Chairman's report

 

Half Year Preliminary Results for SIX MONTH PERIOD ENDED
JUNE 30, 2007

(Stated in Canadian Dollars)

Period; Net Loss for the period (000 C$); Deficit - end of period (000 C$)
Three months (30 June 2007)- (241); (3,422)
Three months (31 May 2006)- (402); (1,953)
Six months (30 June 2007) - (585); (3,422)
Six months (31 May 2006) - (1,075); (1,953)

Significant Expenses of a Corporate Nature

The net loss for the three months ended June 30, 2007 was $241,000, compared with $344,000 in the three months ended March 31, 2007 and $402,000 in the three months ended May 31, 2006. The quarter ended March 31, 2007 included a significant non-cash item of $158,000, being the calculated value attributed to the Incentive Stock Options granted to directors and management staff. The quarter ended May 31, 2006 included the costs related to the fund raising and seeking of a secondary listing in New Zealand.

Other significant expense categories included:

a) general and administration expenses of $112,000 in the three months ended June 30, 2007, compared with $85,000 in the first quarter ended March 31, 2007 and $234,000 for the three months ended May 31, 2006. The quarter ended May 31, 2006 included the costs related to the fund raising and seeking of a secondary listing in New Zealand;
b) professional fees of $39,000, in the three months ended June 30, 2007, compared with $29,000 in the first quarter ended March 31, 2007 and $100,000 for the three months ended May 31, 2006. This related primarily to legal fees incurred in respect of Joint Venture Agreements and Letters of Intent that the Company entered into. The quarter ended May 31, 2006 included the costs related to the fund raising and seeking of a secondary listing in New Zealand;

c) net salaries (after exploration recharges) of $89,000, in the three months ended June 30, 2007, compared with $63,000 in the first quarter ended March 31, 2007 and $8,000 for the three months ended May 31, 2006, now includes two full time senior executives (the COO and CFO); and
d) consulting fees of $8,000, in the three months ended June 30, 2007, compared with $16,000 in the first quarter ended March 31, 2007 and $17,000 for the three months ended May 31, 2006.
The Company now employs 11 permanent staff in New Zealand, including its head office in Wellington, administration office in Auckland and exploration offices in Dunedin (Otago Region) and Rotorua (Mamaku and Central Volcanic Regions).



FINANCIAL COMMENTARY

In 2006 the Company changed its financial year end from May 31 to December 31. During 2006 Glass Earth Limited became a subsidiary of St Andrew Goldfields Limited. As St Andrew Goldfields Limited has a financial year end of December 31, the Company believes that it would be more cost efficient and in the best interest of shareholders for both companies to have the same financial year end. The Company implemented this change by having a transition period of 7 months, with the last day of the transition period being December 31, 2006.

At June 30, 2007, the Company had net working capital of $3,435,000 (December 31, 2006: $6,912,000), including cash and equivalents of $3,903,000 (December 31, 2006: $7,316,000).

Liquidity

The Company's core activity is gold exploration in New Zealand, as supported by necessary administrative expenditures. The Company has 4 main project areas in New Zealand, being;

- Hauraki Region;
- Mamaku Region;
- Central Volcanic Region; and
- Otago Region.

The Hauraki Region is now subject to joint venture with Newmont Mining Corporation, whereby it may earn up to a 75% equity in return for incurring exploration expenditures equivalent to the next 4 years of permit work obligations. Therefore, only limited Company monitoring expenditure is currently planned on this region.

The Mamaku and Central Volcanic Regions are serviced by the Company's Rotorua office. Exploration expenditures, including resistivity surveys and drilling totaling approximately $220,000 per month are budgeted for fiscal 2007.

The Otago Region activity will centre on the airborne geophysics survey, expected to cost approximately $2.2m in fiscal 2007, net of contributions from a regional government body. Additional contributions may reduce this amount.

The Company's General and Administrative expenditures are expected to be approximately $800,000 for fiscal 2007. The Company's cash of $3.9m as at June 30, 2007 is considered sufficient to carry the Company through into 2008.


