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

----

----

----

|                                                                                                                                             |   | February 28,2010$(unaudited) |       |   | May 31,2009$ |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|--------|--------------|--------|
|                                                                                                                                             |   |                         |       |   |         |   |
| ASSETS                                                                                                                                           |   |                         |       |   |         |   |
|                                                                                                                                             |   |                         |       |   |         |   |
| Current assets                                                                                                                                   |   |                         |       |   |         |   |
|                                                                                                                                             |   |                         |       |   |         |   |
| Cash                                                                                                                                             |   |                         | 1,047      |   |         |   | 3,320 |   |
| Amounts receivable                                                                                                                               |   |                         | 22,002     |   |         |   | 19,253 |   |
| Prepaid expenses and deposits                                                                                                                    |   |                         | –    |   |         |   | 6,536 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Total current assets                                                                                                                             |   |                         | 23,049     |   |         |   | 29,109 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Property and equipment                                                                                                                           |   |                         | 83,455     |   |         |   | 109,801 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Total assets                                                                                                                                     |   |                         | 106,504    |   |         |   | 138,910 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                      |   |                         |       |   |         |   |   |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Current liabilities                                                                                                                              |   |                         |       |   |         |   |   |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Accounts payable and accrued liabilities (Note 3)                                                                                                |   |                         | 603,919    |   |         |   | 224,893 |   |
| Deferred revenue                                                                                                                                 |   |                         | 12,300     |   |         |   | – |   |
| Due to related parties (Note 3)                                                                                                                  |   |                         | 5,515      |   |         |   | 76,015 |   |
| Convertible debentures (Note 4)                                                                                                                  |   |                         | 250,000    |   |         |   | 231,618 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Total current liabilities                                                                                                                        |   |                         | 871,734    |   |         |   | 532,526 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Due to related parties (Note 3)                                                                                                                  |   |                         | 111,519    |   |         |   | – |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Total liabilities                                                                                                                                |   |                         | 983,253    |   |         |   | 532,526 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Commitments (Note 5)                                                                                                                             |   |                         |       |   |         |   |   |   |
| Subsequent events (Note 9)                                                                                                                       |   |                         |       |   |         |   |   |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Stockholders’ deficit                                                                                                                      |   |                         |       |   |         |   |   |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Preferred stockAuthorized: 20,000,000 shares, par value $0.00001Issued and outstanding: Nil shares                                               |   |                         | –    |   |         |   | – |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Common stockAuthorized: 100,000,000 shares, par value $0.00001Issued and outstanding: 32,305,561 shares (May 31, 2009 – 23,452,661 shares) |   |                         | 323        |   |         |   | 301 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Additional paid-in capital                                                                                                                       |   |                         | 3,876,317  |   |         |   | 3,431,286 |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Common stock subscribed                                                                                                                          |   |                         | 87,225     |   |         |   | – |   |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Deficit accumulated during the development stage                                                                                                 |   |                         | (4,840,614 | )      |         |   | (3,825,203 | ) |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Total stockholders’ deficit                                                                                                                |   |                         | (876,749   | )      |         |   | (393,616 | ) |
|                                                                                                                                             |   |                         |       |   |         |   |   |   |
| Total liabilities and stockholders’ deficit                                                                                                |   |                         | 106,504    |   |         |   | 138,910 |   |

