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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2010

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to ___________.

Commission file number 000-53461

MANTRA VENTURE GROUP LTD.
(Exact name of registrant as specified in its charter)

British Columbia	26-0592672
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation of Organization)

#4 2119 152nd Street
Surrey BC V4A 4N7
(Address of principal executive offices) (ZIP Code)

(604) 535 4145
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.00001 par value

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [ x ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [ x ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant as required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes [ ] No [ x ]

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]    Accelerated filer [ ]    Non-accelerated filer [ ]    Smaller reporting company [ x ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
Yes [ ] No [ x ]

Aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant at November 30, 2009 (Non affiliate holdings of 14,805,455 shares at the price at which the common shares were last sold: $0.19 per share): $2,813,036

Number of common shares outstanding at September 14, 2010: 35,127,185

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Table of Contents

PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	11
Item 2.	Description of Property	11
Item 3.	Legal Proceedings	11
Item 4.	[Removed and Reserved]	11
PART II		11
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6.	Selected Financial Data	12
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	17
Item 9A.	Controls and Procedures	17
Item 9B.	Other Information	18
PART III		18
Item 10.	Directors, Executive Officers and Corporate Governance	18
Item 11.	Executive Compensation	23
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25
Item 13.	Certain Relationships and Related Transactions, and Director Independence	26
Item 14.	Principal Accountant Fees and Services.	27
Item 15.	Exhibits, Financial Statement Schedules	28

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PART I

Item 1.

Business

Forward-looking Statements

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.

As used in this annual report, the terms "we", "us", "our", “our Company”, and "Mantra" mean Mantra Venture Group Ltd. and our wholly owned subsidiaries Mantra Energy Alternatives Ltd. and Mantra Media Corp., unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Description of Business

We were incorporated in Nevada on January 22, 2007. On December 8, 2008 we continued our corporate jurisdiction out of the state of Nevada and into the Province of British Columbia, Canada. Our principal offices are located at #4 2119 152nd Street, Surrey, British Columbia, Canada, V4A 4N7. Our telephone number is (604) 535 4145. Our fiscal year end is May 31.

We are building a portfolio of companies and technologies that mitigate negative environmental and health consequences that arise from the production of energy and the consumption of resources. On November 2, 2007, through our wholly owned subsidiary, Mantra Energy Alternatives Ltd., we entered into a technology assignment agreement with 0798465 BC Ltd. whereby we acquired 100% ownership of an invention for the electro-reduction of carbon dioxide. This is currently our flagship technology and is described in greater detail under the heading “Electro Reduction of Carbon Dioxide” below.

Our mission is to develop and commercialize alternative energy technologies and services to enable the sustainable consumption, production and management of resources on residential, commercial and industrial scales. We plan to develop or acquire technologies and services which include electrical power system monitoring technology, wind farm electricity generation, online retail of environmental sustainability solutions through a carbon reduction marketplace, and media solutions to promote awareness of corporate actions that support the environment. To carry out our business strategy we intend to acquire or license from third parties technologies that require further development before they can be brought to market. We also intend to develop such technologies ourselves, and we anticipate that to complete commercialization of some technologies we will enter into joint ventures, partnerships, or other strategic relationships with third parties who have expertise that we may require. We also plan to enter into formal relationships with consultants, contractors, retailers and manufacturers who specialize in the areas of environmental sustainability in order to carry out our online retail strategy.

We are a development stage company that has only recently begun operations. We have generated only nominal revenues from our intended business activities, and we do not expect to generate significant revenues in the next 12 months. Other than our invention for the electro-reduction of carbon dioxide, we have not yet developed or acquired any commercially exploitable technology. Since our inception, we have incurred operational losses and we have completed several rounds of financing to fund our operations.

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We carry on our business through our subsidiaries as follows:

• Mantra Energy Alternatives Ltd., through which we identify, acquire, develop and market technologies related to alternative energy production, greenhouse gas emissions reduction and resource consumption reduction; and

• Mantra Media Corp., through which we offer promotional and marketing services to companies in the sustainability sector or those seeking to adopt sustainable practices;

We also have a number of inactive subsidiaries which we plan to engage in various business activities in the future.

On August 16, 2010, we entered into a technology development cooperation agreement with KC Cottrell Co., Ltd. and Korea Southern Power Co., Ltd. pursuant to which KC will provide our company with the basic framework and support for the successful execution of tasks for our company’s electrochemical reduction of carbon dioxide technology development as planned at Ha-dong Power Plant in the Republic of Korea. KC has also agreed to equally share the cost of the project, which is not to exceed US $1,000,000 with our company. The Technology Agreement will expire by the completion of the demonstration project or by July 30, 2011.

Electro Reduction of Carbon Dioxide (“ERC”)

On November 2, 2007 we entered into a technology assignment agreement with 0798465 BC Ltd. through our wholly owned subsidiary Mantra Energy Alternatives Ltd., whereby we acquired all right and title in and to a certain chemical process for the electro-reduction of carbon dioxide as embodied by and described in the following patent cooperation treaty application:

The reactor at the core of the chemical process, referred to as the electrochemical reduction of carbon dioxide, or ERC, has been proven functional through small scale prototype trials. ERC offers a possible solution to reduce the impact of carbon dioxide (CO2) on Earth’s environment by converting CO2 into chemicals with a broad range of commercial applications, including a fuel for a next generation of fuel cells. Powered by electricity, the ERC process combines captured carbon dioxide with water to produce materials, such as formic acid, formate salts, oxalic acid and methanol, that are conventionally obtained from the thermo-chemical processing of fossil fuels. However, while thermo-chemical reactions must be driven at relatively high temperatures that are normally obtained by burning fossil fuels, ERC operates at near ambient conditions and is driven by electric energy that can be taken from an electric power grid supplied by hydro, wind, solar or nuclear energy.

In fuel cells liquid fuels are indirectly burned with air to form carbon dioxide and water, while generating electricity. This process is known as electrochemical combustion or electrooxidation. The complementary nature of ERC and electrooxidation makes it possible to use ERC in a regenerative fuel cell cycle, where carbon dioxide is converted to a fuel that is consumed in a fuel cell to regenerate carbon dioxide. As shown in the figure, the net energy input required in this cycle could be supplied from a renewable or non-fossil fuel source.

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ERC has been shown to produce a range of compounds, including formic acid, formate salts, oxalic acid, and methanol. The efficiency for generation of each compound depends on the experimental conditions, most importantly the material of the cathode, which catalyses the electrochemical reactions.

Until appropriate cathodes are found some products of CO2 reduction (methanol, for instance) are obtained at efficiencies too low for practical use. Other products can be generated on known cathodes with high current yields that could support valuable practical processes. For example, formic acid has been obtained on tin cathodes with current yields above 80%. Formate salts and sodium bicarbonate are obtained at similarly high yields

ERC Development to Date

We have retained one of the creators of the technology, Professor Colin Oloman, as a member of our Scientific Advisory Board, to further develop the carbon dioxide reduction process to achieve optimal results on a consistent basis. On June 1, 2008, we entered into a Technology Development and Support Agreement with Kemetco Research Inc., an integrated science, technology and innovation company. Pursuant to that agreement, we have established a research and development facility for the ERC in Vancouver, British Columbia, staffed by a dedicated research team provided by Kemetco.

In October of 2008, we completed our first ERC prototype reactor capable of processing 1 kilogram of CO2 per day. In order to facilitate the testing and development of this reactor, we entered into an agreement with Kemetco on January 29, 2009. The agreement was intended to govern the development and testing of our prototype reactor for a period of 10 months and contemplated costs of approximately $250,000 including labor and materials purchases. On March 18, 2009 we entered into another agreement with Kemetco which amended and replaced the January 29, 2009 agreement. Under the terms of the latest agreement, we have agreed to proceed with the testing and development of our ERC prototype reactor for a period of 5 months at an estimated cost of approximately $125,000.

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Pictured Above, Design for Bench Scale ERC Reactor

We anticipate that commercialization of ERC will require us to develop reactors capable of processing not less than 100 tons of CO2 per day; however, there is no guarantee that we will successfully produce reactors of that size. Production of commercially viable ERC reactors will depend on continued research and development, successful testing of small scale ERC reactors, and securing of additional financing. At the conclusion of our current agreement and development program with Kemetco, an assessment will be made of the project’s progress and the next phase to be conducted.

Established and Emerging Market for ERC and By-Products:

The technology behind ERC can be applied to any scale commercial venture which outputs CO2 into the atmosphere. We anticipate that, once fully commercialized, we will be able to offer ERC as a CO2 management system to various industry including steel, power generation and lumber.

The existing applications of ERC by-products include use as feedstock preservatives, de-icing solutions, and baking soda, among others. Sodium Formate and Formic Acid, two of the main by-products of ERC, currently have an average market value of $1,200/ton, with more than 600,000 tons of formic acid produced annually (Li, 2006). Their applications are diverse, including feedstock preservatives, de-icing solutions, cleaning solutions and baking soda to name a few. The market for formic acid has experienced continual growth and demand over the past several years, mainly attributed to the following: European and developing country demand for formic acid in silage, rising raw materials, energy and logistics costs; and animal feed preservative and Asian demand for formic acid in leather, rubber, food and pharmaceutical industries. The average market price of formic acid is expected to increase by as much as 20% in 2009. (Dunia Frontier Consultants, 2008).

However, if the ERC process reaches market acceptance as a way to deal with CO2 emissions from industry facilities, it will likely lead to supply of formic acid in excess of current market demand. We have identified several potential future applications for formic acid, which may lead to an expansion in current market demand. The application we have identified and are currently focusing on is steel pickling.

