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

----

| PART I - FINANCIAL INFORMATION                                                                      |     |
|-----------------------------------------------------------------------------------------------------|----------|
| Item 1. Financial Statements                                                                        |  3  |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |  4  |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                  |  8  |
| Item 4. Controls and Procedures                                                                     |  8  |
| PART II – OTHER INFORMATION                                                                   |     |
| Item 1. Legal Proceedings                                                                           |  10 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 |  10 |
| Item 3. Defaults Upon Senior Securities                                                             |  11 |
| Item 4. Submission of Matters to a Vote of Security Holders                                         |  11 |
| Item 5. Other Information                                                                           |  11 |

----

Item 1. Financial Statements

| Consolidated balance sheets                    |  F-1 |
|------------------------------------------------|-----------|
| Consolidated statements of operations          |  F-2 |
| Consolidated statements of cash flows          |  F-3 |
| Notes to the consolidated financial statements |  F-4 |

----

|                                                                                                                                             |   | August 31, 2009$(unaudited) |       |   | May 31, 2009$ |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|--------|---------------|--------|
|                                                                                                                                             |   |                        |       |   |          |   |
| ASSETS                                                                                                                                           |   |                        |       |   |          |   |
|                                                                                                                                             |   |                        |       |   |          |   |
| Current assets                                                                                                                                   |   |                        |       |   |          |   |
|                                                                                                                                             |   |                        |       |   |          |   |
| Cash                                                                                                                                             |   |                        | –    |   |          |   | 3,320 |   |
| Amounts receivable                                                                                                                               |   |                        | 14,689     |   |          |   | 19,253 |   |
| Prepaid expenses and deposits                                                                                                                    |   |                        | 2,500      |   |          |   | 6,536 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Total current assets                                                                                                                             |   |                        | 17,189     |   |          |   | 29,109 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Property and equipment                                                                                                                           |   |                        | 101,019    |   |          |   | 109,801 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Total assets                                                                                                                                     |   |                        | 118,208    |   |          |   | 138,910 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                      |   |                        |       |   |          |   |   |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Current liabilities                                                                                                                              |   |                        |       |   |          |   |   |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Bank indebtedness                                                                                                                                |   |                        | 6,544      |   |          |   | – |   |
| Accounts payable and accrued liabilities                                                                                                         |   |                        | 300,315    |   |          |   | 224,893 |   |
| Accrued interest payable                                                                                                                         |   |                        | 21,836     |   |          |   | – |   |
| Due to related parties (Note 4)                                                                                                                  |   |                        | 104,189    |   |          |   | 76,015 |   |
| Convertible debentures, net of unamortized discount of $7,655 (Note 5)                                                                           |   |                        | 242,345    |   |          |   | 231,618 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Total liabilities                                                                                                                                |   |                        | 675,229    |   |          |   | 532,526 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Going concern (Note 2)                                                                                                                           |   |                        |       |   |          |   |   |   |
| Commitments (Note 6)                                                                                                                             |   |                        |       |   |          |   |   |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| 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: 31,387,455 shares (May 31, 2009 – 30,058,788 shares) |   |                        | 314        |   |          |   | 301 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Additional paid-in capital                                                                                                                       |   |                        | 3,669,444  |   |          |   | 3,446,286 |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Common stock subscribed                                                                                                                          |   |                        | 10,200     |   |          |   | – |   |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Stock subscriptions receivable                                                                                                                   |   |                        | –    |   |          |   | (15,000 | ) |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Deficit accumulated during the development stage                                                                                                 |   |                        | (4,236,979 | )      |          |   | (3,825,203 | ) |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Total stockholders’ deficit                                                                                                                |   |                        | (557,021   | )      |          |   | (393,616 | ) |
|                                                                                                                                             |   |                        |       |   |          |   |   |   |
| Total liabilities and stockholders’ deficit                                                                                                |   |                        | 118,208    |   |          |   | 138,910 |   |

