HIGH WIRE NETWORKS, INC. - Quarter Report: 2008 August (Form 10-Q)
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 August
31, 2008
o 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. Yes o No
þ
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 o Accelerated
filer o
Non-accelerated filer o 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 o No þ
APPLICABLE
ONLY TO CORPORATE ISSUERS
As of October 9, 2008, the
registrant had 26,002,161
shares of common stock outstanding.
2
PART
I - FINANCIAL INFORMATION
Mantra
Venture Group Ltd. And Consolidated Subsidiaries
(A
Development Stage Company)
Consolidated
Balance Sheets
As
of August 31, 2008 and May 31, 2008
(Unaudited)
|
August
31, 2008
|
May
31, 2008
|
|
|
(Unaudited)
|
||
|
ASSETS
|
||
|
Current
Assets
|
||
|
Cash
|
$ 932
|
$ 26,201
|
|
Taxes
receivable
|
25,063
|
18,418
|
|
Security
deposit and prepaid expenses
|
2,003
|
1,008
|
|
Total Current Assets
|
27,998
|
45,627
|
|
Intangible
Assets
|
42,815
|
42,815
|
|
Property and
Equipment –net of accumulated depreciation of$19,174 and
$14,219 as of August 31, 2008 and 2007, respectively
May 31, 2008,
respectively
|
79,046
|
55,682
|
|
Total
Assets
|
$149,859
|
$144,124
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable and accrued liabilities
|
$ 157,769
|
$ 135,309
|
|
Accounts
payable-related party (Note 3)
|
19,500
|
49,750
|
|
Due to
related party
|
54,350
|
53,558
|
|
Total
Liabilities
|
231,619
|
238,617
|
|
Contingency
and Commitments (Note 6)
|
|
|
|
Stockholders’
Equity (Deficit)
|
|
|
|
Preferred
Stock
Authorized: 20,000,000
shares, par value $0.00001
Issued: no
shares
|
–
|
–
|
|
Common Stock
(Note 7)
Authorized: 100,000,000 shares, par
value $0.00001
Issued and outstanding: 26,002,661 and
23,452,661 shares as of August
31, 2008 and May 31, 2008, respectively
|
261
|
235
|
|
Additional
Paid-In Capital
|
2,367,223
|
1,951,884
|
|
Accumulated
Other Comprehensive Income
|
7,120
|
-
|
|
Deficit
Accumulated During the Development Stage
|
(2,456,364)
|
(2,046,612)
|
|
Total
Stockholders’ Equity (Deficit)
|
(81,760)
|
(94,493)
|
|
Total
Liabilities and Stockholders’ Equity (Deficit)
|
$ 149,859
|
$ 144,124
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-1
Mantra
Venture Group Ltd. And Consolidated Subsidiaries
(A
Development Stage Company)
Consolidated
Statements of Operations
For
the Three Month Periods Ended August 31, 2008 and 2007,
And
the Period from January 22, 2007 (Inception) Through August 31,
2008
(Unaudited)
|
For
the Three Months Ended
August
31,
|
January
22, 2007 (Inception)
to
August
31,
|
||
|
2008
|
2007
|
2008
|
|
|
Revenue
|
$ 8,000
|
$ –
|
$ 8,000
|
|
Operating
Expenses
|
|
||
|
Depreciation
and amortization
|
4,955
|
1,600
|
26,174
|
|
Business
development
|
1,449
|
–
|
202,102
|
|
Consulting
and advisory
|
23,773
|
36,497
|
366,916
|
|
Management
fees
|
94,033
|
–
|
354,000
|
|
General and
administrative
|
42,639
|
194,175
|
286,246
|
|
Research and
development
|
19,624
|
–
|
102,052
|
|
Shareholder
communication, awareness, financing
|
104,491
|
–
|
288,403
|
|
Professional
fees
|
91,363
|
16,000
|
283,618
|
|
Salary
expenses
|
23,235
|
–
|
23,235
|
|
Travel meals
and entertainment
|
5,221
|
–
|
216,334
|
|
Public
listing costs
|
1,817
|
–
|
148,864
|
|
Website
development/Corporate branding
|
538
|
–
|
161,806
|
|
Total
Operating Expenses
|
413,138
|
284,272
|
2,459,750
|
|
Net
Operating Loss
|
$ (405,138)
|
$ (284,272)
|
$ (2,451,750)
|
|
Other
Income/(Expense)
|
(4,614)
|
–
|
(4,614)
|
|
Net
Loss before Comprehensive Income
|
$ (409,752)
|
$ (284,272)
|
$ (2,456,364)
|
|
Gain on
Foreign Currency Translation
|