Steel Pickling

Steel Pickling is part of the finishing process in the production of certain steel products in which oxide and scale are removed from the surface of strip steel, steel wire, and other forms of steel, by dissolution in acid. A solution of either Hydrochloric Acid (HCl) or Sulfuric Acid is generally used to treat carbon steel products, while a combination of Hydrofluoric and Nitric Acids is often used for stainless steel. Approximately ¼ of the HCI produced in the U.S. is used for pickling steel (American Chemistry, 2003), consuming an estimated 5Mt/year. As an organic acid, Formic Acid would be a very attractive replacement for Hydrochloric Acid (HCI) in the steel pickling process. Formic Acid has many potential advantages over HCI in this application, including: less iron lost from the steel surface, improvement in final surface quality, and the elimination of corrosion inhibiting and neutralizing rinse processes to prevent rust development. In addition, Formic Acid is both bio-degradable and reusable which would allow water used in the picking process to be recycled more easily.

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Competition

There are several existing alternative methods to ERC which convert CO2 into useful products. Other methods include, for example:

• Thermo-chemical reactions to produce carbon monoxide, formic acid, methane or methanol;
• Bio-chemical reactions to produce methane;
• Photo-chemical reactions to produce carbon monoxide, formaldehyde or formic acid; and
• Photo-electro-chemical reaction to produce carbon monoxide and possibly methane & methanol.

Some thermo-chemical methods are established commercial industrial processes (e.g. production of methanol from CO2) however, like ERC, most of these alternative methods of CO2conversion are still at the level of laboratory research and development projects. These alternative methods typically suffer from the following problems:

• Low reaction rate and low CO2 space velocity make it too costly and time consuming to process industrial quantities of CO2;
• Low selectivity for specified product(s) makes it harder to control product yield;
• High operating temperature and pressure requires large quantities of fossil fuels to power reaction;
• Fast cathode deterioration raises costs and makes the method labour intensive; and
• Highly expensive and cumbersome hydrogen (H₂) is required as a feed reactant.

Based on scholarship and test results to date, we believe that, compared with alternative methods of CO2 conversion, ERC, when converting CO2 to formate or formic acid, has several notable advantages including the following:

• Medium reaction rate allows for commercially viable CO2 processing times;
• Medium CO2 space velocity gives the ability to treat comparatively large volumes of CO2;
• High product selectivity for formate and formic acid;
• Low operating temperature and pressure make it possible to rely on renewable sources of electricity instead of fossil fuels; and
• Hydrogen (H₂) is not required as feed reactant.

However, because ERC has not yet been tested at a commercially viable scale, there is no guarantee that any of the advantages cited by us will translate into actual competitive advantages for ERC over competing methods for CO2 conversion. Also, like other competing methods, ERC suffers from fast cathode deterioration, and we must successfully isolate or develop a better ERC cathode in order to gain a competitive advantage in this regard.

Our competition consists of a number of small companies capable of competing effectively in the alternative energy market as well as several large companies that possess substantially greater financial and other resources than we do. Many of these competitors are substantially larger and better funded than us, and have significantly longer histories of research, operation and development. Our competitors include technology providers or energy producers using biomass combustion, biomass anaerobic digestion, geothermal, solar, wind, new hydro and other renewable energy sources. In addition, we will face well-established competition from electric utilities and other energy companies in the traditional energy industry who have substantially greater financial resources than we do.

Our competitors may be able to offer more competitively priced and more widely available energy products than ours and they also may have greater resources than us to create or develop new technologies and products.

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Therefore, there is no assurance that we will be successful in competing with existing and emerging competitors in the alternative energy industry or traditional energy industry.

We plan to identify business opportunities with interested parties and potential customers by networking and participating in conferences and exhibitions related to greenhouse gas emissions reduction and alternative energy sources and technologies. The strategic and geographic focus of our business is currently the North American market. We believe that one of our competitive advantages is our online carbon reduction marketplace which brings energy/carbon reduction products and service providers into direct contact with consumers and enables the facilitation of business contacts. The focus of our online carbon reduction marketplace is not on business-to-business carbon trading, as is the case with many of our competitors.

While our competitors may be operating similar business models, we plan to build our competitive position in the industry by:

• filling our Scientific Advisory Board with skilled and proficient professionals;
• developing and acquiring technologies to establish sustainable fuel supply chains;
• providing a comprehensive range of services; and
• providing marketing and promotion services to generate public awareness and enhance the reputation of sustainability initiatives.

However, since we are a newly-established company, we face the same problems as other start-up companies in other industries. Our competitors may develop similar technologies to ours and use the same methods as we do, and they may generally be able to respond more quickly to new or emerging technologies and changes in legislation and industry regulation. Additionally, our competitors may devote greater resources to the development, promotion and sale of their technologies or services than we do. Increased competition could also result in loss of key personnel, reduced margins or loss of market share, any of which could harm our business.

Government Regulations

Some aspects of our intended operations will be subject to a variety of federal, provincial, state and local laws, rules and regulations in North America and worldwide relating to, among other things, worker safety and the use, storage, discharge and disposal of environmentally sensitive materials. For example, we are subject to the Resource Conservation Recovery Act (“RCRA”), the principal federal legislation regulating hazardous waste generation, management and disposal.

Under some of the laws regulating the use, storage, discharge and disposal of environmentally sensitive materials, an owner or lessee of real estate may be liable for the costs of removing or remediating certain hazardous or toxic substances located on or in, or emanating from, such property, as well as related costs of investigation and property damage. Laws of this nature often impose liability without regard to whether the owner or lessee knew of, or was responsible for, the presence of the hazardous or toxic substances. These laws and regulations may require the removal or remediation of pollutants and may impose civil and criminal penalties for violations. Some of the laws and regulations authorize the recovery of natural resource damages by the government, injunctive relief and the imposition of stop, control, remediation and abandonment orders. The costs arising from compliance with environmental and natural resource laws and regulations may increase operating costs for both us and our potential customers. We are also subject to safety policies of jurisdictional-specific Workers Compensation Boards and similar agencies regulating the health and safety of workers.

In addition to the forgoing, in the future our U.S., Canadian and global operations may be affected by regulatory and political developments at the federal, state, provincial and local levels including, but not limited to, restrictions on offset credit trading, the verification of offset projects and related offset credits, price controls, tax increases, the expropriation of property, the modification or cancellation of contract rights, and controls on joint ventures or other strategic alliances.

We are not aware of any material violations of environmental permits, licenses or approvals issued with respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our intended business. At this time, we do not anticipate any material capital expenditures to comply with environmental or various regulations and requirements.

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While our intended projects or business activities have been designed to produce environmentally friendly green energy or other alternative products for which no specific regulatory barriers exist, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs and decreasing potential demand for our technologies, products or services, which could have a material adverse effect on our results of operations.

Research and Development Expenditures

During the year ended May 31, 2010 we spent $166,753 on research and development. For the last two fiscal years, we have spent $335,778 on research and development. We anticipate that we will incur $275,000 in expenses on research and development for ERC as well as other technologies we may acquire over the next 12 months.

Employees

As of September 14, 2010, we had 5 employees engaged in administrative duties, website development and marketing. All of these employees were engaged on a full-time basis. Additionally, we have retained a number of consultants for legal, accounting and investor relations services.

Intellectual Property

We acquired the process for the “Continuous Co-Current Electrochemical Reduction of Carbon Dioxide”, or the ERC technology, on November 2, 2007 pursuant to a technology assignment agreement with 0798465 BC Ltd. According to the agreement, we paid 0798465 BC Ltd. 40,000 common shares at a fair market value of $0.25 per share and 250,000 options to purchase our common shares at an exercise price of $0.25 per share until October 31, 2012. The process for the ERC technology was developed by Dr. Colin Oloman and Dr. Hui Li at the University of British Columbia's Clean Energy Research Center in Vancouver. They filed the initial patent application for the invention under the Patent Cooperation Treaty in 2006. We acquired all right and title in and to the ERC technology as embodied by and described in the following patent cooperation treaty application:

The Patent Cooperation Treaty, an international patent law treaty, provides a unified procedure for filing patent applications to protect inventions in each of its contracting states.

The PCT filing was made with a Receiving Office in 2006 and a written opinion was issued by International Searching Authority regarding the patentability of the invention which is the subject of the application. Finally, the examination and grant procedures will be handled by the relevant national or regional authorities. On March 31, 2008 we initiated the national patent process. We plan to begin the national patent process initially in Europe, Japan and China. The national phases for other countries, particularly the U.S. and Canada, will be initiated in the near future.

We have not filed for protection of our trademark. We own the copyright of our logo and all of the contents of our website, www.mantraenergy.com.

Reports to Security Holders

We intend to furnish our shareholders annual reports containing financial statements audited by our independent auditors and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year.

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The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

Item 1A.

Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 1B.

Unresolved Staff Comments

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2.

Description of Property

Our principal executive offices are located at 4 – 2119 152^nd Street, Surrey British Columbia, CanadaV4A 4N7. Our telephone number is (604) 535 4145. The office is approximately 1,650 square feet in size and is leased for a term of eighteen months. The lease began on August 2010 and will end in February of 2012. Currently we pay approximately $3,000 per month for our office space in Vancouver and $1,000 for office space in Washington State which we use from time to time.

Item 3.

Legal Proceedings

As of September 14, 2010, there are no material pending legal proceedings (other than ordinary routine litigation incidental to our business) to which we are a party or concerning any of our properties. Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.

Item 4.