Related Party Transactions

Related party transactions are in the normal course of business and are measured at the exchange amount, which is the fair value as agreed between management and the related parties.

a) On May 15, 2006, Mr. Peter Liddle (a director and former significant shareholder of GENZL) became an employee of GENZL. Mr. Liddle received compensation of $67,803 in the current period (six months ended May 31, 2006: $5,050).

b) On April 1, 2005, Mr. Simon Henderson (a director and former significant shareholder of GENZL) became an employee of GENZL. Mr. Henderson received compensation of $84,662 in the current period (six months ended May 31, 2006: $62,210).

c) During the current period management fees of $30,000 (six months ended May 31, 2006: $16,500) were paid to a company owned by the Hughnie Laing Trust, whose sole beneficiary is the wife of a director, Mr. Glenn Laing.

d) During the current period, $30,069 was paid or accrued to St George Minerals Ltd, (a company which has a common director of the Company) for the provision of office and related facilities in Toronto (six months ended May 31, 2006: $41,750). For the year ended May 31 2006, $9,000 was advanced to St George Minerals Ltd, and remains outstanding at the period end (six months ended May 31, 2006: $9,000).

e) During the current period, $6,000 was paid to non-executive director Mr. R Billingsley for additional duties of a technical nature (six months ended May 31, 2006: $5,604).

f) At June 30 2007, a net balance of $1,992 was outstanding to the Company's parent company, St Andrew Goldfields Limited, for travel expenses incurred on the Company's behalf (six months ended May 31, 2006: Nil).

All outstanding amounts are expected to be repaid within the next year and have been classified as current liabilities in these financial statements.

Other Matters
Use of Financial Instruments

In the current period and in the seven months ended December 31, 2006, the Company did not enter into any specialized financial agreements to minimize its investment risk, currency risk or commodity risk. The principal financial instruments affecting the Company's financial condition and results of operations are currently its cash, amounts receivable and prepayments, and

accounts payable and accrued liabilities. Foreign currency exposure is minimized by retaining most (approximately 96%) cash in Canadian dollar denominated instruments. Funds expected to be expended in New Zealand dollars in the short-term are held in New Zealand dollar denominated investments (approximately 4%).

Contractual Obligations and Commitments

a) The Company had expenditure commitments as at June 30, 2007 of $890,000 (May 31,2006: Nil) principally representing the balance of data processing work to be undertaken in relation to the Otago Region Survey through to completion in August/September 2007. As referred to earlier, the size of the survey has been increased (from a minimum of 30,000 line km to over 47,000 line km). The Company is recovering approximately 25% of these costs from the Otago Regional Council contribution (as referred to earlier).

b) GENZL has granted a 2% production royalty to Geoinformatics Exploration Ireland Ltd in respect of any production achieved from the Company's interests on targets identified and placed in the Target Bank, as a result of the Intervention Project over the CCVR.

c) Under the terms of non cancelable operating leases, the Company is committed to rental payments as follows :

2007 $30,304
2008 $52,499
2009 $ 5,463

$88,266

Off-Balance Sheet Arrangements and Contingent Liabilities

The Company has no off-balance sheet arrangements or contingent liabilities, not already discussed above.


Critical Accounting Policies and Estimates

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities as at the date of the financial statements, as well as the reported amounts of revenues earned and expenses incurred during the period. These estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. The Company's critical accounting policies are those that affect the financial statements and are summarized in Note 4 of the audited consolidated financial statements for the seven months ended December 31, 2006. Critical accounting policies and estimates in the period included capitalization of the costs relating to the acquisition, exploration and development of non-producing resource properties and the recognition of impairment of those assets, and the choice of Generally Accepted Accounting Principles ("GAAP"). Actual results could differ from these estimates.

Mineral Properties

The decision to capitalize exploration expenditures, and the timing of the recognition that capitalized exploration is unlikely to have future economic benefits, can materially affect the reported earnings of the Company. Glass Earth follows Canadian GAAP. In line with accepted industry practice for exploration companies, the Company has adopted the policy of deferring property specific acquisition, exploration and development costs. Deferred costs relating to properties that are relinquished, or where continued exploration is deemed inappropriate, are written off in the year such assessment is made. If Glass Earth adopted a policy of expensing all exploration costs, the Company's asset base, shareholders' equity, and loss from operations would be materially different. These deferred costs will be amortized on the unit-of-production basis over the estimated useful lives of the properties following the commencement of production. The cost of mineral properties includes any cash consideration paid, and the fair market value of shares issued on the acquisition of property interests. The recorded amounts represent actual expenditures incurred and are not intended to reflect present or future values. The Company reviews capitalized costs on its property interests on a periodic, or at least annual, basis and will recognize an impairment in value based upon current exploration results and upon management's assessment of the future probability of profitable revenues from the property or from the sale of the property. Management's assessment of the property's estimated current fair market value may also be based upon a review of other property transactions that have occurred in the same geographic area as that of the property under review.