7,120
|
–
|
7,120
|
|
Net
Comprehensive Loss
|
$ (402,632)
|
$ (284,272)
|
$ (2,449,244)
|
|
Net Loss Per
Share
|
|
|
|
|
Continuing
Operations – Basic and Diluted
|
$ (0.02)
|
$ (0.01)
|
|
|
Weighted
Average Number of Shares Outstanding – Basic and Diluted
|
25,112,308
|
19,087,760
|
|
F-2
Mantra
Venture Group Ltd. And Consolidated Subsidiaries
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
For
the Three Month Periods Ended August 31, 2008 and 2007
and
the
Period from January 22, 2007 (Inception) Through August 31, 2008
(Unaudited)
|
For
the Three Months Ended
August
31,
|
January
22, 2007 (Inception)
to
August
31,
|
||
|
2008
|
2007
|
2008
|
|
|
Operating
Activities
|
|||
|
Net
loss
|
$ (409,752)
|
$ (248,272)
|
$
(2,456,364)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
||
|
Depreciation
and amortization
|
4,955
|
1,600
|
26,174
|
|
Shares issued
for services
|
53,376
|
–
|
574,576
|
|
Stock based
compensation
|
61,989
|
–
|
220,873
|
|
Changes in
operating assets and liabilities
|
|||
|
Taxes
receivable
|
(6,645)
|
(6,645)
|
(25,063)
|
|
Security
deposit and prepaid expenses
|
(995)
|
|
(2,003)
|
|
Other
assets
|
–
|
–
|
(12,000)
|
|
Accounts
payable and accrued liabilities
|
22,460
|
54,929
|
157,769
|
|
Due to
related parties
|
(30,250)
|
10,884
|
73,058
|
|
Net
Cash Used in Operating Activities
|
(304,862)
|
(207,031)
|
(1,442,980)
|
|
Investing
Activities
|
|||
|
Purchase of
property and equipment
|
(28,319)
|
(19,501)
|
(98,220)
|
|
Net
Cash Used in Investing Activities
|
(28,319)
|
(19,501)
|
(98,220)
|
|
Financing
Activities
|
|||
|
Proceeds from
exercise of warrants
|
–
|
–
|
137,500
|
|
Proceeds from
issuance of common stock
|
300,000
|
395,040 |
1,396,720
|
|
Proceeds from
debt- related party
|
20,913
|
–
|
20,913
|
|
Payments on
debt- related party
|
(20,121)
|
–
|
(20,121)
|
|
Net
Cash Provided by Financing Activities
|
300,792
|
395,040
|
1,535,012
|
|
Effect
of Foreign Currency Translation
|
7,120
|
–
|
7,120
|
|
Change
in Cash
|
(25,269)
|
106,856 |
932
|
|
Cash
– Beginning
|
26,201
|
13,982
|
–
|
|
Cash
– Ending
|
$ 932
|
$ 180,838
|
$ 932
|
|
Supplemental
Disclosures:
|
|||
|
Interest
paid
|
–
|
–
|
–
|
|
Income taxes
paid
|
–
|
–
|
–
|
|
Non-cash
Activity
|
|||
|
Stock issued
for patent
|
–
|
–
|
$ 10,000
|
|
Options
issued for patent
|
–
|
–
|
$ 27,854
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-3
Mantra Venture
Group Ltd. and Consolidated Subsidiaries
(A
Development Stage Company)
Notes to the
Consolidated Statements
August 31,
2008
(Unaudited)
|
1.
|
Basis of
Presentation
|
The unaudited
interim consolidated financial statements of the Mantra Venture Group Ltd. and
Consolidated Subsidiaries (the “Company”) have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information
and the rules of the Securities and Exchange Commission and should be read in
conjunction with those financial statements included in Form 10-K. They do not
include all information and footnotes required by United States generally
accepted accounting principles for complete financial statements. However,
except as disclosed herein, there has been no material changes in the
information disclosed in the notes to the financial statements for the year
ended May 31, 2008 included in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission. In the opinion of management, all
adjustments considered necessary for fair presentation, consisting solely of
normal recurring adjustments, have been made. Operating results for the three
months ended August 31, 2008 are not necessarily indicative of the results that
may be expected for the year ending May 31, 2009.
