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

----

| PART I - FINANCIAL INFORMATION                                                                                       | F-1 |
|----------------------------------------------------------------------------------------------------------------------|-----|
|   Item 1. Financial Statements      (unaudited)                                                            | F-1 |
|     Consolidated Balance Sheets (unaudited)                                                      | F-1 |
|     Consolidated Statements of Operations      (unaudited)                                       | F-2 |
|     Consolidated Statements of Cash Flows      (unaudited)                                       | F-3 |
|     Notes to the Consolidated Financial Statements      (unaudited)                              | F-4 |
|   Item 2. Management’s Discussion and Analysis of Financial      Condition and Results of Operations | 3   |
|   Item 3. Quantitative      and Qualitative Disclosures About Market      Risk                             | 7   |
|   Item 4. Controls and Procedures                                                                          | 7   |
| PART II – OTHER INFORMATION                                                                                    | 8   |
|   Item 1. Legal Proceedings                                                                                | 8   |
|   Item 2. Unregistered Sales of Equity Securities and Use of      Proceeds                                 | 8   |
|   Item 3. Defaults Upon Senior      Securities                                                             | 8   |
|   Item 4. Submission of Matters to a Vote of Security      Holders                                         | 8   |
|   Item 5. Other Information                                                                                | 8   |

----

INFORMATION

|                                                                                                                                                                                 |   | November      30, 2008(Unaudited) |       |   | May 31, 2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|--------|--------------|--------|
| ASSETS                                                                                                                                                                               |   |                              |       |   |         |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |
| Current      Assets                                                                                                                                                                  |   |                              |       |   |         |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |
| Cash                                                                                                                                                                                 |   | $                                 | 93,536     |   |         | $      | 26,201 |   |
| Subscriptions      receivable                                                                                                                                                        |   |                              | 95,000     |   |         |   | - |   |
| Taxes      receivable                                                                                                                                                                |   |                              | 30,278     |   |         |   | 18,418 |   |
| Security      deposit and prepaid expenses                                                                                                                                           |   |                              | 21,359     |   |         |   | 1,008 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Total Current      Assets                                                                                                                                                            |   |                              | 240,173    |   |         |   | 45,627 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Intangible      assets net of      accumulated amortization of $12,000 (May 31, 2008 -      $7,000)                                                                                  |   |                              | 37,815     |   |         |   | 42,815 |   |
| Property and      equipment net of accumulated depreciation of $27,525 (May 31,      2008  - $14,219)                                                                      |   |                              | 127,366    |   |         |   | 55,682 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Total      Assets                                                                                                                                                                    |   | $                                 | 405,354    |   |         | $      | 144,124 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ DEFICIT                                                                                                                                     |   |                              |       |   |         |   |   |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Current      Liabilities                                                                                                                                                             |   |                              |       |   |         |   |   |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Accounts      payable and accrued liabilities                                                                                                                                        |   | $                                 | 110,356    |   |         | $      | 135,309 |   |
| Due to      related parties  (Note 3)                                                                                                                                      |   |                              | 89,071     |   |         |   | 103,308 |   |
| Convertible      debentures net of unamortized discount of $42,102 (May 31, 2008      - $0) (Note 4)                                                                            |   |                              | 207,898    |   |         |   | – |   |
| Interest on      convertible debentures (Note 4)                                                                                                                                     |   |                              | 2,725      |   |         |   | – |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Total Current      Liabilities                                                                                                                                                       |   |                              | 410,050    |   |         |   | 238,617 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Promissory      Note (Note 5)                                                                                                                                                        |   |                              | 58,000     |   |         |   | – |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Total      Liabilities                                                                                                                                                               |   |                              | 468,050    |   |         |   | 238,617 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Contingency      and Commitments (Notes 1 and 6)                                                                                                                                     |   |                              |       |   |         |   |   |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Stockholders’      Deficit                                                                                                                                                     |   |                              |       |   |         |   |   |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Preferred      Stock Authorized:      20,000,000 shares, par value $0.00001 Issued and      outstanding: no shares                                                                   |   |                              | –    |   |         |   | – |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Common Stock      (Note 7) Authorized:      100,000,000 shares, par value $0.00001 Issued and      outstanding: 27,260,161 shares (May 31, 2008      – 23,452,661 shares) |   |                              | 273        |   |         |   | 235 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Additional      Paid-In Capital                                                                                                                                                      |   |                              | 2,748,256  |   |         |   | 1,951,884 |   |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Deficit      Accumulated During the Development Stage                                                                                                                                |   |                              | (2,811,225 | )      |         |   | (2,046,612 | ) |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Total      Stockholders’ Deficit                                                                                                                                               |   |                              | (62,696    | )      |         |   | (94,493 | ) |
|                                                                                                                                                                                 |   |                              |       |   |         |   |   |   |
| Total      Liabilities and Stockholders’ Deficit                                                                                                                               |   | $                                 | 405,354    |   |         | $      | 144,124 |   |

