51%)           (108%)
Other expenses                                                  $   (8,495)       $  (4,106)
% of revenue                                                          (331%)           (203%)
Net (loss) before income taxes                                  $   (9,811)       $  (6,296)
% of revenue                                                          (382%)           (311%)
Net (loss)                                                      $   (9,811)       $  (6,296)
% of revenue                                                          (382%)           (311%)
Net (loss) attributable to non-controlling interest (NCI)       $   (1,133)       $  (1,496)
Net (loss) attributable to GLG                                  $   (8,678)       $  (4,800)
% of revenue                                                          (338%)           (237%)
(Loss) per share (LPS, basic and diluted)                       $    (0.23)       $   (0.12)
Other comprehensive income                                      $   (5,399)       $    (565)
% of revenue                                                          (210%)            (28%)
Comprehensive (loss)                                            $  (15,210)       $  (6,861)
Comprehensive (loss) attributable to NCI                        $   (3,022)       $  (1,687)
Comprehensive (loss) attributable to GLG                        $  (12,188)       $  (5,174)
% of revenue                                                          (475%)           (256%)

Revenue

Revenue for the three months ended March 31, 2020, was $2.6-million compared with $2.0-million in revenue for the same period last year. Sales increased by 27 per cent or $500,000 for the period ending March 31, 2020, compared with the prior period. The sales increase of $500,000 was driven primarily by a 27-per-cent increase in international stevia sales; a 72-per-cent increase in international monk fruit sales also contributed (monk fruit sales make up a relatively small percentage of overall sales). International sales continue to be the predominant component of the company's revenues (93 per cent in first quarter 2020 versus 92 per cent in first quarter 2019).

For the three months ended March 31, 2020, the company had a net loss attributable to the company of $8.7-million, an increase of $3.9-million or 81 per cent over the comparable period in 2019 ($4.8-million). The $3.9-million increase in net loss attributable to the company was driven by (1) an increase in other expenses ($4.4-million) and (2) a decrease in net loss attributable to non-controlling interests ($400,000), which were offset by (3) a decrease in loss from operations ($900,000).

Quarterly basic and diluted loss per share

The basic loss and diluted loss per share from operations were 23 cents for the three months ended March 31, 2020, compared with a basic and diluted net loss of 12 cents for the comparable period in 2019.

Additional information

Additional information relating to the company, including its annual information form, is available on SEDAR. Additional information relating to the company is also available on its website.

About GLG Life Tech Corp.

GLG Life Tech is a global leader in the supply of high-purity zero calorie natural sweeteners including stevia and monk fruit extracts used in food and beverages. GLG's vertically integrated operations, which incorporate its fairness to farmers program and emphasize sustainability throughout, cover each step in the stevia and monk fruit supply chains including non-GMO (genetically modified organism) seed and seedling breeding, natural propagation, growth and harvest, proprietary extraction and refining, marketing, and distribution of the finished products.

We seek Safe Harbor.