Alterrus Systems (ASIUF) 6-K Interim Consolidated Financial Statements

EXHIBIT 99.1

Valcent Products Inc.

(A Development Stage Company)

Interim Consolidated Financial Statements

Unaudited and Prepared by Management

(Expressed in Canadian Dollars)

For the Six months Ended September 30, 2008 and 2007

Index	Page
Consolidated Interim Financial Statements
Consolidated Balance Sheets	2
Consolidated Statements of Operations and Deficit	3
Consolidated Statements of Cash Flows	4
Notes to the Consolidated Interim Financial Statements	5

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4 3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these interim financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of the interim financial statements by an entity’s auditor.

“F. George Orr”

F. George Orr

Chief Financial Officer and Director

1

Valcent Products Inc.

(A Development Stage Company)

Interim Consolidated Balance Sheets

Unaudited and Prepared by Management

(Expressed in Canadian Dollars)

	September 30, 2008			March 31,  2008
Assets
Current
Cash and cash equivalents	$	142,025		$	163,437
Accounts receivable (Note 3)		1,090,063			462,156
Prepaid expenses (Note 6)		1,090,183			2,119,546
Inventories (Note 8)		549,855			617,195
		2,872,126			3,362,334
Restricted Cash		-			108,471
Property and Equipment (Note 4)		1,358,468			1,135,108
Product License (Note 5 and 7)		1			1
	$	4,230,595		$	4,605,914
Liabilities and Shareholders' Deficiency
Current
Accounts payable & Accrued liabilities	$	518,369		$	536,563
Current portion of long-term debt		-			16,250
Promissory notes payable (Note 13)		287,141			270,167
Due to related parties (Note 10)		1,645,041			1,490,516
Convertible notes (Note 9)		6,719,766			5,202,741
		9,170,317			7,516,237
Long-term debt		-			158,612
		9,170,317			7,674,849
Shareholders' Deficiency
Share capital (Note 12(b))		19,482,091			16,691,282
Contributed surplus (Note 12(e))		6,230,532			4,203,394
Commitment to issue shares		212,564			-
Conversion component of convertible notes (Note 12(f))		3,681,656			3,591,398
Accumulated deficit from prior operations		(3,237,370	)		(3,237,370	)
Accumulated deficit during the development stage		(31,309,195	)		(24,317,639	)
		(4,939,722	)		(3,068,935	)
	$	4,230,595		$	4,605,914

Going-concern (Note 1), Commitments (Notes 5, 7, 9, 11, 12, 13) and Subsequent Events (Note 16)

On behalf of the board

"Glen Kertz"  Director  "F. George Orr"  Director

See notes to the interim consolidated financial statements.

2

Valcent Products Inc.

(A Development Stage Company)

Interim Consolidated Statements of Operations and Deficit

Unaudited and Prepared by Management

(Expressed in Canadian Dollars)

	Three Months Ended September 30,						Six Months Ended September 30,
	2008			2007			2008			2007
Expenses
Product development	$	2,005,539		$	823,136		$	3,654,467		$	1,354,821
Interest and accretion		1,256,178			249,827			1,440,291			329,944
Investor relations		91,806			214,982			590,721			373,999
Advertising and media development		104,935			361,542			370,953			701,437
Professional fees		147,211			33,495			272,131			88,283
Office and miscellaneous		123,820			84,330			238,723			123,175
Travel		75,492			74,624			164,353			112,107
Amortization		43,091			8,625			82,828			16,634
Rent		39,327			(565	)		72,351			20,700
Filing and transfer agent fees		7,930			7,056			11,864			17,903
Non cash financing expense		181,258			259,333			181,258			259,333
Interest on long term debt		1,090			4,652			4,805			6,520
Loss from Operations		4,077,677			2,121,037			7,084,745			3,404,856
Other (Income) Expense
Foreign exchange gain		(2,202	)		(199,776	)		(93,189	)		(552,627	)
Net Loss and Comprehensive Loss for Period		4,075,475			1,921,261			6,991,556			2,852,229
Deficit During Development Stage, Beginning of Period,		27,233,720			12,536,249			24,317,639			11,605,281
Deficit During Development Stage, End of Period	$	31,309,195		$	14,457,510		$	31,309,195		$	14,457,510
Loss Per Share - Basic	$	0.083		$	0.058		$	0.146		$	0.088
Weighted Average Number of Common Shares Outstanding		49,056,041			33,037,977			47,847,444			32,588,546

See notes to the interim consolidated financial statements.

3

Valcent Products Inc.

(A Development Stage Company)

Interim Consolidated Statements of Cash Flows

Unaudited and Prepared by Management

(Expressed in Canadian Dollars)

	Three Months Ended September 30, 2008						Six Months Ended September 30, 2008
	2008			2007			2008			2007
Cash Provided By (Used In)
Operating Activities
Net loss for year	$	(4,179,948	)	$	(1,921,261	)	$	(7,096,029	)	$	(2,852,229	)
Items not involving cash:
Interest and accretion		1,256,178			247,434			1,440,291			327,551
Product development		703,821			31,762			1,122,998			119,187
Investor relations		21,201			105,358			462,416			219,624
Amortization		43,091			8,625			82,828			16,634
Non cash financing expense		181,258			259,333			181,258			259,333
Foreign exchange gain		90,987			(199,776	)		-			(552,627	)
Changes in non-cash working capital items		(376,659	)		(197,892	)		(583,825	)		(5,597	)
		(2,260,071	)		(1,666,417	)		(4,390,063	)		(2,468,124	)
Investing Activity
Investment in Joint Venture		-			198,357			-			-
Property and equipment		(162,693	)		(9,018	)		(306,187	)		(28,298	)
		(162,692	)		189,339			(306,188	)		(28,298	)
Financing Activities
Advances from related parties		(308,601	)		-			107,893			-
Proceeds from issuance of common shares		349,609			51,910			2,169,955			1,467,346
Change in Convertible Notes		2,250,818			836,065			2,250,818			836,065
Repayments of long-term debt		(59,902	)		(2,936	)		(66,391	)		(5,664	)
Proceeds from share subscriptions		200,439			320,806			212,564			372,083
		2,432,363			1,205,845			4,674,838			2,669,830
Increase (Decrease) in Cash During Period		9,600			(271,233	)		(21,412	)		173,408
Cash and Cash Equivalents, Beginning of Period		132,425			759,613			163,437			314,972
Cash and Cash Equivalents, End of Period		142,025		$	488,380		$	142,025		$	488,380

See notes to the interim consolidated financial statements.