----

Development 

|                                                      |   | Three      Months Ended November      30, |     |   | Six      Months Ended November      30, |   |     | January      22, 2007 (Inception) to November      30, |   |
|-----------------------------------------------------------|--------|-------------------------------------------|----------|--------|-----------------------------------------|--------|----------|--------------------------------------------------------|--------|
|                                                      |   | 2008                                      |     |   | 2007                                    |   |     | 2008                                                   |   |   | 2007 |   |   | 2008 |   |
|                                                      |   |                                      |     |   |                                    |   |     |                                                   |   |   |   |   |   |   |   |
| Revenues                                                  |   | $                                         | 3,058    |   |                                    | $      | -        |                                                   |   | $ | 11,058 |   |   | $ | - |   |   | $ | 11,058 |   |
|                                                      |   |                                      |     |   |                                    |   |     |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Advertising      and promotion                            |   |                                      | 9,851    |   |                                    |   | -        |                                                   |   |   | 9,851 |   |   |   | - |   |   |   | 9,851 |   |
| Depreciation      and amortization                        |   |                                      | 13,351   |   |                                    |   | 1,323    |                                                   |   |   | 18,306 |   |   |   | 1,323 |   |   |   | 39,525 |   |
| Business      development                                 |   |                                      | -        |   |                                    |   | 15,346   |                                                   |   |   | 1,449 |   |   |   | 15,346 |   |   |   | 202,102 |   |
| Consulting      and advisory                              |   |                                      | 11,581   |   |                                    |   | 59,557   |                                                   |   |   | 35,354 |   |   |   | 59,557 |   |   |   | 378,497 |   |
| Management      fees                                      |   |                                      | 53,500   |   |                                    |   | 126,294  |                                                   |   |   | 147,533 |   |   |   | 146,179 |   |   |   | 407,500 |   |
| General and      administrative                           |   |                                      | 37,627   |   |                                    |   | 33,212   |                                                   |   |   | 78,298 |   |   |   | 100,999 |   |   |   | 321,905 |   |
| Research and      development                             |   |                                      | 52,498   |   |                                    |   | 28,204   |                                                   |   |   | 72,122 |   |   |   | 32,920 |   |   |   | 154,550 |   |
| Shareholder      communication, awareness,      financing |   |                                      | 64,854   |   |                                    |   | 22,485   |                                                   |   |   | 169,345 |   |   |   | 32,838 |   |   |   | 353,257 |   |
| Professional      fees                                    |   |                                      | 74,301   |   |                                    |   | 8,215    |                                                   |   |   | 165,664 |   |   |   | 108,671 |   |   |   | 357,919 |   |
| Salary      expenses                                      |   |                                      | 21,777   |   |                                    |   | -        |                                                   |   |   | 45,012 |   |   |   | - |   |   |   | 45,012 |   |
| Travel meals      and entertainment                       |   |                                      | 10,302   |   |                                    |   | 34,945   |                                                   |   |   | 15,523 |   |   |   | 80,020 |   |   |   | 226,636 |   |
| Public      listing costs                                 |   |                                      | 5,683    |   |                                    |   | 27,540   |                                                   |   |   | 7,500 |   |   |   | 27,540 |   |   |   | 154,547 |   |
| Interest      expense                                     |   |                                      | 9,714    |   |                                    |   | -        |                                                   |   |   | 9,714 |   |   |   | - |   |   |   | 9,714 |   |
| Website and      corporate identity                       |   |                                      | -        |   |                                    |   | -        |                                                   |   |   | - |   |   |   | - |   |   |   | 161,268 |   |
| Total      Expenses                                       |   |                                      | 365,039  |   |                                    |   | 357,121  |                                                   |   |   | 775,671 |   |   |   | 605,393 |   |   |   | 2,822,283 |   |
|                                                      |   |                                      |     |   |                                    |   |     |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss for      the Period                              |   | $                                         | (361,981 | )      |                                    | $      | (357,121 | )                                                      |   | $ | (764,613 | ) |   | $ | (605,393 | ) |   | $ | (2,811,225 | ) |