|
2.
|
Going
Concern
|
Mantra’s unaudited
interim 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 generated minimal
revenues since inception and has never paid any dividends and is unlikely to pay
dividends or generate substantial 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 August 31,
2008, the Company has accumulated losses of $2,456,364 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.
|
3.
|
Comprehensive
Income
|
The Company has
adopted SFAS No. 130, "Reporting Comprehensive Income", which establishes
standards for the reporting of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes
in equity except those
resulting from investments by owners or distributions to owners. Among
other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under the current accounting standards as a component of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
Comprehensive income is displayed in the balance sheet as a component of
shareholders' equity.
|
4.
|
Foreign
Currency Translation
|
The Company’s
functional and reporting currency is the United States dollar; however,
foreign currency transactions are primarily undertaken in Canadian dollars.
Thus, monetary accounts denominated in foreign currencies are translated to
United States dollar equivalents in accordance with SFAS No. 52 “Foreign
Currency Translation.” Under this method, assets and liabilities are translated
into United States dollar equivalents at rates of exchange at the balance sheet
date and average rates for the period are used to translate revenues and
expenses. The cumulative translation adjustment is reported as a component of
accumulated other comprehensive income. Gains and/or losses that arise from
foreign currency transactions are included in the determination of net income.
The Company has not, to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.
F-4
5. Related
Party Transactions
During the three
months ended August 31, 2008, the Company generated $8,000 revenue for providing
website design services to a direct relative of the CEO and director of the
Company.
The Company
incurred management fees, related to the CEO and director of the Company, of
$22,500 and $14,135 for the three months ended August 31, 2008 and 2007,
respectively. As of August 31, 2008, $12,000 is outstanding and
included in the accounts payable-related party balance of
$19,500. The company owed $22,500 as of May 31, 2008. In
addition, the Company owed the CEO and director of the Company $54,350 as of
August 31, 2008 and $53,558 as of May 31, 2008 for expenses paid on behalf of
the Company.
During the three
months ended August 31, 2008 and 2007, respectively, the Company incurred $9,000
and $0 for administration fees due to a direct relative of the CEO and director
of the Company, of which $1,000 is outstanding at August 31, 2008 and included
in the accounts payable-related party balance of $19,500. As of May
31, 2008, the company owed $0.
During the three
months ended August 31, 2008 and 2007, respectively, the Company incurred $9,000
and $5,195 for investor communication service fees due to a contractor, who is
also a shareholder of the Company, of which $1,500 is outstanding at August 31,
2008. The Company owed $0 for investor communication services as of August 31,
2007. In addition, as of August 31, 2008 and May 31, 2008, the Company has an
outstanding payable to this shareholder in the amount of $5,000 included in the
accounts payable-related party balance.
During the three
months ended August 31, 2008 and 2007, respectively, the Company made cash
payments of $5,000 and $0 for management fees due to the CFO. In
addition, during the three months ended August 31, 2008, the Company issued
50,000 common shares of the Company with a total value of $20,000 and granted
150,000 options valued at $31,533 for management fees.
During the three
months ended August 31, 2008, 300,000 options granted to the former CFO of the
Company expired. The options were valued at $21,266 upon issuance in fiscal year
2008.
The due to related
party is payable on demand and non-interest bearing. Interest has not been
imputed as of August 31, 2008 it is deemed immaterial. All related party
transactions are conducted in the ordinary course of business and measured at
the exchange amount, which is the consideration established and agreed to by the
related parties.
6. Commitments
The Company has
entered into an operating lease for its office premise in Vancouver, BC which
expires September 30, 2009 and an operating lease for its office premise in
Seattle, WA which expired in May 31, 2008 and is now month to month
basis. Total monthly expense is approximately
$4,800. Total rent expense for the three months ended August 31, 2008
is $14,200.
7. Common
Stock
The Company’s
authorized capital is 20,000,000 preferred shares with a par value of $0.00001
and 100,000,000 common shares with a par value of $0.00001. As of August 31,
2008 no preferred shares are issued or outstanding and 26,002,661 common shares
are issued and outstanding.
