---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended February 28, 2013

or

[ ] TRANSITION REPORT UNDER 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 incorporation or
      organization) | (IRS Employer Identification No.)
|#562  800 15355 24thAvenue,
      Surrey, British Columbia, Canada  | V4A 2H9                          
|(Address of principal executive offices)                             | (Zip Code)                       

(604) 560-1503(Registrants telephone number,
including area code)

N/A(Former name, former address and former
fiscal year, if changed since last report)

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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.[X] YES   [   ]
NO

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).[X] YES   [   ] NO

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a small
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

Large accelerated filer
    [ ]
    
    Accelerated filer [ ]Non-accelerated filer
    [ ]
    (Do not check if a smaller reporting company)
    Smaller reporting company
    [X]


Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act [   ]
YES    [X] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court.[   ] YES   [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
54,764,276 common shares issued and outstanding as of April 19,
2012.

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Table of Contents

|PART
      I  FINANCIAL INFORMATION | 3                                                                                                        
|------------------------------------ | ---------------------------------------------------------------------------------------------------------
|                                     | Item
      1. Financial Statements                                                                       
|                                     | Item
      2. Managements Discussion and Analysis of Financial Condition and Results
      of Operations
|                                     | Item
      3. Quantitative and Qualitative Disclosures About Market Risk                                 
|                                     | Item
      4. Controls and Procedures                                                                    
|PART
      II  OTHER INFORMATION    | 17                                                                                                       
|                                     | Item
      1. Legal Proceedings                                                                          
|                                     | Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds                                
|                                     | Item
      3. Defaults Upon Senior Securities                                                            
|                                     | Item
      4. Mine Safety Disclosures                                                                    
|                                     | Item
      5. Other Information                                                                          
|                                     | Item
      6. Exhibits                                                                                   
|                                     | SIGNATURES                                                                                               

2

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PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited interim consolidated financial statements of
Mantra Venture Group Ltd. (we, us, our and our company) follow. All
currency references in this report are in US dollars unless otherwise noted.

3

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|MANTRA VENTURE GROUP LTD.        
|---------------------------------
|(A development stage company)    
|Consolidated financial statements
|February 28, 2013                
|(Expressed in U.S. dollars)      
|(unaudited)                      

Index

|Consolidated
      balance sheets                    | F1
|---------------------------------------------------- | ---
|Consolidated
      statements of operations          | F2
|Consolidated
      statements of cash flows          | F3
|Notes
      to the consolidated financial statements | F4

4

---

|MANTRA VENTURE GROUP LTD.    
|-----------------------------
|(A development stage company)
|Consolidated balance sheets  
|(Expressed in U.S. dollars)  

|                                                                                                                                                                                                 |  | February 28, |   |  | May 31,    |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | - |  | ---------- | -
|                                                                                                                                                                                                 |  | 2013         |   |  | 2012       |  
|                                                                                                                                                                                                 |  | $            |   |  | $          |  
|                                                                                                                                                                                                 |  | (unaudited)  |   |  |            |  
|ASSETS                                                                                                                                                                                           |  |              |   |  |            |  
|Current assets                                                                                                                                                                                   |  |              |   |  |            |  
|Cash                                                                                                                                                                                             |  | 126,600      |   |  | 215,600    |  
|Amounts receivable                                                                                                                                                                               |  | 49,051       |   |  | 16,120     |  
|Inventory                                                                                                                                                                                        |  |             |   |  | 2,500      |  
|Prepaid expenses and deposits                                                                                                                                                                    |  | 35,954       |   |  | 40,140     |  
|Total current assets                                                                                                                                                                             |  | 211,605      |   |  | 274,360    |  
|Property and
      equipment (Note 3)                                                                                                                                                            |  | 69,357       |   |  | 22,966     |  
|Total assets                                                                                                                                                                                     |  | 280,962      |   |  | 297,326    |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                            |  |              |   |  |            |  
|Current liabilities                                                                                                                                                                              |  |              |   |  |            |  
|Accounts payable and accrued liabilities                                                                                                                                                         |  | 537,558      |   |  | 536,888    |  
|Due to related parties (Note
      4)                                                                                                                                                            |  | 146,707      |   |  | 244,455    |  
|Loans payable (Note 5)                                                                                                                                                                           |  | 254,040      |   |  | 227,347    |  
|Obligations under capital
      lease (Note 6)                                                                                                                                                   |  | 7,336        |   |  |           |  
|Convertible debentures (Note 7)                                                                                                                                                                  |  | 200,000      |   |  | 200,000    |  
|Total current liabilities                                                                                                                                                                        |  | 1,145,641    |   |  | 1,208,690  |  
|Loans payable (Note 5)                                                                                                                                                                           |  | 38,784       |   |  | 60,297     |  
|Obligations under capital lease (Note 6)                                                                                                                                                         |  | 31,605       |   |  |           |  
|Total liabilities                                                                                                                                                                                |  | 1,216,030    |   |  | 1,268,987  |  
|Going concern (Note 1)                                                                                                                                                                           |  |              |   |  |            |  
|Commitments and contingencies (Note 11)                                                                                                                                                          |  |              |   |  |            |  
|Subsequent events (Note 12)                                                                                                                                                                      |  |              |   |  |            |  
|Stockholders deficit                                                                                                                                                                            |  |              |   |  |            |  
|Mantra Venture Group Ltd.
      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: 53,283,140 (May 31, 2012  45,623,806) shares |  | 533          |   |  | 456        |  
|Additional paid-in capital                                                                                                                                                                       |  | 6,526,823    |   |  | 5,675,442  |  
|Common stock
      subscribed (Note 8)                                                                                                                                                           |  | 325,839      |   |  | 144,916    |  
|Common stock subscriptions
      receivable (Note 8)                                                                                                                                             |  |             |   |  | (94,708    | )
|Deficit accumulated during the
      development stage                                                                                                                                           |  | (7,750,374   | ) |  | (6,689,470 | )
|Total Mantra Venture Group Ltd. stockholders deficit                                                                                                                                            |  | (897,179     | ) |  | (963,364   | )
|Non-controlling interest                                                                                                                                                                         |  | (37,889      | ) |  | (8,297     | )
|Total
      stockholders deficit                                                                                                                                                                |  | (935,068     | ) |  | (971,661   | )
|Total liabilities and stockholders deficit                                                                                                                                                      |  | 280,962      |   |  | 297,326    |  

