Exhibit 99.1

Interim Consolidated Financial Statements

(Expressed in Canadian dollars)

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Three months and nine months ended

August 31, 2009 and 2008

(Unaudited)

To the Shareholders of Vasogen Inc.

Notice to Reader:

Management has prepared the accompanying unaudited financial statements of Vasogen Inc. for the three-month period ended August 31, 2009 and the Audit Committee of the Company has approved them. The Company’s independent auditors have not reviewed these statements.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)

	August 31,			November 30,
	2009			2008
	(Unaudited)

Assets

Current assets:
Cash and cash equivalents (note 3)	$	4,843		$	8,556
Tax credits recoverable		422			582
Prepaid expenses and deposits		332			188
		5,597			9,326

Property and equipment		12			16

	$	5,609		$	9,342

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable	$	286		$	101
Accrued liabilities		1,047			1,141
		1,333			1,242

Shareholders' equity (note 4):
Share capital:
Authorized:
Unlimited common shares, without par value
Issued and outstanding:
22,623,195 common shares (November 30, 2008 - 22,424,719)		365,730			365,677
Warrants		16,725			16,725
Contributed surplus		24,172			23,555
Deficit		(402,351	)		(397,857	)
		4,276			8,100

Basis of presentation - going concern (note 1)

	$	5,609		$	9,342

See accompanying notes to interim consolidated financial statements.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Interim Consolidated Statements of Operations, Deficit and Comprehensive Income
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)

													Period from
													December 1,
	Three months ended						Nine months ended						1987 to
	August 31,						August 31,						August 31,
	2009			2008			2009			2008			2009

Expenses:
Research and development	$	7		$	1,096		$	363		$	8,734		$	248,074
General and administration		1,150			1,627			4,594			7,237			129,920
Foreign exchange loss (gain)		4			(59	)		58			(194	)		10,723

Loss before the undernoted		(1,161	)		(2,664	)		(5,015	)		(15,777	)		(388,717	)

Interest expense on senior convertible notes payable		-			-			-			-			(1,279	)

Accretion in carrying value of senior convertible notes payable		-			-			-			-			(10,294	)

Amortization of deferred financing costs		-			-			-			-			(3,057	)

Loss on extinguishment of senior convertible notes payable		-			-			-			-			(6,749	)

Gain on sale of patents		-			-			487			-			487

Investment income		3			78			34			453			13,872

Change in fair value of embedded derivatives		-			-			-			-			829

Loss and comprehensive loss for the period		(1,158	)		(2,586	)		(4,494	)		(15,324	)		(394,908	)

Deficit, beginning of period		(401,193	)		(394,521	)		(397,857	)		(381,783	)		(1,510	)

Impact of change in accounting for stock-based compensation		-			-			-			-			(4,006	)

Impact of change in accounting for financial instruments		-			-			-			-			(1,632	)

Charge for acceleration payments on equity component of senior convertible notes payable		-			-			-			-			(295	)

Deficit, end of period	$	(402,351	)	$	(397,107	)	$	(402,351	)	$	(397,107	)	$	(402,351	)

Basic and diluted loss per common share (note 5)	$	(0.05	)	$	(0.12	)	$	(0.20	)	$	(0.68	)

See accompanying notes to interim consolidated financial statements.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)

													Period from
													December 1,
	Three months ended						Nine months ended						1987 to
	August 31,						August 31,						August 31,
	2009			2008			2009			2008			2009

Cash provided by (used in):


Operating activities:
Loss for the period	$	(1,158	)	$	(2,586	)	$	(4,494	)	$	(15,324	)	$	(394,908	)
Items not involving cash:
Amortization		2			191			4			378			6,381
Loss on disposition of property and equipment		-			-			-			-			125
Gain on sale of patents		-			-			(487	)		-			(487	)
Accretion in carrying value of senior convertible notes payable		-			-			-			-			10,294
Amortization of deferred financing costs		-			-			-			-			3,057
Loss on extinguishment of senior convertible notes payable		-			-			-			-			6,749
Change in fair value of embedded derivatives		-			-			-			-			(829	)
Stock-based compensation		51			141			617			692			11,007
Common shares issued for services		-			-			-			-			2,485
Unrealized foreign exchange gain (loss)		4			(98	)		56			61			11,475
Other		-			-			-			-			(35	)
Change in non-cash operating working capital		114			(348	)		156			493			594
		(987	)		(2,700	)		(4,148	)		(13,700	)		(344,092	)

Financing activities:
Shares and warrants issued for cash		-			-			-			-			326,358
Warrants exercised for cash		-			-			-			-			16,941
Options exercised for cash		-			-			-			-			7,669
Share issue costs		-			-			-			-			(24,646	)
Repayment of senior convertible notes payable, net		-			-			-			-			38,512
Paid to related parties		-			-			-			-			(234	)
		-			-			-			-			364,600

Investing activities:
Purchases of property and equipment		-			-			-			(6	)		(2,471	)
Purchases of acquired technology		-			-			-			-			(1,283	)
Proceeds on disposition of patents		-			-			487			-			487
Purchases of marketable securities		-			-			-			-			(244,846	)
Proceeds on disposition of property and equipment		-			-			-			-			62
Settlement of forward foreign exchange contracts		-			-			-			-			(4,824	)
Maturities of marketable securities		-			-			-			-			240,677
		-			-			487			(6	)		(12,198	)

Foreign exchange gain (loss) on cash held in foreign currency		(4	)		99			(52	)		(51	)		(3,467	)

Increase (decrease) in cash and cash equivalents		(991	)		(2,601	)		(3,713	)		(13,757	)		4,843

Cash and cash equivalents, beginning of period		5,834			12,389			8,556			23,545			-

Cash and cash equivalents, end of period	$	4,843		$	9,788		$	4,843		$	9,788		$	4,843

Supplemental cash flow information (note 6)

See accompanying notes to interim consolidated financial statements.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

1.	Basis of presentation - going concern:

Since its inception, the Company has been engaged in the research and commercial development of product candidates for the treatment of disease and has had no commercial operations. The operations of the Company are not subject to any seasonality or cyclicality factors.

