----

----

----

----

----

----

| Title of each      class |   | Name of each      exchange |
|--------------------------|--------|----------------------------|
|                     |   | on which      registered   |
|                     |   |                       |

----

----

----

| Large Accelerated      filer     o | Accelerated      filer     o | Non Accelerated      filer     x |
|--------------------------------------------------------|--------------------------------------------------|------------------------------------------------------|

| U.S. GAAP | o      | International      Financial Reporting Standards as issued | o      | Other  | x      |
|-----------|--------|------------------------------------------------------------|--------|--------|--------|
|      |   | by the International      Accounting Standards Board       |   |   |   |

----

|         |   |                                                                              |   |       |
|--------------|--------|-----------------------------------------------------------------------------------|--------|------------|
|         |   |                                                                              |   | PageNumber |
| PART I       |   |                                                                              |   | 4          |
|         |   |                                                                              |   |       |
| ITEM 1       |   | Identity of Directors, Senior      Management and Advisors                        |   | 4          |
|         |   |                                                                              |   |       |
| ITEM 2       |   | Offer Statistics and Expected      Timetable                                      |   | 4          |
|         |   |                                                                              |   |       |
| ITEM 3       |   | Key      Information                                                              |   | 4          |
|         |   |                                                                              |   |       |
| ITEM 4       |   | Information on the      Company                                                   |   | 15         |
|         |   |                                                                              |   |       |
| ITEM 5       |   | Operating and Financial Review      and Prospects                                 |   | 33         |
|         |   |                                                                              |   |       |
| ITEM 6       |   | Directors, Senior Management and      Employees                                   |   | 44         |
|         |   |                                                                              |   |       |
| ITEM 7       |   | Major Shareholders and Related      Party Transactions                            |   | 49         |
|         |   |                                                                              |   |       |
| ITEM 8       |   | Financial      Information                                                        |   | 53         |
|         |   |                                                                              |   |       |
| ITEM 9       |   | The Offer and      Listing                                                        |   | 58         |
|         |   |                                                                              |   |       |
| ITEM 10      |   | Additional      Information                                                       |   | 59         |
|         |   |                                                                              |   |       |
| ITEM 11      |   | Quantitative and Qualitative      Disclosures About Market Risk                   |   | 76         |
|         |   |                                                                              |   |       |
| ITEM 12      |   | Description of Securities Other      than Equity Securities                       |   | 76         |
|         |   |                                                                              |   |       |
|         |   |                                                                              |   |       |
| PART II      |   |                                                                              |   | 77         |
|         |   |                                                                              |   |       |
| ITEM 13      |   | Defaults, Dividends, Arrearages      and Delinquencies                            |   | 77         |
|         |   |                                                                              |   |       |
| ITEM 14      |   | Material Modifications to the      Rights of Security Holders and Use of Proceeds |   | 77         |
|         |   |                                                                              |   |       |
| ITEM 15      |   | Control and      Procedures                                                       |   | 77         |
|         |   |                                                                              |   |       |
| ITEM      16 |   | [Reserved]                                                                        |   |       |
|         |   |                                                                              |   |       |
| ITEM 16A     |   | Audit Committee Financial      Expert                                             |   | 80         |
|         |   |                                                                              |   |       |
| ITEM 16B     |   | Code of    Ethics                                                                 |   | 80         |
|         |   |                                                                              |   |       |
| ITEM 16C     |   | Principal Accountant Fees and      Services                                       |   | 80         |
|         |   |                                                                              |   |       |
| ITEM 16D     |   | Exemptions from the Listing      Standards for Audit Committee                    |   | 80         |
|         |   |                                                                              |   |       |
| ITEM 16E     |   | Purchase of Equity Securities by      the Issuer and Affiliated Purchasers        |   | 80         |
|         |   |                                                                              |   |       |
|         |   |                                                                              |   |       |
| PART III     |   |                                                                              |   | 81         |
|         |   |                                                                              |   |       |
| ITEM 17      |   | Financial      Statements                                                         |   | 81         |
|         |   |                                                                              |   |       |
| ITEM 18      |   | Exhibits                                                                          |   | 82         |

----

 PART I

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3.KEY INFORMATION

----

ITEM3. KEY INFORMATION

| (i) | the      development of a commercial bio-diesel feed stock technology via a      formalized corporate joint venture with Global Green Solutions, Inc.      (“Global Green”) through 50% owned Texas subsidiary, Vertigo Algae      Technologies LLC. (During the year ended March 31, 2008 and through May 1,      2008, the Company operated this initiative via a non-incorporated joint      venture with Global Green); |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | the      development of our High Density Vertical Growth System designed to produce      vegetables and other plant crops (“HDVG  System”); |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | the      development and marketing of the Tomorrow GardenTM      consumer retail product in our UK based  subsidiary; |
|-------|-----------------------------------------------------------------------------------------------------------------------|

| (iv) | ongoing      research and development with tissue culture technologies, plant growth      technologies, and other product and technology development initiatives;      and |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (v) | ongoing      development planning and research regarding our Nova Skin Care System      product line. |
|-----|-------------------------------------------------------------------------------------------------------|

----

ITEM3. KEY INFORMATION

| Valcent Products Inc.Selected      Financial Data(Expressed      in Canadian Dollars)   |   | March      31,200812      Months |       |   | March      31,200712      MonthsAs      Restated |   |      | March      31,200612      MonthsAs      Restated |   |   | March      31,200512      Months |   |   | March      31,200412      Months |   |
|-----------------------------------------------------------------------------------------|--------|----------------------------------|------------|--------|--------------------------------------------------|--------|-----------|--------------------------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------|--------|
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |
| Net      Operating Revenues per Canadian      and U.S. GAAP                             |   | $                                | 0.00       |   |                                             | $      | 0.00      |                                             |   | $      | 0.00                             |   |   | $                                | 0.00   |   |   | $ | 0.00 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) from operations                                                      |   | $                                | 12,028,222 |   |                                             | $      | 8,171,090 |                                             |   | $      | 3,442,933                        |   |   | $                                | 45,694 |   |   | $ | 25,885 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) from operations U.S.      GAAP                                       |   | $                                | 13,292,888 |   |                                             | $      | 9,749,339 |                                             |   | $      | 2,844,879                        |   |   | $                                | 45,694 |   |   | $ | 25,885 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) from continued operations      per Canadian GAAP                     |   | $                                | 12,028,222 |   |                                             | $      | 8,171,090 |                                             |   | $      | 3,466,888                        |   |   | $                                | 45,694 |   |   | $ | 25,885 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) from discontinued operations      per Canadian GAAP                  |   | $                                | 0.00       |   |                                             | $      | 0.00      |                                             |   | $      | 0.00                             |   |   | $                                | 0.00   |   |   | $ | (2,238 | ) |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Net      (Income) loss per Canadian GAAP                                                |   | $                                | 12,712,358 |   |                                             | $      | 8,138,393 |                                             |   | $      | 3,466,888                        |   |   | $                                | 45,694 |   |   | $ | 23,647 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) from continued operations      per U.S. GAAP                         |   | $                                | 13,292,888 |   |                                             | $      | 9,749,339 |                                             |   | $      | 2,844,879                        |   |   | $                                | 45,694 |   |   | $ | 25,885 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) from discontinued operations      per U.S. GAAP                      |   | $                                | 0.00       |   |                                             | $      | 0.00      |                                             |   | $      | 0.00                             |   |   | $                                | 0.00   |   |   | $ | (2,238 | ) |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Net      (Income) loss per U.S. GAAP                                                    |   | $                                | 13,292,888 |   |                                             | $      | 9,749,339 |                                             |   | $      | 2,844,879                        |   |   | $                                | 45,694 |   |   | $ | 23,647 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      (Income) per share from continued      operations - basic, Canadian      GAAP |   | $                                | 0.36       |   |                                             | $      | 0.42      |                                             |   | $      | 0.354                            |   |   | $                                | 0.007  |   |   | $ | 0.01 |   |
|                                                                                    |   |                             |       |   |                                             |   |      |                                             |   |   |                             |   |   |                             |   |   |   |   |   |   |
| Loss      per share from discontinued operations,      Canadian GAAP                    |   | $                                | 0.00       |   |                                             | $      | 0.00      |                                             |   | $      | 0.00                             |   |   | $                                | 0.00   |   |   | $ | 0.00 |   |

|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |
|----------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|-----------|
| Loss      (Income) per share after discontinued operations, Canadian      GAAP   |   | $      | 0.36       |   |   | $      | 0.42       |   |   | $      | 0.354      |   |   | $      | 0.007     |   |   | $ | 0.01 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Loss      (Income) per share from continued      operations, U.S. GAAP           |   | $      | 0.37       |   |   | $      | 0.51       |   |   | $      | 0.27       |   |   | $      | 0.007     |   |   | $ | 0.01 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Loss      (Income) per share from discontinued      operations, U.S. GAAP        |   | $      | 0.00       |   |   | $      | 0.00       |   |   | $      | 0.00       |   |   | $      | 0.00      |   |   | $ | 0.01 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Loss      (Income) per share after discontinued      operations, U.S.GAAP        |   | $      | 0.37       |   |   | $      | 0.51       |   |   | $      | 0.27       |   |   | $      | 0.007     |   |   | $ | 0.01 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Share      capital per Canadian GAAP                                             |   | $      | 16,691,282 |   |   | $      | 8,196,982  |   |   | $      | 4,099,870  |   |   | $      | 2,999,420 |   |   | $ | 2,999,420 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Share      capital per U.S. GAAP                                                 |   | $      | 16,866,115 |   |   | $      | 8,434,032  |   |   | $      | 4,391,371  |   |   | $      | 2,999,420 |   |   | $ | 2,999,420 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Common      shares issued                                                        |   |   | 44,276,321 |   |   |   | 30,666,068 |   |   |   | 15,787,835 |   |   |   | 6,435,374 |   |   |   | 6,435,374 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Weighted      average shares outstanding      per Canadian GAAP                  |   |   | 35,545,740 |   |   |   | 19,261,192 |   |   |   | 10,548,042 |   |   |   | 6,435,374 |   |   |   | 6,435,374 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Weighted      average shares outstanding      per U.S. GAAP                      |   |   | 35,545,740 |   |   |   | 19,261,192 |   |   |   | 10,548,042 |   |   |   | 6,435,374 |   |   |   | 6,435,374 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Total      Assets per Canadian GAAP                                              |   | $      | 4,605,914  |   |   | $      | 4,142,485  |   |   | $      | 1,392,801  |   |   | $      | 936       |   |   | $ | 2,059 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Total      Assets per U.S. GAAP                                                  |   | $      | 4,700,482  |   |   | $      | 4,372,786  |   |   | $      | 1,392,801  |   |   | $      | 936       |   |   | $ | 2,059 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Net      assets (liabilities) per Canadian GAAP                                  |   | $      | (3,068,935 | )      |   | $      | (24,376    | )      |   | $      | (441,099   | )      |   | $      | (237,950  | ) |   | $ | (192,256 | ) |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Net      assets (liabilities) per U.S. GAAP                                      |   | $      | (3,161,013 | )      |   | $      | 665,904    |   |   | $      | (590,697   | )      |   | $      | (237,950  | ) |   | $ | (192,256 | ) |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Convertible      debentures (current and      long term portions) per U.S. GAAP) |   | $      | 5,389,387  |   |   | $      | 2,282,483  |   |   | $      | 0.00       |   |   | $      | 0.00      |   |   | $ | 0.00 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Cash      Dividends Declared per common      shares, Canadian and U.S.      GAAP |   | $      | 0.00       |   |   | $      | 0.00       |   |   | $      | 0.00       |   |   | $      | 0.00      |   |   | $ | 0.00 |   |
|                                                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |      |   |   |   |   |   |
| Exchange      Rates (CND to USD) Period      Average                             |   | $      | 1.03304    |   |   | $      | 0.8783     |   |   | $      | 0.8385     |   |   | $      | 0.7842    |   |   | $ | 0.7403 |   |

----

ITEM3. KEY INFORMATION

| Exchange      Rates (CDN to USD)For      the five most recent years ended March 31,calculated      on the average of 12 month end closing days |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                           |   |   |
| March      31, 2008                                                                                                                            |   | $ | 1.0219 |   |
| March      31, 2007                                                                                                                            |   | $ | 1.1336 |   |
| March      31, 2006                                                                                                                            |   | $ | 1.1905 |   |
| March      31, 2005                                                                                                                            |   | $ | 1.2716 |   |
| March      31, 2004                                                                                                                            |   | $ | 1.3462 |   |

| Exchange Rates (CDN to USD)for      six most recent months |   | PeriodHigh |   |   | PeriodLow |   |
|------------------------------------------------------------|--------|------------|--------|--------|-----------|--------|
|                                                       |   |       |   |   |      |   |
|                                                       |   |       |   |   |      |   |
| August      2008                                           |   | $          | 0.9771 |   |      | $      | 0.9365 |   |
| July      2008                                             |   | $          | 0.9984 |   |      | $      | 0.9770 |   |
| June      2008                                             |   | $          | 1.0072 |   |      | $      | 0.9818 |   |
| May      2008                                              |   | $          | 1.0157 |   |      | $      | 0.9814 |   |
| April      2008                                            |   | $          | 0.9963 |   |      | $      | 0.9756 |   |
| March      2008                                            |   | $          | 1.0223 |   |      | $      | 0.9755 |   |
| Exchange      Rate (CDN to USD) September      15, 2008    |   | $          | 0.9437 |   |      |   |   |   |

----

ITEM3. KEY INFORMATION

----

ITEM3. KEY INFORMATION -continued

|   | • | brand      name recognition;                                                                                                                       |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                               |
|   | • | availability      of financial resources;                                                                                                          |
|   |    |                                                                                                                                               |
|   | • | the      quality of products;                                                                                                                      |
|   |    |                                                                                                                                               |
|   | • | reviews      received for products from independent reviewers who publish in magazines,      websites, newspapers and other industry publications; |
|   |    |                                                                                                                                               |
|   | • | availability      of access to retail shelf space;                                                                                                 |
|   |    |                                                                                                                                               |
|   | • | the      price of each product; and                                                                                                                |
|   |    |                                                                                                                                               |
|   | • | the      number of products then available.                                                                                                        |

----

ITEM3. KEY INFORMATION -continued

 -continued

|   | • | general      business conditions;         |
|--------|---------|-------------------------------------------|
|   |    |                                      |
|   | • | interest      rates;                      |
|   |    |                                      |
|   | • | inflation;                                |
|   |    |                                      |
|   | • | consumer      debt levels;                |
|   |    |                                      |
|   | • | the      availability of consumer credit; |

----

ITEM3. KEY INFORMATION -continued

 -continued

|   | • | taxation;                                                             |
|--------|---------|-----------------------------------------------------------------------|
|   |    |                                                                  |
|   | • | fuel      prices and electrical power rates;                          |
|   |    |                                                                  |
|   | • | unemployment      trends;                                             |
|   |    |                                                                  |
|   | • | natural      disasters;                                               |
|   |    |                                                                  |
|   | • | terrorist      attacks and acts of war; and                           |
|   |    |                                                                  |
|   | • | other      matters that influences consumer confidence and  spending. |

----

ITEM3. KEY INFORMATION -continued

 -continued

Thereis no certainty that our key projects will be operationally successful orprofitable.

|   | • | the      trading volume of our shares;                                                             |
|--------|---------|----------------------------------------------------------------------------------------------------|
|   |    |                                                                                               |
|   | • | the      number of securities analysts, market-makers and brokers following our      common stock; |
|   |    |                                                                                               |
|   | • | changes      in, or failure to achieve, financial estimates by securities      analysts;           |

----

ITEM3. KEY INFORMATION -continued

 -continued

|   | • | new      products introduced or announced by us or our  competitors;                                                      |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                      |
|   | • | announcements      of technological innovations by us or our competitors;                                                 |
|   |    |                                                                                                                      |
|   | • | actual      or anticipated variations in quarterly operating  results;                                                    |
|   |    |                                                                                                                      |
|   | • | conditions      or trends in our business industries;                                                                     |
|   |    |                                                                                                                      |
|   | • | announcements      by us of significant acquisitions, strategic partnerships, joint ventures      or capital commitments; |
|   |    |                                                                                                                      |
|   | • | additions      or departures of key personnel;                                                                            |
|   |    |                                                                                                                      |
|   | • | sales      of our common stock; and                                                                                       |
|   |    |                                                                                                                      |
|   | • | general      stock market price and volume fluctuations of publicly-traded, and      particularly microcap, companies.    |

|   | • | deliver      to a prospective investor a standardized risk disclosure document that      provides information about penny stocks and the nature and level of risks      in the penny stock market; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                               |
|   | • | provide      the prospective investor with current bid and ask quotations for the penny      stock;                                                                                                |
|   |    |                                                                                                                                                                                               |
|   | • | explain      to the prospective investor the compensation of the broker-dealer and its      salesperson in the transaction;                                                                        |
|   |    |                                                                                                                                                                                               |
|   | • | provide      investors monthly account statements showing the market value of each      penny stock held in their account; and                                                                     |
|   |    |                                                                                                                                                                                               |
|   | • | make      a special written determination that the penny stock is a suitable      investment for the purchaser and receive the purchaser’s written agreement      to the transaction.        |

----

ITEM3. KEY INFORMATION -continued

 -continued

----

ITEM3. KEY INFORMATION -continued

 -continued

----

| (i) | the      development of a commercial bio-diesel feed stock technology via a      formalized corporate joint venture with Global Green through 50% owned      Texas subsidiary, Vertigo Algae Technologies LLC. (During the year ended      March 31, 2008 and through May 1, 2008, the Company operated this      initiative via a non-incorporated joint venture with Global      Green); |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (ii) | the      development of our High Density Vertical Growth System designed to produce      vegetables and other plant crops (“HDVG  System”); |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | the      development and marketing of the Tomorrow GardenTM      consumer retail product in our UK based  subsidiary; |
|-------|-----------------------------------------------------------------------------------------------------------------------|

| (iv) | ongoing      research and development with tissue culture technologies, plant growth      technologies, and other product and technology development initiatives;      and |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (v) | ongoing      development planning and research regarding our Nova Skin Care System      product line. |
|-----|-------------------------------------------------------------------------------------------------------|

----

| (i) | a      master license agreement for a term continuing so long as royalty payments      continue to be made as required for the exclusive worldwide marketing and      distribution rights to three unrelated and proprietary potential consumer      retail products that had previously been developed (the “Pagic Master      License”), certain of which are patent pending by Pagic, including the      Nova Skin Care System, the Dust Wolf TM,      and the Tomorrow Garden TM      Kit (collectively, and together with any improvements thereon, the      “Initial Products”); |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | the      Pagic Master License also includes a license for a term continuing so long      as royalty payments continue to be made as required for the exclusive      worldwide marketing and distribution rights to any ancillary products      developed and sold for use by consumers in connection with the Initial      Products (the “InitialAncillaries”); |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | a      product development agreement pursuant to which we were granted a right      for an initial period of five years to acquire a license for a term      continuing so long as royalty payments continue to be made as required for      the exclusive worldwide marketing and distribution rights to any new      products developed by Pagic (any such products, collectively, the      “Additional Products”, and, the agreement itself, the “Pagic Product      Development Agreement”); |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv) | the      Pagic Product Development Agreement also includes a license for a term      continuing so long as royalty payments continue to be made as required for      the exclusive worldwide marketing and distribution rights to any ancillary      products developed and sold for use by consumers in connection with the      Additional Products (the “Additional Ancillaries”);  and |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (v) | a      related services agreement pursuant to which Pagic shall provide      consulting support in connection with the Initial Products, the Initial      Ancillaries, the Additional Products and the Additional Ancillaries (the      “Pagic Consulting Agreement”), in exchange for the    following: |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1)     | 20,000,000      shares of our common stock which have been issued to Pagic and its      assigns;                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                  |
|   | 2)     | a      one-time US$125,000 license fee (paid);                                                                                        |
|   |   |                                                                                                                                  |
|   | 3)     | reimbursement      for US$125,000 in development costs associated with each of the Initial      Products since March 17, 2005 (paid); |
|   |   |                                                                                                                                  |
|   | 4)     | consulting      fees of US$156,000 per year, payable monthly in advance, which the Company      has paid to date; and                 |
|   |   |                                                                                                                                  |
|   | 5)     | the      greater of the following, payable annually beginning in the second license      year (beginning April 1, 2007):              |

|   | (i)   | US$400,000      inclusive of all consulting fees, royalty and other fees;    or                                                                                                                                         |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                    |
|   | (ii)  | the      aggregate of the following:                                                                                                                                                                                    |
|   |       |                                                                                                                                                                                                                    |
|   |       | subject      to a minimum amount of US$37,500 per Initial Product during the second      year of the Pagic Master License, and US$50,000 each year thereafter,      continuing royalties payable quarterly at a rateof: |

----

|   | ●       | US$10.00      per Nova Skin Care System unit sold;                   |
|--------|---------------|----------------------------------------------------------------------|
|   |          |                                                                 |
|   | ●  | US$2.00      per Dust WolfTM      unit sold;                         |
|   |          |                                                                 |
|   | ●  | 4.5%      of annual net sales of the Tomorrow GardenTM      Kit; and |
|   |          |                                                                 |
|   | ●  | 3%      of annual net sales of InitialAncillaries.                   |

|   | 6) | a      one-time US$50,000 license fee for each Additional Product licensed      (except for one pre-identified product);and |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------|

|   | 7) | subject      to a minimum amount of US$50,000 per year commencing with the second year      of each corresponding license, continuing royalties of 4.5% of annual net      sales and 3% on annual net sales of any Additional      Ancillaries. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| • | Glen      Kertz, our President and CEO is responsible for overseeing all Company      development initiatives while heading Vertigro and HDVG System research,      design, and development as well as new product research and development      initiatives including tissue culture and plant growth      technologies.  Mr. Glen Kertz also manages intellectual      property, trademarks, and patents relating to our various technologies and      products; |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Forrest      Ely, the Chief Operating Officer (effective January 1, 2007) of Valcent      Manufacturing Ltd., under the direction of M. Glen Kertz, is responsible      for overseeing all aspects of our commercial design, product development,      and fulfillment activities relating to our HDVG System and Vertigro      technologies. He will also aid in the design, engineering, and build out      of our Company’s research facility located in El  Paso; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Chris      Bradford, the Managing Director of Valcent Products EU Limited is      responsible for UK business operations and the Company’s "Tomorrow      Garden TM"      retail plant sales initiative, as well as development of European based      HDVG System market development and sales rollout;  and |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Jack      Potts the Vice President, Sales and Marketing - Consumer Products Division      of Valcent Manufacturing Ltd. is responsible for formulating, managing and      overseeing all aspects of our consumer      products marketing strategies, including our retail sales, infomercial,      internet, and other distribution strategies. He is also be responsible for      working with our advertising agency contracts in facilitating our entry      and sustainability in the direct-response, online and consumer retail      marketing segments. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | · | Greenfuel      Technologies Corporation |
|--------|--------|-----------------------------------------|

|   | · | Aquaflow      Bionomic Corporation |
|--------|--------|------------------------------------|

|   | · | LiveFuels      Inc. |
|--------|--------|---------------------|

|   | · | Green      Star Products, Inc. |
|--------|--------|--------------------------------|

|   | · | Solazyme,      Inc. |
|--------|--------|---------------------|

|   | · | Aurora      BioFuels, Inc. |
|--------|--------|----------------------------|

|   | · | Seambiotic      Ltd. |
|--------|--------|----------------------|

|   | · | Royal      Dutch Shell and HR Biopetroleum |
|--------|--------|--------------------------------------------|

----

|   | · | PetroSun      Inc. |
|--------|--------|--------------------|

|   | · | International      Energy, Inc . |
|--------|--------|----------------------------------|

|   | · | AlgoDyne |
|--------|--------|----------|

|   | · | Circle      Biodiesel & Ethanol Corporation |
|--------|--------|-------------------------------------------------|

|   | ■ | Produces      approximately 10-20 times the normal production volume for field      crops                                                                                                                        |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                             |
|   | ■ | Requires      5% of the normal water requirements for field crops                                                                                                                                                |
|   |    |                                                                                                                                                                                                             |
|   | ■ | Can      be built on non-arable lands and close to major city markets                                                                                                                                            |
|   |    |                                                                                                                                                                                                             |
|   | ■ | Can      work in a variety of environments: urban, suburban, countryside, desert      etc.                                                                                                                       |
|   |    |                                                                                                                                                                                                             |
|   | ■ | Does      not use herbicides or pesticides                                                                                                                                                                       |
|   |    |                                                                                                                                                                                                             |
|   | ■ | Expected      operating and capital cost savings over field agriculture                                                                                                                                          |
|   |    |                                                                                                                                                                                                             |
|   | ■ | Will      likely reduce, to a large extent, transportation costs to market resulting      in   further savings, higher quality, fresher foods on      delivery, and less transportation pollution |
|   |    |                                                                                                                                                                                                             |
|   | ■ | Will      be easily scalable from small to very large food production      situations                                                                                                                            |

|   | ■ | reduction      in global transport and associated carbon emissions |
|--------|---------|--------------------------------------------------------------------|
|   |    |                                                               |
|   | ■ | food      and fuel safety, security and sovereignty                |
|   |    |                                                               |
|   | ■ | local      food is better for public health                        |
|   |    |                                                               |
|   | ■ | building      of local economies                                   |
|   |    |                                                               |
|   | ■ | control      of externalities and true costs                       |

