---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended November 30, 2010

or

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

For the transition period from ____________to______________

Commission File Number 000-53461

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

|British Columbia                                                     | 26-0592672                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)
|                                                                     |                                  
|#4  2119, 152ndStreet, Surrey, British Columbia, Canada             | V4A 4N7                          
|(Address of principal executive offices)                             | (Zip Code)                       

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

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

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

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

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
37,890,631 common shares issued and outstanding as of January 14,
2011

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Table of Contents

|PART I - FINANCIAL INFORMATION                                                                            | 1 
|--------------------------------------------------------------------------------------------------------- | --
|Item 1. Financial Statements                                                                              | 1 
|Item 2. Managements
      Discussion and Analysis of Financial Condition and Results of
      Operations | 2 
|Item 3. Quantitative and Qualitative
      Disclosures About Market Risk                                  | 7 
|Item 4. Controls and
      Procedures                                                                     | 7 
|PART II  OTHER INFORMATION                                                                               | 7 
|Item 1. Legal
      Proceedings                                                                           | 7 
|Item 2. Unregistered Sales of Equity
      Securities and Use of Proceeds                                 | 8 
|Item 3. Defaults Upon
      Senior Securities                                                             | 8 
|Item 4. [Removed and Reserved]                                                                            | 8 
|Item 5. Other
      Information                                                                           | 8 
|Item 6. Exhibits                                                                                          | 9 
|SIGNATURES                                                                                                | 10

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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.

1

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MANTRA VENTURE GROUP LTD.(A development stage
  company) 
  Consolidated financial statements 
  (Expressed in U.S. dollars) 
  November 30, 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  

---

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

|                                                                                                                                                                                             |  | November 30, |   |  | May 31,    |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - |  | ---------- | -
|                                                                                                                                                                                             |  | 2010         |   |  | 2010       |  
|                                                                                                                                                                                             |  | $            |   |  | $          |  
|                                                                                                                                                                                             |  | (unaudited)  |   |  |            |  
|ASSETS                                                                                                                                                                                       |  |              |   |  |            |  
|Current assets                                                                                                                                                                               |  |              |   |  |            |  
|Cash                                                                                                                                                                                         |  | 3,001        |   |  | 4,325      |  
|Amounts receivable                                                                                                                                                                           |  | 13,698       |   |  | 13,744     |  
|Prepaid expenses and deposits                                                                                                                                                                |  | 8,317        |   |  | 1,078      |  
|Total current assets                                                                                                                                                                         |  | 25,016       |   |  | 19,147     |  
|Property and equipment                                                                                                                                                                       |  | 57,890       |   |  | 74,673     |  
|Total assets                                                                                                                                                                                 |  | 82,906       |   |  | 93,820     |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                        |  |              |   |  |            |  
|Current liabilities                                                                                                                                                                          |  |              |   |  |            |  
|Accounts payable and accrued
      liabilities                                                                                                                                               |  | 451,597      |   |  | 449,481    |  
|Due to related parties (Note 3)                                                                                                                                                              |  | 355,837      |   |  | 294,712    |  
|Loans payable (Note 4)                                                                                                                                                                       |  | 66,790       |   |  | 61,708     |  
|Convertible debentures                                                                                                                                                                       |  | 250,000      |   |  | 250,000    |  
|Total liabilities                                                                                                                                                                            |  | 1,124,224    |   |  | 1,055,271  |  
|Going concern (Note 1)                                                                                                                                                                       |  |              |   |  |            |  
|Commitments (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: 37,615,649 shares (May 31, 2010  
        