----

|                                             |   | Three Months EndedFebruary 28, |        |   | Nine Months EndedFebruary 28, |   |        | Accumulated fromJanuary 22, 2007 (Date of Inception) to February 28, |   |
|--------------------------------------------------|--------|--------------------------------|-------------|--------|-------------------------------|--------|-------------|----------------------------------------------------------------------|--------|
|                                             |   |                           | 2010$  |   |                          |   | 2009$  |                                                                 |   |   | 2010$  |   |   |   | 2009$  |   |   |   | 2010$ |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                         |   |                           | 14,530      |   |                          |   | 1,060       |                                                                 |   |   | 86,968 |   |   |   | 12,118 |   |   |   | 104,086 |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses                                         |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Business development                             |   |                           | (2,556      | )      |                          |   | 1,973       |                                                                 |   |   | 57,334 |   |   |   | 3,422 |   |   |   | 269,557 |   |
| Consulting and advisory                          |   |                           | 3,229       |   |                          |   | 8,642       |                                                                 |   |   | 26,432 |   |   |   | 43,996 |   |   |   | 431,439 |   |
| Depreciation and amortization                    |   |                           | 8,782       |   |                          |   | 8,782       |                                                                 |   |   | 26,346 |   |   |   | 27,088 |   |   |   | 84,180 |   |
| Foreign exchange loss                            |   |                           | 4,525       |   |                          |   | –     |                                                                 |   |   | 23,108 |   |   |   | – |   |   |   | 19,851 |   |
| General and administrative (Note 3)              |   |                           | 17,545      |   |                          |   | 58,436      |                                                                 |   |   | 47,779 |   |   |   | 136,734 |   |   |   | 358,960 |   |
| Management fees (Note 3)                         |   |                           | 51,701      |   |                          |   | 232,446     |                                                                 |   |   | 216,510 |   |   |   | 379,979 |   |   |   | 901,092 |   |
| Professional fees (Note 3)                       |   |                           | 53,299      |   |                          |   | 65,467      |                                                                 |   |   | 210,397 |   |   |   | 231,131 |   |   |   | 671,918 |   |
| Public listing costs                             |   |                           | 2,824       |   |                          |   | 21,501      |                                                                 |   |   | 13,767 |   |   |   | 29,001 |   |   |   | 203,110 |   |
| Rent                                             |   |                           | 10,733      |   |                          |   | –     |                                                                 |   |   | 37,116 |   |   |   | – |   |   |   | 146,706 |   |
| Research and development                         |   |                           | 38,398      |   |                          |   | 47,789      |                                                                 |   |   | 145,367 |   |   |   | 119,911 |   |   |   | 396,820 |   |
| Shareholder communications and awareness         |   |                           | 16,346      |   |                          |   | 80,342      |                                                                 |   |   | 107,733 |   |   |   | 249,687 |   |   |   | 600,954 |   |
| Travel and promotion                             |   |                           | 19,148      |   |                          |   | 29,823      |                                                                 |   |   | 50,395 |   |   |   | 55,197 |   |   |   | 305,673 |   |
| Wages and benefits                               |   |                           | 35,063      |   |                          |   | 58,383      |                                                                 |   |   | 102,935 |   |   |   | 103,395 |   |   |   | 240,932 |   |
| Website and corporate identity                   |   |                           | –     |   |                          |   | –     |                                                                 |   |   | – |   |   |   | – |   |   |   | 195,451 |   |
| Write down of intangible assets                  |   |                           | –     |   |                          |   | –     |                                                                 |   |   | – |   |   |   | – |   |   |   | 37,815 |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Total expenses                                   |   |                           | 259,037     |   |                          |   | 613,584     |                                                                 |   |   | 1,065,219 |   |   |   | 1,379,541 |   |   |   | 4,864,458 |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before other expenses                       |   |                           | (244,507    | )      |                          |   | (612,524    | )                                                                    |   |   | (978,251 | ) |   |   | (1,367,423 | ) |   |   | (4,760,372 | ) |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Other expenses                                   |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of discounts on convertible debentures |   |                           | –     |   |                          |   | (11,580     | )                                                                    |   |   | (18,382 | ) |   |   | (15,408 | ) |   |   | (45,930 | ) |
| Interest                                         |   |                           | (6,730      | )      |                          |   | (4,777      | )                                                                    |   |   | (18,778 | ) |   |   | (10,663 | ) |   |   | (34,312 | ) |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other expenses                             |   |                           | (6,730      | )      |                          |   | (16,357     | )                                                                    |   |   | (37,160 | ) |   |   | (26,071 | ) |   |   | (80,242 | ) |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the period                          |   |                           | (251,237    | )      |                          |   | (628,881    | )                                                                    |   |   | (1,015,411 | ) |   |   | (1,393,494 | ) |   |   | (4,840,614 | ) |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss per share, basic and diluted                |   |                           | (0.01       | )      |                          |   | (0.02       | )                                                                    |   |   | (0.03 | ) |   |   | (0.05 | ) |   |   |   |   |
|                                             |   |                           |        |   |                          |   |        |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding    |   |                           | 32,305,561  |   |                          |   | 27,303,448  |                                                                 |   |   | 31,417,671 |   |   |   | 26,141,886 |   |   |   |   |   |