[Removed and Reserved]

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is not traded on any stock exchange in the United States and Canada and there is no established public trading market for our common stock. Our common stock is quoted on the OTC Bulletin Board, under the trading symbol MVTG.OB. The market for our stock is highly volatile. We cannot assure you that there will be a market in the future for our common stock. OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

On February 18, 2008 our common shares began trading on the Frankfurt Stock Exchange under the symbol EDV 5MV. The Frankfurt Stock Exchange is located in Frankfurt, Germany.

The following table shows the high and low closing prices of our common shares on the OTC Bulletin Board for each quarter since our common stock began to trade on the OTC Bulletin Board on January 9, 2008. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

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Holders

As of September 14, 2010, there were 91 holders of record of our common stock.

Dividends

To date, we have not paid any dividends on our common shares and we do not expect to declare or pay any dividends on our common shares in the foreseeable future. Payment of any dividends will depend upon future earnings, if any, our financial condition, and other factors as deemed relevant by our Board of Directors.

Equity Compensation Plans

As of May 31, 2010, we did not have any equity compensation plans.

Recent Sales of Unregistered Securities

There were no previously unreported sales of unregistered securities during the period covered by this report.

Purchase of Equity Securities

Since our inception on January 22, 2007 we have made no purchases of our equity securities.

Item 6.

Selected Financial Data

Not applicable.

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

Forward-Looking Statements

This Annual Report contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for the purposes of these provisions, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties and actual results could differ materially from those anticipated by the forward-looking statements.

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Liquidity and Capital Resources

As of May 31, 2010, we had cash of $4,325 in our bank accounts and a working capital deficit of $1,036,124 compared to a working capital deficit of $503,417 for the year ended May 31, 2009. As of May 31, 2010, we had total assets of $93,820 and total liabilities of $1,055,271.

Our net loss of $5,043,970 from January 22, 2007 (date of inception) to May 31, 2010 was mostly funded by a combination of private placements and loans. Since January 22, 2007 (date of inception) to May 31, 2010, we raised net proceeds of $2,814,862 in cash from financing activities.

We used net cash of $488,362 in operating activities for the year ended May 31, 2010 compared to $1,028,422 for the year ended May 31, 2009. We used net cash of $2,654,902 in operating activities for the period from January 22, 2007 (date of inception) to May 31, 2010.

We did not use any cash in investing activities during the year ended May 31, 2010 compared to net cash of $85,734 used in investing activities for the year ended May 31, 2009. We received net cash of $489,367 from financing activities for the year ended May 31, 2010 compared to $1,091,275 for the year ended May 31, 2009. For the year ended May 31, 2010, $428,289 of cash from financing activities was from the issuance of our common stock and $61,078 from loans payable. During the year ended May 31, 2009, $841,275 of cash from financing activities was from the issuance of our common stock and $250,000 from the issuance of convertible debentures.

During the year ended May 31, 2010 we had an increase in our cash position of a $1,005 compared to a decrease of $22,881 for the year ended May 31, 2009. Our monthly cash requirements for the year ended May 31, 2010 was approximately $40,700. At our current cash position and if this cash requirement continues, we do not have sufficient cash to cover our expenses for one month.

We expect that our total expenses will increase over the next year as we increase our business operations. We have not been able to reach the break-even point since our inception and have had to rely on outside capital resources. We do not anticipate making significant revenues for the next year. Over the next 12 months, we plan to primarily concentrate on commercializing our ERC technology and associated projects.

In order to fully carry out our business plan, we need additional financing of approximately $3,075,000 for the next 12 months. In order to improve our liquidity, we intend to pursue additional equity financing from private placement sales of our equity securities or shareholders’ loans. We do not presently have sufficient financing to undertake our planned business activities. Issuances of additional shares will result in dilution to our existing shareholders.

We currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

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Results of Operations

Our results of operations are summarized below:

Lack of Significant Revenues

We have had limited operational history since our inception on January 22, 2007. Since our inception to May 31, 2010 we have generated $19,898 in revenues. Since our inception to May 31, 2010 we have accumulated a deficit of $5,043,970 during the development stage. We anticipate that we will incur substantial losses over the next year and our ability to generate any revenues in the next 12 months continues to be uncertain.

Expenses

For the year ended May 31, 2010, we had total operating expenses of $1,296,410, including $28,105 in consulting and advisory fees, $195,337 in professional fees, $188,805 in management fees, $86,553 in shareholder communications and awareness, $322,389 in wages and benefits, $50,760 in general and administrative expenses, and $166,753 in research and development.

By comparison, for the year ended May 31, 2009, we had total operating expenses of $1,752,627 including $61,864 in consulting and advisory fees, $269,266 in professional fees, $322,115 in management fees, $309,309 in shareholder communications and awareness, $137,997 in wages and benefits, $87,927 in general and administrative expenses and $169,025 in research and development.

Since our inception on January 22, 2007 to May 31, 2010, we accumulated total expenses of $5,095,649, including $433,112 in consulting and advisory fees, $656,858 in professional fees, $770,887 in management fees, $579,774 in shareholder communications and awareness, $320,550 in travel and promotion, $324,097 in general and administrative expenses and $418,206 in research and development.

Our general and administrative expenses consist of office occupation expenses, communication expenses (cellular, internet, fax and telephone), bank charges, foreign exchange, courier, postage costs and office supplies. Our professional fees include legal, accounting and auditing fees. Business development, consulting and advisory costs include fees paid, shares issued and options granted to contractors and advisory board members

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Inflation

The effect of inflation on our revenue and operating results has not been significant.

14

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Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in note 2 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles 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. We regularly evaluate estimates and assumptions related to allowance for doubtful accounts, the recoverability of intangible and long-lived assets, valuation of convertible debt, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Long-lived Assets

In accordance with ASC 360, “Property, Plant and Equipment”, we test long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Stock-based Compensation

We record stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

We use the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by our stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

15

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Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 8.

Financial Statements and Supplementary Data

MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated financial statements

(Expressed in U.S. dollars)

Years ended May 31, 2010 and 2009

	Index
Report of Independent Registered Public Accounting Firm	F–1
Consolidated balance sheets	F–2
Consolidated statements of operations	F–3
Consolidated statements of stockholders’ equity (deficit)	F–4
Consolidated statements of cash flows	F–7
Notes to the consolidated financial statements	F–8

16

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Mantra Venture Group Ltd.
(A development stage company)

We have audited the accompanying consolidated balance sheets of Mantra Venture Group Ltd. (a development stage company) as of May 31, 2010, and 2009, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and accumulated from June 1, 2008 to May 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of May 31, 2010, and 2009, and the consolidated results of its operations and its cash flows for the years then ended and accumulated from June 1, 2008 to May 31, 2010, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated significant revenues, has a working capital deficit, and has incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ SATURNA GROUP CHARTERED ACCOUNTANTS LLP

Saturna Group Chartered Accountants LLP

Vancouver, Canada

September 13, 2010

F-1

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated balance sheets

(Expressed in U.S. dollars)

		May 31,			May 31,
		2010			2009
		$			$
ASSETS
Current assets
Cash		4,325			3,320
Amounts receivable		13,744			19,253
Prepaid expenses and deposits		1,078			6,536
Total current assets		19,147			29,109
Property and equipment (Note 3)		74,673			109,801
Total assets		93,820			138,910
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities		449,481			224,893
Due to related parties (Note 5)		294,712			76,015
Loans payable (Note 6)		61,078			–
Convertible debentures (Note 7)		250,000			231,618
Total liabilities		1,055,271			532,526
Nature of operations and continuance of business (Note 1)
Commitments (Note 11)
Subsequent events (Note 13)
Stockholders’ deficit
Preferred stock    Authorized: 20,000,000 shares, par value $0.00001    Issued and outstanding: Nil shares		–			–
Common stock    Authorized: 100,000,000 shares, par value $0.00001    Issued and outstanding: 34,034,868 shares (2009 – 30,058,788 shares)		340			301
Additional paid-in capital		4,036,294			3,446,286
Common stock subscribed (Note 8)		45,885			–
Stock subscriptions receivable (Note 8)		–			(15,000	)
Deficit accumulated during the development stage		(5,043,970	)		(3,825,203	)
Total stockholders’ deficit		(961,451	)		(393,616	)
Total liabilities and stockholders’ deficit		93,820			138,910

(The accompanying notes are an integral part of these consolidated financial statements)

F-2

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated statements of operations

(Expressed in U.S. dollars)

								From
								January 22, 2007
		Year ended			Year ended			(date of inception) to
		May 31,			May 31,			May 31,
		2010			2009			2010
		$			$			$
Revenue		2,780			17,118			19,898
Operating expenses
Business development		38,870			11,570			251,093
Consulting and advisory		28,105			61,864			433,112
Depreciation and amortization		35,128			36,615			92,962
Foreign exchange loss (gain)		28,928			(15,814	)		25,671
General and administrative		50,760			87,927			324,097
License fees		28,438			–			28,438
Management fees (Note 5)		188,805			322,115			770,887
Professional fees		195,337			269,266			656,858
Public listing costs		14,488			42,296			203,831
Rent		46,584			63,950			156,174
Research and development		166,753			169,025			418,206
Shareholder communications and awareness		86,553			309,309			579,774
Travel and promotion		65,272			44,165			320,550
Wages and benefits		322,389			278,341			600,730
Website development/corporate branding		–			34,183			195,451
Write down of intangible assets		–			37,815			37,815
Total operating expenses		(1,296,410	)		1,752,627			5,095,649
Loss before other expenses		(1,293,630	)		(1,735,509	)		(5,075,751	)
Other income (expense)
Accretion of discounts on convertible debentures		(18,382	)		(27,548	)		(45,930	)
Government grant income		118,324			–			118,324
Interest expense		(25,079	)		(15,534	)		(40,613	)
Total other income (expense)		74,863			(43,082	)		31,781
Net loss for the period		(1,218,767	)		(1,778,591	)		(5,043,970	)
Net loss per share, basic and diluted		(0.04	)		(0.07	)
Weighted average number of shares outstanding		31,897,588			26,798,279