----

----

----

----

|   | · | Neutrogena      – Advanced Solutions At-Home Microdermabrasion  System; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · |  Homedics      – Facial Cleansing & MicrodermabrasionSet; |
|--------|--------|--------------------------------------------------------------------------|

|   | · |  DermaNew      – Microdermabrasion Total BodyExperience; |
|--------|--------|---------------------------------------------------------------------|

|   | · |  H2O      Plus – Skin Renewal MicrodermabrasionKit; |
|--------|--------|----------------------------------------------------------------|

|   | · |  Visage      Naturel – Home MicrodermabrasionSystem; |
|--------|--------|-----------------------------------------------------------------|

|   | · |  DermaPower      – Home Microdermabrasion System; |
|--------|--------|--------------------------------------------------------------|

|   | · |  Artemis      Woman – The Healing Gems Microdermabrasion  System; |
|--------|--------|------------------------------------------------------------------------------|

|   | · |  Sharper      Image – Microdermabrasion System for Professional Skin      Rejuvenations; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · |  Yuen      Mai Industrial Co., Ltd. – UltrasonicMassager; |
|--------|--------|----------------------------------------------------------------------|

|   | · |  Ultrasonic      – Ultrasonic Face & BodyMassager; |
|--------|--------|-------------------------------------------------------------------|

|   | · |  Wedian      Technology Co. Ltd. – Ultrasonic Beauty Stimulator;  and |
|--------|--------|----------------------------------------------------------------------------------|

|   | · |  Oxylight      – Dermawand. |
|--------|--------|----------------------------------------|

----

|   | • | HerbKits.com      – Indoor Herb Gardening Kits; and |
|--------|---------|-----------------------------------------------------------|
|   |    |                                                      |
|   | • | New      England Herb Company.                            |

----

|   | • | print      advertising;                                                                 |
|--------|---------|-----------------------------------------------------------------------------------------|
|   |    |                                                                                    |
|   | • | infomercials      and home shopping television;                                         |
|   |    |                                                                                    |
|   | • | celebrity      endorsements;                                                            |
|   |    |                                                                                    |
|   | • | internet      websites;                                                                 |
|   |    |                                                                                    |
|   | • | product      sampling campaigns;                                                        |
|   |    |                                                                                    |
|   | • | in-store      promotions, displays and retailer assisted co-operative      advertising; |
|   |    |                                                                                    |
|   | • | publicity      activities; and                                                          |
|   |    |                                                                                    |
|   | • | trade      shows.                                                                       |

----

|   | • | the      Food and Drug Administration, other regulatory authorities or an      institutional review board placing a clinical trial on    hold;                                                                                                                               |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | insufficient      patient enrollment, higher than anticipated attrition, non-compliance with      trial protocols or patient follow-up not occurring at expected      rates;                                                                                                 |
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | institutional      review boards and third party clinical investigators delaying or rejecting      our trial protocol;                                                                                                                                                       |
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | third      party clinical investigators declining to participate in a trial or not      performing a trial on our anticipated schedule or consistent with the      clinical trial protocol, good clinical practices or other Food and Drug      Administration requirements; |
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | third      party organizations not performing data collection and analysis in a      timely or accurate manner;                                                                                                                                                              |
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | regulatory      inspections of our clinical trials or manufacturing facilities, among      other things, requiring us to undertake corrective actions or suspend,      terminate or invalidate our clinical trials;                                                          |
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | changes      in governmental regulations or administrative actions;  and                                                                                                                                                                                                     |
|   |    |                                                                                                                                                                                                                                                                         |
|   | • | the      interim or final results of our clinical trials being inconclusive or      unfavorable as to safety oreffectiveness.                                                                                                                                                |

----

|   | • | brand      name recognition;                                                                                                                       |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                               |
|   | • | availability      of financial resources;                                                                                                          |
|   |    |                                                                                                                                               |
|   | • | the      quality of products;                                                                                                                      |
|   |    |                                                                                                                                               |
|   | • | reviews      received for products from independent reviewers who publish in magazines,      websites, newspapers and other industry publications; |
|   |    |                                                                                                                                               |
|   | • | availability      of access to retail shelf space;                                                                                                 |
|   |    |                                                                                                                                               |
|   | • | the      price of each product; and                                                                                                                |
|   |    |                                                                                                                                               |
|   | • | the      number of products then available.                                                                                                        |

----

| Division                                 | PatentsGranted | PatentsPending | PatentsPublished |
|------------------------------------------|----------------|----------------|------------------|
| High      Density Vertical Bio-Reactor   |           | 5              | 4                |
| High      Density Vertical Growth System | 2              |           |             |
| Nova      Skin Care System               | 2              |           | 4                |

----

| Valcent Products Inc.      [formerly Nettron.Com, Inc.]                 |   |
|-------------------------------------------------------------------------|--------|
| Selected      Financial Data [Annual]                                   |   |
| (Expressed      in Canadian Dollars)                                    |   |
|                                                                    |   | 12      months ended |   |
|                                                                    |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Net      Operating Revenues                                             |   | $ | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
| Loss  from      operations                                    |   | $ | 12,028,222 |   |   |   | 8,171,090 |   |   |   | 3,466,888 |   |   |   | 45,694 |   |
| Loss  from      prior operations                              |   | $ | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 45,694 |   |
| Loss      from development stage                                        |   | $ | 12,712,358 |   |   |   | 8,138,393 |   |   |   | 3,442,933 |   |   |   | 0 |   |
| Net  loss      per Canadian GAAP                              |   | $ | 12,712,358 |   |   |   | 8,138,393 |   |   |   | 3,466,888 |   |   |   | 45,694 |   |
| Loss      per share                                                     |   | $ | 0.36 |   |   |   | 0.42 |   |   |   | 0.35 |   |   |   | 0.01 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share      capital                                                      |   | $ | 16,691,282 |   |   |   | 8,196,982 |   |   |   | 4,099,870 |   |   |   | 2,999,420 |   |
| Common      shares issued                                               |   |   | 44,276,321 |   |   |   | 30,666,068 |   |   |   | 15,787,835 |   |   |   | 6,435,374 |   |
| Weighted      average shares outstanding                                |   |   | 35,545,740 |   |   |   | 19,261,192 |   |   |   | 10,548,042 |   |   |   | 6,435,374 |   |
| Total      Assets                                                       |   | $ | 4,605,914 |   |   |   | 4,142,485 |   |   |   | 1,392,801 |   |   |   | 936 |   |
| Total      Liabilities                                                  |   | $ | (7,674,846 | ) |   |   | (4,166,861 | ) |   |   | (1,833,900 | ) |   |   | (238,886 | ) |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Dividends Declared per Common Shares                          |   | $ | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exchange      Rates (CDN $ to US $) yearly      average                 |   | $ | 1.03304 |   |   |   | 0.8783 |   |   |   | 0.8385 |   |   |   | 0.7842 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exchange      Rates (CDN $ to British Pound £) yearly      average |   | $ | 2.07314 |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |

----

|                                                        |   | As      Previously ReportedMarch      31, 2007 |       |   | Adjustment |   |       | As      RestatedMarch      31, 2007 |   |
|-------------------------------------------------------------|--------|------------------------------------------------|------------|--------|------------|--------|------------|-------------------------------------|--------|
| Convertible      debentures                                 |   | $                                              | 5,301,129  |   |       | $      | (2,558,667 | )                              |   | $ | 2,742,462 |   |
| Share      capital                                          |   | $                                              | 7,836,903  |   |       | $      | 360,079    |                                |   | $ | 8,196,982 |   |
| Contributed      surplus                                    |   | $                                              | 3,253,333  |   |       | $      | 80,102     |                                |   | $ | 3,333,435 |   |
| Conversion      component of convertible notes              |   | $                                              | 4,167,190  |   |       | $      | (879,332   | )                              |   | $ | 3,287,858 |   |
| Deficit,      end of year                                   |   | $                                              | 14,674,170 |   |       | $      | (3,068,889 | )                              |   | $ | 11,605,281 |   |
| Deficit,      beginning of year                             |   | $                                              | 3,734,599  |   |       | $      | (267,711   | )                              |   | $ | 3,466,888 |   |
| Insurance      expense                                      |   | $                                              | 149,855    |   |       | $      | (71,071    | )                              |   | $ | 78,784 |   |
| Interest,      accretion and financing on convertible notes |   | $                                              | 5,606,886  |   |       | $      | (2,880,819 | )                              |   | $ | 2,726,067 |   |
| Foreign      exchange gain (loss)                           |   | $                                              | 110,006    |   |       | $      | (116,999   | )                              |   | $ | (6,993 | ) |
| Basic      loss per share                                   |   | $                                              | 0.57       |   |       | $      | (0.15      | )                              |   | $ | 0.42 |   |

----

----

|                                    |   | 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   |   |       | $      | 0 |   |   | $ | 0 |   |   | $ | 22,389 |   |   | $ | (79,521 | ) |   | $ | 259,825 |   |   | $ | 265,583 |   |
| April      2006 (Note 10(b))            |   |           | 495,607   |   |       |   | 0 |   |   |   | 0 |   |   |   | 38,835 |   |   |   | 0 |   |   |   | 534,442 |   |   |   | 546,841 |   |
| April      2006 (Note 10(c))            |   |           | 79,115    |   |       |   | 0 |   |   |   | 0 |   |   |   | 6,427 |   |   |   | 0 |   |   |   | 85,542 |   |   |   | 87,527 |   |
| December      2006 (Note 10(e))    |   |           | 670,486   |   |       |   | 0 |   |   |   | 0 |   |   |   | 989,296 |   |   |   | 0 |   |   |   | 1,659,782 |   |   |   | 1,698,289 |   |
| January      2007 (Note 10(f))          |   |           | 813,084   |   |       |   | 0 |   |   |   | 0 |   |   |   | 967,767 |   |   |   | (211,668 | ) |   |   | 1,569,183 |   |   |   | 1,605,558 |   |
| August      2007 (Note 10(g))           |   |           | 0         |   |       |   | 650,000 |   |   |   | (230,007 | ) |   |   | 258,574 |   |   |   | 0 |   |   |   | 678,567 |   |   |   | 694,310 |   |
| September      2007 (Note 10(h))   |   |           | 0         |   |       |   | 391,000 |   |   |   | (213,249 | ) |   |   | 119,682 |   |   |   | 0 |   |   |   | 297,433 |   |   |   | 304,633 |   |
|                                    |   | $              | 2,375,249 |   |       | $      | 1,041,000 |   |   | $ | (443,256 | ) |   | $ | 2,402,970 |   |   | $ | (291,189 | ) |   | $ | 5,084,774 |   |   | $ | 5,202,741 |   |

|                                    |   | US      $      |      |   | CDN      $ |   |
|-----------------------------------------|--------|----------------|-----------|--------|------------|--------|
|                                    |   | Balance        |      |   | 2007       |   |   | 2007 |   |   | 2007 |   |   | 2007 |   |   | Balance |   |   | Balance |   |
|                                    |   | March      31, |      |   | Issued     |   |   | Equity |   |   | Interest      / |   |   |   |   |   | March      31, |   |   | March      31, |   |
| Date      of Issue                      |   | 2006           |      |   | Principal  |   |   | Portion |   |   | Penalty |   |   | Conversions |   |   | 2007 |   |   | 2007 |   |
|                                    |   |           |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| July/August      2005 (Note 10(a)) |   | $              | 1,429,104 |   |       | $      | 0 |   |   | $ | 0 |   |   | $ | 119,875 |   |   | $ | (1,232,022 | ) |   | $ | 316,957 |   |   | $ | 365,959 |   |
| April      2006 (Note 10(b))            |   |           | 0         |   |       |   | 551,666 |   |   |   | (388,313 | ) |   |   | 567,366 |   |   |   | (235,112 | ) |   |   | 495,607 |   |   |   | 572,228 |   |
| April      2006 (Note 10(c))            |   |           | 0         |   |       |   | 82,200 |   |   |   | (48,776 | ) |   |   | 70,054 |   |   |   | (24,363 | ) |   |   | 79,115 |   |   |   | 91,346 |   |
| December      2006 (Note 10(e))    |   |           | 0         |   |       |   | 1,500,000 |   |   |   | (1,067,962 | ) |   |   | 238,448 |   |   |   | 0 |   |   |   | 670,486 |   |   |   | 774,143 |   |
| January      2007 (Note 10(f))          |   |           | 0         |   |       |   | 2,000,000 |   |   |   | (1,331,232 | ) |   |   | 144,316 |   |   |   | 0 |   |   |   | 813,084 |   |   |   | 938,786 |   |
|                                    |   | $              | 1,429,104 |   |       | $      | 4,133,866 |   |   | $ | (2,836,283 | ) |   | $ | 1,140,059 |   |   | $ | (1,491,497 | ) |   | $ | 2,375,249 |   |   | $ | 2,742,462 |   |

----

----

----

| (i)  | A      financial services agreement with an arm’s length private company for a      term of seven months. Pursuant to the agreement, the Company issued      120,000 common shares valued at US$84,000;and |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (ii)  | A      financial and business consulting agreement with an individual consultant      for a term of twelve months. Pursuant to the agreement, the Company issued      300,000 common shares valued atUS$201,000. |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i) | issued      2,996,666 units for gross proceeds of US$1,798,000. The Company paid      US$122,577 in cash consultant’s fees with respect to this      issuance; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | issued      195,000 units for gross proceeds of US$117,000. The Company paid no      consultant’s fees respecting the issuance;and |
|------|------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | issued      61,000 units for gross proceeds of US$36,600. The Company paid US$2,562 in      cash consultant’s fees with respect to this  issuance. |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i) | On      June 2, 2008, the Company issued 245,049 common shares relating to the      conversion of US$100,000 in convertible debt and US$9,403 in accumulated      interest; and |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | On      July 3, 2008, the Company issued 267,221 common shares relating to the      conversion of US$92,281 in convertible debt and US$9,243 in accumulated      interest. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2009       |   | $      | 104,068 |   |
|------------|--------|--------|---------|--------|
| 2010       |   |   | 104,068 |   |
| 2011       |   |   | 104,068 |   |
| 2012       |   |   | 104,068 |   |
| 2013       |   |   | 104,068 |   |
| Thereafter |   |   | 305,037 |   |
|       |   | $      | 825,377 |   |

----

|   | • | The      availability of adequate financing;                                                                                                                         |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                 |
|   | • | Our      ability to develop an organizational infrastructure and effective      management systems;                                                                  |
|   |    |                                                                                                                                                                 |
|   | • | The      success of our advertising and marketing plans;                                                                                                             |
|   |    |                                                                                                                                                                 |
|   | • | Market      acceptance and general consumer demand for ourproducts;                                                                                                  |
|   |    |                                                                                                                                                                 |
|   | • | The      performance of our products;                                                                                                                                |
|   |    |                                                                                                                                                                 |
|   | • | Our      ability to effectively distribute our products;                                                                                                             |
|   |    |                                                                                                                                                                 |
|   | • | The      introduction of products that compete with our own;                                                                                                         |
|   |    |                                                                                                                                                                 |
|   | • | The      adoption of new disclosure and/or corporate governance requirements      associated with the maintenance of our status as a publicly reporting      issuer; |
|   |    |                                                                                                                                                                 |
|   | • | Potential      lawsuits involving our products or other matters; and                                                                                                 |
|   |    |                                                                                                                                                                 |
|   | • | General      business and economic conditions;                                                                                                                       |
|   |    |                                                                                                                                                                 |
|   | • | Currency      valuation fluctuations                                                                                                                                 |

As of March 31, 2008,we had the following known contractual obligations noted in this report orfinancial statements dated March 31, 2008:

----

| a) | payment      of US$15,000; |
|----|----------------------------|

| b) | US$3,000      in compensation per month payable quarterly during the effective      term; |
|----|-------------------------------------------------------------------------------------------|

| c) | a      further US$2,000 payable monthly in common shares (27,508 common shares      were issued in the year ended March 31, 2008 for aggregate value of      US$18,000); |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d) | share      options to purchase 500,000 shares were issued at US$0.60 exercise price      that vest quarterly over a two year period;and |
|----|-----------------------------------------------------------------------------------------------------------------------------------------|

| e) | the      issuance of 12,500 common shares at a price of US$0.80 per share which      were issued on April 24, 2008. |
|----|---------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                          |   | 2008   |    |   | 2007   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                                                                                                                                          |   |   |    |   |   |   |
| Prime      plus 0.25% (2008 – 8.00%) bank loan repayable in monthly instalments of      US$2,336 including interest, due September 28, 2011, secured by a first      charge on land and |   |   |    |   |   |   |
| $108,471      of cash                                                                                                                                                                         |   |   | 174,862 |   |   |   | 209,114 |   |
|                                                                                                                                                                                          |   |   |    |   |   |   |   |   |
| Less:  Current      portion                                                                                                                                                         |   |   | 16,250  |   |   |   | 13,451 |   |
|                                                                                                                                                                                          |   |   |    |   |   |   |   |   |
|                                                                                                                                                                                          |   | $      | 158,612 |   |   | $      | 195,663 |   |

| To      March 31, |   |   |    |
|-------------------|--------|--------|---------|
|              |   |   |    |
| 2009              |   |   | 16,250  |   |
| 2010              |   |   | 17,258  |   |
| 2011              |   |   | 18,806  |   |
| 2012              |   |   | 106,298 |   |

| Convertible      Note Continuity:       |   |           |      |   |
|-----------------------------------------|--------|----------------|-----------|--------|
|                                    |   | 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   |   |   | $ | 0 |   |   | $ | 0 |   |   | $ | 22,389 |   |   | $ | (79,521 | ) |   | $ | 259,825 |   |   | $ | 265,583 |   |
| April      2006 (Note 10(b))            |   |           | 495,607   |   |   |   | 0 |   |   |   | 0 |   |   |   | 38,835 |   |   |   | 0 |   |   |   | 534,442 |   |   |   | 546,841 |   |
| April      2006 (Note 10(c))            |   |           | 79,115    |   |   |   | 0 |   |   |   | 0 |   |   |   | 6,427 |   |   |   | 0 |   |   |   | 85,542 |   |   |   | 87,527 |   |
| December      2006 (Note 10(e))    |   |           | 670,486   |   |   |   | 0 |   |   |   | 0 |   |   |   | 989,296 |   |   |   | 0 |   |   |   | 1,659,782 |   |   |   | 1,698,289 |   |
| January      2007 (Note 10(f))          |   |           | 813,084   |   |   |   | 0 |   |   |   | 0 |   |   |   | 967,767 |   |   |   | (211,668 | ) |   |   | 1,569,183 |   |   |   | 1,605,558 |   |
| August      2007 (Note 10(g))           |   |           | 0         |   |   |   | 650,000 |   |   |   | (230,007 | ) |   |   | 258,574 |   |   |   | 0 |   |   |   | 678,567 |   |   |   | 694,310 |   |
| September      2007 (Note 10(h))   |   |           | 0         |   |   |   | 391,000 |   |   |   | (213,249 | ) |   |   | 119,682 |   |   |   | 0 |   |   |   | 297,433 |   |   |   | 304,633 |   |
|                                    |   | $              | 2,375,249 |   |   | $ | 1,041,000 |   |   | $ | (443,256 | ) |   | $ | 2,402,970 |   |   | $ | (291,189 | ) |   | $ | 5,084,774 |   |   | $ | 5,202,741 |   |

----

| Name                      |   | Age    |   | Position                                                                                |
|---------------------------|--------|--------|--------|-----------------------------------------------------------------------------------------|
|                      |   |
| M.      Glen Kertz (1)    |   | 55     |   | Chief      Executive Officer, acting President, Chairman of the Board and      Director |
|                      |   |   |   |                                                                                    |
| F.      George Orr (2)(3) |   | 47     |   | Chief      Financial Officer, Secretary and Director                                    |
|                      |   |   |   |                                                                                    |
| Robert      Wingo         |   | 62     |   | Director      (resigned July 29, 2008)                                                  |
|                      |   |   |   |                                                                                    |
| Gerry      Jardine        |   | 57     |   | Director                                                                                |
|                      |   |   |   |                                                                                    |
| Naveen      Aggarwal      |   | 50     |   | Director                                                                                |

| George      Stapleton |   | 54 |   | Director |
|-----------------------|--------|----|--------|----------|

| (1)    | Appointed      acting President, Chairman of the Board and a director by resolution of      the board of directors, in accordance with Section 111 of the Business      Corporations Act (Alberta), following the resignation of Douglas E. Ford      as acting President and Secretary, on July 31, 2005. Appointed Chief      Executive Officer by resolution of the board of directors in accordance      with Section 121 of the Business Corporations Act (Alberta), and Section 6      of our bylaws on November 30, 2005. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (2)    | Appointed      director by resolution of the board of directors, in accordance with      Section 111 of the Business Corporations Act (Alberta), following the      resignation of Larry F. Robb and Malcolm E. Rogers Jr., on July 23,      2005.                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (3)    | Appointed      Secretary by resolution of the board of directors, in accordance with      Section 111 of the Business Corporations Act (Alberta), following the      resignation of Douglas E. Ford as acting President and Secretary, on July      31, 2005. Appointed Chief Financial Officer by resolution of the board of      directors in accordance with Section 121 of the Business Corporations Act      (Alberta), and Section 6 of our bylaws on November 30,    2005.                                                |

----

----

|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |
|---------------------------------------------------|------------------------------|--------|--------------------------|---------|--------|-----------------------------|--------|---------|-----------------------------|--------|--------|-------------------------------------------|--------|
|                                              |                         |   | Annual      Compensation |    |   | Long      Term Compensation |   |
|                                              |                         |   |                     |    |   |                        |   |
| Name      and Principal Position                  | YearEndedMarch      31, 2008 |   | Salary                   |    |   | Bonus/Fees                  |   |    | AwardsRestrictedStockAwards |   |   | SecuritiesUnderlyingOptions/SARs      (#) |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |
| M.      Glen Kertz (1)President      and Director |                         |   |                     | — |   |                        | $      | 565,135 |                        |   |   | 300,000                                   |   |   |   | — |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |   |   |   |   |
| F.      George Orr (2)CFO      and Director       |                         |   |                     | — |   |                        |   | 35,370  |                        |   |   | —                                   |   |   |   | — |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |   |   |   |   |
| Robert      Wingo (3)Director                     |                         |   |                     | — |   |                        |   | 244,861 |                        |   |   | —                                   |   |   |   | — |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |   |   |   |   |
| Gerry      Jardine (4)Director                    |                         |   |                     | — |   |                        |   | 75,085  |                        |   |   | —                                   |   |   |   | 300,000 |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |   |   |   |   |
| Naveen      Aggarwal (5)Director                  |                         |   |                     | — |   |                        |   | 76,740  |                        |   |   | —                                   |   |   |   | — |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |   |   |   |   |
| George      StapletonDirector                     |                         |   |                     | — |   |                        |   | — |                        |   |   | —                                   |   |   |   | 300,000 |   |
|                                              |                         |   |                     |    |   |                        |   |    |                        |   |   |                                      |   |   |   |   |   |

| (1)    | During      the year ended March 31, 2008, Pagic LP, a company affiliated with Glen      Kertz, was paid or accrued amounts as shown for product development,      expenditures inclusive of service related fees and royalties under various      license agreements between the Company and Pagic LP. In addition, a      further 300,000 common shares were agreed to be issued under the      Technology License Agreement dated May 5, 2008 between Pagic LP, West Peak      Ventures of Canada Ltd., and the Company. These shares were issued      subsequent to the year ended March 31, 2008. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (2)    | Mr.      F. George Orr was appointed Secretary and a director of the Board, and, in      November of 2005, he was appointed Chief Financial Officer of Valcent      Products Inc. He performs these duties as an independent      consultant.                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (3)    | Resigned,      effective July 29, 2008. Amounts were paid for advertising services      performed to Sanders Wingo, a company with a common    director.                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (4)    | Mr.      Gerry Jardine, a director of the Company received amounts owing to      consulting services and investor relations services to a related      company.  During the year, he also received 300,000 share      options exercisable at US$0.70 per share until October 10, 2011 that were      fully vested in the period ended March 31, 2008.                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (5)    | Mr.      Naveen Aggarwal received amounts for consulting services      performed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (6)    | During      the year, Mr. Stapleton received 300,000 share options exercisable at      US$0.70 per share until October 10, 2011 that were fully vested in the      period ended March 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                        |