      34,034,868 shares) |  | 376          |   |  | 340        |  
|Additional paid-in capital                                                                                                                                                                   |  | 4,354,538    |   |  | 4,036,294  |  
|Common stock subscribed (Note
      5)                                                                                                                                                       |  | 193,800      |   |  | 45,885     |  
|Deficit accumulated during the development stage                                                                                                                                             |  | (5,590,032   | ) |  | (5,043,970 | )
|Total stockholders deficit                                                                                                                                                                  |  | (1,041,318   | ) |  | (961,451   | )
|Total liabilities
      and stockholders deficit                                                                                                                                            |  | 82,906       |   |  | 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 |   |  | Six months   |   |  | January 22, 2007 |  
|                                                       |  | ended        |   |  | ended        |   |  | (Inception) to   |  
|                                                       |  | November 30, |   |  | November 30, |   |  | November 30,     |  
|                                                       |  | 2010         |   |  | 2009         |   |  | 2010             |   |  | 2009       |   |  | 2010             |  
|                                                       |  | $            |   |  | $            |   |  | $                |   |  | $          |   |  | $                |  
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Revenues                                               |  | 1,970        |   |  |             |   |  | 1,970            |   |  |           |   |  | 21,868           |  
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Expenses                                               |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Business development                                   |  | 24,843       |   |  | 7,131        |   |  | 24,843           |   |  | 59,890     |   |  | 275,936          |  
|Consulting and
      advisory                          |  | 89,356       |   |  | (4,838       | ) |  | 108,148          |   |  | 23,203     |   |  | 541,260          |  
|Depreciation and amortization                          |  | 8,001        |   |  | 8,782        |   |  | 16,783           |   |  | 17,564     |   |  | 109,745          |  
|Foreign exchange
      loss                            |  | 9,315        |   |  | 13,510       |   |  | 4,890            |   |  | 18,583     |   |  | 30,561           |  
|General and administrative (Note 3)                    |  | 52,899       |   |  | 7,590        |   |  | 64,419           |   |  | 30,234     |   |  | 388,516          |  
|License fees                                           |  |             |   |  |             |   |  |                 |   |  |           |   |  | 28,438           |  
|Management fees
      (Note 3)                         |  | 26,459       |   |  | 112,188      |   |  | 75,023           |   |  | 164,809    |   |  | 845,910          |  
|Professional fees                                      |  | 28,397       |   |  | 108,439      |   |  | 37,242           |   |  | 157,098    |   |  | 694,100          |  
|Public listing
      costs                             |  | 2,637        |   |  | 6,865        |   |  | 3,230            |   |  | 10,943     |   |  | 207,061          |  
|Rent                                                   |  | 5,734        |   |  | 12,917       |   |  | 16,680           |   |  | 26,383     |   |  | 172,854          |  
|Research and
      development                         |  |             |   |  | 44,725       |   |  |                 |   |  | 106,969    |   |  | 418,206          |  
|Shareholder communications and
      awareness         |  | 28,739       |   |  | 7,566        |   |  | 29,209           |   |  | 91,387     |   |  | 608,983          |  
|Travel and
      promotion                             |  | 27,054       |   |  | 19,476       |   |  | 40,783           |   |  | 31,247     |   |  | 361,333          |  
|Wages and benefits                                     |  | 21,263       |   |  | 53,285       |   |  | 52,558           |   |  | 67,872     |   |  | 653,288          |  
|Website and
      corporate identity                   |  |             |   |  |             |   |  |                 |   |  |           |   |  | 195,451          |  
|Write down of intangible assets                        |  |             |   |  |             |   |  |                 |   |  |           |   |  | 37,815           |  
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Total expenses                                         |  | 324,697      |   |  | 397,636      |   |  | 473,808          |   |  | 806,182    |   |  | 5,569,457        |  
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Loss before other income (expense)                     |  | (322,727     | ) |  | (397,636     | ) |  | (471,838         | ) |  | (806,182   | ) |  | (5,547,589       | )
|Other income (expense)                                 |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Accretion of discounts on
      convertible debentures |  |             |   |  | (7,655       | ) |  |                 |   |  | (18,382    | ) |  | (45,930          | )
|Loss on
      settlement of debt                       |  | (61,895      | ) |  |             |   |  | (61,895          | ) |  |           |   |  | (61,895          | )
|Government grant income                                |  |             |   |  | 58,640       |   |  |                 |   |  | 72,438     |   |  | 118,324          |  
|Interest                                               |  | (6,164       | ) |  | (5,747       | ) |  | (12,329          | ) |  | (12,048    | ) |  | (52,942          | )
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Total other income (expense)                           |  | (68,059      | ) |  | 45,238       |   |  | (74,224          | ) |  | 42,008     |   |  | (42,443          | )
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Net loss for the period                                |  | (390,786     | ) |  | (352,398     | ) |  | (546,062         | ) |  | (764,174   | ) |  | (5,590,032       | )
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Loss per share, basic and diluted                      |  | (0.01        | ) |  | (0.01        | ) |  | (0.02            | ) |  | (0.02      | ) |  |                  |  
|                                                       |  |              |   |  |              |   |  |                  |   |  |            |   |  |                  |  
|Weighted average number of shares outstanding          |  | 36,406,602   |   |  | 31,413,663   |   |  | 35,555,566       |   |  | 30,969,856 |   |  |                  |  

