10-Q 1 mantra10q.htm FORM 10-Q Filed by Bacchus Filings Inc. 604.632.1285 Mantra Venture Group Ltd. Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2008

¨ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _________to _________

Commission File Number: 333-146802

Mantra Venture Group Ltd.
(Name of Small Business Issuer in its charter)

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

     1205 – 207 West Hastings Street
Vancouver, British Columbia, Canada V6B 1H7
(Address of principal executive offices)

(604) 609 2898
Issuer’s telephone number

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨ Accelerated filer  ¨ Non-accelerated filer ¨  Smaller reporting company þ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes Noþ

APPLICABLE ONLY TO CORPORATE ISSUERS

As of April 19, 2008, the registrant had 20,744,328 shares of common stock outstanding.


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited interim consolidated financial statements of Mantra Venture Group Ltd. (the “Company”, “Mantra”, “we”, “our”, “us”) follow. All currency references in this report are in US dollars unless otherwise noted.

Mantra Venture Group Ltd.
Consolidated Financial Statements
(A Development Stage Company)
(Unaudited)
February 29, 2008

Financial Statement Index

Consolidated Balance Sheets  F–1 
Consolidated Statements of Operations  F–2 
Consolidated Statements of Cash Flows  F–3 
Consolidated Statement of Stockholders’ Equity  F–4 
Notes to the Consolidated Financial Statements  F–5 

1

Mantra Venture Group Ltd.     
(A Development Stage Company)     
Consolidated Balance Sheets     
 
  February 29, 2008
(Unaudited)  		May 31, 2007 
ASSETS     
Current Assets     
   Cash  73,488  13,982 
   Taxes receivable  15,093  357 
   Security deposit  1,022  932 
Total Current Assets  89,603  15,271 
Intangible Assets (Note 3)  37,095  – 
Property and Equipment  54,403  11,875 
Total Assets  181,101  27,146 
LIABILITIES AND STOCKHOLDERS’ EQUITY     
Current Liabilities     
   Accounts Payable and Accrued Liabilities  82,742  8,794 
   Due to related parties  73,994  13,446 
Total Liabilities  156,736  22,240 
Contingency and Commitments (Notes 2)     
Stockholders’ Equity     
Preferred Stock     
   Authorized: 20,000,000 shares, par value $0.00001     
   Issued: no shares  –  – 
Common Stock (Note 4)     
   Authorized: 100,000,000 shares, par value $0.00001     
   Issued: 21,344,328 shares (May 31, 2007 – 16,760,000 shares)  214  168 
Additional Paid-In Capital  1,383,518  35,332 
Deficit Accumulated During the Development Stage  (1,359,367)  (30,594) 
Total Stockholders’ Equity  24,365  4,906 
Total Liabilities and Stockholders’ Equity  181,101  27,146 

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

F-1

Mantra Venture Group Ltd.
(A Development Stage Company)
Interim Consolidated Statements of Operations
(Unaudited)

  Accumulated    Accumulated    Accumulated 
  From    From    From 
  January 22, 2007  Three  January 22, 2007  Nine  January 22, 2007 
  (Date of Inception)  Months  (Date of Inception)  Months  (Date of Inception) 
  to  Ended  to  Ended  to 
  February 29,  February 29,  February 28,  February 29,  May 31, 
  2008  2008  2007  2008  2007 
  $ $    $   $  $ 
Revenue  –  –  –  –  – 
Operating Expenses           
   Development costs  34,523  11,761  –  34,523  – 
   General and administrative  1,324,844  711,619  –  1,294,250  30,594 
Total Operating Expenses  1,359,367  723,380  –  1,328,773  30,594 
Net Loss  (1,359,367)  (723,380)  –  (1,328,773)  (30,594) 
Net Loss Per Share           
Continuing Operations – Basic and Diluted    (0.03)  –  (0.06)  – 
Weighted Average Number of Shares           
Outstanding – Basic and Diluted    21,344,000  21,189,000  21,344,000  16,760,000 

