FZRO CS Diagnostics Corporation (PK)

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

FORM 20-F

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or

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

For The Fiscal Year Ended October 31, 2014
Or

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

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

Date of event requiring this shell report

Commission File No. 0-26005

MICROMEM TECHNOLOGIES INC.
(Exact name of Registrant as specified in its charter)

Ontario, Canada
(Jurisdiction of incorporation or organization)

121 Richmond Street West, Suite 304
Toronto, Ontario M5H 2K1, Canada
Tel: (416) 364-6513
Fax: (416) 360-4034
(Address of principal executive offices)

Joseph Fuda; 416-364-6513, JFuda@micromeminc.com, 121 Richmond Street West, Suite 304 Toronto, On M5H 2K1
(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
None

Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares without par value

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
188,436,724 Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act:
Yes [   ]      No [X]

If this report is an annual or transition report, indicate by check mark if the registration is not required to file a report pursuant to section 13 or 15 of the Securities Exchange Act of 1934:
Yes [   ]      No [X]

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 [   ]

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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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [   ]      No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerator filer” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer  [   ]          Accelerated Filer [X]         Non-Accelerated Filer [   ]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [   ]	International Financial Reporting Standards as issued	Other [   ]
	by the International Accounting Standards Board [X]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:
Item 17 [   ]     Item 18 [   ]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes [   ]      No [X]

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TABLE OF CONTENTS

		Page
Part I		4
Item 1.	Identity of Directors, Senior Management and Advisors	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
Item 4.	Information on the Company	13
Item 4A.	Unresolved Staff Comments	20
Item 5.	Operating and Financial Review and Prospects	20
Item 6.	Directors, Senior Management and Employees	26
Item 7.	Major Shareholders and Related Party Transactions	31
Item 8.	Financial Information	33
Item 9.	The Offer and Listing	33
Item 10.	Additional Information	34
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 12.	Description of Securities Other Than Equity Securities	41
Part II		41
Item 13.	Defaults, Dividend Arrearages and Delinquencies	41
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	41
Item 15.	Controls and Procedures	41
Item 16.	[Reserved]	42
Item 16A	Audit Committee Financial Expert	42
Item 16B	Code of Ethics	42
Item 16C	Principal Accountant Fees and Services	42
Item 16D	Exemptions from the Listing Standards for Audit Committees	43
Item 16E	Purchases of Equity by the Issuer and Affiliated Purchasers	43
Item 16F	Changes in Registrant’s Certifying Accountant	43
Item 16G	Corporate Governance	43
Item 16H	Mine Safety Disclosure	43
Part III		43
Item 17.	Financial Statements	43
Item 18	Financial Statements	43
Item 19.	Exhibits	44
Signatures		45

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PART I

INTRODUCTION

Abbreviations

Throughout this document, Micromem Technologies Inc. and/or its affiliates are referred to as “Micromem”, the “Company”, “we”, “us” or “our”.

Forward Looking and Cautionary Statements

This Form 20-F contains certain forward-looking statements. These forward-looking statements are based on current expectations, estimates and projections about the business of our company and the industry in which we operate, our management's beliefs, and assumptions made by our management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations on such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Our actual results could differ materially from those expressed or forecasted in these forward-looking statements as a result of certain factors, including those set forth under Item 3-Key Information – Risk Factors and elsewhere in this Form 20-F.

ITEM 1.             IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.             OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.             KEY INFORMATION

A.             Selected Financial Data

Fiscal Years 2014, 2013, 2012 and 2011

The following table sets forth our selected consolidated financial data in United States dollars as of and for each of the fiscal years ended October 31, 2014, October 31, 2013, October 31, 2012 and October 31, 2011. The selected consolidated financial data has been derived from our audited consolidated financial statements. All information contained in the following table should be read in conjunction with our audited consolidated audited financial statements and the notes thereto in “Item 18-Financial Statements” and "Item 5 - Operating and Financial Review and Prospects” included elsewhere in this Annual Report on Form 20-F.

Our consolidated financial statements for the years ended October 31, 2014, 2013, 2012 and 2011 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Previously the Company prepared consolidated financial statements in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).