----

|                                                                               |   | NineMonths EndedFebruary 28,2010$ |       |   | NineMonths EndedFebruary 28,2009$ |   |       | Accumulated fromJanuary 22, 2007(Date of Inception)to February 28,2010$ |   |
|------------------------------------------------------------------------------------|--------|-----------------------------------|------------|--------|-----------------------------------|--------|------------|-------------------------------------------------------------------------|--------|
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |
| Operating activities                                                               |   |                              |       |   |                              |   |       |                                                                    |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |
| Net loss for the period                                                            |   |                              | (1,015,411 | )      |                              |   | (1,393,494 | )                                                                       |   |   | (4,840,614 | ) |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Adjustments to reconcile net loss to net cash used in operating activities:        |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Accretion of discounts on convertible debentures                                   |   |                              | 18,382     |   |                              |   | 15,408     |                                                                    |   |   | 45,930 |   |
| Depreciation and amortization                                                      |   |                              | 26,346     |   |                              |   | 27,088     |                                                                    |   |   | 84,180 |   |
| Stock-based compensation                                                           |   |                              | 161,187    |   |                              |   | 422,342    |                                                                    |   |   | 1,275,917 |   |
| Write-down of intangible assets                                                    |   |                              | –    |   |                              |   | –    |                                                                    |   |   | 37,815 |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Changes in operating assets and liabilities                                        |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Subscriptions receivable                                                           |   |                              | –    |   |                              |   | –    |                                                                    |   |   | – |   |
| Amounts receivable                                                                 |   |                              | (2,749     | )      |                              |   | 3,281      |                                                                    |   |   | (22,002 | ) |
| Accrued interest payable                                                           |   |                              | –    |   |                              |   | 9,233      |                                                                    |   |   | – |   |
| Prepaid expenses and deposits                                                      |   |                              | 6,536      |   |                              |   | (18,378    | )                                                                       |   |   | – |   |
| Other assets                                                                       |   |                              | –    |   |                              |   | –    |                                                                    |   |   | (12,000 | ) |
| Accounts payable and accrued liabilities                                           |   |                              | 444,886    |   |                              |   | 197,453    |                                                                    |   |   | 827,396 |   |
| Deferred revenue                                                                   |   |                              | 12,300     |   |                              |   | –    |                                                                    |   |   | 12,300 |   |
| Due to related parties                                                             |   |                              | 41,019     |   |                              |   | (48,617    | )                                                                       |   |   | 117,034 |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Net cash used in operating activities                                              |   |                              | (307,504   | )      |                              |   | (785,684   | )                                                                       |   |   | (2,474,044 | ) |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Investing activities                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Purchase of property and equipment                                                 |   |                              | –    |   |                              |   | (84,990    | )                                                                       |   |   | (155,635 | ) |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Net cash used in investing activities                                              |   |                              | –    |   |                              |   | (84,990    | )                                                                       |   |   | (155,635 | ) |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Financing activities                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Borrowings on related party debt                                                   |   |                              | –    |   |                              |   | 83,263     |                                                                    |   |   | – |   |
| Repayments of related party debt                                                   |   |                              | –    |   |                              |   | (77,344    | )                                                                       |   |   | – |   |
| Proceeds from issuance of convertible debentures                                   |   |                              | –    |   |                              |   | 250,000    |                                                                    |   |   | 250,000 |   |
| Proceeds from issuance of common stock                                             |   |                              | 305,231    |   |                              |   | 595,000    |                                                                    |   |   | 2,380,726 |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Net cash provided by financing activities                                          |   |                              | 305,231    |   |                              |   | 850,919    |                                                                    |   |   | 2,630,726 |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Change in cash                                                                     |   |                              | (2,273     | )      |                              |   | 19,755     |                                                                    |   |   | 1,047 |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Cash, beginning of period                                                          |   |                              | 3,320      |   |                              |   | 26,201     |                                                                    |   |   | – |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Cash, end of period                                                                |   |                              | 1,047      |   |                              |   | 6,446      |                                                                    |   |   | 1,047 |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Non-cash investing and financing activities:                                       |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Common stock issued to settle accounts payable                                     |   |                              | 65,862     |   |                              |   | 15,000     |                                                                    |   |   | 223,479 |   |
| Common stock issued and stock options granted for acquisition of intangible assets |   |                              | –    |   |                              |   | –    |                                                                    |   |   | 37,815 |   |
| Promissory note issued to settle accounts payable                                  |   |                              | –    |   |                              |   | 58,000     |                                                                    |   |   | 58,000 |   |
| Fair value of share purchase warrants issued for convertible debentures            |   |                              | –    |   |                              |   | 45,930     |                                                                    |   |   | – |   |
|                                                                               |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Supplemental disclosures:                                                          |   |                              |       |   |                              |   |       |                                                                    |   |   |   |   |
| Interest paid                                                                      |   |                              | –    |   |                              |   | –    |                                                                    |   |   | – |   |
| Income taxes paid                                                                  |   |                              | –    |   |                              |   | –    |                                                                    |   |   | – |   |

