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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

[ x ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2010

[     ] TRANSITION REPORT UNDER SECTION
13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _________ to _________

Commission File Number: 000-53461

Mantra Venture Group Ltd.(Name of Small Business Issuer in its charter)

|British Columbia                | 26-0592672                
|------------------------------- | --------------------------
|(state or other jurisdiction of | (I.R.S. Employer I.D. No.)
|incorporation or organization)  |                           

#4 2119  152nd StreetSurrey, British Columbia, Canada V4A 4N7(Address of principal executive
offices)

(604) 535 4145Issuers telephone number

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of October 14, 2010, the registrant had 35,927,185shares of common stock outstanding.

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Table of Contents

|PART
      I - FINANCIAL INFORMATION | 3            
|------------------------------------ | -------------
|                                     | Item
      1.
|                                     | Item
      2.
|                                     | Item
      3.
|                                     | Item
      4.
|PART
      II  OTHER INFORMATION    | 9            
|                                     | Item
      1.
|                                     | Item
      2.
|                                     | Item
      3.
|                                     | Item
      4.
|                                     | Item
      5.
|                                     | Item
      6.
|SIGNATURES                           | 10           

2

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited interim consolidated financial statements of
Mantra Venture Group Ltd. (the Company, Mantra, we, our, us) 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
|(Expressed in U.S. dollars)      
|August 31, 2010                  
|(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,    |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | - |  | ---------- | -
|                                                                                                                                                                        |  | 2010        |   |  | 2010       |  
|                                                                                                                                                                        |  | $           |   |  | $          |  
|                                                                                                                                                                        |  | (unaudited) |   |  |            |  
|ASSETS                                                                                                                                                                  |  |             |   |  |            |  
|Current assets                                                                                                                                                          |  |             |   |  |            |  
|Cash                                                                                                                                                                    |  | 10,226      |   |  | 4,325      |  
|Amounts receivable                                                                                                                                                      |  | 9,511       |   |  | 13,744     |  
|Prepaid expenses and deposits                                                                                                                                           |  | 317         |   |  | 1,078      |  
|Total current assets                                                                                                                                                    |  | 20,054      |   |  | 19,147     |  
|Property and equipment                                                                                                                                                  |  | 65,891      |   |  | 74,673     |  
|Total assets                                                                                                                                                            |  | 85,945      |   |  | 93,820     |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                   |  |             |   |  |            |  
|Current liabilities                                                                                                                                                     |  |             |   |  |            |  
|Accounts payable and accrued
      liabilities                                                                                                                          |  | 462,253     |   |  | 449,481    |  
|Due to related parties (Note 3)                                                                                                                                         |  | 341,858     |   |  | 294,712    |  
|Loans payable (Note 4)                                                                                                                                                  |  | 65,361      |   |  | 61,708     |  
|Convertible debentures                                                                                                                                                  |  | 250,000     |   |  | 250,000    |  
|Total liabilities                                                                                                                                                       |  | 1,119,472   |   |  | 1,055,271  |  
|Going Concern (Note 1)                                                                                                                                                  |  |             |   |  |            |  
|Commitment (Note 8)                                                                                                                                                     |  |             |   |  |            |  
|Subsequent events (Note 9)                                                                                                                                              |  |             |   |  |            |  
|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: 35,127,185 shares (May
      31, 2010     34,034,868 shares) |  | 351         |   |  | 340        |  
|Additional paid-in capital                                                                                                                                              |  | 4,123,668   |   |  | 4,036,294  |  
|Common stock subscribed (Note
      6)                                                                                                                                  |  | 41,700      |   |  | 45,885     |  
|Deficit accumulated during the development stage                                                                                                                        |  | (5,199,246  | ) |  | (5,043,970 | )
|Total stockholders deficit                                                                                                                                             |  | (1,033,527  | ) |  | (961,451   | )
|Total liabilities
      and stockholders deficit                                                                                                                       |  | 85,945      |   |  | 93,820     |  