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

F-1

---

|MANTRA VENTURE GROUP LTD.            
|-------------------------------------
|(A development stage company)        
|Consolidated statements of operations
|(Expressed in U.S. dollars)          
|(unaudited)                          

|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  | Accumulated from |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | - |  | ------------------------------- | - |  | ---------------------- | - |  | ---------- | - |  | ---------------- | -
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  | January 22, 2007 |  
|                                                                                                                                                                        |  | Three Months Ended              |   |  | Nine Months Ended               |   |  | (date of inception) to |  
|                                                                                                                                                                        |  | February 28, February
      29, |   |  | February 28, February
      29, |   |  | February 28,           |  
|                                                                                                                                                                        |  | 2013                            |   |  | 2012                            |   |  | 2013                   |   |  | 2012       |   |  | 2013             |  
|                                                                                                                                                                        |  | $                               |   |  | $                               |   |  | $                      |   |  | $          |   |  | $                |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Revenue                                                                                                                                                                 |  |                                |   |  | 2,371                           |   |  | 3,027                  |   |  | 12,561     |   |  | 38,812           |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Cost of goods sold                                                                                                                                                      |  |                                |   |  | 1,886                           |   |  | 2,500                  |   |  | 9,598      |   |  | 14,973           |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Gross profit                                                                                                                                                            |  |                                |   |  | 485                             |   |  | 527                    |   |  | 2,963      |   |  | 23,839           |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Operating expenses                                                                                                                                                      |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Business
      development                                                                                                                                              |  | 10,797                          |   |  | 657                             |   |  | 21,012                 |   |  | 1,248      |   |  | 353,518          |  
|Consulting and advisory                                                                                                                                                 |  | 27,416                          |   |  | 15,625                          |   |  | 78,951                 |   |  | 144,085    |   |  | 935,789          |  
|Depreciation and
      amortization                                                                                                                                     |  | 8,623                           |   |  | 7,003                           |   |  | 21,950                 |   |  | 21,389     |   |  | 172,584          |  
|Foreign exchange loss (gain)                                                                                                                                            |  | (13,723                         | ) |  | 14,693                          |   |  | 5,044                  |   |  | (8,564     | ) |  | 44,176           |  
|General and
      administrative                                                                                                                                        |  | 11,472                          |   |  | 6,727                           |   |  | 32,453                 |   |  | 17,131     |   |  | 460,304          |  
|License fees                                                                                                                                                            |  |                                |   |  |                                |   |  | 29,442                 |   |  | 19,614     |   |  | 82,494           |  
|Management fees
      (Note 5)                                                                                                                                          |  | 75,776                          |   |  | 40,957                          |   |  | 258,087                |   |  | 121,957    |   |  | 1,385,357        |  
|Professional fees                                                                                                                                                       |  | 28,847                          |   |  | 15,412                          |   |  | 122,748                |   |  | 105,599    |   |  | 1,012,543        |  
|Public listing
      costs                                                                                                                                              |  | 3,325                           |   |  | 1,525                           |   |  | 15,947                 |   |  | 10,122     |   |  | 238,447          |  
|Rent                                                                                                                                                                    |  | 4,500                           |   |  | 5,916                           |   |  | 13,500                 |   |  | 23,896     |   |  | 234,683          |  
|Research and
      development                                                                                                                                          |  | (661                            | ) |  |                                |   |  | 368,157                |   |  |           |   |  | 797,959          |  
|Shareholder communications and                                                                                                                                          |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|awareness                                                                                                                                                               |  |                                |   |  |                                |   |  | 34,719                 |   |  | 797        |   |  | 676,197          |  
|Travel and promotion                                                                                                                                                    |  | 21,390                          |   |  | 3,555                           |   |  | 98,542                 |   |  | 11,305     |   |  | 524,510          |  
|Wages and
      benefits                                                                                                                                                |  |                                |   |  |                                |   |  |                       |   |  |           |   |  | 739,509          |  
|Website development/corporate
      branding                                                                                                                            |  |                                |   |  |                                |   |  |                       |   |  |           |   |  | 195,451          |  
|Write-down of
      intangible assets                                                                                                                                   |  |                                |   |  |                                |   |  |                       |   |  |           |   |  | 37,815           |  
|Write-down of inventory                                                                                                                                                 |  |                                |   |  |                                |   |  |                       |   |  |           |   |  | 12,455           |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Total operating expenses                                                                                                                                                |  | 177,762                         |   |  | 112,070                         |   |  | 1,100,552              |   |  | 468,579    |   |  | 7,903,791        |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Loss
      before other income (expense)                                                                                                                                |  | (177,762                        | ) |  | (111,585                        | ) |  | (1,100,025             | ) |  | (465,616   | ) |  | (7,879,952       | )
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Other income (expense)                                                                                                                                                  |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Accretion of discounts on
      convertible                                                                                                                             |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|debentures                                                                                                                                                              |  |                                |   |  |                                |   |  |                       |   |  |           |   |  | (45,930          | )
|Loss (gain) on disposal of
      equipment                                                                                                                              |  |                                |   |  | (14,999                         | ) |  |                       |   |  | (14,999    | ) |  | (14,999          | )
|Gain (loss) on
      settlement of debt                                                                                                                                 |  | 1,130                           |   |  |                                |   |  | 1,130                  |   |  | 3,250      |   |  | 22,965           |  
|Government grant income                                                                                                                                                 |  |                                |   |  |                                |   |  |                       |   |  | -          |   |  | 118,324          |  
|Interest expense                                                                                                                                                        |  | (8,891                          | ) |  | (6,357                          | ) |  | (29,788                | ) |  | (18,999    | ) |  | (132,255         | )
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Total other income (expense)                                                                                                                                            |  | (7,761                          | ) |  | (21,356                         | ) |  | (28,658                | ) |  | (30,748    | ) |  | (51,895          | )
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Net loss for the period                                                                                                                                                 |  | (185,523                        | ) |  | (132,941                        | ) |  | (1,128,683             | ) |  | (496,364   | ) |  | (7,931,847       | )
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Less: net loss attributable to the non- 
      controlling
      interest                                                                                               |  | 20,292                          |   |  | 3,753                           |   |  | 67,778                 |   |  | 28,754     |   |  | 181,473          |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Net loss attributable to Mantra Venture Group Ltd.                                                                                                                      |  | (165,231                        | ) |  | (129,188                        | ) |  | (1,060,905             | ) |  | (467,610   | ) |  | (7,750,374       | )
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Net loss per share attributable to Mantra 
      Venture Group
      Ltd. common shareholders, 
      basic and diluted                                                 |  |                                |   |  |                                |   |  | (0.02                  | ) |  | (0.01      | ) |  |                  |  
|                                                                                                                                                                        |  |                                 |   |  |                                 |   |  |                        |   |  |            |   |  |                  |  
|Weighted average number of shares 
      outstanding used in the
      calculation of net loss 
      attributable to Mantra Venture Group Ltd. per 
      common share |  | 51,950,921                      |   |  | 44,003,256                      |   |  | 49,898,723             |   |  | 42,961,468 |   |  |                  |  

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

F-2

---

|MANTRA VENTURE GROUP LTD.            
|-------------------------------------
|(A development stage company)        
|Consolidated statements of cash flows
|(Expressed in U.S. dollars)          
|(unaudited)                          