----

| 1.   | Basis of Presentation |
|----------------|-----------------------|

| 2.   | Recent Accounting Pronouncements |
|----------------|----------------------------------|

| 3.   | Related Party Transactions |
|----------------|----------------------------|

| a)   | During the nine months ended February 28, 2010, the Company incurred management fees of $64,000 (2009 - $58,500) to the President of the Company. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | During the nine months ended February 28, 2010, the Company incurred administration fees of $36,173 (2009 - $27,367) to the spouse of the President of the Company. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | During the nine months ended February 28, 2010, the Company incurred professional fees of $39,000 (2009 - $nil) to a company controlled by the Chief Financial Officer of the Company. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | During the nine months ended February 28, 2010, the Company incurred management fees of $5,000 (2009 - $33,000) to a company controlled by the former Chief Financial Officer of the Company. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| e)   | During the nine months ended February 28, 2010, the Company incurred consulting fees of $67,164 (2008 - $nil) to directors of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| f)   | As at February 28, 2010, the Company owes a total of $109,922 (May 31, 2009 - $72,825) to the President of the Company and a company controlled by the President of the Company. The amounts due are non-interest bearing and unsecured. As at May 31, 2009, the amounts owed were due on demand. On November 29, 2009, the repayment terms were amended and the amounts owedare now due on November 29, 2012. As at February 28, 2010, included in accounts payable and accrued liabilities is $62,559 owed to the President of the Company. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g)   | As at February 28, 2010, the Company owes a total of $5,515 (May 31, 2009 - $nil) to directors of the Company. The amounts due are non-interest bearing, unsecured and due on demand. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h)   | As at February 28, 2010, included in accounts payable and accrued liabilities is $24,650 (May 31, 2009 - $Nil) owed to a professional firm where the Chief Financial Officer of the Company is a partner. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i)   | As at February 28, 2010, included in accounts payable and accrued liabilities is $26,097 (May 31, 2009 - $Nil) owed to directors of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Convertible Debentures |
|----------------|------------------------|

----

| 5.   | Commitments |
|----------------|-------------|

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

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

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

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

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

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

| 6.   | Common Stock |
|----------------|--------------|

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

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

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

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

----

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

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

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

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

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

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

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

| 7.   | Stock Options |
|----------------|---------------|

|                                           | Number of options | Weighted average exercise price$ | Weighted average remaining contractual life (years) | Aggregate intrinsic value$ |
|------------------------------------------------|-------------------|----------------------------------|-----------------------------------------------------|----------------------------|
|                                           |              |                             |                                                |                       |
| Outstanding, May 31, 2009                      | 2,800,000         | 0.32                             |                                                |                       |
|                                           |              |                             |                                                |                       |
| Granted                                        | 708,333           | 0.21                             |                                                |                       |
| Cancelled                                      | (1,625,000)       | 0.25                             |                                                |                       |
|                                           |              |                             |                                                |                       |
| Outstanding and exercisable, February 28, 2010 | 1,883,333         | 0.31                             | 0.8                                                 | –                    |