(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        |   |  | (Inception) to   |  
|                                                       |  | August 31,   |   |  | August 31,   |   |  | August 31,       |  
|                                                       |  | 2010         |   |  | 2009         |   |  | 2010             |  
|                                                       |  | $            |   |  | $            |   |  | $                |  
|                                                       |  |              |   |  |              |   |  |                  |  
|Revenues                                               |  |             |   |  | 13,798       |   |  | 19,898           |  
|                                                       |  |              |   |  |              |   |  |                  |  
|Expenses                                               |  |              |   |  |              |   |  |                  |  
|Business development                                   |  |             |   |  | 52,759       |   |  | 251,093          |  
|Consulting and advisory                                |  | 18,792       |   |  | 28,041       |   |  | 451,904          |  
|Depreciation and amortization                          |  | 8,782        |   |  | 8,782        |   |  | 101,744          |  
|Foreign exchange loss (gain)                           |  | (4,425       | ) |  | 5,073        |   |  | 21,246           |  
|General and administrative (Note 3)                    |  | 11,520       |   |  | 22,644       |   |  | 335,617          |  
|License fees                                           |  |             |   |  |             |   |  | 28,438           |  
|Management fees (Note 3)                               |  | 48,564       |   |  | 52,621       |   |  | 819,451          |  
|Professional fees                                      |  | 8,845        |   |  | 48,659       |   |  | 665,703          |  
|Public listing costs                                   |  | 593          |   |  | 4,078        |   |  | 204,424          |  
|Rent                                                   |  | 10,946       |   |  | 13,466       |   |  | 167,120          |  
|Research and development                               |  |             |   |  | 62,244       |   |  | 418,206          |  
|Shareholder communications and
      awareness         |  | 470          |   |  | 83,821       |   |  | 580,244          |  
|Travel and promotion                                   |  | 13,729       |   |  | 11,771       |   |  | 334,279          |  
|Wages and benefits                                     |  | 31,295       |   |  | 14,587       |   |  | 632,025          |  
|Website and corporate identity                         |  |             |   |  |             |   |  | 195,451          |  
|Write down of intangible assets                        |  |             |   |  |             |   |  | 37,815           |  
|Total expenses                                         |  | 149,111      |   |  | 408,546      |   |  | 5,244,760        |  
|                                                       |  |              |   |  |              |   |  |                  |  
|Loss before other
      income (expense)               |  | (149,111     | ) |  | (394,748     | ) |  | (5,224,862       | )
|                                                       |  |              |   |  |              |   |  |                  |  
|Other income (expense)                                 |  |              |   |  |              |   |  |                  |  
|Accretion of discounts on
      convertible debentures |  |             |   |  | (10,727      | ) |  | (45,930          | )
|Government grant income                                |  |             |   |  |             |   |  | 118,324          |  
|Interest                                               |  | (6,165       | ) |  | (6,301       | ) |  | (46,778          | )
|Total other income
      (expense)                     |  | (6,165       | ) |  | (17,028      | ) |  | 25,616           |  
|Net loss for the period                                |  | (155,276     | ) |  | (411,776     | ) |  | (5,199,246       | )
|                                                       |  |              |   |  |              |   |  |                  |  
|Loss per share, basic and diluted                      |  |             |   |  | (0.02        | ) |  |                  |  
|                                                       |  |              |   |  |              |   |  |                  |  
|Weighted average number of shares outstanding          |  | 34,721,241   |   |  | 30,504,665   |   |  |                  |  