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

F-2

Mantra Venture Group Ltd.       
(A Development Stage Company)       
Interim Consolidated Statements of Cash Flows       
(Unaudited)       
 
      Accumulated 
  Accumulated    From 
  From January 22,    January 22, 2007 
  2007 (Date of  Nine Months  (Date of Inception) 
  Inception) to  Ended  to 
  February 29,  February 29,  February 28, 
  2008  2008  2007 
  $   $  $ 
Operating Activities       
   Net loss  (1,359,367)  (1,328,773)  – 
   Adjustments to reconcile net loss to net cash used in operating activities:       
       Depreciation  11,324  10,001  – 
       Shares issued for services  381,917  381,717  – 
   Changes in operating assets and liabilities       
       Accounts receivable  (15,093)  (14,736)  – 
       Prepaid expenses  (1,022)  (90)  – 
       Accounts payable and accrued liabilities  82,742  73,948  – 
Net Cash Used in Operating Activities  (899,499)  (877,933)  – 
Investing Activities       
       Purchase of intangible assets  (12,000)  (12,000)  – 
       Purchase of property equipment  (65,727)  (52,529)  – 
Net Cash Used in Investing Activities  (77,727)  (64,529)  – 
Financing Activities       
       Due to related parties  73,994  60,548  – 
       Proceeds from issuance of common stock  976,720  941,420  – 
Net Cash Provided by Financing Activities  1,050,714  1,001,968  – 
Change in Cash  73,488  59,506  – 
Cash – Beginning  –  13,982  – 
Cash – Ending  73,488  73,488  – 
Supplemental Disclosures:       
   Interest paid  –  –  – 
   Income taxes paid  –  –  – 

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

F-3

Mantra Venture Group Ltd.           
(A Development Stage Company)           
Consolidated Statement of Stockholders’ Equity           
Period from January 22, 2007 (Date of Inception) to February 29, 2008       
(Unaudited)           
 
        Deficit   
      Additional Accumulated   
      Paid-in   During the  Total 
     Common Shares  Capital  Development    Stockholders’
  Number  Amount  (Discount)   Stage  Equity (Deficit) 
    $   $  $   $ 
Balance – January 22, 2007         
(date of inception)  –    –  –  – 
Stock issued for cash at $0.00001 per share  15,000,000  150  150  –  300 
Stock issued for cash at $0.02 per share  1,750,000  18  34,982  –  35,000 
Stock issued for services at $0.02 per share  10,000  –  200  –  200 
Net loss for the period  –   –  –  (30,594)  (30,594) 
Balance – May 31, 2007  16,760,000  168  35,332  (30,594)  4,906 
Stock issued for cash at $0.10 per share  1,221,500  12  124,638  –  124,650 
Stock issued for cash at $0.25 per share  1,399,078  14  349,756  –  349,770 
Stock issued for services at $0.25 per share  100,000  1  24,999  –  25,000 
Common stock issued for services at $0.40 per share  125,000  1  49,999  –  50,000 
Stock issued for acquisition at $0.25 per share  40,000  –  10,000  –  10,000 
Stock issued for cash at $0.40 per share  155,000  –  –  –  – 
     Allocation to shares  –  2  31,206  –  31,208 
     Allocation to warrants  –  –  30,792  –  30,792 
Common stock issued for cash at $0.40 per share  668,750  –  –  –  – 
     Allocation to shares  –  7  256,879  –  256,886 
     Allocation to warrants  –  –  10,614  –  10,614 
Common stock issued for services at $0.40 per share  600,000  –  –  –  – 
     Allocation to shares  –  6  218,078  –  218,084 
     Allocation to warrants  –  –  21,917  –  21,917 
Common stock issued for cash upon exercise of         
   warrants at $0.50 per share  275,000  3  137,497  –  137,500 
Stock-based compensation    81,811  –  81,811 
Net loss for the period  –  –  –  (1,328,773)  (1,328,773) 
Balance – February 29, 2008  21,344,328  214  1,383,518  (1,359,367)  24,365 

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

F-4

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

1.     