| Basic and      Diluted Net Loss per      Share                      |   | $      | (0.01      | )      |   | $      | (0.02      | )      |   | $      | (0.03      | )      |   | $      | (0.03      | )      |
|---------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|
| Weighted      Average Number of Common Shares      Outstanding |   |   | 26,033,980 |   |   |   | 19,675,578 |   |   |   | 25,570,625 |   |   |   | 18,485,249 |   |

----

Development 

|                                                                                  |   | Six      Months      EndedNovember      30,2008 |     |   | Six      Months      EndedNovember      30,2007 |   |     | January      22, 2007(Inception)      toNovember      30,2008 |   |
|---------------------------------------------------------------------------------------|--------|-------------------------------------------------|----------|--------|-------------------------------------------------|--------|----------|---------------------------------------------------------------|--------|
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |
| Operating      Activities                                                             |   |                                            |     |   |                                            |   |     |                                                          |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |
| Net      loss                                                                         |   | $                                               | (764,613 | )      |                                            | $      | (605,393 | )                                                             |   | $ | (2,811,225 | ) |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Adjustments      to reconcile net loss to net cash used in operating      activities: |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Depreciation      and amortization                                                    |   |                                            | 22,133   |   |                                            |   | 5,275    |                                                          |   |   | 43,352 |   |
| Shares issued      for services                                                       |   |                                            | 68,750   |   |                                            |   | 25,000   |                                                          |   |   | 589,950 |   |
| Stock based      compensation                                                         |   |                                            | 73,570   |   |                                            |   | 64,191   |                                                          |   |   | 232,454 |   |
| Imputed      Interest                                                                 |   |                                            | 3,160    |   |                                            |   | -        |                                                          |   |   | 3,160 |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Changes in      operating assets and liabilities                                      |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Subscriptions      receivable                                                         |   |                                            | (95,000  | )      |                                            |   | -        |                                                          |   |   | (95,000 | ) |
| Taxes      receivable                                                                 |   |                                            | (11,860  | )      |                                            |   | (14,842  | )                                                             |   |   | (30,278 | ) |
| Security      deposit and prepaid expenses                                            |   |                                            | (20,351  | )      |                                            |   | (67      | )                                                             |   |   | (21,359 | ) |
| Other      assets                                                                     |   |                                            | -        |   |                                            |   | (12,000  | )                                                             |   |   | (12,000 | ) |
| Accounts      payable and accrued liabilities                                         |   |                                            | 45,773   |   |                                            |   | 9,991    |                                                          |   |   | 194,528 |   |
| Due to      related parties                                                           |   |                                            | (38,626  | )      |                                            |   | (2,179   | )                                                             |   |   | 51,236 |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Net Cash Used      in Operating Activities                                            |   |                                            | (717,064 | )      |                                            |   | (530,024 | )                                                             |   |   | (1,855,182 | ) |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Investing      Activities                                                             |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Purchase of      property & equipment                                             |   |                                            | (84,990  | )      |                                            |   | (44,995  | )                                                             |   |   | (154,891 | ) |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Net Cash Used      in Investing Activities                                            |   |                                            | (84,990  | )      |                                            |   | (44,995  | )                                                             |   |   | (154,891 | ) |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Financing      Activities                                                             |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Borrowings on      related party debt                                                 |   |                                            | 98,595   |   |                                            |   | -        |                                                          |   |   | 98,595 |   |
| Payments on      related party debt                                                   |   |                                            | (74,206  | )      |                                            |   | -        |                                                          |   |   | (74,206 | ) |
| Proceeds from      exercise of warrants                                               |   |                                            | –  |   |                                            |   | –  |                                                          |   |   | 137,500 |   |
| Proceeds from      debenture issuances                                                |   |                                            | 250,000  |   |                                            |   | -        |                                                          |   |   | 250,000 |   |
| Proceeds from      issuance of common stock                                           |   |                                            | 595,000  |   |                                            |   | 746,920  |                                                          |   |   | 1,691,720 |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Net Cash      Provided by Financing Activities                                        |   |                                            | 869,389  |   |                                            |   | 746,920  |                                                          |   |   | 2,103,609 |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Change in      Cash                                                                   |   |                                            | 67,335   |   |                                            |   | 171,901  |                                                          |   |   | 93,536 |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Cash –      Beginning                                                           |   |                                            | 26,201   |   |                                            |   | 13,982   |                                                          |   |   | – |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Cash –      Ending                                                              |   |                                            | 93,536   |   |                                            |   | 185,883  |                                                          |   |   | 93,536 |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Supplemental      Disclosures:                                                        |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Interest      paid                                                                    |   | $                                               | –  |   |                                            | $      | –  |                                                          |   | $ | – |   |
| Income taxes      paid                                                                |   | $                                               | –  |   |                                            | $      | –  |                                                          |   | $ | – |   |
|                                                                                  |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Non-cash      Activity                                                                |   |                                            |     |   |                                            |   |     |                                                          |   |   |   |   |
| Stock issued      for patent                                                          |   | $                                               | –  |   |                                            | $      | –  |                                                          |   | $ | 10,000 |   |
| Options      issued for patent                                                        |   | $                                               | –  |   |                                            | $      | –  |                                                          |   | $ | 27,854 |   |
| Stock issued      for accounts payable                                                |   | $                                               | 10,000   |   |                                            | $      | –  |                                                          |   | $ | 10,000 |   |
| Promissory      note issued for accounts payable                                      |   | $                                               | 58,000   |   |                                            | $      | –  |                                                          |   | $ | 58,000 |   |
| Discount on      convertible debenture                                                |   | $                                               | 45,930   |   |                                            | $      | –  |                                                          |   | $ | 45,930 |   |