(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        |   |  | (Inception) to   |  
|                                                                                        |  | August 31,   |   |  | August 31,   |   |  | August 31,       |  
|                                                                                        |  | 2010         |   |  | 2009         |   |  | 2010             |  
|                                                                                        |  | $            |   |  | $            |   |  | $                |  
|                                                                                        |  |              |   |  |              |   |  |                  |  
|Operating activities                                                                    |  |              |   |  |              |   |  |                  |  
|                                                                                        |  |              |   |  |              |   |  |                  |  
|Net loss for the period                                                                 |  | (155,276     | ) |  | (411,776     | ) |  | (5,199,246       | )
|Adjustments to reconcile net loss to net cash
      used in operating activities:       |  |              |   |  |              |   |  |                  |  
|Accretion of
      discounts on convertible debentures                                  |  |             |   |  | 10,727       |   |  | 45,930           |  
|Depreciation and amortization                                                           |  | 8,782        |   |  | 8,782        |   |  | 101,744          |  
|Foreign exchange                                                                        |  | (717         | ) |  |             |   |  | (717             | )
|Shares issued for services                                                              |  |             |   |  | 37,250       |   |  |                 |  
|Stock-based
      compensation                                                          |  |             |   |  | 9,121        |   |  | 1,218,510        |  
|Write-down of intangible assets                                                         |  |             |   |  |             |   |  | 37,815           |  
|Changes in operating assets
      and liabilities                                       |  |              |   |  |              |   |  |                  |  
|Amounts receivable                                                                      |  | 4,233        |   |  | 4,564        |   |  | (9,511           | )
|Prepaid expenses
      and deposits                                                     |  | 761          |   |  | 4,036        |   |  | (317             | )
|Other assets                                                                            |  |             |   |  |             |   |  | (12,000          | )
|Accounts payable
      and accrued liabilities                                          |  | 12,772       |   |  | 112,258      |   |  | 738,733          |  
|Due to related parties                                                                  |  | 47,146       |   |  | 28,174       |   |  | 341,858          |  
|Net cash used in operating activities                                                   |  | (82,299      | ) |  | (196,864     | ) |  | (2,737,201       | )
|Investing activities                                                                    |  |              |   |  |              |   |  |                  |  
|Purchase of property and equipment                                                      |  |             |   |  |             |   |  | (155,635         | )
|Net cash used in
      investing activities                                             |  |             |   |  |             |   |  | (155,635         | )
|Financing activities                                                                    |  |              |   |  |              |   |  |                  |  
|Proceeds from loans payable                                                             |  | 5,000        |   |  |              |   |  | 66,078           |  
|Bank indebtedness                                                                       |  |             |   |  | 6,544        |   |  |                 |  
|Proceeds from issuance of convertible
      debentures                                  |  |             |   |  |             |   |  | 250,000          |  
|Proceeds from issuance of common stock                                                  |  | 83,200       |   |  | 187,000      |   |  | 2,586,984        |  
|Net cash provided
      by financing activities                                         |  | 88,200       |   |  | 193,544      |   |  | 2,903,062        |  
|Change in cash                                                                          |  | 5,901        |   |  | (3,320       | ) |  | 10,226           |  
|Cash, beginning of
      period                                                         |  | 4,325        |   |  | 3,320        |   |  |                 |  
|Cash, end of period                                                                     |  | 10,226       |   |  |             |   |  | 10,226           |  
|Non-cash investing and financing activities:                                            |  |              |   |  |              |   |  |                  |  
|Common stock issued to settle
      debt                                                |  |             |   |  | 15,000       |   |  | 276,480          |  
|Common stock issued and stock options grated 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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|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|August 31, 2010                               
|(unaudited)                                   

|1. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The accompanying consolidated financial statements of
      Mantra Venture Group Ltd. (the Company) should be read in conjunction
      with the consolidated financial statements and accompanying notes filed
      with the U.S. Securities and Exchange Commission in the Companys Annual
      Report on Form 10-K for the fiscal year ended May 31, 2010. In the opinion
      of management, the accompanying financial statements reflect all
      adjustments of a recurring nature considered necessary to present fairly
      the Companys financial position and the results of its operations and its
      cash flows for the periods shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The preparation of financial statements in accordance
      with accounting principles generally accepted in the United States
      requires management to make estimates and assumptions that affect the
      amounts reported. Actual results could differ materially from those
      estimates. The results of operations and cash flows for the periods shown
      are not necessarily indicative of the results to be expected for the full
      year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | These consolidated financial statements have been
      prepared on a going concern basis, which implies the Company will continue
      to realize its assets and discharge its liabilities in the normal course
      of business. The Company has never generated revenues since inception and
      is unlikely 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 the
      Company to obtain necessary equity financing to continue operations, and
      the attainment of profitable operations. As at August 31, 2010, the
      Company has a working capital deficit of $1,099,418 and has accumulated
      losses of $5,199,246 since inception. These factors raise substantial
      doubt regarding the Companys ability to continue as a going concern.
      These financial statements do not include any adjustments to the
      recoverability and classification of recorded asset amounts and
      classification of liabilities that might be necessary should the Company
      be unable to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In January 2010, the FASB issued an amendment to ASC 820,
      Fair Value Measurements and Disclosures, 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, 2010 did not have a
      material effect on the Companys 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-4

