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

----

| PART I - FINANCIAL INFORMATION                                                                      |  3  |
|-----------------------------------------------------------------------------------------------------|----------|
| Item 1. Financial Statements                                                                        |  3  |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |  4  |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                  |  9  |
| Item 4. Controls and Procedures                                                                     |  9  |
| PART II – OTHER INFORMATION                                                                   |  10 |
| Item 1. Legal Proceedings                                                                           |  10 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 |  10 |
| Item 3. Defaults Upon Senior Securities                                                             |  11 |
| Item 4. Submission of Matters to a Vote of Security Holders                                         |  11 |
| Item 5. Other Information                                                                           |  11 |

----

PART I - FINANCIAL INFORMATION

Item 1. Financial 

|                                           | 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   |

----

|                                                                                                                                             |   | November 30, 2009$(unaudited) |       |   | May 31, 2009$ |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|--------|---------------|--------|
|                                                                                                                                             |   |                          |       |   |          |   |
| ASSETS                                                                                                                                           |   |                          |       |   |          |   |
|                                                                                                                                             |   |                          |       |   |          |   |
| Current assets                                                                                                                                   |   |                          |       |   |          |   |
|                                                                                                                                             |   |                          |       |   |          |   |
| Cash                                                                                                                                             |   |                          | 3,267      |   |          |   | 3,320 |   |
| Amounts receivable                                                                                                                               |   |                          | 25,173     |   |          |   | 19,253 |   |
| Prepaid expenses and deposits                                                                                                                    |   |                          | –    |   |          |   | 6,536 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Total current assets                                                                                                                             |   |                          | 28,440     |   |          |   | 29,109 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Property and equipment                                                                                                                           |   |                          | 92,237     |   |          |   | 109,801 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Total assets                                                                                                                                     |   |                          | 120,677    |   |          |   | 138,910 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                      |   |                          |       |   |          |   |   |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Current liabilities                                                                                                                              |   |                          |       |   |          |   |   |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Accounts payable and accrued liabilities (Note 3)                                                                                                |   |                          | 506,398    |   |          |   | 224,893 |   |
| Due to related parties (Note 3)                                                                                                                  |   |                          | 5,245      |   |          |   | 76,015 |   |
| Convertible debentures (Note 4)                                                                                                                  |   |                          | 250,000    |   |          |   | 231,618 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Total current liabilities                                                                                                                        |   |                          | 761,643    |   |          |   | 532,526 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Due to related parties (Note 3)                                                                                                                  |   |                          | 127,644    |   |          |   | – |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Total liabilities                                                                                                                                |   |                          | 889,287    |   |          |   | 532,526 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Commitments (Note 5)                                                                                                                             |   |                          |       |   |          |   |   |   |
| Subsequent events (Note 9)                                                                                                                       |   |                          |       |   |          |   |   |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Stockholders’ deficit                                                                                                                      |   |                          |       |   |          |   |   |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Preferred stock Authorized: 20,000,000 shares, par value $0.00001 Issued and outstanding: Nil shares                                             |   |                          | –    |   |          |   | – |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Common stockAuthorized: 100,000,000 shares, par value $0.00001Issued and outstanding: 32,011,455 shares (May 31, 2009 – 23,452,661 shares) |   |                          | 320        |   |          |   | 301 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Additional paid-in capital                                                                                                                       |   |                          | 3,820,447  |   |          |   | 3,431,286 |   |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Deficit accumulated during the development stage                                                                                                 |   |                          | (4,589,377 | )      |          |   | (3,825,203 | ) |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Total stockholders’ deficit                                                                                                                |   |                          | (768,610   | )      |          |   | (393,616 | ) |
|                                                                                                                                             |   |                          |       |   |          |   |   |   |
| Total liabilities and stockholders’ deficit                                                                                                |   |                          | 120,677    |   |          |   | 138,910 |   |