----

| Number ofOptions | ExercisePrice$ | Expiry Date        |
|------------------|----------------|--------------------|
|             |           |               |
| 200,000          | 0.75           | March 5, 2010      |
| 75,000           | 0.45           | April 25, 2010     |
| 100,000          | 0.25           | July 16, 2010      |
| 375,000          | 0.30           | January 1, 2011    |
| 75,000           | 0.27           | February 10, 2011  |
| 100,000          | 0.30           | October 6, 2010    |
| 250,000          | 0.25           | November 1, 2012   |
| 75,000           | 0.15           | June 1, 2011       |
| 233,333          | 0.24           | September 21, 2010 |
| 400,000          | 0.20           | October 1, 2010    |
|             |           |               |
| 1,883,333        |           |               |

|                     |   | Nine months endedFebruary 28,2010 |   |   | Nine months endedFebruary 28,2009 |   |
|--------------------------|--------|-----------------------------------|--------|--------|-----------------------------------|--------|
|                     |   |                              |   |   |                              |   |
| Risk-free Interest rate  |   |                              | 0.39   | %      |                              |   | 0.80 | % |
| Expected life (in years) |   |                              | 1.0    |   |                              |   | 0.9 |   |
| Expected volatility      |   |                              | 92     | %      |                              |   | 111 | % |

----

| 8.   | Share Purchase Warrants |
|----------------|-------------------------|

|                       |   | Number of Warrants |       |   | Weighted Average Exercise Price$ |   |
|----------------------------|--------|--------------------|------------|--------|----------------------------------|--------|
| Balance, May 31, 2009      |   |               | 6,576,358  |   |                             |   | 0.36 |   |
|                       |   |               |       |   |                             |   |   |   |
| Issued                     |   |               | 1,836,000  |   |                             |   | 0.19 |   |
| Expired                    |   |               | (2,948,750 | )      |                             |   | 0.26 |   |
|                       |   |               |       |   |                             |   |   |   |
| Balance, February 28, 2010 |   |               | 5,463,608  |   |                             |   | 0.34 |   |

| Number of Warrants | Exercise Price$ | Expiry Date       |
|--------------------|-----------------|-------------------|
|               |            |              |
| 75,000             | 0.50            | May 1, 2010       |
| 200,000            | 0.50            | October 16, 2010  |
| 50,000             | 0.50            | October 17, 2010  |
| 610,000            | 0.50            | November 30, 2010 |
| 199,998            | 0.40            | March 10, 2011    |
| 859,625            | 0.30            | April 1, 2011     |
| 71,152             | 0.30            | April 3, 2011     |
| 292,500            | 0.30            | April 6, 2011     |
| 860,000            | 0.30            | April 16, 2011    |
| 88,000             | 0.30            | May 20, 2011      |
| 321,333            | 0.30            | May 28, 2011      |
| 466,334            | 0.30            | July 16, 2011     |
| 118,000            | 0.30            | July 24, 2011     |
| 594,333            | 0.30            | August 24, 2011   |
| 68,000             | 0.30            | October 15, 2011  |
| 556,000            | 0.30            | November 27, 2011 |
| 33,333             | 0.30            | December 5, 2011  |
|               |            |              |
| 5,463,608          |            |              |

| 9.   | Subsequent Events |
|----------------|-------------------|

| a)   | Subsequent to quarter end the Company settled a claim for investor relations services which in the Company’s view were not satisfactorily rendered to the Company. The Company is to pay $9,000 over a five month period commencing April 1, 2010 and issue 53,333 shares of common stock with a fair value of $8,000 to the investor relations firm. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | The Company entered into a share cancellation agreement and cancelled 400,000 shares of common stock issued to a consultant who was to provide marketing services. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| 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                   |

----

----

----

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

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

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

----

|                 | Mantra Venture Group Ltd.                             |
|----------------------|-------------------------------------------------------|
|                 | (Registrant)                                          |
|                 |                                                  |
|                 | /s/ Larry Kristof                                     |
| Date: April 19, 2010 | Larry Kristof                                         |
|                 | President, Chief Executive Officer, Director          |
|                 |                                                  |
|                 | /s/ Con Buckley                                       |
| Date: April 19, 2010 | Con Buckley                                           |
|                 | Chief Financial Officer, Principal Accounting Officer |