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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 August 31, 2011

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.)
|                                                                     |                                  
|#4  2119, 152ndStreet, Surrey, British Columbia, Canada             | V4A 4N7                          
|(Address of principal executive offices)                             | (Zip Code)                       

(604) 535 4145(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).[   ] 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.
44,003,256 common shares issued and outstanding as of October 24,
2011.

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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    | 13                                                                                                 
|                                     |                                                                                                    
|                                     | Item 1. Legal Proceedings                                                                          
|                                     |                                                                                                    
|                                     | Item 2. Unregistered Sales
      of Equity Securities and Use of Proceeds                          
|                                     |                                                                                                    
|                                     | Item 3. Defaults Upon Senior
      Securities                                                      
|                                     |                                                                                                    
|                                     | Item 4. [Removed and Reserved]                                                                     
|                                     |                                                                                                    
|                                     | Item 5. Other Information                                                                          
|                                     |                                                                                                    
|                                     | Item 6. Exhibits                                                                                   
|                                     |                                                                                                    
|SIGNATURES                           | 16                                                                                                 

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 August 31, 2011
(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

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

|                                                                                                                                                                                          |  | August 31,  |   |  | May 31,    |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | - |  | ---------- | -
|                                                                                                                                                                                          |  | 2011        |   |  | 2011       |  
|                                                                                                                                                                                          |  | $           |   |  | $          |  
|                                                                                                                                                                                          |  | (unaudited) |   |  |            |  
|ASSETS                                                                                                                                                                                    |  |             |   |  |            |  
|Current assets                                                                                                                                                                            |  |             |   |  |            |  
|Cash                                                                                                                                                                                      |  | 21,908      |   |  | 39,101     |  
|Amounts receivable                                                                                                                                                                        |  | 33,608      |   |  | 25,549     |  
|Inventory                                                                                                                                                                                 |  | 16,069      |   |  | 15,979     |  
|Prepaid expenses and deposits                                                                                                                                                             |  | 18,395      |   |  | 21,349     |  
|Total current assets                                                                                                                                                                      |  | 89,980      |   |  | 101,978    |  
|Property and
      equipment (Note 3)                                                                                                                                                     |  | 56,461      |   |  | 63,656     |  
|Total assets                                                                                                                                                                              |  | 146,441     |   |  | 165,634    |  
|                                                                                                                                                                                          |  |             |   |  |            |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                     |  |             |   |  |            |  
|Current liabilities                                                                                                                                                                       |  |             |   |  |            |  
|Accounts payable and accrued
      liabilities                                                                                                                                            |  | 677,767     |   |  | 676,675    |  
|Due to related parties (Note 4)                                                                                                                                                           |  | 236,558     |   |  | 205,695    |  
|Deferred revenue                                                                                                                                                                          |  | 3,100       |   |  |           |  
|Loans payable (Note 5)                                                                                                                                                                    |  | 147,759     |   |  | 112,903    |  
|Convertible debentures (Note 6)                                                                                                                                                           |  | 250,000     |   |  | 250,000    |  
|Total liabilities                                                                                                                                                                         |  | 1,315,184   |   |  | 1,245,273  |  
|Nature of operations and continuance of
      business (Note 1)                                                                                                                           |  |             |   |  |            |  
|Commitments (Note 10)                                                                                                                                                                     |  |             |   |  |            |  
|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: 44,003,256 shares (May 31, 2011  40,540,756 shares) |  | 440         |   |  | 405        |  
|Additional
      paid-in capital                                                                                                                                                          |  | 5,091,654   |   |  | 4,827,439  |  
|Common stock subscribed (Note 7)                                                                                                                                                          |  | 55,528      |   |  | 163,000    |  
|Deficit accumulated during the
      development stage                                                                                                                                    |  | (6,308,130  | ) |  | (6,080,808 | )
|Total Mantra
      Venture Group Ltd. stockholders deficit                                                                                                                               |  | (1,160,508  | ) |  | (1,089,964 | )
|Non-controlling interest                                                                                                                                                                  |  | (8,235      | ) |  | 10,325     |  
|Total
      stockholders deficit                                                                                                                                                         |  | (1,168,743  | ) |  | (1,079,639 | )
|Total liabilities and stockholders deficit                                                                                                                                               |  | 146,441     |   |  | 165,634    |  