(The accompanying notes are an integral part of these consolidated financial statements)

F-3

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated statements of stockholder’s equity (deficit)

Period from January 22, 2007 (date of inception) to May 31, 2010

(Expressed in U.S. dollars)

											Deficit
											accumulated
								Additional			during the			Total
		Common stock						paid-in			development			stockholders’
					Amount			capital			stage			equity (deficit)
		Number			$			$			$			$
Balance, January 22, 2007 (date of inception)		–			–			–			–			–
Stock issued for cash at $0.00001 per share		15,000,000			150			150			–			300
Stock issued for cash at $0.02 per share		1,750,000			18			34,982			–			35,000
Stock issued for services at $0.02 per share		10,000			–			200			–			200
Net loss for the period		–			–			–			(30,594	)		(30,594	)
Balance, May 31, 2007		16,760,000			168			35,332			(30,594	)		4,906
Stock Issued for Cash
Stock issued at $0.10 per share		1,221,500			12			122,138			–			122,150
Units issued at $0.125 per share		1,600,000			16			199,984			–			200,000
Stock issued at $0.25 per share		1,399,078			14			349,756			–			349,770
Stock issued at $0.30 per share		100,000			1			29,999			–			30,000
Units issued at $0.40 per share		898,750			9			359,491			–			359,500
Stock Issued for Services
Stock issued at $0.25 per share		100,000			1			24,999			–			25,000
Stock issued at $0.30 per share		133,333			2			39,998			–			40,000
Stock issued at $0.40 per share		125,000			1			49,999			–			50,000
Units issued at $0.40 per share		600,000			6			239,994						240,000
Stock issued at $0.83 per share		200,000			2			165,998			–			166,000
Issued for Intangible Assets
Stock issued at $0.25 per share		40,000			–			10,000			–			10,000
Stock options granted		–			–			27,815						27,815
Stock issued upon exercise of warrants		275,000			3			137,497			–			137,500
Fair value of stock options granted		–			–			158,884			–			158,884
Net loss for the year		–			–			–			(2,016,018	)		(2,016,018	)
Balance, May 31, 2008		23,452,661			235			1,951,884			(2,046,612	)		(94,493	)

(The accompanying notes are an integral part of these consolidated financial statements)

F-4

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated statements of stockholder’s equity (deficit)

Period from January 22, 2007 (date of inception) to May 31, 2010

(Expressed in U.S. dollars)

														Deficit
														accumulated
								Additional			Stock			during the			Total
		Common Stock						paid-in			subscriptions			development			stockholders’
					Amount			capital			receivable			stage			equity (deficit)
		Number			$			$			$			$			$
Balance, May 31, 2008		23,452,661			235			1,951,884			–			(2,046,612	)		(94,493	)
Stock Issued for Cash
Units issued at $0.125 per share		2,400,000			24			299,976			–			–			300,000
Units issued at $0.15 per share		1,741,831			18			261,256			(15,000	)		–			246,274
Units issued at $0.25 per share		1,180,000			12			294,988			–			–			295,000
Stock Issued for Services
Stock issued at $0.15 per share		25,000			–			3,750			–			–			3,750
Stock issued at $0.20 per share		37,500			–			7,500			–			–			7,500
Stock issued at $0.36 per share		37,500			–			13,500			–			–			13,500
Stock issued at $0.36 per share		25,000			–			9,000			–			–			9,000
Stock issued at $0.40 per share		50,000			1			19,999			–			–			20,000
Stock issued at $0.41 per share		37,500			–			15,375			–			–			15,375
Stock issued at $0.45 per share		62,500			1			28,124			–			–			28,125
Stock Issued for Debt
Units issued at $0.15 per share		950,777			10			142,607			–			–			142,617
Stock issued at $0.25 per share		40,000			–			10,000			–			–			10,000
Units issued at $0.27 per share		18,519			–			5,000			–			–			5,000
Discount on convertible debentures		–			–			45,930			–			–			45,930
Fair value of stock options granted		–			–			337,397			–			–			337,397
Net loss for the year		–			–			–			–			(1,778,591	)		(1,778,591	)
Balance, May 31, 2009		30,058,788			301			3,446,286			(15,000	)		(3,825,203	)		(393,616	)

(The accompanying notes are an integral part of these consolidated financial statements)

F-5

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated statements of stockholder’s equity (deficit)

Period from January 22, 2007 (date of inception) to May 31, 2010

																	Deficit
																	accumulated
								Additional			Common			Stock			during the			Total
		Common Stock						paid-in			stock			subscriptions			development			stockholders’
					Amount			capital			subscribed			receivable			stage			equity (deficit)
		Number			$			$			$			$			$			$
Balance, May 31, 2009		30,058,788			301			3,446,286			–			(15,000	)		(3,825,203	)		(393,616	)
Stock Issued for Cash
Units issued at $0.08 per share		1,337,556			14			106,990			–			–			–			107,004
Units issued at $0.15 per share		1,735,999			17			260,383			–			15,000			–			275,400
Stock Issued for Services
Stock issued at $0.24 per share		125,000			1			29,999			–			–			–			30,000
Stock issued at $0.29 per share		25,000			–			7,250			–			–			–			7,250
Stock Issued for Debt
Stock issued at $0.15 per share		300,000			3			44,997			–			–			–			45,000
Stock issued at $0.17 per share		299,192			3			50,860			–			–			–			50,863
Units issued at $0.15 per share		153,333			1			22,999			–			–			–			23,000
Share subscriptions received		–			–			–			45,885			–			–			45,885
Fair value of stock options granted		–			–			66,530			–			–			–			66,530
Net loss for the year		–			–			–			–			–			(1,218,767	)		(1,218,767	)
Balance, May 31, 2010		34,034,868			340			4,036,294			45,885			–			(5,043,970	)		(961,451	)

(The accompanying notes are an integral part of these consolidated financial statements)

F-6

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Consolidated statements of cash flows

(Expressed in U.S. dollars)

								From
								January 22, 2007
		Year ended			Year ended			(date of inception)
		May 31,			May 31,			to May 31,
		2010			2009			2010
		$			$			$
Operating activities
Net loss for the period		(1,218,767	)		(1,778,591	)		(5,043,970	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discounts on convertible debentures		18,382			27,548			45,930
Depreciation and amortization		35,128			36,615			92,962
Stock-based compensation		103,780			434,646			1,218,510
Write-down of intangible assets		–			37,815			37,815
Changes in operating assets and liabilities:
Amounts receivable		5,509			(835	)		(13,744	)
Prepaid expenses and deposits		5,458			(5,528	)		(1,078	)
Other assets		–			–			(12,000	)
Accounts payable and accrued liabilities		343,451			247,201			725,961
Due to related parties		218,697			(27,293	)		294,712
Net cash used in operating activities		(488,362	)		(1,028,422	)		(2,654,902	)
Investing activities
Purchase of property and equipment		–			(85,734	)		(155,635	)
Net cash used in investing activities		–			(85,734	)		(155,635	)
Financing activities
Proceeds from loans payable		61,078			–			61,078
Proceeds from issuance of convertible debentures		–			250,000			250,000
Proceeds from issuance of common stock		428,289			841,275			2,503,784
Net cash provided by financing activities		489,367			1,091,275			2,814,862
Change in cash		1,005			(22,881	)		4,325
Cash, beginning of period		3,320			26,201			–
Cash, end of period		4,325			3,320			4,325
Non-cash investing and financing activities:
Common stock issued to settle debt		118,863			157,617			276,480
Shares issued and stock options granted for         acquisition of intangible assets		–			–			37,815
Supplemental disclosures:
Interest paid		–			–			–
Income taxes paid		–			–			–

(The accompanying notes are an integral part of these consolidated financial statements)

F-7

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

1.	Nature of Operations and Continuance of Business
	The Company was incorporated in the State of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. On December 8, 2008, the Company continued its corporate jurisdiction out of the State of Nevada and into the province of British Columbia, Canada. The Company is a development stage company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ”915”, “Development Stage Entities,” in the business of developing and providing energy alternatives. The Company also provides marketing and graphic design services to help companies optimize their environmental awareness presence through the eyes of government, industry, and the general public.
	These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, has not generated significant revenues since inception, and unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As at May 31, 2010, the Company has a working capital deficit of $1,036,124 and has accumulated losses of $5,043,970 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
	Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. There can be no certainty that these sources will provide the additional funds required for the next twelve months.
2.	Summary of Significant Accounting Policies
	a)	Basis of Presentation
		These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Energy Alternatives Ltd., Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., and Mantra Wind Inc. All inter-company balances and transactions have been eliminated.
	b)	Use of Estimates
		The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the recoverability of long-lived assets, valuation of convertible debt, stock- based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

F-8

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

2.	Summary of Significant Accounting Policies (continued)
	c)	Cash and Cash Equivalents
		The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
	d)	Accounts Receivable
		The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company considers at risk.
	e)	Property and Equipment
		Property and equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following annual rates:

	f)	Long-lived Assets
		In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
	g)	Foreign Currency Translation
		Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.
		The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in income.