4

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

1. Financial Statement Presentation,Nature of Business, and Ability to Continue as a Going-Concern   Valcent Products Inc. (the “Company”) was incorporated under the Alberta Business Corporations Act on January 19, 1996.  The Company is in the development stage and is engaged principally in the development and marketing of industrial green technology products and processes for global markets. The Company had previously been pursuing various business opportunities and effective March 24, 2004 discontinued those operations. During the year ended March 31, 2006, the Company acquired a license to certain proprietary technology (Note 5). The development of these products has been the Company’s primary business.   While the information presented in the accompanying interim financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented. These interim financial statements follow the same accounting policies and methods of their application as the March 31, 2008 annual financial statements. They do not, however, conform in all respects to the requirements of Canadian generally accepted accounting principles (“GAAP”) for annual statements and as such these statements should be read in conjunction with our March 31, 2008 annual financial statements.   The Company considers its development stage operations to have commenced during fiscal 2006. During the year ended March 31, 2006, the Company also formed a wholly owned Nevada corporation, Valcent USA, Inc. to conduct operations in the United States. In turn Valcent USA, Inc. incorporated Valcent Management, LLC, a wholly owned limited liability company under the laws of Nevada, to serve as the general partner in Valcent Manufacturing Ltd., a limited partnership also formed by Valcent USA, Inc. under the laws of Texas, wherein Valcent USA, Inc. serves as its limited partner. During the year ended March 31, 2007, the Company incorporated Valcent Products EU Limited in England to conduct future anticipated operations in Europe.   These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) applicable to a going-concern, which assumes the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at September 30, 2008, the Company had an accumulated deficit of $31,309,195 (2007 - $14,457,510) and a working capital deficiency of $6,298,191 (2007 - $4,863,024). The Company’s ability to continue as a going-concern is dependent upon the economic development of its products, the attainment of profitable operations, and the Company’s ability to obtain financing.   These interim consolidated financial statements do not include any adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going-concern.

2.  Significant Accounting Policies

These interim financial statements have been prepared in accordance with Canadian GAAP, certain of the significant accounting policies used in these consolidated interim financial statements are as follows:

(a) Principles of consolidation   These interim financial statements include the accounts of Valcent Products Inc. and its wholly owned, integrated subsidiaries, Valcent Products EU Limited (“Valcent EU”) and Valcent USA, Inc. (“Valcent USA”), and Valcent USA’s wholly-owned, integrated subsidiaries, Valcent Management LLC (“Valcent Management”) and Valcent Manufacturing Ltd. (“Valcent Manufacturing”), in which Valcent Management is the general partner and Valcent USA is the limited partner. All significant inter-company transactions and balances have been eliminated.   These interim consolidated financial statements also include the Company’s proportionate share of the assets, liabilities, income and expenses of the Vertigro Joint Venture (Note 7).

(b) Research and product development costs   Research costs are expensed as incurred. At this time, development costs, which meet Canadian GAAP criteria including reasonable assurance regarding recoverability, are capitalized and amortized over the expected economic useful life of the product.  No development costs have been deferred to date.  As the Company is in the development stage, any revenue derived from the test marketing and development of products is considered to be an expense recovery and is, therefore, netted against product development costs.

5

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

2. Significant Accounting Policies(Continued)

(c) Cash and cash equivalents   The Company considers all highly liquid financial instruments with a maturity of 90 days or less from the date purchased to be cash equivalents.

(d) Property and equipment   The Company amortizes its leasehold improvements on a straight-line basis over the life of the lease.  Other assets are amortized using the declining balance method at an annual rate of 10% for building, 20% for equipment, 30% for computer equipment, 20% for furniture and fixtures, and 20% for automobiles.   During the year of acquisition, amortization is 50% of amounts otherwise determinable.

(e) Foreign currency transactions and translation   The Company’s functional and reporting currency is the Canadian dollar. Amounts recorded in foreign currencies are translated into Canadian dollars as follows:

(i) Monetary assets and liabilities, at the year-end exchange rates;

(ii) Non-monetary assets and liabilities, at historical exchange rates; and

(iii) Revenue and expense items, at the average rate of exchange by quarter except for amortization of property and equipment, which is translated at the same rate as the related asset.

Gains and losses arising from the translation of foreign currency are included in operations for the year.

(f) Use of estimates   The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Significant areas requiring the use of estimates include allowance for doubtful accounts, the net realizable value of inventories, impairment of property and equipment, rates of amortization, fair value of product license, amount of accrued liabilities, the variables used to calculate interest, accretion and financing costs on convertible notes, the variables used to calculate the fair value of stock-based compensation, and the determination of the valuation allowance for future income tax assets. While management believes the estimates are reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.

(g) Loss per share   Loss per share is calculated using the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method for calculating diluted earnings per share.  Under this method, the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.  It assumes that the proceeds would be used to purchase common shares at the average market price during the period.  Diluted loss per share is not presented where the effect of conversion on exercise of options and warrants and similar instruments would be anti-dilutive.

(h) Stock-based compensation   The Company accounts for stock-based compensation expense using the fair value based method with respect to all stock-based payments to directors, employees and non-employees, including awards that are direct awards of stock and call for settlement in cash or other assets, or stock appreciation rights that call for settlement by the issuance of equity instruments. Under this method, stock-based payments are recorded as an expense over the vesting period or when the awards or rights are granted, with a corresponding increase to contributed surplus. When stock options are exercised, the corresponding fair value is transferred from contributed surplus to share capital.

6

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

2.  Significant Accounting Policies(Continued)

(i) Non-monetary consideration   In situations where common shares are issued and the fair value of the goods or services received is not readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of:

(i) the date at which the counterparty’s performance is complete;

(ii) the date at which a commitment for performance by the counterparty to earn the common shares is reached; or

(iii) the date at which the common shares are issued if they are fully vested and non-forfeitable at that date.

(j) Impairment of long-lived assets   Long-lived assets are reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  An impairment loss would be recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value, with fair value generally based on future discounted cash flows.

(k) Revenue recognition   Revenue from the sales of products is recognized when the product has been delivered to the purchaser, the price is fixed or determinable, and when collectability is reasonably assured. Sales during the development stage are netted against product development costs (Note 3).   Interest income is recognized on an accrual basis as earned at the stated rate of interest of the investment over the term to maturity.

(l) Changes in accounting policies   There have been no changes in accounting policies during the six months ended September 30, 2008.