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

F-1

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

|                                                                                                                                                                       |  |              |   |  |              |   |  | Accumulated from       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ---------------------- | -
|                                                                                                                                                                       |  | Three Months |   |  | Three Months |   |  | January 22, 2007       |  
|                                                                                                                                                                       |  | Ended        |   |  | Ended        |   |  | (date of inception) to |  
|                                                                                                                                                                       |  | August 31,   |   |  | August 31,   |   |  | August 31,             |  
|                                                                                                                                                                       |  | 2011         |   |  | 2010         |   |  | 2011                   |  
|                                                                                                                                                                       |  | $            |   |  | $            |   |  | $                      |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Revenue                                                                                                                                                                |  | 550          |   |  |             |   |  | 23,054                 |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Cost of goods sold                                                                                                                                                     |  | 490          |   |  |             |   |  | 2,725                  |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Gross profit                                                                                                                                                           |  | 60           |   |  |             |   |  | 20,329                 |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Operating expenses                                                                                                                                                     |  |              |   |  |              |   |  |                        |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Business development                                                                                                                                                   |  | 1,243        |   |  |             |   |  | 315,197                |  
|Consulting and advisory                                                                                                                                                |  | 128,760      |   |  | 18,792       |   |  | 807,582                |  
|Depreciation and amortization                                                                                                                                          |  | 7,195        |   |  | 8,782        |   |  | 131,336                |  
|Foreign exchange loss (gain)                                                                                                                                           |  | (1,949       | ) |  | (4,425       | ) |  | 58,323                 |  
|General and administrative                                                                                                                                             |  | 6,070        |   |  | 11,520       |   |  | 378,417                |  
|License fees                                                                                                                                                           |  |             |   |  |             |   |  | 33,438                 |  
|Management fees (Note 4)                                                                                                                                               |  | 48,000       |   |  | 48,564       |   |  | 1,006,459              |  
|Professional fees                                                                                                                                                      |  | 39,130       |   |  | 8,845        |   |  | 775,092                |  
|Public listing costs                                                                                                                                                   |  | 1,881        |   |  | 593          |   |  | 212,793                |  
|Rent                                                                                                                                                                   |  | 8,671        |   |  | 10,946       |   |  | 196,736                |  
|Research and development                                                                                                                                               |  |             |   |  |             |   |  | 418,206                |  
|Shareholder communications and awareness                                                                                                                               |  |             |   |  | 470          |   |  | 638,685                |  
|Travel and promotion                                                                                                                                                   |  | 3,739        |   |  | 13,729       |   |  | 394,625                |  
|Wages and benefits                                                                                                                                                     |  |             |   |  | 31,295       |   |  | 739,509                |  
|Website development/corporate
      branding                                                                                                                           |  |             |   |  |             |   |  | 195,451                |  
|Write
      down of intangible assets                                                                                                                                  |  |             |   |  |             |   |  | 37,815                 |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Total operating
      expenses                                                                                                                                         |  | 242,740      |   |  | 149,111      |   |  | 6,339,664              |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Loss before other
      income (expense)                                                                                                                               |  | (242,680     | ) |  | (149,111     | ) |  | (6,319,335             | )
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Other income (expense)                                                                                                                                                 |  |              |   |  |              |   |  |                        |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Accretion of discounts on convertible
      debentures                                                                                                                 |  |             |   |  |             |   |  | (45,930                | )
|Government grant income                                                                                                                                                |  |             |   |  |             |   |  | 118,324                |  
|Interest expense                                                                                                                                                       |  | (6,452       | ) |  | (6,165       | ) |  | (76,386                | )
|Gain (loss) on settlement of debt                                                                                                                                      |  | 3,250        |   |  |             |   |  | (56,378                | )
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Total other income (expense)                                                                                                                                           |  | (3,202       | ) |  | (6,165       | ) |  | (60,370                | )
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Net loss for the period                                                                                                                                                |  | (245,882     | ) |  | (155,276     | ) |  | (6,379,705             | )
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Less: net loss attributable to the
    non-controlling interest                                                                                                        |  | 18,560       |   |  |             |   |  | 71,575                 |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Net loss
      attributable to Mantra Venture Group Ltd.                                                                                                               |  | (227,322     | ) |  | (155,276     | ) |  | (6,308,130             | )
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Net loss per share
      attributable to Mantra Venture Group Ltd.
      common shareholders, basic and
      diluted                                                  |  | (0.01        | ) |  |             |   |  |                        |  
|                                                                                                                                                                       |  |              |   |  |              |   |  |                        |  
|Weighted average
      number of shares outstanding used in the 
      calculation of net loss
      attributable to Mantra Venture Group Ltd. 
      per common share |  | 40,900,539   |   |  | 34,721,241   |   |  |                        |  