(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             |  
|                                                                                                   |  | Six months   |   |  | Six months   |     |  | January 22, 2007 |  
|                                                                                                   |  | ended        |   |  | ended        |     |  | (Inception) to   |  
|                                                                                                   |  | November 30, |   |  | November 30, |     |  | November 30,     |  
|                                                                                                   |  | 2010         |   |  | 2009         |     |  | 2010             |  
|                                                                                                   |  | $            |   |  | $            |     |  | $                |  
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Operating activities                                                                               |  |              |   |  |              |     |  |                  |  
|Net loss for the period                                                                            |  | (546,062     | ) |  | (764,174     | )   |  | (5,590,032       | )
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Adjustments to reconcile net
      loss to net cash used in operating activities:                  |  |              |   |  |              |     |  |                  |  
|Accretion of discounts on
      convertible debentures                                             |  |             |   |  | 18,382       |     |  | 45,930           |  
|Depreciation and
      amortization                                                                |  | 16,783       |   |  | 17,564       |     |  | 109,745          |  
|Foreign exchange loss                                                                              |  | 841          |   |  |             |     |  | 841              |  
|Loss on
      settlement of debt                                                                   |  | 61,895       |   |  |              |     |  | 61,895           |  
|Stock-based compensation                                                                           |  | 50,000       |   |  | 103,780      |     |  | 1,268,510        |  
|Write-down of
      intangible assets                                                              |  |             |   |  |             |     |  | 37,815           |  
|Changes in operating assets and liabilities                                                        |  |              |   |  |              |     |  |                  |  
|Amounts
      receivable                                                                           |  | 46           |   |  | (5,920       | )  |  | (13,698          | )
|Prepaid expenses and deposits                                                                      |  | (7,239       | ) |  | 6,536        |     |  | (8,317           | )
|Other assets                                                                                       |  |             |   |  |             |     |  | (12,000          | )
|Accounts payable and accrued
      liabilities                                                     |  | 41,116       |   |  | 296,505      |     |  | 767,077          |  
|Due to related parties                                                                             |  | 61,125       |   |  | 56,874       |     |  | 355,837          |  
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Net cash used in operating activities                                                              |  | (321,495     | ) |  | (270,453     | )   |  | (2,976,397       | )
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Investing activities                                                                               |  |              |   |  |              |     |  |                  |  
|Purchase of property and equipment                                                                 |  |             |   |  |             |     |  | (155,635         | )
|Net cash used in investing activities                                                              |  |             |   |  |             |     |  | (155,635         | )
|Financing activities                                                                               |  |              |   |  |              |     |  |                  |  
|Proceeds from loans payable                                                                        |  | 4,871        |   |  |             |     |  | 65,949           |  
|Bank indebtedness                                                                                  |  |             |   |  |             |     |  |                 |  
|Proceeds from issuance of
      convertible debentures                                             |  |             |   |  |             |     |  | 250,000          |  
|Proceeds from issuance of common stock/ 
             subscriptions received                       |  | 315,300      |   |  | 270,400      |     |  | 2,819,084        |  
|Net cash provided
      by financing activities                                                    |  | 320,171      |   |  | 270,400      |     |  | 3,135,033        |  
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Change in cash                                                                                     |  | (1,324       | ) |  | (53          | )   |  | 3,001            |  
|Cash, beginning of period                                                                          |  | 4,325        |   |  | 3,320        |     |  |                 |  
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Cash, end of period                                                                                |  | 3,001        |   |  | 3,267        |     |  | 3,001            |  
|Non-cash investing and financing activities:                                                       |  |              |   |  |              |     |  |                  |  
|Common stock issued to settle
      debt                                                           |  | 90,895       |   |  | 15,000       |     |  | 367,375          |  
|Common stock issued and stock options granted
      for 
         acquisition of intangible assets |  |             |   |  |             |     |  | 37,815           |  
|                                                                                                   |  |              |   |  |              |     |  |                  |  
|Supplemental disclosures:                                                                          |  |              |   |  |              |     |  |                  |  
|Interest paid                                                                                      |  |             |   |  |             |     |  |                 |  
|Income taxes paid                                                                                  |  |             |   |  |             |     |  |                 |  