|                                                                                                |  |              |   |  |              |   |  | Accumulated from       |  
|----------------------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ---------------------- | -
|                                                                                                |  | Nine Months  |   |  | Nine Months  |   |  | January 22, 2007       |  
|                                                                                                |  | Ended        |   |  | Ended        |   |  | (date of inception) to |  
|                                                                                                |  | February 28, |   |  | February 29, |   |  | February 28,           |  
|                                                                                                |  | 2013         |   |  | 2012         |   |  | 2013                   |  
|                                                                                                |  | $            |   |  | $            |   |  | $                      |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Operating activities                                                                            |  |              |   |  |              |   |  |                        |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Net loss for the period                                                                         |  | (1,128,683   | ) |  | (496,364     | ) |  | (7,931,847             | )
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Adjustments to reconcile net
      loss to net cash used in operating 
         activities:     |  |              |   |  |              |   |  |                        |  
|Accretion of discounts on
      convertible debentures                                          |  |             |   |  |             |   |  | 45,930                 |  
|Depreciation and
      amortization                                                             |  | 21,950       |   |  | 21,389       |   |  | 172,584                |  
|Foreign exchange loss (gain)                                                                    |  | 5,734        |   |  | (1,138       | ) |  | (693                   | )
|Gain on
      settlement of debt                                                                |  | (1,130       | ) |  | (3,250       | ) |  | (22,965                | )
|Loss on disposal of property and
      equipment                                                |  |             |   |  | 14,999       |   |  | 14,999                 |  
|Stock-based
      compensation                                                                  |  | 24,090       |   |  | 92,457       |   |  | 1,610,415              |  
|Write-down of intangible assets                                                                 |  |             |   |  |             |   |  | 37,815                 |  
|Write-down of
      inventory                                                                   |  |             |   |  |             |   |  | 12,455                 |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Changes in operating assets
      and liabilities:                                              |  |              |   |  |              |   |  |                        |  
|Amounts receivable                                                                              |  | (32,931      | ) |  | (11,804      | ) |  | (49,051                | )
|Inventory                                                                                       |  | 2,500        |   |  | 1,024        |   |  | (12,455                | )
|Prepaid expenses and deposits                                                                   |  | 4,186        |   |  | 2,765        |   |  | (35,954                | )
|Other assets                                                                                    |  |             |   |  |             |   |  | (12,000                | )
|Accounts payable and accrued
      liabilities                                                  |  | (3,200       | ) |  | 59,535       |   |  | 1,007,396              |  
|Due to related parties                                                                          |  | (111,918     | ) |  | 51,075       |   |  | 132,537                |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Net cash used in operating activities                                                           |  | (1,219,402   | ) |  | (269,312     | ) |  | (5,030,834             | )
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Investing activities                                                                            |  |              |   |  |              |   |  |                        |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Purchase of property and
      equipment                                                        |  | (6,628       | ) |  |             |   |  | (184,127               | )
|Proceeds from sale of property plant and equipment                                              |  |             |   |  | 900          |   |  | 900                    |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Net cash used in
      investing activities                                                     |  | (6,628       | ) |  | 900          |   |  | (183,227               | )
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Financing activities                                                                            |  |              |   |  |              |   |  |                        |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Proceeds from loans payable                                                                     |  |             |   |  | 86,873       |   |  | 201,571                |  
|Repayment of loans payable                                                                      |  | (50,100      | ) |  |             |   |  | (50,100                | )
|Repayment of capital lease obligations                                                          |  | (4,056       | ) |  |             |   |  | (4,056                 | )
|Proceeds from issuance of
      convertible debentures                                          |  |             |   |  |             |   |  | 250,000                |  
|Proceeds from issuance of common stock and subscriptions 
           received                   |  | 1,191,186    |   |  | 154,028      |   |  | 4,943,246              |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Net cash provided
      by financing activities                                                 |  | 1,137,030    |   |  | 240,901      |   |  | 5,340,661              |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Change in cash                                                                                  |  | (89,000      | ) |  | (27,511      | ) |  | 126,600                |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Cash, beginning of
      period                                                                 |  | 215,600      |   |  | 39,101       |   |  |                       |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Cash, end of
      period                                                                       |  | 126,600      |   |  | 11,590       |   |  | 126,600                |  
|                                                                                                |  |              |   |  |              |   |  |                        |  
|Non-cash investing and financing activities:                                                    |  |              |   |  |              |   |  |                        |  
|Property and equipment
      financed under capital leases                                      |  | 42,543       |   |  |             |   |  | 42,543                 |  
|Shares issued to settle debt                                                                    |  |             |   |  | 22,750       |   |  | 409,372                |  
|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-3

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|1. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The accompanying consolidated interim financial
      statements of Mantra Venture Group Ltd. (the Company) should be read in
      conjunction with the consolidated financial statements and accompanying
      notes filed with the U.S. Securities and Exchange Commission in the
      Companys Annual Report on Form 10-K for the fiscal year ended May 31,
      2012. In the opinion of management, the accompanying financial statements
      reflect all adjustments of a recurring nature considered necessary to
      present fairly the Companys financial position and the results of its
      operations and its cash flows for the periods shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The preparation of financial statements in accordance
      with accounting principles generally accepted in the United States
      requires management to make estimates and assumptions that affect the
      amounts reported. Actual results could differ materially from those
      estimates. The results of operations and cash flows for the periods shown
      are not necessarily indicative of the results to be expected for the full
      year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | 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 is 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 February 28, 2013, the Company has a working capital
      deficit of $934,036, has not generated significant revenues, and has
      accumulated losses of $7,750,374 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Summary of Significant Accounting
      Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | (a) | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | These consolidated financial statements are expressed in
      US dollars. These consolidated financial statements include the accounts
      of the Company and its 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 the subsidiaries are wholly-owned with the exception of
      Climate ESCO Ltd., which is 64.84% owned and Mantra Energy Alternatives
      Ltd., which is 89.09% owned. All inter-company balances and transactions
      have been eliminated.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | 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.                                                                                                                                                                                                                                                                                                     

|3. | Property and Equipment
|-- | ----------------------

| |                                    |  |         |  |  |              |  |  | February 28, |  |  | May 31,      | 
| | ---------------------------------- |  | ------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                    |  |         |  |  |              |  |  | 2013         |  |  | 2012         | 
| |                                    |  |         |  |  | Accumulated  |  |  | Net carrying |  |  | Net carrying | 
| |                                    |  | Cost    |  |  | depreciation |  |  | value        |  |  | value        | 
| |                                    |  | $       |  |  | $            |  |  | $            |  |  | $            | 
| |                                    |  |         |  |  |              |  |  |              |  |  |              | 
| | Computer                           |  | 1,702   |  |  | 520          |  |  | 1,182        |  |  | 1,607        | 
| | Office furniture and equipment     |  | 48,847  |  |  | 47,435       |  |  | 1,412        |  |  | 8,000        | 
| | Research equipment                 |  | 53,793  |  |  | 48,382       |  |  | 5,411        |  |  | 13,359       | 
| | Vehicles under
      capital lease |  | 68,340  |  |  | 6,988        |  |  | 61,352       |  |  |             | 
| |                                    |  |         |  |  |              |  |  |              |  |  |              | 
| |                                    |  | 172,682 |  |  | 103,325      |  |  | 69,357       |  |  | 22,966       | 

F-4

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|4. | Related Party Transactions
|-- | --------------------------
|   |                           
|   | (a)                       
|   |                           
|   | (b)                       
|   |                           
|   | (c)                       
|   |                           
|   | (d)                       
|   |                           
|   | (e)                       
|   |                           
|   | (f)                       

|5. | Loans Payable
|-- | -------------
|   |              
|   | (a)          
|   |              
|   | (b)          
|   |              
|   | (c)          
|   |              
|   | (d)          
|   |              
|   | (e)          
|   |              
|   | (f)          
|   |              
|   | (g)          
|   |              
|   | (h)          
|   |              
|   | (i)          
|   |              
|   | (j)          