----

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

| 2.   | Going      Concern |
|----------------|--------------------|

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

----

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

| 5.   | Promissory      Note |
|----------------|----------------------|

| 6.  | Commitments |
|----------|-------------|

| 7.  | Common      Stock |
|----------|-------------------|

| a)   | 37,500 shares      of common stock at $0.19 per share for contract services valued at $7,126      based on the closing price of the Company’s common stock at the grant      date. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | 2,400,000      units at $0.125 per share for total cash proceeds of $300,000. Each unit      consists of one share of common stock and one share purchase warrant      exercisable at $0.20 until July 2,2009. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | 50,000 shares      of common stock at $0.40 per share for CFO management services valued at      $20,000 based on the closing price of the Company’s common stock at the      grant date. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | 62,500 shares      of common stock at $0.42 per share for contract services valued at $26,250      based on the closing price of the Company’s common stock at the grant      date. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e)   | 37,500 shares      of common stock at $0.41 per share for contract services valued at $15,375      based on the closing price of the Company’s common stock at the grant      date. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f)   | 1,180,000      units at $0.25 per unit for total cash proceeds of $295,000 and 40,000      units at $0.25 per unit for the settlement of $10,000 in accounts payable.      Each unit consists of one common share and one-half non-transferrable      warrant to purchase one further share of the Company’s common stock at an      exercise price of $0.50 expiring on the earlier  of: |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | 24 months      from the date of issuance of the warrant certificate (November 30, 2008),      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 $0.80 per      share for seven consecutive tradingdays. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 8.  |     Stock      Options |
|----------|--------------------------------------------|

|                                |   | Number      of Options  |   | Weighted      Average Exercise Price$ |   | Weighted      Average Remaining Contractual      Term(Months) |   | Aggregate      Intrinsic Value$ |
|-------------------------------------|--------|------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------|--------|---------------------------------|
|                                |   |                         |   |                                  |   |                                                          |   |                            |
| Outstanding,      May 31, 2008      |   | 1,450,000                    |   | 0.33                                  |   |                                                          |   |                            |
|   Granted                 |   | 450,000                      |   | 0.33                                  |   |                                                          |   |                            |
|   Cancelled               |   | (300,000)                    |   | 0.25                                  |   |                                                          |   |                            |
| Exercisable,      November 30, 2008 |   | 1,600,000                    |   | 0.35                                  |   | 14                                                       |   | –                         |