The unaudited interim consolidated financial statements presented have been prepared on the basis that the Company is considered a development stage enterprise and, accordingly, the consolidated statements of operations, deficit and comprehensive income and cash flows also reflect the cumulative amounts from December 1, 1987 (the date development operations commenced) to August 31, 2009.

The accompanying unaudited interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained losses since its formation, and at August 31, 2009, had a deficit of $402 million. In 2008, the Company undertook a significant reduction in work force after determining that larger than anticipated clinical studies would be required to receive approval for the Company's lead product, Celacade™, and in an effort to manage expenses, the Company suspended all operations related to the commercialization of Celacade™ in Europe. On July 3, 2008, following an extensive review of the Company's VP Series of drug programs, the Company undertook an additional restructuring to further manage expenses as strategic alternatives are explored. The Company retained an investment bank to assist it in exploring these potential strategic alternatives.

On August 14, 2009, the Company entered into a arrangement agreement, subject to shareholder approvals, with Cervus LP that will reorganize the Company prior to completion of the transaction with IntelliPharmaCeutics ("IPC", "IPC Opco", and "IPC US") and which will provide gross proceeds to the Company of approximately $7.5 million in non-dilutive capital. As a result, substantially all of the operating assets and liabilities of Vasogen, except its tax accounts and certain receivables, will be transferred to a new entity formed pursuant to the Plan of Arrangement ("New Vasogen").

Also, on August 14, 2009, the Company entered into a definitive agreement, subject to shareholder and regulatory approvals, with IPC, whereby the Company will combine with IPC under a plan of arrangement and merge to continue as a publicly-traded entity to be called IntelliPharmaCeutics International Ltd.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

1.	Basis of presentation - going concern (continued):

While these unaudited interim consolidated financial statements do not include the adjustments that would be necessary should the Company be unable to continue as a going concern, the above matters raise substantial doubt about the Company's ability to continue to operate as currently structured.

The Company's future operations are completely dependent upon its ability to complete a sale, merger, acquisition or other strategic alternative, and/or secure additional funds. If the Company cannot complete the transactions that were entered into on August 14, 2009 resulting from our strategic review and or secure additional financing, or if it cannot secure additional financing on terms that would be acceptable to it, the Company will have to consider additional strategic alternatives which may include, among other strategies, exploring the monetization of certain intangible assets as well as seeking to out-license assets, potential asset divestitures, winding up, dissolution or liquidation of the Company.

2.	Significant accounting policies:

These unaudited interim consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"), which, except as described in note 11, conform, in all material respects, with accounting principles generally accepted in the United States ("United States GAAP").

Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with Canadian GAAP have been condensed or excluded. As a result, these unaudited interim consolidated financial statements do not contain all disclosures required to be included in the annual consolidated financial statements and should be read in conjunction with the most recent audited annual consolidated financial statements and notes thereto for the year ended November 30, 2008.

The financial information included herein reflects all adjustments consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the three months and nine months ended August 31, 2009 are not necessarily indicative of the results to be expected for the full year.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

2.	Significant accounting policies (continued):

These unaudited interim consolidated financial statements are prepared following accounting policies consistent with the Company's audited annual consolidated financial statements and notes thereto for the year ended November 30, 2008, except for the following changes in accounting policies:

(a) Change in accounting policies:

(i) Inventories:

On December 1, 2008, the Company adopted The Canadian Institute of Chartered Accountants' ("CICA") Handbook Section 3031, Inventories, which supersedes existing guidance on inventories in Section 3030, Inventories. There was no impact on the Company's consolidated financial position and results of operations on adoption of this standard.

(ii) General standards of financial statement presentation:

On December 1, 2008, the Company adopted CICA Handbook Section 1400, General Standards of Financial Statement Presentation. Management is required to make an assessment of an entity's ability to continue as a going concern and should take into account all available information about the future, which is at least, but is not limited to, 12 months from the balance sheet dates. There was no impact on the Company's consolidated financial position and results of operations, as the Company has disclosed its assessment of going concern in note 1.

(iii) Goodwill and intangible assets:

On December 1, 2008, the Company adopted CICA Handbook Section 3064, Goodwill and Intangible Assets ("Section 3064"). Section 3064, which replaces Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. There was no impact on the Company's consolidated financial position and results of operations on adoption of this standard.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

2.	Significant accounting policies (continued):

(b) Recent accounting pronouncements issued and not yet applied:

(i) Business combinations:

In January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces the existing standards. This section establishes the standards for the accounting of business combinations, and states that all assets and liabilities of an acquired business will be recorded at fair value. Obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. This standard is effective for the Company on December 1, 2011. Earlier adoption is permitted. The Company is currently assessing the impact this standard will have on its consolidated financial position and results of operations.

(ii) Consolidated financial statements:

In January 2009, the CICA issued Handbook Section 1601, Consolidated Financial Statements, which replaces the existing standards. This section establishes the standards for preparing consolidated financial statements and is effective for the Company on December 1, 2011. Earlier adoption is permitted. The Company is currently assessing the impact this standard will have on its consolidated financial position and results of operations.