Nature of Operations and Continuance of Business

 
 

The Company was incorporated in the state of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. The Company is a development stage company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7 “Accounting and Reporting by Development Stage Enterprises,” in the business of developing and providing energy alternatives.

 
 

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, has never generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As at February 29, 2008, the Company has accumulated losses of $1,359,367 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 
2.     

Summary of Significant Accounting Policies

 
  a)     

Basis of Presentation

 
   

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Mantra Energy Alternatives Ltd., incorporated in the state of Nevada on May 22, 2007. All significant intercompany balances and transactions have been eliminated. The Company’s fiscal year-end is May 31.

 
  b)     

Interim Financial Statements

 
   

The unaudited interim consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States for interim financial information and conforms with instructions to Form 10-QSB of Regulation S-B and reflects all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending May 31, 2008. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These unaudited interim consolidated financial statements and notes included herein should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended May 31, 2007. The accounting principles applied in the preparation of these interim consolidated financial statements are consistent with those applied for the year ended May 31, 2007.

 

F-5

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

2.     

Summary of Significant Accounting Policies (continued)

 
  c)     

Use of Estimates

 
   

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 
  d)     

Basic and Diluted Net Income (Loss) Per Share

 
   

The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. At February 29 2008, the Company had 2,598,750 dilutive potential shares outstanding.

 
  e)     

Comprehensive Loss

 
   

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at February 29, 2008, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

 
  f)     

Cash and Cash Equivalents

 
   

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

 
  g)     

Financial Instruments

 
   

The fair value of financial instruments, which include cash, accounts receivable, accounts payable, accrued liabilities and due to related parties, were estimated to approximate their carrying values due to the immediate or short-term maturities of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

 
  h)     

Income Taxes

 
   

The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

F-6

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

2.     

Summary of Significant Accounting Policies (continued)

 
  i)     

Foreign Currency Translation

 
   

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 “Foreign Currency Translation”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

 
  j)     

Stock-based Compensation

 
   

The Company has adopted the fair value recognition provisions of SFAS No. 123R “Share Based Payments”, using the modified retrospective transition method. The Company has not issued any stock options since its inception. Accordingly, there was no effect on the Company’s reported loss from operations, cash flows or loss per share as a result of SFAS No. 123R.

 
  k)     

Long-Lived Assets

 
   

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

 
   

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

 
  l)     

Intangible Assets

 
   

The costs of the Company’s intangible assets have been capitalized pursuant to FAS 141 “Business Combinations” and FAS 142 “Goodwill and Other Intangible Assets” as they have been developed to the point where technological feasibility has been proven. The Company will record amortization on its intangible assets upon receipt patent approval. If the Company fails to obtain the patents the costs will be expensed.

 
  m)     

Property and Equipment

 
   

Property & equipment is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of the related asset. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized.

 

F-7

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

2.     

Summary of Significant Accounting Policies (continued)

 
  n)     

Recently Issued Accounting Pronouncements

 
   

In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The Company is currently evaluating the impact of SFAS No. 161 on its financial statements, and the adoption of this statement is not expected to have a material effect on the Company’s financial statements.

 
   

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141R, “Business Combinations”. This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

 
   

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements Liabilities –an Amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the Noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

 
   

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for- sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

 
   

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

 

F-8

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

3. Intangible Assets

Intangible assets consists of costs incurred related to technology patent applications. On October 1, 2007, the Company entered into an agreement and paid $12,000 to acquire the exclusive right, for a period of twelve months commencing October 1, 2007, to negotiate and obtain and exclusive worldwide license to exploit an invention known as “A Novel System for Detection and Extraction of Useful Signals in Three-Phase Power Systems” (the “TPS Processor”). The inventors of the TPS Processor (who are represented by the University of Toronto) filed patent applications for the TPS Processor in the United States and Canada in 2005. Those patent applications are pending and no patent has yet been granted in respect of the TPS Processor. There is no guarantee that any such patent will be granted in whole or in part.