----

----

SHARE OWNERSHIP

| Name                                                       |   | Amount      andNature      of Ownership |       |   | Percent      of Class* |   |
|------------------------------------------------------------|--------|-----------------------------------------|------------|--------|------------------------|--------|
|                                                       |   |                                    |       |   |                   |   |
| M.      Glen Kertz (1)                                     |   |                                    | 4,247,000  |   |                   |   | 8.52 | % |
|                                                       |   |                                    |       |   |                   |   |   |   |
| F.      George Orr (2)                                     |   |                                    | 3,239,914  |   |                   |   | 6.32 | % |
|                                                       |   |                                    |       |   |                   |   |   |   |
| Robert      Wingo (3) (resigned July 29, 2008)             |   |                                    | 375,000    |   |                   |   | ** | % |
|                                                       |   |                                    |       |   |                   |   |   |   |
| Gerry      Jardine (4)                                     |   |                                    | 302,450    |   |                   |   | ** | % |
|                                                       |   |                                    |       |   |                   |   |   |   |
| Naveen      Aggarwal (5)                                   |   |                                    | 1,000,000  |   |                   |   | 1.99 | % |
|                                                       |   |                                    |       |   |                   |   |   |   |
| George      Stapleton (6)                                  |   |                                    | 1,132,924  |   |                   |   | 2.24 | % |
|                                                       |   |                                    |       |   |                   |   |   |   |
| All      officers and directorsas      a group (6 persons) |   |                                    | 10,297,288 |   |                   |   | 19.44 | % |

| *      | No      director or executive officer has different voting rights from any other      holder of our common stock. Based on 49,856,981 shares issued and      outstanding at September 15, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **     | Beneficially      owns less than one percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (1)    | Consists      of 4,247,000 shares of common stock beneficially owned through Pagic LP,      previously MK Enterprises LLC. Voting and/or investment power over all of      these securities is held by M. Glen Kertz.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (2)    | Consists      of (i) 950,000 shares of common stock directly owned, (ii) 778,205      unregistered shares of common stock beneficially owned through this      director’s spouse, (iii) 120,401 shares of common stock and 60,200      warrants exercisable at US$0.75 per share until December 18, 2009 issued      pursuant to private placement of units at US$0.60 per share all directly      owned, (iv) 777,696 shares issuable on conversion of US$168,000 in      convertible notes and interest accrued to September 15, 2008 of US$2,619      with interest and principal assumed converted according to the terms of      the convertible note at a 30% discount to the 4 lowest volume weighted      average bid prices of the stock preceding the election to convert with a      share price market value assumption of US$0.55 per      share,  368,941 warrants exercisable at US$0.55 until July 21,      2013, and 184,471 warrants exercisable at US$0.75 until July 21,      2013.                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (3)    | Consists      of 300,000 fully vested stock options with exercise price of US$0.55 until      December 13, 2011 issued under our 2006 Stock Option Plan directly owned,      and (ii) 75,000 fully vested stock options with exercise price of US$1.00      until March 1, 2010 issued under our 2006 Stock Option Plan directly owned      by Sanders Wingo, a company with this director in  common.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (4)    | Consists      of (i) 300,000 fully vested stock options with exercise price of US$0.70      until October 10, 2011 under our 2006 Stock Option Plan directly owned,      and (ii) 2,450 trading shares purchased in market      transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (5)    | Consists      of (i) 300,000 fully vested stock options with exercise price of US$0.55      until December 13, 2011 issued under our 2006 Stock Option Plan directly      owned, and (ii) 700,000 common shares of common stock beneficially owned      through a spouse.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (6)    | Consists      of (i) 300,000 fully vested stock options with exercise price of US$0.70      and an expiration date of October 11, 2011 issued under our 2006 Stock      Option Plan directly owned, and (ii) 300,000 shares of common stock and      150,000 warrants exercisable at US$0.75 per share issued pursuant to      private placement of units at US$0.60 per share in a private company      affiliated with this director, (iii) 89,447 trading shares purchased in      market transactions, (iv) 214,967 shares issuable on conversion of      US$46,141 in convertible notes and interest accrued to September 15, 2008      of US$2,619 with interest converted at US$0.50 per share, and principal      assumed converted according to the terms of the convertible note at a 30%      discount to the 4 lowest volume weighted average bid prices of the stock      preceding the election to convert with a share price market value      assumption of US$0.55 per share,  36,713 warrants exercisable at      US$0.40 until April 6, 2009, 36,713 warrants exercisable at US$0.90 until      April 6, 2009,  and 5,084 warrants exercisable at US$0.65 until      April 6, 2009. |

----

SHAREOWNERSHIP

|                                                      |   | Shares      Beneficially Owned |
|-----------------------------------------------------------|--------|--------------------------------|
|                                                      |   |                           |
| Major      Shareholders                                   |   | Number                         |   |   | Percent |
|                                                      |   |                           |   |   |   |
| Pagic      LP (1)                                         |   |                           | 4,247,000 |   |   |   | 8.52 | % |
|                                                      |   |                           |   |   |   |   |   |   |
| Larry      Thompson (2)                                   |   |                           | 5,500,000 |   |   |   | 10.71 | % |
|                                                      |   |                           |   |   |   |   |   |   |
| F.      George Orr (3)                                    |   |                           | 3,239,914 |   |   |   | 6.32 | % |
|                                                      |   |                           |   |   |   |   |   |   |
| Agosto      Corporation Limited (4) (6)                   |   |                           | 7,949,020 |   |   |   | 13.63 | % |
|                                                      |   |                           |   |   |   |   |   |   |
| Woodburn      Holdings Ltd. (5) (6)                       |   |                           | 4,756,833 |   |   |   | 8.84 | % |
|                                                      |   |                           |   |   |   |   |   |   |
| Platinum      Long Term Growth VI, LLC (7) (6)            |   |                           | 9,058,823 |   |   |   | 15.38 | % |
|                                                      |   |                           |   |   |   |   |   |   |
| Total                                                     |   |                           | 34,751,590 |   |   |   | 47.14 | % |
|                                                      |   |                           |   |   |   |   |   |   |
|  Total      Shares outstanding at September 15, 2008 |   |                           | 49,856,981 |   |   |   |   |   |

| (1)    | Includes      3,947,000 shares of common stock issued as of August 11, 2005, and 300,000      shares of common stock issued on August 18, 2008 pursuant to a further      Technology License Agreement between Pagic LP, West Peak Ventures of      Canada Ltd, and Pagic LP.  Voting and/or investment power over      these common shares is held by M. Glen Kertz of Pagic  LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (2)    | Consists      of (i) 4,000,000 shares of common stock directly owned, (ii) 250,000      warrants to purchase common shares at US$0.75 per share until December 18,      2009, and (iii) 1,250,000 warrants to purchase commons shares at US$0.75      per share until May 1, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (3)    | Consists      of (i) 950,000 shares of common stock directly owned, (ii) 778,205      unregistered shares of common stock beneficially owned through this      director’s spouse, (iii) 120,401 shares of common stock and 60,200      warrants exercisable at US$0.75 per share until December 18, 2009 issued      pursuant to private placement of units at US$0.60 per share all directly      owned, (iv) 777,696 shares issuable on conversion of US$168,000 in      convertible notes and interest accrued to September 15, 2008 of US$2,619      with interest and principal assumed converted according to the terms of      the convertible note at a 30% discount to the 4 lowest volume weighted      average bid prices of the stock preceding the election to convert with a      share price market value assumption of US$0.55 per      share,  368,941 warrants exercisable at US$0.55 until July 21,      2013, and 184,471 warrants exercisable at US$0.75 until July 21,      2013. |

----

| (4) | Consists      of convertible debentures for stated values as follows with conversion      figures (if applicable) based on a weighted average price of US$0.55 per      share:  (i) US$235,000 6% convertible note with accrued interest      of US$22,599 at $US0.50 per unit convertible into 515,197 common shares      and 515,197 warrants to purchase common shares at US$0.70 per share until      December 11, 2008; (ii) US$850,000 8% (15% after December 1, 2007)      convertible note with interest accrued to September 15, 2008 of US$165,459      convertible at the lesser of US$0.55 per share and 70% of the average five      lowest closing bid prices for the ten trading days preceding conversion      (market value of shares assumed US$0.55 for purposes herein) resulting in      2,603,645 potential common shares on conversion, and includes 1,333,333      Class A warrants convertible into common shares at US$0.50 per share until      December 1, 2009 and 1,333,333 Class B warrants convertible into common      shares at US$1.00 per share until December 1, 2009; (iii) $650,000 6% (15%      after November 14, 2007) convertible term note with accrued interest to      September 15, 2008 of US$89,326 convertible into units at the US$0.60 per      unit, resulting in 1,232,210 common shares and 616,105 share purchase      warrants exercisable at US$0.75 for a 3 year term from the date of      conversion, and (iv) 100,000 common shares issued in connection with a      debt agreement pertaining to bonus interest.  Voting and/or      investment power over these common shares is held by Dr. J. Gordon Murphy,      a resident of Barbados. Dr. Murphy beneficially owns 2,000,000 shares in      the capital of the Company but such shares are not included in the shares      reported for Agosto Corporation Limited in the above  table. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)             | Consists      of (i) 762,750 shares of common stock directly, (ii) 38,000 shares of      common stock owned in the name of the Robert Baker, the President of      Woodburn Holdings Ltd., and (iii) US$650,000 8% (15% after December 1,      2007) convertible note with interest accrued to September 15, 2008 of      US$126,527 convertible at the lesser of US$0.55 per share and 70% of the      average five lowest closing bid prices for the ten trading days preceding      conversion (market value of shares assumed US$0.55 for purposes herein)      resulting in 2,222,751 potential common shares on conversion, and includes      866,666 Class A warrants convertible into common shares at US$0.50 per      share until December 1, 2009 and 866,666 Class B warrants convertible into      common shares at US$1.00 per share until December 1,      2009.  Voting and/or investment power over these common shares      is held by Robert Baker of Vancouver, British Columbia. |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (6)             | This      shareholder has contractually agreed with the Company to not convert any      portion of certain notes or the exercise of certain warrants that would      provide this shareholder with an equity interest in the Company of more      than 9.99% of the Company’s issued and outstanding capital at any date      while this convertible note is outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (7)   | The      subject common shares are issuable upon conversion of a US$1,848,000      principal amount zero coupon senior secured convertible promissory note.      The note may be converted into common shares at any time at a conversion      price of US$0.51 per share. However, after January 16, 2009, the      conversion price of the Note will equal the lesser of US$0.51 (unless the      conversion price has been adjusted as provided in the Note) and 70% of the      average of the five lowest closing bid prices of the common shares for the      ten trading days prior to the conversion date. The Company also issued      3,623,529 non-redeemable warrants exercisable at US$0.55 until July 20,      2013 and 1,811,765 redeemable warrants exercisable at US$0.75 until July      20, 2013.                                                                                                                                                                                            |

|             |                                                                                                                                                                                              |   | 2008   |      |   | 2007   |   |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| (a)         | Pagic      royalties, etc. Pagic is a company related by a common director, M. Glen      Kertz, our President and director                                                                        |   | $      | 189,156   |   |   | $      | 0 |   |
| (b)              | CFO      charges and advances.  George Orr is our CFO and      director.                                                                                                                |   |   | 158,370   |   |   |   | 43,500 |   |
| (b)              | Consulting      services and unsecured loan advances                                                                                                                                              |   |   | 73,896    |   |   |   | 57,364 |   |
| (c)              | Consulting      services and unsecured loan advances due to West Peak and its principal      shareholder, Tim Brock, a beneficial owner of more that 5% of the      Company’s common shares |   |   | 1,000,165 |   |   |   | 784,362 |   |
| (d)              | Advertising      due to Sanders  Wingo, with our ex-director, Robert Wingo in      common                                                                                               |   |   | 52,145    |   |   |   | 17,319 |   |
| (e)      and (f) | Operational      management consulting due to our directors, Naveen Aggarwal and Gerry      Jardine                                                                                               |   |   | 16,784    |   |   |   | 27,630 |   |
|             |                                                                                                                                                                                              |   | $      | 1,490,516 |   |   | $      | 930,175 |   |

----

|   |                                                                                                                                                                        |                                                                             |   | 2008    |    |   | 2007   |    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|--------|---------|---------|--------|--------|---------|
| (a)    | Charges      from Pagic, a company related by a common director, Glen Kertz, our      President and director, for product development expenses including      royalties     |                                                                             | $      | 565,135 |    |   | $      | 269,455 |   |
| (b)    | Charges      from our CFO and director, George Orr for professional fees                                                                                                    |                                                                             | $      | 35,370  |    |   | $      | 33,000  |   |
|   | Short-term      advance from CFO and director, George Orr, at 10% interest per    annum                                                                                     |                                                                             | $      | 150,000 |    |   | $      | 0       |   |
|   | Charges      from private companies with this director (George Orr) in common      for:                                                                                     |                                                                             |   |    |    |   |   |    |   |
|   | (i)                                                                                                                                                                    | Office      rent paid to Sweetwater Capital Corp.                                |   | $       | 30,000  |   |   | $       | 7,500 |   |
|   | (ii)                                                                                                                                                                        | Consulting      fee paid to Sweetwater Capital Corp.                             |   | $       | 150,000 |   |   | $       | 46,745 |   |
|   | (iii)                                                                                                                                                                       | Unsecured      loan advances from Savi Product Marketing Group Inc.              |   | $       | 57,364  |   |   | $       | 57,364 |   |
| (c)    | West      Peak and its principal shareholder, Tim Brock, a beneficial owner of more      that 5% of the Company’s shares:                                             |                                                                             |   |    |    |   |   |    |   |
|   | (i)                                                                                                                                                                    | The      Company received unsecured loan advances, at 8% interest per      annum |   | $       | 977,665 |   |   | $       | 784,837 |   |
|   | (ii)                                                                                                                                                                        | Consulting      services paid to West Peak                                       |   | $       | 52,500  |   |   | $       | 0 |   |
| (d)    | Advertising      services of a private company, Sanders  Wingo, with our      ex-director, Robert Wingo in common                                                 |                                                                             | $      | 244,861 |    |   | $      | 337,749 |   |
| (e)    | Operational      management consulting services of our director, Naveen Aggawal                                                                                             |                                                                             | $      | 76,740  |    |   | $      | 0       |   |
| (f)    | Operational      management consulting and investor relations services of our director,      Gerry Jardine and a related company providing investor relations      services |                                                                             | $      | 75,085  |    |   | $      | 0       |   |
| (g)    | Bonus      of 100,000 restricted common shares to a retiring director, Carlton      Parfitt                                                                                 |                                                                             | $      | 0       |    |   | $      | 52,889  |   |

|   | (i)    | a      master license agreement for a term continuing so long as royalty payments      continue to be made as required, for the exclusive worldwide marketing and      distribution rights to three unrelated and proprietary potential consumer      retail products that had previously been developed (the “Pagic Master      License”), certain of which are patent pending, including the Nova Skin      Care System, the Dust WolfTM, and the Tomorrow GardenTM Kit (collectively,      and together with any improvements thereon, the “Initial Products”) each      of which are described in fuller detail elsewhere in this annual report.      See “Business—Potential Products” and “Business—Intellectual      Property”; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | (vi)   | the      Pagic Master License also includes a license for a term continuing so long      as royalty payments continue to be made as required, for the exclusive      worldwide marketing and distribution rights to any ancillary products      developed and sold for use by consumers in connection with the Initial      Products (the “Initial Ancillaries”);                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | (vii)  | a      product development agreement pursuant to which we were granted a right      for an initial period of five years to acquire a license for a term      continuing so long as royalty payments continue to be made as required,      for the exclusive worldwide marketing and distribution rights to any new      products developed by Pagic (any such products, collectively, the      “Additional Products”, and, the agreement itself, the “Pagic Product      Development Agreement”);                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | (viii) | the      Pagic Product Development Agreement also includes a license for a term      continuing so long as royalty payments continue to be made as required,      for the exclusive worldwide marketing and distribution rights to any      ancillary products developed and sold for use by consumers in connection      with the Additional Products (the “Additional Ancillaries”);      and                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | (ix)   | a      related services agreement pursuant to which Pagic shall provide      consulting support in connection with the Initial Products, the Initial      Ancillaries, the Additional Products and the Additional Ancillaries (the      “Pagic Consulting Agreement”), in exchange for the    following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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|   | • | 20,000,000      shares of our common stock;                                                                                    |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                           |
|   | • | a      one-time US$125,000 license fee;                                                                                        |
|   |    |                                                                                                                           |
|   | • | reimbursement      for US$125,000 in development costs associated with each of the Initial      Products since March 17, 2005; |
|   |    |                                                                                                                           |
|   | • | consulting      fees of US$156,000 per year, payable monthly in advance;    and                                                |
|   |    |                                                                                                                           |
|   | • | the      greater of the following, payable annually beginning in the second license      year:                                 |

|   | (i)    | US$400,000;      or                  |
|--------|--------|--------------------------------------|
|   |   |                                 |
|   | (ii)   | the      aggregate of the following: |

|   | • | subject      to a minimum amount of US$37,500 per Initial Product during the second      year of the Pagic Master License, and US$50,000 each year thereafter,      continuing royalties payable quarterly at a rate  of: |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | US$10.00      per Nova Skin Care System unit sold;               |
|--------|--------|------------------------------------------------------------------|
|   |   |                                                             |
|   |   | US$2.00      per Dust WolfTM unit sold;                     |
|   |   |                                                             |
|   |   | 4.5%      of annual net sales of the Tomorrow GardenTM Kit; |
|   |   |                                                             |
|   | and    |                                                             |
|   |   |                                                             |
|   |   | 3%      of annual net sales of InitialAncillaries.               |

|   | • | a      one-time US$50,000 license fee for each Additional Product licensed      (except for one pre-identified product); and                                                                                                                    |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                            |
|   | • | subject      to a minimum amount of US$50,000 per year commencing with the second year      of each corresponding license, continuing royalties of 4.5% of annual net      sales and 3% on annual net sales of any Additional      Ancillaries. |

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|   | • | To      retire certain short-term obligations and existing liabilities and to      provide additional general corporate and working capital to pursue our      business plan, on April 6, 2006, we consummated a follow-on private      offering transaction with and among a syndicated group of institutional      investors pursuant to which we issued, in the aggregate, US$551,666 in 8%      per annum convertible notes and three-year warrants to acquire (i) up to      735,544 shares of our common stock at a price per share of US$0.40, and      (ii) up to an additional 735,544 shares of our common stock at a price per      share of US$0.90. Subject to certain limitations, the principal amount of      the notes, together with any accrued interest may be converted into shares      of our common stock at the lesser of (i) 70% of the average of the five      lowest closing bid prices for our common stock for the ten trading days      prior to conversion, or (ii) US$0.55. The convertible notes carry a      redemption feature which allows us 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 our 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 “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. |
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|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Also      in connection with the follow-on private offering transaction, we issued      183,886 shares of our common stock and three-year warrants to purchase up      to an additional 110,320 shares of our common stock at a price per share      of US$0.50 and up to an additional 183,867 shares of our common stock at a      price of US$0.75 as partial compensation in the form of a finder’s      fee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Our      registration statement on Form F-1 was originally filed with the SEC on      April 27, 2006, which delay resulted in a reduction in the exercise price      of the Class A and Class B warrants issued as part of the July 25, 2005      through August 5, 2005 and April 6, 2006 transactions from US$0.50 and      US$1.00 to US$0.40 and US$0.90, respectively. Moreover, as of the date of      this annual report we are accruing penalties at a rate of 2% per thirty      day period for having failed to have our registration statement declared      effective by June 5, 2006. As of September 13, 2006, we have accrued up to      approximately US$123,094 in penalties under the terms of the registration      provisions of each of the July 25, 2005 through August 5, 2005 and April      6, 2006 transactions, exclusive of those penalties previously converted      into convertible penalty notes and warrants. The penalties which we have      accumulated to date, and any penalties which we may accumulate for future      delays, will negatively affect our business, our financial condition and      our results of operations, leading to a corresponding reduction in our net      income and the likelihood of a net loss for the year in which they are      incurred. The delays in meeting our registration obligations are a      consequence, among other reasons, of ongoing delays resulting from our      having recently undergone a significant restructuring and change in      business direction, and the unavailability of certain information      necessary for preparing the filing. Our management is hopeful that we will      cause our registration statement to be declared effective in the near      future.                |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | In      connection with the July 25, 2005 through August 5, 2005 transactions, on      April 6, 2006 we reached a verbal agreement with the syndicated group of      institutional and other investors, to convert accruing penalties      associated with delays in our filing of a registration statement under the      terms of the transactions, an aggregate of US$82,200, into convertible      penalty notes carrying terms similar to those notes issued in the original      series of private offering transactions, and in addition to issue each      investor one three-year penalty warrant for each US$0.75 of penalties owed      to purchase, in the aggregate, up to an additional 109,600 shares of      common stock at a price per share of US$0.75.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Pursuant      to an Investor Relations Consulting Agreement with a third party for      services provided to Valcent, SmallCap Partners Ltd. received 120,000      shares of common stock at US$0.41 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | On      May 31, 2006, the Company issued 786,700 shares pursuant to the license      agreement. As of June 30, 2006, 7,601,325 common shares remained to be      issued pursuant to the license agreement and are reflected in share      subscription.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | On      May 15, 2006, the Company completed a private placement of units whereby      it issued a total of 1,104,165 units at US$0.60 per unit whereby each unit      consisted of one common share and one share purchase warrant to purchase      an additional common share at US$0.80. Of the warrants issued, 833,332      expire on May 15, 2008 and 270,833 on June 7, 2008. The Company also paid      consultants fees consisting of $58,860 plus 66,666 warrants to purchase      that number of common shares at US$0.80 until May 15, 2008 and 21,666      warrants to purchase that number of common shares at US$0.80 until June 7,      2008.·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | On      August 18, 2006, the Company completed a private placement of units      whereby it issued a total of 430,000 units at US$0.60 per unit for a total      of US$258,000 whereby each unit consisted of one common share and one      share purchase warrant to purchase an additional common share at US$0.80.      The warrants issued will expire on August 18, 2008. The Company paid      consultants fees consisting of $58,860 plus 24,800 warrants to purchase      that number of common shares at US$0.80 until August 18,    2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | We      entered into a manufacturing agreement with Solid Integrations, LLC, for      the manufacture and assembly of our Nova Skin Care System. Under this      agreement we will provide and make available to Solid Integrations, LLC,      and its subcontractor(s), the raw materials, machinery, equipment, tooling      and molds necessary for Solid Integrations, LLC, and its subcontractor(s),      to manufacture and assemble the Nova Skin Care System at a manufacturing      facility located in Mexico.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | During      the year ended March 31, 2007, $1,491,497 of the convertible note      principal and interest were converted into 3,967,157 common      shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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|   | • | During      the quarter ended December 31, 2006, pursuant to Regulation S of the      Securities Act, the Company received subscriptions of US$1,500,000 from a      group of non-US accredited investors towards a private placement of 8% per      annum convertible notes and three year warrants to acquire (i) up to      2,000,000 shares of our common stock at a price per share of US$0.50, and      (ii) up to an additional 2,000,000 shares of our 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 our common stock at the lesser of (i) seventy percent (70%) of      the average of the five lowest closing bid prices for our common stock for      the ten trading days prior to conversion, or (ii) US$0.55. The convertible      notes carry a redemption feature which allows us 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 our 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 “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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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|   | • | On      January 12, 2007, pursuant to an Investor Relations Consulting Agreement      with a third party for services provided to the Company, SmallCap      Corporate Partners Inc. received a total of 160,000 shares of common stock      at US$0.45 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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|   | • | On      January 12, 2007, pursuant to a Public Relations Agreement with a third      party for services provided to Valcent, Vorticom Inc. received a total of      25,000 shares of restricted common stock and will receive 25,000 shares of      stock quarterly for the twelve month term following the date of the      agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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|   | • | On      January 12, 2007, the Board of Directors authorized a bonus of 100,000      restricted common shares to a retiring director of the      Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
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|   | • | On      January 19, 2007, pursuant to a Consulting Services Agreement with a third      party for services provided to the Company, PowerOne Capital Markets      Limited received a total of 400,000 shares of common  stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | • | On      January 29, 2007, the Company completed a private placement comprised of      $2,000,000 convertible promissory notes with a group of non-US accredited      investors, pursuant to Regulation S of the Securities Act. The      convertible notes will mature on December 11, 2008 and carry interest at      six percent (6%) per annum. The Notes are convertible into “Units” at the      Note Holder’s discretion at a conversion price of US$0.50 per Unit. Each      “Unit” consists of one Valcent 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 that the      Company’s achieves pre-tax earnings or the end of the term. Pre-tax      earnings are to be determined in accordance with Valcent’s quarterly and      annual financial statements as filed with regulatory agencies and will be      payable thirty days after filing with such regulatory agencies. At the      discretion of the Note Holder, interest on the Notes is payable in either      cash or Units at US$0.50 per Unit. The Company is obligated to file a      resale registration statement on the underlying securities within four      months of closing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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|   | • | In      connection with finders fees payable under our January 2007 $2,000,000      private placement financing of convertible promissory notes, US$108,000 in      cash was paid to PowerOne Capital Markets Limited along with 135,000      warrants issued 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
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|   | • | Global      Green Joint Venture On      October 2, 2006, the Company entered into a letter agreement 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      our High Density Vertical Bio-Reactor technology (the “GGS Agreement”).      Pursuant to the GGS Agreement, the Company and Global Green established a      commercial joint venture named “Vertigro”, in which Global Green has      agreed to provide up to US$3,000,000 in 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 warehouse and land      near El Paso, Texas, as necessary for which Global Green has agreed to      reimburse the Company as part of its US$3,000,000 commitment. Until such      time as the joint venture has fully repaid the US$3,000,000, Global Green      will have an 80% joint venture interest, leaving the Company with a 20%      carried joint venture interest, both subject to an aggregate product      license royalty of 0.9% to Pagic and West Peak. Once the joint venture has      repaid Global Green the US$3,000,000, Global Green’s interest will be      reduced to 70% and the Company will retain a 30% non-carried interest,      both subject to an aggregate product license royalty of 4.5% to Pagic and      West Peak. As      at March 31, 2007, Global Green had incurred a total of US$2,023,379 in      costs related to the GGS Agreement.  Of the costs incurred to      March 31, 2007, Global Green had paid US$1,653,981 and owed the Company      $426,507 (US$369,398), which is included in accounts receivable and has      been subsequently collected. On      July 9, 2007, the parties to the GGS Agreement entered into the Vertigro      Algae Stakeholders Letter of Agreement (the “Global Green Joint Venture”),      which replaced the GGS Agreement.  Pursuant to the new      agreement, each of Global Green and the Company will hold a 50% interest      in the Global Green Joint Venture, subject to an aggregate 4.5% royalty to      Pagic and West Peak.  The Global Green Joint Venture covers the      Bio-Reactor 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, animal and agriculturalfeeds. |