| Grant      Date      |   | Expected      Life(Months) |   |   | Expected      Volatility |   |   | Dividend      Yield |   |   | Risk      Free Rate |   |   | Weighted      Average Grant      Date      Fair      Value |   |
|----------------------|--------|----------------------------|--------|--------|--------------------------|--------|--------|---------------------|--------|--------|---------------------|--------|--------|------------------------------------------------------------|--------|
|                 |   |                       |   |   |                     |   |   |                |   |   |                |   |   |                                                       |   |
| June 9,      2008    |   |                       | 6      |   |                     |   | 95.30  | %                   |   |   | 0                   | %      |   |                                                       | 2.12   | % |   | $ | 6,684 |   |
| July 1,      2008    |   |                       | 12     |   |                     |   | 95.64  | %                   |   |   | 0                   | %      |   |                                                       | 2.38   | % |   | $ | 31,533 |   |
| July 16,      2008   |   |                       | 12     |   |                     |   | 98.04  | %                   |   |   | 0                   | %      |   |                                                       | 2.16   | % |   | $ | 23,772 |   |
| October 6,      2008 |   |                       | 6      |   |                     |   | 141.96 | %                   |   |   | 0                   | %      |   |                                                       | 1.12   | % |   | $ | 11,580 |   |

----

| Number      of Options | Exercise      Price | Expiry      Date       |
|------------------------|---------------------|------------------------|
| 100,000                | $0.20               | June 9,      2009      |
| 75,000                 | $0.25               | September 1,      2009 |
| 250,000                | $0.25               | October 5,      2009   |
| 100,000                | $0.30               | October 6,      2009   |
| 50,000                 | $0.25               | October 31,      2009  |
| 100,000                | $0.25               | December 31,      2009 |
| 100,000                | $0.25               | January 1,      2010   |
| 50,000                 | $0.40               | December 13,      2009 |
| 200,000                | $0.75               | March 5,      2010     |
| 75,000                 | $0.45               | April 25,      2010    |
| 150,000                | $0.25               | June 30,      2010     |
| 100,000                | $0.25               | July 16,      2010     |
| 250,000                | $0.25               | November 1,      2012  |
| 1,600,000              |                |                   |

| 9.  | Warrants |
|----------|----------|

| Grant      Date           |   | Expected      Life(Months) |   |   | Expected      Volatility |   |   | Dividend      Yield |   |   | Risk      Free Rate |   |   | Weighted      Average      Grant      DateFair      Value |                   |
|---------------------------|--------|----------------------------|--------|--------|--------------------------|--------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------------------------------------------------------|------------------------|
|                      |   |                       |   |   |                     |   |   |                |   |   |                |   |   |                                                      |                   |
| July 2,      2008         |   |                       | 6      |   |                     |   | 95.68  | %                   |   |   | 0                   | %      |   |                                                      | 2.10                   | % |   | $ | 0.22 |   |
| October 16      -17, 2008 |   |                       | 24     |   |                     |   | 144.95 | %                   |   |   | 0                   | %      |   |                                                      | 1.61 –      1.64 | % |   | $ | 0.10 |   |
| November      24-28, 2008 |   |                       | 24     |   |                     |   | 140.59 | %                   |   |   | 0                   | %      |   |                                                      | 1.00 –      1.31 | % |   | $ | 0.09 |   |

----

| Number      of Warrants | Exercise      Price | Expiry      Date             |
|-------------------------|---------------------|------------------------------|
| 4,000,000               | $0.20               | May 28,      2009            |
| 103,750                 | $0.50               | November 19,      2009       |
| 6,250                   | $0.50               | November 20,      2009       |
| 45,000                  | $0.50               | December 1,      2009        |
| 35,000                  | $0.50               | December 5,      2009        |
| 221,250                 | $0.50               | December 10,      2009       |
| 37,500                  | $0.50               | December 18,      2009       |
| 100,000                 | $0.50               | February 28,      2010       |
| 75,000                  | $0.50               | May 1,      2010             |
| 250,000                 | $0.50               | October 16      and 17, 2010 |
| 610,000                 | $0.50               | November 30,      2010       |
| 5,483,750               |                |                         |