F-9

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

2.	Summary of Significant Accounting Policies (continued)
	h)	Income Taxes
		The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
		As of May 31, 2010 and 2009, the Company did not have any amounts recorded pertaining to uncertain tax positions.
		The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2007 to 2009. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.
		The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the years ended May 31, 2010 and 2009, there were no charges for interest or penalties.
	i)	Revenue Recognition
		The Company has earned revenue from the provision of media design services. The Company recognizes revenue in accordance with ASC 605, “Revenue Recognition”. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability is reasonably assured.
	j)	Financial Instruments and Fair Value Measures
		ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

F-10

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

2.	Summary of Significant Accounting Policies (continued)
	j)	Financial Instruments and Fair Value Measures (continued)

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, amounts receivables, accounts payable, accrued liabilities, convertible debentures, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

	k)	Research and Development Costs
		Research and development costs are expensed as incurred.
	l)	Stock-based Compensation
		The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
		The Company uses the Black-Scholes option pricing model to calculate the fair value of stock- based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.
	m)	Loss Per Share
		The Company computes loss per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As at May 31, 2010, the Company had 8,959,496 (2009 - 10,001,358) dilutive potential shares outstanding.
	n)	Comprehensive Loss
		ASC 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at May 31, 2010 and 2009, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.

F-11

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

2.	Summary of Significant Accounting Policies (continued)
	o)	Recent Accounting Pronouncements
		In June 2009, the FASB issued guidance now codified as FASB ASC Topic 105, “Generally Accepted Accounting Principles” as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with US GAAP, aside from those issued by the SEC. ASC 105 does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company’s consolidated financial statements, but did eliminate all references to pre-codification standards.
		In January 2010, the FASB issued an amendment to ASC 820, “Fair Value Measurements and Disclosure”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.
		In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption of this standard did not have an impact on the Company’s consolidated financial statements
		The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
	q)	Reclassifications
		Certain comparative figures have been reclassified to conform to the current year's presentation.
3.	Property and Equipment

									2010			2009
						Accumulated			Net carrying			Net carrying
			Cost			depreciation			value			value
			$			$			$			$
	Automobile		11,938			7,866			4,072			6,462
	Computer equipment		31,145			26,732			4,413			14,791
	Leasehold improvements		4,982			2,790			2,192			3,188
	Office furniture and equipment		53,777			24,348			29,429			40,185
	Research equipment		53,793			19,226			34,567			45,175
			155,635			80,962			74,673			109,801

F-12

---

MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

4.	Intangible Assets
	Intangible assets consisted of costs incurred related to the acquisition of certain technologies and related patent applications. On October 1, 2007, the Company entered into an agreement and paid $12,000 to acquire the exclusive right to obtain the exclusive worldwide license to exploit an invention known as “A Novel System for Detection and Extraction of Useful Signals in Three-Phase Power Systems” (the “TPS Processor”) for a period of one year. The inventors of the TPS Processor filed patent applications for the TPS Processor in the United States and Canada in 2005. Those patent applications are pending and no patent has yet been granted in respect of the TPS Processor. There is no guarantee that any such patent will be granted in whole or in part.
	On November 2, 2007, the Company entered into a technology assignment agreement whereby the Company acquired all right and title in and to a certain invention for the electro-reduction of carbon dioxide (“ERC”) subject to a patent cooperation treaty application in consideration for 40,000 shares of the Company’s common stock with a fair value of $10,000 and stock options to purchase 250,000 shares of the Company’s common stock with a fair value of $27,815.
	On May 31, 2009, the Company wrote down its intangible assets by $37,815 to $nil due to the uncertainty of expected future cash flows.
5.	Related Party Transactions
	a)	During the year ended May 31, 2010, the Company incurred management fees of $57,000 (2009 - $0) to an accounting firm where the Chief Financial Officer of the Company is a partner.
	b)	During the year ended May 31, 2010, the Company incurred management fees of $10,124 (2009 - $73,500) to a company controlled by the former Chief Financial Officer of the Company.
	c)	During the year ended May 31, 2010, the Company incurred management fees of $41,948 (2009 - $nil) to the Vice President of the Company
	d)	As at May 31, 2010, the Company owes $34,592 (2009 - $nil) to a Vice President of the Company which is non-interest bearing, unsecured, and due on demand.
	e)	As at May 31, 2010, the Company owes $17,608 (2009 - $nil) to a Vice President of the Company which is non-interest bearing, unsecured, and due on demand
	f)	As at May 31, 2010, the Company owes $21,045 (2009 - $nil) to the spouse of the President of the Company which is non-interest bearing, unsecured, and due on demand.
	g)	As at May 31, 2010, Company owes $38,550 (2009 - $nil) to an accounting firm where the Chief Financial Officer of the Company is a partner which is non-interest bearing, unsecured, and due on demand.
	h)	As at May 31, 2010, Company owes a total of $9,179 (2009 - $3,190) to the Chief Financial Officer and a company controlled by the former Chief Financial Officer of the Company.
	i)	As at May 31, 2010, Company owes a total of $173,738 (2009 - $72,825) to the President of the Company and a company controlled by the President of the Company which is non-interest bearing, unsecured, and due on demand.
6.	Loans Payable
	a)	As at May 31, 2010, the amount of $51,078 (Cdn$53,300) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.
	b)	As at May 31, 2010, the amount of $10,000 is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

F-13

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

7.	Convertible Debentures
	In October 2008, the Company issued three convertible debentures for total proceeds of $250,000 which bear interest at 10% per annum, are unsecured, and due one year from date of issuance. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option into 625,000 shares of the Company’s common stock at a price of $0.40 per share. The Company also issued 250,000 detachable, non-transferable share purchase warrants. Each share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock for a period of two years from the date of issuance at an exercise price of $0.50 per share.
	In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company determined that the convertible debentures contained no embedded beneficial conversion feature as the convertible debentures were issued with a conversion price higher than the fair market value of the Company’s common shares at the time of issuance.
	In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company allocated the proceeds of issuance between the convertible debt and the detachable share purchase warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the share purchase warrants of $45,930 as additional paid-in capital and an equivalent discount against the convertible debentures. For the year ended May 31, 2010, the Company has recorded accretion expense of $18,382 (2009 - $27,548), increasing the carrying value of the convertible debentures to $250,000.
8.	Common Stock
	Stock transactions during the year ended May 31, 2010:
	a)	On June 1, 2009, the Company issued 100,000 shares of common stock with a fair value of $24,000 for services rendered.
	b)	On July 3, 2009, the Company issued 25,000 shares of common stock with a fair value of $6,000 for services rendered.
	c)	On July 16, 2009, the Company issued 484,334 units at $0.15 per unit for proceeds of $72,650. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	d)	On July 24, 2009, the Company issued 100,000 units at $0.15 per unit with a fair value of 15,000 to settle accounts payable. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	e)	On August 17, 2009, the Company issued 25,000 shares of common stock with a fair value of $7,250 for services rendered.
	f)	On August 24, 2009, the Company issued 594,333 units at $0.15 per unit for proceeds of $89,150. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.

F-14

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

8.	Common Stock (continued)
	Stock transactions during the year ended May 31, 2010 (continued):
	g)	On October 15, 2009, the Company issued 68,000 units at $0.15 per unit for proceeds of $10,200. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	h)	On November 27, 2009, the Company issued 555,999 units at $0.15 per unit for proceeds of $83,400. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	i)	On December 5, 2009, the Company issued 33,333 units at $0.15 per unit for proceeds of $5,000. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	j)	On December 11, 2009, the Company issued 299,192 shares of common stock with a fair value of $50,863 as settlement for services.
	k)	On April 5, 2010, the Company issued 53,333 shares of common stock with a fair value of $8,000 to settle accounts payable.
	l)	On April 5, 2010, the Company issued 1,337,556 units at $0.08 per unit for proceeds of $107,004. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.20 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.40 per share for seven consecutive trading days.
	m)	On April 14, 2010, the Company issued 300,000 shares of common stock with a fair value of $45,000 for services rendered.
	n)	As at May 31, 2010, the Company has received share subscriptions of $45,885. The shares were issued subsequently. Refer to Note 13(a).
	Stock transactions during the year ended May 31, 2009:
	a)	On June 15, 2008, the Company issued 37,500 shares of common stock with a fair value of $7,500 for services rendered.
	b)	On July 1, 2008, the Company issued 50,000 shares of common stock with a fair value of $20,000 to the Chief Financial Officer of the Company.
	c)	On July 2, 2008, the Company issued 2,400,000 units at $0.125 per unit for proceeds of $300,000. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.20 per share expiring on July 2, 2009.
	d)	On July 18, 2008, the Company issued 62,500 shares of common stock with a fair value of $28,125 for services rendered.
	e)	On September 15, 2008, the Company issued 37,500 shares of common stock with a fair value of $15,375 for services rendered.

F-15

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

8.	Common Stock (continued)
	Stock transactions during the year ended May 31, 2009 (continued):
	f)	On November 30, 2008, the Company issued 1,180,000 units at $0.25 per unit for proceeds of $295,000 and 40,000 units at $0.25 per unit to settle accounts payable of $10,000. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.50 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.80 per share for seven consecutive trading days.
	g)	On December 15, 2008, the Company issued 37,500 shares of common stock with a fair value of $13,500 for services rendered.
	h)	On January 28, 2009, the Company issued 25,000 shares of common stock with a fair value of $9,000 for services rendered.
	i)	On February 10, 2009, the Company issued 18,519 shares of common stock with a fair value of $5,000 to settle accounts payable.
	j)	On March 10, 2009, the Company issued 199,998 units at $0.15 per unit for proceeds of $30,000. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	k)	On April 1, 2009, the Company issued 859,625 units with a fair value of $128,944 to settle accounts payable and note payable. Each unit consisted of one common share and one-half non- transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	l)	On April 3, 2009, the Company issued 71,152 units with a fair value of $10,673 to settle accounts payable. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	m)	On April 6, 2009, the Company issued 292,500 units at $0.15 per unit for proceeds of $43,875. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	n)	On April 16, 2009, the Company issued 860,000 units at $0.15 per unit for proceeds of $129,000. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.