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|   | • | During      the year ended March 31, 2007, the Company entered into a ten year      commercial real estate note totaling US$190,000 to fund the acquisition of      land.  The loan is secured by the land and a US$50,000 term deposit      which is included in the prepaid expenses.  Borrowings under the      Agreement accrue interest equal to the Wall Street Journal prime rate plus      0.25 percent adjusted annually.  The current interest rate is 8% per      annum and the current portion of the loan is $14,041.                                                                                                                                                                                                 |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | • | During      the year ended March 31, 2007, the Company issued 8,388,025 restricted      common shares as the remaining shares owed in conjunction with the      Licensing Agreement with Pagic LP (formerly MK Enterprises      LLC).  The Company on July 29, 2005, agreed to issue Pagic and      its assigns 20 million common shares at a deemed cost of $1,306,075, 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. Included in the 20 million shares issued for      the license were 9,428,205 shares that were issued to parties that became      related parties to the Company. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | • | On      April 1, 2007, the Company entered into an agreement with a third party to      provide investor relations and financial services for an eight month term      from April 1, 2007 through December 31, 2007.  The agreement      provides for the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|  | a) | payment      of US$15,000; |
|--|----|----------------------------|

|  | b) | US$3,000      in compensation per month payablequarterly; |
|--|----|-----------------------------------------------------------|

|  | c) | a      further US$2,000 payable monthly in common  shares; |
|--|----|------------------------------------------------------------|

|  | d) | share      options to purchase 500,000 shares at US$0.60 exercise price that vest      quarterly over a two year period;and |
|--|----|-----------------------------------------------------------------------------------------------------------------------------|

|  | e) | the      issuance of 12,500 common shares at a deemed price of US$0.80 per      share. |
|--|----|----------------------------------------------------------------------------------------|

|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | On      August 10, 2007, the Company issued a convertible term promissory note in      the amount of $650,000 to a third party.  The convertible note      is due November 15, 2007 with interest at the rate of 6% with both      interest and principal convertible at the option of the lender at the end      of term into units at the US$0.60 per unit, with each unit convertible      into 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 shares.  The Company is required to register for trading      the securities underlying the conversion features of this convertible note      by February 10, 2008 on a best efforts basis without    penalty. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | • | During      the year ended March 31, 2008, the Company completed a private placement      of units whereby a total of 8,382,721 units were issued at US$0.60 per      unit for gross proceeds of US$5,029,636.  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 Company paid US$88,438 cash to      consultants in connection with this private placement.                                                                                                                                                                                                                                                          |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | • | During      the year ended March 31, 2008, the Company completed a private placement      of units whereby a total of 142,857 units were issued at US$0.70 per unit      for gross proceeds of US$100,000.  Each unit consists of one      common share and one-half common share purchase warrant with each whole      warrant exercisable at US$0.85 to purchase an additional common share of      the Company.                                                                                                                                                                                                                                                                                                                                                                        |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | • | During      the year ended March 31, 2008, the Company issued 3,462,008 shares in      connection with seven financial consulting services agreements for      administrative, investor relations, business and financial consulting      services at an average value of US$0.68 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | • | During      the year ended March 31, 2008, the Company issued the following common      shares pursuant to the exercise of warrants, options, and the conversion      of convertible debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|  | · | Issued      699,903 common shares on exercise of 699,903 share purchase warrants at an      average exercise price of US$0.40 perwarrant; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Issued      175,000 common shares on exercise of 175,000 stock options at an exercise      price of US$0.50 per option by a past director of the Company;      and |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Issued      747,764 common shares upon receiving conversion notices to convert      US$275,000 of convertible notes, interest of US$4,521 and a registration      penalty of US$11,668 fromholders. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | 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. |

|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | 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 (unissued), 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. |

----

|   | • | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | 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. 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. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | 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. 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 year ended March 31, 2008, the Company raised $154,196 from interest      bearing promissory notes during the year ended March 31, 2008 for an      aggregate outstanding of $270,167 as at March 31, 2008 (2007 -      $115,460).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | As      a result of the Nova Skin Care System our inventories were $617,195 as at      March 31, 2008 (2007 - $1,236,808).  The company wrote down raw      materials inventories during the year ended March 31, 2008 due to      obsolescence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | We      purchased $834,084 (2007 - $310,448) in fixed assets during the year ended      March 31, 2008 relating to the development of our various operational      divisions located in El Paso, Texas and Cornwall, UK.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | The      Company entered into the following agreements on April 1, 2008 and May 1,      2008 respectively:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|  | (i) | A      financial services agreement with an arm’s length private company for a      term of seven  months. Pursuant to the agreement, the Company      issued 120,000 common shares valued at US$84,000;  and |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | A      financial and business consulting agreement with an individual consultant      for a term of twelve months. Pursuant to the agreement, the Company issued      300,000 common shares valued atUS$201,000. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |    |                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | The      Company completed a series of US$0.60 per unit private      placements.  Each unit consisted of one common share and      one-half common share purchase warrant with each whole warrant exercisable      at US$0.75 per share for two years. The private placements took place on      May 7, June 6, and July 23, 2008, respectively, with details as      follows: |

|  | (i) | issued      2,996,666 units for gross proceeds of US$1,798,000. The Company paid      US$122,577 in cash consultant’s fees with respect to this      issuance; |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | issued      195,000 units for gross proceeds of US$117,000. The Company paid no      consultant’s fees respecting the issuance;and |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii) | issued      61,000 units for gross proceeds of US$36,600. The Company paid US$2,562      cash in consultant’s fees with respect to this  issuance. |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |    |                                                                                                                                                  |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | On      May 28, 2008, the Company issued 100,000 common shares in relation to a      promissory note as part of the note’s interest provisions. |
|   |    |                                                                                                                                                  |
|   | • | The      Company issued the following common shares in relation to the conversion      of certain notes:                                              |

|  | (i) | On      June 2, 2008, the Company issued 245,049 common shares relating to the      conversion of US$100,000 in convertible debt and US$9,403 in accumulated      interest; and |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | On      July 3, 2008, the Company issued 267,221 common shares relating to the      conversion of US$92,281 in convertible debt and US$9,243 in accumulated      interest. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | • | 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. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | On      August 18, 2008, the Company issued 300,000 common shares to Pagic LP in      relation to the Technology License agreed to by the Company, Pagic LP, and      West Peak Ventures of Canada Ltd. on May 5, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | On      August 18, 2008, the Company issued 383,331 common shares pursuant to the      exercise of 383,331 warrants for gross proceeds of    US$191,666.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | The      Company issued the following common shares in relation to the conversion      of certain notes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

|  | (i) | On      August 18, 2008, the Company issued 62,703 common shares relating to the      conversion of US$25,000 in convertible debt and US$6,352 in accumulated      interest and registration penalties. The Company also issued as part of      converted amounts, 54,550 warrants exercisable at US$0.70 per share until      December 11, 2008; |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | On      September 10, 2008, the Company issued 549,690 common shares relating to      the conversion of US$250,000 in convertible debt and US$24,845 in      accumulated interest. The Company also issued as part of converted      amounts, 549,690 warrants exercisable at US$0.70 per share until December      11, 2008; and |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii) | On      September 19, the Company issued 417,322 common shares relating to the      conversion of US$175,000 in convertible debt and US$33,662 in accumulated      interest and registration penalties. The Company also issued as part of      converted amounts, 385,104 warrants exercisable at US$0.70 per share until      December 11, 2008. |
|--|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Period                           |   |   | OTC      Bulletin Board(USD) |   |   | TSX      Venture Exchange(CND) |   |
|----------------------------------|--------|--------|------------------------------|--------|--------|--------------------------------|--------|
|                             |   |   | High                         |   |   | Low                            |   |   | High |   |   | Low |   |
|                             |   |   |                         |   |   |                           |   |   |   |   |   |   |   |
| Fiscal      year ended March 31, |   |   |                         |   |   |                           |   |   |   |   |   |   |   |
| 2004                             |   |   | $                            | 0.075  |   |                           | $      | 0.0144 |   |   | $ | 0.090 |   |   | $ | 0.030 |   |
| 2005*                            |   |   | $                            | 0.600  |   |                           | $      | 0.030 |   |   | $ | 0.555 |   |   | $ | — |   |
| 2006                             |   |   | $                            | 0.950  |   |                           | $      | 0.250 |   |   | $ | — |   |   | $ | — |   |
| 2007                             |   |   | $                            | 0.840  |   |                           | $      | 0.400 |   |   | $ | — |   |   | $ | — |   |
| 2008                             |   |   | $                            | 0.930  |   |                           | $      | 0.450 |   |   | $ | — |   |   | $ | — |   |
|                             |   |   |                         |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Quarter      ended               |   |   |                         |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| September      30, 2006          |   |   | $                            | 0.750  |   |                           | $      | 0.500 |   |   | $ | — |   |   | $ | — |   |
| December      31, 2006           |   |   | $                            | 0.700  |   |                           | $      | 0.400 |   |   | $ | — |   |   | $ | — |   |
| March      31, 2007              |   |   | $                            | 0.740  |   |                           | $      | 0.450 |   |   | $ | — |   |   | $ | — |   |
| June      30, 2007               |   |   | $                            | 0.670  |   |                           | $      | 0.510 |   |   | $ | — |   |   | $ | — |   |
| September      30, 2007          |   |   | $                            | 0.770  |   |                           | $      | 0.500 |   |   | $ | — |   |   | $ | — |   |
| December      31, 2007           |   |   | $                            | 0.930  |   |                           | $      | 0.550 |   |   | $ | — |   |   | $ | — |   |
| March      31, 2008              |   |   | $                            | 0.900  |   |                           | $      | 0.450 |   |   | $ | — |   |   | $ | — |   |
| June      30, 2008               |   |   | $                            | 0.740  |   |                           | $      | 0.500 |   |   | $ | — |   |   | $ | — |   |
|                             |   |   |                         |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Month      ended                 |   |   |                         |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| March      31, 2008              |   |   | $                            | 0.730  |   |                           | $      | 0.450 |   |   | $ | — |   |   | $ | — |   |
| April      30, 2008              |   |   | $                            | 0.740  |   |                           | $      | 0.670 |   |   | $ | — |   |   | $ | — |   |
| May      31, 2008                |   |   | $                            | 0.700  |   |                           | $      | 0.550 |   |   | $ | — |   |   | $ | — |   |
| June      30, 2008               |   |   | $                            | 0.700  |   |                           | $      | 0.500 |   |   | $ | — |   |   | $ | — |   |
| July      31, 2008               |   |   | $                            | 0.670  |   |                           | $      | 0.480 |   |   | $ | — |   |   | $ | — |   |
| August      31, 2008             |   |   | $                            | 0.620  |   |                           | $      | 0.480 |   |   | $ | — |   |   | $ | — |   |

| * | We      voluntarily delisted from the TSX Venture Exchange on May 3,      2005. |
|---|---------------------------------------------------------------------------------|

ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

----

ITEM10. ADDITIONAL INFORMATION

----

ITEM10. ADDITIONAL INFORMATION

----

ITEM10. ADDITIONAL INFORMATION

----

ITEM10. ADDITIONAL INFORMATION

|   | (i)    | A      license for a period lasting so long as royalty payments continue to be      made as required, for the exclusive worldwide marketing and distribution      rights to three unrelated and proprietary consumer retail products that      had previously been developed by Pagic, including the Ultrasonic Skincare      System, the Dust Wolf TM,      and the Tomorrow Garden TM,      (collectively, and together with any improvements thereon, the “Initial      Products”); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | (ii)   | A      license for a period lasting so long as royalty payments continue to be      made as required, for the exclusive worldwide marketing and distribution      rights to any ancillary products developed and sold for use by consumers      in connection with the Initial Products (“Initial      Ancillaries”);                                                                                                                                                                  |

----

ITEM10. ADDITIONAL INFORMATION

|   | (iii)  | A      right for an initial period of five years to acquire a license for a      period lasting so long as royalty payments continue to be made as      required, for the exclusive worldwide marketing and distribution rights to      any new products developed by Pagic (collectively, “Additional      Products”);         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                        |
|   | (iv)   | A      license for a period lasting so long as royalty payments continue to be      made as required, for the exclusive worldwide marketing and distribution      rights to any ancillary products developed and sold for use by consumers      in connection with the Additional Products (“Additional Ancillaries”);      and |
|   |   |                                                                                                                                                                                                                                                                                                                                        |
|   | (v)    | A      related services agreement pursuant to which Pagic would provide      consulting support in connection with the Initial Products, the Initial      Ancillaries, the Additional Products and the Additional      Ancillaries.                                                                                                         |

|   | • | 20,000,000      shares of our common stock;                                                                                    |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                           |
|   | • | A      one-time US$125,000 license fee;                                                                                        |
|   |    |                                                                                                                           |
|   | • | Reimbursement      for US$125,000 in development costs associated with each of the Initial      Products since March 17, 2005; |
|   |    |                                                                                                                           |
|   | • | The      greater of the following, payableannually:                                                                            |

|   | (i)    | US$400,000;      or                  |
|--------|--------|--------------------------------------|
|   |   |                                 |
|   | (ii)   | The      aggregate of the following: |

|   | • | Subject      to a minimum amount of US$37,500 per Initial Product during the second      year of the Pagic Master License, and US$50,000 each year thereafter,      continuing royalties payable quarterly at a rate  of: |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | :      | US$10.00      per Ultrasonic Skincare System unit sold;       |
|--------|--------|---------------------------------------------------------------|
|   |   |                                                          |
|   | :      | US$2.00      per Dust Wolf TM,      unit sold;                |
|   |   |                                                          |
|   | :      | 4.5%      of annual net sales of the Tomorrow Garden Kit; and |
|   |   |                                                          |
|   | :      | 3%      of annual net sales of InitialAncillaries.            |

|   | • | A      one-time US$50,000 license fee for each Additional Product licensed      (except for a one pre-identified product);                                                                                                                          |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                |
|   | • | Subject      to a minimum amount of US$50,000 per year commencing with the second year      of each corresponding license, continuing royalties of 4.5% of annual net      sales and 3% on annual net sales of any Additional Ancillaries;      and |
|   |    |                                                                                                                                                                                                                                                |
|   | • | Consulting      fees of US$156,000 per year, payable monthly in  advance.                                                                                                                                                                           |

----

ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

----

ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

|   | • | an      individual citizen or resident of the United States;                                                                                                                                                                                                        |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                |
|   | • | a      corporation, or entity taxable as a corporation, that is created or      organized under the laws of the United States or of any political      subdivision thereof or the District of Columbia;                                                             |
|   |    |                                                                                                                                                                                                                                                                |
|   | • | an      estate whose income is taxable in the United States irrespective of      source; or                                                                                                                                                                         |
|   |    |                                                                                                                                                                                                                                                                |
|   | • | a      trust if, (i) a court within the United States is able to exercise primary      supervision over the administration of the trust, and (ii) one or more      United States persons have the authority to control all substantial      decisions of the trust. |

----

ITEM10. ADDITIONAL INFORMATION

|   | • | to      the extent such distributions are paid out of our current or accumulated      earnings and profits, as determined for United States federal income tax      purposes, subject to any applicable foreign tax credit, and without a      reduction for any Canadian income tax withheld from such distributions,      such holders would generally be required to include, in their gross income      for United States federal income tax purposes, an amount equal to the      United States Dollar value of such distributions on the date of receipt      (based on the exchange rate on such date).         |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | • | to      the extent such dividend distributions exceed our current or accumulated      earnings and profits, as determined for United States federal income tax      purposes, the amount of any distribution so received will (i) first be      applied to reduce a U.S. Holder’s adjusted basis in our common shares,      and, as a return of basis, will not be subject to United States federal      income tax, and (ii) thereafter, any residual amount of such distribution      will be treated as a gain from the sale or exchange of our common shares,      which amount is taxable as a capitalgain. |

|   | • | we      are a qualified foreign corporation—one eligible for the benefits of a      comprehensive income tax treaty with the United States, which the United      States Treasury Department has determined to be satisfactory for this      purpose and which includes an exchange of information program—for which      purposes the Canada-US Income Tax Convention (1980)    qualifies; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | we      are not a passive foreign investment company for the taxable year during      which the dividend is paid or the immediately preceding taxable year      (which we do not believe we are, have been or anticipate that we will      be);                                                                                                                                                         |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | the      Individual Holder has held the common shares for more than 60 days during      the 121-day period beginning 60 days prior to the date on which the common      shares become ex-dividend; and                                                                                                                                                                                                  |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | • | the      Individual Holder is not obligated to make related payments with respect      to positions in substantially similar or related  property.                                                                                                                                                                                                                                                      |

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ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

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ITEM10. ADDITIONAL INFORMATION

|   | • | a      non-resident of Canada;                                                                          |
|--------|---------|---------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                    |
|   | • | holds      our common shares as capital property;                                                       |
|   |    |                                                                                                    |
|   | • | deals      with us at arm’s length; and                                                           |
|   |    |                                                                                                    |
|   | • | does      not use or hold our common shares in or in the course of carrying on      business in Canada. |

|   | • | to      the extent such holder beneficially owns at least 10% of our voting stock,      5% of the gross amount of such distribution paid; or |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                         |
|   | • | to      the extent such holder beneficially owns less than 10% of our voting      stock, 15% of the gross amount of such distribution  paid. |

----

ITEM10. ADDITIONAL INFORMATION

ITEM11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

ITEM12. DESCRIPTION OF SECURITIES OTHER THAN EQUITYSECURITIES

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ITEM13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

ITEM14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OFPROCEEDS

ITEM15. CONTROLS AND PROCEDURES

| (i)  | pertain      to the maintenance of records that, in reasonable detail, accurately and      fairly reflect the transactions and dispositions of the assets of the      Company; |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)  | provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with generally accepted      accounting principles, and that receipts and expenditures of the Company      are being made only in accordance with authorizations of management and      our directors; and |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)  | provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use or disposition of the Company’s assets that      could have a material effect on the financial  statements. |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

ITEM15. CONTROLS AND PROCEDURES

|  | (1)  | Lack      of an independent audit committee or audit committee financial expert, and      no independent directors.  Although our audit committee      functions with one officer/director and two other directors who are not      corporate officers, the two non-officer directors are paid consultants to      the Company and as such may not be deemed truly      independent.  These factors may be counter to corporate      governance practices as defined by the various stock exchanges and may      lead to less supervision overmanagement; |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2)  | Inadequate      staffing and supervision within our bookkeeping operations. We have three      employees or consultants involved in bookkeeping functions in three      separate operating subsidiaries where transactional volumes require such      services, and we utilize independent consultants on a part-time basis to      supplement our accounting staff.  The relatively small number of      people who are responsible for bookkeeping functions prevents us from      segregating duties within our internal control system. The inadequate      segregation of duties is a weakness because it could lead to the untimely      identification and resolution of accounting and disclosure matters or      could lead to a failure to perform timely and effective reviews which may      result in a failure to detect errors in spreadsheets, calculations, or      assumptions used to compile the financial statements and related      disclosures as filed with the SEC; |
|--|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (3)  | Outsourcing      of significant portions of the accounting operations of our      Company.  Because there are few employees in our administration,      we have outsourced a portion of the accounting functions of our Company to      an independent accounting firm where particular skills are required due to      the nature of complex financial transactions especially relating to      convertible debenture financings. The employees of this accounting firm      are managed by supervisors within the accounting firm, and are not      answerable to the Company's management. This is a material weakness      because it could result in a disjunction between the accounting policies      adopted by our Board of Directors and the accounting practices applied by      the accounting firm; |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (4)  | Insufficient      installation of information technology to assist in our accounting      functions.  Because of a lack of working capital and personnel,      we have been unable to upgrade our information technology software and      hardware to assist in providing effective  controls; |
|--|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (5)  | Insufficient      written policies and procedures for accounting and financial reporting      with respect to the requirements and application of US GAAP and SEC      disclosure requirements; |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (6)  | Ineffective      controls over period end financial disclosure and reporting      processes. |
|--|-----------|----------------------------------------------------------------------------------------------|

----

ITEM15. CONTROLS AND PROCEDURES

----

ITEM16B. CODE OF ETHICS

ITEM16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATEDPURCHASERS

----

PART III

ITEM 17. FINANCIAL STATEMENTS

| Index                                                        | Page             |
|--------------------------------------------------------------|------------------|
|                                                         |             |
| Auditors' Report to the      Shareholders                    | F-1              |
|                                                         |             |
| Consolidated Financial      Statements                       |             |
|                                                         |             |
| Consolidated Balance      Sheets                             | F-2              |
|                                                         |             |
| Consolidated      Statements of Operations and Deficit  | F-3              |
|                                                         |             |
| Consolidated      Statements of Cash Flows                   | F-4              |
|                                                         |             |
| Notes to the      Consolidated Financial Statements          | F-5 to      F-39 |

----

----

----

----

----

|                                                                |   | 2008   |        |   | 2007          |   |
|---------------------------------------------------------------------|--------|--------|-------------|--------|---------------|--------|
|                                                                |   |   |        |   | (Note      2) |   |
| Assets                                                              |   |   |        |   |          |   |
| Current                                                             |   |   |        |   |          |   |
| Cash      and cash equivalents                                      |   | $      | 163,437     |   |          | $      | 314,972 |   |
| Accounts      receivable (Notes 8 and 16)                           |   |   | 462,156     |   |          |   | 462,055 |   |
| Prepaid      expenses (Note 7)                                      |   |   | 2,119,546   |   |          |   | 356,761 |   |
| Inventories      (Note 9)                                           |   |   | 617,195     |   |          |   | 1,236,808 |   |
|                                                                |   |   |        |   |          |   |   |   |
|                                                                |   |   | 3,362,334   |   |          |   | 2,370,596 |   |
| Restricted Cash (Note      13)                                      |   |   | 108,471     |   |          |   | 117,327 |   |
| Property and Equipment      (Notes 5 and 13)                        |   |   | 1,135,108   |   |          |   | 348,487 |   |
| Product License (Note      6)                                       |   |   | 1           |   |          |   | 1,306,075 |   |
|                                                                |   |   |        |   |          |   |   |   |
|                                                                |   | $      | 4,605,914   |   |          | $      | 4,142,485 |   |
|                                                                |   |   |        |   |          |   |   |   |
| Liabilities      and Shareholders' Deficiency                       |   |
|                                                                |   |   |        |   |          |   |   |   |
| Current                                                             |   |   |        |   |          |   |   |   |
| Accounts      payable                                               |   | $      | 382,605     |   |          | $      | 115,744 |   |
| Accrued      liabilities                                            |   |   | 153,958     |   |          |   | 53,906 |   |
| Current      portion of long-term debt (Note 13)                    |   |   | 16,250      |   |          |   | 13,451 |   |
| Promissory      notes payable (Note 18)                             |   |   | 270,167     |   |          |   | 115,460 |   |
| Due      to related parties (Note 11)                               |   |   | 1,490,516   |   |          |   | 930,175 |   |
| Convertible      notes (Note 10)                                    |   |   | 5,202,741   |   |          |   | 2,742,462 |   |
|                                                                |   |   |        |   |          |   |   |   |
|                                                                |   |   | 7,516,237   |   |          |   | 3,971,198 |   |
| Long-term      debt (Note 13)                                       |   |   | 158,612     |   |          |   | 195,663 |   |
|                                                                |   |   |        |   |          |   |   |   |
|                                                                |   |   | 7,674,849   |   |          |   | 4,166,861 |   |
| Shareholders'      Deficiency                                       |   |   |        |   |          |   |   |   |
| Share      capital (Note 14)                                        |   |   | 16,691,282  |   |          |   | 8,196,982 |   |
| Contributed      surplus (Note 14(e))                               |   |   | 4,203,394   |   |          |   | 3,333,435 |   |
| Conversion      component of convertible notes (Notes 10 and 14(f)) |   |   | 3,591,398   |   |          |   | 3,287,858 |   |
| Accumulated      deficit from prior operations                      |   |   | (3,237,370  | )      |          |   | (3,237,370 | ) |
| Accumulated      deficit during the development stage               |   |   | (24,317,639 | )      |          |   | (11,605,281 | ) |
|                                                                |   |   |        |   |          |   |   |   |
|                                                                |   |   | (3,068,935  | )      |          |   | (24,376 | ) |
|                                                                |   |   |        |   |          |   |   |   |
|                                                                |   | $      | 4,605,914   |   |          | $      | 4,142,485 |   |