SUBSEQUENT EVENTS

None to report


OUTLOOK

By unlocking the value in the data available and enabling objective targeting and ranking through the conversion of data into information and from there into knowledge, the Company is building a predictive framework for the discovery of new gold deposits. This approach ensures ongoing objectivity for individual prospects, discarding of potential failures, and an enhanced understanding of the multidimensional geology and mineral deposit process. Glass Earth has already applied this process in the Hauraki / Central Volcanic Regions, where the Data Intervention project kick-started the generation of new gold targets augmented by the implementation of two major airborne geophysical surveys. Glass Earth has commenced ground verification of its portfolio of targets by drilling in the Central Volcanic region. Glass Earth plans further significant drilling of multiple targets. Glass Earth has now commenced its next Data Collation / Interrogation project in the Otago mesothermal gold region, with an integrated geological data base compilation and airborne geophysical survey program similar to the one completed in the Hauraki / Central Volcanic Regions.

Glass Earth's pipeline of prospects at different stages of development offers a well-balanced portfolio of quality exploration prospects. Endorsement of this approach was obtained by Glass Earth entering into two joint ventures with Newmont Mining Corporation, one over Glass Earth's

Waihi West exploration permit alongside the Martha gold mine and another over Glass Earth's entire Hauraki Region permits.

Glass Earth's medium term aim is to develop into a significant gold producer, but also sees earlier opportunities to create and capture value purely through successful exploration. The worldwide exploration industry has been severely diminished by acquisition and merger, which has dramatically reduced the commitment to greenfields exploration. Glass Earth intends to exploit a potential valuable gap by generating and managing the early stages of resource identification and development of world-class gold deposits. Delineation of such resources can generate significant premium and value-add at the exploration stage.

For additional information, please refer to the Company's website at www.glassearthlimited.com and for regulatory filings, including news releases, please refer to www.SEDAR.com.


RISKS, UNCERTAINTIES and OTHER ISSUES

Glass Earth's business of exploring mineral resources involves a variety of operational, financial and regulatory risks that are typical in the natural resource industry. The Company attempts to mitigate these risks and minimize their effect on its financial performance, but there is no guarantee that the Company will be profitable in the future. Glass Earth's common shares should be considered speculative.

Nature of Mineral Exploration and Development Projects

The business of exploring for minerals involves a high degree of risk. Few properties that are explored are ultimately developed into mines. Glass Earth's properties are in the exploration stage and at present, none of the Company's properties have a known body of commercial ore. The proposed exploration programs are an exploratory search for such a deposit. The long term profitability of the Company's operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors that are beyond the control of the Company.

In the event the Company is fortunate enough to discover a gold and / or silver deposit, the economics of commercial production depend on many factors, including the cost of operations, the grade of the deposit, proximity to infrastructure, metal prices, financing costs and Government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of gold and silver and environmental protection. The effects of these factors cannot be accurately predicted, but any combination of these factors could adversely affect the economics of commencement or continuation of commercial production.

The profitability of the Company's operations will be dependent, inter alia, on the market prices of gold and silver, which are affected by numerous factors beyond the control of the Company, including international economic and political conditions, levels of supply and demand, and international currency exchange rates.

Success in establishing reserves is a result of a number of factors, including the quality of management, the Company's level of geological and technical expertise, the quality of land available for exploration, the availability of suitable contractors, and other factors. If mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish reserves through drilling, to determine the optimal metallurgical process and to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that exploration programs will result in the establishment or expansion of resources or reserves.


Licenses and Permits, Laws and Regulations

Glass Earth's exploration activities require permits from various government authorities, and are subject to extensive federal, provincial and local laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters. Such laws and regulations are subject to change, can become more stringent and compliance can therefore become more costly. Glass Earth draws on the expertise and commitment of its management team, their advisors, its employees and contractors to ensure compliance with current laws and fosters a climate of open communication and co-operation with regulatory bodies.