3.  Accounts Receivable   Accounts receivable as at September 30, 2008 consists of $1,090,063, of which $1,009,712 (2007 $90,134) is due from the Global Green Solutions Inc. (“Global Green”), the Company’s joint venture partner in the development of the Company’s High Density Vertical Bio-Reactor technology (“Vertigro”); and amounts due pertaining to advances provided on the potential sale of Global Green’s 50% interest in Vertigro Algae Technologies, the joint venture company developing Vertigro; $13,883 (2007 $126,947), net of allowance for doubtful accounts of $21,662 from test sales relating to the Company’s Nova Skin Care System; and $66,467 (2007 $24,560) in value added tax is owed to a subsidiary, Valcent Products EU Limited and goods and services tax receivable by Valcent Products, Inc.

4.  Property and Equipment

			Accumulated		Net Book
	Cost		Amortization		Value
	September 30, 2008		September 30, 2008		September 30, 2008
Leasehold improvements	$	199,790	$	30,172	$	169,617
Computer equipment		145,806		52,355		93,451
Furniture and fixtures		102,902		30,043		72,859
Building		501,465		26,478		474,987
Equipment		243,533		20,380		223,152
Automobiles		54,696		5,534		49,162
Land		275,240		-		275,240
	$	1,523,430	$	164,943	$	1,358,468
			Accumulated		Net Book
	Cost		Amortization		Value
	March 31, 2008		March 31, 2008		March 31, 2008
Leasehold improvements	$	167,593	$	20,731	$	146,862
Computer equipment		121,320		31,605		89,715
Furniture and fixtures		89,134		20,684		68,450
Building		389,348		4,951		384,397
Equipment		134,895		3,351		131,544
Automobiles		39,711		811		38,900
Land		275,240		-		275,240
	$	1,217,241		82,133	$	1,135,108

7

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

5.  Product License   On July 29, 2005, the Company completed a licensing agreement (“Agreement”) for the exclusive worldwide marketing rights to the Nova Skincare System, a Duster, the Tomorrow Garden Kit and a right of first offer on future products developed by Pagic LP (“Pagic”), formerly MK Enterprises LLC, a private company with a director in common.   In conjunction with the Agreement, the Company agreed to issue Pagic and its assignees 20,000,000 common shares at a deemed cost of $1,000,000, based on the historical cost of the license, of which 11,611,975 shares were issued during the year ended March 31, 2006 and the balance during the year ended March 31, 2007. Of the 20,000,000 common shares issued, 9,428,205 common shares were issued to parties that became related parties to the Company.   As part of the Agreement, the Company is committed to pay Pagic and its assignees, royalties of US$10 per Nova Skincare System unit sold, US$2 per Duster unit sold and 4.5% of Tomorrow Garden  Kit  net  sales.  In addition, the  Company  must  pay a royalty  of 3%  of  net sales  related to ancillary product sales from these products.  If the Company elects to acquire the rights to future products developed by Pagic, they must pay a royalty of 4.5% of net sales of the new product plus 3% of net sales from ancillary product sales.   In order to keep the products under license, the Company must pay a minimum royalty for each of the Nova Skincare System, Duster and Tomorrow Garden Kit and their related ancillary products of US$37,500 beginning April 1, 2007 and US$50,000 per year thereafter. For any new products acquired they will be subject to minimum royalties of US$50,000 per year beginning April 1, 2007.   To keep the overall master license in good standing, the total of royalties and all other fees paid to Pagic shall be at least US$400,000 per year beginning April 1, 2007. During the year ended March 31, 2008, $565,135 (2007 - $269,745) was paid or accrued to Pagic under the terms of the license. During the six months ended September 30, 2008, $129,410 was paid or accrued to Pagic.   Due to uncertainty in determining future cash flows related to products under license, the Company, during the year ended March 31, 2008, wrote-down the value of the product license by $1,306,074 to $1.

6.  Prepaid Expenses   Prepaid expenses as at September 30, 2008 consists of $1,090,183 (2007 - $95,133), $997,830 of which is the deferred portion of investor relations and business consulting services agreements, $81,283 of prepaid rent and equipment deposits relating to the operations of Valcent UK operations, with the balance consisting of $11,070 in prepaid insurance deposits.

7.  Vertigro Joint Venture   On October 2, 2006, the Company entered into a letter agreement replaced on July 9, 2007 by the Vertigro Algae Stakeholders Letter of Agreement, (together “LOA”) with Pagic, West Peak Ventures of Canada Limited (“West Peak”) and Global Green, whereby Global Green agreed to fund the next phase of the development of a high density vertical bio-reactor technology.  Pursuant to the LOA, the Company and Global Green established a commercial joint venture named “Vertigro” in which Global Green agreed to provide up to US$3,000,000 in initial funding to continue the research and development of the bio-reactor technology, construct a working prototype of the bio-reactor and develop the technology for commercial uses. The Company is obligated to provide product support, research and development, and the non-exclusive use of the Company’s properties and lands for which Global Green has agreed to reimburse the Company as part of its US$3,000,000 initial funding commitment. Until such time as the joint venture has fully repaid to Global Green the US$3,000,000, Global Green shall receive 70% of the net cash flow generated by anticipated future operations after which each of Global Green and the Company will hold a 50% interest in the Vertigro, subject to an aggregate 4.5% royalty to Pagic and West Peak.  Vertigro covers the bio-reactor technology and any subsequent related technologies for the commercial scale products of algae based biomass for all industrial commercial and retail applications including, but not limited to bio-fuel, food, health, pharmaceutical, and animal and agricultural feeds.