(iii) Non-controlling interests:

In January 2009, the CICA issued Handbook Section 1602, Non-controlling Interests, which establishes standards for the accounting of non-controlling interests of a subsidiary in the preparation of consolidated financial statements subsequent to a business combination, and is effective for the Company on December 1, 2011. The Company is currently assessing the impact this standard will have on its consolidated financial position and results of operations.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

2.	Significant accounting policies (continued):

(iv) International financial reporting standards:

In February 2008, the CICA confirmed its strategy of replacing Canadian GAAP with International Financial Reporting Standards ("IFRS") for Canadian publicly accountable enterprises. These new standards will be effective for the Company's interim and annual financial statements commencing December 1, 2011. The Company is assessing the impact of the transition to IFRS on its consolidated financial statements.

3.	Cash and cash equivalents:

As at August 31, 2009, the Company held $4.8 million (November 30, 2008 - $8.5 million) of cash and cash equivalents, of which $0.2 million (U.S. $0.2 million) (November 30, 2008 - $0.9 million (U.S. $0.7 million)) is denominated in U.S. dollars. Cash equivalents consist of highly liquid government and corporate bonds having a single "A" credit rating or greater.

As at August 31, 2009, the Company's cash equivalents were held with major Canadian financial institutions, as detailed below:

Description	Maturity	Amount

Royal Bank of Canada bankers' acceptance	September 21, 2009	$	1,160
Canadian Imperial Bank of Commerce bankers' acceptance	September 14, 2009		1,670
Bank of Nova Scotia bearer deposit	September 8, 2009		1,750
Royal Bank of Canada U.S. dollar term deposit	September 8, 2009		181

		$	4,761

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity:

(a) Consolidated statement of shareholders' equity:

			Common											Period from
			shares'											December 1,
			average											1987 to
	Number		share		Share		Contributed							August 31,
	of shares		price		capital		surplus		Warrants		Deficit			2009

Balance, November 30, 2007		22,391			$	365,670	$	22,744	$	16,725	$	(381,783	)	$	23,356
Fair value of stock options granted		-				-		811		-		-			811
Deferred share units exercised		34		0.21		7		-		-		-			7
Loss		-				-		-		-		(16,074	)		(16,074	)

Balance, November 30, 2008		22,425				365,677		23,555		16,725		(397,857	)		8,100
Fair value of stock options and deferred share units granted		-				-		617		-		-			617
Deferred share units exercised		198		0.27		53		-		-		-			53
Loss		-				-		-		-		(4,494	)		(4,494	)

Balance, August 31, 2009		22,623			$	365,730	$	24,172	$	16,725	$	(402,351	)	$	4,276

If the transactions that were entered into on August 14, 2009 are approved, each Vasogen Share (excluding those held by Dissenting Vasogen Shareholders) shall be transferred to New Vasogen in exchange for the issuance of one New Vasogen Share pursuant to the Plan of Arrangement. Each New Vasogen Share shall become a number of New IPC Shares within a range of a conversion factor of 0.05:1 and 0.10:1, with the specific number in such range to be determined by the Vasogen Board and agreed to by IPC US at or prior to the date of the meeting of Vasogen shareholders to vote on the proposed transaction (the "Vasogen Exchange Ratio").

(b) Stock-based compensation plans:

In May 2003, the Company adopted two new stock option plans (the "2003 Employee Plan" and the "2003 Director Plan") to eventually replace the Company's original stock option plan (the "Original Plan"). All grants of options after May 2003 are made from the new plans and no further option grants will be made under the Original Plan.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity (continued):

On March 25, 2008, the Company's shareholders approved an increase in the maximum number of common shares issuable under the 2003 Employee Plan to 12% of the issued and outstanding common shares of the Company from time to time, or 2,714,783, based on the number of issued and outstanding common shares as at August 31, 2009. In addition, the Company's shareholders approved amending the 2003 Employee Plan to allow restricted stock units to be granted. No restricted stock units were outstanding as at August 31, 2009. On March 25, 2008, the Company's shareholders approved an increase in the maximum number of common shares issuable under the 2003 Director Plan to 300,000.

Each option granted allows the holder to purchase one common share at an exercise price not less than the closing price of the Company's common shares on the Toronto Stock Exchange on the last trading day prior to the grant of the option. Options granted under these plans have a maximum term of 10 years and generally vest over a period of up to three years. As at August 31, 2009, there were 2.1 million (November 30, 2008 - 2.0 million) options and restricted stock units available for grant.

	August 31, 2009					November 30, 2008
				Weighted					Weighted
				average					average
	Number of			exercise		Number of			exercise
	options			price		options			price

Outstanding, beginning of period		1,009		$	11.61		879		$	20.67
Issued		70			0.22		1,224			1.74
Expired or cancelled		(123	)		25.39		(1,094	)		7.21

Outstanding, end of period		956			8.99		1,009			11.61

Exercisable, end of period		878			9.51		517			19.67

There were no options granted to non-employees in the three months and nine months ended August 31, 2009 (nine months ended August 31, 2008 - 25,000 with a fair value of $15,513).

