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

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended February 28, 2015

or

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

For the Transition Period from ________to _________

Commission file number: 000-53461

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

#562 – 800 15355 24^th Avenue
Surrey, British Columbia, Canada V4A 2H9
(Address of principal executive offices) (zip code)

(604) 560-1503
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  [ X ]  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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

As of April 20, 2015, there were 71,377,692 shares of registrant’s common stock outstanding.

MANTRA VENTURE GROUP LTD.

INDEX

PART I – FINANCIAL INFORMATION

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

MANTRA VENTURE GROUP LTD.
Consolidated balance sheets
(Expressed in U.S. dollars)

MANTRA VENTURE GROUP LTD.
Consolidated statements of operations
(Expressed in U.S. dollars)
(unaudited)

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

MANTRA VENTURE GROUP LTD.
Consolidated statements of cash flows
(Expressed in U.S. dollars)
(unaudited)

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

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

Mantra Venture Group Ltd. (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. On December 8, 2008, the Company continued its corporate jurisdiction out of the State of Nevada and into the province of British Columbia, Canada. The Company is in the business of developing and providing energy alternatives. The Company also provides marketing and graphic design services to help companies optimize their environmental awareness presence through the eyes of government, industry and the general public.

The accompanying unaudited consolidated interim financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

These unaudited consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, and is unlikely to 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. At February 28, 2015, the Company has accumulated losses of $11,012,752. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated 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.

Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. There can be no certainty that these sources will provide the additional funds required for the next twelve months.

These unaudited consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Energy Alternatives Ltd., Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., and Mantra Wind Inc. All the subsidiaries are wholly-owned with the exception of Climate ESCO Ltd., which is 65% owned and Mantra Energy Alternatives Ltd., which is 89% owned. All inter-company balances and transactions have been eliminated.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments consist principally of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of “Level 3” during the nine months ended February 28, 2015 and 2014. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 10 for additional information.

The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As at February 28, 2015 and 2014, the Company had a $160,370 and $Nil derivative liability, respectively.

Restricted cash represents cash pledged as security for the Company’s credit cards.

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

Estimated Future Amortization Expense:

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

On each of July 31, 2012 and December 21, 2012, the Company entered an agreement to lease a vehicle for three years each. The vehicle leases are classified as a capital leases. The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of February 28, 2015:

At the end of both leases, the Company has the option to purchase the vehicles for $9,000 each.

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

The embedded conversion option of the convertible debenture described in Note 9(g) contains a conversion feature that qualifies for embedded derivative classification. The fair value of the liability will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

Upon the issuance of the convertible note payable described in Note 9(g), the Company concluded that it only has sufficient shares to satisfy the conversion of some, but not all, of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election would qualify for treatment as derivative liabilities. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities:

The following table summarizes the change in fair value of derivatives:

The Company uses Level 2 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

Stock transactions during the nine months ended February 28, 2015:

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

The following table summarizes the continuity of share purchase warrants:

As at February 28, 2015, the following share purchase warrants were outstanding:

On June 1, 2014, the Company granted 150,000 stock options exercisable at $0.02 per share for a period of two years to a director. The Company recorded the fair value of the options of $94,600 as research and development fees.

On July 17, 2014, the Company granted 200,000 stock options exercisable at $0.30 per share for a period of two years to two consultants. The options vest 25% every six months following the date of grant. The Company recorded the fair value of the vested portion of the options of $16,900 as consulting fees.

On August 1, 2014, the Company granted 100,000 stock options each to two consultants. The options are exercisable at $0.10 per share for a period of two years. The Company recorded the fair value of the options of $88,900 as consulting fees.

On November 1, 2014, the Company granted 100,000 stock options each to two employees. The options are exercisable at $0.20 per share for a period of two years. The Company recorded the fair value of the options of $55,600 as consulting fees.

On December 9, 2014, the Company granted 200,000 stock options exercisable at $0.20 per share for a period of two years to a director. The options vest 25% on the date of grant and 25% every four months following the date of grant. The Company recorded the fair value of the vested portion of the options of $25,695 as management fees.

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

The following table summarizes the continuity of the Company’s stock options:

A summary of the changes of the Company’s non-vested stock options is presented below:

As at February 28, 2015, there was $30,255 of unrecognized compensation cost related to non-vested stock option agreements. This cost is expected to be recognized over a weighted average period of 1.08 years.