During the three
months ended August 31, 2008, the Company issued common shares as
follows.
|
|
a)
|
37,500 shares
of common stock at $0.19 per share for contract services of
$7,126.
|
|
|
b)
|
2,400,000
units at $0.125 per share for total cash proceeds of $300,000. Each unit
consists of one share of common stock and one share purchase warrant
exercisable at $0.20 until May 28,
2009.
|
|
|
c)
|
50,000 shares
of common stock at $0.40 per share for CFO management services of
$20,000.
|
|
|
d)
|
62,500 shares
of common stock at $0.42 per share for contract services of
$26,250.
|
F-5
8.
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 three
month ended August 31, 2008 the Company granted 350,000 options valued at
$61,989 for investor relations, CFO management and technology consulting
services. As of August 31, 2008, the Company had no unrecognized compensation
expense relating to unvested options.
A summary of the
Company’s stock option activity is as follows:
|
Number
of Options
|
Weighted
Average
Exercise
Price
$
|
Weighted
Average Remaining Contractual Term
(Months)
|
Aggregate
Intrinsic
Value
$
|
|
|
Outstanding,
May 31, 2008
|
1,450,000
|
0.33
|
||
|
Granted
|
350,000
|
0.33
|
||
|
Cancelled
|
(300,000)
|
0.25
|
||
|
Exercisable,
August 31, 2008
|
1,500,000
|
0.35
|
18
|
–
|
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:
The fair market value of stock-based compensation awards granted during the
three months ended August 31, 2008 was estimated using the Black-Scholes option
pricing model with the following assumptions:
|
Grant Date
|
Expected
Life
(Months)
|
Expected
Volatility
|
Dividend
Yield
|
Risk
Free
Rate
|
Weighted
Average
Grant
Date Fair
Value
|
|
June 9,
2008
|
6
|
95.30%
|
0%
|
2.12%
|
$6,684
|
|
July 1,
2008
|
12
|
95.64%
|
0%
|
2.38%
|
$31,533
|
|
July 16,
2008
|
12
|
98.04%
|
0%
|
2.16%
|
$11,886
|
|
July 16,
2008
|
12
|
98.04%
|
0%
|
2.16%
|
$11,886
|
As the Company has
less than two years of stock history, volatility calculations were taken from a
comparable with a longer trading history. 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 half of the stated term of the award. 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 while the Company was a private
Company. Thereafter the fair value of the options was determined by
reference to the closing price of the stock as quoted on the OTCBB.
Additional
information regarding stock options as at August 31, 2008, is as
follows:
|
Number
of Options
|
Exercise
Price
|
Expiry
Date
|
|
100,000
|
$0.20
|
June 9,
2009
|
|
75,000
|
$0.25
|
August 30,
2009
|
|
250,000
|
$0.25
|
October 4,
2009
|
|
50,000
|
$0.25
|
October 31,
2009
|
|
100,000
|
$0.40
|
November 2,
2009
|
|
100,000
|
$0.25
|
December 31,
2009
|
|
50,000
|
$0.40
|
December 13,
2009
|
|
200,000
|
$0.75
|
February 4,
2010
|
|
75,000
|
$0.45
|
April 25,
2010
|
|
150,000
|
$0.25
|
June 30,
2010
|
|
100,000
|
$0.25
|
July 15,
2010
|
|
250,000
|
$0.25
|
October 13,
2012
|
|
1,500,000
|
|
9.
|
Warrants
|
During the three
months ended August 31, 2008, the Company issued 2,400,000 warrants with an
exercise price of $0.20 as part of the units purchased at $0.125 per
unit. The fair value of the share purchase warrants issued during the
period ending August 31, 2008, was in the amount of $518,974, which was
determined using the Black-Scholes option model with the following
assumptions:
|
Grant
Date
|
Expected
Life
(Months)
|
Expected
Volatility
|
Dividend
Yield
|
Risk
Free
Rate
|
Weighted
Average
Grant
Date
Fair
Value
|
|
July 2,
2008
|
6
|
95,68%
|
0%
|
2.10%
|
$0.22
|
During the three
months ended August 31, 2008, 600,000 warrants with an exercise price of $0.40
expired.