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity (continued):

The following table provides information on options outstanding and exercisable as of August 31, 2009:

	Options outstanding						Options exercisable
					Weighted
			Weighted		average				Weighted
			average		remaining				average
Exercise	Number		exercise		contractual		Number		exercise
price	outstanding		price		life (years)		exercisable		price

$0.22 - $ 0.78		70	$	0.22		9.74		70	$	0.22
$0.79 - $ 1.63		90		0.79		4.69		90		0.79
$1.64 - $ 2.11		300		1.92		7.25		248		1.92
$2.12 - $ 4.29		200		2.12		8.09		200		2.12
$4.30 - $ 7.50		126		5.66		6.61		100		5.67
$7.51 - $92.10		170		40.09		3.47		170		40.09

		956		8.99		6.61		878		9.51

The total number of in-the-money options vested and exercisable as of August 31, 2009 was 70,000 (November 30, 2008 - nil).

The aggregate intrinsic value of exercisable options as at August 31, 2009 was $5,250 (November 30, 2008 - nil).

The weighted average remaining contractual life of exercisable options is 6.5 years.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity (continued):

The fair value of stock-based compensation was estimated using the Black-Scholes option pricing model at the grant date using the following assumptions:

	Three months ended				Nine months ended
	August 31,				August 31,
	2009		2008		2009			2008

Dividend yield		-		-		-			-
Weighted average risk-free interest rate		-		-		2.73	%		3.42	%
Volatility factor of the expected market price of the Company's common shares		-		-		118.26	%		96.20	%
Weighted average expected life of the employment options		-		-	6.2 years			6.1 years

The resulting weighted average fair value per share at the grant date of the employee and non-employee stock-based compensation issued during the three months and nine months ended August 31, 2009 is nil and $0.19 (August 31, 2008 - nil and $1.38).

Total compensation cost for stock-based compensation arrangements recognized in income during the three months and nine months ended August 31, 2009 was $0.1 million and $0.6 million (August 31, 2008 - $0.1 million and $0.7 million).

On exercise of options, the Company's policy is to issue shares from treasury.

If the transactions that were entered into on August 14, 2009 are approved, each outstanding Vasogen Option will be exchanged for New Vasogen Options on the basis of one New Vasogen Option for each Vasogen Option held and the exercise price per New Vasogen Share will be determined as specified in the Plan of Arrangement. Then each outstanding New Vasogen Option will be exchanged for such number of New IPC Options for each New Vasogen Option held as is determined on the basis of the Vasogen Exchange Ratio pursuant to the Plan of Arrangement. The exercise price per New IPC Share issuable upon exercise of each New IPC Option will be equal to the quotient obtained by dividing the exercise price per New Vasogen Share of such New Vasogen Option by such Vasogen Exchange Ratio.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity (continued):

Effective January 1, 2004, the Company established a plan to grant deferred share units ("DSUs") to its non-management directors. On May 27, 2009, the Company's shareholders approved increasing the maximum number of common shares issuable under the DSU plan to 1,200,000. Under the plan, the directors will defer any cash remuneration that they would have otherwise received for services rendered and in lieu thereof will receive the number of DSUs which is equivalent in value to the remuneration deferred. A DSU is a unit equivalent in value to one common share of the Company based on the trading price of the Company's common shares on the Toronto Stock Exchange. Upon termination of board service, the director will be able to redeem DSUs based upon the then market price of the Company's common shares on the date of redemption in exchange for any combination of cash or common shares as the Company may determine.

As at August 31, 2009, there are 516,576 DSUs issued and outstanding. Any grants granted prior to May 27, 2009 were accounted for as liabilities, for which 293,991 (November 30, 2008 - 390,705) DSUs are issued and outstanding with an intrinsic value of $87,000 (November 30, 2008 - $47,000) based upon the market value of the Company's common shares at August 31, 2009.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity (continued):

All DSUs granted on or after May 27, 2009 are accounted for under the equity method, as the Company intends to settle future DSU issuances in the form of common shares. During the three months ended August 31, 2009, the Company recorded $11,000 (August 31, 2008 - nil) in compensation expense relating to 51,932 (August 31, 2008 - nil) DSUs granted for services rendered during the period. The fair value of the awards for the three months ended August 31, 2009 was $0.21 and was estimated using the Black-Scholes option pricing model at the grant date using the following assumptions:

	Three months ended					Nine months ended
	August 31,					August 31,
	2009			2008		2009			2008

Dividend yield		-			-		-			-
Weighted average risk-free interest rate		0.22	%		-		0.24	%		-
Volatility factor of the expected market price of the Company's common shares		151.25	%		-		164.48	%		-
Weighted average expected life of the DSUs	0.3 years				-	0.4 years				-

During the nine months ended August 31, 2009, 198,478 DSUs were exercised and 2,693 were cancelled (August 31, 2008 - nil and nil).

If the transactions that were entered into on August 14, 2009 are approved, each of the Vasogen DSUs will be exercised for such number of New Vasogen Shares on the basis as if they had been exercised for Vasogen Shares that the holder would have been entitled to as is determined under the Vasogen DSU plan. Then each New Vasogen Share shall become a number of New IPC Shares as is determined on the basis of the Vasogen Exchange Ratio.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

4.	Shareholders' equity (continued):

(d) Warrants:

The following table provides information on the 6.5 million warrants outstanding and exercisable as of August 31, 2009:

Exercise	Number		Shares issuable
price	outstanding	Expiry	upon exercise

U.S. $ 13.59	333	October 7, 2010	736
U.S. $ 14.05	39	February 28, 2011	86
U.S. $ 13.59	39	March 31, 2011	86
U.S. $ 13.59	39	April 30, 2011	86
U.S. $ 13.59	61	May 31, 2011	134
U.S. $ 6.30	1,728	November 14, 2011	1,728
U.S. $ 6.30	256	November 14, 2009	256
U.S. $ 3.16	3,688	May 24, 2012	3,688
U.S. $ 3.81	295	May 24, 2010	295

	6,478		7,095

If the transactions that were entered into on August 14, 2009 are approved, each of the 0.5 million warrants outstanding that were issued in connection with the senior convertible notes or the acceleration payments on these notes will be transferred to New Vasogen and cancelled in exchange for the payment by New Vasogen to each holder of such warrants of U.S. $0.021 multiplied by the number of Vasogen Shares to which such warrants relate.