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

F-3

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|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|November 30, 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 not generated significant 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 November
      30, 2010, the Company has a working capital deficit of $1,099,208 and has
      accumulated losses of $5,590,032 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) | During the six months ended November 30, 2010, the
      Company incurred management fees of $48,023 (2009 - $ 43,000) to the
      President of the Company.                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                               
| | b) | During the six months ended November 30, 2010, the
      Company incurred administration fees of $18,659 (2009 - $24,458) to the
      spouse of the President of the Company.
| |    |                                                                                                                                                                               
| | c) | During the six months ended November 30, 2010, the
      Company incurred management fees of $31,760 (2009 - $63,180) to directors
      of the Company.                      

F-4

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|November 30, 2010                             
|(unaudited)                                   

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

F-5

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|November 30, 2010                             
|(unaudited)                                   

|5. | Common Stock (continued)
|-- | ------------------------

| | c) | On September 23, 2010, the Company issued 400,000 shares
      of common stock with a fair value of $60,000 for consulting
      services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | d) | On September 25, 2010, the Company issued 400,000 shares
      of common stock with a fair value of $72,000 to settle accounts payable of
      $10,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | e) | On October 22, 2010, the Company issued 62,500 units at
      $0.08 per unit for proceeds of $5,000. Each unit consisted of one common
      share and one common share purchase warrant. Each whole common share
      purchase warrant is exercisable for a period of 24 months from the date of
      closing at a price of US$0.20 per share or five business days after the
      Companys common stock trades at least one time per day on the FINRA
      Over-the-Counter Bulletin Board at a price at or above US$0.40 per share
      for seven consecutive trading days.                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | f) | On October 22, 2010, the Company issued 1,500,000 units
      at $0.05 per unit for proceeds of $75,000. Each unit consisted of one
      common share and one common share purchase warrant. Each whole common
      share purchase warrant is exercisable for a period of 24 months from the
      date of closing at a price of US$0.20 per share or five business days
      after the Companys common stock trades at least one time per day on the
      FINRA Over-the-Counter Bulletin Board at a price at or above US$0.40 per
      share for seven consecutive trading days.                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | g) | On November 15, 2010, the Company issued 125,964 shares
      of common stock with a fair value of $18,895 to settle debt of
      $19,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | h) | The Company received share subscriptions for 475,000
      units at $0.10 per unit for proceeds of $47,500 which is included in
      common stock subscribed as at November 30, 2010. Each unit will consist of
      one common share and non-transferrable share purchase warrant to purchase
      one additional share of common stock at an exercise price of $0.20 per
      share expiring on the earlier of two years or five business days after the
      companys common stock trades at least one time per day on the FINRA Over
      the Counter Bulletin Board at a price at or above $0.40 per share for
      seven consecutive trading days.                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | i) | The Companys subsidiary, Climate ESCO Ltd., received
      share subscriptions for 1,463,000 units at $0.10 per unit for proceeds of
      $146,300 which is included in common stock subscribed as at November 30,
      2010. Each unit will consist of one common share and non-transferrable
      share purchase warrant to purchase one additional share of common stock at
      an exercise price of $0.20 per share expiring on the earlier of two years
      or five business days after the companys common stock trades at least one
      time per day on the FINRA Over the Counter Bulletin Board at a price at or
      above $0.40 per share for seven consecutive trading
      days.