F-5

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|6. | Obligations Under Capital Lease                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On July 31, 2012 and December 21, 2012, the Company
      entered into two agreements to lease two vehicles for three years each.
      The vehicle leases are classified as a capital leases. The following is a
      schedule by years of future minimum lease payments under capital leases
      together with the present value of the net minimum lease payments as of
      February 28, 2013:

| | Year ending May 31:                         |  | $       |  
| | ------------------------------------------- |  | ------- | -
| | 2013                                        |  | 3,058   |  
| | 2014                                        |  | 12,230  |  
| | 2015                                        |  | 12,230  |  
| | 2016                                        |  | 22,005  |  
| |                                             |  |         |  
| | Net minimum lease payments                  |  | 49,523  |  
| | Less: amount representing interest payments |  | (10,582 | )
| |                                             |  |         |  
| | Present value of net minimum lease          |  | 38,941  |  
| | Less: current
      portion                 |  | (7,336  | )
| |                                             |  |         |  
| | Long-term portion                           |  | 31,605  |  

|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. The Company
      had recorded accretion expense of $45,930, increasing the carrying value
      of the convertible debentures to $250,000.                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | On January 19, 2012, the Company entered into a
      settlement agreement with one of the debenture holders to settle a $50,000
      convertible debenture and $122,535 in accounts payable and accrued
      interest with the debt holder. Pursuant to the agreement, the debt holder
      agreed to reduce the debt to Cdn$100,000 on the condition that the Company
      pays the amount of Cdn$2,500 per month for 40 months, beginning March 1,
      2012 and continuing on the first day of each month thereafter.                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | On July 18, 2012, the Company entered into a settlement
      agreement with the $150,000 debenture holder. Pursuant to the settlement
      agreement, the due date of the convertible debenture with a principal
      amount of $150,000 was extended to April 11, 2013, and the Company paid
      $43,890 of interest. In addition, commencing on October 31, 2012, the
      Company will pay accrued monthly interest at 10% per annum until April 11,
      2013 when the Company will pay a $10,000 premium and the $150,000
      outstanding principal.                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company evaluated the modification and determined
      that the creditor did not grant a concession. In addition, as the present
      value of the future cash flows was less than 10% different than the cash
      flows of the original debt, it was determined that the original and new
      debt instruments are not substantially different. As a result, the
      modification was not treated as an extinguishment of the debt and no gain
      or loss is recognized.                                                                                                                                                                                                                                                      

F-6

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|8. | Common Stock
|-- | ------------
|   |             
|   | (a)         
|   |             
|   | (b)         
|   |             
|   | (c)         
|   |             
|   | (d)         
|   |             
|   | (e)         
|   |             
|   | (f)         
|   |             
|   | (g)         
|   |             
|   | (h)         
|   |             
|   | (i)         
|   |             
|   | (j)         
|   |             
|   | (k)         

F-7

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|9. | Share Purchase Warrants                                                        
|-- | -------------------------------------------------------------------------------
|   |                                                                                
|   | The following table summarizes the continuity of share
      purchase warrants:

| |                                  |  |            |   |  | Weighted | 
| | -------------------------------- |  | ---------- | - |  | -------- | 
| |                                  |  |            |   |  | average  | 
| |                                  |  |            |   |  | exercise | 
| |                                  |  | Number of  |   |  | price    | 
| |                                  |  | warrants   |   |  | $        | 
| |                                  |  |            |   |  |          | 
| | Balance, May 31, 2012            |  | 7,745,992  |   |  | 0.20     | 
| |                                  |  |            |   |  |          | 
| | Issued                           |  | 5,050,001  |   |  | 0.18     | 
| | Expired                          |  | (4,377,942 | ) |  | 0.20     | 
| |                                  |  |            |   |  |          | 
| | Balance, February
      28, 2013 |  | 8,418,051  |   |  | 0.19     | 

As at February 28, 2013, the following
  share purchase warrants were outstanding:

ExerciseNumber of
      pricewarrants
      $
      Expiry date185,000
      0.20
      March 28, 201325,000
      0.20
      August 11, 20132,037,500
      0.20
      August 31, 20131,120,550
      0.20
      March 9, 20142,025,000
      0.15
      September 11, 2014100,000
      0.15
      September 23, 20142,925,001
      0.20
      December 11, 20148,418,051


|10. | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On September 15, 2012, the Company granted 200,000 stock
      options exercisable at $0.10 per share of common stock for two years to an
      officer of the Company. The fair value of $24,090 for the stock options
      granted was estimated using the Black-Scholes option pricing model
      assuming no expected dividends, a risk-free rate of 0.27, an expected life
      of 2 years, and an expected volatility of 179%.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | 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, 2012                            |  | 1,300,000        |   |  | 0.10     |  |  |                  |  |  |           | 
| |                                                      |  |                  |   |  |          |  |  |                  |  |  |           | 
| | Granted                                              |  | 200,000          |   |  | 0.20     |  |  |                  |  |  |           | 
| | Exercised                                            |  | (450,000         | ) |  | 0.04     |  |  |                  |  |  |           | 
| | Expired                                              |  | (250,000         | ) |  | 0.25     |  |  |                  |  |  |           | 
| | Forfeited                                            |  | (300,000         | ) |  | 0.10     |  |  |                  |  |  |           | 
| |                                                      |  |                  |   |  |          |  |  |                  |  |  |           | 
| | Outstanding and
      exercisable, February 28, 2013 |  | 500,000          |   |  | 0.09     |  |  | 0.1              |  |  | 45,000    | 

Additional information regarding stock
  options as of February 28, 2013 is as follows:

ExerciseNumber of
      priceoptions
      $
      Expiry
        date500,000
      0.10
      March 31, 2013


F-8

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|11. | Commitments and Contingencies
|--- | -----------------------------
|    |                              
|    | (a)                          
|    |                              
|    |                              
|    |                              
|    |                              

September 1, 2010
      Cdn$10,000 (accrued)September 1, 2011
      Cdn$20,000 (accrued)September 1, 2012
      Cdn$30,000 (accrued)September 1, 2013
      Cdn$40,000September 1, 2014 and eachsuccessive anniversary
      Cdn$50,000


| |     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | On April 3, 2012, the Company entered into a consulting
      agreement with a company controlled by a director of the Company. Pursuant
      to the agreement, the Company issued 250,000 stock options and will pay
      $5,000 per month until April 3, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (c) | On April 11, 2012, the Company entered into a consulting
      agreement. Pursuant to the agreement, the Company issued the consultant
      200,000 stock options and will pay the consultant $3,000 per month for a
      period of one year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (d) | On May 23, 2012, a former employee of the Company
      delivered a Notice of Application seeking judgment against the Company for
      approximately $55,000. The hearing of that Application took place on July
      31, 2012, at which time the former employee obtained judgment in the
      approximate amount of $55,000. The Company did not defend the amount of
      the judgment and the amount is included in accounts payable, but claims a
      complete set-off on the basis that the former employee retains 1,000,000
      shares of common stock of the Company as security for payment of the
      outstanding consulting fees owed to him. On August 31, 2012, the Company
      commenced a separate action against the former employee seeking a return
      of the 1,000,000 shares of common stock and a stay of execution of the
      judgment. That application is pending and has not yet been heard or
      determined by the court. The payment of the judgment claim of
      approximately $55,000 is dependent upon whether the former employee will
      first return the 1,000,000 shares of common stock noted above. The
      probable outcome of the Companys claim for the return of the shares
      cannot yet be determined.

|12. | Subsequent Events
|--- | -----------------
|    |                  
|    | (a)              
|    |                  
|    | (b)              

F-9

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|Nine months ended February 28, 2013           
|(Expressed in U.S. dollars)                   
|(unaudited)                                   

|12. | Subsequent Events (continued)
|--- | -----------------------------
|    |                              
|    | (c)                          

F-10

---

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This quarterly 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", "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 law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

Our unaudited consolidated financial statements are stated in
United States Dollars (US$) and are prepared in accordance with United States
generally accepted accounting principles. The following discussion should be
read in conjunction with our financial statements and the related notes that
appear elsewhere in this quarterly report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
quarterly report.