International Financial Reporting Standards

Selected balance sheet information
(all amounts in U.S. dollars)
		2014			2013			2012			2011
Working capital (deficiency)	$	1,034,921		$	425,888			($1,793,217	)		($2,239,178	)
Capital Assets		21,483			13,998			5,787			10 ,201
Total Assets		5,636,605			2,166,455			1,180,278			906,346
Capital Stock		70,802,776			57,755,613			54,728,239			51,774,555
Shareholders' equity (deficiency)		4,862,773			1,536,319			(904,030	)		(1,409,228	)

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Selected statement of operations and deficit information

(all amounts in U.S. dollars)
		2014			2013			2012			2011
Interest and other income		-			-			-		$	963
Research and development expenses		703,671			160,920			229,840			(75,896	)
General and administrative and other expenses		3,081,947			2,198,466			2,618,792			1,916,981
(Gain) Loss on revaluation of embedded derivatives (1)		-			3,205,752			(1,504,423	)		412,563
Stock compensation expense (2)		379,253			368,790			430,856			928,497
Loss before income taxes		(4,164,871	)		(5,933,928	)		(1,775,065	)		(3,181,182	)
Provision for income taxes (recovery)		-			-			-			1,205
Net loss		(4,164,871	)		(5,933,928	)		(1,775,065	)		3,182,387
Loss per share-basic and diluted		(0.02	)		(0.04	)		(0.01	)		(0.03	)
Weighted average number of basic and diluted shares		171,534,969			146,814,466			123,375,510			102,301,168
Dividends		-			-			-			-

1)	(Gain) loss on revaluation of embedded derivatives as reported above relates principally to the measurement of the derivative warrant liability relating to outstanding Canadian dollar denominated common share purchase warrants. The (gain) loss as reported is a non-cash charge which is calculated in accordance with IFRS.
2)	Stock compensation expense is a non cash expense calculated in accordance with the Black Scholes option pricing model.

Fiscal Year 2010

The following table sets forth our selected consolidated financial data in United States dollars as of and for the fiscal year ended October 31, 2010. The selected consolidated financial data has been derived from our audited consolidated financial statements. These consolidated financial statements have been prepared in accordance with Canadian GAAP which differ in certain respects from the principles the Company would have followed had it consolidated financial statements been prepared in accordance with U.S. GAAP. The selected consolidated financial information in the IFRS chart above should not be compared to the information in the Canadian GAAP table below as the information was prepared using different financial reporting standards.

Canadian GAAP

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Reconciliation between Canadian GAAP and U.S. GAAP:

Canadian GAAP conforms in all material respects with U.S. GAAP except for how the Company has accounted for development expenditures reported in the fiscal year ended October 31, 2010.

Currency and Exchange Rates

Our financial statements are all expressed in United States dollars. All other financial data appearing in this Form 20-F are expressed in United States dollars with the exception of certain limited cases when reference is made to instruments denominated in Canadian dollars (“CDN $”).

Transactions that were conducted in Canadian dollars or other foreign currencies have been converted into United States dollars using the 3 month average rate of exchange per quarter which rate approximates the rate of exchange prevailing at the date of such transactions. Monetary assets and liabilities denominated in Canadian dollars or other foreign currencies but expressed in this Form 20-F in United States dollars have been converted into United States dollars at the rate of exchange prevailing on the date of the applicable financial statement. Non monetary assets and liabilities denominated in Canadian dollars but expressed in this Form 20-F in United States dollars have been converted into US dollars at the historical exchange rate at the date of the transaction.

The following table sets forth, for the periods indicated, the high, low, end of period and average for period noon buying rates as published by the Bank of Canada, as expressed in the amount of U.S. Dollars equal to one Canadian dollar.

The following table sets forth, for each period indicated, the high and low exchange rates for United States dollars expressed in Canadian dollars on the last day of each month during such period, based on the Noon Buying Rate.

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On February 25, 2015 the noon buying rate for one Canadian dollar, as quoted by the Bank of Canada, was CDN $.1.2419 = U.S. $1.00.

B.             Capitalization and Indebtedness

Not applicable.