Additional information regarding stock options as of February 28, 2015 is as follows:

The fair values for stock options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

During the nine month period ended February 28, 2015, the Company recorded stock-based compensation of $281,695 (2014 - $38,200) for stock options granted.

The weighted average fair value of the stock options granted for the nine month period ended February 28, 2015, was $0.42 (2014 - $0.13) per option.

MANTRA VENTURE GROUP LTD.
Notes to the consolidated financial statements
February 28, 2015
(Expressed in U.S. dollars)
(unaudited)

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.

Our unaudited consolidated financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Mantra Venture Group Ltd. and our wholly owned subsidiaries Carbon Commodity Corporation, Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., and Mantra Wind Inc., as well as our majority owned subsidiary Climate ESCO Ltd. and Mantra Energy Alternatives Ltd., unless otherwise indicated.

Business Overview

We were incorporated in Nevada on January 22, 2007. On December 8, 2008 we continued our corporate jurisdiction out of the state of Nevada and into the Province of British Columbia, Canada. Our principal offices are located at 1562 128th Street, Surrey, British Columbia, V4A 3T7 Our Lab space is located at #202 3590 W41st Avenue, Vancouver, British Columbia V6N 3E6. Our telephone number is (604) 560-1503. Our fiscal year end is May 31.

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.

Our mission is to develop and commercialize alternative energy technologies and services to enable the sustainable consumption, production and management of resources on residential, commercial and industrial scales. We plan to develop or acquire technologies and services which include electrical power system monitoring technology, wind farm electricity generation, online retail of environmental sustainability solutions through a carbon reduction marketplace, and media solutions to promote awareness of corporate actions that support the environment. To carry out our business strategy we intend to acquire or license from third parties technologies that require further development before they can be brought to market. We also intend to develop such technologies ourselves, and we anticipate that to complete commercialization of some technologies we will enter into joint ventures, partnerships, or other strategic relationships with third parties who have expertise that we may require. We also plan to enter into formal relationships with consultants, contractors, retailers and manufacturers who specialize in the areas of environmental sustainability in order to carry out our online retail strategy.

We own a technology for the electro-reduction of carbon dioxide and have the exclusive global license for a mixed-reactant fuel cell. Since our inception, we have incurred operational losses and we have completed several rounds of financing to fund our operations.

We carry on our business through our subsidiary, Mantra Energy Alternatives Ltd. (“MEA”), through which we identify, acquire, develop and market technologies related to alternative energy production, greenhouse gas emissions reduction and resource consumption reduction.

We also have a number of inactive subsidiaries which we plan to engage in various business activities in the future.

Collaboration with Alstom (Switzerland) Ltd.

On June 24, 2013, MEA entered into an agreement with Alstom (Switzerland) Ltd. concerning the joint research and development projects relating to (1) a pilot plant for the conversion of carbon dioxide to formate at a Lafarge cement plant (the “Lafarge pilot project”); and (2) the development of processes for the conversion of carbon dioxide to other valuable chemicals.

Pursuant to the agreement with Alstom, MEA and Alstom will co-operate in one or more research and development projects related to MEA’s ERC technology. Prospective projects will be associated with the development of technologies and processes for the conversion of CO₂ to chemical products and the investigation of the feasibility of scale-up and commercialization of these processes. Prior to undertaking any research and development project under the agreement, MEA and Alstom will mutually agree to special terms and conditions governing the purpose, aims and objectives of any such project, including technical descriptions, the designation of work phases and project managers, and the allocation of responsibilities and costs between the parties. The commencement of any work phase for any project will be at the sole discretion of Alstom.

Lafarge Pilot Project and Carbon Dioxide to Alternative Products

The agreement with Alstom will remain valid for the later of five years or the completion of the last active project, and may be extended at any time by the written agreement of both parties. The first joint research and development project under the agreement is the Lafarge pilot project, which plans for the design, construction, and installation of a pilot plant for the conversion of 100 kg/day carbon dioxide to formate, followed by a commercialization scale-up study. Alstom’s contribution to the Lafarge pilot plant project will be approximately Cdn$250,000 for in-kind services. A second integrated research and development project will study carbon dioxide conversion to alternative chemical products by electrochemical reduction, with a focus on catalyst materials and lifetime. Alstom has contributed approximately $430,750 for Phases 1 and 2 of the alternative products project, and has committed to $180,375 for Phase 3. Alstom's planned, but not committed, contribution is estimated at $35,375 for Phase 4, and the final amount for Phase 5 is yet to be determined. Mantra and Alstom are actively seeking external funding to support the execution of the projects.