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to "US$"
refer to United States dollars and all references to "common stock" refer to the
common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our"
and "our company" mean Mantra Venture Group Ltd. and our wholly owned
subsidiaries Carbon Commodity Corporation, Mantra China Inc., Mantra China
Limited, Mantra Media Corp., Mantra NextGen Power Inc., and Mantra Wind Inc., as
well as our majority owned subsidiary Climate ESCO Ltd. and Mantra Energy
Alternatives Ltd., unless otherwise indicated.

Business Overview

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 #562  800 15355 24thAvenue, Surrey, British Columbia, Canada,
V4A 2H9. Our telephone number is (604) 560-1503. 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.

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.

5

---

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.

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;
- Mantra Media Corp., through which we offer promotional and marketing
  services to companies in the sustainability sector or those seeking to adopt
  sustainable practices; and
- Climate ESCO Ltd., majority owned, through which we distribute and install
  LED lighting solutions.

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

On February 20, 2012, we entered into a director agreement with
Tommy David Unger. As compensation, under the director agreement, we granted
stock options to Mr. Unger to purchase up to 500,000 shares of our common stock
at a price of $0.01 per share. These options are non-transferrable, vest
immediately and expire the earlier of 24 months, or upon the termination of the
director agreement.

On February 29, 2012, our wholly owned subsidiary, Mantra
Energy Alternatives Ltd., entered into subscription agreements with a number of
non-US investors for the sale of 3,200,000 shares of Mantra Energy at a price of
CAD $1.00 per share, for total proceeds of CAD $3,200,000. As of the closing of
this financing, our company holds 6,000,000 shares of Mantra Energy out of a
total of 9,200,000 issued and outstanding.

On April 3, 2012, we entered into a consulting agreement with BC0848571 Ltd., a company controlled by Tommy David Unger, a director of our company, whereby Mr. Unger agreed to provide consulting services as our company’s vice president of corporate finance for a period of 12 months. In consideration for agreeing to provide such consulting services by Mr. Unger, we agreed to pay a salary of $5,000 per month and to grant 250,000 options to acquire 250,000 shares of our common stock at a purchase price of $0.03 per share. These options are non-transferrable, vest immediately and expire the earlier of 24 months, or upon the termination of the consulting agreement.  As of the quarter ended February 28, 2013, the agreement has expired and will not be renewed.

Effective June 19, 2012, our companys subsidiary, Mantra
Energy, entered into a service contract with PowerTech Labs Inc., whereby
PowerTech will assist Manta Energy in the evaluation and the development of our
ERC System under specific terms and conditions for a period ending February 19,
2013. As compensation, PowerTech will be paid $171,000 plus the cost of
materials as further described in the service contract. As of the quarter ended
February 28, 2013, the contract with PowerTech has expired and a new proposal is
being reviewed.

On October 28, 2008, we entered into a convertible debenture
with StichtingAdministratiekantoor Carlos Bijl (Bijl) for a principal amount
of $150,000 and an annual interest rate of 10%. Bijl started an action in the
Supreme Court of British Columbia for non-payment of the convertible debenture.

On July 18, 2012, we entered into a settlement agreement with
Bijl dated July 16, 2012, pursuant to which:

- the due date of the convertible debenture would be extended to April 11,
  2013.Our company is currently negotiating the extension of this convertible
  debenture;
- within 5 business days we pay $43,890.41 representing net interest to and
  including September 30, 2012, less $15,000 we forwarded to Bijl on February
  16, 2012. Our company has made monthly interest payments to March 2013.

6

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- commencing on October 31, 2012 we will pay accrued monthly interest at 10%
  per annual until April 11, 2013 (Paid);
- we were to pay a $10,000 premium on the $150,000 principal of the
  convertible debenture when we satisfy it on April 11, 2013. We are currently
  negotiating an extension.

On July 31, 2012, our subsidiary, Mantra Energy, entered into a master services agreement with Tekion (Canada), Inc. Mantra Energy’s ERC technology converts carbon dioxide (CO2) in stack gases to a formate salt which can then be further processed into formic acid or used to operate a fuel cell to generate power. Mantra Energy has engaged Powertech Labs to do further engineering on the system. In order to get this technology to commercialization, Tekion has proposed a program that will run in parallel to the Powertech program to help Mantra with some of the critical issues regarding this process.

Pursuant to the terms of the master services agreement, Tekion
will provide services to Mantra Energy as follows:

|1. | Mantra Energy will authorize provision of services from
      time to time by the execution of a statement of work (SOW).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | Tekion shall provide Mantra Energy with the deliverables,
      and on the terms, as specified in the SOW.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | Mantra Energy shall not be liable for any deliverable to
      be provided by Tekion unless and until the same is decided by Mantra
      Energy as being in compliance with the functions, features, capabilities,
      components, aspects, qualities and capacities described in any
      specification agreed to by the parties relating to deliverables. Mantra
      Energy shall not unreasonably withhold its acceptance of any such
      deliverable.                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | Mantra Energy agrees to pay Tekion in the manner
      specified in each SOW. In addition, Mantra Energy will be responsible for
      and shall reimburse Tekion for any reasonable travel or other business
      consulting related expenses incurred by Tekion which directly relate to
      fulfilling a SOW, including, without limitation, air and other travel
      (including car rental) and lodging expenses, internet access while
      travelling, copying and reproduction and related expenses and cellular
      phone charges, including long distance, roaming and other related cellular
      phone charges.

Also on July 31, 2012, Mantra Energy entered into a SOW with
Tekion setting out the work summary, deliverables, budgets and timelines in
several stages as follows, which have now all been completed:

Stage 1  Baseline electrode/membrane materials
selection.   Budgeted Cost: $ 49,900 + materials
   Timeline: 8 weeks

Stage 2a  Reactor
scale-up   Budgeted Cost: $ 74,850 + materials
Timeline: 12 weeks (parallel with Stages 1, 2b)

Stage 2b  Improving catalyst functionality (if
required)   Budgeted Cost: $ 62,375 + materials
   Timeline: 10 weeks (parallel with Stage 2a)

Stage 3  Single cell
characterization   Budgeted Cost: $ 49,900 + materials
   Timeline: 4 weeks

Stage 4  Conceptual 100 kg/day pilot plant
design   Budgeted Cost:$ 24,950 + materials
   Timeline: 4 weeks

7

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Mantra Energy provided an upfront payment to Tekion of $50,000
on the signing of the SOW.

On January 8, 2013, our company entered into an employment
agreement with our officer and director, Larry Kristof, whereby Larry Kristof
has agreed to provide services as chief executive officer of our company for a
period of two years. As compensation, pursuant to the terms of the employment
agreement, Larry Kristof will receive an annual salary of $60,000, payable in
equal monthly installments. The employment agreement may be terminated by Larry
Kristof, for any reason, by providing at least three months advance written
notice to our company.

Also on January 8, 2013, our companys subsidiary, Mantra
Energy Alternatives Ltd., entered into an employment agreement with Larry
Kristof, whereby Larry Kristof has agreed to provide services as chief executive
officer of Mantra Energy for a period of two years. As compensation, pursuant to
the terms of the employment agreement, Larry Kristof will receive an annual
salary of $60,000, payable in equal monthly installments. The employment
agreement may be terminated by Larry Kristof, for any reason, by providing at
least three months advance written notice to our company.