C.             Reasons for the Offer and Use of Proceeds

Not applicable.

D.             Risk Factors

We and our investors face a number of risks, which are described below.

Risk Factors Related to Our Business

The financial statements of our company have been prepared on a going concern basis.

We have prepared our financial statements on a “going concern” basis which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future.

Our ability to continue as a going concern is dependent upon the successful commercialization of our sensor technology platforms that we currently have under development with our industry partners. Ultimately we must achieve a profitable level of operation through licensing fees, royalties and the commercial sale of our products. We will require additional financing in the interim to fund our activity.

Our consolidated financial statements have been prepared on a going concern basis do not include any adjustments to the amounts and classifications of the assets and liabilities that might be necessary should we be unable to continue in business. If the going concern assumption was not appropriate for our financial statements then adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.

At October 31, 2014 we had $935,987 cash on hand and our current monthly cash expenses were approximately $175,000. Our working capital position is $1,034,921 at October 31, 2014. Subsequent to October 31, 2014, through to the date of the filing of this Annual Report on Form 20-F, we have raised an additional $565,714 through the exercise of warrants. Additionally, we collected $1,392,978 from development partners with respect to our ongoing joint product development projects with our existing customers.

We currently have no operating revenue.

We have not yet reported commercial revenues from licensing fees, royalties or product sales. If we fail to enter into license agreements or if we do not obtain purchase orders from potential customers, we will have no revenues. If we enter into such agreements the amount of the revenues we receive will depend on the terms we are able to secure from each licensee and the ability of licensees to compete in their particular market.

There are market risks relating to the sale of our sensor technology platforms.

We continued to develop applications of our magnetic sensor technology in 2014 working with our technical advisors, and our strategic development partners. We are pursuing joint development agreements with potential strategic partners with the expectation that we will jointly develop sensor applications for use by these potential strategic partners. We believe that these current initiatives will result in revenues and cash flow to the Company in the future but there can be no assurance when and if such revenues will be achieved.

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We may face competition from larger corporations which also sell sensor technology and who have greater financial resources than the Company.

Our success will in part be determined by the following factors which have not yet been fully and completely tested nor measured: the ability of manufacturers to incorporate the technology into existing manufacturing capabilities without significant retooling and material costs, price competitiveness and the differential performance advantages of our technology.

Additionally our ability to compete successfully will depend on elements outside of our control, including the rate at which customers incorporate our technology into their products, the success of such customers in selling those products, our protection of our intellectual property, the number, nature and success of our competitors and their product introductions and general market and economic conditions. Our success will depend on our ability to protect our intellectual property, to develop, introduce, and license or sell in a timely manner our technology or products incorporating our technology and to compete effectively on the basis of factors such as speed, density, die size and power consumption.

We are not actively pursuing further development of our memory technology.

Until 2008 our Company was positioned as a developer of memory technology, specifically our Magnetic Random Access Memory (MRAM), which is a non-volatile memory technology that uses magnetic, thin film elements on a gallium arsenide substrate to store information.

Beginning in 2008 we began to shift our focus to the development of sensor based technology solutions. By 2011, we decided to no longer pursue memory technology. We wrote off all costs associated with our memory technology by 2011. We are currently attempting to sell our interests in our memory related intellectual property. To date we have not been successful in attracting a buyer for this intellectual property and there can be no assurance that we will secure a buyer.

Failure to secure continued financing will cause our business to suffer.

Since there is no assurance that commercial revenues will be realized in future, we will need additional financing to continue our development and to successfully market our technology to potential licensees and strategic partners.

There can be no assurance that we will be able to continue to raise sufficient financing in the future and the failure to do so would affect our ability to further develop our technology platforms and to market our products to existing and new potential customers.

Because much of our success and value depends on our ownership and use of intellectual property, our failure to protect our property could adversely affect our future growth and success.

Our success will depend on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods to protect our proprietary technology and processes. Despite our efforts to do so, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology, develop similar technology independently or design around our patents. Policing unauthorized use of our products is expensive and difficult, and we cannot be certain that all required steps we have taken will prevent misappropriation or infringement of our intellectual property.

Intellectual property claims against us, no matter how groundless, could cause our business to suffer.