----

|                                             |   | Three Months EndedNovember 30, |       |   | Six Months EndedNovember 30, |   |        | Accumulated fromJanuary 22, 2007 (Date of Inception) to November 30, |   |
|--------------------------------------------------|--------|--------------------------------|------------|--------|------------------------------|--------|-------------|----------------------------------------------------------------------|--------|
|                                             |   |                           | 2009$      |   |                         |   | 2008$  |                                                                 |   |   | 2009$  |   |   |   | 2008$  |   |   | 2009$ |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                         |   |                           | 58,640     |   |                         |   | 3,058       |                                                                 |   |   | 72,438 |   |   |   | 11,058 |   |   |   | 89,556 |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses                                         |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Business development                             |   |                           | 7,131      |   |                         |   | 9,851       |                                                                 |   |   | 59,890 |   |   |   | 11,300 |   |   |   | 272,113 |   |
| Consulting and advisory                          |   |                           | (4,838     | )      |                         |   | 11,581      |                                                                 |   |   | 23,203 |   |   |   | 35,355 |   |   |   | 428,210 |   |
| Depreciation and amortization                    |   |                           | 8,782      |   |                         |   | 13,351      |                                                                 |   |   | 17,564 |   |   |   | 18,305 |   |   |   | 75,398 |   |
| Foreign exchange loss                            |   |                           | 13,510     |   |                         |   | –     |                                                                 |   |   | 18,583 |   |   |   | – |   |   |   | 15,326 |   |
| General and administrative (Note 3)              |   |                           | 7,590      |   |                         |   | 37,627      |                                                                 |   |   | 30,234 |   |   |   | 78,298 |   |   |   | 341,415 |   |
| Management fees (Note 3)                         |   |                           | 112,188    |   |                         |   | 53,500      |                                                                 |   |   | 164,809 |   |   |   | 147,533 |   |   |   | 849,391 |   |
| Professional fees (Note 3)                       |   |                           | 108,439    |   |                         |   | 74,301      |                                                                 |   |   | 157,098 |   |   |   | 165,664 |   |   |   | 618,619 |   |
| Public listing costs                             |   |                           | 6,865      |   |                         |   | 5,683       |                                                                 |   |   | 10,943 |   |   |   | 7,500 |   |   |   | 200,286 |   |
| Rent                                             |   |                           | 12,917     |   |                         |   | –     |                                                                 |   |   | 26,383 |   |   |   | – |   |   |   | 135,973 |   |
| Research and development                         |   |                           | 44,725     |   |                         |   | 52,498      |                                                                 |   |   | 106,969 |   |   |   | 72,122 |   |   |   | 358,422 |   |
| Shareholder communications and awareness         |   |                           | 7,566      |   |                         |   | 64,854      |                                                                 |   |   | 91,387 |   |   |   | 169,345 |   |   |   | 584,608 |   |
| Travel and promotion                             |   |                           | 19,476     |   |                         |   | 10,302      |                                                                 |   |   | 31,247 |   |   |   | 15,523 |   |   |   | 286,525 |   |
| Wages and benefits                               |   |                           | 53,285     |   |                         |   | 21,777      |                                                                 |   |   | 67,872 |   |   |   | 45,012 |   |   |   | 205,869 |   |
| Website and corporate identity                   |   |                           | –    |   |                         |   | –     |                                                                 |   |   | – |   |   |   | – |   |   |   | 195,451 |   |
| Write down of intangible assets                  |   |                           | –    |   |                         |   | –     |                                                                 |   |   | – |   |   |   | – |   |   |   | 37,815 |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Total expenses                                   |   |                           | 397,636    |   |                         |   | 355,325     |                                                                 |   |   | 806,182 |   |   |   | 765,957 |   |   |   | 4,605,421 |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before other expenses                       |   |                           | (338,996   | )      |                         |   | (352,267    | )                                                                    |   |   | (733,744 | ) |   |   | (754,899 | ) |   |   | (4,515,865 | ) |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Other expenses                                   |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of discounts on convertible debentures |   |                           | (7,655     | )      |                         |   | (3,828      | )                                                                    |   |   | (18,382 | ) |   |   | (3,828 | ) |   |   | (45,930 | ) |
| Interest                                         |   |                           | (5,747     | )      |                         |   | (5,886      | )                                                                    |   |   | (12,048 | ) |   |   | (5,886 | ) |   |   | (27,582 | ) |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other expenses                             |   |                           | (13,402    | )      |                         |   | (9,714      | )                                                                    |   |   | (30,430 | ) |   |   | (9,714 | ) |   |   | (73,512 | ) |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the period                          |   |                           | (352,398   | )      |                         |   | (361,981    | )                                                                    |   |   | (764,174 | ) |   |   | (764,613 | ) |   |   | (4,589,377 | ) |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss per share, basic and diluted                |   |                           | (0.01      | )      |                         |   | (0.01       | )                                                                    |   |   | (0.02 | ) |   |   | (0.03 | ) |   |   |   |   |
|                                             |   |                           |       |   |                         |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding    |   |                           | 31,413,663 |   |                         |   | 26,033,980  |                                                                 |   |   | 30,969,856 |   |   |   | 25,570,625 |   |   |   |   |   |