F-16

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

8.	Common Stock (continued)

Stock transactions during the year ended May 31, 2009 (continued):

	o)	On May 15, 2009, the Company issued 20,000 shares of common stock with a fair value of $3,000 to settle accounts payable. Each unit consisted of one common share and one-half non- transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	p)	On May 19, 2009, the Company issued 25,000 shares of common stock with a fair value of $3,750 for services rendered.
	q)	On May 20, 2009, the Company issued 68,000 units at $0.15 per unit for proceeds of $10,200. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
	r)	On May 28, 2009, the Company issued 321,333 units at $0.15 per unit for proceeds of $48,200, of which $15,000 was received subsequent to year end. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.
9.	Share Purchase Warrants
	The following table summarizes the continuity of share purchase warrants:

						Weighted
						Average
						Exercise
			Number of			Price
			Warrants			$
	Balance, May 31, 2008		2,823,750			0.30
	Issued		5,952,608			0.29
	Exercised		(2,200,000	)		0.25
	Balance, May 31, 2009		6,576,358			0.31
	Issued		3,173,555			0.26
	Expired		(3,023,750	)		0.26
	Balance, May 31, 2010		6,726,163			0.31

F-17

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

9.	Share Purchase Warrants (continued)

As at May 31, 2010, the following share purchase warrants were outstanding:

10.	Stock Options

The following table summarizes the continuity of the Company’s stock options:

						Weighted			Weighted
						average			average			Aggregate
						exercise			remaining			intrinsic
			Number			price			contractual life			value
			of options			$			(years)			$
	Outstanding, May 31, 2008		1,450,000			0.33
	Granted		1,900,000			0.29
	Cancelled		(550,000	)		0.25
	Outstanding, May 31, 2009		2,800,000			0.33
	Granted		708,333			0.21
	Cancelled		(1,150,000	)		0.29
	Expired		(750,000	)		0.41
	Outstanding and exercisable, May 31, 2010		1,608,333			0.25			0.8			750

F-18

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

10.	Stock Options (continued)

Additional information regarding stock options as of May 31, 2010, is as follows:

The fair values for stock options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:

The weighted average fair value of the stock options granted during 2010 was $0.10 (2009 - $0.18) per option.

As of May 31, 2010, the Company had no unrecognized compensation expense relating to unvested options.

11.	Commitments
	a)	On October 1, 2009, the Company entered into an agreement with the Chief Financial Officer of the Company for $6,000 per month expiring on September 30, 2010
	b)	On September 2, 2009, the Company entered into an agreement with a company to acquire a worldwide, exclusive license for the Mixed Reactant Flow-By Fuel Cell technology. The term of the agreement is for twenty years or the expiry of the last patent licensed under the agreement, whichever is later. The Company agreed to pay the licensor the following license fees:
			an initial license fee of Cdn$10,000 payable in two installments: Cdn$5,000 upon execution of the agreement (paid) and Cdn$5,000 within thirty days of September 2, 2009 (accrued);
			a further license fee of Cdn$15,000 (accrued) to be paid within ninety days of September 2, 2009; and
			an annual license fee, payable annually on the anniversary of the date of the agreement as follows:

F-19

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

11.	Commitments (continued)

The Company is to pay the licensor a royalty calculated as 2% of the gross revenue and 15% of any and all consideration directly or indirectly received by the Company from the grant of any sublicense rights. The Company will pay interest at a rate of 1% per month on any amounts past due. In addition, the Company is responsible for the timely payment of all future costs relating to patent expenses and any new or useful art, process, machine, manufacture or composition of matter arising out of any licensor improvements or joint improvements licensed under this agreement and identified by the licensor as potentially patentable. The Company must also invest a minimum of Cdn$250,000 in research and development directly associated with the technology.

12.	Income Taxes
	The Company has net operating losses carried forward of $4,407,414 available to offset taxable income in future years which expires in beginning in fiscal 2027.
	The Company is subject to United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

			2010			2009
			$			$
	Income tax recovery at statutory rate		(414,381	)		(604,721	)
	Permanent differences and other		25,471			136,939
	Valuation allowance change		388,910			467,782
	Provision for income taxes		–			–

The significant components of deferred income taxes and assets as at May 31, 2009 and 2008 are as follows:

			2010			2009
			$			$
	Net operating losses carried forward		1,498,521			1,109,611
	Valuation allowance		(1,498,521	)		(1,109,611	)
	Net deferred income tax asset		–			–

	As at May 31, 2010, the Company is in arrears on filing its statutory corporate income tax returns and the amounts presented above are based on estimates. The actual losses available could differ from these estimates.
13.	Subsequent Events
	a)	On June 3, 2010, the Company issued 573,567 units at $0.08 per unit for proceeds of $45,885 which was recorded as common stock subscribed as at May 31, 2010. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.20 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.40 per share for seven consecutive trading days.

F-20

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MANTRA VENTURE GROUP LTD.

(A development stage company)

Notes to the consolidated financial statements

Years ended May 31, 2010 and 2009

(Expressed in U.S. dollars)

13.	Subsequent Events (continued)
	b)	On August 9, 2010, the Company issued 518,750 units at $0.08 per unit for proceeds of $41,500. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.20 per share expiring on the earlier of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.40 per share for seven consecutive trading days.
	c)	On August 5, 2010, the Company entered into a premises agreement for a period of eighteen months where it is obligated to pay a base rent of Cdn$1,894 per month for the first twelve months and Cdn$2,030 per month thereafter.

F-21

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Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2010. Based on the evaluation of these disclosure controls and procedures, and in light of the weaknesses identified below, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of May 31, 2010 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of May 31, 2010, the Company determined that there were significant deficiencies that constituted material weaknesses, as described below.

	1.	Certain entity level controls establishing a “tone at the top” were considered material weaknesses. The Company does not have any independent directors and thus no independent directors sit on the audit committee.
	2.	The Company has not formally adopted internal controls surrounding its cash and financial reporting procedures including the absence of sufficient management review controls and separation of duties.
	3.	There is no segregation of duties in the area of accounts receivable as one person receives, deposits and records all checks received.
	4.	The lack of independent directors exercising an oversight role increases the risk of management override.
	5.	Inadequate controls over equity transactions.

Management is currently evaluating remediation plans for the above control deficiencies.

In light of the existence of these control deficiencies, management concluded that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

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As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of May 31, 2010 based on criteria established in Internal Control—Integrated Framework issued by COSO.

Saturna Group Chartered Accountants LLP, an independent registered public accounting firm, was not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of May 31, 2010.

Changes in Internal Control

During the quarter ended May 31, 2010 there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information

None.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Our bylaws state that the authorized number of directors shall be not less than one and not more than fifteen and shall be set by resolution of the Board of Directors. Our Board of Directors has fixed the number of directors at 5.

Our current directors and officers are as follows:

Our directors serve until our next annual shareholder meeting or until his successor is elected who accepts the position. Officers hold their positions at the pleasure of the Board of Directors. There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.

Larry Kristof, President, Chief Executive Officer, Director

Larry Kristof has been our President, Chief Executive Officer and sole director since our inception on January 22, 2007. Mr. Kristof has over 15 years experience in business development and management. From 2003 until April 2007 he was the President and Chief Executive Officer of Lexington Energy Services Inc., a public company quoted on the OTC Bulletin Board under the symbol LXES.OB.

Mr. Kristof co-founded Lexington Energy in 2003 and successfully built the company from concept through assets of over $7 million. Under Mr. Kristof’s direction, Lexington Energy designed and commercialized innovative mobile drilling rigs and nitrogen generation technologies. From 2003 to 2005, Mr. Kristof co-founded Lexington Communications Ltd., a company in the business of providing investor and corporate communications expertise to public companies. In early 2003, Mr. Kristof worked as the Corporate Communications Manager of Trivello Energy Corp. (TSX-V: TRV.V), a company engaged in oil and gas exploration and production in western Canada. From 1998 to 2001, Mr. Kristof was the founder and President of Westec Venture Group Inc., a business development and venture capital service provider.

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Con Buckley, Chief Financial Officer

Mr. Buckley graduated from the faculty of commerce at the University of British Columbia in 1968 with a major in finance. Admitted as a member of the institute of chartered accountants of British Columbia in 1971, Mr. Buckley is currently the senior partner of the Vancouver accounting firm of Buckley Dodds, where he started in January of 1994. As a member of the Buckley Dodds staff, Mr. Buckley has been involved with several public company IPOs as well as various government programs instituted to help with financing for Canadian companies, and helped structure various debt and equity instruments to meet the needs of his clients.

Shawn Kim, Vice President of International Business Development and Director

Shawn Kim has been our Vice President of International Business Development since June 3, 2009. Mr. Kim has nine years of experience in the financial industry. From July 2000 to October 2002 he worked as a business analyst for Mackenzie Financial Corporation in Toronto, following which he was employed by American International Group, Inc. in Korea from February 2003 to March 2006. While employed at AIG, Mr. Kim successfully implemented a worldwide marketing model and secured new business alliances. Most recently, Mr. Kim served as an international business consultant with the District of North Vancouver, British Columbia. Mr. Kim graduated from the University of Western Ontario in 1996 with a Bachelor of Arts degree in Administrative and Commercial Studies.

John Russell, Director

Mr. Russell has over 30 years experience in the identification, evaluation and marketing of technology; he has authored a chapter on sonic energy applications (Elsevier), several scientific publications, and has given conference presentations on new technologies. He was Vice-President of Technology with ARC Sonics Inc., a specialty engineering firm. John holds a Bachelor of Arts degree from the University of British Columbia. As Vice-President of Technology Evaluation, Chair of the Science Advisory Board and a Director, Mr. Russell draws upon his knowledge and experience to identify, evaluate and select the most promising technologies within those industry sectors targeted by Mantra.