|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/expired                               |  | (833,333         | ) |  | 0.23           |  |  |                  |  |  |           | 
| |                                                 |  |                  |   |  |                |  |  |                  |  |  |           | 
| | Outstanding and exercisable,  November 30, 2010 |  | 775,000          |   |  | 0.27           |  |  | 0.7              |  |  |          | 

F-6

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|November 30, 2010                             
|(unaudited)                                   

|6. | Stock Options (continued)                                                                   
|-- | --------------------------------------------------------------------------------------------
|   |                                                                                             
|   | Additional information regarding stock options as of
      November 30, 2010, is as follows:

ExerciseNumber of
      PriceOptions
      $
      Expiry
        Date75,000
      0.15
      June 1, 2011250,000
      0.25
      November 1, 201275,000
      0.27
      February 10, 2011375,000
      0.30
      January 1, 2011775,000


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:

Six months
      
      
      Six monthsended
      
      
      endedNovember 30,
      
      
      November 30,2010
      
      
      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 the six months ended November 30, 2010 was $nil
  (2009 - $0.12) per option.

|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                     |  | 2,654,817 |   |  | 0.20     | 
| | Expired                    |  | (860,000  | ) |  | 0.50     | 
| | Balance, November 30, 2010 |  | 8,520,980 |   |  | 0.22     | 

F-7

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|November 30, 2010                             
|(unaudited)                                   

|7. | Share Purchase Warrants (continued)                                                   
|-- | --------------------------------------------------------------------------------------
|   |                                                                                       
|   | As at November 30, 2010, the following share purchase
      warrants were outstanding:

ExerciseNumber of
      PriceWarrants
      $
      Expiry
        Date199,998
      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, 20121,562,500
      0.20
      October 22, 20128,520,980


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

| |  | an initial license fee of Cdn$10,000 payable in
      two installments: Cdn$5,000 upon execution of the agreement (paid) and
      Cdn$5,000 within thirty days of September 2, 2009 (accrued);
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a further license fee of Cdn$15,000 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$10,000September 1, 2011
      Cdn$20,000September 1, 2012
      Cdn$30,000September 1, 2013
      Cdn$40,000September 1, 2014 and each successive
        anniversary
      Cdn$50,000


F-8

---

|MANTRA VENTURE GROUP LTD.                     
|----------------------------------------------
|(A development stage company)                 
|Notes to the consolidated financial statements
|(Expressed in U.S. dollars)                   
|November 30, 2010                             
|(unaudited)                                   

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

| |    | The Company is to pay the licensor a royalty calculated
      as 2% of the gross revenue and 15% of any and all consideration directly
      or indirectly received by the Company from the grant of any sublicense
      rights. The Company will pay interest at a rate of 1% per month on any
      amounts past due. In addition, the Company is responsible for the timely
      payment of all future costs relating to patent expenses and any new or
      useful art, process, machine, manufacture or composition of matter arising
      out of any licensor improvements or joint improvements licensed under this
      agreement and identified by the licensor as potentially patentable. The
      Company must also invest a minimum of Cdn$250,000 in research and
      development directly associated with the technology.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b) | On September 14, 2010, the Company entered into a
      management agreement with an unrelated company for a period of five years.
      The Company has agreed to issue 4,000,000 share purchase warrants. Each
      share purchase warrant is exercisable into one common share for a period
      of three years from the date of issuance at an exercise price as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |  | $0.30 per share for 800,000 warrants to be
      issued on September 1, 2010;    
| |  | ---------------------------------------------------------------------------------
| |  | $0.40 per share for 800,000 warrants to be
      issued on September 1, 2011;    
| |  | $0.50 per share for 800,000 warrants to be
      issued on September 1, 2012;    
| |  | $0.60 per share for 800,000 warrants to be
      issued on September 1, 2013; and
| |  | $0.70 per share for 800,000 warrants to be
      issued on September 1, 2014.    

This agreement was cancelled
  subsequently.