8

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

7. Vertigro Joint Venture (Continued)   Limited Liability Company Operating Agreement for Vertigro Algae Technologies, LLC   On May 5, 2008, Valcent USA and Global Green signed a Limited Liability Company Operating Agreement (“New Operating Agreement”) replacing the LOA to form Vertigro Algae Technologies, LLC (“Vertigro Algae”), a Texas LLC, which is the formalized operating entity for the previous unincorporated operations of Vertigro.  The business activities of Vertigro Algae will be the same as when the operations were under Vertigro.  Under the New Operating Agreement, Global Green and the Company will each hold a 50% stake in Vertigro Algae, and have committed to fund project development according to ownership allocation. Further, the Company will acquire assets of Vertigro, including buildings, laboratory, and equipment.  To allow for prior capital contributions, Global Green has incurred in excess of the Company’s prior aggregate capital contribution, Global Green will receive 70% of the net cash flow generated by Vertigro Algae until it has received $3,000,000 in excess of its 50% interest in such cash flow.   After the start up of Vertigro Algae in May, 2008, and as at September 30, 2008, Global Green and the Company incurred a total of US$687,263 in costs related to operation of Vertigro Algae of which all of Global Green’s portion due is included as part of accounts receivable.   On September 26, 2008, the Company and Global Green entered in to an agreement for the Company to purchase Global Green’s entire interest in Vertigro Algae for US$5,000,000 and 5,000,000 restricted shares in the capital of the Company (“Vertigro Algae Purchase Agreement”).  The agreement is subject to finance and under further negotiation for extension.  As at September 30, 2008, the Company has paid Global Green’s portion of amounts due by them for Vertigro related project development in the amount of $386,498 through July 31, 2008 per the cutoff date for shared development costs pursuant to the Vertigro Algae Purchase Agreement, and the Company has further advanced $623,214 in amounts relating to the Vertigro Algae Purchase Agreement.   Technology License Agreement   On May 5, 2008, Vertigro Algae executed a Technology License Agreement (“Technology License”) together with Pagic, West Peak and the Company.  The Technology License licenses certain algae biomass technology and intellectual property to Vertigro Algae for purposes of commercialization and exploitation for all industrial, commercial, and retail applications worldwide (“Algae Biomass Technology”).  In return for the Algae Biomass Technology, both the Company and Global Green will each issue 300,000 common shares to Pagic, and also pay a one-time commercialization fee of US$50,000 upon the Algae Biomass Technology achieving commercial viability.  The Technology License is subject to royalty of 4.5% of gross customer sales receipts for use of the Algae Biomass Technology; and aggregate annual royalty minimum amounts of US$50,000 in 2009, US$100,000 in 2010, and US$250,000 in 2011 and each year thereafter in which the Technology License is in place.  The Company issued the 300,000 common shares due to Pagic on August 18, 2008 at a value of $190,746 and charged to product development expenses.   All prior agreements between the Company and Pagic that relate to the Algae Biomass Technology will be replaced by the new Operating Agreement and the Technology License.

8.  Inventories   As at September 30, 2008, inventories in the aggregate of $549,855 consist of raw materials in the amount of $226,811 (2007 – 471,474) and finished goods in the amount of $302,880 (2007 – 794,801) relating to the Nova Skin Care System, and $20,164 (2007 - $0) relating to the Company’s Tomorrow Garden project in the UK.

9

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

9.  Convertible Notes

Convertible note continuity:	US $														CDN $
	Balance		Q1-2 2009		Q1-2 2009			Q1-2 2009		Q1-2 2009			Balance		Balance
	March 31,		Issued		Equity			Interest/Accret/					Sept. 30,		Sept. 30,
Date of Issue	2008		Principal		Portion			Penalty		Conversions			2008		2008
July/August 2005 (Note 10(a))	$	259,825		-		-		$	9,891	$	(101,524	)	$	168,192	$	174,617
April 2006 (Note 10(b))		534,442		-		-			16,403		(109,403	)		441,442		458,305
April 2006 (Note 10(c))		85,542		-		-			3,213		-			88,755		92,145
December 2006 (Note 10(e))		1,659,782		-		-			138,986		-			1,798,768		1,867,481
January 2007 (Note 10(f))		1,569,183		-		-			632,579		(514,859	)		1,686,903		1,751,343
August 2007 (Note 10(g))		678,567		-		-			70,841		-			749,408		778,035
September 2007 (Note 10(h))		297,433		-		-			154,935		-			452,368		469,648
July 2008 (Note 10(i))				2,168,000		(1,351,003	)		269,682					1,086,679		1,128,190
	$	5,084,774	$	2,168,000	$	(1,351,003	)	$	1,296,531	$	(725,786	)	$	6,472,515	$	6,719,766
	US $														CDN $
	Balance		2008		2008			2008		2008			Balance		Balance
	March 31,		Issued		Equity			Interest /					March 31,		March 31,
Date of Issue	2007		Principal		Portion			Penalty		Conversions			2008		2008
July/August 2005 (Note 10(a))	$	316,957		-		-		$	22,389	$	(79,521	)	$	259,825	$	265,583
April 2006 (Note 10(b))		495,607		-		-			38,835		-			534,442		546,841
April 2006 (Note 10(c))		79,115		-		-			6,427		-			85,542		87,527
December 2006 (Note 10(e))		670,486		-		-			989,296		-			1,659,782		1,698,289
January 2007 (Note 10(f))		813,084		-		-			967,767		(211,668	)		1,569,183		1,605,558
August 2007 (Note 10(g))		-		650,000		(230,007	)		258,574		-			678,567		694,310
September 2007 (Note 10(h))		-		391,000		(213,249	)		119,682		-			297,433		304,633
	$	2,375,249	$	1,041,000	$	(443,256	)	$	2,402,970	$	(291,189	)	$	5,084,774	$	5,202,741

(a) US$1,277,200 July – August 2005 Convertible Note   During July and August 2005, the Company issued one-year, unsecured US$1,277,200 8% per annum convertible notes and three-year warrants to acquire: (i) up to 913,332 common shares of the Company at a price per share of US$0.50; and (ii) up to an additional 913,332 common shares of the Company at a price per share of US$1.00. The holders of the convertible notes may elect to convert the notes into common shares of the Company at the lesser of: (i) 70% of the average of the five lowest closing bid prices for the common stock for the ten trading days prior to conversion; and (ii) US$0.55. Accrued and unpaid interest may be converted into common shares of the Company at US$0.50 per share.  The Company may, subject to notice provisions and the common shares trading above US$1.50 per share for more than twenty consecutive trading days, elect to payout the notes and interest due by paying 130% of the amount due under the notes plus interest.  The common stock purchase warrants carry a “net cashless” exercise feature allowing the holder thereof, under certain limited circumstances, to exercise the warrants without payment of the stated exercise price, but rather solely in exchange for the cancellation of that number of common shares into which such warrants are exercisable.

10

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

9. Convertible Notes(Continued)

(a)  US$1,277,200 July – August 2005 Convertible Note (Continued)   As a result of the issuance of the warrants in conjunction with the convertible notes, the Company recorded a non-cash financing expense of $1,328,337. These convertible notes are unsecured, and due on demand.   In conjunction with this financing, the Company paid consultants an amount equal to 10% of the gross proceeds, which was included in investor relations during the year ended March 31, 2006 and issued 425,735 common shares at a deemed value of $285,242. There are 255,440 finders’ A warrants outstanding whereby the holders have the right to purchase 255,440 common shares at US$0.50 per share until August 5, 2008 and 425,733 finders’ B warrants whereby the holders shall have the right to purchase 425,733 common shares at US$0.75 per share until August 5, 2008.  A total of US$82,200 in registration penalties incurred in the year ended March 31, 2007 were converted to a new convertible debenture in the same amount on April 6, 2007 (Note 8(c)).   During the six months ended September 30, 2008, interest of US$9,891 (2007 – US$12,699) was accrued on the principal balance of these convertible notes and interest and accrued principal in the amount of US$101,524 was converted to 267,221 common shares.