Corporate Advisory Board

Our Corporate Advisory Board provides information and recommendations to our directors and management regarding the economic and regulatory aspects of our various technologies, solutions and services. Our Corporate Advisory Board is composed of specialists in the legal, finance, environmental policy, development, and marketing fields whom we have engaged as consultants on a part-time basis.

Our Corporate Advisory Board provides advice and expertise on regulatory and corporate governance issues, strategic partnership and joint venture opportunities, project management, financing, marketing, sales, software and new technology issues and development opportunities. We also intend to use the diverse network of individuals on the Corporate Advisory Board to promote our business, products and services in the sustainability industry and to attract desirable strategic partners.

Dr. Kevin Wainwright

Dr. Kevin Wainwright was appointed as a member of our Corporate Advisory Board on October 5, 2007. For the past five years, Dr. Wainwright has been the head of the Bachelor of Business Administration program at the British Columbia Institute of Technology (“BCIT”) School of Business, a lecturer for Simon Fraser University’s Masters of Public Policy program, and an instructor in Simon Frasier University’s Department of Economics. He has also served as a director of BCIT’s SITE Centre of Excellence for applied research since March 2007.

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Dr. Wainwright’s fields of specialization are microeconomic theory, industrial organization and the environment and resources. His publications and working papers include Fundamental Methods of Mathematical Economics (4th edition), co-authored with Alpha Chiang (McGraw Hill, 2004); “Environmental Regulation, Asymmetric Information and Moral Hazard”; “Dual Organizational Structures in Franchise Industries”’; and “Dogs of War: The Strategic Use of Legal Services in the Tort System”.

Scientific Advisory Board

Our Scientific Advisory Board provides information and recommendations to our directors and management regarding the scientific and technical aspects of our various technologies, solutions and services. Our Scientific Advisory Board is composed of specialists in the scientific, environmental, electrical and systems engineering fields whom we have engaged as consultants on a part-time basis.

Our Scientific Advisory Board provides advice and expertise on technology and software design, sustainability, environmental policy, and technology and service assessment and implementation. The Board also provides input on the technical, ethical and environmental consequences associated with our technologies, projects and operations.

We have entered into consulting agreements with the individuals listed below and appointed them as members of our Scientific Advisory Board. We have also identified other suitable candidates and are currently in negotiations with them regarding the terms of their respective services. However, there is no assurance that we will be able to identify, attract or retain any or a sufficient number of qualified professionals.

Professor Colin Oloman, P.Eng.

Prof. Colin Oloman has been a member of our Scientific Advisory Board since November 2, 2007. Prof. Oloman is a graduate of the Universities of Sydney and British Columbia and has been engaged in the field of chemical engineering for 40 years, both on the academic and industry sides. As a faculty member in the Department of Chemical and Biological Engineering at the University of British Columbia, Prof. Oloman taught a range of undergraduate and graduate courses until his retirement in 2004.

In addition to his status as a professor emeritus at the University of British Columbia, Prof. Oloman is a professional engineer, a member of the Chemical Institute of Canada and the Electrochemical Society, has and the author or coauthor of three books (Ol's Notes on Material and Energy Balances, Electrochemical Processing for the Pulp and Paper Industry and Handbook of Fuel Cell Modeling) as well as numerous proprietary reports and publications in technical journals. He is also the holder or co-holder of some twenty U.S. and international patents. Prof. Oloman’s ongoing research and consulting work focuses on electrochemical systems and in particular the design of electrochemical reactors for electro-synthesis and power generation

Dr. Edward J. (Ben) Anthony

Dr. Edward J. (Ben) Anthony has been a member of our Scientific Advisory Board since January 23, 2008. Dr. Anthony is a Senior Research Scientist for the National Research Council ("NRC") of Canada and enjoyed a lifetime of involvement with energy-related issues. He recently served as the Canadian representative to the International Energy Agency and as the Session Chair responsible for the September 2007 Greenhouse Climate Change Sessions of the Pittsburgh Coal Conference in Johannesburg, South Africa.

On March 4, 2008 Dr. Anthony was appointed the head of Canada's Clean Electric Power Generation ('CEGP') program. The CEPG program is administered by NRC and works in partnership with numerous agencies, universities and research institutes, including the International Energy Agency, Environment Canada and the United States Departments of Energy and Environmental Protection. Dr. Anthony has published over 100 papers in refereed journals and directed several research projects at the NRC on the capture and sequestration of carbon dioxide for greenhouse gas abatement.

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Norman Chow, P.Eng.

Norman Chow has been a member of our Scientific Advisory Board since July 22, 2008. Mr. Chow earned a B.A.Sc. in Metals and Materials Engineering from the University of British Columbia, graduating top of his class. Continuing his education, he received a Masters of Applied Science Degree and then became a Registered Professional Engineer (P. Eng.) in British Columbia. Mr. Chow has over 10 years of technology development experience and contract research experience. Mr. Chow also co-invented a patented electrochemical metal cleaning process that is used worldwide by multi-national companies. He has a background in technology development, business management, international sales, project management and manufacturing. Mr. Chow has been the winner of several prestigious awards that recognize his skills in engineering and business. In 1996, his patented metal cleaning technology, won the Financial Post Gold Award for being the Top Environmental Technology in Canada, and then in 2004 he was named the winner of the Business in Vancouver Top Forty under 40 Award.

Joey Jung, P.Eng.

Joey Jung has been a member of our Scientific Advisory Board since July 22, 2008. Mr. Jung earned his Masters of Applied Science Degree from the University of British Columbia in Chemical Engineering and subsequently became a Registered Professional Engineer (P. Eng.) in British Columbia. Mr. Jung has had a successful career in electrochemical engineering and battery research, formerly serving as Vice President and Chief Technology Officer of a publicly traded battery development company.

John Russell

John Russell has been the Chair of our Scientific Advisory Board since October 5, 2007. His biographical information is provided above.

Significant Employees

Other than as described above, we do not expect any other individuals to make a significant contribution to our business.

Family Relationships

There are no family relationships among our officers, directors or persons nominated for such positions.

Legal Proceedings

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:

• any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
• any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
• being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
• being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Audit Committee

The functions of the Audit Committee are currently carried out by our Board of Directors. Our Board of Directors has determined that we do not have an audit committee financial expert on our Board of Directors carrying out the duties of the Audit Committee. The Board of Directors has determined that the cost of hiring a financial expert to act as our director and a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on our Board of Directors.

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Code of Ethics

Effective February 11, 2008 we adopted a code of ethics and business conduct that applies to our officers, directors and employees and we have filed copies of our code of ethics as an exhibit to the registration statement of which this Prospectus is a part. We intend to disclose any amendments to or waivers of certain provisions of our code of ethics in a current report on Form 8-K.

Audit Committee and Audit Committee Financial Expert

Our audit committee consists of Larry Kristof, Shawn Kim and John Russell.

Our board of directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K.

Our audit committee is governed by an Audit Committee Charter adopted by our board of directors.

We believe that the members of our audit committee are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or committees performing similar functions nor do we have a written nominating, compensation. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.

Director Nominees

We do not have a nominating committee. Our sole director, in his capacity as a director, selects individuals to stand for election as members of the Board. Since the Board of Directors does not include any independent directors, the decision of the Board as to director nominees is made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, not less than 90 days prior to the next annual Board of Directors' meeting at which the slate of Board nominees is adopted, the Board will accept written submissions of proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the shareholder submitting the proposed nominee believes that the nomination would be in the best interests of shareholders. If the proposed nominee is not the same person as the shareholder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee's qualifications to serve on the Board of Directors, as well as a list of references.

The Board identifies director nominees through a combination of referrals from different people, including management, existing Board members and security holders. Once a candidate has been identified, the Board reviews the individual's experience and background and may discuss the proposed nominee with the source of the recommendation. If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of management's slate of director nominees submitted to shareholders for election to the Board.

Among the factors that the Board considers when evaluating proposed nominees are their knowledge of, and experience in business matters, finance, capital markets and mergers and acquisitions. The Board may request additional information from the candidate prior to reaching a determination. The Board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.

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Section 16(a) Beneficial Ownership Compliance Reporting

Section 16(a) of the Securities Exchange Act of 1934 requires a company’s directors and officers, and persons who own more than ten-percent (10%) of the company’s common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5. Such officers, directors and ten-percent stockholders are also required to furnish the company with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such forms received by us and on written representations from certain reporting persons, we believe that all Section 16(a) reports applicable to our officers, directors and ten-percent stockholders with respect to the fiscal year ended May 31, 2010 were filed. However, some were filed late.

Item 11.

Executive Compensation

The particulars of the compensation paid to the following persons:

• our principal executive officer;

• each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended April 30, 2010 and 2009; and

• up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended April 30, 2010 and 2009,

who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:

	1)	Con Buckley was appointed Chief Financial Officer on October 1, 2009.
	2)	Dennis Petke was appointed Chief Financial Officer on June 1, 2008 and resigned as Chief Financial Officer on October 1, 2009.

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Option Grants in the Last Fiscal Year

The following table outlines unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year:

1)

We have omitted certain columns in the outstanding equity awards table pursuant to Item 402(a)(5) of Regulation S-K as no equity awards were awarded to, earned by, or paid to any of the executive officers or directors required to be reported in that table or column in any fiscal year covered by that table.

As of September 14, 2010 we did not have any equity compensation plans.