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|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|August 31, 2010                               
|(unaudited)                                   

|3. | Related Party Transactions (continued)
|-- | --------------------------------------
|   |                                       
|   | d)                                    
|   |                                       
|   | e)                                    
|   |                                       
|   | f)                                    
|   |                                       
|   | g)                                    
|   |                                       
|   | h)                                    
|   |                                       
|   | i)                                    
|   |                                       
|   | j)                                    
|   |                                       
|   | k)                                    
|   |                                       
|4. | Loans Payable                         
|   |                                       
|   | a)                                    
|   |                                       
|   | b)                                    
|   |                                       
|   | c)                                    
|   |                                       
|5. | Common Stock                          
|   |                                       
|   | a)                                    
|   |                                       
|   | b)                                    

F-5

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|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|August 31, 2010                               
|(unaudited)                                   

|5. | Common Stock (continued)                                                           
|-- | -----------------------------------------------------------------------------------
|   |                                                                                    
|   | c)                                                                                 
|   |                                                                                    
|6. | Stock Options                                                                      
|   |                                                                                    
|   | The following table summarizes the continuity of the
      Companys stock options:

| |                              |  |                  |   |  |                |  |  | Weighted         |  |  |           | 
| | ---------------------------- |  | ---------------- | - |  | -------------- |  |  | ---------------- |  |  | --------- | 
| |                              |  |                  |   |  | Weighted       |  |  | average          |  |  | Aggregate | 
| |                              |  |                  |   |  | average        |  |  | remaining        |  |  | intrinsic | 
| |                              |  | Number           |   |  | exercise price |  |  | contractual life |  |  | value     | 
| |                              |  | of
      options |   |  | $              |  |  | (years)          |  |  | $         | 
| |                              |  |                  |   |  |                |  |  |                  |  |  |           | 
| | Outstanding, May 31, 2010    |  | 1,608,333        |   |  | 0.25           |  |  |                  |  |  |           | 
| | Cancelled                    |  | (100,000         | ) |  | 0.25           |  |  |                  |  |  |           | 
| | Outstanding and exercisable, |  |                  |   |  |                |  |  |                  |  |  |           | 
| | August 31, 2010              |  | 1,508,333        |   |  | 0.25           |  |  | 0.5              |  |  |          | 

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

ExerciseNumber of
    
    PriceOptions
    
    $
    
    
    Expiry
      Date75,000
    
    0.15
    
    
    June 1, 2011400,000
    
    0.20
    
    
    October 1, 2010233,333
    
    0.24
    
    
    September 21, 2010250,000
    
    0.25
    
    
    November 1, 201275,000
    
    0.27
    
    
    February 10, 2011100,000
    
    0.30
    
    
    October 6, 2010375,000
    
    0.30
    
    
    January 1, 20111,508,333


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

Three months
    Three monthsended
    endedAugust 31,
    August 31,2010
    2009Risk-free Interest rate
    
    0.48%Expected life (in years)
    
    1.0Expected volatility
    
    90%


The weighted average fair value of the
stock options granted during 2010 was $nil (2009 - $0.12) per option.

F-6

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|August 31, 2010                               
|(unaudited)                                   

|7. | Share Purchase Warrants                                                        
|-- | -------------------------------------------------------------------------------
|   |                                                                                
|   | The following table summarizes the continuity of share
      purchase warrants:

| |                          |  |           |  |  | Weighted | 
| | ------------------------ |  | --------- |  |  | -------- | 
| |                          |  |           |  |  | Average  | 
| |                          |  |           |  |  | Exercise | 
| |                          |  | Number of |  |  | Price    | 
| |                          |  | Warrants  |  |  | $        | 
| | Balance, May 31, 2010    |  | 6,726,163 |  |  | 0.31     | 
| | Issued                   |  | 1,092,317 |  |  | 0.20     | 
| | Balance, August 31, 2010 |  | 7,818,480 |  |  | 0.29     | 