On March 13, 2013, we entered into a letter of engagement with
BC Research Inc. pursuant to which we engaged BC Research to design and engineer
a proposed demonstration unit of our companys ERC (electro-reduction of carbon
dioxide) technology. The scope of work will include determining power
requirements for the planned ERC unit, and producing an equipment list, a
functional description of equipment and specification, electrical drawings, a
drawing package for potential suppliers, and a simplified 3D model of the
system. The objective of the engagement is to determine the fabrication and
operating costs of the demonstration unit to within a 25% variance. It is
estimated that completion of the planned work will be achieved within 15 weeks
from the date of our companys purchase order and payment of a CDN$30,000
retainer. Our company will compensate BC Research based on its customary hourly
rates. The total estimated cost of the work plan is CDN$137,000 (approximately
USD$134,000). Our company will retain all intellectual property resulting from
the services and may elect to terminate the work at its discretion.

Concurrently with the engagement of B.C. Research, our company,
through our subsidiary Mantra Energy Alternatives Ltd., has entered into a
sublease agreement with B.C. Research, dated as at February 25, 2013, for the
sublease of a workshop and office space of approximately 600 square feet located
in Burnaby, British Columbia. The term of the sublease will continue until March
1, 2014 at a cost of CDN$18,720 (approximately USD$18,322) payable in monthly
installments of CDN$1,560.

Electro Reduction of Carbon Dioxide (ERC)

On November 2, 2007, through our subsidiary, Mantra Energy, we
entered into a technology assignment agreement with 0798465 BC Ltd. whereby we
acquired 100% ownership 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:

Country
    Application Number
    File Date
    StatusPatent Cooperation Treaty (PCT)
    W02207
    10/13/2006
    PCT


The reactor at the core of the chemical process, referred to as the electrochemical reduction of carbon dioxide (CO2), or ERC, has been proven functional through small scale prototype trials. ERC offers a possible solution to reduce the impact of 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.

8

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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 electro-oxidation. The complementary
nature of ERC and electro-oxidation 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.



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 CO2per day. In
order to facilitate the testing and development of this reactor, we entered into
an agreement with Kemetco on January 29, 2010. 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, 2010 we entered into another agreement with
Kemetco which amended and replaced the January 29, 2010 agreement. Under the
terms of the latest agreement, we 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.

9

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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 2012. (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.

10

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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 one quarter of the HCl 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 HCl in the steel pickling process. Formic acid has many potential advantages over HCl 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.

Results of Operations for the Three Month Periods Ended
February 28, 2013 and February 29, 2012.

Revenues

The following summary of our results of operations should be
read in conjunction with our consolidated financial statements for the quarter
ended February 28, 2013 which are included herein.

Our operating results for three month periods ended February
28, 2013 and February 29, 2012 are summarized as follows:

|                   |  |                   |   |  |                   |   |  | Difference Between |  
|------------------ |  | ----------------- | - |  | ----------------- | - |  | ------------------ | -
|                   |  |                   |   |  |                   |   |  | Three Month Period |  
|                   |  |                   |   |  |                   |   |  | Ended              |  
|                   |  | Three Months      |   |  | Three Months      |   |  | February 28, 2013  |  
|                   |  | Ended             |   |  | Ended             |   |  | and                |  
|                   |  | February 28, 2013 |   |  | February 29, 2012 |   |  | February 29, 2012  |  
|                   |  | ($)               |   |  | ($)               |   |  | ($)                |  
|Revenue            |  | Nil               |   |  | 2,371             |   |  | (2,371             | )
|Cost of goods sold |  | Nil               |   |  | 1,886             |   |  | (1,886             | )
|Operating expenses |  | 177,762           |   |  | 112,070           |   |  | 65,692             |  
|Other expense      |  | 7,761             |   |  | 21,356            |   |  | (13,595            | )
|Net Loss           |  | (165,231          | ) |  | (129,188          | ) |  | (36,043            | )

We have had limited operational history since our inception on January 22, 2007. From our inception on January 22, 2007 to February 28, 2013 we have generated $38,812 in revenues. For the three months ended February 28, 2013 we generated $nil in revenues compared to revenues of $2,371 generated during the same period in 2012. From January 22, 2007 (inception) to February 28, 2013, we have an accumulated deficit of $7,750,374. We anticipate that we will incur substantial losses over the next year and our ability to generate additional revenues in the next 12 months remains uncertain.

11

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Expenses

Our operating expenses for the three month periods ended
February 28, 2013 and February 29, 2012 are summarized as follows:

|                              |  | Three Months Ended |  
|----------------------------- |  | ------------------ | -
|                              |  | February 28,       |  
|                              |  | 2013               |  
|                              |  | ($)                |  
|Business development          |  | 10,797             |  
|Consulting and advisory       |  | 27,416             |  
|Depreciation and amortization |  | 8,623              |  
|Foreign exchange loss (gain)  |  | (13,723            | )
|General and administrative    |  | 11,472             |  
|Management fees               |  | 75,776             |  
|Professional fees             |  | 28,847             |  
|Public listing costs          |  | 3,325              |  
|Rent                          |  | 4,500              |  
|Research and development      |  | (661               | )
|Travel and promotion          |  | 21,390             |  

For the three months ended February 28, 2013, we incurred total operating expenses of $177,762 compared to total operating expenses for the three months ended February 29, 2012 of $112,070. The $65,692 increase is primarily due to an increase in business development, consulting and advisory, management fees, professional fees, and travel and promotion.

Net Loss

Since our inception on January 22, 2007 to February 28, 2013, we have incurred a net loss of $7,750,374. For the three months ended February 28, 2013 we have incurred a net loss of $185,523 compared to a net loss of $129,188 for the same period in 2012. Our net loss per share for the three months ended February 28, 2013 was $Nil, compared to $nil for the same period in 2012.

Results of Operations for the Nine Month Periods Ended
February 28, 2013 and February 29, 2012.

Revenues

Our operating results for nine month periods ended February 28,
2013 and February 29, 2012 are summarized as follows:

|                   |  |                   |   |  |                   |   |  | Difference Between |  
|------------------ |  | ----------------- | - |  | ----------------- | - |  | ------------------ | -
|                   |  |                   |   |  |                   |   |  | Nine Month Period  |  
|                   |  |                   |   |  |                   |   |  | Ended              |  
|                   |  | Nine Months       |   |  | Nine Months       |   |  | February 28, 2013  |  
|                   |  | Ended             |   |  | Ended             |   |  | and                |  
|                   |  | February 28, 2013 |   |  | February 29, 2012 |   |  | February 29, 2012  |  
|                   |  | ($)               |   |  | ($)               |   |  | ($)                |  
|Revenue            |  | 3,027             |   |  | 12,561            |   |  | (9,534             | )
|Cost of goods sold |  | 2,500             |   |  | 9,598             |   |  | (7,098             | )
|Operating expenses |  | 1,100,552         |   |  | 468,579           |   |  | 631,973            |  
|Other expense      |  | 28,658            |   |  | 30,748            |   |  | (2,090             | )
|Net Loss           |  | (1,060,905        | ) |  | (467,610          | ) |  | (593,295           | )

12

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For the nine months ended February 28, 2013 we generated $3,027
in revenues compared to revenues of $12,561 generated during the same period in
2012.