(b) US$551,666 April 2006 Convertible Note   On April 6, 2006, the Company consummated a private offering transaction with and among a syndicated group of investors, pursuant to which the Company issued, in the aggregate, US$551,666 in 8% per annum convertible notes and three-year Class A and B warrants to acquire: (i) up to 735,544 shares of the Company’s common stock at a price per share of US$0.50; and (ii) up to an additional 735,544 shares of the Company’s common stock at a price per share of US$1.00. Subject to certain limitations, the principal amount of the notes, together with any accrued interest may be converted into shares of the Company’s common stock at the lesser of: (i) 70% of the average of the five lowest closing bid prices for the common stock for the ten trading days prior to conversion; or (ii) US$0.55. The convertible notes carry a redemption feature, which allows the Company to retire them, in whole or in part, for an amount equal to 130% of that portion of the face amount being redeemed, but only in the event that the common shares have a closing price of US$1.50 per share for at least twenty consecutive trading days and there has otherwise been no default. The common stock purchase warrants carry a Cashless Conversion Feature. These convertible notes are unsecured, and due on demand.   In conjunction with these private offering transactions, the Company paid consultants: (i) US$55,166 cash, representing 10% of the gross proceeds realized; (ii) 183,886 shares of common stock; (iii) three-year warrants to purchase up to 110,320 shares of common stock at a price per share of US$0.50; and (iv) three-year warrants to purchase up to 183,867 shares of common stock at a price per share of US$0.75.   During the six months ended September 30, 2008, convertible note principal and accrued interest in the aggregate amount of US$109,403 was converted into 245,049 common shares, and interest of US$16,403 (2007 – US$20,415) was accrued on the outstanding principal balance of these convertible notes.

(c) US$82,200 April 2006 penalty Convertible Note   On April 6, 2006, and in conjunction with certain private placements, the Company reached a verbal agreement with investors wherein the Company agreed to convert US$82,200 in accrued penalties associated with the July 25, 2005 through August 5, 2005 convertible notes into US$82,200 convertible penalty notes (Note 10(a)) carrying terms similar to the July 25, 2005 through August 5, 2005 convertible notes and an aggregate of 109,600 warrants.  These warrants carry a Cashless Conversion Feature and each warrant entitles the holder to purchase additional common shares for three years at a price of US$0.75 per share. These convertible notes are unsecured and due on demand.   During the six months ended September 30, 2008, interest of US$3,213 (2007 – US$3,213) was accrued on the principal balance of these convertible notes.

(d) Warrant Exercise Price Reduction and Registration Penalty Interest   Certain of the July and August 2005 and the April 6, 2006 convertible notes contained registration rights whereby the Company agreed to pay a penalty of 2% for every thirty days after a required filing and registration effective date plus a reduction in the warrant price of certain of the warrants issued of US$0.10.  As a result of the Company not filing its registration statement until April 27, 2006, the Company incurred penalties, which have been included in interest expense. An aggregate of 3,407,372 previously issued share purchase warrants relating to certain of the July and August 2005 and the April 6, 2006 convertible notes have reduced exercise prices from US$0.50, US$0.75, and US$1.00 to US$0.40, US$0.65, and US$0.90, respectively. In 2007, the Company recognized $80,102 in interest expense with the corresponding amount to contributed surplus as a result of re-valuation of the warrants upon the change in the pricing. The registration statement was subsequently declared effective.

11

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

9. Convertible Notes(Continued)

(e) US$1,500,000 December 2006 Convertible Note   On December 1, 2006, the Company accepted subscriptions of US$1,500,000 towards a private placement of 8% per annum, unsecured, convertible notes and three-year warrants to acquire: (i) up to an aggregate of 2,000,000 shares of the Company’s common stock at a price per share of US$0.50; and (ii) up to an additional 2,000,000 shares of the Company’s common stock at a price per share of US$1.00. Subject to certain limitations, the principal amount of the notes, together with any accrued interest may be converted into shares of the Company’s common stock at the lesser of: (i) 70% of the average of the five lowest closing bid prices for the Company’s common stock for the ten trading days prior to conversion; or (ii) US$0.55. The convertible notes carry a redemption feature, which allows the Company to retire them, in whole or in part, for an amount equal to 130% of that portion of the face amount being redeemed, but only in the event that the common shares have a closing price of US$1.50 per share for at least twenty consecutive trading days and there has otherwise been no default. These convertible notes are unsecured and due on demand. The common stock purchase warrants may be exercised on a cashless basis. After December 31, 2008, this convertible note accrues interest at the rate of 15% per annum.   During the six months ended September 30, 2008, interest of US$138,986 (2007 – US$60,164) was accrued on the principal balance of these convertible notes.

(e) US$1,500,000 December 2006 Convertible Note (Continued)   The right of the note holders to convert into the Company’s common stock is subject to the contractual agreement between the parties that any conversion by the note holders may not lead at the date of such conversion to an aggregate equity interest in the common stock of the Company greater than 9.99% inclusive of any derivative securities including options, warrants, convertible debt, any other convertible debt securities, or any other financial instruments convertible into common equity.

(f) US$2,000,000 January 2007 Convertible Note   On January 29, 2007, the Company completed a private placement comprised of $2,000,000 convertible notes. The convertible notes will mature on December 11, 2008, carry interest at 6% per annum and are unsecured. The notes are convertible into “Units” at the note holders’ discretion at a conversion price of US$0.50 per Unit. Each “Unit” consists of one common share and one purchase warrant to purchase an additional common share at US$0.70 per share until December 11, 2008. The notes and any accrued interest are callable by the Company at any time after December 11, 2007 by providing thirty days’ written notice to the note holders. Interest on the notes will be compounded annually and be cumulative until the earlier of either the date the Company achieves pre-tax earnings or the end of the term. At the discretion of the note holders, interest on the notes is payable in either cash or units at US$0.50 per unit. In connection with this financing, the Company has paid consultants US$108,000 in cash and issued 135,000 warrants exercisable at US$0.50 per unit, with each unit consisting of one common share and one share purchase warrant to purchase a further common share at US$0.70 per share until December 11, 2008. The Company is obligated to file a resale registration statement on the underlying securities within four months of closing, which it has failed to do.   As a result of the failure to file the registration statement, the Company recorded penalties of US$120,000 as of March 31, 2007 and a further US$289,973 during the year ended March 31, 2008.  During the six months ended September 30, 2008, interest of US$47,342 (2007 – US$46,627) and accretion of the convertible debenture of US$585,237 (2007 – US$180,953) was accrued on the principal balance of these convertible notes; the principal portion of the notes was increased owing to the accretion of interest expense in the same amount relating to convertible debenture equity conversion component.  During the six months ended September 30, 2008, convertible note principal and accrued interest in the aggregate amount of US$514,859 was converted into 1,027,714 common shares.