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

F-2

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

|                                                                                   |  |              |   |  |              |   |  | Accumulated from       |  
|---------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ---------------------- | -
|                                                                                   |  | Three Months |   |  | Three Months |   |  | January 22, 2007       |  
|                                                                                   |  | Ended        |   |  | Ended        |   |  | (date of inception) to |  
|                                                                                   |  | August 31,   |   |  | August 31,   |   |  | August 31,             |  
|                                                                                   |  | 2011         |   |  | 2010         |   |  | 2011                   |  
|                                                                                   |  | $            |   |  | $            |   |  | $                      |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Operating activities                                                               |  |              |   |  |              |   |  |                        |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Net loss for the period                                                            |  | (245,882     | ) |  | (155,276     | ) |  | (6,379,705             | )
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Adjustments to reconcile net
      loss to net cash used in operating activities:  |  |              |   |  |              |   |  |                        |  
|Accretion of discounts on
      convertible debentures                             |  |             |   |  |             |   |  | 45,930                 |  
|Depreciation and
      amortization                                                |  | 7,195        |   |  | 8,782        |   |  | 131,336                |  
|Foreign exchange loss                                                              |  | 166          |   |  | (717         | ) |  | 4,633                  |  
|Loss on
      settlement of debt                                                   |  | (3,250       | ) |  |             |   |  | 56,378                 |  
|Stock-based compensation                                                           |  | 78,500       |   |  |             |   |  | 1,547,583              |  
|Write-down of
      intangible assets                                              |  |             |   |  |             |   |  | 37,815                 |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Changes in operating assets
      and liabilities:                                 |  |              |   |  |              |   |  |                        |  
|Amounts receivable                                                                 |  | (8,059       | ) |  | 4,233        |   |  | (33,608                | )
|Inventory                                                                          |  | (90          | ) |  |             |   |  | (16,069                | )
|Prepaid expenses and deposits                                                      |  | 2,954        |   |  | 761          |   |  | (18,395                | )
|Other assets                                                                       |  |             |   |  |             |   |  | (12,000                | )
|Accounts payable and accrued
      liabilities                                     |  | 27,092       |   |  | 12,772       |   |  | 1,030,761              |  
|Deferred revenue                                                                   |  | 3,100        |   |  |             |   |  | 3,100                  |  
|Due to related parties                                                             |  | 30,863       |   |  | 47,146       |   |  | 236,558                |  
|                                                                                   |  |              |   |  |              |   |  | -                      |  
|Net cash used in
      operating activities                                        |  | (107,411     | ) |  | (82,299      | ) |  | (3,365,683             | )
|                                                                                   |  |              |   |  |              |   |  | -                      |  
|Investing activities                                                               |  |              |   |  |              |   |  |                        |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Purchase of property and equipment                                                 |  |             |   |  |             |   |  | (175,797               | )
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Net cash used in
      investing activities                                        |  |             |   |  |             |   |  | (175,797               | )
|Financing activities                                                               |  |              |   |  |              |   |  |                        |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Proceeds from loans payable                                                        |  | 34,690       |   |  | 5,000        |   |  | 143,126                |  
|Proceeds from issuance of convertible
      debentures                             |  |             |   |  |             |   |  | 250,000                |  
|Proceeds from issuance of common stock and
      subscriptions received            |  | 55,528       |   |  | 83,200       |   |  | 3,170,262              |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Net cash provided by financing activities                                          |  | 90,218       |   |  | 88,200       |   |  | 3,563,388              |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Change in cash                                                                     |  | (17,193      | ) |  | 5,901        |   |  | 21,908                 |  
|Cash, beginning of
      period                                                    |  | 39,101       |   |  | 4,325        |   |  |                       |  
|                                                                                   |  |              |   |  |              |   |  | -                      |  
|Cash, end of
      period                                                          |  | 21,908       |   |  | 10,226       |   |  | 21,908                 |  
|                                                                                   |  |              |   |  |              |   |  |                        |  
|Non-cash investing and financing activities:                                       |  |              |   |  |              |   |  |                        |  
|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