If the transactions that were entered into on August 14, 2009 are approved, each of the 2.0 million warrants outstanding that were issued in connection with the November 2006 financing and each of the 4.0 million warrants outstanding that were issued in connection with the May 2007 financing will become New Vasogen Warrants on the basis of one New Vasogen warrant for each warrant held. Then each of the New Vasogen warrants will become such number of New IPC Warrants for each New Vasogen Warrant as is determined on the basis of the Vasogen Exchange Ratio pursuant to the Plan of Arrangement and the exercise price per New IPC Share issuable upon exercise of each New IPC warrant will be equal to the quotient obtained by dividing the exercise price per New Vasogen Share of such New Vasogen warrant by such Vasogen Exchange Ratio.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

5.	Loss per share:

The computations for basic and diluted loss per share are as follows:

	Three months ended						Nine months ended
	August 31,						August 31,
	2009			2008			2009			2008

Loss for the period	$	(1,158	)	$	(2,586	)	$	(4,494	)	$	(15,324	)


Weighted average number of common shares outstanding:
Basic and diluted		22,623			22,391			22,546			22,391


Loss per common share:
Basic and diluted	$	(0.05	)	$	(0.12	)	$	(0.20	)	$	(0.68	)

The options and warrants to purchase common shares are not included in the calculation of diluted loss per share because the Company has a loss for each period presented and to do so would be anti-dilutive.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

6.	Consolidated statements of cash flows:

Supplemental disclosure of non-cash transactions:

									Period from
									December 1,
	Three months ended				Nine months ended				1987 to
	August 31,				August 31,				August 31,
	2009		2008		2009		2008		2009

Non-cash financing activities:
Warrants and options issued as share issue costs	$	-	$	-	$	-	$	-	$	2,944
Shares issued for services and exercise of DSUs		-		-		53		-		2,545
Debt conversion		-		-		-		-		(40,684	)
Shares issued on debt repayment		-		-		-		-		44,259
Acceleration warrants issued in connection with debt		-		-		-		-		2,322
Shares issued on debt conversion by note holders		-		-		-		-		263
Shares issued for technology		-		-		-		-		2,799
Share issue costs associated with public offering		-		-		-		-		(1,175	)
Deferred share issue costs		-		-		-		-		503
Non-cash investing activities:
Shares issued to acquire technology		-		-		-		-		(2,799	)

7.	Fair values of financial instruments:

The carrying values of cash and cash equivalents, accounts payable and accrued liabilities approximate their fair values due to the relatively short periods to maturity of these financial instruments.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

8.	Commitments and contingencies:

Under the terms of certain operating lease agreements, the Company is committed to make a payment of $6,000 for the year ending November 30, 2009. The Company has no further material commitments beyond 2009.

Subsequent to August 31, 2009 and in accordance with the IPC Arrangement Agreement, Vasogen advanced to IPC Opco a loan of $500,000 (the "IPC Bridge Loan") subject to terms and conditions agreed to by IPC Opco and Vasogen and evidenced by a grid promissory note in favour of Vasogen (the "Grid Note"). The amount of the IPC Bridge Loan and any other amounts owing with respect thereto will be secured by charges reflected in a general security agreement over the assets of IPC Opco and guaranteed by each of IPC US and IntelliPharmaCeutics Inc. together with a general security agreement over the assets of each such entity and in all cases with such security ranking senior to all indebtedness of such parties. The IPC Bridge Loan will be used by IPC Opco to fund its operations and working capital (and will not be used to pay any amounts owing from time to time under the Shareholder Note or for payment of the transaction costs or expenses of any IPC Company in connection with the transactions contemplated herein). The IPC Bridge Loan will bear interest at a rate of 8% per annum and be payable when the principal amount becomes due and payable. The IPC Bridge Loan and any interest shall be repaid 90 days after the earlier of (i) the date Vasogen Shareholders vote against an Arrangement with IPC, (ii) the termination of the IPC Arrangement Agreement; and (iii) the termination of the Merger Agreement.

Pursuant to the arrangement agreement between Vasogen and Cervus dated August 14, 2009, Vasogen and New Vasogen will enter into an indemnity agreement (the “Indemnity Agreement”).

The Indemnity Agreement is designed to provide Vasogen, following the completion of the plan of arrangement, with indemnification from New Vasogen, the resulting entity that will carry on the business previously carried on by Vasogen, for claims relating to Vasogen's and New Vasogen's business that are brought against Vasogen in the future, subject to certain conditions and limitations.

New Vasogen's obligations under the Indemnity Agreement relating to the Tax Pools (as defined in the Indemnity Agreement) are limited to an aggregate of $1.5 million with a threshold amount of $50,000 before there is an obligation to make a compensation payment.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

9.	Segment information:

The Company operates in one business segment: the development of treatments and related products addressing chronic inflammatory disease. The primary property and equipment are located in Canada. The acquired technology, which as at November 30, 2008 was fully amortized, is primarily in Ireland.