----

----

|                                                        |   | 2008   |          |   | 2007               |   |                      | 2006               |   |
|-------------------------------------------------------------|--------|--------|---------------|--------|--------------------|--------|---------------------------|--------------------|--------|
|                                                        |   |   |          |   | (Note      2)      |   |                      | (Note      2)      |   |
|                                                        |   |   |          |   | (as      restated) |   |                      | (as      restated) |   |
| Expenses                                                    |   |   |          |   |               |   |                      |               |   |
| Product      development (Note 16)                          |   | $      | 4,081,435     |   |               | $      | 1,562,421                 |               |   | $ | 685,432 |   |
| Interest,      accretion and financing on convertible notes |   |   | 2,804,582     |   |               |   | 2,726,067                 |               |   |   | 1,630,852 |   |
| Advertising      and media development                      |   |   | 1,953,998     |   |               |   | 1,092,917                 |               |   |   | 0 |   |
| Stock-based      compensation                               |   |   | 990,305       |   |               |   | 1,127,141                 |               |   |   | 533,664 |   |
| Investor      relations                                     |   |   | 871,542       |   |               |   | 287,834                   |               |   |   | 19,037 |   |
| Professional      fees                                      |   |   | 431,270       |   |               |   | 712,458                   |               |   |   | 175,833 |   |
| Travel                                                      |   |   | 291,465       |   |               |   | 156,498                   |               |   |   | 69,600 |   |
| Office      and miscellaneous                               |   |   | 234,817       |   |               |   | 281,696                   |               |   |   | 38,125 |   |
| Interest      and penalties                                 |   |   | 112,376       |   |               |   | 6,910                     |               |   |   | 193,987 |   |
| Rent                                                        |   |   | 77,918        |   |               |   | 65,693                    |               |   |   | 56,771 |   |
| Insurance                                                   |   |   | 71,071        |   |               |   | 78,784                    |               |   |   | 0 |   |
| Amortization                                                |   |   | 47,463        |   |               |   | 25,288                    |               |   |   | 9,382 |   |
| Filing      and transfer agent fees                         |   |   | 44,500        |   |               |   | 38,883                    |               |   |   | 26,250 |   |
| Interest      on long-term debt                             |   |   | 15,480        |   |               |   | 8,500                     |               |   |   | 0 |   |
| Management      fees                                        |   |   |   0 |   |               |   |     0 |               |   |   |  4,000 |   |
|                                                        |   |   |          |   |               |   |                      |               |   |   |   |   |
| Loss      from Operations                                   |   |   | 12,028,222    |   |               |   |  8,171,090           |               |   |   | 3,442,933 |   |
| Other      (Income) Expense                                 |   |   |          |   |               |   |                      |               |   |   |   |   |
| Write-down      on product license (Note 6)                 |   |   | 1,306,074     |   |               |   | 0                         |               |   |   | 0 |   |
| Interest      income                                        |   |   | (10,805       | )      |               |   | (25,704                   | )                  |   |   | 0 |   |
| Foreign      exchange gain (loss)                           |   |   | (611,133      | )      |               |   |  (6,993              | )                  |   |   |   23,955 |   |
|                                                        |   |   |          |   |               |   |                      |               |   |   |   |   |
| Net      Loss and Comprehensive Loss for Year               |   |   | 12,712,358    |   |               |   | 8,138,393                 |               |   |   |   3,466,888 |   |
| Deficit      During Development Stage, Beginning of Year,   |   |   |          |   |               |   |                      |               |   |   |   |   |
| As      previously reported                                 |   |   | 14,674,170    |   |               |   | 3,734,599                 |               |   |   | 0 |   |
| Prior      period correction (Note 2)                       |   |   | (3,068,889    | )      |               |   |  (267,711            | )                  |   |   |   0 |   |
|                                                        |   |   |          |   |               |   |                      |               |   |   |   |   |
| As      restated                                            |   |   | 11,605,281    |   |               |   | 3,466,888                 |               |   |   |   0 |   |
|                                                        |   |   |          |   |               |   |                      |               |   |   |   |   |
| Deficit      During Development Stage, End of Year          |   | $      | 24,317,639    |   |               | $      | 11,605,281                |               |   | $ | 3,466,888 |   |
|                                                        |   |   |          |   |               |   |                      |               |   |   |   |   |
| Loss Per Share - Basic      (Note 21)                       |   | $      |  0.36    |   |               | $      | 0.42                      |               |   | $ | 0.329 |   |
|                                                        |   |   |          |   |               |   |                      |               |   |   |   |   |
| Weighted      Average Number of Common Shares Outstanding   |   |   | 35,545,740    |   |               |   |  19,261,192          |               |   |   |  10,548,042 |   |

----

----

|                                                        |   | 2008   |                      |   | 2007               |   |       | 2006               |   |
|-------------------------------------------------------------|--------|--------|---------------------------|--------|--------------------|--------|------------|--------------------|--------|
|                                                        |   |   |                      |   | (Note      2)      |   |       | (Note      2)      |   |
|                                                        |   |   |                      |   | (as      restated) |   |       | (as      restated) |   |
| Cash      Provided By (Used In)                             |   |   |                      |   |               |   |       |               |   |
| Operating      Activities                                   |   |   |                      |   |               |   |       |               |   |
| Net loss for    year                                        |   | $      | (12,712,358               | )      |               | $      | (8,138,393 | )                  |   | $ | (3,466,888 | ) |
| Items not involving      cash                               |   |   |                      |   |               |   |       |               |   |   |   |   |
| Interest,      accretion and financing on convertible notes |   |   | 2,839,430                 |   |               |   | 2,327,985  |               |   |   | 1,345,868 |   |
| Stock-based      compensation (Note 14)                     |   |   | 990,305                   |   |               |   | 1,127,141  |               |   |   | 533,664 |   |
| Write-down      on product license (Note 6)                 |   |   | 1,306,074                 |   |               |   | 0          |               |   |   | 0 |   |
| Product      development                                    |   |   | 506,869                   |   |               |   | 0          |               |   |   | 0 |   |
| Consulting                                                  |   |   | 198,493                   |   |               |   | 52,708     |               |   |   | 0 |   |
| Investor      relations                                     |   |   | 199,904                   |   |               |   | 174,924    |               |   |   | 0 |   |
| Interest      and penalties                                 |   |   | 4,195                     |   |               |   | 0          |               |   |   | 0 |   |
| Amortization                                                |   |   | 47,463                    |   |               |   | 25,288     |               |   |   | 9,382 |   |
| Foreign      exchange gain                                  |   |   | (630,984                  | )      |               |   | 0          |               |   |   |   |   |
| Changes      in non-cash working capital items              |   |   | 732,607                   |   |               |   | (1,870,635 | )                  |   |   | 104,109 |   |
|                                                        |   |   | (6,518,002                | )      |               |   | (6,300,982 | )                  |   |   | (1,473,865 | ) |
| Investing      Activities                                   |   |   |                      |   |               |   |       |               |   |   |   |   |
| Product license                                             |   |   | 0                         |   |               |   | 0          |               |   |   | (306,075 | ) |
| Property and      equipment                                 |   |   | (834,084                  | )      |               |   | (310,448   | )                  |   |   | (72,709 | ) |
|                                                        |   |   | (834,084                  |   |               |   | (310,448   | )                  |   |   | (378,784 | ) |
|                                                        |   |   |                      |   |               |   |       |               |   |   |   |   |
| Financing      Activities                                   |   |   |                      |   |               |   |       |               |   |   |   |   |
| Advances      from (repayment to) related parties           |   |   | 560,341                   |   |               |   | 860,902    |               |   |   | (84,076 | ) |
| Restricted      cash                                        |   |   | 0                         |   |               |   | 117,327    |               |   |   | 0 |   |
| Proceeds      from issuance of common shares, net           |   |   | 5,448,774                 |   |               |   | 1,028,266  |               |   |   | 0 |   |
| Promissory      notes payable                               |   |   | 150,512                   |   |               |   | 115,460    |               |   |   | 0 |   |
| Repayments      of long-term debt                           |   |   | (34,252                   | )      |               |   | (25,440    | )                  |   |   | 0 |   |
| Proceeds      from issuance of convertible notes            |   |   | 1,100,108                 |   |               |   | 4,817,114  |               |   |   | 1,565,069 |   |
| Shares      issued for settlement of debt                   |   |   | 0                         |   |               |   | 0          |               |   |   | 234,609 |   |
| Debt      discount                                          |   |   | 0                         |   |               |   | 0          |               |   |   | 149,598 |   |
|                                                        |   |   | 7,225,483                 |   |               |   | 6,913,629  |               |   |   | 1,865,200 |   |
|                                                        |   |   |                      |   |               |   |       |               |   |   |   |   |
| Foreign      Exchange on Cash Held in Foreign Currency      |   |   | (24,932                   | )      |               |   | 0          |               |   |   | 0 |   |
| (Decrease)      Increase in Cash During Year                |   |   | (151,535                  | )      |               |   | 302,199    |               |   |   | 12,551 |   |
| Cash      and Cash Equivalents, Beginning of Year           |   |   | 314,972                   |   |               |   | 12,773     |               |   |   | 222 |   |
|                                                        |   |   |                      |   |               |   |       |               |   |   |   |   |
| Cash      and Cash Equivalents, End of Year                 |   | $      | 163,437                   |   |               | $      | 314,972    |               |   | $ | 12,773 |   |
|                                                        |   |   |                      |   |               |   |       |               |   |   |   |   |
| Supplemental      Cash Flow Information                     |   |   |                      |   |               |   |       |               |   |   |   |   |
| Shares      issued for product license                      |   | $      |     0 |   |               | $      | 419,401    |               |   | $ | 0 |   |
| Shares      issued for investor relations/public relations  |   | $      |   303,804       |   |               | $      | 460,614    |               |   | $ | 0 |   |
| Shares      issued as bonus to director                     |   | $      | 0                         |   |               | $      | 52,708     |               |   | $ | 0 |   |
| Shares      issued for consulting services                  |   | $      | 2,110,429                 |   |               | $      | 107,681    |               |   | $ | 0 |   |
| Shares      issued on conversion of convertible notes       |   | $      | 532,295                   |   |               | $      | 1,668,363  |               |   | $ | 0 |   |
| Interest      paid                                          |   | $      | 15,480                    |   |               | $      | 0          |               |   | $ | 0 |   |
| Income      taxes paid                                      |   | $      | 0                         |   |               | $      | 0          |               |   | $ | 0 |   |
|                                                        |   |   |                      |   |               |   |       |               |   |   |   |   |

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| 1.  | Nature of Business and      Ability to Continue as a Going-Concern Valcent      Products Inc. (the “Company”) was incorporated under the Alberta Business      CorporationsAct      on January 19, 1996.  The Company is in the development      stage and is engaged principally in the development and marketing of      consumer and industrial products and processes for global      markets. These      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 March 31, 2008, the Company had an accumulated deficit of      $27,555,009 (2007 - $14,839,651) and a working capital deficiency of      $4,153,903 (2007 - $1,600,602). 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      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. |
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| 2.  | Prior Period      Adjustment and Comparative Figures The consolidated financial statements for the      year ended March 31, 2007 have been restated to adjust prepaid expenses      and insurance expense for amounts that relate to the 2008 fiscal year as      well as to correct the bifurcation of convertible notes, the amortization      thereof using the effective interest method and the transfer of the      conversion component of convertible notes to share capital upon conversion      of these notes into common shares of the Company. This error was noted in      the current year and resulted in a restatement to reduce net loss by      $2,801,178 and reduce deficit at the beginning of the year by $267,711 for      the year ended March 31, 2007. The resulting restatement to amounts for      the year-ended March 31, 2007 are asfollows: |
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|                                                        |   | As      Previously Reported March 31, 2007 |       |   | Adjustment |   |       | As      Restated March 31, 2007 |   |
|-------------------------------------------------------------|--------|--------------------------------------------|------------|--------|------------|--------|------------|---------------------------------|--------|
|                                                        |   |                                       |       |   |       |   |       |                            |   |
| Convertible      debentures                                 |   | $                                          | 5,301,129  |   |       | $      | (2,558,667 | )                               |   | $ | 2,742,462 |   |
| Share      capital                                          |   | $                                          | 7,836,903  |   |       | $      | 360,079    |                            |   | $ | 8,196,982 |   |
| Contributed      surplus                                    |   | $                                          | 3,253,333  |   |       | $      | 80,102     |                            |   | $ | 3,333,435 |   |
| Conversion      component of convertible notes              |   | $                                          | 4,167,190  |   |       | $      | (879,332   | )                               |   | $ | 3,287,858 |   |
| Deficit,      end of year                                   |   | $                                          | 14,674,170 |   |       | $      | (3,068,889 | )                               |   | $ | 11,605,281 |   |
| Deficit,      beginning of year                             |   | $                                          | 3,734,599  |   |       | $      | (267,711   | )                               |   | $ | 3,466,888 |   |
| Insurance      expense                                      |   | $                                          | 149,855    |   |       | $      | (71,071    | )                               |   | $ | 78,784 |   |
| Interest,      accretion and financing on convertible notes |   | $                                          | 5,606,886  |   |       | $      | (2,880,819 | )                               |   | $ | 2,726,067 |   |
| Foreign      exchange gain (loss)                           |   | $                                          | 110,006    |   |       | $      | (116,999   | )                               |   | $ | (6,993 | ) |
| Basic      loss per share                                   |   | $                                          | 0.57       |   |       | $      | (0.15      | )                               |   | $ | 0.42 |   |

|   | Certain of the comparative figures for the year      ended March 31, 2007 have been reclassified to conform to the current      year’s presentation. |
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| 3.  | Significant Accounting      Policies These financial statements have been prepared in      accordance with Canadian GAAP.  The significant accounting      policies used in these consolidated financial statements are as      follows: |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (a) | Principles      of consolidation These      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      consolidated financial statements also include the Company’s proportionate      share of the assets, liabilities, income and expenses of the Vertigro      Joint Venture, as described in Note8. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (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. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (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.  At      March 31, 2008 and 2007, cash and cash equivalents consisted of cash on      deposit and money marketsecurities. |
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|  | (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. |
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|  | (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; |
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|   | (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. |
|--|--------|----------------------------------------------------------------------------------------------------------------------|

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| 3.  | Significant      Accounting Policies (Continued) |
|----------|-------------------------------------------------------|

|   | (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 sharecapital. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Income      taxes The Company      follows the asset and liability method of accounting for income      taxes.  Under this method of tax allocation, future income tax      assets and liabilities are determined based on differences between the      financial statement carrying values and their respective income tax basis      (temporary differences).  Future income tax assets and      liabilities are measured using the tax rates expected to be in effect when      the temporary differences are likely to reverse.  The effect on      future income tax assets and liabilities of a change in tax rates is      included in operations in the period in which the change is enacted or      substantially assured.  The amount of future income tax assets      recognized is limited to the amount of the benefit that is more likely      than not to be realized. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 3.  | Significant      Accounting Policies (Continued) |
|----------|-------------------------------------------------------|

|  | (j) | 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 earliestof: |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------|

|  | (k) | 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 cashflows. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (l) | 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(b)). Interest      income is recognized on an accrual basis as earned at the stated rate of      interest of the investment over the term to  maturity. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (m) | Changes      in accounting policies The following      changes in accounting policies were applied in accordance with the      transitional provisions contained in each of the Canadian Institute of      Chartered Accountants’ (“CICA”) Handbook sections, and their adoption had      no impact on the Company’s consolidated financial    statements. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Financial      instruments Effective April 1, 2007, the Company      adopted the CICA Handbook Section 3855, “Financial Instruments –      Recognition and Measurement”, which establishes standards for recognizing      and measuring financial assets, financial liabilities and non-financial      derivatives. The standard requires the Company to account for certain      financial assets and liabilities at fair value at each balance sheet date.      Financial instruments must be classified into one of these five      categories: held-for-trading, held-to-maturity, loans and receivables,      available-for-sale financial assets or other financial liabilities. All      financial instruments are measured in the balance sheet at fair value      except for loans and receivables, held-to-maturity investments and other      financial liabilities, which are measured at amortized cost. Subsequent      measurement and changes in fair value will depend on their initial      classification as follows: held-for-trading financial assets are measured      at fair value and changes in fair value are recognized in net income;      available-for-sale financial instruments are measured at fair value with      changes in fair value recorded in other comprehensive income until the      investment is no longer recognized or impaired, at which time the amounts      would be recorded in net income. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 3.  | Significant      Accounting Policies (Continued) |
|----------|-------------------------------------------------------|

|  | (m)  | Changes      in accounting policies (Continued) |
|--|-----------|-------------------------------------------------|

|  | (i)  | Financial      instruments (Continued) The adoption of this section did not impact the      Company’s consolidated financialstatements. |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Comprehensive      income (loss) Effective April 1, 2007, the Company      adopted the CICA Handbook Section 1530, “Comprehensive Income”, which      establishes standards for presentation and disclosure of comprehensive      income (loss). Comprehensive income (loss) is the overall change in the      net assets of the Company for the period, other than changes attributed to      transactions with shareholders. It is made up of net income and other      comprehensive income (loss). The historical make up of net income (loss)      has not changed. Other comprehensive income (loss) includes gains or      losses, which Canadian GAAP requires to be recognized in a period but      excluded from net income (loss) for that period.  The Company      has no items of other comprehensive income (loss) in any period      presented.  Accordingly, net loss as presented in the Company’s      statement of operations equals comprehensive  loss. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Inventories During      the year ended March 31, 2008, the Company adopted CICA Handbook Section      3031, “Inventories”. This section requires that inventory be recorded at      the lower of cost or net realizable value. This section also clarifies      that the allocation of fixed production overhead requires the consistent      use of either first-in, first-out or the weighted average method to      measure inventory, and requires that any previous write-downs be reversed      when the value of the inventory increases. The amount of the reversal is      limited to the amount of the original write-down. Inventories      are valued at the lower of cost and net realizable value, with cost being      determined on an average costbasis. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Goodwill      and intangible assets During      the year ended March 31, 2008, the Company adopted CICA Handbook Section      3064, “Goodwill and Intangible Assets”, which replaced Section 3062,      “Goodwill and Other Intangible Assets”, and Section 3450, “Research and      Development Costs”. This section establishes standards for the      recognition, measurement, presentation and disclosure of goodwill      subsequent to its initial recognition and of intangible assets by      profit-oriented enterprises. Standards concerning goodwill are unchanged      from the standards included in the previous Section 3062. The      Company’s intangible assets are amortized over their useful lives, unless      the life is determined to be indefinite, in which case, no amortization is      taken. The Company reviews the estimated useful lives and carrying values      of its intangible assets as part of its periodic assessment for impairment      of long-lived assets. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 3.  | Significant      Accounting Policies (Continued) |
|----------|-------------------------------------------------------|

|  | (n) | Future      accounting changes |
|--|-----|--------------------------------|

|   | (i) | Capital      disclosures In February      2007, the CICA issued Handbook Section 1535, “Capital Disclosures”, which      requires the disclosure of both qualitative and quantitative information      that provides users of financial statements with information to evaluate      the entity’s objectives, policies and procedures for managing capital. The      new section is effective for the Company for the year beginning      April 1, 2008.  The Company is in the process of assessing      the impact of this new section on its consolidated financial      statements. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Financial      instruments In February 2007, the CICA issued two new      standards, Section 3862, “Financial Instruments Disclosures”, and Section      3863, “Financial Instruments Presentation”. These sections will replace      the existing Section 3861, “Financial Instruments Disclosure and      Presentation”. Section 3862 provides users with information to evaluate      the significance of the financial instruments of the entity’s financial      position and performance, nature and extent of risks arising from      financial instruments, and how the entity manages those      risks.  Section 3863 deals with the classification of financial      instruments, related interest, dividends, losses and gains, and the      circumstances where financial assets and financial liabilities are      offset.  These new sections are effective for the Company for      the year beginning April 1, 2008.  The Company is in the      process of assessing the impact of these new sections on its consolidated      financial statements. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | International      Financial Reporting Standards ("IFRS") In      2006, the Canadian Accounting Standards Board ("AcSB") published a new      strategic plan that will significantly affect financial reporting      requirements for Canadian companies. The AcSB strategic plan outlines      the convergence of Canadian GAAP with IFRS over an expected five year      transitional period.  In February 2008, the AcSB announced that      2011 is the changeover date for publicly-listed companies to use IFRS,      replacing Canada's own GAAP. The date is for interim and annual financial      statements relating to fiscal years beginning on or after January 1, 2011.      The transition date of January 1, 2011 will require the restatement for      comparative purposes of amounts reported by the Company for the year ended      March 31, 2011 and earlier where applicable. While the Company has      begun assessing the adoption of IFRS for 2011, the financial reporting      impact of the transition to IFRS cannot be reasonably estimated at this      time. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.  | Financial      Instruments The Company has designated its cash and cash      equivalents and restricted cash as held-for-trading; accounts receivable      as loans and receivables; and its accounts payable, accrued liabilities,      promissory note payable, amounts due to related parties, convertible notes      and long-term debt as otherliabilities. |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 4.  | Financial      Instruments (Continued) |
|----------|---------------------------------------------|

|  | (a) | Fair      value The      carrying values of cash and cash equivalents, accounts receivable,      accounts payable, accrued liabilities, promissory note payable, amounts      due to related parties and convertible notes approximated their fair      values because of the short-term maturity of these financial      instruments. The      carrying values of restricted cash and long-term debt approximated their      fair values as these financial instruments bore interest at approximate      market rates of interest. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | Interest      rate risk Interest rate risk consists of two      components: |
|--|-----|----------------------------------------------------------------------------------|

|   | (i) | To      the extent that payments made or received on the Company’s monetary assets      and liabilities are affected by changes in prevailing market interest      rates, the Company is exposed to interest rate cash flow    risk. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | To      the extent that changes in prevailing market interest rates differ from      the interest rates in the Company’s monetary assets and liabilities, the      Company is exposed to interest rate pricerisk. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | The      Company is not exposed to significant interest rate risk due to the      short-term maturity of its monetary current assets and current      liabilities. The      Company is exposed to interest rate cash flow risk on its long-term debt      with variable interest rates as the payments on the loan will fluctuate as      interest rates fluctuate during the term of the debt. The      Company is exposed to interest rate price risk on its promissory and      convertible notes with fixed interest rates as the market rate of interest      differs from the interest rate of the convertible    notes. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | Credit      risk The Company's      financial assets that are exposed to credit risk consist of cash and cash      equivalents, accounts receivable and restricted cash.  This risk      is minimized as cash and cash equivalents and restricted cash are placed      with well capitalized, high quality financial      institutions.  Accounts receivable primarily consists of      receivables arising in connection with test sales of the Nova Skincare      System and amounts due to the Company in connection with the Company’s      joint venture partner, GlobalGreen. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (d) | Currency      risk The Company      undertakes certain transactions in foreign currencies and as such is      subject to risk due to fluctuations in exchange rates. Currently the      Company is exposed to currency risk with respect to approximately      US$728,000 and GBP£32,000 in cash and accounts receivable and      approximately US$5,519,000 and GBP£19,000 in accounts payable and      convertible debt. The Company does not use derivatives or other techniques      to manage foreign currency risk. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 5.  | Property and      Equipment |
|----------|-----------------------------|

|                        |   | 2008   |      |
|-----------------------------|--------|--------|-----------|
|                        |   | Cost   |      |   | Accumulated      Amortization |   |   | Net      Book Value |   |
|                        |   |   |      |   |   |   |   |   |   |
| Land                        |   | $      | 275,240   |   |   | $ | 0 |   |   | $ | 275,240 |   |
| Building                    |   |   | 389,348   |   |   |   | 4,951 |   |   |   | 384,397 |   |
| Equipment                   |   |   | 134,895   |   |   |   | 3,351 |   |   |   | 131,544 |   |
| Computer      equipment     |   |   | 121,320   |   |   |   | 31,605 |   |   |   | 89,715 |   |
| Furniture      and fixtures |   |   | 89,134    |   |   |   | 20,684 |   |   |   | 68,450 |   |
| Automobiles                 |   |   | 39,711    |   |   |   | 811 |   |   |   | 38,900 |   |
| Leasehold      improvements |   |   | 167,593   |   |   |   | 20,731 |   |   |   | 146,862 |   |
|                        |   | $      | 1,217,241 |   |   | $ | 82,133 |   |   | $ | 1,135,108 |   |
|                        |   |   |      |   |   |   |   |   |   |   |   |   |
|                        |   |   |      |   |   |   |   |   |   |   |   |   |
|                        |   | 2007   |      |
|                        |   | Cost   |      |   | Accumulated      Amortization |   |   | Net      Book Value |   |
|                        |   |   |      |   |   |   |   |   |   |   |   |   |
| Land                        |   | $      | 275,240   |   |   | $ | 0 |   |   | $ | 275,240 |   |
| Furniture      and fixtures |   |   | 51,941    |   |   |   | 9,692 |   |   |   | 42,249 |   |
| Computer      equipment     |   |   | 34,985    |   |   |   | 13,798 |   |   |   | 21,187 |   |
| Leasehold      improvements |   |   | 20,991    |   |   |   | 11,180 |   |   |   | 9,811 |   |
|                        |   | $      | 383,157   |   |   | $ | 34,670 |   |   | $ | 348,487 |   |

| 6.  | 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. |
|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 6.  | Product      License (Continued) 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. 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. |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.  | Prepaid      Expenses Prepaid expenses as at March 31, 2008 consists      of $2,015,837 (2007 - $285,690), which is the deferred portion of investor      relations and business consulting services agreements with the balance      consisting of $103,709 (2007 - $71,071) in prepaid insurance and rental      deposits. |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.  | 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. As      at March 31, 2008, Global Green and the Company incurred a total of      US$5,735,893 (2007 - US$2,023,379) in costs related to      Vertigro.  Of the costs incurred to March 31, 2008, Global Green      paid US$4,338,204 (2007 - US$1,653,981) of which US$7,806 is included      in accounts payable. During the year ended March 31, 2007, accounts      receivable included US$369,398 due from Global  Green. |
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| 8. | 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. 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 (unissued), 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. 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. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.  | Inventories |
|----------|-------------|

|                                                                      |   | 2008   |    |   | 2007   |   |
|---------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Finished      goods:                                                      |   |   |    |   |   |   |
|   Nova      Skincare Systems, 7,896 units (2007 – 10,877) |   | $      | 291,703 |   |   | $      | 442,066 |   |
| Raw      materials                                                        |   |   | 325,492 |   |   |   | 794,742 |   |
|                                                                      |   | $      | 617,195 |   |   | $      | 1,236,808 |   |

