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The following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.
Forward-Looking Statements
This Prospectus contains certain forward-looking statements. All statements other than statements of historical fact are "forward-looking statements" for the purposes of these provisions, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties and actual results could differ materially from those anticipated by the forward-looking statements.
Results of Operations
Our results of operations are summarized below:
Period from Year Ended Period from |
dilution) (0.10) (0.00)
Lack of Revenues
We have had limited operational history since our inception on January 22, 2007. Since our inception to May 31, 2008 we have not generated any revenues. As of May 31, 2008 we had total assets of $144,124 and total liabilities of $238,617. Since our inception to May 31, 2008 we accumulated a deficit of $2,046,612. As of May 31, 2007 we had total assets of $27,146 and total liabilities of $22,240. 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
For the year ended May 31, 2008, we have total expenses of $2,046,612, including $200,653 in development costs, $19,896 in amortization, $340,185 in consulting and advisory fees, $192,255 in professional fees, $259,967 in management fees, $197,559 in travel, meals and entertainment, and $230,848 in other general and administrative expenses.
By comparison, for the year ended May 31, 2007, we had total expenses of $30,594, including $1,323 in amortization, $2,958 in consulting and advisory fees, $13,554 in professional fees, $12,759 in other general and administrative expenses.
The main reason for the increase in expenses is due to the significant increase in the activity of the company in the following areas - researching, reviewing and performing due diligence on potential projects, getting the company listed for trading, investor awareness and communication, development of website and the corporate identity, financing related expenditures, research and development of technologies and patents, maintaining the public company listing, continuous disclosure, regulatory reporting in both the U.S. and Canada, consulting and advisory fees, general administration and management fees paid to the CEO and CFO.
The prior year consisted of approximately four months of administrative and planning activity relating to initial set up of the company, incorporation costs, engaging legal counsel and auditor, initial recruiting of consultants and advisory board members as well as contractors for all aspects of the business.
Since our inception on January 22, 2007 to May 31, 2008, we accumulated total expenses of $2,046,612, including $200,653 in development costs, $21,219 in amortization, $342,143 in consulting and advisory fees, $192,255 in professional fees, $211,113 in travel, meals and entertainment relating primarily to investor awareness and financing activities, $259,967 in management fees and $243,607 in general and administrative expenses.
Our general and administrative expenses consist of office occupation expenses, communication expenses (cellular, internet, fax and telephone), bank charges, foreign exchange, courier, postage costs and office supplies. Our professional fees include legal, accounting and auditing fees. Our Website development/Corporate branding costs include fees paid and options granted to contractors for the development of our website and the online carbon calculator, as well as development of the corporate identity including graphics design for advertising, brochures and other related material. Business development, consulting and advisory costs include fees paid, shares issued and options granted to contractors and advisory board members. A significant portion relates to fees paid in the form of shares for the development of business in China and Hong Kong. As a result of these expenditures, the Company has identified several promising "green technology" joint ventures in Asia, including an exclusive distributorship arrangement for industrial lighting products with a Hong Kong company.
Net Loss
Since our inception on January 22, 2007 to May 31, 2008, we incurred net loss of $2,046,612. For the year ended May 31, 2008, we incurred net loss of $2,016,018. For the period from January 22, 2007 (Date of Inception) to May 31, 2007, we incurred a net loss of $30,594. Our net loss per share was $0.10 for the year ended May 31, 2008 and $0.001 for the period from January 22, 2007 (Date of Inception) to May 31, 2007.
Liquidity and Capital Resources
As of May 31, 2008 we had cash of $26,201 and a working capital deficit of $192,990. Since our inception on January 22, 2007 to May 31, 2008, our accumulated net loss was $2,046,612. We are solely dependent on the funds raised through our equity or debt financing and our net loss was funded through equity financing.
Since our inception on January 22, 2007 to May 31, 2008, we have raised gross proceeds of $1,198,920 in cash from the sale of our securities and the exercise of warrants.
Since our inception on January 22, 2007 to May 31, 2008 we used net cash of $69,901 in investing activities and $1,151,564 in operating activities. We also received net cash of $1,234,220 from financing activities.