| 10.  | Subsequent      Events |
|-----------|------------------------|

----

Item 2

| ·   | Mantra Energy      Alternatives Ltd., through which we identify, acquire, develop and market      technologies related to alternative energy production, greenhouse gas      emissions reduction and resource consumption  reduction; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mantra Media      Corp., through which we offer promotional and marketing services to      companies in the sustainability sector or those seeking to adopt      sustainable practices; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Carbon      Commodity Corp., through which we intend to license or develop carbon      footprint assessment software and develop an online carbon reduction      marketplace; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Climate ESCO      Ltd., through which we plan obtain the distribution or licensing rights to      commercialized technologies and broker them to residential and industrial      consumers seeking sustainabilitysolutions; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mantra Next      Gen Power Inc., through which we anticipate developing technologies in the      alternative energy sector; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mantra China      Limited, through which we, together with our joint venture partners, plan      to develop our business in Hong Kong and mainland  China. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

Results of Operations for the Period from January 22, 2007(Inception) to November 30, 2008 and for the Six Months Ended November 30, 2008compared to the Six Months Ended November 30, 2007.

----

| Description                                                   |   | Expense |      |   | Stock      based/other |   |    | Total  |   |
|---------------------------------------------------------------|--------|---------|-----------|--------|------------------------|--------|---------|--------|--------|
| Amortization                                                  |   | $       | 39,525    |   |                   |   | -       |   |   | $ | 39,525 |   |
| Interest      expense                                         |   |    | 9,714     |   |                   |   | -       |   |   |   | 9,714 |   |
| Business      development                                     |   |    | 34,698    |   |                   |   | 167,404 |   |   |   | 202,102 |   |
| Consulting      and advisory                                  |   |    | -         |   |                   |   | 378,497 |   |   |   | 378,497 |   |
| Management      fees                                          |   |    | 334,700   |   |                   |   | 72,800  |   |   |   | 407,500 |   |
| Research and      development                                 |   |    | 143,275   |   |                   |   | 11,275  |   |   |   | 154,550 |   |
| Shareholder      communication, awareness and financing costs |   |    | 285,350   |   |                   |   | 67,907  |   |   |   | 353,257 |   |
| Professional      fees                                        |   |    | 266,419   |   |                   |   | 91,500  |   |   |   | 357,919 |   |
| Public      listing and related                               |   |    | 114,547   |   |                   |   | 40,000  |   |   |   | 154,547 |   |
| Website and      corporate identity                           |   |    | 134,293   |   |                   |   | 26,975  |   |   |   | 161,268 |   |
| General,      Administrative and salaries                     |   |    | 595,677   |   |                   |   | 7,727   |   |   |   | 603,404 |   |
|                                                          |   | $       | 1,958,198 |   |                   | $      | 864,085 |   |   | $ | 2,822,283 |   |

| Description                                                   |   | Expense |    |   | Stock      based/other |   |    | Total  |   |
|---------------------------------------------------------------|--------|---------|---------|--------|------------------------|--------|---------|--------|--------|
| Amortization                                                  |   | $       | 18,306  |   |                   |   | -       |   |   | $ | 18,306 |   |
| Interest      expense                                         |   |    | 9,714   |   |                   |   | -       |   |   |   | 9,714 |   |
| Business      development                                     |   |    | 1,449   |   |                   |   | -       |   |   |   | 1,449 |   |
| Consulting      and advisory                                  |   |    | -       |   |                   |   | 35,354  |   |   |   | 35,354 |   |
| Management      fees                                          |   |    | 96,000  |   |                   |   | 51,533  |   |   |   | 147,533 |   |
| Research and      development                                 |   |    | 72,122  |   |                   |   | -       |   |   |   | 72,122 |   |
| Shareholder      communication, awareness and financing costs |   |    | 113,912 |   |                   |   | 55,433  |   |   |   | 169,345 |   |
| Professional      fees                                        |   |    | 115,664 |   |                   |   | 50,000  |   |   |   | 165,664 |   |
| Public      listing and related                               |   |    | 7,500   |   |                   |   | -       |   |   |   | 7,500 |   |
| General,      Administrative and salaries                     |   |    | 148,684 |   |                   |   | -       |   |   |   | 148,684 |   |
|                                                          |   | $       | 583,351 |   |                   | $      | 192,320 |   |   | $ | 775,671 |   |