----

|                                             |   | Three months endedAugust 31, |       |   | Accumulated fromJanuary 22, 2007 (Inception) to August 31, |   |
|--------------------------------------------------|--------|------------------------------|------------|--------|------------------------------------------------------------|--------|
|                                             |   |                         | 2009$      |   |                                                       |   | 2008$ |   |   |   | 2009$ |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Revenues                                         |   |                         | 13,798     |   |                                                       |   | 8,000 |   |   |   | 30,916 |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Expenses                                         |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Business development                             |   |                         | 52,759     |   |                                                       |   | 1,449 |   |   |   | 264,982 |   |
| Consulting and advisory                          |   |                         | 28,041     |   |                                                       |   | 23,773 |   |   |   | 433,048 |   |
| Depreciation and amortization                    |   |                         | 8,782      |   |                                                       |   | 4,955 |   |   |   | 66,616 |   |
| Foreign exchange loss                            |   |                         | 5,073      |   |                                                       |   | – |   |   |   | 1,816 |   |
| General and administrative (Note 4)              |   |                         | 22,644     |   |                                                       |   | 42,639 |   |   |   | 333,825 |   |
| Management fees (Note 4)                         |   |                         | 52,621     |   |                                                       |   | 94,033 |   |   |   | 737,203 |   |
| Professional fees                                |   |                         | 48,659     |   |                                                       |   | 91,363 |   |   |   | 510,180 |   |
| Public listing costs                             |   |                         | 4,078      |   |                                                       |   | 1,817 |   |   |   | 193,421 |   |
| Rent                                             |   |                         | 13,466     |   |                                                       |   | – |   |   |   | 123,056 |   |
| Research and development                         |   |                         | 62,244     |   |                                                       |   | 19,624 |   |   |   | 313,697 |   |
| Salaries and benefits                            |   |                         | 14,587     |   |                                                       |   | 23,235 |   |   |   | 152,584 |   |
| Shareholder communications and awareness         |   |                         | 83,821     |   |                                                       |   | 104,491 |   |   |   | 577,042 |   |
| Travel                                           |   |                         | 11,771     |   |                                                       |   | 5,221 |   |   |   | 267,049 |   |
| Website and corporate identity                   |   |                         | –    |   |                                                       |   | 538 |   |   |   | 195,451 |   |
| Write down of intangible assets                  |   |                         | –    |   |                                                       |   | – |   |   |   | 37,815 |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Total expenses                                   |   |                         | 408,546    |   |                                                       |   | 413,138 |   |   |   | 4,207,785 |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Loss before other expenses                       |   |                         | (394,748   | )      |                                                       |   | (405,138 | ) |   |   | (4,176,869 | ) |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Other expenses                                   |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Accretion of discounts on convertible debentures |   |                         | (10,727    | )      |                                                       |   | – |   |   |   | (38,275 | ) |
| Interest                                         |   |                         | (6,301     | )      |                                                       |   | (4,614 | ) |   |   | (21,835 | ) |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Total other expenses                             |   |                         | (17,028    | )      |                                                       |   | (4,614 | ) |   |   | (60,110 | ) |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Net loss for the period                          |   |                         | (411,776   | )      |                                                       |   | (409,752 | ) |   |   | (4,236,979 | ) |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Loss per share, basic and diluted                |   |                         | (0.02      | )      |                                                       |   | (0.02 | ) |   |   |   |   |
|                                             |   |                         |       |   |                                                       |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding    |   |                         | 30,504,665 |   |                                                       |   | 25,112,308 |   |   |   |   |   |