|   | During      the year ended March 31, 2008, raw materials inventory was written down by      $413,216 (2007 - $nil) due to obsolescence. This amount has been      included in product development expense for the year (Note      16). |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 10.  | Convertible      Notes Details      of the convertible notes are as follows: Convertible      note continuity: |
|-----------|--------------------------------------------------------------------------------------------------------------------------|

|                                    |   | 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   |   |       | $      | 0 |   |   | $ | 0 |   |   | $ | 22,389 |   |   | $ | (79,521 | ) |   | $ | 259,825 |   |   | $ | 265,583 |   |
| April      2006 (Note 10(b))            |   |           | 495,607   |   |       |   | 0 |   |   |   | 0 |   |   |   | 38,835 |   |   |   | 0 |   |   |   | 534,442 |   |   |   | 546,841 |   |
| April      2006 (Note 10(c))            |   |           | 79,115    |   |       |   | 0 |   |   |   | 0 |   |   |   | 6,427 |   |   |   | 0 |   |   |   | 85,542 |   |   |   | 87,527 |   |
| December      2006 (Note 10(e))    |   |           | 670,486   |   |       |   | 0 |   |   |   | 0 |   |   |   | 989,296 |   |   |   | 0 |   |   |   | 1,659,782 |   |   |   | 1,698,289 |   |
| January      2007 (Note 10(f))          |   |           | 813,084   |   |       |   | 0 |   |   |   | 0 |   |   |   | 967,767 |   |   |   | (211,668 | ) |   |   | 1,569,183 |   |   |   | 1,605,558 |   |
| August      2007 (Note 10(g))           |   |           | 0         |   |       |   | 650,000 |   |   |   | (230,007 | ) |   |   | 258,574 |   |   |   | 0 |   |   |   | 678,567 |   |   |   | 694,310 |   |
| September      2007 (Note 10(h))   |   |           | 0         |   |       |   | 391,000 |   |   |   | (213,249 | ) |   |   | 119,682 |   |   |   | 0 |   |   |   | 297,433 |   |   |   | 304,633 |   |
|                                    |   | $              | 2,375,249 |   |       | $      | 1,041,000 |   |   | $ | (443,256 | ) |   | $ | 2,402,970 |   |   | $ | (291,189 | ) |   | $ | 5,084,774 |   |   | $ | 5,202,741 |   |

|                                    |   | US      $      |      |   | CDN      $ |   |
|-----------------------------------------|--------|----------------|-----------|--------|------------|--------|
|                                    |   | Balance        |      |   | 2007       |   |   | 2007 |   |   | 2007 |   |   | 2007 |   |   | Balance |   |   | Balance |   |
|                                    |   | March      31, |      |   | Issued     |   |   | Equity |   |   | Interest      / |   |   |   |   |   | March      31, |   |   | March      31, |   |
| Date      of Issue                      |   | 2006           |      |   | Principal  |   |   | Portion |   |   | Penalty |   |   | Conversions |   |   | 2007 |   |   | 2007 |   |
|                                    |   |           |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| July/August      2005 (Note 10(a)) |   | $              | 1,429,104 |   |       | $      | 0 |   |   | $ | 0 |   |   | $ | 119,875 |   |   | $ | (1,232,022 | ) |   | $ | 316,957 |   |   | $ | 365,959 |   |
| April      2006 (Note 10(b))            |   |           | 0         |   |       |   | 551,666 |   |   |   | (388,313 | ) |   |   | 567,366 |   |   |   | (235,112 | ) |   |   | 495,607 |   |   |   | 572,228 |   |
| April      2006 (Note 10(c))            |   |           | 0         |   |       |   | 82,200 |   |   |   | (48,776 | ) |   |   | 70,054 |   |   |   | (24,363 | ) |   |   | 79,115 |   |   |   | 91,346 |   |
| December      2006 (Note 10(e))    |   |           | 0         |   |       |   | 1,500,000 |   |   |   | (1,067,962 | ) |   |   | 238,448 |   |   |   | 0 |   |   |   | 670,486 |   |   |   | 774,143 |   |
| January      2007 (Note 10(f))          |   |           | 0         |   |       |   | 2,000,000 |   |   |   | (1,331,232 | ) |   |   | 144,316 |   |   |   | 0 |   |   |   | 813,084 |   |   |   | 938,786 |   |
|                                    |   | $              | 1,429,104 |   |       | $      | 4,133,866 |   |   | $ | (2,836,283 | ) |   | $ | 1,140,059 |   |   | $ | (1,491,497 | ) |   | $ | 2,375,249 |   |   | $ | 2,742,462 |   |

|   | (a) | US$1,277,200 July – August 2005      Convertible Note To provide working capital for product      development, during July and August 2005, the Company issued one-year,      unsecured US$1,277,200 8% per annum convertible notes and three-year Class      A and B 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 (“Cashless Conversion 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. 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. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 10. | Convertible      Notes (Continued) |
|-----|-----------------------------------------|

|  | (a)  | US$1,277,200 July – August 2005      Convertible Note (Continued) 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 10(c)). During      the year ended March 31, 2008, convertible notes of US$75,000 and interest      totaling US$4,521 were converted to 262,057 common shares, and interest of      US$22,389 (2007 – US$119,875) was accrued on the principal balance of      these convertible notes. |
|--|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 year ended March 31, 2008, the Company accrued US$38,835 (2007 –      US$567,366) in interest on the 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. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 10. | Convertible      Notes (Continued) |
|-----|-----------------------------------------|

|  | (c)  | US$82,200 April 2006 penalty      Convertible Note (Continued) During the year ended March 31, 2008, the      Company accrued US$6,427 (2007 – US$70,054) in interest 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      has subsequently been declaredeffective. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. During      the year ended March 31, 2008, the Company accrued US$989,296 (2007 -      US$238,448) in interest on the principal balance of these convertible      notes. 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. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 10. | Convertible      Notes (Continued) |
|-----|-----------------------------------------|

|   | (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.  In      addition, during the year ended March 31, 2008, convertible notes of      US$200,000 and interest and registration penalty totaling US$11,668 were      converted to 485,707 common shares, and the Company accrued US$677,794 in      interest on the principal  balance of these convertible notes      (2007 - US$24,316). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 year ended March      31, 2008, the Company accrued US$230,007 (2007 – US$0) in interest on the      principal balance of these convertible notes. 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. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 10. | Convertible      Notes (Continued) |
|-----|-----------------------------------------|

|   | (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.      During the year ended March 31, 2008, the Company accrued US$96,222      (2007 - US$0) in interest on the principal balance of these convertible      notes. 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$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. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11.  | 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 financial statements      are as follows: |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                                                                                   |                                                   |   | 2008    |    |   | 2007   |    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|--------|---------|---------|--------|--------|---------|
| (a)    | Charges      from Pagic, a company related by a common officer and director, for      product development expenses including royalties |                                                   | $      | 565,135 |    |   | $      | 269,455 |   |
| (b)    | Charges      from CFO and director for professional fees                                                                               |                                                   | $      | 35,370  |    |   | $      | 33,000  |   |
|   | Short-term      advance from CFO, at 10% interest per annum                                                                            |                                                   | $      | 150,000 |    |   | $      | 0       |   |
|   | Charges      from private companies with this director in common for:                                                                  |                                                   |   |    |    |   |   |    |   |
|   | (i)                                                                                                                                    | Office      rent                                       |   | $       | 30,000  |   |   | $       | 7,500 |   |
|   | (ii)                                                                                                                                   | Consulting      fee                                    |   | $       | 150,000 |   |   | $       | 46,745 |   |
|   | (iii)                                                                                                                                  | Unsecured      loan advances                           |   | $       | 57,364  |   |   | $       | 57,364 |   |
| (c)    | West      Peak and its principal shareholder, a beneficial owner of more than 5% of      the Company’s common shares:            |                                                   |   |    |    |   |   |    |   |
|   | (i)                                                                                                                                    | Unsecured      loan advances, at 8% interest per annum |   | $       | 977,665 |   |   | $       | 784,837 |   |
|   | (ii)                                                                                                                                   | Consulting      services                               |   | $       | 52,500  |   |   | $       | 0 |   |
| (d)    | Advertising      services of a private company with a director in common                                                               |                                                   | $      | 244,861 |    |   | $      | 337,749 |   |
| (e)    | Operational      management consulting services of a director                                                                          |                                                   | $      | 76,740  |    |   | $      | 0       |   |
| (f)    | Operational      management consulting and investor relations services of a director and a      related company                        |                                                   | $      | 75,085  |    |   | $      | 0       |   |
| (g)    | Bonus      of 100,000 restricted common shares to a retiring director                                                                  |                                                   | $      | 0       |    |   | $      | 52,889  |   |

----

----

| 11. | Related Party      Transactions (Continued) Amounts due to related parties are non-interest      bearing and have no specific terms of repayment. Due to related parties      includes the following amounts at March 31 in respect to certain of the      above transactions: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|             |                                                 |   | 2008   |      |   | 2007   |   |
|------------------|------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| (a)              | Pagic      royalties, etc.                           |   | $      | 189,156   |   |   | $      | 0 |   |
| (b)              | CFO      charges and advances                        |   |   | 158,370   |   |   |   | 43,500 |   |
| (b)              | Consulting      services and unsecured loan advances |   |   | 73,896    |   |   |   | 57,364 |   |
| (c)              | Consulting      services and unsecured loan advances |   |   | 1,000,165 |   |   |   | 784,362 |   |
| (d)              | Advertising                                          |   |   | 52,145    |   |   |   | 17,319 |   |
| (e)      and (f) | Operational      management consulting               |   |   | 16,784    |   |   |   | 27,630 |   |
|             |                                                 |   | $      | 1,490,516 |   |   | $      | 930,175 |   |

| 12.  | Commitments Commitments      not disclosed elsewhere in these financial statements are as      follows: On      June 28, 2005, Valcent Manufacturing leased office and development space      in El Paso, Texas, under a three-year lease at a cost of US$3,170 per      month.  There were five months remaining on the lease as at      March 31, 2008. 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 7.5 months remaining on the      lease as at March 31, 2008.  Fiscal yearly commitments are      as follows: |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2009       |   | $      | 104,068 |   |
|------------|--------|--------|---------|--------|
| 2010       |   |   | 104,068 |   |
| 2011       |   |   | 104,068 |   |
| 2012       |   |   | 104,068 |   |
| 2013       |   |   | 104,068 |   |
| Thereafter |   |   | 305,037 |   |
|       |   | $      | 825,377 |   |

----

----

| 13. | Long-Term      Debt At March 31, the Company’s long-term debt      outstanding was as follows: |
|-----|-----------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                  |   | 2008   |    |   | 2007   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                                                                                                                                                                                  |   |   |    |   |   |   |
| Prime      plus 0.25% (2007 – 8.50%) bank loan repayable in monthly instalments of      US$2,336 including interest, due September 28, 2011, secured by a first      charge on land and $108,471 of cash (2007 - $117,327 cash) |   | $      | 174,862 |   |   | $      | 209,114 |   |
| Less:  Current      portion                                                                                                                                                                                                 |   |   | 16,250  |   |   |   | 13,451 |   |
|                                                                                                                                                                                                                                  |   |   |    |   |   |   |   |   |
|                                                                                                                                                                                                                                  |   | $      | 158,612 |   |   | $      | 195,663 |   |

|   | The      portion of long-term debt repayable in each of the next four fiscal years      is as follows: |
|--------|--------------------------------------------------------------------------------------------------------|

| 2009 |   | $ | 16,250  |   |
|------|--------|---|---------|--------|
| 2010 |   | $ | 17,258  |   |
| 2011 |   | $ | 18,806  |   |
| 2012 |   | $ | 106,298 |   |

|   | Subsequent      to March 31, 2008, the Company repaid this debt in its      entirety. |
|--------|---------------------------------------------------------------------------------------|

----

----

| 14.  | 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: |
|--------|-----|------------------------------------------------------------------------------------------------------------|

|                                                                 |   | Numberof      Shares |       |   | Amount        |   |
|----------------------------------------------------------------------|--------|----------------------|------------|--------|---------------|--------|
|                                                                 |   |                 |       |   | (Note      2) |   |
|                                                                 |   |                 |       |   |          |   |
| Balance,      as at March 31, 2006                                   |   |                 | 15,787,835 |   |          | $      | 4,099,870 |   |
| Issued      pursuant to product license purchase agreement (i)       |   |                 | 8,388,025  |   |          |   | 419,401 |   |
| Issued      for investor and public relations services (iv) to (vii) |   |                 | 705,000    |   |          |   | 460,614 |   |
| Issued      as bonus (viii)                                          |   |                 | 100,000    |   |          |   | 52,708 |   |
| Private      placement, net of share issue costs (ii)                |   |                 | 1,534,165  |   |          |   | 1,028,266 |   |
| Issued      for financial consulting services (iii)                  |   |                 | 183,886    |   |          |   | 107,681 |   |
| Conversion      of convertible notes (ix)                            |   |                 | 3,967,157  |   |          |   | 1,668,363 |   |
| Reallocation      of equity upon conversion                          |   |                 |       |   |          |   |   |   |
|     of      debentures                           |   |                 | 0          |   |          |   | 360,079 |   |
|  Balance,      as at March 31, 2007                             |   |                 | 30,666,068 |   |          |   | 8,196,982 |   |
|  Private      placement, net of share issue costs (x) and (xi)  |   |                 | 8,525,578  |   |          |   | 5,081,103 |   |
| Issued      for financial consulting services (xii)                  |   |                 | 3,462,008  |   |          |   | 2,414,233 |   |
| Conversion      of convertible notes (xv)                            |   |                 | 747,764    |   |          |   | 323,392 |   |
| Reallocation      of equity upon conversion                          |   |                 |       |   |          |   |   |   |
|     of      debentures                           |   |                 | 0          |   |          |   | 232,808 |   |
| Stock      options exercised (xiv)                                   |   |                 | 175,000    |   |          |   | 83,834 |   |
| Stock-based      compensation for options exercised                  |   |                 | 0          |   |          |   | 75,093 |   |
| Warrants      exercised (xiii)                                       |   |                 | 699,903    |   |          |   | 283,837 |   |
|                                                                 |   |                 |       |   |          |   |   |   |
|                                                                 |   |                 | 13,610,253 |   |          |   | 8,494,300 |   |
| Balance,      as at March 31, 2008                                   |   |                 | 44,276,321 |   |          | $      | 16,691,282 |   |

----

----

| 14.  | Share      Capital (Continued) |
|-----------|-------------------------------------|

|   | (b) | Issued      and outstanding (Continued): During the year ended March 31, 2007, the      Company: |
|--------|-----|-------------------------------------------------------------------------------------------------------|

|   | (i) | Issued      8,388,025 shares pursuant to the Agreement (Note  6); |
|--------|-----|-------------------------------------------------------------------|

|   | (ii) | Completed      a private placement of units whereby a total of 1,534,165 units were      issued at US$0.60 per unit. Each unit consists of one common share and one      common share purchase warrant to purchase an additional common share at      US$0.80. Of      the warrants issued, 833,332 expire on May 15, 2008, 270,833 on June 7,      2008 and 430,000 on August 18, 2008. The      Company paid consultants $65,843 cash, 66,666 finders’ A      warrants to purchase that number of common shares at US$0.80 until May 15,      2008, 21,666 finders’ A warrants to purchase that number of common      shares at US$0.80 until June 7, 2008 and 34,400 finders’ A warrants      to purchase that number of common shares at US$0.80 until August 18,      2008; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | In      conjunction with the April 6, 2006 convertible note      offering, the Company issued 183,886 common shares to      consultants; |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Issued      120,000 common shares at US$0.45 per common share for investor relations      services; |
|--------|------|-----------------------------------------------------------------------------------------------------|

|   | (v) | Issued      400,000 common shares at US$0.64 per common share pursuant to a contract      whereby a company is to provide investor relations services for a term of      one year; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi) | Issued      160,000 common shares at US$0.45 per common share pursuant to a contract      whereby a company is to provide investor relations services for a term of      one year; |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Issued      25,000 common shares at US$0.45 per common share pursuant to a contract      whereby a company is to provide public relations services for a term of      one year; |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (viii) | Issued      100,000 common shares at US$0.45 per common share to a retiring director      of the Company in recognition of services rendered;  and |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ix) | Issued      3,967,157 common shares upon receiving conversion notices to convert      US$1,424,369 in principal and interest from holders of convertible      notes. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | During      the year ended March 31, 2008, theCompany: |
|--------|--------|--------------------------------------------------------|

|   | (x) | Completed      a private placement of units whereby a total of 8,382,721 units were      issued at US$0.60 per unit for gross proceeds of      US$5,029,636.  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 Company paid US$88,438 cash to consultants in      connection with this privateplacement; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (xi) | Completed      a private placement of units whereby a total of 142,857 units were issued      at US$0.70 per unit for gross proceeds of US$100,000.  Each unit      consist of one common share and one-half common share purchase warrant      with each whole warrant exercisable at US$0.85 to purchase an additional      common share of the Company; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (xii) | Issued      3,462,008 shares in connection with seven financial consulting services      agreements for administrative, investor relations, business and financial      consulting services at an average deemed value of US$0.68 per      share; |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 14.  | Share      Capital (Continued) |
|-----------|-------------------------------------|

|   | (b) | Issued      and outstanding (Continued): |
|--------|-----|------------------------------------------|

|   | (xiii) | Issued      699,903 common shares on exercise of 699,903 share purchase warrants at an      average exercise price of US$0.40 perwarrant; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|  | (xiv) | Issued      175,000 common shares on exercise of 175,000 stock options at an exercise      price of US$0.50 per option by a past director of the Company;      and |
|--|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (xv) | Issued      747,764 common shares upon receiving conversion notices to      convert US$275,000 of convertible notes, interest of US$4,521 and a      registration penalty of US$11,668 from holders (Note  10). |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 2007      and changes during the years then ended are as  follows: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   |            |      |   | Weighted         |        |
|------------------------------------------|--------|-----------------|-----------|--------|------------------|-------------|
|                                     |   |            |      |   | Average          |        |
|                                     |   | Number          |      |   | US      Exercise |        |
|                                     |   | of      Options |      |   | Price            |        |
|                                     |   |            |      |   |             |        |
| Options      outstanding, March 31, 2006 |   |            | 1,425,000 |   |             | $      0.67 |   |
| Granted                                  |   |            | 3,010,000 |   |             | $      0.59 |   |
| Expired      or forfeited                |   |            | (600,000  | )      |             | $      0.61 |   |
| Options      outstanding, March 31, 2007 |   |            | 3,835,000 |   |             | $      0.58 |   |
| Granted                                  |   |            | 2,515,000 |   |             | $      0.69 |   |
| Forfeited                                |   |            | (235,000  | )      |             | $      0.60 |   |
| Exercised                                |   |            | (175,000  | )      |             | $      0.50 |   |
| Options      outstanding, March 31, 2008 |   |            | 5,940,000 |   |             | $      0.63 |   |
| Options      exercisable, March 31, 2008 |   |            | 4,740,000 |   |             | $      0.61 |   |

----

----

| 14.  | Share      Capital (Continued) |
|-----------|-------------------------------------|

|   | (c) | Stock      options (Continued) As at March 31, 2008 and 2007, the      following stock options wereoutstanding: |
|--------|-----|----------------------------------------------------------------------------------------------------------------------|

|                   |   |                   |   |   | 2008                   |      |      | 2007        |   |
|------------------------|--------|------------------------|--------|--------|------------------------|-----------|-----------|-------------|--------|
| Expiry      Date       |   | US      Exercise Price |   |   | Number      of Options |      |      | Exercisable |   |   | Number      of Options |   |   | Exercisable |   |
| December      31, 2008 |   | $      0.50            |   |   |                   | 125,000   |      |        |   | 125,000 |   |   |   | 0 |   |   |   | 0 |   |
| March      22, 2009    |   | $      0.60            |   |   |                   | 500,000   |      |        |   | 300,000 |   |   |   | 500,000 |   |   |   | 0 |   |
| November      10, 2009 |   | $      0.60            |   |   |                   | 650,000   |      |        |   | 450,000 |   |   |   | 650,000 |   |   |   | 300,000 |   |
| March      1, 2010     |   | $      1.00            |   |   |                   | 75,000    |      |        |   | 75,000 |   |   |   | 75,000 |   |   |   | 75,000 |   |
| April      1, 2010     |   | $      0.70            |   |   |                   | 600,000   |      |        |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
| April      9, 2010     |   | $      0.80            |   |   |                   | 50,000    |      |        |   | 50,000 |   |   |   | 50,000 |   |   |   | 50,000 |   |
| June      30, 2010     |   | $      0.60            |   |   |                   | 200,000   |      |        |   | 200,000 |   |   |   | 260,000 |   |   |   | 260,000 |   |
| October      2, 2010   |   | $      0.70            |   |   |                   | 200,000   |      |        |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
| October      10, 2010  |   | $      0.70            |   |   |                   | 300,000   |      |        |   | 300,000 |   |   |   | 0 |   |   |   | 0 |   |
| December      20, 2010 |   | $      0.60            |   |   |                   | 300,000   |      |        |   | 300,000 |   |   |   | 0 |   |   |   | 0 |   |
| October      10, 2011  |   | $      0.70            |   |   |                   | 750,000   |      |        |   | 750,000 |   |   |   | 0 |   |   |   | 0 |   |
| February      21, 2011 |   | $      0.50            |   |   |                   | -         |      |        |   | - |   |   |   | 300,000 |   |   |   | 300,000 |   |
| December      13, 2011 |   | $      0.55            |   |   |                   | 1,650,000 |      |        |   | 1,650,000 |   |   |   | 1,650,000 |   |   |   | 1,325,000 |   |
| December      20, 2011 |   | $      0.70            |   |   |                   | 155,000   |      |        |   | 155,000 |   |   |   | 0 |   |   |   | 0 |   |
| March      21, 2012    |   | $      0.60            |   |   |                   | 300,000   |      |        |   | 300,000 |   |   |   | 350,000 |   |   |   | 350,000 |   |
| March      31, 2012    |   | $      0.70            |   |   |                   | 85,000    |      |        |   | 85,000 |   |   |   | 0 |   |   |   | 0 |   |
|                   |   |                   |   |   |                   |      | 5,940,000 |        |   |   | 4,740,000 |   |   |   | 3,835,000 |   |   |   | 2,660,000 |   |

|   |   | The      weighted average remaining contractual life is 2.77 years (2007 – 3.64      years). During      the year ended March 31, 2008, 2,515,000 (2007 – 3,010,000) stock options      were granted to directors, officers, employees and      consultants.  The fair value of these stock options is      recognized as stock-based compensation expense over the vesting period of      the options.  The total fair value of these stock options was      calculated at $1,020,687 (2007 - $1,385,759), of which $807,687 was      recognized in 2008 (2007 - $1,127,141) and $213,003 will be recognized in      2009.  Stock-based compensation expense includes $182,618 for      the fair value of options issued in 2007, which vested in      2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 14.  | Share      Capital (Continued) |
|-----------|--------------------------------|

|   | (c) | Stock      options (Continued) The      stock-based compensation expense was $990,305 (2007 -      $1,127,141).  The fair value of stock options granted and the      issue of finders’ warrants are calculated using the following weighted      average assumptions: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       |   | 2008   |       |   | 2007   |   |
|----------------------------|--------|--------|------------|--------|--------|--------|
|                       |   |   |       |   |   |   |
| Expected      life (years) |   |   | 2 -      5 |   |   |   | 2 -      4 |   |
| Interest      rate         |   |   | 4.17       | %      |   |   | 4.64 | % |
| Volatility                 |   |   | 94.91      | %      |   |   | 111.90 | % |
| Estimated      forfeitures |   |   | 0.00       | %      |   |   | 0.00 | % |
| Dividend      yield        |   |   | 0.00       | %      |   |   | 0.00 | % |

|   | (d) | Warrants Each of the      Company’s share purchase warrants are exercisable into one common share.      As at March 31, 2008 and 2007 and the changes during the years then ended      are as follows: |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | Number      of Warrants |       |   | Weighted      AverageUS      Price |   |
|-------------------------------------------------------|--------|-------------------------|------------|--------|------------------------------------|--------|
|                                                  |   |                    |       |   |                               |   |
| Warrants      outstanding and exercisable,            |   |                    |       |   |                               |   |
| March 31, 2006                                        |   |                    | 4,087,021  |   |                               | $      | 0.69 |   |
| Granted                                               |   |                    | 7,666,795  |   |                               | $      | 0.74 |   |
|                                                  |   |                    |       |   |                               |   |   |   |
| Warrants      outstanding and exercisable,            |   |                    |       |   |                               |   |   |   |
| March 31, 2007                                        |   |                    | 11,753,816 |   |                               | $      | 0.73 |   |
| Granted                                               |   |                    | 4,698,338  |   |                               | $      | 0.90 |   |
| Exercised                                             |   |                    | (699,903   | )      |                               | $      | 0.41 |   |
|                                                  |   |                    |       |   |                               |   |   |   |
| Warrants      outstanding  and exercisable, |   |                    |       |   |                               |   |   |   |
| March 31, 2008                                        |   |                    | 15,752,251 |   |                               | $      | 0.74 |   |