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|1. | Nature of Operations and Continuance of
Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company was incorporated in the State of Nevada on
      January 22, 2007 to acquire and commercially exploit various new energy
      related technologies through licenses and purchases. On December 8, 2008,
      the Company continued its corporate jurisdiction out of the State of
      Nevada and into the province of British Columbia, Canada. The Company is a
      development stage company, as defined by Financial Accounting Standards
      Board (FASB) Accounting Standards Codification (ASC) 915, Development
      Stage Entities, in the business of developing and providing energy
      alternatives. The Company also provides marketing and graphic design
      services to help companies optimize their environmental awareness presence
      through the eyes of government, industry and the general public.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | These consolidated financial statements have been
      prepared on a going concern basis, which implies the Company will continue
      to realize its assets and discharge its liabilities in the normal course
      of business. The Company has yet to acquire commercially exploitable
      energy related technology, has not generated significant revenues since
      inception, and unlikely to generate earnings in the immediate or
      foreseeable future. The continuation of the Company as a going concern is
      dependent upon the continued financial support from its shareholders, the
      ability of management to raise additional equity capital through private
      and public offerings of its common stock, and the attainment of profitable
      operations. As at August 31, 2011, the Company has a working capital
      deficit of $1,225,204 has not generated significant revenues, and has
      accumulated losses of $6,308,130 since inception. These factors raise
      substantial doubt regarding the Companys ability to continue as a going
      concern. These consolidated financial statements do not include any
      adjustments to the recoverability and classification of recorded asset
      amounts and classification of liabilities that might be necessary should
      the Company be unable to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Management requires additional funds over the next twelve
      months to fully implement its business plan. Management is currently
      seeking additional financing through the sale of equity and from
      borrowings from private lenders to cover its operating expenditures. There
      can be no certainty that these sources will provide the additional funds
      required for the next twelve months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In January 2010, the FASB issued an amendment to ASC 820,
      Fair Value Measurements and Disclosure, to require reporting entities to
      separately disclose the amounts and business rationale for significant
      transfers in and out of Level 1 and Level 2 fair value measurements and
      separately present information regarding purchase, sale, issuance, and
      settlement of Level 3 fair value measures on a gross basis. This standard
      is effective for interim and annual reporting periods beginning after
      December 15, 2009 with the exception of disclosures regarding the
      purchase, sale, issuance, and settlement of Level 3 fair value measures
      which are effective for fiscal years beginning after December 15, 2010.
      The adoption of the applicable standard on June 1, 2011 did not have a
      material effect on the Companys consolidated financial
  statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company has implemented all new accounting
      pronouncements that are in effect and that may impact its financial
      statements and does not believe that there are any other new accounting
      pronouncements that have been issued that might have a material impact on
      its financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-4

---

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

| |                                |  |         |  |  |              |  |  | August 31,   |  |  | May 31,      | 
| | ------------------------------ |  | ------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                |  |         |  |  |              |  |  | 2011         |  |  | 2011         | 
| |                                |  |         |  |  | Accumulated  |  |  | Net carrying |  |  | Net carrying | 
| |                                |  | Cost    |  |  | depreciation |  |  | value        |  |  | value        | 
| |                                |  | $       |  |  | $            |  |  | $            |  |  | $            | 
| | Automobile                     |  | 11,938  |  |  | 10,851       |  |  | 1,087        |  |  | 1,684        | 
| | Leasehold improvements         |  | 25,144  |  |  | 7,061        |  |  | 18,083       |  |  | 19,340       | 
| | Office furniture and equipment |  | 53,777  |  |  | 37,793       |  |  | 15,984       |  |  | 18,673       | 
| | Research equipment             |  | 53,793  |  |  | 32,486       |  |  | 21,307       |  |  | 23,959       | 
| |                                |  | 144,652 |  |  | 88,191       |  |  | 56,461       |  |  | 63,656       | 

|4. | Related Party Transactions
|-- | --------------------------
|   |                           
|   | (a)                       
|   |                           
|   | (b)                       
|   |                           
|   | (c)                       
|   |                           
|   | (d)                       
|   |                           
|   | (e)                       
|   |                           
|   | (f)                       
|   |                           
|   | (g)                       
|   |                           
|   | (h)                       
|   |                           
|5. | Loans Payable             
|   |                           
|   | (a)                       
|   |                           
|   | (b)                       
|   |                           
|   | (c)                       

F-5

---

|6. | 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
      has recorded accretion expense of $45,930, increasing the carrying value
      of the convertible debentures to $250,000.                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|7. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-6

---

|7. | Common Stock (continued)                                                       
|-- | -------------------------------------------------------------------------------
|   |                                                                                
|   | (g)                                                                            
|   |                                                                                
|8. | Share Purchase Warrants                                                        
|   |                                                                                
|   | The following table summarizes the continuity of share
      purchase warrants:

| |                                |  |            |   |  | Weighted | 
| | ------------------------------ |  | ---------- | - |  | -------- | 
| |                                |  |            |   |  | average  | 
| |                                |  |            |   |  | exercise | 
| |                                |  | Number of  |   |  | price    | 
| |                                |  | warrants   |   |  | $        | 
| | Balance, May 31, 2011          |  | 7,736,497  |   |  | 0.22     | 
| | Issued                         |  | 2,062,500  |   |  | 0.20     | 
| | Expired                        |  | (1,178,667 | ) |  | 0.30     | 
| | Balance, August
      31, 2011 |  | 8,620,330  |   |  | 0.21     | 

As at August 31, 2011, the following
share purchase warrants were outstanding:

ExerciseNumber of
    pricewarrants
    $
    Expiry
      date68,000
    0.30
    October 15, 2011555,999
    0.30
    November 27, 201133,333
    0.30
    December 5, 20111,337,556
    0.20
    April 5, 2012573,567
    0.20
    June 3, 2012518,750
    0.20
    August 9, 20121,562,500
    0.20
    October 22, 2012275,000
    0.20
    December 10, 2012400,000
    0.20
    December 25, 20121,048,125
    0.20
    January 27, 2013185,000
    0.20
    March 28, 201325,000
    0.20
    August 11, 20132,037,500
    0.20
    August 31, 20138,620,330