On November 2, 2007, the Company entered into a technology assignment agreement whereby the Company acquired all right and title in and to a certain invention for the electro-reduction of carbon dioxide subject to a patent cooperation treaty application in consideration for 40,000 shares of the Company’s common stock with a fair value of $0.25 per share and options to purchase 250,000 shares of the Company’s common stock with a fair value of $15,095.

4.     

Common Stock

 
  a)     

On January 23, 2007, the Company issued 30,000,000 shares of common stock to a company controlled the Company’s President, CEO and director at $0.00001 per share for cash proceeds of $300. On July 12, 2007, 15,000,000 of the shares of common stock were cancelled.

 
5.     

Stock Options

 
 

Options have been granted with an exercise price equal to the fair market value of our stock on the date of the grant and expire either, two years after grant or vesting or five years after grant, depending on the terms of the grant.

 
 

During the nine month period ended February 29, 2008, the Company granted 1,450,000 options which vest over a period of 4 months from grant and 50,000 options which vested immediately. All options granted during the period had an exercise price equal to the fair market value of our stock on the date of the grant.

 

The total fair value of the options vested during the nine months ended February 29, 2008, was $81,811 (2007 -$nil) and $66,716 included in the Statement of Operations for the nine months ended February 29, 2008 and the fair value of options associated with asset acquisition of $15,095 has been allocated to the asset.. At February 29 2008, the Company had no unrecognized compensation expense relating to unvested options.

A summary of the Company’s stock option activity is as follows: 

    Weighted  Weighted Average   
  Number of  Average  Remaining  Aggregate 
  Options  Exercise Price  Contractual Term  Intrinsic Value 
    $ (Months)    $ 
 Outstanding, May 31, 2007  –  –     
     Granted  1,500,000  0.27     
     Cancelled  (50,000)  0.08     
 Outstanding, February 29, 2008  1,450,000  0.27  26  – 
 Exercisable, February 29, 2008  1,450,000  0.27  26  – 

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:

F-9

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

5. Stock Options (continued)

The fair market value of stock-based compensation awards granted during the period under review was estimated using the Black-Scholes option pricing model with the following assumptions:

  Expected        Weighted Average 
  Life  Expected  Dividend  Risk Free  Grant Date 
Grant Date  (Months)  Volatility  Yield     Rate  Fair Value 
September 1, 2007             24  16%  0%  3.92%  $22,877 
October 5, 2007             24  16%  0%  4.01%  $14,770 
November 1, 2007             24  16%  0%  3.69%  $1,608 
November 1, 2007             60  17%  0%  3.93%  $15,095 
November 5, 2007             24  16%  0%  3.58%  $16,652 
November 15, 2007             24  17%  0%  3.20%  $8,284 
December 13, 2007             24  17%  0%  3.04%  $2,525 

As the Company has limited trading history, the S & P Small Cap Index was used to calculate volatility. The risk free interest rate is the rate currently available on zero-coupon U.S. government issues with a term equal to the expected life of the option. The dividend rate was 0% as the Company has not paid, and does not intend to pay any dividends. The expected life of the award is assumed to be equal to the full term of the award. The fair value of the Company’s common stock was $0.25 for 1,450,000 options and $0.40 for 50,000 options at the measurement date. The Company determined that the fair value of their common stock was equal to the value of the Company’s most recent issuance of common stock for cash.

Additional information regarding stock options as at February 29, 2008 is as follows:

Number of Options  Exercise Price  Expiry Date 
250,000  $0.25  August 30, 2009 
400,000  $0.25  October 4, 2009 
50,000  $0.25  October 31, 2009 
50,000  $0.40  November 4, 2009 
50,000  $0.40  November 14, 2009 
350,000  $0.25  December 31, 2009 
50,000  $0.40  December 13, 2009 
250,000  $0.25  October 31, 2012 
1,450,000     

A summary of the status of the Company’s nonvested shares as of February 29, 2008 and changes during the nine month period ended February 29, 2008, is presented below:

    Weighted-Average 
    Grant-Date 
  Number of  Fair Value 
  Shares  $ 
Nonvested at May 31, 2007  –  – 
   Granted  1,450,000  0.05 
   Vested  (1,450,000)  0.05 
Nonvested at February 29, 2008  –  – 

F-10

Mantra Venture Group Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)

6.     