Expenses

Our operating expenses for the nine month periods ended
February 28, 2013 and February 29, 2012 are summarized as follows:

|                                         |  | Nine Months Ended | 
|---------------------------------------- |  | ----------------- | 
|                                         |  | February 28,      | 
|                                         |  | 2013              | 
|                                         |  | ($)               | 
|Business development                     |  | 21,012            | 
|Consulting and advisory                  |  | 78,951            | 
|Depreciation and amortization            |  | 21,950            | 
|Foreign exchange loss (gain)             |  | 5,044             | 
|General and administrative               |  | 32,453            | 
|License fees                             |  | 29,442            | 
|Management fees                          |  | 258,087           | 
|Professional fees                        |  | 122,748           | 
|Public listing costs                     |  | 15,947            | 
|Rent                                     |  | 13,500            | 
|Research and development                 |  | 368,157           | 
|Shareholder communications and awareness |  | 34,719            | 
|Travel and promotion                     |  | 98,542            | 

For the nine months ended February 28, 2013, we incurred total
operating expenses of $1,100,552 compared to total operating expenses for the
nine months ended February 29, 2012 of $468,579. The $634,409 increase is
primarily due to an increase in business development, general and
administrative, management fees, professional fees, research and development,
and travel and promotion.

Net Loss

For the nine months ended February 28, 2013 we have incurred a net loss of $1,060,905 compared to a net loss of $467,610 for the same period in 2012. Our net loss per share for the nine months ended February 28, 2013 was $0.02, compared to $0.01 for the same period in 2012.

Liquidity and Capital Resources

|Working Capital         |   |              |   |   |           |  
|----------------------- | - | ------------ | - | - | --------- | -
|                        |   | At           |   |   | At        |  
|                        |   | February 28, |   |   | May 31,   |  
|                        |   | 2013         |   |   | 2012      |  
|Current Assets          | $ | 211,605      |   | $ | 274,360   |  
|Current Liabilities     | $ | 1,145,641    |   | $ | 1,208,690 |  
|Working Capital Deficit | $ | (934,036     | ) | $ | (934,330  | )

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|Cash Flows                                               |   |              |   |   |              |   |   | January 22,    |  
|-------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | -------------- | -
|                                                         |   | Nine Months  |   |   | Nine Months  |   |   | 2007           |  
|                                                         |   | Ended        |   |   | Ended        |   |   | (Inception) to |  
|                                                         |   | February 28, |   |   | February 29, |   |   | February 28,   |  
|                                                         |   | 2013         |   |   | 2012         |   |   | 2013           |  
|Net Cash (Used In)Provided by Operating
      Activities | $ | (1,219,401   | ) | $ | (269,312     | ) | $ | (950,089       | )
|Net Cash (Used In)Provided by Investing Activities       | $ | (6,628       | ) | $ | 900          |   | $ | (7,528         | )
|Net Cash (Used In)Provided by Financing
      Activities | $ | 1,137,030    |   | $ | 240,901      |   | $ | 896,129        |  
|Change In Cash                                           | $ | (89,000      | ) | $ | (27,511      | ) | $ | (61,489        | )

As of February 28, 2013, we had $126,600 cash in our bank
accounts and a working capital deficit of $934,036. As of February 28, 2013 we
had total assets of $280,962 and total liabilities of $1,216,030.

From January 22, 2007 (date of inception) to February 28, 2013, we raised net proceeds of $4,943,246 in cash from the issuance of common stock and share subscriptions received, $201,571 from loans payable and $250,000 from proceeds from the issuance of convertible debentures offset by repayment of loans payable of $50,100 and repayment of capital lease obligations of $4,056 for a total of $5,340,661 of cash provided by financing activities for the period.

We received net cash of $1,137,030 from financing activities for the nine months ended February 28, 2013 compared to $249,901 for the same period in 2012. During the period in 2013 we raised cash from the issuance of our common stock and share subscriptions received. In the comparable period, we also raised cash in the same manner.

We used net cash of $1,219,401 in operating activities for the nine months ended February 28, 2013 compared to $269,312 for the same period in 2012. We used net cash of $5,030,834 in operating activities for the period from January 22, 2007 (date of inception) to February 28, 2013.

We used cash of $6,628 in investing activities for the nine
months ended February 28, 2013 compared to $900 cash provided by investing
activities for the same period in 2012.

During the nine months ended February 28, 2013 we had a net decrease of $89,000 in our cash position compared to a net decrease of $27,511 for the same period in 2012. Our monthly cash requirements for the nine month period ended February 28, 2013 was approximately $101,617 compared to $22,443 for the same period in 2012. 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.

Description
    Estimated expenses
      ($)Research and Development
    2,200,000Consulting Fees
    250,000Commercialization of ERC
    1,300,000Shareholder communication and awareness
    200,000Professional Fees
    300,000Wages and Benefits
    200,000Management Fees
    150,000Total
    4,600,000


14

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In order to fully carry out our business plan, we need
additional financing of approximately$4,600,000 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.

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 financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.

Inflation

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

Critical Accounting Policies

Our consolidated 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 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. Our company regularly evaluates estimates and assumptions
related to allowance for doubtful accounts, the estimated useful lives and
recoverability of long-lived assets, stock-based compensation, and deferred
income tax asset valuation allowances. Our 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 our company may differ
materially and adversely from our companys 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,
our 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.

15

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Stock-based Compensation

Our 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.

Our company uses the Black-Scholes option pricing model to
calculate the fair value of stock-based awards. This model is affected by our
companys stock price as well as assumptions regarding a number of subjective
variables. These subjective variables include, but are not limited to our
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.

Recent Accounting Pronouncements

Our 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.

Item 3. 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 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, 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 (our principal executive officer, principal
financial officer and principal accounting officer) to allow for timely
decisions regarding required disclosure.

As of the end of our quarter covered by this report, we carried
out an evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer (our principal executive officer,
principal financial officer and principal accounting officer), of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our chief executive officer and chief
financial officer (our principal executive officer, principal financial officer
and principal accounting officer) concluded that our disclosure controls and
procedures were not effective as of the end of the period covered by this
quarterly report.

Changes in Internal Controls

During the period covered by this report 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.

16

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

On May 23, 2012, a former employee of our company delivered a
Notice of Application seeking judgment against our company for approximately
$55,000. The hearing of that Application took place on July 31, 2012, at which
time the former employee obtained judgment in the approximate amount of $55,000.
Our company did not defend the amount of the judgment and the amount is included
in accounts payable, but claims a complete set-off on the basis that the former
employee retains 1,000,000 shares of common stock of our company as security for
payment of the outstanding consulting fees owed to him.