----

| Date      of issuance | Type      of security      issued                                                           | Number      of securities issued | Price      per security($) | Value($) |
|-----------------------|---------------------------------------------------------------------------------------------|----------------------------------|----------------------------|----------|
| June      2008        | Common Shares      for services                                                             | 37,500                           | 0.19                       | 7,125    |
| July      2008        | Units (common      shares and warrants) for cash                                            | 2,400,000                        | 0.125                      | 300,000  |
| July      2008        | Common Shares      for services                                                             | 50,000                           | 0.40                       | 20,000   |
| July      2008        | Common Shares      for services                                                             | 62,500                           | 0.45                       | 26,250   |
| September      2008   | Common Shares      for services                                                             | 37,500                           | 0.41                       | 15,375   |
| October      2008     | Convertible      Debentures                                                                 | N/A                              | N/A                        | 250,000  |
| November      2008    | Units (common      shares and warrants) for cash - $10,000 applied to accounts      payable | 1,220,000                        | 0.25                       | 305,000  |

| Description                                                                                    | Target      completion date or period | Estimated      expenses ($) |
|------------------------------------------------------------------------------------------------|---------------------------------------|----------------------------------|
| Development      of the ERC reactor to demonstration pre-commercial scale                      | December 31,      2009                | 554,232                          |
| TSX Venture      listing costs including legal fees, sponsorship fees and financing      costs | March 31,      2009                   | 230,000                          |
| Management      and consulting fees (including expenses of our Scientific Advisory      Board) | 12      months                        | 240,000                          |
| Corporate      communication, investor awareness and financing costs                           | 12      months                        | 126,000                          |
| Professional      fees, legal and audit                                                        | 12      months                        | 122,000                          |
| General,      administrative and salary expenses                                               | 12      months                        | 158,698                          |
| Travel,      advertising and promotional expenses                                              | 12      months                        | 48,000                           |
| Total                                                                                          |                                  | $1,478,930                       |

----

----

Item 3

Item 4. Controls and Procedures.

----

PART II – OTHER INFORMATION

We are not aware of any material legal proceedings not in theordinary course of business and incidental to our operations which involveMantra or any of its properties or subsidiaries.

| ·   | On September      15, 2008, we issued 37,500 common shares to ECON Corporate Services, Inc.      (“ECON”) pursuant to a consulting agreement whereby we agreed to issue      150,000 common shares to ECON as compensation for investor services, which      shares are to be issued in four quarterly installments during the term of      the agreement. The shares were issued at a price of $0.41 per share. These      securities were issued without a prospectus pursuant to Regulation S of      the Securities Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On October 6,      2008, we granted two members of our Scientific Advisory Board the option      to purchase 50,000 common shares each at a price of $0.30 per share with      an expiry date of October 6, 2009 (aggregate of 100,000      options).  These securities were issued without a prospectus      pursuant to Regulation S of the SecuritiesAct. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On November      30, 2008 we issued a promissory note whereby we agreed to pay a lender the      principal amount of $58,000, with an interest rate of 10% per year      calculated monthly, on December 31, 2009.  This promissory note      was issued without a prospectus pursuant to Regulation S of the Securities      Act. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit No. | Description                                                                                                                                                            |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1         | Plan of      Conversion of Mantra Venture Group Ltd. from a Nevada Corporation into a      British Columbia Corporation dated October 29, 2008     (1)            |
| 3.1         | Articles of      Conversion of Mantra Venture Group Ltd. dated October 28, 2008      (1)                                                                               |
| 10.1        | Revolving Line of Credit Agreement with Larry      Kristof dated October 15, 2008                                                                                      |
| 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) Included as Exhibits in our Current Report on Form 8-K filed onNovember 4, 2008

|                        | Mantra      Venture Group Ltd.                                  |
|-----------------------------|-----------------------------------------------------------------|
|                        | (Registrant)                                                    |
|                        |                                                            |
|                        | /s/      Larry Kristof                                          |
| Date: January      14, 2009 | Larry      Kristof                                              |
|                        | President,      Chief Executive Officer, Director               |
|                        |                                                            |
|                        |                                                            |
|                        | /s/      Dennis      Petke                                      |
| Date: January      14, 2009 | Dennis      Petke                                               |
|                        | Chief      Financial Officer, Principal      Accounting Officer |
|                        |                                                            |