Mr. Simon Springett reports

GLG LIFE TECH CORPORATION REPORTS 2023 FIRST QUARTER FINANCIAL RESULTS

GLG Life Tech Corp. has released its financial results for the three months ended March 31, 2023. The complete set of financial statements and management's discussion and analysis (MD&A) are available on SEDAR and on the company's website.

Financial summary

The company reported revenues of $1.6-million in the first quarter of 2023, compared with $2.8-million in revenue for the first quarter of 2022. The revenue decrease of $1.2-million resulted from a temporary slowdown in orders from one of the company's largest customers and a reduction in monk fruit sales driven by increasingly competitive monk fruit pricing. The company's gross profit margin decreased by four percentage points for the first quarter 2023 to 25 per cent, compared with 29 per cent for the same period in 2022.

The company continues its efforts to closely manage its selling, general and administrative (SG&A) expenses, keeping SG&A even in the first quarter of 2023, compared with the first quarter of 2022, at $800,000 in both quarters.

For the three months ended March 31, 2023, the company had a net loss attributable to the company's shareholders of $6.4-million, an increase of $2.2-million over the comparable period in 2022 ($4.3-million). The company reported a net loss per share of 17 cents for the first quarter of 2023, compared with a net loss per share of 11 cents for the first quarter of 2022.

Corporate developments

Company outlook

In recent quarters, 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 continues to manage its cash flows carefully to mitigate risk of insolvency. As a result of these efforts, management has been successful in improving the company's cash flows. 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 $1-million revolving loan facilities with a third party for working capital purposes. In 2020, management also realized the sale of one of its two idle assets; the sale of the Runhao facility resulted in significant debt reduction and better positions the company to be able to access additional lines of working capital. Management also continues to explore options for the sale or repurposing of its idle Runyang primary processing facility in Jiangsu province to further address its cash needs and/or balance sheet.

Another factor that continues to contribute to the company's financial situation is the competitive price pressure in the stevia market over the last two years that has reduced mainstream Reb A products (such as Reb A 80 and Reb A 97) to the lowest price levels in years, although pricing has begun to rise (reflecting the increased cost of raw materials in the most recent harvest). Monk fruit prices have also become highly competitive in the marketplace. To maintain margins at sustainable levels, the company has focused on improving its production efficiencies, continues to strive for a mix of products that is weighted more heavily on higher-margin, specialty products and has focused more on higher-margin direct sales.

The company's focus on maintaining positive cash flow led the company to take decisive steps in 2021 and 2022 to reduce its SG&A costs as well as its production costs. Both its North American operations and Chinese operations have significantly reduced SG&A costs. 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 aim continues to be 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 -- and management made significant progress in this area and continues striving to optimize staffing and production plans. As a result, this has enabled the company to sell its goods at more competitive and/or more profitable prices although the competitive price pressures remain strong.

The company continues to explore options to significantly improve its balance sheet and cash flows, whether through restructuring of debt or other opportunities for infusions of cash to address the debt load. Having closed the idle asset sale in 2020 and having successfully implemented right-sizing efforts to manage costs, having entered into the joint venture, and continuing to optimize production efficiencies, costs and planning, management is proceeding down the best available path to increased financial stability and improved profitability.

Selected financials

As noted above, the complete set of financial statements and MD&A for the three months ended March 31, 2023, are available on SEDAR and on the company's website.

Results from operations

The results from operations in the attached table have been derived from and should be read in conjunction with the company's annual consolidated financial statements for 2022 and the condensed interim consolidated financial statements for the three-month period ended March 31, 2023.

Revenue

Revenue for the three months ended March 31, 2023, was $1.6-million, compared with $2.8-million in revenue for the same period last year. Sales decreased by 43 per cent or $1.2-million for the period ending March 31, 2023, compared with the prior period. The sales decrease of $1.2-million was driven by decreases in both stevia and monk fruit sales; the decrease in stevia sales was driven in part by a temporary slowdown in orders from one of the company's largest customers and the reduction in monk fruit sales was driven by increasingly competitive monk fruit pricing in the international market. International sales remain the predominant component of the company's revenues (100 per cent in first quarter 2023 versus 89 per cent in first quarter 2022).

Cost of sales

For the quarter ended March 31, 2023, the cost of sales was $1.2-million, compared with $1.9-million in cost of sales for the same period last year ($800,000 or 40-per-cent decrease). Cost of sales as a percentage of revenues was 75 per cent for the first quarter 2023, compared with 71 per cent for the comparable period, an increase of four percentage points.

The increase in cost of sales as a percentage of revenue for the three months ended March 31, 2023, compared with the prior comparable period, is primarily attributable to the decrease in sales.

Capacity charges charged to the cost of sales ordinarily would flow to inventory and are a significant component of the cost of sales. Only two of GLG's manufacturing facilities were operating during the first quarter of 2023 and capacity charges of $200,000 were charged to cost of sales (representing 17 per cent of cost of sales) compared with $100,000 charged to cost of sales in the same period of 2022 (representing 7 per cent of cost of sales).

Gross profit (loss)

Gross profit for the three months ended March 31, 2023, was $400,000, compared with a gross profit of $800,000 for the comparable period in 2022. The gross profit margin was 25 per cent in the first quarter of 2023, compared with 29 per cent for the same period in 2022, a decrease of four percentage points. This four-percentage-point decrease in gross profit margin for the first quarter of 2023, relative to the comparable period in 2022, is primarily attributable to the decrease in sales.

Selling, general and administration expenses

SG&A expenses include sales, marketing, general and administration (G&A) costs, stock-based compensation, and depreciation and amortization expenses on G&A fixed assets. A breakdown of SG&A expenses into these components is presented in the attached table.

G&A expenses for the three months ended March 31, 2022, were $800,000, versus $800,000 in the same period in 2021.

Net loss attributable to the company

For the three months ended March 31, 2023, the company had a net loss attributable to the company of $6.4-million, an increase of $2.2-million or 51 per cent over the comparable period in 2022 ($4.3-million). The $2.2-million increase in net loss attributable to the company was driven by increases in other expenses ($1.8-million) and operating loss ($400,000).

Quarterly basic and diluted loss per share

The basic and diluted net loss per share from operations was 17 cents for the three months ended March 31, 2023, compared with a basic and diluted net loss of 11 cents for the comparable period in 2022.

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 the company's website.

About GLG Life Tech Corp.

GLG 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 the company's 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, and marketing and distribution of the finished products. Additionally, to further meet the varied needs of the food and beverage industry, GLG, through its Naturals+ product line, supplies a host of complementary ingredients reliably sourced through its supplier network in China.

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