F-7

---

|9. | Stock Options                                                                      
|-- | -----------------------------------------------------------------------------------
|   |                                                                                    
|   | The following table summarizes the continuity of the
      Companys stock options:

| |                                              |  |                  |   |  | Weighted |  |  | Weighted         |  |  |           | 
| | -------------------------------------------- |  | ---------------- | - |  | -------- |  |  | ---------------- |  |  | --------- | 
| |                                              |  |                  |   |  | average  |  |  | average          |  |  | Aggregate | 
| |                                              |  |                  |   |  | exercise |  |  | remaining        |  |  | intrinsic | 
| |                                              |  | Number           |   |  | price    |  |  | contractual life |  |  | value     | 
| |                                              |  | of
      options |   |  | $        |  |  | (years)          |  |  | $         | 
| | Outstanding, May 31, 2011                    |  | 1,575,000        |   |  | 0.17     |  |  |                  |  |  |           | 
| | Expired                                      |  | (75,000          | ) |  | 0.15     |  |  |                  |  |  |           | 
| | Outstanding and exercisable, August 31, 2011 |  | 1,500,000        |   |  | 0.17     |  |  | 1.7              |  |  |           | 

Additional information regarding stock
options as of August 31, 2011, is as follows:

ExerciseNumber of
    priceoptions
    $
    Expiry date500,000
    0.10
    March 31, 2013500,000
    0.10
    May 17, 2014250,000
    0.15
    January 13, 2012250,000
    0.25
    November 1, 20121,500,000


|10. | Commitments
|--- | -----------
|    |            
|    | (a)        
|    |            
|    |            
|    |            
|    |            

September 1, 2010
    Cdn$10,000 (accrued)September 1, 2011
    Cdn$20,000September 1, 2012
    Cdn$30,000September 1, 2013
    Cdn$40,000September 1, 2014 and each successive
      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.

F-8

---

|10. | Commitments (continued)
|--- | -----------------------
|    |                        
|    | (b)                    
|    |                        
|    | (c)                    

F-9

---

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 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 Energy Alternatives Ltd.,
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., 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 # 4 2119 152nd Street Surrey BC V4A 4N7. Our telephone number
  is (604) 535 4145. Our fiscal year end is May 31.

We are building a portfolio of companies and technologies that
mitigate negative environmental and health consequences that arise from the
production of energy and the consumption of resources.

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

On August 25, 2011, we entered into a consulting agreement with
  Richard Malcolm Smith, whereby Mr. Smith has agreed to provide certain management
  consulting services to our company for a period of six months regarding our
  ongoing corporate development and acquisitions. In consideration for the services,
  we have agreed to issue to Mr. Smith 700,000 shares of our common stock, previously
  registered on a Form S-8 registration statement.

Electro Reduction of Carbon Dioxide (ERC)

On November 2, 2007, through our wholly owned subsidiary,
Mantra Energy Alternatives Ltd., we entered into a technology assignment
agreement with 0798465 BC Ltd. whereby we acquired 100% ownership 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, or ERC, has been proven
functional through small scale prototype trials. ERC offers a possible solution
to reduce the impact of carbon dioxide (CO2) on Earths environment by
converting CO2 into chemicals with a broad range of commercial applications,
including a fuel for a next generation of fuel cells. Powered by electricity,
the ERC process combines captured carbon dioxide with water to produce
materials, such as formic acid, formate salts, oxalic acid and methanol, that
are conventionally obtained from the thermo-chemical processing of fossil fuels.
However, while thermo-chemical reactions must be driven at relatively high
temperatures that are normally obtained by burning fossil fuels, ERC operates at
near ambient conditions and is driven by electric energy that can be taken from
an electric power grid supplied by hydro, wind, solar or nuclear energy.

6

---

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



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

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

ERC Development to Date

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

In October of 2008, we completed our first ERC prototype
reactor capable of processing 1 kilogram of CO2 per day. In order to facilitate
the testing and development of this reactor, we entered into an agreement with
Kemetco on January 29, 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 have agreed to proceed with the testing and development
of our ERC prototype reactor for a period of 5 months at an estimated cost of
approximately $125,000.

7

---



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 2010. (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.

8

---

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 1⁄4
of the HCI produced in the U.S. is used for pickling steel (American Chemistry,
2003), consuming an estimated 5Mt/year. As an organic acid, Formic Acid would be
a very attractive replacement for Hydrochloric Acid (HCI) in the steel pickling
process. Formic Acid has many potential advantages over HCI in this application,
including: less iron lost from the steel surface, improvement in final surface
quality, and the elimination of corrosion inhibiting and neutralizing rinse
processes to prevent rust development. In addition, Formic Acid is both
bio-degradable and reusable which would allow water used in the picking process
to be recycled more easily.