(g) US$650,000 August 2007 Convertible Note   On August 10, 2007, the Company issued an unsecured convertible term promissory note in the amount of US$650,000 to a third party. The convertible note is due on demand and bears interest at 6% with both interest and principal convertible at the option of the lender into units at US$0.60 per unit, with each unit consisting of one common share and one-half share purchase warrant with each whole share purchase warrant exercisable at US$0.75 to purchase an additional common share.  After November 25, 2008, this convertible note accrues interest at the rate of 15% per annum. During the six months ended September 30, 2008, interest of US$70,841 (2007 – US$5,449) was accrued on the principal balance of these convertible notes.

12

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

9. Convertible Notes(Continued)

(g) US$650,000 August 2007 Convertible Note (Continued)   The Company is required to register for trading the securities underlying the conversion features of this convertible note on a best efforts basis, but has failed to do so within terms agreed.  A one-time financial penalty of US$28,567 for failure to register the securities underlying this convertible note within 180 days from the date of issuance has been incurred in the year ended March 31, 2008.   The right of the note holder to convert into the Company’s common stock is subject to the contractual agreement between parties that any conversion by the note holder may not lead, at the date of such conversion, to an aggregate equity interest in the common stock of the Company greater than 9.99% inclusive of any derivative securities including options, warrants, convertible debt, any other convertible debt securities, or any other financial instruments convertible into common equity.

(h) US$391,000 September 2007 Convertible Note   On September 27, 2007, the Company issued unsecured one-year term convertible notes bearing interest at 6% per annum in the amount of US$391,000 to third parties.  Both interest and principal may be converted at the option of the lender at any time at US$0.60 per unit, with each unit consisting of one common share and one-half share purchase warrant, with each whole share purchase warrant exercisable at US$0.75 to purchase an additional common share for a two-year term from the date of conversion.   The Company was required to register for trading the securities underlying the conversion features of this convertible note on a best efforts basis, but has failed to do so within terms agreed.  A one-time financial penalty of US$23,460 for failure to register the securities underlying this convertible note within 90 days from the date of issuance has been incurred during the year ended March 31, 2008.   During the six months ended September 30, 2008, interest of US$11,762 (2007 – US$373) and accretion of the convertible debenture of US$143,173 (2007 – US$0) was accrued on the principal balance of these convertible notes; the principal portion of the notes was increased owing to the accretion of interest expense in the same amount relating to convertible debenture equity conversion component.

(i) US$2,428,160 July 2008 Convertible Note   On July 21, 2008, the Company closed a financing of zero coupon, 12% interest, senior secured convertible promissory notes in the amount of US$2,428,160 with an aggregate purchase price of US$2,168,000 with four investors, one of which was the Company’s Chief Financial Officer as to US$168,000. The debt is convertible into shares of common stock at the lesser of US$0.51 per share (unless the conversion price has been adjusted pursuant to further contract covenants) and 70% of the average of the five lowest closing bid prices for the ten preceding trading days. The Company issued each purchaser in the private placement two warrants, one warrant being redeemable by the Company and the other being non-redeemable. The non-redeemable warrants are exercisable at US$0.55 and permit the holder to purchase shares of common stock equal to 100% of the number of shares issuable upon the conversion of the notes calculated on July 21, 2008. The redeemable warrants are exercisable at US$0.75 and permit the holder to purchase common stock equal to 50% of the number of shares issuable upon the conversion of the notes issued calculated on the closing date. The Company issued a total of redeemable warrants to purchase an aggregate of 4,761,098 shares of common stock and a total of redeemable warrants to purchase an aggregate of 2,380,550 shares of common stock. Further, the Company issued 439,216 non-redeemable warrants and 219,608 redeemable warrants and $160,000 in cash fees to close the transaction. Each non-redeemable warrant is exercisable at US$0.55, and each redeemable warrant is exercisable at US$0.75; warrants carry a term of five years from the date of closing of the financing. The redeemable warrants may be redeemed by the Company only if certain conditions have been satisfied including the Company’s common stock having closed at $1.50 per share for a period of 20 consecutive trading days and the warrant holder being able to resell the shares acquired upon exercise through a resale registration statement or under Rule 144 of the Securities Act.

13

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

10.  Related Party Transactions   Related party transactions are in the ordinary course of business and are measured at the exchange amount at the time the agreement is entered into or services are provided.  Related party transactions not disclosed elsewhere in these interim financial statements are as follows:

			Six months ended September 30, 2008
(a)	Charges from Pagic, a company related by a common officer and director, for product development expenses including royalties		$	129,410
(b)	Charges from CFO and director for professional fees		$	9,000
	Interest on advance from CFO, at 10% interest per annum		$	2,138
	Charges from private companies with this director in common for:
	(i)	Office rent	$	15,000
	(ii)	Consulting fee	$	75,000
	(iii)	Repayment of an advance received in the quarter	$	10,000
(c)	West Peak and its principal shareholder, a beneficial owner of more than 5% of the Company’s common shares:
	(i)	Net unsecured loan advances, at 8% interest per annum	$	314,250
(d)	Advertising and consulting services of a private company with a director in common		$	173,916
(e)	Operational management consulting services of a director		$	26,250
(f)	Operational management consulting services of a director and a related company		$	54,000
(g)	Unsecured loan advances, at 8% interest per annum received from a director of the Company and repaid during the period		$	105,242

Amounts due to related parties except for advances to the Company are non-interest bearing and have no specific terms of repayment. Advances are unsecured.  Due to related parties includes the following amounts at September 30, 2008 in respect to certain of the above transactions:

		September 30, 2008
(a)	Pagic royalties, etc.	$	153,480
(b)	CFO charges and advances		15,014
(c)	Consulting services and unsecured loan advances		1,357,545
(d)	Advertising		-
(e) and (f)	Operational management consulting		61,638
(g)	Unsecured loan advances		-
Unsecured loan advances from a company with a director in common			57,364
		$	1,645,041

11.  Commitments   Commitments not disclosed elsewhere in these interim financial statements are as follows:   On November 16, 2007, Valcent EU leased office and development space in Launceston, Cornwall, UK, under a ten-year lease beginning November 15, 2007 and ending on November 15, 2017 at a quarterly cost of $26,017 (GB£12,550).  There were 9 years and 1.5 months remaining on the lease as at September 30, 2008.