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

F-9

---

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 Three Month Periods Ended
November 30, 2010 and November 30, 2009.

Revenues

The following summary of our results of operations should be
read in conjunction with our financial statements for the quarter ended November
30, 2010 which are included herein.

Our operating results for three month periods ended November
30, 2010 and November 30, 2009 are summarized as follows:

2

---

|                   |  |                |   |  |              |   |  | Change Between     | 
|------------------ |  | -------------- | - |  | ------------ | - |  | ------------------ | 
|                   |  |                |   |  |              |   |  | Three Month Period | 
|                   |  |                |   |  | Three Months |   |  | Ended              | 
|                   |  | Three Months   |   |  | Ended        |   |  | November 30, 2010  | 
|                   |  | Ended November |   |  | November 30, |   |  | and November 30,   | 
|                   |  | 30, 2010       |   |  | 2009         |   |  | 2009               | 
|                   |  | ($)            |   |  | ($)          |   |  | ($)                | 
|Revenue            |  | 1,970          |   |  | -            |   |  | 1,970              | 
|Operating expenses |  | 324,697        |   |  | 397,636      |   |  | 72,939             | 
|Net Income (Loss)  |  | (390,786       | ) |  | (352,398     | ) |  | 38,388             | 

We have had limited operational history since our inception on
January 22, 2007. From our inception on January 22, 2007 to November 30, 2010 we
have generated $21,868 in revenues. For the three months ended November 30, 2010
we generated $1,970 in revenues compared to no revenues generated during the
same period in 2009. Since our inception on January 22, 2007 to November 30,
2010, we have an accumulated deficit of $5,590,032. We anticipate that we will
incur substantial losses over the next year and our ability to generate
additional revenues in the next 12 months remains uncertain.

Expenses

Our operating expenses for the three month periods ended
November 30, 2010 and November 30, 2009 are summarized as follows:

**Three Months
      Ended**November 30,**2010**
    
    
    2009**($)**
    
    
    ($)Business development
    
    24,843
    
    
    7,131Consulting and advisory
    
    89,356
    
    
    (4,838
    )Depreciation and amortization
    
    8,001
    
    
    8,782Foreign exchange loss
    
    9,315
    
    
    13,510General and administrative
    
    52,899
    
    
    7,590Management fees
    
    26,459
    
    
    112,188Professional fees
    
    28,397
    
    
    108,439Public listing costs
    
    2,637
    
    
    6,865Rent
    
    5,734
    
    
    12,917Research and development
    
    
    
    
    44,725Shareholder communications
      and awareness
    
    28,739
    
    
    7,566Travel and promotion
    
    27,054
    
    
    19,476Wages and benefits
    
    21,263
    
    
    53,285


For the three months ended November 30, 2010, we incurred total
expenses of $324,697 compared to total operating expenses for the three months
ended November 30, 2009 of $397,636. The 72,939 decrease is primarily due to a
decrease in wages and benefits, research and development expenses as well as
management and professional fees.

Net Loss

Since our inception on January 22, 2007 to November 30, 2010,
we have incurred a net loss of $5,590,032. For the three months ended November
30, 2010 we have incurred a net loss of $390,786 compared to a net loss of
$352,398 for the same period in 2009. Our net loss per share for the three
months ended November 30, 2010 was $0.01, the same as for the same period in
2009.

3

---

Results of Operations for the Six Month Periods Ended
November 30, 2010 and November 30, 2009.

Revenues

For the six months ended November 30, 2010 we generated
revenues of $1,970 compared to no revenues generated during the same period in
2009.