Results of Operations for the Three Month Periods Ended
August 31, 2011 and August 31, 2010.

Revenues

The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended August
31, 2011 which are included herein.

Our operating results for three month periods ended August 31,
2011 and August 31, 2010 are summarized as follows:

|                   |  |                 |   |  |                 |   |  | Change Between     | 
|------------------ |  | --------------- | - |  | --------------- | - |  | ------------------ | 
|                   |  |                 |   |  |                 |   |  | Three Month Period | 
|                   |  |                 |   |  |                 |   |  | Ended              | 
|                   |  | Three Months    |   |  | Three Months    |   |  | August 31, 2011    | 
|                   |  | Ended           |   |  | Ended           |   |  | and                | 
|                   |  | August 31, 2011 |   |  | August 31, 2010 |   |  | August 31, 2010    | 
|                   |  | ($)             |   |  | ($)             |   |  | ($)                | 
|Revenue            |  | 550             |   |  | Nil             |   |  | 550                | 
|Operating expenses |  | 242,740         |   |  | 149,111         |   |  | 93,629             | 
|Net Loss           |  | (245,882        | ) |  | (155,276        | ) |  | 90,606             | 

We have had limited operational history since our inception on January 22, 2007. From our inception on January 22, 2007 to August 31, 2011 we have generated $23,054 in revenues. For the three months ended August 31, 2011 we generated $550 in revenues compared to revenues of $Nil generated during the same period in 2010. Since our inception on January 22, 2007 to August 31, 2011, we have an accumulated deficit of $6,308,130. 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.

Expenses

Our operating expenses for the three month periods ended August
31, 2011 and August 31, 2010 are summarized as follows:

9

---

|                                         |  | Three Months Ended |  
|---------------------------------------- |  | ------------------ | -
|                                         |  | August 31,         |  
|                                         |  | 2011               |  
|                                         |  | ($)                |  
|Business development                     |  | 1,243              |  
|Consulting and advisory                  |  | 128,760            |  
|Depreciation and amortization            |  | 7,195              |  
|Foreign exchange loss (gain)             |  | (1,949             | )
|General and administrative               |  | 6,070              |  
|Management fees                          |  | 48,000             |  
|Professional fees                        |  | 39,130             |  
|Public listing costs                     |  | 1,881              |  
|Rent                                     |  | 8,671              |  
|Shareholder communications and awareness |  | Nil                |  
|Travel and promotion                     |  | 3,739              |  
|Wages and benefits                       |  | Nil                |  

For the three months ended August 31, 2011, we incurred total expenses of $242,740 compared to total operating expenses for the three months ended August 31, 2010 of $149,111. The $93,629 increase is primarily due to consulting and advisory fees and professional fees.

Net Loss

Since our inception on January 22, 2007 to August 31, 2011, we have incurred a net loss of $6,308,130. For the three months ended August 31, 2011 we have incurred a net loss of $245,882 compared to a net loss of $155,276 for the same period in 2010. Our net loss per share for the three months ended August 31, 2011 was $0.01, compared to $Nil for the same period in 2010.

Liquidity and Capital Resources

Working CapitalAt August 31,
    
    
    May 31,2011
    
    
    2011Current Assets
    $
    89,980
    
    $
    101,978Current Liabilities
    $
    1,315,184
    
    $
    1,245,273Working Capital Deficit
    $
    (1,225,204
    )
    $
    (1,143,295
    )


|Cash Flows                                      |   | Three Months |   |   | Three Months |   |   | January 22,    |  
|----------------------------------------------- | - | ------------ | - | - | ------------ | - | - | -------------- | -
|                                                |   |              |   |   |              |   |   | 2007           |  
|                                                |   | Ended        |   |   | Ended        |   |   | (Inception) to |  
|                                                |   | August 31,   |   |   | August 31,   |   |   | August 31,     |  
|                                                |   | 2011         |   |   | 2010         |   |   | 2011           |  
|Net Cash Used in Operating Activities           | $ | (107,411     | ) | $ | (82,299      | ) | $ | (3,365,683     | )
|Net Cash Used In Investing Activities           | $ | Nil          |   | $ | Nil          |   | $ | (175,797       | )
|Net Cash Provided by
      Financing Activities | $ | 90,218       |   | $ | 88,200       |   | $ | 3,563,388      |  
|Change In Cash                                  | $ | (17,193      | ) | $ | 5,901        |   | $ | 21,908         |  

As of August 31, 2011, we had $21,908 cash in our bank accounts
and a working capital deficit of $1,225,204. As of August 31, 2011, we had total
assets of $89,980 and total liabilities of $1,315,184.