10. Termination costs:

In 2008, the Company implemented a restructuring plan as described in note 1, reducing the number of full-time employees from 104 to six. In 2009, the Company implemented additional restructuring efforts and has reduced the number of full-time employees to one. The CEO and CFO are currently fulfilling their roles in a consulting capacity at a substantially reduced compensation.

The costs associated with this restructuring plan are reflected in the following table:

	Three months ended				Nine months ended
	August 31,				August 31,
	2009		2008		2009		2008

Termination benefits:
Research and development	$	-	$	419	$	231	$	1,983
General and administration		13		266		1,382		817
Other associated costs:
Research and development		-		147		76		147
General and administration		-		-		-		210

Total restructuring	$	13	$	832	$	1,689	$	3,157

As at August 31, 2009, $75,000 is accrued for outstanding termination payments, which is expected to be fully paid by October 21, 2009, if the transactions entered into on August 14, 2009 are completed.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States:

The Company's consolidated financial statements are prepared in accordance with Canadian GAAP, which differ in certain respects from United States GAAP. The following tables present the impact of material differences between Canadian GAAP and United States GAAP on the Company's consolidated financial statements:

(a) Consolidated statements of operations, deficit and comprehensive income:

							Period from
							December 1,
	Nine months ended						1987 to
	August 31,						August 31,
	2009			2008			2009

Loss per Canadian GAAP	$	(4,494	)	$	(15,324	)	$	(394,908	)
Acquired technology costs (b)(ii)		-			-			(4,081	)
Technology amortization (b)(ii)		-			-			4,081
Non-employee stock options (b)(iii)		-			-			(3,476	)
Employee stock options (b)(iv)		-			-			2,879
Performance-based options (b)(iv)		-			-			(278	)
Warrants issued to acquire technology (b)(v)		-			-			(61	)
Accretion of senior convertible notes payable (b)(vi)		-			-			(1,855	)
Amortization of deferred financing costs (b)(vi)		(199	)		(199	)		(1,870	)
Loss on debt extinguishment (b)(vi)		-			-			(2,557	)
Fair value adjustment on embedded derivatives and warrants (b)(vi)		-			-			10,083
Fair market value adjustment on warrants on senior convertible notes (b)(vi)		(60	)		734			6,747
Fair value adjustment on warrants from November 2006 financing (b)(vii)		(96	)		1,176			5,913
Fair value adjustment on warrants from May 2007 financing (b)(vii)		(294	)		3,113			6,592

Loss and comprehensive loss per United States GAAP	$	(5,143	)	$	(10,500	)	$	(372,791	)

Weighted average number of common shares under United States GAAP:
Basic and diluted		22,546			22,391


Basic and diluted loss per common share under United States GAAP	$	(0.23	)	$	(0.47	)

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(b) Consolidated balance sheets:

	August 31, 2009						November 30, 2008
				United						United
	Canada			States			Canada			States

Assets:
Deferred financing costs (v), (vi)	$	-		$	575		$	-		$	774
Liabilities:
Warrants (v), (vi)		-			574			-			124
Shareholders' equity:
Share capital (iv)		365,730			364,927			365,677			364,874
Contributed surplus (ii), (iii), (v)		24,172			13,651			23,555			13,034
Warrants		16,725			-			16,725			-
Deficit, end of period (i), (ii), (iii), (iv), (v), (vi)		(402,351	)		(374,301	)		(397,857	)		(369,158	)
Deficit accumulated during development stage (i), (ii), (iii), (iv), (v), (vi)		(400,841	)		(372,791	)		(396,347	)		(367,648	)

(i) Acquired technology:

Canadian GAAP requires the capitalization and amortization of acquired technology costs. Under United States GAAP, such acquired technology costs are charged to expense when incurred if, at the acquisition date, the technological feasibility of this technology has not yet been established and no future alternative uses existed. Accordingly, for United States GAAP purposes, the costs would have been expensed at the date of acquisition and the amortization recorded under Canadian GAAP would be reversed.

(ii) Stock-based compensation to non-employees:

Under Canadian GAAP, the Company accounts for stock-based compensation granted to non-employees on or after December 1, 2002 at fair value. The fair value of any awards to non-employees granted prior to December 1, 2002 is not required to be recorded or presented under Canadian GAAP.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

Under United States GAAP, the Company accounted for stock-based compensation, including options and warrants granted to non-employees on or after December 15, 1995, at fair value in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation. Effective December 1, 2005, the Company adopted FASB Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004), Share-based Payments ("SFAS No. 123R"). There was no impact on the accounting for stock-based awards issued to non-employees in exchange for services as a result of this change.

There exists a difference between Canadian GAAP and United States GAAP for the fair value of options granted to non-employees after December 15, 1995 and prior to December 1, 2002, which are recorded at fair value under United States GAAP and which have not been recorded under Canadian GAAP.

(iii) Stock-based compensation to employees:

Under Canadian GAAP, effective December 1, 2004, the Company accounts for stock-based compensation granted to employees, officers and directors on or after December 1, 2002 at fair value, which is measured using the Black-Scholes option pricing model. Compensation cost is recognized over the service period. Prior to December 1, 2004, the Company accounted for stock-based awards to employees, officers and directors using the settlement method.

Under United States GAAP, the Company accounted for stock-based compensation, including options and warrants granted to employees prior to December 1, 2005, using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). In addition, the Company granted performance-based options to employees. In accordance with APB 25, these awards were accounted for using variable plan accounting. At each reporting date, compensation cost was measured based on an estimate of the number of options that vest considering the performance criteria and the difference between the market price of the underlying stock and the exercise price on that date. Compensation cost was recognized over the performance period.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

Effective December 1, 2005, the Company adopted SFAS No. 123R using the modified prospective transition approach, whereby the fair value of awards granted or modified on or after December 1, 2005 are measured at fair value. The Company's awards have graded vesting conditions. The compensation cost for each award is recognized on a straight-line basis over the service period of the entire award.