At August 31, 2008,
the following share purchase warrants were outstanding:
|
Number of
Warrants
|
Exercise
Price
|
Expiry
Date
|
|
4,000,000
|
$0.20
|
May 28,
2009
|
|
103,750
|
$0.50
|
November 19,
2009
|
|
6,250
|
$0.50
|
November 20,
2009
|
|
45,000
|
$0.50
|
December 1,
2009
|
|
35,000
|
$0.50
|
December 5,
2009
|
|
221,250
|
$0.50
|
December 10,
2009
|
|
37,500
|
$0.50
|
December 18,
2009
|
|
100,000
|
$0.50
|
February 28,
2010
|
|
75,000
|
$0.50
|
May 01,
2010
|
|
4,623,750
|
|
F-6
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.
This management's
discussion and analysis or plan of operation should be read in conjunction with
the financial statements and notes thereto of the Company for the three months
ended August 31, 2008. The reported results may not necessarily reflect the
future.
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.
In December 2007 our common stock became quoted on the OTC Bulletin Board under
the symbol “MVTG.OB”.
On February 18, 2008 our stock became 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. On November 2, 2007, through our wholly owned
subsidiary, Mantra Energy Alternatives Ltd., we entered into a technology
assignment agreement with 0798465 BC Ltd. whereby we acquired 100% ownership of
an invention for the electro-reduction of carbon dioxide. This technology is
described in greater detail under the heading “Our Business” below. Other than
this, we have not acquired or developed any further commercially exploitable
technologies. There is no guarantee that we will ever acquire any
further commercially exploitable technologies, that any of our present or future
technologies will be commercially viable, or that we will succeed in
commercially exploiting any of our technologies.
We
carry on our business through our six wholly owned subsidiaries and one majority
owned subsidiary as follows:
| · | Mantra Energy Alternatives Ltd., through which we identify, acquire, develop and market technologies related to alternative energy production, greenhouse gas emissions reduction and resource consumption reduction; | |
|
|
·
|
Carbon
Commodity Corp., through which we intend to license or develop carbon
footprint assessment software and develop an online carbon reduction
marketplace;
|
|
|
·
|
Climate ESCO
Ltd., through which we plan obtain the distribution or licensing rights to
commercialized technologies and broker them to residential and industrial
consumers seeking sustainability
solutions;
|
|
|
·
|
Mantra Media
Corp., through which we offer promotional and marketing services to
companies in the sustainability sector or those seeking to adopt
sustainable practices;
|
|
|
·
|
Mantra Wind
Inc., through which we plan to develop small to medium scale wind
farms;
|
|
|
·
|
Mantra China
Inc., our majority owned subsidiary, through which we intend to distribute
Asian-produced technologies in North America;
and
|
|
|
·
|
Mantra China
Limited, through which we, together with our joint venture partners, plan
to develop our business in Hong Kong and mainland
China.
|
Results of Operations for the Period From January 22, 2007 (Date of
Inception) to August 31, 2008 and for the Three Months Ended August 31,
2008 compared
to the Three Months Ended August 31, 2007.
Lack
of Revenues
We
have had limited operational history since our inception on January 22, 2007.
From our inception on January 22, 2007 to May 31, 2008 we did not generate any
revenues; however for the three months ended August 31, 2008 we generated $8,000
in website development revenue. As at August 31, 2008, we had total assets of
$149,859 and total liabilities of $231,619. Since our inception to August 31,
2008, we have an accumulated deficit of $2,456,364. We anticipate that we will
incur substantial losses over the next year and our ability to generate
additional revenues in the next 12 months remains uncertain.
Expenses
We
accumulated total expenses of $2,459,750 from the date of our inception to
August 31, 2008, including $102,052 in research and development
costs, $26,174 in amortization expense, $366,916 in consulting and advisory fees
(of which $ 220,873 is stock based), $202,102 in business development
expenses (of which $167,404 is stock based), $354,000 in management fees (of
which $72,977 is stock based), $288,403 in shareholder communication, awareness
and financing (of which $45,407 is stock based), $283,618 in professional fees
(of which $41,500 is stock based), $148,864 in public listing costs (of which
40,000 is stock based), $161,806 in expenses related to website development and
corporate branding (of which $26,975 is stock based) $286,246 in other general
and administrative expenses.