Electro Reduction of Carbon Dioxide (“ERC”)

On November 2, 2007, MEA entered into a technology assignment agreement with 0798465 BC Ltd. whereby we acquired 100% ownership in and to a certain chemical process for the electro-reduction of carbon dioxide as embodied by and described in the following patent cooperation treaty application:

As of the date of this quarterly report, we have been awarded the following patents:

The reactor at the core of the chemical process, referred to as the electrochemical reduction of carbon dioxide (CO₂), or ERC, has been proven functional through small scale prototype trials. ERC offers a possible solution to reduce the impact of CO₂ on Earth’s environment by converting CO₂ of fuel cells. Powered by electricity, the ERC process combines captured carbon dioxide with water to produce materials, such as formic acid, formate salts, oxalic acid and methanol, that are conventionally obtained from the thermo-chemical processing of fossil fuels. However, while thermo-chemical reactions must be driven at relatively high temperatures that are normally obtained by burning fossil fuels, ERC operates at near ambient conditions and is driven by electric energy that can be taken from an electric power grid supplied by hydro, wind, solar or nuclear energy. into chemicals with a broad range of commercial applications, including a fuel for a next generation

In fuel cells, liquid fuels are indirectly burned with air to form carbon dioxide and water, while generating electricity. This process is known as electrochemical combustion or electro-oxidation. The complementary nature of ERC and electro-oxidation makes it possible to use ERC in a regenerative fuel cell cycle, where carbon dioxide is converted to a fuel that is consumed in a fuel cell to regenerate carbon dioxide. As shown in the figure, the net energy input required in this cycle could be supplied from a renewable or non-fossil fuel source.

ERC has been shown to produce a range of compounds, including formic acid, formate salts, oxalic acid, and methanol. The efficiency for generation of each compound depends on the experimental conditions, most importantly the material of the cathode, which catalyzes the electrochemical reactions.

Until appropriate cathodes are found, some products of CO₂ reduction (methanol, for instance) are obtained at efficiencies too low for practical use. Other products can be generated on known cathodes with high current yields that could support valuable practical processes. For example, formic acid has been obtained on tin cathodes with current yields above 80%. Formate salts and sodium bicarbonate are obtained at similarly high yields.

ERC Development to Date

Since the technology was acquired in 2008, ERC has been developed in several contracted laboratories, including Kemetco Research Inc., Powertech Labs Inc., and Tekion (Canada) Inc. In early 2013, Mantra established its own internal research and development labs and has since built a team of five Ph.D. engineers and four technical support staff to carry out the technology development.

Having improved the product selectivity, energy efficiency, and overall economics of the ERC process at the bench scale, Mantra is currently in the process of designing a pilot plant for the conversion of 100 kg/day of CO₂ from industrial emissions into formic acid and formate salts. This plant will be installed at the site of the Lafarge cement plant in Richmond, British Columbia. It will serve as a technical and economical validation of the industrial process, and will be followed by the development of the first large-scale pre-commercial plant, which will likely be on the scale of converting 10 tonnes/day of CO₂.

We anticipate that commercialization of ERC will require us to develop reactors capable of processing not less than 100 tons of CO₂ per day; however, there is no guarantee that we will successfully produce reactors of that size. Production of commercially viable ERC reactors will depend on continued research and development, successful testing of pilot-scale ERC reactors, and securing of additional financing.

Applications for Formic Acid and Formate Salts

Formic acid and formate salts have a variety of applications in industry. Formic acid’s uses include in animal feed preservation, leather tanning, textiles production, and industrial cleaning and de-scaling. Formate salts are used as environmentally benign de-icing agents, in oil well drilling, and as heat exchange fluids. Because these chemicals are conventionally produced from natural gas, their displacement with ERC-derived formic acid/formate salts will eliminate CO₂ emissions associated with their production and degradation.

Established and Emerging Market for ERC and By-Products:

The technology behind ERC can be applied to any scale commercial venture that outputs CO₂ into the atmosphere. We anticipate that, once fully commercialized, we will be able to offer ERC as a CO₂ management system to various industries, including steel, power generation and lumber.

The ERC products formic acid and its salts (such as potassium formate) have a market value of greater than $1,000 per pure tonne in North American and European markets, and existing applications include feedstock preservatives, de-icing solutions, and heat transfer fluids, among others. Approximately 720,000 tonnes of formic acid were produced in 2009. The market for formic acid has experienced continual growth and demand over the past several years, mainly attributed to European and developing country demand for formic acid in silage, rising raw materials, energy and logistics costs, as well as animal feed preservative and Asian demand for formic acid in leather, rubber, food and pharmaceutical industries.