14

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

12.  Share Capital

(a) Authorized:

Unlimited number of common shares without par value

Unlimited number of preferred shares without par value – None issued

(b) Issued and outstanding:   The common share issuances consisted of the following transactions:

	Number of Shares		Amount
Balance, as at March 31, 2008		44,276,321		16,691,282
Shares issued for private placement		3,252,666		1,567,336
Shares issued for promissory note interest		100,000		65,432
Shares issued for consulting services		720,000		476,008
Shares issued for convertible debt principal and interest		1,541,984		1,120,885
Shares issued for warrants exercised		383,331		193,391
Reallocation of equity from modified warrant terms				(632,244	)
Balance, as at September 30, 2008		50,274,302		19,482,091

During the six months ended September 30, 2008, the Company:

(i) Completed private placement of units whereby a total of 3,252,666 units were issued at US$0.60 per unit for gross proceeds of $1,976,564.  Each unit consists of one common share and one-half common share purchase warrant with each whole warrant exercisable at US$0.75 to purchase an additional common share of the Company. The fair value of aggregate warrants issued in the amount of $409,228 was classified as contributed surplus.

(ii) Issued 100,000 shares in connection with interest charges regarding a promissory note valued at $65,432;

(iii) Issued 420,000 shares in connection with two financial consulting services agreements for investor relations and product development services valued at an aggregate of $285,262, and 300,000 shares valued at $190,746 issued to a company affiliated with a director and officer of the Company relating to the Technology License and charged to product development;

(iv) Issued 1,541,984 common shares upon conversion of US$642,281 of convertible notes and interest of US$83,505 to convertible debenture holders;

(v) Issued 383,331 common shares upon the exercise of 383,331 warrants at US$0.50 per share;

(vi) On July 15, 2008, the Company agreed to change the term of certain warrants issued previously as part of various private placements.  1,393,982 warrants exercisable at US$0.40 to US$0.90 per share expiring in July and August 2008 were extended to April 9, 2009, and 2,872,224 warrants expiring in July and August 2009 were extended to December 31, 2008.  The Company applies the fair value method using Black-Scholes option pricing model in accounting for warrants utilizing a risk free interest rate of 1.8% and expected volatility of 64%.  The warrants with extended terms resulted in a fair value of $632,244 reclassified from share capital to contributed surplus warrants.

15

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

12. Share Capital(Continued)

(c) Stock options   The Company has a stock option plan (“Plan”) that allows for share options to be issued to employees, directors, officers, and consultants on both a qualified and non-qualified basis. The aggregate number of shares of common stock as to which options and bonuses may be granted from time to time under the Plan shall not exceed 20% of the Company’s issued and outstanding shares of common stock and the number of shares of common stock as to which options and bonuses may be granted under the US incentive portion of the Plan shall not exceed 17% of the Company’s issued and outstanding shares of common stock. The Company’s Plan provides that the terms of the options and the option prices shall be fixed by the board of directors or committee, and subject to the requirements of the exchange on which the Company’s common shares are traded, or any other governing regulatory body, at the time of exercise. Options granted shall expire after a period of five years or terminate three months after the recipient ceases to be an employee of the Company.   Details of the status of the Company's stock options as at March 31, 2008 and at September 30, 2008 are as follows:

				Weighted
				Average
	Number			US Exercise
	of Options			Price
Options outstanding, March 31, 2007		3,835,000		$	0.58
Granted		2,315,000		$	0.69
Forfeited		(235,000	)	$	0.60
Exercised		(175,000	)	$	0.50
Options outstanding, March 31, 2008		5,740,000		$	0.63
Granted		200,000		$	0.70
Options outstanding, September 30, 2008		5,940,000		$	0.63
Options exercisable, September, 2008		5,490,000		$	0.63

As at March 31, 2008 and September 30, 2008, the following stock options were outstanding:

Expiry Date	US Exercise Price		Number of Options		Exercisable
December 31, 2008	$	0.50		125,000		125,000
March 22, 2009	$	0.60		500,000		450,000
November 10, 2009	$	0.60		650,000		450,000
March 1, 2010	$	1.00		75,000		75,000
April 1, 2010	$	0.70		600,000		600,000
April 9, 2010	$	0.80		50,000		50,000
June 30, 2010	$	0.60		200,000		200,000
October 2, 2010	$	0.70		200,000		-
October 10, 2010	$	0.70		300,000		300,000
December 20, 2010	$	0.60		300,000		300,000
October 10, 2011	$	0.70		750,000		750,000
December 13, 2011	$	0.55		1,650,000		1,650,000
December 20, 2011	$	0.70		155,000		155,000
March 21, 2012	$	0.60		300,000		300,000
March 31, 2012	$	0.70		85,000		85,000
				5,940,000		5,490,000

Options vesting in the six months ended September 30, 2008 included 150,000 share options exercisable at US$0.60 per share and 600,000 share options exercisable at US$0.70 per share.

16

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

12. Share Capital (Continued)

(d) Warrants   Each of the Company’s share purchase warrants are exercisable into one common share. The changes during the six month period ended September 30, 2008 are as follows:

	Number of Warrants			Weighted Average US Price
Warrants outstanding  and exercisable,
March 31, 2008		15,752,251		$	0.74
Granted		10,416,147		$	0.65
Expired		(661,661	)	$	0.50
Exercised		(383,331	)	$	0.50
Warrants outstanding  and exercisable,
September 30, 2008		25,123,406		$	0.71

The Company applies the fair value method using Black-Scholes option pricing model in accounting for warrants.  During the period ended September 30, 2008, 10,416,147 warrants were granted (2007 – 1,109,166) as follows:

(i) 1,626,333 warrants exercisable at US$0.75 per share which resulted in $409,228 (2007 - $298,738) as fair value of the warrants recorded in share capital valued using a risk free interest rate of 2.75%, expected volatility of 74%, and a term of 2 years;

(ii) 5,200,313 warrants exercisable at US$0.55 per share and 2,600,158 warrants exercisable at US$0.75 per share which resulted in $865,646 as fair value of these warrants issued in conjunction with certain convertible notes issued in the period recorded in contributed surplus valued using a risk free interest rate of 3.32%, expected volatility of 105.77%, and a term of 5 years.