----

|                                                                               |   | Six Months EndedNovember 30, |     |   | Six Months EndedNovember 30, |   |     | Accumulated fromJanuary 22, 2007(Date of Inception)to November 30, |   |
|------------------------------------------------------------------------------------|--------|------------------------------|----------|--------|------------------------------|--------|----------|--------------------------------------------------------------------|--------|
|                                                                               |   |                         | 2009$    |   |                         |   | 2008$    |                                                               |   |   | 2009$ |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Operating activities                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Net loss for the period                                                            |   |                         | (764,174 | )      |                         |   | (764,613 | )                                                                  |   |   | (4,589,377 | ) |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Adjustments to reconcile net loss to net cash used in operating activities:        |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Accretion of discounts on convertible debentures                                   |   |                         | 18,382   |   |                         |   | 3,828    |                                                               |   |   | 45,930 |   |
| Depreciation and amortization                                                      |   |                         | 17,564   |   |                         |   | 18,305   |                                                               |   |   | 75,398 |   |
| Imputed interest                                                                   |   |                         | –  |   |                         |   | 3,160    |                                                               |   |   | – |   |
| Stock-based compensation                                                           |   |                         | 103,780  |   |                         |   | 142,320  |                                                               |   |   | 1,218,510 |   |
| Write-down of intangible assets                                                    |   |                         | –  |   |                         |   | –  |                                                               |   |   | 37,815 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Changes in operating assets and liabilities                                        |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Subscriptions receivable                                                           |   |                         | –  |   |                         |   | (95,000  | )                                                                  |   |   | – |   |
| Amounts receivable                                                                 |   |                         | (5,920   | )      |                         |   | (11,860  | )                                                                  |   |   | (25,173 | ) |
| Prepaid expenses and deposits                                                      |   |                         | 6,536    |   |                         |   | (20,351  | )                                                                  |   |   | – |   |
| Other assets                                                                       |   |                         | –  |   |                         |   | –  |                                                               |   |   | (12,000 | ) |
| Accounts payable and accrued liabilities                                           |   |                         | 296,505  |   |                         |   | 45,773   |                                                               |   |   | 679,015 |   |
| Due to related parties                                                             |   |                         | 56,874   |   |                         |   | (38,626  | )                                                                  |   |   | 132,889 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Net cash used in operating activities                                              |   |                         | (270,453 | )      |                         |   | (717,064 | )                                                                  |   |   | (2,436,993 | ) |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Investing activities                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Purchase of property and equipment                                                 |   |                         | –  |   |                         |   | (84,990  | )                                                                  |   |   | (155,635 | ) |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Net cash used in investing activities                                              |   |                         | –  |   |                         |   | (84,990  | )                                                                  |   |   | (155,635 | ) |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Financing activities                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Borrowings on related party debt                                                   |   |                         | –  |   |                         |   | 98,595   |                                                               |   |   | – |   |
| Payments on related party debt                                                     |   |                         | –  |   |                         |   | (74,206  | )                                                                  |   |   | – |   |
| Proceeds from issuance of convertible debentures                                   |   |                         | –  |   |                         |   | 250,000  |                                                               |   |   | 250,000 |   |
| Proceeds from issuance of common stock                                             |   |                         | 270,400  |   |                         |   | 595,000  |                                                               |   |   | 2,345,895 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Net cash provided by financing activities                                          |   |                         | 270,400  |   |                         |   | 869,389  |                                                               |   |   | 2,595,895 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Change in cash                                                                     |   |                         | (53      | )      |                         |   | 67,335   |                                                               |   |   | 3,267 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Cash, beginning of period                                                          |   |                         | 3,320    |   |                         |   | 26,201   |                                                               |   |   | – |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Cash, end of period                                                                |   |                         | 3,267    |   |                         |   | 93,536   |                                                               |   |   | 3,267 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Non-cash investing and financing activities:                                       |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Common stock issued to settle accounts payable                                     |   |                         | 15,000   |   |                         |   | –  |                                                               |   |   | 172,617 |   |
| Common stock issued and stock options granted for acquisition of intangible assets |   |                         | –  |   |                         |   | –  |                                                               |   |   | 37,815 |   |
|                                                                               |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Supplemental disclosures:                                                          |   |                         |     |   |                         |   |     |                                                               |   |   |   |   |
| Interest paid                                                                      |   |                         | –  |   |                         |   | –  |                                                               |   |   | – |   |
| Income taxes paid                                                                  |   |                         | –  |   |                         |   | –  |                                                               |   |   | – |   |