Warrants

 
 

At February 29, 2008, 1,148,750 share purchase warrants were outstanding as follows:

 
Number of Warrants  Exercise Price  Expiry Date 
600,000  $0.40  August 12, 2008 
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 
1,148,750     

The fair value of the share purchase warrants issued during the period ending February 29, 2008, was in the amount of $63,323, which was determined using the Black-Scholes option model with the following assumptions:

          Weighted 
  Expected        Average 
  Life  Expected  Dividend  Risk Free  Grant Date 
Grant Date  (Months)  Volatility  Yield     Rate  Fair Value 
November 20, 2009  24             17%                 0%     3.10%  $0.26 
November 21, 2009  24             17%                 0%     2.99%  $0.26 
December 12, 2009  24             17%                 0%     3.04%  $0.47 
February 8, 2008  6             21%                 0%     1.88%  $0.39 

F-11

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

Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.

Business Overview and Uncertainties

We were incorporated as a Nevada company on January 22, 2007. Our principal office is located at 1205 – 207 West Hastings Street, Vancouver, British Columbia, Canada, V6B 1H7. Our telephone number is (604) 609 2898. Our fiscal year end is May 31. Our website is www.mantraenergy.com. On February 21, 2008 our homepage was available in Chinese to reflect our ongoing efforts to build ties with markets in Hong Kong and mainland of China. Our common stock is quoted on the OTC Bulletin Board under the symbol “MVTG.OB”. On February 18, 2008 our stock is eligible for trading on the Frankfurt Stock Exchange under the symbol “EDV 5MV”. The Frankfurt Stock Exchange is a stock exchange located in Frankfurt, Germany.

We are building a portfolio of companies and technologies that mitigate negative environmental and health consequences that arise from the production of energy and the consumption of resources. We have not yet acquired or developed a commercially exploitable technology. Our mission is to develop and commercialize alternative energy technologies and services to enable sustainable consumption, production and management of resources on residential, commercial and industrial scales.

We previously had five wholly owned subsidiaries, all of which were incorporated in the State of Nevada: Mantra Energy Alternatives Ltd., Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Media Corp., and Mantra Wind Inc. On February 29, 2008 we incorporated an additional wholly owned subsidiary in the State of Nevada, Mantra China Inc.

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Results of Operations for the Period From January 22, 2007 (Date of Inception) to February 29, 2008 and for the Three Months Ended February 29, 2008.

Lack of Revenues

We have had limited operational history since our inception on January 22, 2007. Since our inception on January 22, 2007 to February 29, 2008, we have not generated any revenues. As of February 29, 2008, we had total assets of $181,101 and total liabilities of $156,736. Since our inception to February 29, 2008, we have an accumulated deficit of $1,359,367. We anticipate that we will incur substantial losses over the next year and our ability to generate any revenues in the next 12 months continues to be uncertain.

Expenses

We accumulated total expenses of $1,359,367 from the date of our inception to February 29, 2008, including $34,523 in development costs, $11,324 in amortization expense, $517,565 in consulting fees, $53,956 in professional fees, $34,019 in rent and $707,980 in other general and administrative expenses.

For the three months ended February 29, 2008, we incurred total expenses of $723,380, including $11,761 in development costs, $4,726 in amortization, $364,016 in consulting fees, $27,053 in professional fees, $13,434 in rent and $302,390 in other general and administrative expenses. For the nine months ended February 29, 2008, we incurred total expenses of $1,328,773, including $34,523 in development costs, $10,001 in amortization, $514,408 in consulting fees, $43,360 in professional fees, $32,529 in rent and $693,952 in other general and administrative expenses.