There exists a difference between Canadian GAAP and United States GAAP for the intrinsic and variable plan measurement for employee and performance-based options granted to employees prior to December 1, 2005 under United States GAAP and for the fair value measurement of such awards under Canadian GAAP.

(iv) 1996 warrants:

In 1996, 10,000 warrants were issued as part of the technology acquisition consideration. United States GAAP requires these acquired technology costs to be recorded in an amount approximating the fair value of the warrants issued, estimated at their grant date using the Black-Scholes option pricing model, and expensed as research and development expenses.

(v) Senior convertible notes payable and warrants:

Prior to December 1, 2006 and the adoption of CICA Handbook Section 3855, Financial Instruments - Recognition and Measurement ("Section 3855"), under Canadian GAAP, the common share purchase warrants and the equity component of the senior convertible notes payable were presented separately as components of shareholders' equity. The Company allocated the gross proceeds received on the issuance of the senior convertible notes payable on a relative fair value basis between the three elements: the equity and debt components of the senior convertible notes payable and the warrants. Issuance costs were allocated on a pro rata basis among the three elements. Prior to December 1, 2006, Canadian GAAP did not permit separate accounting for embedded derivatives.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

Effective December 1, 2006, with the adoption of Section 3855, Canadian GAAP requires recognition of embedded derivatives at fair value. The Company adopted Section 3855 retrospectively, without restatement. As a result of the adoption of Section 3855, the gross proceeds allocated to the debt component of the senior convertible notes payable were further allocated between the embedded derivatives, at fair value, and the debt component at the residual amount. The embedded derivatives identified on December 1, 2006 were consistent with those previously recognized under United States GAAP.

Under United States GAAP, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, requires that an embedded derivative included in a debt arrangement for which the economic characteristics and risks are not clearly and closely related to the economic characteristics of the debt host contract be measured at fair value and presented as a liability. Changes in fair value of the embedded derivative are recorded in the consolidated statements of operations, deficit and comprehensive income at each reporting date. Embedded derivatives that met the criteria for bifurcation from the senior convertible notes payable and that were, therefore, measured at fair value consisted of the holders' conversion right, the instalment payment mechanism and the holders' contingent redemption and conversion rights in the event of a change in control or an event of default. Under Canadian GAAP, the conversion option was an equity instrument that did not need to be remeasured. As the conversion option expired unexercised, the amounts allocated to it were reclassified to contributed surplus.

Under United States GAAP, the warrants are presented as a liability because they do not meet the criteria of Emerging Issues Task Force ("EITF") Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock ("EITF 00-19"), for equity classification. Subsequent changes in fair value are recorded in the consolidated statements of operations, deficit and comprehensive income. Under Canadian GAAP, the warrants are considered equity instruments and are not remeasured.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

Under United States GAAP, the Company allocated the residual amount of the gross proceeds received to the senior convertible notes payable after the separate fair value measurement of the warrants and embedded derivatives. All of the issuance costs related to the transaction were recognized as deferred financing costs under United States GAAP and were amortized to the consolidated statements of operations, deficit and comprehensive income using the effective interest yield method over the period to maturity. The senior convertible notes payable carried an effective interest rate of 42%. Differences in United States GAAP and Canadian GAAP result from the initial allocation differences and the subsequent accretion expense and amortization of deferred financing costs. Differences in United States GAAP also result from the fair value remeasurement of the warrants and the conversion option as liabilities at each reporting period.

Subsequent to December 1, 2006 for Canadian GAAP and United States GAAP, the twelve-day weighted average share price adjustment represented a derivative that was measured at fair value and changes in fair value were recorded in the consolidated statements of operations, deficit and comprehensive income as extinguishment loss. The settlement of the twelve-day weighted average share price adjustment was accounted for as either a settlement of additional debt, if an asset, or as the proceeds to issue additional shares if a liability. Prior to the adoption of Section 3855, under Canadian GAAP, there was no recognition of the twelve-day weighted average share price adjustment as a derivative. Adjustments to the number of shares issued or debt exchanged were accounted for as adjustments to share capital at no value.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(vi) Warrants:

Under Canadian GAAP, the common shares and the warrants issued on November 14, 2006 and on May 24, 2007 are presented separately as components of shareholders' equity. The Company allocated the gross proceeds received on a relative fair value basis between the common shares and the warrants. The related issuance costs were allocated on a pro rata basis to the common shares and the warrants.

Under United States GAAP, the warrants are presented as a liability because they do not meet the criteria of EITF 00-19 for equity classification. As a result, the Company allocated the residual amount of the gross proceeds received to the common shares after the separate fair value measurement of the liability-classified warrants. Subsequent changes in the fair value of the warrants are recorded in the consolidated statements of operations, deficit and comprehensive income. Under Canadian GAAP, the related issuance costs were allocated on a pro rata basis to the common shares and the warrants and recorded in shareholders' equity. However, under United States GAAP, the amount of issuance costs allocated to the warrants is recognized as deferred financing costs and is amortized to the consolidated statements of operations, deficit and comprehensive income over the term of the warrants.

Cash from operations under United States GAAP includes the adjustments to loss for the period outlined in note 11(b). Cash used in investments under United States GAAP excludes amounts representing acquired technology (note 11(b)(i)).