On August 31, 2012, our company commenced a separate action
against the former employee seeking a return of the 1,000,000 shares of common
stock and a stay of execution of the judgment. That application is pending and
has not yet been heard or determined by the court. The payment of the judgment
claim of approximately $55,000 is dependent upon whether the former employee
will first return the 1,000,000 shares of common stock noted above. The probable
outcome of our companys claim for the return of the shares cannot yet be
determined.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds

On December 11, 2012, we issued 2,925,001 units at a purchase
price of USD$0.12 per unit, for total proceeds of USD$351,000.12. Each unit
consists of one share of our common stock and one non-transferable common share
purchase warrant. Each whole common share purchase warrant is exercisable for
the purchase of one share for a period of 24 months from the date of closing at
a price of USD$0.20 per share or five business days after our companys common
stock trades at least one time per day on the FINRA Over-the-Counter Bulletin
Board at a price equal to or above USD$0.40 per Share for seven consecutive
trading days. We issued 2,883,001 units of private placement to 20 non U.S.
persons (at that term as defined in Regulation S of the Securities Act of 1933),
in an offshore transaction relying on Regulation S of the Securities Act of
1933. The remaining 42,000 units were issued to one U.S. individual (as that
term is defined in Section 4(2) of the Securities Act of 1933) pursuant to the
exemption from registration provided for under Rule 506 of Regulation D,
promulgated under the United States Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

|Exhibit
    Number | **Exhibit 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)

17

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|ExhibitNumber | **Exhibit
      Description**                                                                                                                                                                                                            
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                                                                          
|(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          | Revolving Line of Credit Agreement with Larry Kristof
      dated October 15, 2008 (incorporated by reference to our Quarterly Report
      on Form 10-Q filed on January 14, 2009)                                                      
|              |                                                                                                                                                                                                                                          
|10.2          | Director Agreement with Tommy David Unger dated February
      20, 2012 (incorporated by reference to our Current Report on Form 8-K
      filed on February 28, 2012)                                                                   
|              |                                                                                                                                                                                                                                          
|10.3          | Subscription Agreement with Mantra Energy Alternatives
      Ltd. dated February 29, 2012 (incorporated by reference to our Current
      Report on Form 8-K filed on March 9, 2012)                                                     
|              |                                                                                                                                                                                                                                          
|10.4          | Consulting Agreement with BC0848571 Ltd. dated April 3,
      2012 (incorporated by reference to our Current Report on Form 8-K filed on
      April 11, 2012)                                                                           
|              |                                                                                                                                                                                                                                          
|10.5          | Service Contract with Powertech Labs Inc. dated June 19,
      2012 (incorporated by reference to our Current Report on Form 8-K filed on
      June 25, 2012)                                                                           
|              |                                                                                                                                                                                                                                          
|10.6          | Settlement Agreement with StichtingAdministratiekantoor
      Carlos Bijl dated July 16, 2012 (incorporated by reference to our Current
      Report on Form 8-K filed on July 23, 2012)                                                 
|              |                                                                                                                                                                                                                                          
|10.7          | Master Services Agreement between our subsidiary, Mantra
      Energy Alternatives Ltd., and Tekion (Canada), Inc. dated July 31, 2012
      (incorporated by reference to our Current Report on Form 8-K filed on
      August 30, 2012)
|              |                                                                                                                                                                                                                                          
|10.8          | Statement of Work between our subsidiary, Mantra Energy
      Alternatives Ltd. and Tekion (Canada), Inc. dated July 31, 2012
      (incorporated by reference to our Current Report on Form 8-K filed on
      August 30, 2012)         
|              |                                                                                                                                                                                                                                          
|10.9          | Employment Agreement between our company and Larry
      Kristof dated January 8, 2013 (incorporated by reference to our Current
      Report on Form 8-K filed on January 14, 2013)                                                     
|              |                                                                                                                                                                                                                                          
|10.10         | Employment Agreement between our subsidiary, Mantra
      Energy Alternatives Ltd. and Larry Kristof dated January 8, 2013
      (incorporated by reference to our Current Report on Form 8-K filed on
      January 14, 2013)           
|              |                                                                                                                                                                                                                                          
|10.11         | Sublease Agreement with BC Research Inc. dated February
      25, 2013 (incorporated by reference to our Current Report on Form 8-K
      filed on March18, 2013)                                                                        
|              |                                                                                                                                                                                                                                          
|10.12         | Letter of Engagement with BC Research Inc. dated March
      13, 2013 (incorporated by reference to our Current Report on Form 8-K
      filed on March18, 2013)                                                                         
|              |                                                                                                                                                                                                                                          
|(14)          | Code of Ethics                                                                                                                                                                                                                           
|              |                                                                                                                                                                                                                                          
|14.1          | Code of Ethics and Business Conduct (incorporated by
      reference to our Registration Statement on Form S-1 filed on February 26,
      2008)                                                                                         
|              |                                                                                                                                                                                                                                          
|(21)          | List of Subsidiaries                                                                                                                                                                                                                     

18

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|ExhibitNumber | **Exhibit
      Description**                                                                                                                                                       
|------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                     
|21.1          | Carbon Commodity Corporation                                                                                                                                                        
|              | Climate ESCO Ltd.                                                                                                                                                                   
|              | Mantra Energy Alternatives Ltd.                                                                                                                                                     
|              | Mantra China Inc.                                                                                                                                                                   
|              | Mantra China Limited                                                                                                                                                                
|              | Mantra Media Corp.                                                                                                                                                                  
|              | Mantra NextGen Power Inc.                                                                                                                                                           
|              | Mantra Wind Inc.                                                                                                                                                                    
|              |                                                                                                                                                                                     
|(31)          | (i) Rule 13a-14(a)/ 15d-14(a) Certifications
      (ii) Rule 13a-14(d)/ 15d-14(d) Certifications                                                                                    
|              |                                                                                                                                                                                     
|31.1*         | Certification pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal
      Financial Officer and Principal Accounting Officer
|              |                                                                                                                                                                                     
|(32)          | Section 1350 Certifications                                                                                                                                                         
|              |                                                                                                                                                                                     
|32.1*         | Certification pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal
      Financial Officer and Principal Accounting Officer
|              |                                                                                                                                                                                     
|(99)          | Additional Exhibits                                                                                                                                                                 
|              |                                                                                                                                                                                     
|99.1          | Audit Committee Charter adopted April 20, 2010
      (incorporated by reference to our Annual Report on Form 10-K filed with
      the SEC on September 14, 2010)                   
|              |                                                                                                                                                                                     
|(101)**       | Interactive Data Files                                                                                                                                                              
|              |                                                                                                                                                                                     
|101.INS       | XBRL Instance Document                                                                                                                                                              
|101.SCH       | XBRL Taxonomy Extension Schema
      Document.                                                                                                                                      
|101.CAL       | XBRL Taxonomy Extension Calculation Linkbase
      Document.                                                                                                                        
|101.DEF       | XBRL Taxonomy Extension
      Definition Linkbase Document.                                                                                                                         
|101.LAB       | XBRL Taxonomy Extension Label Linkbase
      Document.                                                                                                                              
|101.PRE       | XBRL Taxonomy Extension
      Presentation Linkbase Document.                                                                                                                       

|*  | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|** | Furnished herewith. Pursuant to Rule 406T of
      Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are
      deemed not filed or part of any registration statement or prospectus for
      purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed
      not filed for purposes of Section 18 of the Securities and Exchange Act of
      1934, and otherwise are not subject to liability under those
      sections.

19

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SIGNATURES

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                     | Mantra Venture Group Ltd.                                      
|-------------------- | ---------------------------------------------------------------
|                     | (Registrant)                                                   
|                     |                                                                
|Date: April 22, 2013 | /s/
      Larry Kristof                                        
|                     | Larry Kristof                                                  
|                     | President, Chief Executive Officer, Chief
      Financial      
|                     | Officer, Secretary, Treasurer and Director                     
|                     | (Principal Executive Officer, Principal
      Financial Officer
|                     | and Principal Accounting Officer)                              

20

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