----

----

| 14.  | Share      Capital (Continued) |
|-----------|--------------------------------|

|   | (d) | Warrants      (Continued) As at March 31 the following share      purchase warrants were outstanding: |
|--------|-----|------------------------------------------------------------------------------------------------------------|

| Expiry      Date             |   | US      Exercise Price |   |   | 2008Number      ofWarrants |      |       | 2007Number      of Warrants |   |
|------------------------------|--------|------------------------|--------|--------|----------------------------|-----------|------------|-----------------------------|--------|
| May      15, 2008 (i)        |   | $      0.80            |   |   |                       | 833,332   |       |                        |   | 833,332 |   |
| May      15, 2008 (i)        |   | $      0.80            |   |   |                       | 66,666    |       |                        |   | 66,666 |   |
| June      7, 2008 (i)        |   | $      0.80            |   |   |                       | 270,833   |       |                        |   | 270,833 |   |
| June      7, 2008 (i)        |   | $      0.80            |   |   |                       | 21,666    |       |                        |   | 21,666 |   |
| July      25, 2008           |   | $      0.50            |   |   |                       | 526,660   |       |                        |   | 526,660 |   |
| July      25, 2008 (ii)      |   | $      0.40            |   |   |                       | 480,650   |       |                        |   | 913,332 |   |
| July      25, 2008 (i)       |   | $      1.00            |   |   |                       | 526,660   |       |                        |   | 526,660 |   |
| July      25, 2008 (ii)      |   | $      0.90            |   |   |                       | 913,332   |       |                        |   | 913,332 |   |
| July      25, 2008           |   | $      0.50            |   |   |                       | 216,000   |       |                        |   | 216,000 |   |
| July      25, 2008 (i)       |   | $      0.75            |   |   |                       | 360,001   |       |                        |   | 360,001 |   |
| August      5, 2008 (i)      |   | $      0.50            |   |   |                       | 262,932   |       |                        |   | 262,932 |   |
| August      5, 2008 (i)      |   | $      1.00            |   |   |                       | 262,932   |       |                        |   | 262,932 |   |
| August      5, 2008          |   | $      0.50            |   |   |                       | 39,440    |       |                        |   | 39,440 |   |
| August      5, 2008 (i)      |   | $      0.75            |   |   |                       | 65,733    |       |                        |   | 65,733 |   |
| August      18, 2008         |   | $      0.80            |   |   |                       | 430,000   |       |                        |   | 430,000 |   |
| August      18, 2008 (i)     |   | $      0.80            |   |   |                       | 34,400    |       |                        |   | 34,400 |   |
| December      11, 2008 (i)   |   | $      0.70            |   |   |                       | 435,554   |       |                        |   | 0 |   |
| December      11, 2008       |   | $      0.50            |   |   |                       | 135,000   |       |                        |   | 135,000 |   |
| April      6, 2009           |   | $      0.40            |   |   |                       | 513,334   |       |                        |   | 735,555 |   |
| April      6, 2009           |   | $      0.90            |   |   |                       | 735,555   |       |                        |   | 735,555 |   |
| April      6, 2009           |   | $      0.50            |   |   |                       | 65,320    |       |                        |   | 110,320 |   |
| April      6, 2009           |   | $      0.75            |   |   |                       | 183,867   |       |                        |   | 183,867 |   |
| April      6, 2009           |   | $      0.65            |   |   |                       | 109,600   |       |                        |   | 109,600 |   |
| April      23, 2009          |   | $      0.75            |   |   |                       | 833,333   |       |                        |   | 0 |   |
| May      24, 2009            |   | $      0.75            |   |   |                       | 223,333   |       |                        |   | 0 |   |
| July      10, 2009           |   | $      0.75            |   |   |                       | 52,500    |       |                        |   | 0 |   |
| October      9, 2009         |   | $      0.75            |   |   |                       | 608,333   |       |                        |   | 0 |   |
| December      1, 2009        |   | $      0.50            |   |   |                       | 2,000,000 |       |                        |   | 2,000,000 |   |
| December      1, 2009        |   | $      1.00            |   |   |                       | 2,000,000 |       |                        |   | 2,000,000 |   |
| December      18, 2009       |   | $      0.75            |   |   |                       | 2,348,857 |       |                        |   | 0 |   |
| February      19, 2010       |   | $      0.75            |   |   |                       | 125,000   |       |                        |   | 0 |   |
| March      21, 2010          |   | $      0.85            |   |   |                       | 71,428    |       |                        |   | 0 |   |
|                         |   |                   |   |   |                       |      |       |                        |   |   |   |   |
| Total      at March 31, 2008 |   |                   |   |   |                       |      | 15,752,251 |                        |   |   | 11,753,816 |   |

|   | (i) | Subsequent      to March 31, 2008, the Company extended the expiry dates of these      2,877,776 warrants to December 31, 2008. No changes were made to the      exercise prices. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Subsequent      to March 31, 2008, the Company extended the expiry date of these 1,393,982      warrants to April 9, 2009.  No changes were made to the exercise      prices. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 14.  | Share      Capital (Continued) |
|-----------|--------------------------------|

|   | (e) | Contributed      surplus |
|--------|-----|--------------------------|

|                                                  |   | 2008   |      |   | 2007   |   |
|-------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                  |   |   |      |   |   |   |
| Contributed      surplus, beginning of year           |   | $      | 3,253,333 |   |   | $      | 1,663,066 |   |
| Non-cash      financing expense                       |   |   | 0         |   |   |   | 463,126 |   |
| Issuance      of warrants on conversion of debentures |   |   | 34,849    |   |   |   | 0 |   |
| Re-pricing      of warrants                           |   |   | 0         |   |   |   | 80,102 |   |
| Stock      option expense for year                    |   |   | 990,305   |   |   |   | 1,127,141 |   |
| Stock      options exercised during the year          |   |   | (75,093   | )      |   |   | 0 |   |
|                                                  |   |   |      |   |   |   |   |   |
| Contributed      surplus, end of year                 |   | $      | 4,203,394 |   |   | $      | 3,333,435 |   |

|   | (f) | Conversion      component of convertible notes |
|--------|-----|------------------------------------------------|

|                              |   |   |      |
|-----------------------------------|--------|--------|-----------|
| Balance,      March 31, 2006      |   | $      | 348,532   |   |
| Issuance      of convertible debt |   |   | 3,299,405 |   |
| Conversion      of debentures     |   |   | (360,079  | ) |
|                              |   |   |      |   |
| Balance,      March 31, 2007      |   |   | 3,287,858 |   |
| Issuance      of convertible debt |   |   | 456,246   |   |
| Re-pricing      of warrants       |   |   | 80,102    |   |
| Conversion      of debentures     |   |   | (232,808  | ) |
|                              |   |   |      |   |
| Balance,      March 31, 2008      |   | $      | 3,591,398 |   |

| 15. | Deferred Income      Taxes The tax effects of the temporary differences      that give rise to the Company’s future tax assets and liabilities are as      follows: |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | 2008   |       |   | 2007   |   |
|-------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                  |   |   |       |   |   |   |
| Future      income tax assets                         |   |   |       |   |   |   |
| Non-capital losses carried      forward               |   | $      | 4,593,497  |   |   | $      | 2,731,027 |   |
| Net capital losses carried      forward               |   |   | 186,646    |   |   |   | 244,794 |   |
| Temporary differences on      assets                  |   |   | 47,417     |   |   |   | 0 |   |
|                                                  |   |   |       |   |   |   |   |   |
|                                                  |   |   | 4,827,560  |   |   |   | 2,975,821 |   |
| Valuation      allowance for future income tax assets |   |   | (4,827,560 | )      |   |   | (2,975,821 | ) |
| Future      income tax assets, net                    |   | $      | 0          |   |   | $      | 0 |   |

|   | The Company evaluates its valuation allowance      requirements based on projected future operations. When circumstances      change and this causes a change in management’s judgment about the      recoverability of future tax assets, the impact of the change in the      valuation allowance will be reflected in current  income. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 15. | Deferred      Income Taxes (Continued) The      Company has non-capital losses available for income tax purposes in      Canada, the United Kingdom and the United States totaling $15,305,017      (2007 - $8,008,876), which expire in various amounts from 2009 to      2028.  This amount can be used to reduce taxable income of      future years.  Additionally, the Company has capital losses of      $1,435,740 (2007 - $1,435,740), which are available to reduce capital      gains in future periods. The      reconciliation of income tax provision computed at statutory rates to the      reported income tax provision is asfollows: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | 2008   |       |   | 2007   |   |
|--------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                         |   |   |       |   |   |   |
|                                                         |   |   | 33.33      | %      |   |   | 34.12 | % |
|                                                         |   |   |       |   |   |   |   |   |
| Income      tax benefit computed at Canadian statutory rates |   | $      | 4,071,130  |   |   | $      | 2,731,027 |   |
| Temporary      differences not recognized                    |   |   | (7,665     | )      |   |   | 0 |   |
| Permanent      differences not recognized                    |   |   | (1,499,462 | )      |   |   | (1,692,480 | ) |
| Income      tax rate changes                                 |   |   | (37,655    | )      |   |   | 0 |   |
| Unrecognized      tax losses                                 |   |   | (2,526,348 | )      |   |   | (1,038,547 | ) |
|                                                         |   |   |       |   |   |   |   |   |
|                                                         |   | $      | 0          |   |   | $      | 0 |   |

| 16. | Product      Development Costs As the Company is in the development stage,      test sales, bad debts and write-down of inventory related to the Nova      Skincare System are included in product development costs as      follows: |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |   | 2008   |       |   | 2007   |   |
|---------------------------------------|--------|--------|------------|--------|--------|--------|
|                                  |   |   |       |   |   |   |
| Product      development costs        |   | $      | 4,653,998  |   |   | $      | 1,576,107 |   |
| Test      sales, Nova Skincare System |   |   | (1,079,432 | )      |   |   | (17,484 | ) |
| Bad      debts                        |   |   | 93,653     |   |   |   | 3,798 |   |
| Write-down      of inventory          |   |   | 413,216    |   |   |   | 0 |   |
|                                  |   |   | (572,563   | )      |   |   | (13,686 | ) |
|                                  |   |   |       |   |   |   |   |   |
| Product      development costs, net   |   | $      | 4,081,435  |   |   | $      | 1,562,421 |   |

----

----

| 17. | Segmented      Information Operating segments are defined as components of      an enterprise about which separate financial information is available,      which is evaluated regularly by management in deciding how to allocate      resources and in assessing performance.  All of the Company’s      operations are in the research, product development, and resale      sectors.  The Company’s product development, research, and      resale operations are focused in the United States and, on a secondary      basis, in the United Kingdom whereby management of the Company is      responsible for business results and the operational decision making.      Canadian operations are core to administration and finance      functions.  The Company’s operations are, therefore, segmented      on a geographic basis. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                     |   | UnitedStates |      |   | UnitedKingdom |   |    | Canada |   |   | Consolidated |   |
|--------------------------|--------|--------------|-----------|--------|---------------|--------|---------|--------|--------|--------|--------------|--------|
| March      31, 2008      |   |         |      |   |          |   |    |   |   |   |         |   |
| Segmented      revenue   |   | $            | 0         |   |          | $      | 0       |   |   | $      | 0            |   |   | $ | 0 |   |
| Segmented      loss      |   | $            | 5,432,464 |   |          | $      | 757,819 |   |   | $      | 6,120,463    |   |   | $ | 12,310,746 |   |
| Identifiable      assets |   | $            | 1,979,342 |   |          | $      | 518,932 |   |   | $      | 2,107,640    |   |   | $ | 4,605,914 |   |
|                     |   |         |      |   |          |   |    |   |   |   |         |   |   |   |   |   |
| March      31, 2007      |   |         |      |   |          |   |    |   |   |   |         |   |   |   |   |   |
| Segmented      revenue   |   | $            | 0         |   |          | $      | 0       |   |   | $      | 0            |   |   | $ | 0 |   |
| Segmented      loss      |   | $            | 2,937,034 |   |          | $      | 0       |   |   | $      | 4,923,413    |   |   | $ | 7,860,447 |   |
| Identifiable      assets |   | $            | 2,364,342 |   |          | $      | 0       |   |   | $      | 1,778,143    |   |   | $ | 4,142,485 |   |

| 18.  | Promissory Notes      Payable As at March 31, promissory notes payable      consists of the following due to a third party  lender: |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                               |   | 2008   |    |   | 2007   |   |
|----------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                                               |   |   |    |   |   |   |
| 7%      simple interest, US$100,000 promissory note payable, unsecured, no terms      of repayment |   | $      | 115,971 |   |   | $      | 115,460 |   |
| 10%      simple interest, US$150,000 promissory note payable, unsecured, due May      15, 2008 (*) |   |   | 154,196 |   |   |   | 0 |   |
|                                                                                               |   |   |    |   |   |   |   |   |
|                                                                                               |   | $      | 270,167 |   |   | $      | 115,460 |   |

|  | (*) | Pursuant      to the promissory note agreement, the Company is obligated to issue      100,000 common shares of the Company at maturity. Subsequent to March 31,      2008, the Company repaid the principal and interest and issued the 100,000      common shares at US$0.66 per commonshare. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 19.  | Subsequent      Events Subsequent events not disclosed elsewhere in      these financial statements are asfollows: |
|-----------|-------------------------------------------------------------------------------------------------------------------------|

|  | (a) | The      Company entered into the following agreements on April 1, 2008 and May 1,      2008 respectively: |
|--|-----|------------------------------------------------------------------------------------------------------------|

|   | (i) | A      financial services agreement with an arm’s length private company for a      term of seven  months. Pursuant to the agreement, the Company      issued 120,000 common shares valued at US$84,000;  and |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | A      financial and business consulting agreement with an individual consultant      for a term of twelve months. Pursuant to the agreement, the Company issued      300,000 common shares valued atUS$201,000. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | The      Company completed a series of US$0.60 per unit private      placements.  Each unit consisted of one common share and      one-half common share purchase warrant with each whole warrant exercisable      at US$0.75 per share for two years. The private placements took place on      May 7, June 6, and July 23, 2008, respectively, with details as      follows: |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | issued      2,996,666 units for gross proceeds of US$1,798,000. The Company paid      US$122,577 in cash consultant’s fees with respect to this      issuance; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | issued      195,000 units for gross proceeds of US$117,000. The Company paid no      consultant’s fees respecting the issuance;and |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | issued      61,000 units for gross proceeds of US$36,600. The Company paid US$2,562 in      cash consultant’s fees with respect to this  issuance. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | The      Company issued the following common shares in relation to the conversion      of certain notes: |
|--|-----|----------------------------------------------------------------------------------------------------------|

|   | (i) | On      June 2, 2008, the Company issued 245,049 common shares relating to the      conversion of US$100,000 in convertible debt and US$9,403 in accumulated      interest; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | On      July 3, 2008, the Company issued 267,221 common shares relating to the      conversion of US$92,281 in convertible debt and US$9,243 in accumulated      interest. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 19.  | Subsequent      Events (Continued) |
|-----------|-----------------------------------------|

|  | (d) | 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. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 20. | Generally Accepted      Accounting Principles in Canada and the United States Reconciliation      of Net Loss Under Canadian GAAP to US GAAP The      effect of the material measurement differences between generally accepted      accounting principles in Canada and the United States on the Company’s net      loss is summarized asfollows: |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | 2008   |       |   | 2007   |   |      | 2006   |   |
|-------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|
|                                                        |   |   |       |   |   |   |      |   |   |
| Net      loss under Canadian GAAP (Note 2)                  |   | $      | 12,712,358 |   |   | $      | 8,138,393 |   |   | $ | 3,466,888 |   |
| Add      (deduct):                                          |   |   |       |   |   |   |      |   |   |   |   |   |
| Interest      and accretion expense (Note 20(b))            |   |   | 399,496    |   |   |   | 1,463,628 |   |   |   | (416,266 | ) |
| Debt      issue costs (Note 20(c))                          |   |   | 135,733    |   |   |   | 108,696   |   |   |   | (338,997 | ) |
| Product      development (Note 20(d))                       |   |   | (1,878,438 | )      |   |   | (420,670  | )      |   |   | – |   |
| Net      loss of interest in joint venture (Note 20(d))     |   |   | 1,878,438  |   |   |   | 420,670   |   |   |   | – |   |
| Foreign      exchange gain/loss and other (Note 20(b))      |   |   | 45,301     |   |   |   | 38,622    |   |   |   | 133,254 |   |
|                                                        |   |   |       |   |   |   |      |   |   |   |   |   |
| Net      loss and comprehensive loss under US GAAP          |   | $      | 13,292,888 |   |   | $      | 9,749,339 |   |   | $ | 2,844,879 |   |
|                                                        |   |   |       |   |   |   |      |   |   |   |   |   |
| Loss      per share under US GAAP – basic and diluted |   | $      | 0.37       |   |   | $      | 0.51      |   |   | $ | 0.27 |   |
|                                                        |   |   |       |   |   |   |      |   |   |   |   |   |

----

----

| 20. | Generally      Accepted Accounting Principles in Canada and the United States      (Continued) Presentation      of Balance Sheets Under Canadian and United States GAAP Balance      sheets under Canadian GAAP and US GAAP are as    follows: |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | 2008         |        |   | 2007   |   |
|-------------------------------------------------------------|--------|--------------|-------------|--------|--------|--------|
|                                                        |   | CanadianGAAP |        |   | USGAAP |   |   | CanadianGAAP |   |   | USGAAP |   |
|                                                        |   |         |        |   |   |   |   | (Note      2) |   |   | (Note      20(f)) |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |
| Assets                                                      |   |         |        |   |   |   |   |   |   |   |   |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |
| Current                                                     |   |         |        |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents                              |   | $            | 163,437     |   |   | $      | 163,437 |   |   | $ | 314,972 |   |   | $ | 314,972 |   |
| Accounts      receivable                                    |   |         | 462,156     |   |   |   | 462,156 |   |   |   | 462,055 |   |   |   | 462,055 |   |
| Prepaid      expenses                                       |   |         | 2,119,546   |   |   |   | 2,119,546 |   |   |   | 356,761 |   |   |   | 356,761 |   |
| Inventories                                                 |   |         | 617,195     |   |   |   | 617,195 |   |   |   | 1,236,808 |   |   |   | 1,236,808 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         | 3,362,334   |   |   |   | 3,362,334 |   |   |   | 2,370,596 |   |   |   | 2,370,596 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted      cash                                        |   |         | 108,471     |   |   |   | 108,471 |   |   |   | 117,327 |   |   |   | 117,327 |   |
| Debt      issue costs (Note 20(c))                          |   |         | –     |   |   |   | 94,568 |   |   |   | – |   |   |   | 230,301 |   |
| Property      and equipment                                 |   |         | 1,135,108   |   |   |   | 1,135,108 |   |   |   | 348,487 |   |   |   | 348,487 |   |
| Product      license                                        |   |         | 1           |   |   |   | 1 |   |   |   | 1,306,075 |   |   |   | 1,306,075 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   | $            | 4,605,914   |   |   | $      | 4,700,482 |   |   | $ | 4,142,485 |   |   | $ | 4,372,786 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and Shareholders' Deficiency               |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                     |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts      payable                                       |   | $            | 382,605     |   |   | $      | 382,605 |   |   | $ | 115,744 |   |   | $ | 115,744 |   |
| Accrued      liabilities                                    |   |         | 153,958     |   |   |   | 153,958 |   |   |   | 53,906 |   |   |   | 53,906 |   |
| Current      portion of long-term debt                      |   |         | 16,250      |   |   |   | 16,250 |   |   |   | 13,451 |   |   |   | 13,451 |   |
| Promissory      notes payable                               |   |         | 270,167     |   |   |   | 270,167 |   |   |   | 115,460 |   |   |   | 115,460 |   |
| Due      to related parties                                 |   |         | 1,490,516   |   |   |   | 1,490,516 |   |   |   | 930,175 |   |   |   | 930,175 |   |
| Convertible      notes (Note 20(b))                         |   |         | 5,202,741   |   |   |   | 5,389,387 |   |   |   | 2,742,462 |   |   |   | 2,282,483 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         | 7,516,237   |   |   |   | 7,702,883 |   |   |   | 3,971,198 |   |   |   | 3,511,219 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term      debt                                         |   |         | 158,612     |   |   |   | 158,612 |   |   |   | 195,663 |   |   |   | 195,663 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         | 7,674,849   |   |   |   | 7,861,495 |   |   |   | 4,166,861 |   |   |   | 3,706,882 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders'      Equity (Deficiency)                      |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share      capital (Note 20(b))                             |   |         | 16,691,282  |   |   |   | 16,866,115 |   |   |   | 8,196,982 |   |   |   | 8,434,032 |   |
| Contributed      surplus (Note 20(b))                       |   |         | 4,203,394   |   |   |   | 9,097,348 |   |   |   | 3,333,435 |   |   |   | 8,063,460 |   |
| Conversion      component of convertible notes (Note 20(b)) |   |         | 3,591,398   |   |   |   | – |   |   |   | 3,287,858 |   |   |   | – |   |
| Accumulated      deficit from prior operations              |   |         | (3,237,370  | )      |   |   | (3,237,370 | ) |   |   | (3,237,370 | ) |   |   | (3,237,370 | ) |
| Accumulated      deficit during the development stage       |   |         | (24,317,639 | )      |   |   | (25,887,106 | ) |   |   | (11,605,281 | ) |   |   | (12,594,218 | ) |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |         | (3,068,935  | )      |   |   | (3,161,013 | ) |   |   | (24,376 | ) |   |   | 665,904 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   | $            | 4,605,914   |   |   | $      | 4,700,482 |   |   | $ | 4,142,485 |   |   | $ | 4,372,786 |   |
|                                                        |   |         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

| 20. | Generally      Accepted Accounting Principles in Canada and the United States      (Continued) |
|-----|------------------------------------------------------------------------------------------------|

|  | (a)  | Recently      Adopted Accounting Pronouncements |
|--|-----------|-------------------------------------------------|

|  | (i)  | Accounting      for Uncertainty in Income Taxes In      June 2006, the Financial Accounting Standards Board (‘FASB’) issued      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an      interpretation of FASB Statements No. 109” (“FIN 48”). FIN 48 clarifies      the accounting for uncertainty in income taxes by prescribing a two-step      method of first evaluating whether a tax position has met a      more-likely-than-not recognition threshold and second, measuring that tax      position to determine the amount of benefit to be recognized in the      financial statements. FIN 48 provides guidance on the presentation of such      positions within a classified balance sheet as well as on derecognition,      interest and penalties, accounting in interim periods, disclosure, and      transition. FIN 48 is effective for fiscal years beginning after December      15, 2006. The adoption of this statement during the year did not have a      material effect on the Company's consolidated financial      statements. |
|--|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii)  | Accounting      for Servicing of Financial Assets In March 2006, the FASB issued SFAS No. 156,      "Accounting for Servicing of Financial Assets, an amendment of FASB      Statement No. 140, Accounting for Transfers and Servicing of Financial      Assets and Extinguishments of Liabilities". This statement requires all      separately recognized servicing assets and servicing liabilities be      initially measured at fair value, if practicable, and permits for      subsequent measurement using either fair value measurement with changes in      fair value reflected in earnings or the amortization and impairment      requirements of Statement No. 140. The subsequent measurement of      separately recognized servicing assets and servicing liabilities at fair      value eliminates the necessity for entities that manage the risks inherent      in servicing assets and servicing liabilities with derivatives to qualify      for hedge accounting treatment and eliminates the characterization of      declines in fair value as impairments or direct write-downs. SFAS No. 156      is effective for an entity's first fiscal year beginning after September      15, 2006. The adoption of this statement during the year did not have a      material effect on the Company's consolidated financial      statements. |
|--|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii)  | Accounting      for Certain Hybrid Financial Instruments In February 2006, the FASB issued SFAS No. 155,      "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB      Statements No. 133 and 140", to simplify and make more consistent the      accounting for certain financial instruments. SFAS No. 155 amends SFAS No.      133, "Accounting for Derivative Instruments and Hedging Activities"; to      permit fair value re-measurement for any hybrid financial instrument with      an embedded derivative that otherwise would require bifurcation, provided      that the whole instrument is accounted for on a fair value basis. SFAS No.      155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of      Long-Lived Assets", to allow a qualifying special-purpose entity to hold a      derivative financial instrument that pertains to a beneficial interest      other than another derivative financial instrument. SFAS No. 155 applies      to all financial instruments acquired or issued after the beginning of an      entity's first fiscal year that begins after September 15, 2006, with      earlier application allowed. The adoption of this statement during the      year did not have a material effect on the Company's consolidated      financial statements. |
|--|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 20. | Generally      Accepted Accounting Principles in Canada and the United States      (Continued) |
|-----|------------------------------------------------------------------------------------------------|