In April 2008 we signed a letter of intent with Northwind Ethanol Inc. for a possible multi-stage investment in Northwind's cellulose ethanol process. We are now conducting due diligence of Northwind's proprietary technology, which is intended to support a closed-loop cellulose ethanol production facility with zero emissions. We estimate that we will require approximately $100,000 in financing to acquire Northwind's proprietary technology.
We expect to require approximately $3,470,000 in financing to acquire and develop technologies and launch the online carbon reduction marketplace over the next 12 months (beginning September 1, 2008), as follows:
Description Estimated expenses |
Our other planned operational expenses for the next twelve months (beginning September 1, 2008) are summarized as follows:
Target completion Estimated expenses |
At present, our cash requirements for the next 12 months outweigh the funds available to maintain or develop our operations. Of the $4,872,000 that we require for the next 12 months, we had $26,201 in cash as of May 31, 2008. In order to fully carry out our business plan, we therefore need additional financing for the next 12 months of approximately $4,846,000 In order to improve our liquidity, we intend to pursue additional equity financing from private investors or possibly a registered public offering. We tend 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 and our subsidiaries may not be able to continue operations or effectively develop and market our products and services. Our business plan may fail and you may lose your entire investment.
If our operations and cash flow improve through these efforts, our management believes that we can continue to operate. However, no assurance can be given that our management's actions will result in profitable operations or improve our liquidity. The threat that we will be unable 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 our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
Inflation
The effect of inflation on our revenue and operating results has not been significant.
Critical Accounting Policies
Our 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.
Foreign Currency Translation
Our 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. We have not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Stock-Based Compensation
We have adopted the fair value recognition provisions of SFAS No. 123R "Share Based Payments" using the modified retrospective transition method. We did not issue any stock options since our inception to May 31, 2007. Accordingly, there was no effect on our reported loss from operations, cash flows or loss per share as a result of SFAS No. 123R. As of September 10, 2008 we had outstanding options to purchase 1,700,000 common shares which were granted to our consultants for their consulting services.
As we have a limited trading history, we have used the S&P Small Cap Index to calculate the volatility of our common stock. The assumptions we relied upon in our calculations are as follows: the risk-free interest rate, which 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, which was 0% as we have not paid, and do not intend to pay any dividends; the expected life of the award, which is assumed to be equal to the full term of the award as we had not previously granted options; and the fair value of our common stock, which was $0.25 at the measurement date. We determined that the fair value of our common stock was equal to the value of our most recent issuance of common stock for cash.
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Report of Independent Registered Public Accounting Firm
To the Shareholders, Audit Committee and Board of Directors Mantra Venture Group, Ltd and Subsidiary
(A Development Stage Company)
Vancouver, British Columbia
We have audited the accompanying consolidated balance sheets of Mantra Venture Group, Ltd and Subsidiary's as of May 31, 2008, and the related consolidated statements of operations, stockholders' deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of Mantra Venture Group, Ltd and Subsidiary's as of May 31, 2007 and from the period of inception (January 22, 2007) to May 31, 2007 and from the period of inception (January 22, 2007) to May 31, 2007 were audited by other auditors whose report dated September 20, 2007 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mantra Venture Group, Ltd and Subsidiary as of May 31, 2008 and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 10 to the consolidated financial statements, the Company has suffered recurring losses from operations,a net stockholders' deficit, and a working capital deficit. The factors raise substantial doubt that the Company wllwill be able to continue as a going concern. The consolidated financial statements do not include any adjustments that might reflect these uncertainties.
/s/McElravy, Kinchen & Associates, P.C.
Houston, Texas
September 15, 2008
F-1
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Mantra Venture Group Ltd.
(a development stage company)
Vancouver, BC, Canada
We have audited the accompanying consolidated balance sheet of Mantra Venture Group Ltd., a Nevada corporation, as of May 31, 2007, and the related consolidated statements of operations, stockholders' equity and cash flows for the period from January 22, 2007 (inception) to May 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mantra Venture Group Ltd. (a development stage company) as of May 31, 2007, and the results of its operations and its cash flows for the period from January 22, 2007 (inception) to May 31, 2007 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the exploration stage, has not yet achieved profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations. These factors, along with other matters set forth in Note 2, raise substantial doubt that the Company will be able to continue as a going concern. Management's plan to address these matters is disclosed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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JORGENSEN & CO. |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
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The accompanying notes are an integral part of these consolidated financial statements.
F-4
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