----

| a)   | During the six months ended November 30, 2009, the Company incurred management fees of $43,000 (2008 - $48,000) to the President of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | During the six months ended November 30, 2009, the Company incurred administration fees of $24,458 (2008 - $19,670) to the spouse of the President of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | During the six months ended November 30, 2009, the Company incurred professional fees of $12,000 (2008 - $nil) to a company controlled by the Chief Financial Officer of the Company. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | During the six months ended August 31, 2009, the Company incurred management fees of $5,000 (2008 - $33,000) to a company controlled by the former Chief Financial Officer of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| e)   | During the six months ended November 30, 2009, the Company incurred consulting fees of $63,180 (2008 - $nil) to directors of the Company. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| f)   | As at November 30, 2009, the Company owes a total of $127,644 (May 31, 2009 - $72,825) to the President of the Company and a company controlled by the President of the Company. The amounts due are non-interest bearing and unsecured. As at May 31, 2009, the amounts owed were due on demand. On November 29, 2009, the repayment terms were amended and the amounts owedare now due on November 29, 2012. As at November 30, 2009, included in accounts payable and accrued liabilities is $41,560 owed to the President of the Company. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g)   | As at November 30, 2009, the Company owes a total of $5,245 (May 31, 2009 - $nil) to directors of the Company. The amounts due are non-interest bearing, unsecured and due on demand. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h)   | As at November 30, 2009, included in accounts payable and accrued liabilities is $15,750 (May 31, 2009) owed to a professional firm where the Chief Financial Officer of the Company is a partner. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i)   | As at November 30, 2009, included in accounts payable and accrued liabilities is $18,182 (May 31, 2009) owed to directors of the Company. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| a)   | The Company entered into a premises agreement whereby it is committed to pay $1,000 per month expiring on December 15, 2009. |
|----------------|------------------------------------------------------------------------------------------------------------------------------|

| b)   | On October 1, 2009, the Company entered into an agreement with an individual to become the Chief Financial Officer of the Company for $6,000 per month expiring on September 30, 2010. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| c)   | On September 2, 2009, the Company entered into an agreement with a company to acquire a worldwide, exclusive license for the Mixed Reactant Flow-By Fuel Cell technology. The term of the agreement is for twenty years or the expiry of the last patent licensed under the agreement, whichever is later. The Company agreed to pay the licensor the following license fees: |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an initial license fee of Cdn$10,000 payable in two instalments: Cdn$5,000 upon execution of the agreement (paid) and Cdn$5,000 within thirty days of September 2, 2009 (accrued); |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a further license fee of Cdn$15,000 to be paid within ninety days of September 2, 2009; and |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | an annual license fee, payable annually on the anniversary of the date of the agreement as follows: |
|--------------------|-----------------------------------------------------------------------------------------------------|