The Company believes that it holds, or has applied for, all necessary licenses and permits under applicable laws and regulations and believes it is presently complying in all material respects with the terms of such licenses and permits. There is no assurance that future changes in such regulation, if any, will not adversely affect the Company's operations. Government approvals and permits are required in connection with the exploration activities proposed for the properties. To the extent such approvals are required and not obtained, the Company's planned exploration, development and production activities may be delayed, curtailed, or cancelled entirely.

Environmental

Mining operations are subject to various environmental laws and regulations including, for example, those relating to waste treatment, emissions and disposal, and companies must generally comply with permits or standards governing, among other things, tailing dams and waste disposal areas, water consumption, air emissions and water discharges. Existing and possible future environmental legislation, regulations and actions could cause significant expense, capital expenditures, restrictions and delays in the Company's activities, the extent of which cannot be predicted and which may well be beyond the capacity of the Company to fund. The Company's right to exploit any minerals it discovers is subject to various reporting requirements and to acquiring certain Government approvals and there is no assurance that such approvals, including environmental approvals, will be granted without inordinate delays or at all.

Conflicts of Interest

Certain of the Company's directors, officers and significant shareholders are or may become shareholders, directors and / or officers of other natural resource companies, and, to the extent

that such other companies may participate in ventures with the Company, they may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or of its terms. In appropriate cases the Company will establish a special committee of independent directors to review a matter in which one or more directors or officers may have a conflict. From time to time, the Company, together with other companies, may be involved in a joint venture opportunity where several companies participate in the acquisition, exploration and development of natural resource properties, thereby permitting the Company to be involved in a greater number of larger projects with an associated reduction of financial exposure in any given project. The Company may also assign all or a portion of its interest in a particular project to any of these companies due to the financial position of the other company or companies. In accordance with the laws of the province of British Columbia, the directors are required to act honestly and in good faith with a view to furthering the best interest of the Company. In determining whether or not the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to the Company, the degree of risk to which the Company may be exposed and its financial position at that time. Other than as indicated, the Company has no procedures or mechanisms to deal with conflicts of interest.

For a more complete description of the uncertainties and risk factors faced by the Company, please refer to Management's Discussion and Analysis of the audited annual financial statements for the seven months ended December 31, 2006.


CANADIAN ACCOUNTING ISSUES

Multilateral Instrument 52-109 : Internal controls over financial reporting

As at March 31, 2007 management of the Company is responsible for evaluating the design of internal control over financial reporting. The Chief Executive Officer and Chief Financial Officer, together with other members of management, after having designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reporting in accordance with the issuer's Generally Accepted Accounting Principles as of June 30, 2007, have not identified any changes to the Company's internal control over financial reporting in the latest interim reporting period that would materially affect, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


SUPPLEMENTAL TO THE FINANCIAL STATEMENTS

Outstanding Share and Option Data

Glass Earth's shares trade on the TSX Venture Exchange and the NZAX under the symbol "GEL". The Company is authorized to issue an unlimited number of common shares without par value. As at July 31, 2007, the following items were issued and outstanding:


- 129,902,633 common shares;
- 12,640,000 Incentive Stock Options with an average exercise price of $0.16 per share and expiry dates of between February 22, 2011 and March 27, 2012;
- 16,332,498 common share purchase warrants with an average exercise price of $0.25 per share and expiry dates of between January 13, 2008 and June 6, 2008; and
- 20,000,000 listed (on the NZAX) common share purchase warrants with an exercise price of NZ$0.35 (approximately $0.26) per share and expiry date of October 13, 2008.

Pursuant to escrow agreements with the TSX Venture Exchange, the following holdings are the subject of escrow provisions:

- the 36,000,720 common shares issued to purchase GENZL, on March 31, 2005, with an initial 10% released immediately subject to a hold provision of 4 months. A further 15% was released on October 6, 2005 and will be released every 6 months thereafter.
- 5,018,000 common shares held as of the date of the purchase of GENZL by a control party, with an initial 10% released immediately subject to a hold provision of 4 months. A further 15% was released on October 6, 2005 and will be released every 6 months thereafter.

A total of 12,305,616 common shares remain subject to the provisions of the escrow agreement.