However, if the ERC process reaches market acceptance as a way to deal with CO₂ emissions from industry facilities, it will likely lead to supply of formic acid in excess of current market demand. We have identified several potential future applications for formic acid, which may lead to an expansion in current market demand. The application we have identified and are currently focusing on is steel pickling.

Results of Operations for the Three Month Periods Ended February 28, 2015 and February 28, 2014.

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the quarters ended February 28, 2015 and 2014, which are included herein.

Our operating results for three month periods ended February 28, 2015 and 2014 are summarized as follows:

Revenues

For the three months ended February 28, 2015, we generated $39,116 in revenue compared to revenue of $16,858 generated during the same period in 2014. This is a result of new projects during the three months ended February 28, 2015, compared to the three months ended February 28, 2014.

Expenses

Our operating expenses for the three month periods ended February 28, 2015 and February 28, 2014 are summarized as follows:

For the three months ended February 28, 2015, we incurred total operating expenses of $397,637, compared to total operating expenses for the three months ended February 28, 2014 of $218,553. The $179,084 increase in operating expense during 2014 is primarily due to an increase of $110,842 of expenses for consulting and advisory services as a result of our launching the detailed engineering phase of the Lafarge pilot project, along with a $31,393 increase in management fees expenses due to hiring additional employees for the execution of Phase 2 of the alternative products project and a $21,100 increase in travel and promotion expenses related to attendance at various trade shows in Europe, which was partially offset by a $36,722 decrease in research and development as we have more operations and less research.

Net Loss

For the three months ended February 28, 2015, we incurred a net loss of $430,715, compared to a net loss of $215,291 for the same period in 2014.

Results of Operations for the Nine Month Periods Ended February 28, 2015 and February 28, 2014.

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the nine month period ended February 28, 2015 and 2014, which are included herein.

Our operating results for the nine month periods ended February 28, 2015 and February 28, 2014 are summarized as follows:

Revenues

For the nine months ended February 28, 2015, we generated $116,912 in revenue compared to revenue of $165,262 generated during the same period in 2014. We completed the previous phase of our current project in September 2014. We did not start the next phase of the project until the beginning of January 2015. As a result of this downtime, revenue decreased during the nine months ended February 28, 2015, compared to the nine months ended February 28, 2014.

Expenses

Our operating expenses for the nine month periods ended February 28, 2015 and February 28, 2014 are summarized as follows:

For the nine months ended February 28, 2015, we incurred total operating expenses of $1,764,744, compared to total operating expenses for the nine months ended February 28, 2014 of $823,917. The $940,827 increase in operating expense is primarily due to a $388,084 increase in research and development expenses as a result of having hired additional employees performing research and development to accelerate the commercialization of our two technologies, an increase of $273,482 related to consulting and advisory services as a result of our launching the detailed engineering phase of the Lafarge pilot project, an $103,909 increase in travel and promotion expenses related to proposed projects in Europe and grant proposals, an increase of $54,444 in management fees as a result of recording $25,695 of stock-based compensation relating to a grant of stock options to a director and an increase in management fees paid to the President, and an increase of $54,190 in general and administrative expenses due to hiring of additional administrative staff. Labor costs are allocated based on the services provided by the employee. Employees performing research and development are classified as research and development costs, employees performing administrative functions are charged to general and administrative expense and salaries to management performing management services are classified as management fees.

Net Loss

For the nine months ended February 28, 2015, we incurred a net loss of $1,758,065, compared to a net loss of $711,146 for the same period in 2014.

Liquidity and Capital Resources

Working Capital

Cash Flows

As of February 28, 2015, we had $67,735 cash in our bank accounts and a working capital deficit of $(895,544). As of February 28, 2015, we had total assets of $494,059 and total liabilities of $1,212,181.

We received net cash of $306,235 from financing activities for the nine months ended February, 2015, compared to $420,264 for the same period in 2014. During the nine months ended February 28, 2015, we raised $253,787 in cash from the issuance of our common stock and share subscriptions received and $125,000 from the issuance of convertible debentures, offset by repayment of loans payable of $54,809, payment of financing costs of $9,500 and repayment of capital lease obligations of $8,243.