Our other general and administrative expenses consist of bank charges, travel, meals and entertainment, foreign exchange, office maintenance, communication expenses (cellular, internet, fax, and telephone), courier, postage costs and office supplies. Our professional fees include legal, accounting and auditing fees. Our development costs are fees paid to our consultants, Fred Mandl and Shawn McQuaid, for development of our carbon calculator

Net Loss

Since our inception on January 22, 2007 to February 29, 2008, we have incurred net loss of $1,359,367. For the three months ended February 29, 2008, we incurred net loss of $723,380. For the nine months ended February 29, 2008, we incurred net loss of $1,328,773. Our net loss per share was $0.06 for the nine months ended February 29, 2008 and $0.03 for the three months ended February 29, 2008.

Liquidity and Capital Resources

At February 29, 2008 we had cash of $73,488 in our bank accounts and a working capital deficit of $67,133. Our net loss from January 22, 2007 to February 29, 2008 was $1,359,367. We are solely dependent on the funds raised through our equity or debt financing and our net loss was funded through equity financing.

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Since January 22, 2007 (date of inception) to present, we raised gross proceeds of $846,720 in cash from the sale of our securities as described in the following table.

Date of issuance     Type of security issued   Number of securities issued  Price per security ($)  Total funds received ($) 
January 2007  Common Shares    15,000,000 (1)  0.00001  300 
May 2007    Common Shares   1,750,000  0.02  35,000 
  Common Shares   10,000 (2)  -  For services 
July 2007    Common Shares   1,221,500  0.10  122,150 
  Common Shares   0 (3)  -  For services 
August 2007  Common Shares    1,102,000  0.25  275,500 
Common Shares   37,878  0.25  9,470 
September 2007  Common Shares   100,000  -  For services 
  Options  550,000  -  For services 
October 2007 Common Shares   259,200  0.25  64,800 
    Options  400,000  -  For services 
November 2007     Units  155,000  0.40  62,000 
Common Shares   40,000  -  technology 
  Options  500,000  -  For services 
December 2007   Common Shares   125,000  -  For services 
Units  568,750  0.40  227,500 
  Options  50,000    For services 
February 2008   Common Shares    275,000  0.50  Upon exercise of warrants 
  Units  600,000  0.40  For services 
  Units  100,000  0.40  40,000 
Total Common Shares    21,344,328    846,720 

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(1) On January 23, 2007, we issued 30,000,000 shares of our common stock to 0770987 BC Ltd., a company controlled by Larry Kristof, our President, CEO, CFO and director at $0.00001 per share for cash proceeds of $300. On July 12, 2007, 15,000,000 of the shares of our common stock issued to 0770987 BC Ltd. were cancelled.

(2) On May 28, 2007, we issued 20,000 shares of our common stock to an individual with a fair market value of $400 for consulting services. On September 7, 2007, the 10,000 shares of our common stock issued for consulting services were cancelled due to the cancellation of the consulting agreement.

(3) On July 6, 2007, we issued 25,000 shares of our common stock to an individual with a fair market value of $2,500 for consulting services. On September 7, 2007, the 25,000 shares of our common stock issued for consulting services were cancelled due to the cancellation of the consulting agreement.

For the nine months ended February 29, 2008, we used net cash of $64,529 in investing activities and we used net cash of $877,933 in operating activities. We also received net cash of $1,001,968 from financing activities. The increase in cash for the three months ended February 29, 2008 was $59,506 due to the sale of our common stock.

We expect to require approximately $4,005,000 in financing to acquire and develop technologies and launch the online carbon reduction marketplace over the next 12 months (beginning April 2008), as follows:

Description  Estimated expenses ($)  
Completion, full launch and development of an online carbon reduction marketplace  1,135,000 
Development and marketing of TPS Processor  1,000,000 
Development and marketing of ERC Technology and establishment of a research laboratory facility  500,000 
Development of the end-to-end energy services business  525,000 
Development of the promotional and marketing service business  225,000 
Preliminary development of Wind Farms  620,000 
Total  4,005,000 

5

Our other planned operational expenses for the next twelve months (beginning April 2008) are summarized as follows:

 Description  Target completion date or period   Estimated expenses ($)  
Completion of road shows  April 30, 2008  26,000 
Management and consulting fees (including expenses of the proposed Scientific Advisory Board) 12 months  700,000 
Raise additional private or public equity (legal, accounting and marketing fees)  September 30, 2008  176,000 
Legal and Professional Fees  12 months  140,500 
Travel and Promotional Expenses  12 months  230,000 
General and Administrative Expenses  12 months  129,500 
Total    1,402,000 

At present, our cash requirements for the next twelve months outweigh the funds available to maintain or develop our operations. Of the $5,407,000 that we need for the next 12 months, we had $73,488 in cash as of February 29, 2008. In order to fully carry out our business plan, we need additional financing of approximately $5,334,000 for the next 12 months. In order to improve our liquidity, we intend to pursue additional equity financing from private investors or possibly a registered public offering. We intend to negotiate with our management and consultants to pay parts of salaries and fees with stock and stock options instead of cash. There can be no assurance we will be successful in our efforts to secure additional equity financing. If we are unable to raise equity or obtain alternative financing, we may not be able to continue operations with respect to the continued development and marketing of our company and our subsidiaries and we may not be able to continue our operations and our business plan may fail. You may lose your entire investment.

If operations and cash flow improve through these efforts, management believes that we can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or an improvement in our liquidity situation. The threat of our ability to continue as a going concern will be removed only when revenues have reached a level that sustains our business operations.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Not applicable.

Item 4T. Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of February 29, 2008. Based on this evaluation, our management has concluded that our disclosure controls and procedures adequately ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The evaluation did not identify any change in our internal control over financial reporting that occurred during the fiscal year ended February 29, 2008 that has materially affected or is reasonably likely to materially affect our internal control over such reporting.

The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1)     

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

 
(2)     

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

 
(3)     

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, or use or disposition of the registrant's assets that could have a material effect on the financial statements.

 

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any legal proceedings which involve Mantra or any of its properties or subsidiaries.

Item 1A. Risk Factors.

Not applicable.

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

From September 1, 2007 to April 16, 2008, we made the following sales of unregistered securities:

  • On September 1, 2007 we issued options to purchase up to 550,000 common shares to seven consultants pursuant to consulting agreements for management or administrative services. Of the 550,000 options, 300,000 options vested on September 1, 2007 and will be exercisable at $0.25 per share until August 30, 2009 or upon the termination of consulting agreements, whatever occurs earlier. The remaining 250,000 options vested on January 1, 2008 and will be exercisable at $0.25 per share until December 31, 2009 or upon the termination of the applicable consulting agreements, whichever occurs earlier. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • In September 2007, we issued 37,878 shares of our common stock to one non US investor at $0.25 per share for cash proceeds of $9,470 and issued four consultants a total of 100,000 common shares with a fair market value of $0.25 per share for their consulting services. These shares were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • In October 2007 we issued 259,200 shares of our common stock to seven non US investors at $0.25 per share for cash proceeds of $64,800. These shares were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • On October 5, 2007, we issued six consultants options to purchase up to 400,000 common shares pursuant to consulting agreements for advisory services in relation to our corporate and scientific advisory boards. The 400,000 options are exercisable at $0.25 per share until October 4, 2009 or upon the termination of the applicable consulting agreements, whichever occurs earlier. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • On November 1, 2007 we issued 0798465 BC Ltd., a company owned by our consultant and scientific advisory board member, Colin Oloman, 40,000 common shares and options to purchase up to 250,000 according to a technology assignment agreement. The options will be exercisable at $0.25per share until October 31, 2012 or upon the rescission of the technologyassignment agreement, whatever occurs earlier. These securities wereissued without a prospectus pursuant to Regulation S of the Securities Act.