Our future success and competitive position depend in part on our ability to retain rights to our technology, including any improvements that may be made on that technology from time to time by us or on our behalf. Our technology is patented or is subject to pending patent applications in the United States and abroad and we know of no challenge that has been made either against our technology or our rights to it. We have no reason to believe that any such challenge might be made or that the grounds for any such challenge exist. If any intellectual property litigation were to be commenced against us, no matter how groundless, the result could be a significant expense to us, adversely affecting further development, licensing and sales, diverting the efforts of our technical and management personnel and, in the event of an adverse outcome, damages and possible restrictions on the further development, licensing and use of our technology. There can be no assurance that any of our pending patent applications will be issued as patents or that any issued patent will not be determined to be invalid at a later date.

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We have a history of losses, and we may continue to generate losses in future.

To date, we have operated as a product development company and have not been profitable. Unless and until we are able to successfully commercialize our technology applications, we may not be able to generate sufficient revenues in future periods and we may not be able to attain profitability.

The further development of our sensor technology may require significant additional capital which we may have to fund directly if we are unable to secure financing from development partners. Therefore, we may incur expenses without receiving equal and offsetting revenues at least until we are able to license our technology to third parties. This may result in net operating losses until we can generate an acceptable level of revenues. Further, even if we achieve operating revenues, there can be no assurance that such revenues will be sufficient to fund continuing operations.

The likelihood of the success of our business plan must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early stage businesses and the competitive environment in which we operate.

We will be dependent upon the success of a limited range of products.

The range of products we intend to commercialize is currently limited to applications of our sensor technology. If we are not successful in commercializing our technology platforms, or if there is not adequate demand for such technology or the market for such technology develops less rapidly than we anticipate, we may not have the capability to shift our resources to the development of alternative products, on a timely basis. This could limit future revenues and profitability.

We may not realize income from the licensing of our technologies if our licensees fail to commercialize the products that incorporate these technologies.

In order to generate revenues from our sensor technology platforms, we will need to enter into licensing arrangements with third parties who can integrate our technology into products that will gain acceptance in the market. We have not yet entered into any licensing agreements, and there is no assurance that we will be able to do so on acceptable terms in future. To the extent we are successful in licensing our technology; in general we will seek upfront payments plus ongoing royalties based on anticipated commercial sales of the products into which our technology is incorporated. Our ability to realize royalties will thus depend upon the successful manufacture and commercialization of such products, which will be primarily within the control of the licensee. There is no assurance that such licensees will be successful in marketing and selling such products. In addition, licensees could decide to delay or discontinue the commercialization of products for financial or other business reasons. Even if our licensees succeed in developing products that incorporate our technology, in all likelihood a significant amount of development and testing will be required before such products can be introduced to market. Therefore we may not receive royalty income for a substantial period following the commencement of any licensing arrangements. If our licensees are unable to commercialize products on a timely basis, they may lose market share to competing or alternative technologies. Any failure by the companies to which we license our technologies to successfully develop marketable products would have an adverse effect on our future royalty payments and financial condition.

In order to commercialize our future products, we will need to establish a sales and marketing capability.

At present, we have limited sales and marketing capability and our financial resources have been limited. We will need to add marketing and sales expertise and must also develop the necessary supporting distribution channels. Although we believe we can build the required infrastructure either in-house or through strategic relationships, we may not be successful in doing so. Failure to establish a sales force and distribution network would have an adverse effect on our ability to grow our business.

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We depend on key personnel.

Our senior managers and employees are Joseph Fuda, who serves as our Chief Executive Officer; Steven Van Fleet, who has primary responsibility for business development and who serves as President of our wholly-owned subsidiary, Micromem Applied Sensor Technology Inc (MAST) and Dan Amadori, who serves as our Chief Financial Officer. We have engaged the services of several engineering/technical consulting firms to assist in converting our development efforts to commercialization. Our success depends on our ability to retain certain of our senior management and key technical personnel and our ability to attract and retain additional highly skilled personnel in the future.

We may be materially affected by global economic and political conditions.