Management Compensation Narrative

On January 1, 2009 we entered into a consulting agreement with Larry Kristof whereby we engaged Mr. Kristof’s services as our President and Chief Executive Officer. In exchange for these services, we agreed to pay Mr. Kristof a monthly salary of $8,500. The agreement may be terminated by us at any time without notice.

On June 1, 2009 we entered into a consulting agreement with Shawn Kim whereby we agreed to compensate Mr. Kim for provision of services as our Vice President of International Business Development with a monthly payment of approximately $5,300 (CAD $6,000) as well as the issuance of 100,000 shares of our common stock and options to purchase an additional 75,000 shares of our common stock at a price of $0.15 per shares exercisable within two years after the date such option is granted or upon the termination of this Agreement, whichever occurs earlier.

On October 1, 2009, we entered into a management agreement with Con Buckley. The agreement is for a period of one year. Pursuant to the terms of the management agreement, Mr. Buckley will be paid US$6,000 per month and will be granted options to acquire 400,000 shares of our common stock at $0.20 per share. The options are valid until October 1, 2010. Management agreement may be terminated by our company with 7 days notice and will automatically renew on September 30 of each year unless otherwise terminated.

Compensation of Directors

Other than as set out below, we have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.

One June 8, 2009, we entered into a director agreement with Shawn Kim, to the effective upon Mr. Kim’s official appointment to our company’s board of directors. Pursuant to the terms of this agreement Mr. Kim received options to purchase 200,000 shares of our company’s common stock at a price of $0.24 per share in consideration for fulfilling his duties as one of our company’s directors for a period of 12 months. The options expire the earlier of September 21, 2010, 5 days after Mr. Kim resigns from our company’s board of directors or after our company’s common shares end trading at a price of $0.50 per share for a period of 5 trading days.

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On June 8, 2009, we entered into a director agreement with John Russell, to the effective upon Mr. Russell’s official appointment to our company’s board of directors. Pursuant to the terms of this agreement Mr. Russell received options to purchase 33,333 shares of our company’s common stock at a price of $0.24 per share in consideration for fulfilling his duties as one of our company’s directors for a period of 60 days. The options expire the earlier of September 21, 2010, 5 days after Mr. Russell resigns from our company’s board of directors or after our company’s common shares end trading at a price of $0.50 per share for a period of 5 trading days.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

Compensation Committee

We do not currently have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table lists, as of September 14, 2010, the number of shares of our common stock beneficially owned by (i) each person or entity known to us to be the beneficial owner of more than 5% of our outstanding common stock; (ii) each of our officers and directors; and (iii) all of our officers and directors as a group. Information relating to the beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be the beneficial owner of a security if that person has or shares voting power or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the rules of the Securities and Exchange Commission, more than one person may be deemed to be a beneficial owner of the same security, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest.

The percentages below are calculated based on 35,127,185 issued and outstanding shares of our common stock as of September 14, 2010.

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1)	Larry Kristof is our President, Chief Executive Officer and sole director.
2)	Includes:
	a)	175,000 common shares held by 0770987 BC Ltd. and Larry Kristof’s spouse, Kelly Kristof, in street name; and
	b)	13,250,000 common shares held by 0770987 BC Ltd.
	c)	Mr. Kristof has sole voting and investment control over 0770987 BC Ltd.
3)	Con Buckley is our Chief Financial Officer and Principal Accounting Officer.
4)	Includes:
	a)	options to purchase 400,000 common shares at an exercise price of $0.20 per share until October 1, 2010 or 5 days after Mr. Buckley resigns from our company’s board of directors whichever occurs earlier.
5)	Shawn Kim is our Vice President of International Development and a Director.
6)	Includes 100,000 shares of our common stock and options to purchase an additional 75,000 shares of our common stock at $0.15 per share.
7)	John Russell is a Director of our company.
8)	Includes:
	a)	1,133,551 shares of our common stock;
	b)	options to purchase 33,333 common shares at an exercise price of $0.24 per share until September 21, 2010 or 5 days after Mr. Russell resigns from our company’s board of directors, or after our company’s common shares end trading at a price of $0.50 per share for a period of 5 trading days, whichever occurs earlier; and
	c)	warrants to purchase 71,152 common shares at an exercise price of $0.30 per share until April 3, 2011

Changes in Control

There are currently no arrangements or agreements which would result in a change in control of our company.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Except as set forth below, we have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of these persons wherein the amount involved in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last three fiscal years:

• During the year ended May 31, 2010, we incurred management fees of $57,000 (2009 - $0) to an accounting firm where our Chief Financial Officer is a partner.
• During the year ended May 31, 2010, we incurred management fees of $10,124 (2009 - $73,500) to a company controlled by our former Chief Financial Officer.
• During the year ended May 31, 2010, we incurred management fees of $41,948 (2009 - $nil) to our Vice President.
• As at May 31, 2010, we owe $34,592 (2009 - $nil) to our Vice President which is non-interest bearing, unsecured, and due on demand.
• As at May 31, 2010, we owe $17,608 (2009 - $nil) to our Vice President of the Company which is non- interest bearing, unsecured, and due on demand
• As at May 31, 2010, we owe $21,045 (2009 - $nil) to the spouse of our President which is non-interest bearing, unsecured, and due on demand.
• As at May 31, 2010, we owe a total of $38,550 (2009 - $nil) to an accounting firm where our Chief Financial Officer is a partner which is non-interest bearing, unsecured, and due on demand.

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• As at May 31, 2010, we owe a total of $9,179 (2009 - $3,190) to our Chief Financial Officer and a company controlled by our former Chief Financial Officer.
• As at May 31, 2010, we owe a total of $173,738 (2009 - $72,825) to our President and a company controlled by our President which is non-interest bearing, unsecured, and due on demand.

Director Independence

Our securities are quoted on the OTC Bulletin Board which does not have any director independence requirements.

However, we currently use NASDAQ’s general definition for determining director independence, which states that “independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, that, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director. Currently, none of our directors meet this definition of independence.

Our audit committee consists of Larry Kristof, Shawn Kim and John Russell

We do not have a standing compensation or nominating committee, but our entire board of directors acts in such capacities.

Item 14.

Principal Accountant Fees and Services.

The aggregate fees billed for the most recently completed fiscal year ended May 31, 2010 and for fiscal year ended May 31, 2009 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

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PART IV

Item 15.

Exhibits, Financial Statement Schedules

Exhibits

Exhibit	Exhibit
Number	Description
(2)	Plan of acquisition, reorganization, arrangement, liquidation or succession
2.1	Plan of Conversion of Mantra Venture Group Ltd. from a Nevada Corporation into a British Columbia Corporation dated October 29, 2008. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on November 4, 2008)
(3)	Articles of Incorporation, Bylaws
3.1	Articles of Conversion of Mantra Venture Group Ltd. dated October 28, 2008 (incorporated by reference to our Current Report on Form 8-K filed with the SEC on November 4, 2008)
3.2	British Columbia Table 1 Articles adopted on December 4, 2008 (incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 12, 2008)
3.3	British Columbia Notice of Articles (incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 12, 2008)
(10)	Material Contracts
10.1	Investor Relations Service Agreement between Mantra Venture Group Ltd. and Primus Public Relations dated as of June 9, 2008. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on June 20, 2008)
10.2	Consulting Agreement between Mantra Venture Group Ltd. and ECON Corporate Services, Inc. dated as of June 15, 2008. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on June 20, 2008)
10.3	Stock Option Modification Agreement between Mantra Venture Group Ltd. and David Warren dated as of July 1, 2008. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on June 30, 2008)
10.4	Revolving Line of Credit Agreement with Larry Kristof dated October 15, 2008 (incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on January 14, 2009)
10.5	Sponsorship and Proposed Equity Capital Raise Agreement with M Partners Inc. dated December 4, 2008. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 11, 2008)
10.6	Contractor Proposal Agreement entered into with Kemetco Research Inc. on January 29, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 4, 2009)
10.7	Option Agreement entered into with Synergy BioMetals Recovery Systems Inc. on February 27, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 2, 2009)
10.8	Extension of Option Agreement entered into with Synergy BioMetals Recovery Systems Inc. on May 1, 2009. (incorporated by reference to our Annual Report on Form 18-K filed with the SEC on September 15, 2009)
10.9	Contractor Proposal Agreement entered into with Kemetco Research Inc. on March 18, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 26, 2009)
10.10	Director Agreement with Shawn Kim dated June 8, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 23, 2009)
10.11	Director Agreement with John Russell dated June 8, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 23, 2009)
10.12	Management Agreement with Con Buckley dated October 1, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on October 7, 2009)

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Exhibit	Exhibit
Number	Description
10.13	Development Agreement with 3M dated October 28, 2009. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on November 6, 2009)
10.14	Technology Development Cooperation Agreement entered into on August 16, 2010. (incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 17, 2010)
(31)	(i) Rule 13a-14(a)/ 15d-14(a) Certifications (ii) Rule 13a-14(d)/ 15d-14(d) Certifications
31.1*	Certification of the Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32)	Section 1350 Certifications
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(99)	Additional Exhibits
99.1*	Audit Committee Charter adopted April 20, 2010

*filed herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MANTRA VENTURE GROUP LTD.
Date: September 14, 2010	By:	/s/ Larry Kristof
		Larry Kristof
		Director, President, Chief Executive Officer
		(Principal Executive Officer)
Date: September 14, 2010	By:	/s/ Con Buckley
		Con Buckley
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting
		Officer)

Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: September 14, 2010	/s/ Larry Kristof
	Larry Kristof
	Director, President, Chief Executive Officer
Date: September 14, 2010	/s/ Shawn Kim
	Shawn Kim
	Director

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