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

ExerciseNumber of
    
    PriceWarrants
    
    $
    
    
    Expiry
      Date50,000
    
    0.50
    
    
    October 16, 201050,000
    
    0.50
    
    
    October 17, 2010150,000
    
    0.50
    
    
    October 28, 2010610,000
    
    0.50
    
    
    November 30, 2010199,998
    
    0.40
    
    
    March 10, 2011859,625
    
    0.30
    
    
    April 1, 201171,152
    
    0.30
    
    
    April 3, 2011292,500
    
    0.30
    
    
    April 6, 2011860,000
    
    0.30
    
    
    April 16, 201188,000
    
    0.30
    
    
    May 20, 2011321,333
    
    0.30
    
    
    May 28, 2011466,334
    
    0.30
    
    
    July 16, 2011118,000
    
    0.30
    
    
    July 24, 2011594,333
    
    0.30
    
    
    August 24, 201168,000
    
    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, 20127,818,480


|8. | Commitments
|-- | -----------
|   |            
|   | a)         

F-7

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|August 31, 2010                               
|(unaudited)                                   

|8. | Commitments (continued)
|-- | -----------------------
|   |                        
|   | b)                     
|   |                        
|   |                        
|   |                        
|   |                        

September 1, 2010
    Cdn$10,000September 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.

|9. | Subsequent Events
|-- | -----------------
|   |                  
|   | a)               
|   |                  
|   |                  
|   |                  
|   |                  
|   |                  
|   |                  
|   |                  
|   | b)               

F-8

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

Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking
statements that involve risks and uncertainties. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology including "could", "may",
"will", "should", "expect", "plan", "anticipate", "believe", "estimate",
"predict", "potential" and the negative of these terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially.

While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested in this report.

Business Overview

We are building a portfolio of companies and technologies that
mitigate negative environmental and health consequences that arise from the
production of energy and the consumption of resources. On November 2, 2007,
through our wholly owned subsidiary, Mantra Energy Alternatives Ltd., we entered
into a technology assignment agreement with 0798465 BC Ltd. whereby we acquired
100% ownership of an invention for the electro-reduction of carbon dioxide.

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.

Results of Operations for the Period From January 22, 2007
(Date of Inception) to August 31, 2010 and for the Three Months Ended August 31,
2010.

We have had limited operational history since our inception on
January 22, 2007. From our inception on January 22, 2007 to August 31, 2010 we
have generated $19,898 in revenues. For the three months ended August 31, 2010
we did not generate revenues compared to revenues generated of $13,798 during
the same period in 2009. Since our inception on January 22, 2007 to August 31,
2010, we have an accumulated deficit of $5,199,246. 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

We accumulated total expenses of $5,244,760 from the date of
our inception to August 31, 2010, including $418,206 in research and development
costs, $819,451 in management fees, $665,703 in professional fees, $580,244 in
shareholder communications and awareness and $451,904 in consulting and advisory
expenses.

For the three months ended August 31, 2010, we incurred total
expenses of $149,111 including $48,564 in management fees, $18,792 in consulting
and advisory, $8,845 in professional fees, $470 in shareholder communications
and awareness, and $31,295 in wages and benefits.

5

---

By comparison, our total operating expenses for the three
months ended August 31, 2009 were $408,546 including $62,244 in research and
development costs, $52,621 in management fees, $48,659 in professional fees,
$83,821 in shareholder communications and awareness, and $28,041 in consulting
and advisory expenses.

Net Loss

Since our inception on January 22, 2007 to August 31, 2010, we
have incurred a net loss of $5,199,246. For the three months ended August 31,
2010, we incurred a net loss of $155,276 compared to our net loss of $411,776
for the same period in 2009. Our net loss per share for the three months ended
August 31, 2010 was $Nil and for the same period in 2009 was $0.02.

Liquidity and Capital Resources

As of August 31, 2010, we had $10,226 cash in our bank accounts
and a working capital deficit of $1,099,418. As of August 31, 2010, we had total
assets of $85,945 and total liabilities of $1,119,472.

From January 22, 2007 (date of inception) to August 31, 2010,
we raised net proceeds of $2,586,984 in cash from the issuance of common stock,
$66,078 from loans payable and $250,000 from proceeds from the issuance of
convertible debentures for a total of $2,903,062 of cash provided by financing
activities for the period.

We received net cash of $88,200 from financing activities for
the three months ended August 31, 2010 compared to $193,544 for the same period
in 2009.