----

|                                                                               |   | ThreeMonths EndedAugust 31, 2009$ |     |   | ThreeMonths EndedAugust 31, 2008$ |   |     | Accumulated fromJanuary 22, 2007(Inception) toAugust 31, 2009$ |   |
|------------------------------------------------------------------------------------|--------|-----------------------------------|----------|--------|-----------------------------------|--------|----------|----------------------------------------------------------------|--------|
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Operating activities                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Net loss for the period                                                            |   |                              | (411,776 | )      |                              |   | (409,752 | )                                                              |   |   | (4,236,979 | ) |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Adjustments to reconcile net loss to net cash used in operating activities:        |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Accretion of discounts on convertible debentures                                   |   |                              | 10,727   |   |                              |   | –  |                                                           |   |   | 38,275 |   |
| Depreciation and amortization                                                      |   |                              | 8,782    |   |                              |   | 4,955    |                                                           |   |   | 66,616 |   |
| Shares issued for services                                                         |   |                              | 37,250   |   |                              |   | 53,376   |                                                           |   |   | 37,250 |   |
| Stock-based compensation                                                           |   |                              | 9,121    |   |                              |   | 61,989   |                                                           |   |   | 1,123,851 |   |
| Write-down of intangible assets                                                    |   |                              | –  |   |                              |   | –  |                                                           |   |   | 37,815 |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Changes in operating assets and liabilities                                        |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Amounts receivable                                                                 |   |                              | 4,564    |   |                              |   | (6,645   | )                                                              |   |   | (14,689 | ) |
| Prepaid expenses and deposits                                                      |   |                              | 4,036    |   |                              |   | (995     | )                                                              |   |   | (2,500 | ) |
| Other assets                                                                       |   |                              | –  |   |                              |   | –  |                                                           |   |   | (12,000 | ) |
| Accounts payable and accrued liabilities                                           |   |                              | 112,258  |   |                              |   | 22,460   |                                                           |   |   | 494,768 |   |
| Due to related parties                                                             |   |                              | 28,174   |   |                              |   | (29,458  | )                                                              |   |   | 104,189 |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Net cash used in operating activities                                              |   |                              | (196,864 | )      |                              |   | (304,070 | )                                                              |   |   | (2,363,404 | ) |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Investing activities                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Purchase of property and equipment                                                 |   |                              | –  |   |                              |   | (28,319  | )                                                              |   |   | (155,635 | ) |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Net cash used in investing activities                                              |   |                              | –  |   |                              |   | (28,319  | )                                                              |   |   | (155,635 | ) |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Financing activities                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Bank indebtedness                                                                  |   |                              | 6,544    |   |                              |   | –  |                                                           |   |   | 6,544 |   |
| Proceeds from issuance of convertible debentures                                   |   |                              | –  |   |                              |   | –  |                                                           |   |   | 250,000 |   |
| Proceeds from issuance of common stock                                             |   |                              | 187,000  |   |                              |   | 300,000  |                                                           |   |   | 2,262,495 |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Net cash provided by financing activities                                          |   |                              | 193,544  |   |                              |   | 300,000  |                                                           |   |   | 2,519,039 |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Effect of foreign currency translation                                             |   |                              | –  |   |                              |   | 7,120    |                                                           |   |   | – |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Change in cash                                                                     |   |                              | (3,320   | )      |                              |   | (25,269  | )                                                              |   |   | – |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Cash, beginning of period                                                          |   |                              | 3,320    |   |                              |   | 26,201   |                                                           |   |   | – |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Cash, end of period                                                                |   |                              | –  |   |                              |   | 932      |                                                           |   |   | – |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Non-cash investing and financing activities:                                       |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Common stock issued to settle accounts payable                                     |   |                              | 15,000   |   |                              |   | –  |                                                           |   |   | 172,617 |   |
| Common stock issued and stock options granted for acquisition of intangible assets |   |                              | –  |   |                              |   | –  |                                                           |   |   | 37,815 |   |
|                                                                               |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Supplemental disclosures:                                                          |   |                              |     |   |                              |   |     |                                                           |   |   |   |   |
| Interest paid                                                                      |   |                              | –  |   |                              |   | –  |                                                           |   |   | – |   |
| Income taxes paid                                                                  |   |                              | –  |   |                              |   | –  |                                                           |   |   | – |   |

----

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

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

| 3.   | Recent Accounting Pronouncements |
|----------------|----------------------------------|

----

| 3.  | Recent Accounting Pronouncements (continued) |
|----------|----------------------------------------------|

----

| 3.  | Recent Accounting Pronouncements (continued) |
|----------|----------------------------------------------|

| 4.   | Related Party Transactions |
|----------------|----------------------------|

| a)   | During the three months ended August 31, 2009, the Company incurred management fees of $22,000 (2008 - $22,500) to the President of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | As at August 31, 2009, the Company owes a total of $100,134 (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, unsecured and due on demand. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | During the three months ended August 31, 2009, the Company incurred administrative fees of $9,357 (2008 - $9,000) to the spouse of the President of the Company. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 4.  | Related Party Transactions (continued) |
|----------|----------------------------------------|