3
For the three months ended August 31, 2008, we incurred total expenses of
$413,138 including $19,624 in research and development costs, $4,955 in
amortization expense, $23,733 in
consulting and advisory fees ($28,262 is stock based), $1,449 in business
development expense, $94,033 in management fees (of which $51,711 is stock
based), $538 in expenses related to corporate branding, $104,491 in shareholder
awareness, and financing expense(of which $35,713 is stock based), $1,817 public
listing costs, $91,363 in professional fees, and $42,363 in other general and
administrative expenses.
By
comparison, our total operating expenses were $284,272 for the three months
ended August 31, 2007. Our expenses during that period consisted
primarily of $194,175 in general and administrative expense, $36,497 in
consulting and advisory fees, and $16,000 in professional fees.
Our other general
and administrative expenses consist of bank charges, travel, meals and
entertainment, foreign exchange, office rent and maintenance, communication
expenses (cellular, internet, fax, and telephone), courier, postage costs and
office supplies. Our professional fees include legal, accounting and auditing
fees.
Net
Loss
Since our inception
on January 22, 2007 to August 31, 2008, we have incurred net loss of $2,449,244.
For the three months ended August 31, 2008, we incurred net loss of
$402,632.compared to our net loss of $284,272 for the same period in 2007.
.
Liquidity
and Capital Resources
At
August 31, 2008 we had cash of $932 in our bank accounts and a working capital
deficit of $203,621. This compares to our cash of $26,201 and working capital
deficit of $192,290 for the period ended May 31, 2008. We are solely dependent
on the funds raised through our equity or debt financing and our net loss was
funded through equity financing.
During the three
months ended August 31, 2008, we raised gross proceeds of $646,720 from the sale
of our securities as described in the following table.
|
Date
of issuance
|
Type
of security
issued
|
Number
of securities issued
|
Price
per security
($)
|
Total
funds received
($)
|
|
June
2008
|
Options
|
100,000
|
0.20
|
For
services
|
|
Common
Shares
|
37,500
|
0.20
|
For
services
|
|
|
July
2008
July
2008
July
2008
July
2008
July
2008
|
Common
Shares
|
50,000
|
0.40
|
For
services
|
|
Options
|
150,000
|
0.25
|
For
services
|
|
|
Units
|
2,400,000
|
0.125
|
300,000
|
|
|
Common
Shares
|
62,000
|
0.45-
|
For
services
|
During the three
months ended August 31, 2008, we used net cash of $28,319 in investing
activities and net cash of $304,862 in operating activities. This
compares to our net cash used in investing activities of $13,198 and net cash
used in operating activities of $8,120 for the same period in
2007. During the three months ended August 31, 2008 we received net
cash of $300,000 from financing activities compared to $35,300 for the same
period in 2007. The increase in cash received from financing for the
three months ended August 31, 2008 was due to the sale of our common
stock.
We
expect to require approximately $3,725,000 in financing to acquire and develop
technologies and launch our online carbon reduction marketplace over the next 12
months (beginning October 1, 2008), as follows:
|
Description
|
Estimated
expenses
($)
|
|
Full launch
and development of an online carbon reduction marketplace
|
100,000
|
|
Development
and marketing of the ERC Technology
|
2,800,000
|
|
Development
of promotional and marketing service business
|
225,000
|
|
Evaluation
and acquisition of new technologies
|
600,000
|
|
Total
|
3,725,000
|
Our other planned
operational expenses for the next twelve months (beginning October 1, 2008) are
summarized as follows:
|
Description
|
Target
completion date or period
|
Estimated
expenses
($)
|
|
Completion of
road shows
|
December 31,
2008
|
26,000
|
|
Management
and consulting fees (including expenses of our Scientific Advisory
Board)
|
12
months
|
700,000
|
|
Raise
additional private or public equity (legal, accounting and marketing
fees)
|
December 31,
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
|
4
At
present, our cash requirements for the next twelve months outweigh the funds
available to maintain or develop our operations. Of the $5,127,000 that we need
for the next 12 months, we had $932 in cash as of August 31, 2008. In order to
fully carry out our business plan, we need additional financing of approximately
$5,127,000 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. We also intend to implement cost reduction measures
which may include reducing our budget for the evaluation of potential new
projects, focusing our expenditures on less speculative or less developed
projects, reducing our reliance on outside contractors, and tailoring our
investor awareness programs and initiatives to a scale that is appropriate to
our level of activity and the nature of our business. Finally, we
intend to seek out alternative sources of funding, such as research and
development grants to offsetting the cost of our technology
development
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.