10

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From January 22, 2007 (date of inception) to August 31, 2011,
we raised net proceeds of $3,170,262 in cash from the issuance of common stock
and share subscriptions received, $143,126 from loans payable and $250,000 from
proceeds from the issuance of convertible debentures for a total of $3,563,388
of cash provided by financing activities for the period.

We received net cash of $90,218 from financing activities for the three months ended August 31, 2011 compared to $88,200 for the same period in 2010. During the period in 2011 we raised cash from the issuance of our common stock and share subscriptions received and proceeds from loans payable. In the comparable period, we raised cash primarily from the issuance of our common stock.

We used net cash of $107,411 in operating activities for the
three months ended August 31, 2011 compared to $82,299 for the same period in
2010. We used net cash of $3,365,683 in operating activities for the period from
January 22, 2007 (date of inception) to August 31, 2011.

We did not use any cash in investing activities for the three months ended August 31, 2011 and 2010.

During the three months ended August 31, 2011 we had a net
decrease of $17,193 in our cash position compared to a net increase of $5,901
for the same period in 2010. Our monthly cash requirements for the three month
period ended August 31, 2011 was approximately $5,731 compared to $1,967 for the
same period in 2010. 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
    275,000Consulting Fees
    100,000Commercialization of ERC
    1,300,000Shareholder communication and awareness
    250,000Professional Fees
    200,000Wages and Benefits
    150,000Management Fees
    300,000Total
    2,575,000


In order to fully carry out our business plan, we need
additional financing of approximately $2,575,000 for the next 12 months. In
order to improve our liquidity, we intend to pursue additional equity financing
from private placement sales of our equity securities or shareholders loans. We
do not presently have sufficient financing to undertake our planned business
activities. Issuances of additional shares will result in dilution to our
existing shareholders.

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

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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 consolidated financial statements for the year ended
May 31, 2011 filed in an annual report on Form 10-K. 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.

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, under the
Securities Exchange Act of 1934, that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms
and that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer (our principal
executive officer, principal financial officer and principal accounting
officer), as appropriate to allow timely decisions regarding required
disclosure.

We carried out an evaluation, under the supervision and with
the participation of our management, including our chief executive officer and
chief financial officer (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 as of August 31, 2011.
Based on the evaluation of these disclosure controls and procedures, and in
light of the weaknesses identified in our internal controls over financial
reporting which were enumerated in our annual report on Form 10-K for the year
ended May 31, 2011, the 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.

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.

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

On December 21, 2010, one of our convertible debenture holders
  filed suit in the Supreme Court of British Columbia for re-payment of a $150,000
  convertible debenture, including 10% annual interest from October 28, 2008,
  the date the loan was provided. Our company does not dispute the amount owing
  and has properly recorded the principal and interest as per the terms of the
  convertible debt agreement.

We know of no other material, existing or pending legal
proceedings against our company, nor are we involved as a plaintiff in any
material proceeding or pending litigation. There are no proceedings in which any
of our directors, officers or affiliates, or any registered beneficial
shareholder, is an adverse party or has a material interest adverse to our
interest.

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

On July 27, 2011, we issued 150,000 shares with a fair value
  of $12,000 to a consultant for financial public relations services. These shares
  were issued pursuant to an exemption from registration relying on Section 4(2)
  of the Securities Act of 1933.

On July 27, 2011, we issued 250,000 shares of common stock with
a fair value of $17,500 pursuant to an investor relations agreement. These
shares were issued pursuant to an exemption from registration relying on Section
4(2) of the Securities Act of 1933.

On August 10, 2011, we issued 300,000 shares of common stock
and 25,000 units with an aggregate fair value of $22,750 to the former vice
president of corporate development for $26,000 to settle amounts owing. Our
company recorded a gain on settlement of debt of $3,250. Each unit consisted of
one common share and one-half non-transferrable warrant to purchase one
additional share of common stock at an exercise price of $0.20 per share
expiring on the earlier of two years or five business days after our companys
common stock trades at least one time per day on the FINRA Over the Counter
Bulletin Board at a price at or above $0.40 per share for seven consecutive
trading days. These securities were issued pursuant to an exemption from
registration relying on Regulation S of the Securities Act of 1933.

On August 31, 2011, we issued 2,037,500 units at $0.08 per unit
for proceeds $163,000, which was recorded as common stock subscribed as at May
31, 2011. Each unit consisted of one common share and one-half non-transferrable
warrant to purchase one additional share of common stock at an exercise price of
$0.20 per share expiring on the earlier of two years or five business days after
our companys common stock trades at least one time per day on the FINRA Over
the Counter Bulletin Board at a price at or above $0.40 per share for seven
consecutive trading days. These securities were issued pursuant to an exemption
from registration relying on Regulation S of the Securities Act of 1933.