8

  • In November 2007 we issued to four consultants options to purchase up to 250,000 common shares pursuant to consulting agreements for technology, business and multi-media development services. The 250,000 options are exercisable at $0.25 or $0.40 per share within two years after the date of issuance of the options or upon the termination of the applicable consulting agreements, whichever occurs earlier. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • In November 2007 we issued eight non US investors and one US investor an aggregate of 155,000 units at $0.40 per unit for cash proceeds of $62,000.
    Each unit consists of one common share and one warrant to purchase onecommon share at $0.50 per share for two years from the date of issuance ofthe warrants. Of the 155,000 warrants, 103,750 were issued November 20,2007, 6,250 were issued on November 21, 2007 and 45,000 were issued onDecember 1, 2007. These securities were issued without a prospectuspursuant to Regulation S and Section 4(2) of the Securities Act.

  • On December 4, 2007 we issued 100,000 shares of our common stock to our stock transfer agent, Island Stock Transfer, for its services. On December 13, 2007 we issued Dominic Roy 25,000 shares of our common stock for his multi-media development consulting services. These securities were issued without a prospectus pursuant to Section 4(2) and Regulation S of the Securities Act.

  • In December 2007 we issued various non US investors and two US investors an aggregate of 68,750 units at $0.40 per unit for cash proceeds of $227,500. We also issued 100,000 units to Larry Kristof, our President and Chief Executive Officer, at $0.40 per unit for cash proceeds of $40,000. Each unit consists of one common share and one warrant to purchase one common share at $0.50 per share for two years from the date of issuance of the warrants. These securities were issued without a prospectus pursuant to Section 4(2) and Regulation S of the Securities Act.

  • In December 2007 we issued Dr. Anthony, a member of Scientific Advisory Board, options to purchase 50,000 common shares pursuant to a consulting agreement. The 50,000 options are exercisable at $0.40 per share within two years after the date of issuance of the options or upon the termination of the applicable consulting agreements, whichever occurs earlier. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • On February 12, 2008, we issued 600,000 units at $0.40 per unit to Metradon Ventures Limited pursuant to a consulting agreement for business development services. Each unit consists of one common share and one warrant to purchase one common share at $0.50 per share for six months from the date of issuance of the warrants. These securities were issued without a prospectus pursuant to Section 4(2) and Regulation S of theSecurities Act.

9

  • On February 13, 2008 we issued 275,000 common shares to Dan Funaro and Omni Enterprises Limited upon exercise of warrants at an exercise price of $0.50 per share for cash proceeds of $137,500. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • On February 13, 2008 we issued 275,000 common shares to Dan Funaro and Omni Enterprises Limited upon exercise of warrants at an exercise price of $0.50 per share for cash proceeds of $137,500. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

  • On February 28, 2008, we issued 100,000 units at $0.40 per unit to 0770987 BC Ltd., a company controlled by Larry Kristof, our President, CEO and director, for cash proceeds of $40,000. Each unit consists of one common share and one warrant to purchase one common share at $0.50 per share until February 28, 2010. These securities were issued without a prospectus pursuant to Regulation S of the Securities Act.

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

Our reliance upon the exemption under Section 4(2) of the Securities Act of 1933 was based on the fact that the issuance of these shares did not involve a “public offering.” The offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a "public offering." The investors negotiated the terms of the transactions directly with our executive officers. No general solicitation was used, no commission or other remuneration was paid in connection with these transactions, and no underwriter participated. Based on an analysis of the above factors, these transactions were effected in reliance on the exemption from registration provided in Section 4(2) of the Securities Act for transactions not involving any public offering.

Each investor was given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. No registration rights were granted to any of the purchasers.

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Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit    Description No.

10.1         Consulting Agreement Between Mantra Venture Group Ltd. and Metradon 10.1 Ventures Ltd. dated February 8, 2008 (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

(1) Included as exhibits on our Form 8-K filed on February 21, 2008.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  Mantra Venture Group Ltd. 
  (Registrant) 
 
 

/s/ Larry Kristof

Date: April 21, 2008

Larry Kristof
President, Chief Executive Officer Director

/s/ David Warren

Date: April 21, 2008

David Warren Chief Financial Officer
Principal Accounting Officer


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