Our operating results for the six month periods ended November
30, 2010 and November 30, 2009 are summarized as follows:

|                   |  |                  |   |  |                   |   |  | Change Between     | 
|------------------ |  | ---------------- | - |  | ----------------- | - |  | ------------------ | 
|                   |  |                  |   |  |                   |   |  | Three Month Period | 
|                   |  |                  |   |  |                   |   |  | Ended              | 
|                   |  | Six Months Ended |   |  |                   |   |  | November 30, 2010  | 
|                   |  | November 30,     |   |  | Six Months Ended  |   |  | and November 30,   | 
|                   |  | 2010             |   |  | November 30, 2009 |   |  | 2009               | 
|                   |  | ($)              |   |  | ($)               |   |  | ($)                | 
|Revenue            |  | 1,970            |   |  | -                 |   |  | 1,970              | 
|Operating expenses |  | 473,808          |   |  | 806,182           |   |  | 332,374            | 
|Net Income (Loss)  |  | (546,062         | ) |  | (764,174          | ) |  | 218,112            | 

We have had limited operational history since our inception on
January 22, 2007. For the six months ended November 30, 2010 we generated $1,970
in revenue compared to no revenue generated during the same period in 2009. We
anticipate that we will incur substantial losses over the next year and our
ability to generate additional revenues in the next 12 months remains uncertain.

Expenses

Our operating expenses for the six month periods ended November
30, 2010 and November 30, 2009 are summarized as follows:

Six Months EndedNovember 30,2010
    
    
    2009($)
    
    
    ($)Business development
    
    24,843
    
    
    59,890Consulting and advisory
    
    108,148
    
    
    23,203Depreciation and amortization
    
    16,783
    
    
    17,564Foreign exchange loss
    
    4,890
    
    
    18,583General and administrative
    
    64,419
    
    
    30,234Management fees
    
    75,023
    
    
    164,809Professional fees
    
    37,242
    
    
    157,098Public listing costs
    
    3,230
    
    
    10,943Rent
    
    16,680
    
    
    26,383Research and development
    
    
    
    
    106,969Shareholder communications
      and awareness
    
    29,209
    
    
    91,387Travel and promotion
    
    40,783
    
    
    31,247Wages and benefits
    
    52,558
    
    
    67,872


For the six months ended November 30, 2010, we incurred total
expenses of $473,808 compared to total operating expenses for the six months
ended November 30, 2009 of $806,182. The $332,374 decrease was primarily due to
a decrease in management and professional fees, research and development
expenses and shareholder communication and awareness costs.

4

---

Net Loss

For the six months ended November 30, 2010, we have incurred a
net loss of $546,062 compared to a net loss of $764,174 for the same period in
2009. Our net loss per share for the period ended November 30, 2010 was $0.02,
the same as during the same period in 2009.

Liquidity and Capital Resources

As of November, 2010, we had $3,001 cash in our bank accounts and a working capital deficit of $1,099,208. As of November 30, 2010, we had total assets of $82,906 and total liabilities of $1,124,224.

From January 22, 2007 (date of inception) to November 30, 2010, we raised net proceeds of $2,819,084 in cash from the issuance of common stock and share subscriptions received, $65,949 from loans payable and $250,000 from proceeds from the issuance of convertible debentures for a total of $3,135,033 of cash provided by financing activities for the period.

We received net cash of $321,495 from financing activities for the six months ended November 30, 2010 compared to $270,400 for the same period in 2009.  During the period in 2010 we raised cash primarily from the issuance of our common stock and share subscriptions received.

We used net cash of $321,495 in operating activities for the six months ended November 30, 2010 compared to $270,453 for the same period in 2009. We used net cash of $2,976,397 in operating activities for the period from January 22, 2007 (date of inception) to November 30, 2010.

We did not use any cash in investing activities for the six
months ended November 30, 2010 and for the six months ended November 30,
2009.

During the six months ended November 30, 2010 we had a decrease
of $1,324 in our cash position compared to a decrease of $53 for the same period
in 2009. Our monthly cash requirements for six month period ended November 30,
2010 was approximately $45,665 compared to $45,076 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.

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:

|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.

5

---

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.

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.

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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

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and
Procedures

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

We carried out an evaluation, under the supervision and with
the participation of our management, including our chief executive officer (also
our principal executive officer) and chief financial officer (also our principal
financial officer and principal accounting officer), of the effectiveness of the
design and operation of our disclosure controls and procedures as of November
30, 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 (also our principal
executive officer) and chief financial officer (also our principal financial
officer and principal accounting officer) concluded that our disclosure controls
and procedures were not effective.