Our ability to generate revenue may be adversely affected by uncertainty in the global economy and could also be affected by unstable global political conditions. Terrorist attacks or acts of war could significantly disrupt our operations and the operations of our future customers, suppliers, distributors, or resellers. We cannot predict the potential impact on our financial condition or our results of operations should such events occur.

We may be materially affected by rapid technological change and evolving industry standards.

Short product life cycles are inherent in high-technology companies due to rapid technological change and evolving industry standards. Our future financial condition and results of operations depend on our ability to respond effectively to these changes. There can be no assurance that we will be able to successfully do so or adapt our current products to new technologies or new industry standards. In addition, our customers may be reluctant to adopt new technologies and standards or they may prefer competing technologies and standards. Because the technology market changes so rapidly, it is difficult for us to predict the rate of adoption of our technology.

We may be materially affected by risks associated with new product development.

Our new product development is complex and requires us to investigate and evaluate multiple alternatives, as well as plan the design and manufacture of those alternatives selected for further development. Our development efforts could be adversely affected by hardware and software design flaws, product development delays, changes in operating systems and changes in industry standards. The manufacturing of new products involves integrating complex designs and processes, coordinating with suppliers for parts and components and managing manufacturing capacities to accommodate forecasted demand. If we are not successful in meeting these requirements, this could adversely affect our ability to introduce new products on a timely basis.

Our operations may be materially affected by the risks associated with the continued developments and protection of our intellectual property.

There can be no assurance that we will be able to continue to develop new intellectual property or that we will continue to have it developed for us. We rely on a combination of U.S. patent, copyright, trademark, and trade secret laws to protect our intellectual property rights. We have decided to file patent and trademark registration applications with certain foreign governments but we may not have appropriate coverage in all jurisdictions where we may sell or license our product in future.

We enter into confidentiality and non-disclosure agreements relating to our intellectual property with our employees and consultants. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain or use our intellectual property. Monitoring the unauthorized use of our intellectual property is difficult and we cannot be certain that we will be able to adequately protect our intellectual property in the future.

There are foreign exchange risks associated with our Company.

Because we have historically raised funds in both U.S. and Canadian markets and a portion of our costs are denominated in Canadian dollars, our funding is subject to foreign exchange risks. A decrease in the value of the U.S. dollar relative to the Canadian dollar could affect our costs and potential future profitability. We do not currently hold forward exchange contracts or other hedging instruments to exchange foreign currencies for U.S. dollars so as to offset potential currency rate fluctuations.

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Risk Factors Related to Our Common Shares

Our stock is subject to the penny stock regulations, which may discourage brokers from effecting transactions in the stock and adversely affect the stock's market price and liquidity

Our common shares constitute “penny stock” under applicable regulations of the Securities and Exchange Commission. The penny stock regulations impose significant restrictions on brokers who sell penny stock to persons other than established customers and institutional accredited investors. Broker-dealers participating in sales of our stock will be subject to the so called “penny stock” regulations covered by Rule 15g-9 under the Exchange Act. Under the rule, broker-dealers must furnish to all investors in penny stocks a risk disclosure document required by the rule, make a special suitability determination of the purchaser and have received the purchaser's written agreement to the transaction prior to the sale. The penny stock regulations may discourage brokers from effecting transactions in the common shares. This would decrease market liquidity, adversely affect market price and make it difficult for you to use the common shares as collateral.

The rights of our shareholders may differ from the rights typically afforded to shareholders of a U.S. corporation.

We are incorporated under the Business Corporations Act (Ontario), also referred to herein as the OBCA. The rights of holders of our common shares are governed by the laws of the Province of Ontario, including the OBCA, by the applicable laws of Canada, and by our Articles of Incorporation and all amendments thereto, also referred to herein as the Articles, and our By-laws. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. The principal differences include without limitation the following:

Under the OBCA, we have a lien on any common share registered in the name of a shareholder or the shareholder's legal representative for any debt owed by the shareholder to us. Under U.S. state law, corporations generally are not entitled to any such statutory liens in respect of debts owed by shareholders.