| September 1, 2010                                 | Cdn$10,000 |
|---------------------------------------------------|------------|
| September 1, 2011                                 | Cdn$20,000 |
| September 1, 2012                                 | Cdn$30,000 |
| September 1, 2013                                 | Cdn$40,000 |
| September 1, 2014 and each successive anniversary | Cdn$50,000 |

| a)   | On June 1, 2009, the Company issued 100,000 shares of common stock with a fair value of $24,000 for services rendered. |
|----------------|------------------------------------------------------------------------------------------------------------------------|

| b)   | On July 3, 2009, the Company issued 25,000 shares of common stock with a fair value of $6,000 for services rendered. |
|----------------|----------------------------------------------------------------------------------------------------------------------|

| c)   | On July 16, 2009, the Company issued 466,334 units at $0.15 per unit for proceeds of $69,950. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’scommon stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | On July 24, 2009, the Company issued 18,000 units at $0.15 per unit for proceeds of $2,700. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s commonstock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| e)   | On July 24, 2009, the Company issued 100,000 units with a fair value of $15,000 to settle accounts payable. Each unit consisted of one common share and one-half non-transferrable warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’s commonstock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f)   | On August 17, 2009, the Company issued 25,000 shares of common stock with a fair value of $7,250 for services rendered. |
|----------------|-------------------------------------------------------------------------------------------------------------------------|

| g)   | On August 24, 2009, the Company issued 594,333 units at $0.15 per unit for proceeds of $89,150. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’scommon stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h)   | On October 15, 2009, the Company issued 68,000 units at $0.15 per unit for proceeds of $10,200. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’scommon stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i)   | On November 27, 2009, the Company issued 556,000 units at $0.15 per unit for proceeds of $83,400. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’scommon stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           | Number of options | Weighted average exercise price$ | Weighted average remaining contractual life (years) | Aggregate intrinsic value$ |
|------------------------------------------------|-------------------|----------------------------------|-----------------------------------------------------|----------------------------|
|                                           |              |                             |                                                |                       |
| Outstanding, May 31, 2009                      | 2,800,000         | 0.32                             |                                                |                       |
|                                           |              |                             |                                                |                       |
|     Granted                | 708,333           | 0.21                             |                                                |                       |
|     Cancelled              | (1,475,000)       | 0.28                             |                                                |                       |
|                                           |              |                             |                                                |                       |
| Outstanding and exercisable, November 30, 2009 | 2,033,333         | 0.31                             | 1.0                                                 | 3,000                      |

----

| Number of Options | Exercise Price$ | Expiry Date        |
|-------------------|-----------------|--------------------|
|              |            |               |
| 100,000           | 0.25            | January 1, 2010    |
| 50,000            | 0.40            | December 13, 2009  |
| 200,000           | 0.75            | March 5, 2010      |
| 75,000            | 0.45            | April 25, 2010     |
| 100,000           | 0.25            | July 16, 2010      |
| 375,000           | 0.30            | January 1, 2011    |
| 75,000            | 0.27            | February 10, 2011  |
| 100,000           | 0.30            | October 6, 2010    |
| 250,000           | 0.25            | November 1, 2012   |
| 75,000            | 0.15            | June 1, 2011       |
| 233,333           | 0.24            | September 21, 2010 |
| 400,000           | 0.20            | October 1, 2010    |
|              |            |               |
| 2,033,333         |            |               |

|                     |   | Six months endedNovember 30,2009 |   |   | Six months endedNovember 30,2008 |   |
|--------------------------|--------|----------------------------------|--------|--------|----------------------------------|--------|
|                     |   |                             |   |   |                             |   |
| Risk-free Interest rate  |   |                             | 0.39   | %      |                             |   | 2.26 | % |
| Expected life (in years) |   |                             | 1.0    |   |                             |   | 0.9 |   |
| Expected volatility      |   |                             | 92     | %      |                             |   | 96 | % |

|                       |   | Number of Warrants |       |   | Weighted Average Exercise Price$ |   |
|----------------------------|--------|--------------------|------------|--------|----------------------------------|--------|
| Balance, May 31, 2009      |   |               | 6,576,358  |   |                             |   | 0.31 |   |
|                       |   |               |       |   |                             |   |   |   |
| Issued                     |   |               | 1,802,667  |   |                             |   | 0.30 |   |
| Expired                    |   |               | (2,510,000 | )      |                             |   | 0.21 |   |
|                       |   |               |       |   |                             |   |   |   |
| Balance, November 30, 2009 |   |               | 5,869,025  |   |                             |   | 0.35 |   |