Changes in Internal Controls

During the period covered by this report there were no changes
in our internal control over financial reporting that materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

On December 21, 2010, one of our convertible debenture holders
filed suit in the Supreme Court of British Columbia for re-payment of a $150,000
convertible debenture, including 10% annual interest from October 28, 2008, the
date the loan was provided. On January 11, 2011, we filed a response to the
claim and a counterclaim against an associate of the debenture holder. We will
defend this claim aggressively and are confident of a favorable outcome for our
company.

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

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

| | a) | On September 23, 2010, the Company issued 400,000 shares of common stock with a fair value of $60,000 for consulting services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | b) | On September 25, 2010, the Company issued 400,000 shares of common stock with a fair value of $72,000 to settle accounts payable of $10,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | c) | On October 22, 2010, we issued 62,500 units at $0.08 per unit for proceeds of $5,000. Each unit consisted of one common share and one common share purchase warrant. Each whole common share purchase warrant is exercisable for a period of 24 months from the date of closing at a price of US$0.20 per share 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 US$0.40 per share for seven consecutive trading days.                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | d) | On October 22, 2010, we issued 1,500,000 units at $0.05 per unit for proceeds of $75,000. Each unit consisted of one common share and one common share purchase warrant. Each whole common share purchase warrant is exercisable for a period of 24 months from the date of closing at a price of US$0.20 per share 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 US$0.40 per share for seven consecutive trading days.                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | e) | On November 15, 2010, we issued 125,964 shares of common stock with a fair value of $18,895 to settle debt of $19,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | f) | The Company received share subscriptions for 475,000 units at $0.10 per unit for proceeds of $47,500 which is included in common stock subscribed as at November 30, 2010. Each unit will consist of one common share and non-transferrable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.20 per share expiring on the earlier of two years or five business days after the company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.40 per share for seven consecutive trading days.                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | g) | The Company’s subsidiary, Climate ESCO Ltd., received share subscriptions for 1,463,000 units at $0.10 per unit for proceeds of $146,300 which is included in common stock subscribed as at November 30, 2010. Each unit will consist of one common share and non-transferrable share purchase warrant to purchase one additional share of common stock at an exercise price of $0.20 per share expiring on the earlier of two years or five business days after the company’s common stock trades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.40 per share for seven consecutive trading days.

We completed these offerings of our securities pursuant to Rule
903 of Regulation S of the Securities Act on the basis that the sale of the
common stock was completed in an "offshore transaction", as defined in Rule
902(h) of Regulation S. We did not engage in any directed selling efforts, as
defined in Regulation S, in the United States in connection with the sale of the
securities. Each investor was not a US person, as defined in Regulation S, and
was not acquiring the securities for the account or benefit of a US person.

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Removed and Reserved]

Item 5. Other Information

None

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Item 6. Exhibits

|Exhibit No. |  | Description                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                         
|(10)        |  | Material Contracts                                                                                                                                      
|            |  |                                                                                                                                                         
|10.1        |  | Development Agreement with 3M
      dated October 28, 2009 (incorporated by reference to our current report on
      Form 8-K filed on November 6, 2009)
|            |  |                                                                                                                                                         
|10.2        |  | Management Agreement with Con
      Buckley October 1, 2009 (incorporated by reference to our current report
      on Form 8-K filed on October 7, 2009)
|            |  |                                                                                                                                                         
|(31)        |  | Rule 13a-14 / 15d-14
      Certifications                                                                                                               
|            |  |                                                                                                                                                         
|31.1*       |  | Certification of the Chief
      Executive Officer and Chief Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002          
|            |  |                                                                                                                                                         
|(32)        |  | Section 1350
      Certifications                                                                                                                       
|            |  |                                                                                                                                                         
|32.1*       |  | Certification of the Chief
      Executive Officer and Chief Financial Officer pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002          

*Filed herewith.

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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: January 19, 2011 | Larry Kristof                                                                                       
|                       | President, Chief Executive Officer, Chief
      Financial Officer, Secretary, Treasurer and Director
|                       | (Principal Executive Officer, Principal
      Accounting Officer)                                   

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