5
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
The Company is
a smaller reporting company
as defined by Rule 12b-2 of the
Securities Exchange Act of
1934, as amended (the "Exchange Act") and is not required to provide the information
required under this item.
Evaluation of Disclosure
Controls and Procedures
We carried
out an evaluation, under the supervision and with the
participation of our management, including our principal
executive officer and principal financial officer, of the
effectiveness of our disclosure
controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of
the Exchange Act
(defined below)). Based upon that
evaluation, our principal executive officer and principal
financial officer concluded that,
as of the end of the period
covered in this report, our
disclosure controls and procedures were not effective to ensure that
information required to be disclosed in reports
filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")
is recorded, processed, summarized and reported within the
required time periods and is accumulated and communicated to our
management, including our principal executive officer and
principal financial officer,
as appropriate to allow timely
decisions regarding required disclosure.
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 August 31, 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 of
our disclosure controls and procedures did not identify any change in our
internal control over financial reporting that occurred during or subsequent to
the quarter ended August 31, 2008 that has materially affected or is
reasonably likely to materially affect our internal control over such
reporting.
6
PART
II – OTHER INFORMATION
As of the date of
this report, there are no pending legal proceedings in which the Company or any
of its officers, directors or affiliates is a party, and the Company is not
aware of any threatened legal proceedings.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
From June 1, 2008
to August 31, 2008, we made the following sales (and cancellation) of
unregistered securities:
|
|
·
|
On June 9,
2008, we issued options to purchase 100,000 common shares to Primus Public
Relations pursuant to an investor relations service agreement. The options
are exercisable at a price of $0.20 per share for the period of one year
after the date of issuance. These securities were issued without a
prospectus pursuant to Regulation S of the Securities
Act.
|
|
|
·
|
On June 10,
2008, we issued 100,000 restricted common shares to Qualico Capital Corp.
as compensation for public relations services performed from May 14 to
December 14, 2008. These securities were issued without a prospectus
pursuant to Regulation S of the Securities
Act.
|
|
|
·
|
On June 15,
2008, we issued 37,500 common shares to ECON Corporate Services, Inc.
(“ECON”) pursuant to a consulting agreement whereby we agreed to issue
150,000 common shares to ECON as compensation for investor services, which
shares are to be issued in four quarterly installments during the term of
the agreement. The shares were issued at a price of $0.20 per share. These
securities were issued without a prospectus pursuant to Regulation S of
the Securities Act.
|
|
|
·
|
On July 1,
2008, we issued 50,000 restricted common shares and an option to purchase
150,000 common shares to Q4 Financial Group Inc. pursuant to a consulting
agreement as of July 1, 2008, whereby Dennis Petke, President of Q4
Financial Group Inc will act as our Chief Financial Officer. The common
shares were issued at $0.40 per share. The option is exercisable at a
price of $0.25 per share within two years after the date of issuance.
These securities were issued without a prospectus pursuant to Regulation S
of the Securities Act.
|
|
|
·
|
On July 2,
2008, we issued 4,000,000 units at a price of $0.125 per unit to Metradon
Ventures Limited. Each unit consists of one common share and one warrant
to purchase one common share at a price of $0.20 per share until July 2,
2009. The proceeds are to be received in two installments of $200,000 and
$300,000 respectively. These securities were issued without a prospectus
pursuant to Regulation S of the Securities
Act.
|
|
|
·
|
On July 2,
2008, we cancelled 100,000 restricted common shares issued to Qualico
Capital Corp. on June 10, 2008 as compensation for public relations
services due to failure of Qualico Capital to provide services in
accordance with the agreement of May 14,
2008.
|
|
|
·
|
On July 17,
2008, we issued 62,000 common shares at $0.45 per share to
SmallCapVoice.com pursuant to a financial public relations agreement dated
July 15, 2008. 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.
7
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 No.
|
Description
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
8
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: October
20, 2008
|
Larry
Kristof
|
|
President,
Chief Executive Officer Director
|
|
|
/s/
Dennis
Petke
|
|
|
Date: October
20, 2008
|
Dennis
Petke
|
|
Chief
Financial Officer, Principal
Accounting Officer
|