We used net cash of $82,299 in operating activities for the
three months ended August 31, 2010 compared to $196,864 for the same period in
2009. We used net cash of $2,737,201 in operating activities for the period from
January 22, 2007 (date of inception) to August 31, 2010.

We did not use any cash in investing activities for the three
months August 31, 2010 and for the three months August 31, 2009.

During the three months ended August 31, 2010 we had an
increase of $5,901 in our cash position compared to a decrease of $3,320 for the
same period in 2009. Our monthly cash requirements for three month period ended
August 31, 2010 was approximately $27,433 compared to $65,621 for the same
period in 2009. At our current cash position and if this cash requirement
continues, we do not have sufficient cash to cover our expenses for one month.

On October 16, 17 and 28, 2008, we 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 our common stock at a price of $0.40 per share. We
also issued 250,000 detachable, non-transferable share purchase warrants. Each
share purchase warrant entitles the holder to purchase one additional share of
our common stock for a period of two years from the date of the issue at an
exercise price of $0.50 per share.

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. Below is a summary of our anticipated
expenditures over the next 12 months:

6

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|Description                             |     | Estimated expenses | 
|--------------------------------------- | --- | ------------------ | 
|                                        | ($) |                   
|Research and Development                |     | 275,000            | 
|Consulting Fees                         |     | 100,000            | 
|Acquisition of new technologies         |     | 500,000            | 
|Commercialization
      of ERC          |     | 1,200,000          | 
|Shareholder communication and awareness |     | 250,000            | 
|Professional Fees                       |     | 200,000            | 
|Wages and Benefits                      |     | 150,000            | 
|Management Fees                         |     | 400,000            | 
|Total                                   |     | 3,075,000          | 

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

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

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 amounts presented in the financial statements do not
provide for the effect of inflation on our operations or financial position. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation adjustments.

Critical Accounting Policies

Our financial statements are impacted by the accounting
policies used and the estimates and assumptions made by management during their
preparation. A complete summary of these policies is included in note 2 of the
notes to our consolidated financial statements for the year ended May 31, 2010
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.

Use of Estimates

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

7

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Long-lived Assets

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

Stock-based Compensation

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

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

Item 3. Quantitative and Qualitative Disclosures About
Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

We carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as of August 31, 2010. 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 period ended May 31,
2010, the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective.

8

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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.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any material legal proceedings which
involve Mantra or any of its properties or subsidiaries.

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

On June 3, 2010, we issued 573,567 units at $0.08 per unit for
proceeds of $45,885 which was recorded as common stock subscribed as at May 31,
2010. Each unit consists of one share of common stock and one non-transferable
share purchase warrant exercisable at $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.

On August 9, 2010, we issued 518,750 units at $0.08 per unit
for proceeds of $41,500. Each unit consists of one common share and one
non-transferrable share 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.

We have issued all of the securities to non-US persons (as that
term is defined in Regulation S of the Securities Act of 1933) in an offshore
transaction relying on Regulation S and/or Section 4(2) of the Securities Act of
1933.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. [Removed and Reserved]

Item 5. Other Information.

None

Item 6. Exhibits

|Exhibit | Description                                                                                                                                                             
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                         
|10.1    | Development Agreement with 3M
      dated October 28, 2009 (1)                                                                                                          
|10.2    | Management Agreement with Con Buckley October
      1, 2009 (2)                                                                                                         
|31.1    | Certification of the Chief
      Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|31.2    | Certification of the Chief Financial Officer
      Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002
|32.1    | Certification of the Chief
      Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002        
|32.2    | Certification of the Chief Financial Officer
      Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002        

| | (1) | Attached as an exhibit to our current report on Form 8-K
      filed on November 6, 2009.
| | --- | -----------------------------------------------------------------------------------------
| | (2) | Attached as an exhibit to our current report on Form 8-K
      filed on October 7, 2009  

9

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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)                                               
|                       |                                                            
|                       | /s/
      Larry Kristof                                    
|Date: October 15, 2010 | Larry Kristof                                              
|                       | President, Chief Executive Officer, Director               
|                       |                                                            
|                       | /s/
      Con Buckley                                      
|Date: October 15, 2010 | Con Buckley                                                
|                       | Chief Financial Officer, Principal Accounting
      Officer

10

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