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

| e)   | As at August 31, 2009, Company owes a total of $4,055 (May 31, 2009 - $3,190) to the Chief Financial Officer and a company controlled by the Chief Financial Officer of the Company. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Convertible Debentures |
|----------------|------------------------|

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

| a)   | On January 7, 2009, the Company entered a management services agreement with a company controlled by the Chief Financial Officer of the Company where it is committed to pay $8,500 per month for a period of one year. The agreement may be terminated by either party with seven days written notice. On March 1, 2009, the agreement was amended to $5,000 per month forthe remainder of the term. On July 1, 2009, the agreement was amended to $2,500 per month for the remainder of the term. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | The Company entered into a premises agreement whereby it is committed to pay $3,780 (Cdn$4,127) per month expiring on September 30, 2009. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

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

| d)   | On June 1, 2009, the Company entered into an agreement with a consultant who will provide international business development services for Cdn$6,000 per month expiring on December 1, 2009. The Company also issued 100,000 shares and granted 75,000 stock options to the consultant. The stock options are exercisable at $0.15 per share expiring on June 1, 2011. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6.  | Commitments (continued) |
|----------|-------------------------|

| e)   | On June 8, 2009, the Company entered into an agreement with an individual to become a director of the Company for a period of one year. The individual is to be granted 200,000 stock options exercisable at $0.24 per share expiring one year from the date of grant or upon the Company’s shares of common stock closing trading for a period of five trading days ata price of $0.50 or greater The effective date of the agreement is September 21, 2009, when the individual was officially appointed to the Board of Directors. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f)   | On June 8, 2009, the Company entered into an agreement with an individual to become a director of the Company for a period of sixty days. The individual was granted 33,333 stock options exercisable at $0.24 per share expiring one year from the date of grant or upon the Company’s shares of common stock closing trading for a period of five trading days at aprice of $0.50 or greater. The effective date of the agreement is September 21, 2009, when the individual was officially appointed to the Board of Directors. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | 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. |
|----------------|----------------------------------------------------------------------------------------------------------------------|

----

| 7.  | Common Stock (continued) |
|----------|--------------------------|

| 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. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                         | Number of options | Weighted averageexercise price$ | Weighted average remaining contractual life (years) | Aggregate intrinsic value$ |
|----------------------------------------------|-------------------|---------------------------------|-----------------------------------------------------|----------------------------|
|                                         |              |                            |                                                |                       |
| Outstanding, May 31, 2009                    | 2,800,000         | 0.32                            |                                                |                       |
|                                         |              |                            |                                                |                       |
| Granted                                      | 75,000            | 0.15                            |                                                |                       |
| Cancelled                                    | (100,000)         | 0.20                            |                                                |                       |
|                                         |              |                            |                                                |                       |
| Outstanding and exercisable, August 31, 2009 | 2,775,000         | 0.31                            | 1.3                                                 | 5,250                      |

----

| 8.   | Stock Options (continued) |
|----------------|---------------------------|

| Number of Options | Exercise Price$ | Expiry Date       |
|-------------------|-----------------|-------------------|
|              |            |              |
| 75,000            | 0.25            | September 1, 2009 |
| 100,000           | 0.25            | October 5, 2009   |
| 100,000           | 0.30            | October 6, 2009   |
| 50,000            | 0.25            | October 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     |
| 1,375,000         | 0.30            | January 7, 2011   |
| 75,000            | 0.27            | February 10, 2011 |
| 250,000           | 0.25            | November 1, 2012  |
| 75,000            | 0.15            | June 1, 2011      |
|              |            |              |
| 2,775,000         |            |              |

|                     |   | Three months endedAugust 31, 2009 |   |   | Three months endedAugust 31, 2008 |   |
|--------------------------|--------|-----------------------------------|--------|--------|-----------------------------------|--------|
|                     |   |                              |   |   |                              |   |
| Risk-free Interest rate  |   |                              | 0.48   | %      |                              |   | 2.26 | % |
| Expected life (in years) |   |                              | 1.0    |   |                              |   | 0.9 |   |
| Expected volatility      |   |                              | 90     | %      |                              |   | 96 | % |