During the three months ended August 31, 2011, we received
share subscriptions for 1,070,550 units at $0.05 per unit for proceeds of
$53,528. Each unit will consist of one common share and one-half
non-transferrable warrant to purchase one additional share of common stock at an
exercise price of $0.20 per share expiring on the earlier of two years or five
business days after our companys common stock trades at least one time per day
on the FINRA Over the Counter Bulletin Board at a price at or above $0.40 per
share for seven consecutive trading days. These securities were issued pursuant
to an exemption from registration relying on Regulation S of the Securities Act
of 1933.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. [Removed and Reserved]

Item 5. Other Information

On May 17, 2011, we accepted the resignation of Shawn Kim as
director of our company. Mr. Kims resignation was not the result of any
disagreement with our company regarding its operations, policies, practices or
otherwise. Concurrently with Mr. Kims resignation, we appointed Elden Schorn as
a director of our company.

Item 6. Exhibits

|Exhibit |                                                                                                                                                                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                
|(2)     | Plan of acquisition, reorganization, arrangement,
      liquidation or succession                                                                                                                                                              
|        |                                                                                                                                                                                                                                                
|2.1     | Plan of Conversion of Mantra Venture Group Ltd. from a
      Nevada Corporation into a British Columbia Corporation dated October 29,
      2008. (incorporated by reference to our Current Report on Form 8-K filed
      on November 4, 2008)
|        |                                                                                                                                                                                                                                                
|(3)     | Articles of Incorporation, Bylaws                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                
|3.1     | Articles of Conversion of Mantra Venture Group Ltd. dated
      October 28, 2008 (incorporated by reference to our Current Report on Form
      8-K filed 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 on
      December 12, 2008)                                                                             
|        |                                                                                                                                                                                                                                                
|3.3     | British Columbia Notice of Articles (incorporated by
      reference to our Current Report on Form 8-K filed 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    | Sponsorship and Proposed Equity Capital Raise Agreement
      with M Partners Inc. dated December 4, 2008. (incorporated by reference to
      our Current Report on Form 8-K filed on December 11, 2008)                                      
|        |                                                                                                                                                                                                                                                
|10.3    | Contractor Proposal Agreement entered into with Kemetco
      Research Inc. on January 29, 2009.  (incorporated by reference
      to our Current Report on Form 8-K filed on February 4, 2009)                                                
|        |                                                                                                                                                                                                                                                
|10.4    | Option Agreement entered into with Synergy BioMetals
      Recovery Systems Inc. on February 27, 2009. (incorporated by reference to
      our Current Report on Form 8-K filed on March 2, 2009)                                              
|        |                                                                                                                                                                                                                                                
|10.5    | Extension of Option Agreement entered into with Synergy
      BioMetals Recovery Systems Inc. on May 1, 2009. (incorporated by reference
      to our Annual Report on Form 18-K filed on September 15, 2009)                                  
|        |                                                                                                                                                                                                                                                
|10.6    | Contractor Proposal Agreement entered into with Kemetco
      Research Inc. on March 18, 2009. (incorporated by reference to our Current
      Report on Form 8-K filed on March 26, 2009)                                                     
|        |                                                                                                                                                                                                                                                
|10.10   | Development Agreement with 3M dated October 28, 2009.
      (incorporated by reference to our Current Report on Form 8-K filed on
      November 6, 2009)                                                                                      
|        |                                                                                                                                                                                                                                                
|10.11   | Technology Development Cooperation Agreement entered into
      on August 16, 2010. (incorporated by reference to our Current Report on
      Form 8-K filed on August 17, 2010)                                                               
|        |                                                                                                                                                                                                                                                
|10.12   | Director Agreement between the Company and Elden Schorn
      dated May 17, 2011. (incorporated by reference to our Current Report on
      Form 8-K filed on May 24, 2011)                                                                    
|        |                                                                                                                                                                                                                                                
|10.13   | Consulting Agreement with Richard Malcolm Smith dated
      August 25, 2011. (incorporated by reference to our Current Report on Form
      8-K filed on September 1, 2011)                                                                    

14

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|Exhibit |                                                                                                                                                                             
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                 
|        |                                                                                                                                                                             
|(21)    | List of Subsidiaries                                                                                                                                                        
|        |                                                                                                                                                                             
|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)    | Rule 13a-14 / 15d-14 Certifications                                                                                                                                         
|        |                                                                                                                                                                             
|31.1*   | Certification
        of the Chief Executive Officer, Chief Financial Officer and Chief Accounting
        Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                                             
|(32)    | Section 1350 Certifications                                                                                                                                                 
|        |                                                                                                                                                                             
|32.1*   | Certification
        of the Chief Executive Officer, Chief Financial Officer and Chief Accounting
        Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15

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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: October 24, 2011 | /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)                              

16

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