|  | (b) | Convertible      Notes Under      Canadian GAAP, the principal amount of financial liabilities convertible      in common shares of an entity are bifurcated between its liability and      equity components. The liability component commonly consists of an      entity’s obligation to make principal and interest payments while the      equity component consists of the debtor’s option to convert the financial      liability into common shares of the entity. The Company follows the      residual value method of bifurcation under which the difference between      the principal amount and the fair value of the liability component is      allocated to the equity component. The liability component of the      financial liability is accreted over its estimated life to the principal      amount using the effective interest method. Upon conversion of the      financial liability to common shares of the entity, the difference between      the carrying value of the liability component and the principal amount, if      any, is recognized in income as interest expense and the principal amount      and equity component are transferred to share capital. Should the debtor’s      option to convert the financial liability into common shares of the entity      expire unexercised, the equity component is transferred to contributed      surplus. Under      US GAAP, the principal amount of financial liabilities convertible in      common shares of an entity are not bifurcated between its liability and      equity components unless the debtor’s option to convert the financial      liability into common shares of the entity is in-the-money on the date of      issuance, which results in a beneficial conversion feature. The value of      the beneficial conversion feature is classified in equity and presented as      additional paid-in-capital, the US GAAP equivalent of contributed surplus.      The difference between the principal amount of a financial liability and      the value of the beneficial conversion feature is classified in      liabilities. The discounted financial liability is accreted over its      estimated life to the principal amount using the effective interest      method. Upon conversion of the financial liability to common shares of the      entity, the difference between the carrying value of the financial      liability and the principal amount, if any, is recognized in income as      interest expense and the principal amount and amount of the beneficial      conversion feature are transferred to share  capital. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c)  | Debt      Issue Costs Under Canadian GAAP, an entity may make an      accounting policy choice to either defer transaction costs that are      directly attributable to the issue of a financial liability classified as      other than held-for-trading or to recognize all transaction costs in net      income as incurred. The Company’s accounting policy is to recognize all      transaction costs in net income as incurred. Under US GAAP, transaction      costs that are directly attributable to the issue of a financial liability      are deferred and amortized on a straight-line basis over the life of the      financial liability. |
|--|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (d)  | Proportionate      Consolidation Under      Canadian GAAP, the accounts of joint ventures are proportionately      consolidated while US GAAP requires investments in joint ventures to be      accounted for under the equity method. Under Canadian GAAP, the Company      has classified amounts advanced to and expended by its Vertigro joint      venture of $1,878,438 (2007 - $420,670; 2006 - $nil) as product      development in its statement of operations. Under US GAAP, these amounts      are classified as net loss from interest in joint venture. This difference      does not have material effect on the Company's consolidated balance      sheet.  Additional information concerning the Company’s      interests in a joint venture is presented in Note  8. |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 20. | Generally      Accepted Accounting Principles in Canada and the United States      (Continued) |
|-----|------------------------------------------------------------------------------------------------|

|  | (e)  | Recently      Issued Accounting Pronouncements |
|--|-----------|------------------------------------------------|

|  | (i)  | Accounting      for Financial Guarantee Insurance Contracts In May 2008, the FASB issued SFAS No. 163,      “Accounting for      Financial Guarantee Insurance Contracts – An interpretation of FASB      Statement No. 60”.  SFAS 163 requires that an insurance      enterprise recognize a claim liability prior to an event of default when      there is evidence that credit deterioration has occurred in an insured      financial obligation. It also clarifies how Statement 60 applies to      financial guarantee insurance contracts, including the recognition and      measurement to be used to account for premium revenue and claim      liabilities, and requires expanded disclosures about financial guarantee      insurance contracts. It is effective for financial statements issued for      fiscal years beginning after December 15, 2008, except for some      disclosures about the insurance enterprise’s risk-management activities.      SFAS 163 requires that disclosures about the risk-management activities of      the insurance enterprise be effective for the first period beginning after      issuance. Except for those disclosures, earlier application is not      permitted.  The adoption of this statement is not expected to      have a material effect on the Company’s consolidated financial      statements. |
|--|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii)  | Hierarchy      of GAAP In May 2008, the FASB issued SFAS No. 162, “The      Hierarchy of Generally Accepted Accounting Principles”. SFAS 162      identifies the sources of accounting principles and the framework for      selecting the principles to be used in the preparation of financial      statements of non-governmental entities that are presented in conformity      with GAAP in the United States.  It is effective 60 days      following the SEC’s approval of the Public Company Accounting Oversight      Board amendments to AU Section 411, “The Meaning of Present Fairly in      Conformity With Generally Accepted Accounting Principles”. The adoption of      this statement is not expected to have a material effect on the Company’s      consolidated financial statements. |
|--|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii)  | Disclosures      about Derivative Instruments and Hedging Activities In March 2008, the FASB issued SFAS No. 161,      “Disclosures about Derivative Instruments and Hedging Activities – an      amendment to FASB Statement No. 133”.  SFAS No. 161 is intended to      improve financial standards for derivative instruments and hedging      activities by requiring enhanced disclosures to enable investors to better      understand their effects on an entity's financial position, financial      performance and cash flows. Entities are required to provide enhanced      disclosures about: (a) how and why an entity uses derivative instruments;      (b) how derivative instruments and related hedged items are accounted for      under Statement 133 and its related interpretations; and (c) how      derivative instruments and related hedged items affect an entity’s      financial position, financial performance and cash flows.  It is      effective for financial statements issued for fiscal years beginning after      November 15, 2008, with early adoption encouraged.  The Company is      currently assessing the impact of the adoption of this      statement. |
|--|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 20. | Generally      Accepted Accounting Principles in Canada and the United States      (Continued) |
|-----|------------------------------------------------------------------------------------------------|

|  | (e)  | Recently      Issued Accounting Pronouncements(Continued) |
|--|-----------|-----------------------------------------------------------|

|   | (iv) | Business      Combinations In December 2007, the FASB issued SFAS No.      141R, “Business Combinations”.  This statement replaces SFAS 141      and defines the acquirer in a business combination as the entity that      obtains control of one or more businesses in a business combination and      establishes the acquisition date as the date that the acquirer achieves      control. SFAS 141R requires an acquirer to recognize the assets acquired,      the liabilities assumed and any non-controlling interest in the acquiree      at the acquisition date, measured at their fair values as of that date.      SFAS 141R also requires the acquirer to recognize contingent consideration      at the acquisition date, measured at its fair value at that date. This      statement is effective for fiscal years and interim periods within those      fiscal years, beginning on or after December 15, 2008 and earlier      adoption is prohibited. The adoption of this statement is not expected to      have a material effect on the Company's consolidated financial      statements. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (v)  | Non-controlling      Interests in Consolidated Financial Statements Liabilities In December 2007, the FASB issued SFAS No. 160,      “Non-controlling Interests in Consolidated Financial Statements      Liabilities – an Amendment of ARB No. 51”.  This statement      amends ARB 51 to establish accounting and reporting standards for the      non-controlling interest in a subsidiary and for the deconsolidation of a      subsidiary. This statement is effective for fiscal years and interim      periods within those fiscal years, beginning on or after December 15, 2008      and earlier adoption is prohibited. The adoption of this statement is not      expected to have a material effect on the Company's consolidated financial      statements. |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (vi)  | The      Fair Value Option for Financial Assets and Financial      Liabilities In February 2007, the FASB issued SFAS No. 159,      “The Fair Value Option for Financial Assets and Financial Liabilities –      Including an Amendment of FASB Statement No. 115”.  This      statement permits entities to choose to measure many financial instruments      and certain other items at fair value. Most of the provisions of SFAS No.      159 apply only to entities that elect the fair value option. However, the      amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and      Equity Securities”, applies to all entities with available-for-sale and      trading securities. SFAS No. 159 is effective as of the beginning of an      entity’s first fiscal year that begins after November 15, 2007. Early      adoption is permitted as of the beginning of a fiscal year that begins on      or before November 15, 2007, provided the entity also elects to apply the      provision of SFAS No. 157, “Fair Value Measurements”. The Company is      currently assessing the impact of the adoption of this      statement. |
|--|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (vii) | Fair      Value Measurements In September 2006, the FASB issued SFAS No.      157, “Fair Value Measurements”. The objective of SFAS No. 157 is to      increase consistency and comparability in fair value measurements and to      expand disclosures about fair value measurements.  SFAS No. 157      defines fair value, establishes a framework for measuring fair value in      GAAP, and expands disclosures about fair value measurements. SFAS No. 157      applies under other accounting pronouncements that require or permit fair      value measurements and does not require any new fair value measurements.      The provisions of SFAS No. 157 are effective for fair value measurements      made in fiscal years beginning after November 15, 2007. The Company is      currently assessing the impact of the adoption of this      statement. |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| 20. | Generally      Accepted Accounting Principles in Canada and the United States      (Continued) |
|-----|------------------------------------------------------------------------------------------------|

|   | (f) | Restatement      of Prior Year Figures During the year ended March 31, 2008, the      Company determined that it had inappropriately accounted for insurance      expense and convertible notes under Canadian GAAP (refer to Note 2) and      convertible notes, debt issue costs and its joint venture under US GAAP      (refer to Notes 20(b), (c) and (d)) during the years ended March 31, 2007      and 2006. The following tables summarize the restatement of the affected      balances: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  Year      Ended March 31, 2007                       |   | Previously      Reported |       |   | Change |   |       | Restated |   |
|------------------------------------------------------------|--------|--------------------------|------------|--------|--------|--------|------------|----------|--------|
|                                                       |   |                     |       |   |   |   |       |     |   |
| Statement      of Operations:                              |   |                     |       |   |   |   |       |     |   |
| Interest and accretion      expense                        |   | $                        | 5,606,886  |   |   | $      | (1,149,480 | )        |   | $ | 4,457,406 |   |
| Debt issue costs                                           |   | $                        | 512,573    |   |   | $      | 108,696    |     |   | $ | 621,269 |   |
| Productdevelopment                                         |   | $                        | 1,562,421  |   |   | $      | (420,670   | )        |   | $ | 1,141,751 |   |
| Net loss of interest in joint      venture                 |   | $                        | –    |   |   | $      | 420,670    |     |   | $ | 420,670 |   |
| Insurance expense                                          |   | $                        | 149,855    |   |   | $      | (71,071    | )        |   | $ | 78,784 |   |
| Foreign exchange loss      (gain)                          |   | $                        | 110,006    |   |   | $      | (78,377    | )        |   | $ | 31,629 |   |
| Net loss and comprehensive loss      under USGAAP          |   | $                        | 10,939,571 |   |   | $      | (1,190,232 | )        |   | $ | 9,749,339 |   |
| Loss per share under US GAAP –      basic anddiluted |   | $                        | 0.57       |   |   | $      | (0.06      | )        |   | $ | 0.51 |   |
|                                                       |   |                     |       |   |   |   |       |     |   |   |   |   |
| Balance      Sheet:                                        |   |                     |       |   |   |   |       |     |   |   |   |   |
| Debt issue costs                                           |   | $                        | –    |   |   | $      | 230,301    |     |   | $ | 230,301 |   |
| Convertiblenotes                                           |   | $                        | 5,301,129  |   |   | $      | (3,018,646 | )        |   | $ | 2,282,483 |   |
| Share capital                                              |   | $                        | 7,836,903  |   |   | $      | 597,129    |     |   | $ | 8,434,032 |   |
| Contributedsurplus                                         |   | $                        | 3,253,333  |   |   | $      | 4,810,127  |     |   | $ | 8,063,460 |   |
| Conversion component of      convertible notes             |   | $                        | 4,167,190  |   |   | $      | (4,167,190 | )        |   | $ | – |   |
| Deficit, beginning of      year                            |   | $                        | 3,734,599  |   |   | $      | (889,720   | )        |   | $ | 2,844,879 |   |
| Deficit, end of    year                                    |   | $                        | 14,674,170 |   |   | $      | (2,079,952 | )        |   | $ | 12,594,218 |   |

|  Year      Ended March 31, 2006                       |   | PreviouslyReported |      |   | Change |   |     | Restated |   |
|------------------------------------------------------------|--------|--------------------|-----------|--------|--------|--------|----------|----------|--------|
|                                                       |   |               |      |   |   |   |     |     |   |
| Statement      of Operations:                              |   |               |      |   |   |   |     |     |   |
| Financing expense                                          |   | $                  | 1,328,337 |   |   | $      | (683,977 | )        |   | $ | 644,360 |   |
| Convertible note issuance      costs                       |   | $                  | 570,226   |   |   | $      | (338,997 | )        |   | $ | 231,229 |   |
| Foreign exchange    loss                                   |   | $                  | 23,955    |   |   | $      | 133,254  |     |   | $ | 157,209 |   |
| Net loss and comprehensive loss      under USGAAP          |   | $                  | 3,734,599 |   |   | $      | (889,720 | )        |   | $ | 2,844,879 |   |
| Loss per share under US GAAP –      basic anddiluted |   | $                  | 0.35      |   |   | $      | (0.08    | )        |   | $ | 0.27 |   |

----

----

| 21. | Loss      Per Share |
|-----|---------------------|

|                                                      |   | Income      (Numerator) |        |   | Shares      (Denominator) |   |       | Per      Share Amount |   |
|-----------------------------------------------------------|--------|-------------------------|-------------|--------|---------------------------|--------|------------|-----------------------|--------|
|                                                      |   |                    |        |   |                      |   |       |                  |   |
| 2008                                                      |   |                    |        |   |                      |   |       |                  |   |
|   Loss      attributable to common shareholders |   | $                       | (12,712,358 | )      |                      |   | 35,545,740 |                  |   | $ | (0.36 | ) |
|                                                      |   |                    |        |   |                      |   |       |                  |   |   |   |   |
| 2007                                                      |   |                    |        |   |                      |   |       |                  |   |   |   |   |
|   Loss      attributable to common shareholders |   | $                       | (8,138,393  | )      |                      |   | 19,261,192 |                  |   | $ | (0.42 | ) |
|                                                      |   |                    |        |   |                      |   |       |                  |   |   |   |   |
| 2006                                                      |   |                    |        |   |                      |   |       |                  |   |   |   |   |
|   Loss      attributable to common shareholders |   | $                       | (3,466,888  | )      |                      |   | 42,814,988 |                  |   | $ | (0.33 | ) |

|   | Common      share equivalents consisting of 4,740,000 (2007 – 3,660,000) stock options      and 15,752,251 (2007 – 11,753,816) share purchase warrants are not      considered in the computation of diluted loss per share because their      effect would beanti-dilutive. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 18. EXHIBITS.

| No.          | Description      of Exhibit                                                                                                                                                                                                                                      |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |                                                                                                                                                                                                                                                             |
| 1(i)(1)      | Articles      of Incorporation of Valcent Products Inc., dated January 19, 1996,      incorporated by reference to Exhibit 1(a)(i) on Form 20-F filed October      13, 2005.                                                                                     |
|         |                                                                                                                                                                                                                                                             |
| 1(i)(2)      | Amendment      to Articles of Incorporation of Valcent Products Inc., dated March 12,      1996, incorporated by reference to Exhibit 1(a)(ii) on Form 20-F filed      October 13, 2005.                                                                         |
|         |                                                                                                                                                                                                                                                             |
| 1(i)(3)      | Amendment      to Articles of Incorporation of Valcent Products Inc., dated August 19,      1996, incorporated by reference to Exhibit 1(a)(i) on Form 20-F filed      October 13, 2005.                                                                         |
|         |                                                                                                                                                                                                                                                             |
| 1(i)(4)      | Amendment      to Articles of Incorporation of Valcent Products Inc., dated June 30,      1998, incorporated by reference to Exhibit 1(a)(iv) on Form 20-F filed      October 13, 2005.                                                                          |
|         |                                                                                                                                                                                                                                                             |
| 1(i)(5)      | Amendment      to Articles of Incorporation of Valcent Products Inc., dated July 8, 1999,      incorporated by reference to Exhibit 1(a)(v) on Form 20-F filed October      13, 2005.                                                                            |
|         |                                                                                                                                                                                                                                                             |
| 1(i)(6)      | Amendment      to Articles of Incorporation of Valcent Products Inc., dated September 28,      1999, incorporated by reference to Exhibit 1(a)(vi) on Form 20-F filed      October 13, 2005.                                                                     |
|         |                                                                                                                                                                                                                                                             |
| 1(i)(7)      | Amendment      to Articles of Incorporation of Valcent Products Inc., dated April 15,      2005, incorporated by reference to Exhibit 1(a)(vii) on Form 20-F filed      October 13, 2005.                                                                        |
|         |                                                                                                                                                                                                                                                             |
| 1(ii)        | By-laws      of Valcent Products Inc., dated March 26, 1996, incorporated by reference      to Exhibit 1(b) on Form 20-F filed October 13, 2005.                                                                                                                 |
|         |                                                                                                                                                                                                                                                             |
| 1      (iii) | Audit      Committee charter of Valcent Products, Inc., dated March 2005,      incorporated by reference to Exhibit 15.A on Form 20-F filed October 31,      2005.                                                                                               |
|         |                                                                                                                                                                                                                                                             |
| 4.1          | Master      license agreement between Valcent Products Inc. and MK Enterprises LLC,      dated July 29, 2005, incorporated by reference to Exhibit 4(a)(i) on Form      20-F filed October 13, 2005.                                                             |
|         |                                                                                                                                                                                                                                                             |
| 4.2          | Product      development agreement between Valcent Products Inc. and MK Enterprises      LLC, dated July 29, 2005, incorporated by reference to Exhibit 4(a)(ii) on      Form 20-F filed October 13, 2005.                                                       |
|         |                                                                                                                                                                                                                                                             |
| 4.3          | Invention      license agreement between Valcent Products Inc. and MK Enterprises LLC,      dated July 29, 2005, incorporated by reference to Exhibit 4(a)(iii) on      Form 20-F filed October 13, 2005.                                                        |
|         |                                                                                                                                                                                                                                                             |
| 4.4          | Consulting      agreement between Valcent Products Inc. and M. Glen Kertz, dated July 29,      2005, incorporated by reference to Exhibit 4(a)(iv) on Form 20-F filed      October 13, 2005.                                                                     |
|         |                                                                                                                                                                                                                                                             |
| 4.5          | Consulting      agreement between Valcent Products Inc. and MK Enterprises LLC, dated July      29, 2005, incorporated by reference to Exhibit 4(a)(v) on Form 20-F filed      October 13, 2005.                                                                 |
|         |                                                                                                                                                                                                                                                             |
| 4.6          | Form      of liquidated damages convertible note agreement between Valcent Products      Inc., and certain institutional note holders, dated April 6, 2006,      incorporated by reference to Exhibit 10.12 on Form F-1/A filed June 30,      2006.              |
|         |                                                                                                                                                                                                                                                             |
| 4.7          | Form      of liquidated damages warrant agreement between Valcent Products Inc., and      certain institutional note holders, dated April 6, 2006, incorporated by      reference to Exhibit 10.13 on Form F-1/A filed June 30,    2006.                         |
|         |                                                                                                                                                                                                                                                             |
| 4.8          | Creative      and production services agreement between Valcent Products Inc., and      Hawthorne Direct, dated June 14, 2006, incorporated by reference to      Exhibit 10.14 on Form F-1/A filed June 30, 2006.                                                |
|         |                                                                                                                                                                                                                                                             |
| 4.9          | Media      services agreement between Valcent Products Inc., and Hawthorne Direct,      dated June 14, 2006, incorporated by reference to Exhibit 10.15 on Form      F-1/A filed June 30, 2006.                                                                  |
|         |                                                                                                                                                                                                                                                             |
| 4.10         | Manufacturing      agreement between Valcent Manufacturing Ltd. and Solid Integrations LLC      dated September 22, 2006, incorporated by reference to Exhibit 10.16 on      Form F-1/A filed October 2, 2006.                                                   |
|         |                                                                                                                                                                                                                                                             |
| 4.11         | Farm      and Ranch Contract between Valcent Products, Inc. C/O Gordon & Mott,      P.C., and Roberto H. Silvas, dated October 2, 2006, incorporated by      reference to Exhibit 10.19 on Form F-1/A filed February 7,      2007.                           |
|         |                                                                                                                                                                                                                                                             |
| 4.12         | Letter      of Agreement between Valcent Products, Inc., Global Green Solutions Inc.,      Pagic LP, and West Peak Ventures of Canada Limited, dated October 2, 2006,      incorporated by reference to Exhibit 10.17 on Form F-1/A filed February 7,      2007. |

----

ITEM 18.EXHIBITS. -continued

| 4.13        | Direct      Response Services Agreement between Valcent Products, Inc. and InPulse      Response Group, dated October 23, 2006, incorporated by reference to      Exhibit 10.22 on Form F-1/A filed February 7, 2007.                                                                                                     |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.14        | Corporate      Support Agreement between Valcent Products, Inc., and Sweetwater Capital      Corporation dated November 1, 2006, FILED HEREWITH.                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.15        | Master      Services Agreement between Valcent Products, Inc. and Accretive Commerce,      Inc., dated November 30, 2006, incorporated by reference to Exhibit 10.20      on Form F-1/A filed February 7, 2007.                                                                                                           |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.16        | Stakeholders      Letter of Agreement between Valcent Products, Inc., Global Green      Solutions, Inc., Pagic LP, and West Peak Ventures of Canada Limited, dated      June 25, 2007, FILED HEREWITH.                                                                                                                    |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.17        | Consulting      Services Agreement between Valcent Products, Inc., and MB Pics Capital      Corporation, dated November 2, 2007, FILED HEREWITH.                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.18        | Consulting      Services Agreement between Valcent Products, Inc., and Yellow Rose Ltd.,      dated February 1, 2008, FILED HEREWITH.                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.19        | Consulting      Agreement between Valcent Products, Inc., and J. Gordon Murphy, dated      February 29, 2008, FILED HEREWITH.                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.20        | Financial      Advisory Consulting Services Agreement, between Valcent Products, Inc.,      and Mark T. Cox, dated May 1, 2008, FILED HEREWITH.                                                                                                                                                                           |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.21        | Limited      Liability Company Operating Agreement of Vertigro Algae Technologies, LLC,      between Valcent USA, Inc., and Global Green Solutions Inc., dated May 5,      2008, incorporated by reference to Exhibit 10.1 on Form 6-K filed May 14,      2008.                                                           |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.22        | Vertigro      Algae Technologies LLC Technology License Agreement, between Valcent      Products, Inc., Pagic LP, and West Peak Ventures of Canada Ltd., dated May      7, 2008, incorporated by reference to Exhibit 10.2 on Form 6-K filed May      14, 2008.                                                           |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.23        | Vertigro      Algae Technologies LLC Amendment to the Technology License Agreement,      between Valcent Products, Inc., Pagic LP, and West Peak Ventures of Canada      Ltd., dated May 5, 2008 FILED HEREWITH.                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.24        | Form      of convertible note agreement between Valcent Products Inc., and certain      institutional note holders, dated July 16, 2008, incorporated by reference      to Exhibit 4.1 on Form 6-K filed July 25, 2008.                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.25        | Form      of Series A Warrant between Valcent Products Inc., and certain      institutional note holders, dated July 16, 2008, incorporated by reference      to Exhibit 4.2 on Form 6-K filed July 25, 2008.                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.26        | Form      of Series B Warrant between Valcent Products Inc., and certain      institutional note holders, dated July 16, 2008, incorporated by reference      to Exhibit 4.3 on Form 6-K filed July 25, 2008.                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.27        | Note      and Warrant Purchase Agreement, between Valcent Products, Inc., and      certain institutional note holders, dated July 16, 2008, incorporated by      reference to Exhibit 10.1 on Form 6-K filed July 25,  2008.                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.28        | Security      Agreement, between Valcent Products, Inc., and Platinum Long Term Growth      VI, LLC, dated July 16, 2008, incorporated by reference to Exhibit 10.2 on      Form 6-K filed July 25, 2008.                                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.29        | Patent      Trademark and Copyright Security Agreement, between Valcent Products,      Inc., Valcent USA Inc., Valcent Manufacturing, Ltd., Vertigro Algae      Technologies LLC, Valcent Products EU Limited, and Platinum Long Term      Growth VI, LLC, dated July 16, 2008 and FILED      HEREWITH.    |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.30        | Deed      of Trust, Assignment of Rents and Leases, Security Agreement and Fixture      Filing, between, Valcent Products, Inc., Valcent Manufacturing, Ltd.,      Deborah P. Everett, and Platinum Long Term Growth VI, LLC, dated July 16,      2008, and FILED HEREWITH.                                               |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.31        | Hazardous      Substances Indemnity Agreement between Valcent Products, Inc., Valcent USA      Inc., Valcent Manufacturing, Ltd., Valcent Management LLC, Vertigro Algae      Technologies LLC, Valcent Products EU Limited, and Platinum Long Term      Growth VI, LLC, dated July 16, 2008, and FILED HEREWITH.         |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.32        | Letter      of Intent between Valcent Products, Inc., and Hydroganics JV, dated      September 3, 2008, FILED HEREWITH.                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.33        | Letter      of Intent between Valcent Products, Inc., Mark Spencer, and Mike Geleta,      dated September 16, 2008, and FILED HEREWITH.                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                      |
| 4.34        | Purchase      and Sale Agreement between Valcent USA Inc., Global Green Solutions, Inc.,      and Vertigro Algae Technologies LLC, dated September 26, 2008,      incorporated by reference to Exhibit 10.1 on Form 6-K filed October 1,      2008.                                                                       |
|        |                                                                                                                                                                                                                                                                                                                      |
| 5.1         | Subsidiaries      of Valcent Products Inc., as of September 15, 2008 FILED      HEREWITH.                                                                                                                                                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                      |
| 12(a)(iii)  | Certification      pursuant to Rule 13A-14(A) in Accordance with Section 302 of the      Sarbanes-Oxley Act of 2002 FILED HEREWITH.                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                      |
| 12(a)(iiii) | Certification      pursuant to Rule 13A-14(A) in Accordance with Section 302 of the      Sarbanes-Oxley Act of 2002 FILED HEREWITH.                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                      |
| 13(a)(iii)  | Certification      pursuant to 18 U.S.C. Section 1350 as Adopted pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002 FILED HEREWITH.                                                                                                                                                                           |
|        |                                                                                                                                                                                                                                                                                                                      |
| 13(a)(iiii) | Certification      pursuant to 18 U.S.C. Section 1350 as Adopted pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002 FILEDHEREWITH.                                                                                                                                                                            |

----

|                             |                        |                                             |
|----------------------------------|-----------------------------|--------------------------------------------------|
|                             | VALCENT      PRODUCTS, INC. |
|                             |                        |                                             |
|                             |                        |                                             |
| Date: October      10, 2008 | By:               | /s/ M.      Glen Kertz                      |
|                             |                        |                                             |
|                             |                        | M.      Glen Kertz                               |
|                             |                        | Chief      Executive Officer and ActingPresident |

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