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(d) Income taxes:

During the three months and nine months ended August 31, 2009 and 2008, the Company did not record any tax expense on loss from operations.

At August 31, 2009, the Company did not have any gross unrecognized tax benefits.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the three months and nine months ended August 31, 2009 and 2008, the Company did not recognize any interest and penalties. The Company had no amounts accrued for the payment of interest and penalties as of August 31, 2009 and November 30, 2008.

The Company is subject to tax examinations in all major taxing jurisdictions in which it operates (namely Canada, the United States and Ireland). The Company's tax years 2001 through 2008 remain open in Canada for regular examination and for transfer pricing purposes. Furthermore, taxation years 2003 through 2008 remain open for examination in other jurisdictions.

In accordance with SFAS No. 109, Accounting for Income Taxes, the Company reviews all available positive and negative evidence to evaluate the recoverability of the deferred tax assets. This includes a review of such evidence as the carryforward periods of the significant tax assets, the Company's history of generating taxable income in its significant tax jurisdictions (namely Canada, the United States and Ireland), the Company's cumulative profits or losses in recent years, and the Company's projections of earnings in its significant jurisdictions. On a jurisdictional basis, the Company is in a cumulative loss position in all of its significant jurisdictions. For all jurisdictions, the Company continues to maintain a valuation allowance against all of its deferred income tax assets.

Under Canadian GAAP, investment tax credits and other research and development credits are deducted from research and development expenses for items of a current nature, and deducted from property and equipment for items of a capital nature. Under United States GAAP, these tax credits would be reclassified as a reduction of income tax expense.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(e) Consolidated statement of shareholders' equity in accordance with United States GAAP:

			Common											Period from
			shares'											December 1,
			average				Additional							1987 to
	Number		share		Share		paid-in							August 31,
	of shares		price		capital		capital		Warrants		Deficit			2009

Balance, November 30,2007		22,391			$	364,867	$	12,223	$	-	$	(358,588	)	$	18,502
Fair value of stock options granted		-				-		811		-		-			811
DSUs exercised		34		0.21		7		-		-		-			7
Loss and comprehensive loss		-				-		-		-		(10,570	)		(10,570	)

Balance, November 30,2008		22,425				364,874		13,034		-		(369,158	)		8,750
Fair value of stock options DSUs granted		-				-		617		-		-			617
DSUs exercised		198		0.27		53		-		-		-			53
Loss and comprehensive loss		-				-		-		-		(5,143	)		(5,143	)

Balance, August 31, 2009		22,623			$	364,927	$	13,651	$	-	$	(374,301	)	$	4,277

(f) Changes in accounting policy:

(i) Collaborative arrangements:

On December 1, 2008, the Company adopted EITF No. 07-1, Collaborative Arrangements, which addresses the accounting for arrangements in which two companies work together to achieve a commercial objective, without forming a separate legal entity. There was no impact on the Company's consolidated financial position and results of operations on adoption of this standard.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(ii) Accounting for advance payments for research and development activities:

On December 1, 2008, the Company adopted EITF No. 07-3, Accounting for Advance Payments for Goods or Services to be Received for Use in Future Research and Development Activities, which provides clarification surrounding the accounting for non-refundable research and development advance payments, whereby such payments should be recorded as an asset when the advance payment is made and recognized as an expense when the research and development activities are performed. There was no impact on the Company's consolidated financial position and results of operations on adoption of this standard.

(iii) Disclosure about derivative instruments and hedging activities:

On December 1, 2008, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, which amends and expands the disclosure requirements in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. There was no impact on the Company's consolidated financial position and results of operations on adoption of this standard.

(g) Recent accounting pronouncements issued and not yet applied:

(i) Business combinations:

In December 2007, the FASB issued FASB Statement No. 141R, Business Combinations. The statement will require all business acquisitions to be measured at fair value, the existing definition of a business would be expanded, pre-acquisition contingencies would be measured at fair value, most acquisition-related costs would be recognized as expenses as incurred, as well as other changes. The statement is effective for the Company beginning December 1, 2009 and will be applicable to new acquisitions subsequent to that date.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(ii) Non-controlling interests:

In December 2007, the FASB issued FASB Statement No. 160, Non-controlling Interests in Financial Statements. The statement will improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing new accounting and reporting standards. The statement is effective for the Company beginning December 1, 2009. As the Company has no minority interests, the statement will only be applicable to business combinations involving less than 100% of the entity acquired subsequent to December 1, 2009.

(iii) Subsequent events:

In May 2009, the FASB issued FASB Statement No. 165, Subsequent Events ("SFAS 165"). SFAS 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. SFAS 165 sets forth:

(a) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.

(b) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements.

SFAS 165 is effective for the Company's interim period beginning on June 1, 2009. The adoption of SFAS 165 is not expected to have any impact on the Company's consolidated financial statements.

VASOGEN INC.

(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Consolidated Financial Statements (continued)

(Tabular figures in thousands, except per share amounts)

Three months and nine months ended August 31, 2009 and 2008

(Unaudited)

11. Differences between generally accepted accounting principles in Canada and the United States (continued):

(iv) Hierarchy of Generally Accepted Accounting Principles:

In June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("SFAS 168"). SFAS 168 will become the source of authoritative U.S. generally accepted accounting principles recognized by the FASB. Under SFAS 168, the GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and non-authoritative. As a result, this Statement replaces FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles, to indicate this change to the GAAP hierarchy. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and is not expected to have any impact on the Company's consolidated financial statements.

VASOGEN INC 6-K