----

| Number of Warrants | Exercise Price$ | Expiry Date       |
|--------------------|-----------------|-------------------|
|               |            |              |
| 45,000             | 0.50            | December 1, 2009  |
| 35,000             | 0.50            | December 5, 2009  |
| 221,250            | 0.50            | December 10, 2009 |
| 37,500             | 0.50            | December 18, 2009 |
| 100,000            | 0.50            | February 28, 2010 |
| 75,000             | 0.50            | May 1, 2010       |
| 200,000            | 0.50            | October 16, 2010  |
| 50,000             | 0.50            | October 17, 2010  |
| 610,000            | 0.50            | November 30, 2010 |
| 199,998            | 0.40            | March 10, 2011    |
| 859,625            | 0.30            | April 1, 2011     |
| 71,152             | 0.30            | April 3, 2011     |
| 292,500            | 0.30            | April 6, 2011     |
| 860,000            | 0.30            | April 16, 2011    |
| 88,000             | 0.30            | May 20, 2011      |
| 321,333            | 0.30            | May 28, 2011      |
| 466,334            | 0.30            | July 16, 2011     |
| 118,000            | 0.30            | July 24, 2011     |
| 594,333            | 0.30            | August 24, 2011   |
| 68,000             | 0.30            | October 15, 2011  |
| 556,000            | 0.30            | November 27, 2011 |
|               |            |              |
| 5,869,025          |            |              |

| a)   | On December 3, 2009, the Company issued 400,000 shares of common stock to a consultant who is to provide marketing services. On January 11, 2010, the Company cancelled these shares. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | On December 4, 2009, the Company issued 33,334 units at $0.15 per unit for proceeds of $5,000.  Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after the Company’scommon stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | On December 11, 2009, the Company issued 299,192 shares of common stock to settle $50,862 of accounts payable. |
|----------------|----------------------------------------------------------------------------------------------------------------|

----

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

----

----

----

| 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                   |

----

----

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures.

----

PART II – OTHER INFORMATION

Proceedings

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

| ·   | On October 15, 2009, we issued 68,000 units at $0.15 per unit for proceeds of $10,200. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring onthe earlier of two years or five business days after our common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.  These shares were issued without a prospectus pursuant to exemptions from registration found in Regulation S of the Securities Act of 1933, as amended. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On November 27, 2009, we issued 556,000 units at $0.15 per unit for proceeds of $83,400. Each unit consisted of one share of common stock and one non-transferable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.30 per share expiring on the earlier of two years or five business days after our commonstock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.  These shares were issued without a prospectus pursuant to exemptions from registration found in Regulation S of the Securities Act of 1933, as amended. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On October 1, 2009 we issued options to acquire 400,000 shares of our common stock at $0.20 per share to our current CFO.  The options expire in 1 year, or upon the termination of our consulting agreement with our CFO. These shares were issued without a prospectus pursuant to exemptions from registration found in Regulation S of the SecuritiesAct of 1933, as amended. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 3. Defaults Upon Senior Securities.

Item 4. Submission of Matters to a Vote of Security Holders.

Item 5. Other Information.

Item 6. Exhibits

| Exhibit No. | Description                                                                                                                                                  |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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 |
|-----------------|-----------------------------------------------------------------------------------|

----

|                   | Mantra Venture Group Ltd.                             |
|------------------------|-------------------------------------------------------|
|                   | (Registrant)                                          |
|                   |                                                  |
|                   | /s/Larry Kristof                                      |
| Date: January 14, 2010 | Larry Kristof                                         |
|                   | President, Chief Executive Officer, Director          |
|                   |                                                  |
|                   | /s/ Con Buckley                                       |
| Date: January 14, 2010 | Con Buckley                                           |
|                   | Chief Financial Officer, Principal Accounting Officer |