(iii) 989,343 warrants exercisable at US$0.70 per share issued in connection of convertible debenture conversions previously valued.

(iv) 1,393,982 warrants exercisable at US$0.40 to US$0.90 per share expiring in July and August 2008 were extended to April 9, 2009, and 2,872,224 warrants expiring in July and August 2009 were extended to December 31, 2008 and valued using a risk free interest rate of 1.8% and expected volatility of 64%.  The warrants with extended terms resulted in a fair value of $632,244 reclassified from share capital to contributed surplus warrants.

As at September 30, 2008, the following share purchase warrants were outstanding:

Expiry Date	US Exercise Price		Number of Warrants
December 11, 2008	$	0.50		135,000
December 11, 2008	$	0.70		1,424,938
December 31, 2008	$	0.75		425,735
December 31, 2008	$	0.80		1,656,897
December 31, 2008	$	1.00		789,592
April 6, 2009	$	0.40		993,981
April 6, 2009	$	0.50		65,320
April 6, 2009	$	0.65		109,604
April 6, 2009	$	0.75		183,867
April 6, 2009	$	0.90		1,648,884
May 24, 2009	$	0.75		1,056,666
July 10, 2009	$	0.75		52,500
October 9, 2009	$	0.75		608,333
December 1, 2009	$	0.50		2,000,000
December 1, 2009	$	1.00		2,000,000
December 18, 2009	$	0.75		2,348,857
February 19, 2010	$	0.75		125,000
March 21, 2010	$	0.85		71,428
May 1, 2010	$	0.75		1,498,334
June 6, 2010	$	0.75		97,499
July 22, 2010	$	0.75		30,500
July 30, 2013	$	0.75		7,800,471
Total at September 30, 2008				25,123,406

17

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

12. Share Capital (Continued)

(e) Contributed surplus

	2008
Contributed surplus, March 31, 2008	$	4,203,394
Issuance of warrants from private placement		409,228
Reclassification on warrant term extension		632,244
Warrants issued with convertible debenture		865,646
Stock options expense		120,021
Contributed surplus, September 30, 2008	$	6,230,532

(f) Conversion component of convertible notes

	2008
Balance, March 31, 2008	$	3,591,398
Issuance of convertible debt		485,357
Conversion of debentures		(395,099	)
Contributed surplus, September 30, 2008	$	3,681,656

13.  Promissory Notes Payable   As at September 30, 2008, promissory notes payable consists of the following due to a third party lender:

7% simple interest, US$100,000 promissory note payable, unsecured, no terms of repayment	$	122,877
10% simple interest, US$150,000 promissory note payable, unsecured, no terms of repayment.		164,263
	$	287,140

14.  Financial Instruments   The Company has exposure to credit, liquidity and market risks from its use of financial instruments.  This note provides information about the Company's exposure to each of these risks, and the Company's objectives, policies and processes for measuring and managing such risks.  The board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework.   Liquidity risk   Liquidity risk is the risk that the Company will encounter difficulty in paying obligtions as they come due.  The Company's financial liabilities consist of accounts payable, accrued liabilities, amounts due to related parties, and convertible debt instruments and promissory notes.  Accounts payable consists of invoices payable to trade suppliers for capital and operating expenditures and for general corporate expenses.  The Company processes invoices within a normal payment period. Convertible debt instruments and promissory notes are renegotiated to extend terms as required.  Amounts due to related parties bear interest at market rates and are provided on an non-secured basis.  A secured interest over the assets of the Company however has been pledged for our most recent convertible debt issued in July 2008.   The Company prepares funds from operations and capital expenditure budgets which are regularly monitored and updated.  As well, the Company utilizes authorizations for expenditures on sites relating to its primary development initiatieves to further manage capital expenditures.

18

Valcent Products Inc.

Notes to the Interim Consolidated Financial Statements

(A Development Stage Company)

(Expressed in Canadian Dollars)

Unaudited and Prepared by Management

14.  Financial Instruments (Continued)   Market risk   Market risk is the risk that changes in market conditions, such as commodity prices, interest rates, and foreign exchange rates, will affect the Company's cash flows or the value of its financial instruments.  The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.  The Company does not utilize financial derivatives or other contracts to manage market risks.   Foreign currency exchange rate risk   The Company is exposed to foreign currency fluctuations as it has cash, short-term deposits and accounts payable denominated in U.S. dollars, Canadian dollars, and British Pounds.  In addition, a significant portion of the Company's operating activities are conducted in U.S. dollars.  There are no exchange rate contracts in place.   Fair Value   At September 30, 2008, the fair value of the Company's financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate their carrying values due to their short terms to maturity.  Certain of the Company’s convertible debentures or promissory notes may be extended beyond stated terms, and certain of the convertible notes may be converted at a percentage discount to market value.

15.  Capital Management   The Company strives to build a strong capital base to maintain financial flexibility and to sustain the future development of the business.  In order to maintain financial flexibility, the Company may from time to time issue shares and adjust its capital spending to manage current and projected capital levels.  To assess capital and operating efficiency and financial strength, the Company continually monitors its working capital deficiency.   The Company is an exploration stage company.  The Company monitor’s its cash flow requirement on a monthly basis. The Company prepares annual operating and capital expenditure budgets, which are updated as necessary depending on varying factors including current and forecast exchange rates, project development, successful capital deployment, and general industry conditions. The Company’s share capital is not subject to external restrictions. The Company has not paid or declared any dividends since the date of incorporation, nor are any contemplated in the foreseeable future. There were no changes to the Company’s approach to capital management during the quarter.

16.  Subsequent Events   Subsequent events not disclosed elsewhere in these interim financial statements are as follows:

(a) On November 15, 2008,

(i)  the Company changed certain terms and conditions of US$1,150,000 in convertible notes effecting a) the change of conversion price from US$0.50 per unit to US$0.30 per unit, b) the change of the term of the debt from December 11, 2008 to December 11, 2009, c) the change to the conversion unit’s warrant exercise price issuable from US$0.70 to US$0.50, and d) the extension of the unit’s embedded warrant exercise term from December 11, 2008 to December 11, 2010.

(ii)  the Company ratified a verbal extension to a previous written agreement that had lapsed effective December 31, 2007 by entering into a new public relations services agreement with a third party requiring the issuance of 100,000 restricted shares on or before December 31, 2008, and cash of US$4,000 per month from January 1, 2008 to December 31, 2008.

(b) On November 20, 2008, the Company issued 34,000 common shares at $0.40 per share relating to a debt setoff agreement for public relations services rendered.

19