----

| 9.   | Share Purchase Warrants |
|----------------|-------------------------|

|                     |   | Number ofWarrants |       |   | Weighted Average Exercise Price$ |   |
|--------------------------|--------|-------------------|------------|--------|----------------------------------|--------|
|                     |   |              |       |   |                             |   |
| Balance, May 31, 2009    |   |              | 6,576,358  |   |                             |   | 0.31 |   |
|                     |   |              |       |   |                             |   |   |   |
| Issued                   |   |              | 1,178,667  |   |                             |   | 0.30 |   |
| Expired                  |   |              | (2,400,000 | )      |                             |   | 0.20 |   |
|                     |   |              |       |   |                             |   |   |   |
| Balance, August 31, 2009 |   |              | 5,355,025  |   |                             |   | 0.36 |   |

| Number of Warrants | Exercise Price$ | Expiry Date       |
|--------------------|-----------------|-------------------|
|               |            |              |
| 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       |
| 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   |
|               |            |              |
| 5,355,025          |            |              |

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

| a)   | 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 and Cdn$5,000 within thirty days of September 2, 2009; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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 |

| b)   | On October 1, 2009, the Company entered into an agreement with an individual to become the Chief Financial Officer of the Company for $6,000 per month expiring on September 30, 2010. The individual was also granted 400,000 stock options which are exercisable at $0.20 per share expiring on October 1, 2010. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----

----

----

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

----

----

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures.

----

Item 1. Legal Proceedings.

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

| ·   | On June 1, 2009, we issued 100,000 shares of our common stock and options to acquire 75,000 more share of our common stock at $0.15 per share until June 1, 2010 for services rendered to one of our directors and officers.  These shares were issued without a prospectus pursuant to exemptions found in Regulation S of the Securities Act of 1933, as amended. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On July 3, 2009, we issued 25,000 shares of our common stock with a fair value of $6,000 for services rendered.  These shares were issued without a prospectus pursuant to the exemption from registration found in Section 4(2) of the Securities Act of 1933, as amended. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On July 16, 2009, we 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’s common stocktrades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.  These shares were issued without a prospectus pursuant to exemptions found in Regulation S and Section 4(2) of the Securities Act of 1933, as amended. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On July 24, 2009, we 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 common stocktrades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days.  These shares were issued without a prospectus pursuant to exemptions found in Regulation S of the Securities Act of 1933, as amended. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On July 24, 2009, we 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 common stocktrades at least one time per day on the FINRA Over the Counter Bulletin Board at a price at or above $0.60 per share for seven consecutive trading days. These shares were issued without a prospectus pursuant to exemptions found in Regulation S of the Securities Act of 1933, as amended. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On August 17, 2009, we issued 25,000 shares of common stock with a fair value of $7,250 for services rendered. These shares were issued without a prospectus pursuant to the exemption from registration found in Section 4(2) of the Securities Act of 1933, as amended. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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. These shares were issued without a prospectus pursuant to exemptions found in Regulation S of the Securities Act of 1933, as amended. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 3. Defaults Upon Senior Securities.

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

Item 5. Other Information.

Item 6. Exhibits

| Exhibit No. | Description                                                                                                                                                  |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                         |
| 10.1        | Director Agreement with Shawn Kim dated June 8, 2009 (1)                                                                                                     |
|        |                                                                                                                                                         |
| 10.2        | Director Agreement with John Russell dated June 8, 2009 (1)                                                                                                  |
|        |                                                                                                                                                         |
| 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         |

----

|                   | Mantra Venture Group Ltd.                             |
|------------------------|-------------------------------------------------------|
|                   | (Registrant)                                          |
|                   |                                                  |
|                   | /s/Larry Kristof                                      |
| Date: October 20, 2009 | Larry Kristof                                         |
|                   | President, Chief Executive Officer, Director          |
|                   |                                                  |
|                   |                                                  |
|                   | /s/ Con Buckley                                       |
| Date: October 20, 2009 | Con Buckley                                           |
|                   | Chief Financial Officer, Principal Accounting Officer |