We expect that our total expenses will increase over the next year as we increase our business operations. We have not been able to reach the break-even point since our inception and have had to rely on outside capital resources. We do not anticipate achieving significant revenues for the next year. Over the next 12 months, contingent upon raising the necessary funds, for which we do not currently have any commitments for, we plan to primarily concentrate on commercializing our ERC technology and associated projects.

In order to fully carry out our business plan, we need additional financing of approximately $4,300,000 for the next 12 months. Of this amount, we have prepaid some of the research and development expenses and we will receive reimbursement for certain wages and benefits from various grants, which offset the total expenses for these categories. In order to improve our liquidity, we intend to pursue additional equity financing from private placement sales of our equity securities or shareholders’ loans. We do not presently have sufficient financing to undertake our planned business activities. Issuances of additional shares will result in dilution to our existing shareholders.

We currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

Settlement Agreement

On July 18, 2012, we entered into a settlement agreement with the holder of a $150,000 debenture holder, pursuant to which the holder agreed to extend the due date until April 11, 2013 and we paid $43,890 of accrued interest, agreed to pay the accruing interest on a monthly basis, and pay a $10,000 premium in addition to the $150,000 principal outstanding on April 11, 2013.On April 29, 2013, we entered into an amended settlement agreement whereby the holder agreed to extend the due date to September 15, 2013 and we paid $6,836 of interest for the period from April 1 to September 15, 2013 and issued the holder 100,000 stock options exercisable at $0.12 per share for a period of two years.

On November 15, 2013, we entered into a second settlement agreement amendment, pursuant to which we paid interest of $4,438 and agreed that commencing on February 1, 2014, we would make monthly payments of $10,000 on the outstanding principal and interest. During the nine months ended February 28, 2015, the Company repaid $54,808, decreasing the carrying value to $59,853.

Off-Balance Sheet Arrangements

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

Inflation

The effect of inflation on our revenue and operating results has not been significant.

Critical Accounting Policies

Our consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in note 2 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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. Our company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, stock-based compensation, and deferred income tax asset valuation allowances. Our 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 our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Stock-based Compensation

Our company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Our company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by our company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to our company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

Technology Development Revenue

Our company performs research and development services. Our company recognizes revenue under research contracts when a contract has been executed, the contract price is fixed and determinable, delivery of services or products has occurred, and collectability of the contract price is considered reasonably assured and can be reasonably estimated. Revenue is based on direct labor hours expended at contract billing rates plus other billable direct costs.

Recent Accounting Pronouncements

Our company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Not required under Regulation S-K for “smaller reporting companies.”

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, as of February 28, 2015, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

We are committed to improving our financial organization. In addition, we will look to increase our personnel resources and technical accounting expertise within the accounting function to resolve non-routine or complex accounting matters. In addition, when funds are available, we will take the following action to enhance our internal controls: Hiring additional knowledgeable personnel with technical accounting expertise to further support our current accounting personnel, which management estimates will cost approximately $100,000 per annum. As our operations are relatively small and we continue to have net cash losses each quarter, we do not anticipate being able to hire additional internal personnel until such time as our operations are profitable on a cash basis or until our operations are large enough to justify the hiring of additional accounting personnel. We currently engage an outside accounting firm to assist us in the preparation of our consolidated financial statements and anticipate doing so until we have a sufficient number of internal accounting personnel to achieve compliance. As necessary, we will engage consultants in the future in order to ensure proper accounting for our consolidated financial statements.

Due to the fact that our internal accounting staff consists solely of a Chief Executive Officer, who functions as our Principal Accounting Officer, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turn over issues within the department occur. We believe this will greatly decrease any control and procedure issues we may encounter in the future.

During the quarter ended February 28, 2015, we appointed another independent director to our board of directors and implemented written policies that require all invoices and outgoing payments to be reviewed and approved by two executive officers. There were no other changes in our internal control over financial reporting that occurred during the quarter ended February 28, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

We are currently not a party to any material legal proceedings or claims.

Not required under Regulation S-K for “smaller reporting companies.”

During the quarter ended February 28, 2015, we sold an aggregate of 500,000 shares of common stock to 10 investors for aggregate gross proceeds of $100,000.

* All of the above offerings and sales were deemed to be exempt under either rule 506 of Regulation D and Section 4(a)(2) or Rule 902 of Regulation S of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of Mantra Venture Group or executive officers of Mantra Venture Group, and transfer was restricted by Mantra Venture Group in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Except as expressly set forth above, the individuals and entities to whom we issued securities as indicated in this section are unaffiliated with us.

None.

None.

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.