With regard to certain matters, we must obtain approval of our shareholders by way of at least 662/3% of the votes cast at a meeting of shareholders duly called for such purpose being cast in favor of the proposed matter. Such matters include without limitation: (a) the sale, lease or exchange of all or substantially all of our assets out of the ordinary course of our business; and (b) any amendments to our Articles including, but not limited to, amendments affecting our capital structure such as the creation of new classes of shares, changing any rights, privileges, restrictions or conditions in respect of our shares, or changing the number of issued or authorized shares, as well as amendments changing the minimum or maximum number of directors set forth in the Articles. Under U.S. state law, the sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation generally requires approval by a majority of the outstanding shares, although in some cases approval by a higher percentage of the outstanding shares may be required. In addition, under U.S. state law the vote of a majority of the shares is generally sufficient to amend a company's certificate of incorporation, including amendments affecting capital structure or the number of directors. Under certain circumstances the board of directors may also have the ability to change the number of directors under U.S. state law.

Pursuant to our By-laws, two persons present in person or represented by proxy and each entitled to vote thereat shall constitute a quorum for the transaction of business at any meeting of shareholders. Under U.S. state law, a quorum generally requires the presence in person or by proxy of a specified percentage of the shares entitled to vote at a meeting, and such percentage is generally not less than one-third of the number of shares entitled to vote.

Under rules of the Ontario Securities Commission, a meeting of shareholders must be called for consideration and approval of certain transactions between a corporation and any “related party” (as defined in such rules). A “related party” is defined to include, among other parties, directors and senior officers of a corporation, holders of more than 10% of the voting securities of a corporation, persons owning a block of securities that is otherwise sufficient to affect materially the control of the corporation, and other persons that manage or direct, to a substantial degree, the affairs or operations of the corporation. At such shareholders' meeting, votes cast by any related party who holds common shares and has an interest in the transaction may not be counted for the purposes of determining whether the minimum number of required votes have been cast in favor of the transaction. Under U.S. state law, a transaction between a corporation and one or more of its officers or directors can generally be approved either by the shareholders or a by majority of the directors who do not have an interest in the transaction. Corporations that are listed on a U.S. securities exchange or are quoted on Nasdaq may also be required to have transactions with officers and directors and other related party transactions reviewed by an audit committee comprised of independent directors.

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There is no limitation imposed by our Articles or other charter documents on the right of a non-resident to hold or vote our common shares. However, the Investment Canada Act , also referred to herein as the Investment Act, as amended by the World Trade Organization Agreement Implementation Act, also referred to herein as the WTOA Act, generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian,” as defined in the Investment Act, unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be a net benefit to Canada. An investment in our common shares by a non-Canadian would be reviewable under the Investment Act if it were an investment to acquire direct control of Micromem, and the value of our assets were CDN $5.0 million or more. However, an investment in our shares by a national of a country (other than Canada) that is a member of the World Trade Organization or has a right of permanent residence in such a country (or by a corporation or other entity that is a “WTO Investor-controlled entity” pursuant to detailed rules set out in the Investment Act) would be reviewable at a higher threshold of CDN $344 million in assets, except for certain economic sectors with respect to which the lower threshold would apply. A non-Canadian, whether a national of a WTO member or otherwise, would acquire control of Micromem for purposes of the Investment Act if he or she acquired a majority of our common shares. The acquisition of less than a majority, but at least one-third of our common shares, would also be presumed to be an acquisition of control of Micromem, unless it could be established that Micromem was not controlled in fact by the acquirer through the ownership of voting shares. The United States is a WTO Member for purposes of the Investment Act. Certain transactions involving our common shares would be exempt from the Investment Act, including:

• an acquisition of our common shares if the acquisition were made in connection with the person's business as a trader or dealer in securities;
• an acquisition of control of Micromem in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Act; and
• an acquisition of control of Micromem by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control of Micromem, through the ownership of voting interests, remains unchanged. Under U.S. law, except in limited circumstances, restrictions generally are not imposed on the ability of non- residents to hold a controlling interest in a U.S. corporation.

U.S. shareholders may not be able to enforce civil liabilities against us.

Micromem is incorporated under the laws of the Province of Ontario. Additionally, a number of our directors and executive officers are non-residents of the U.S., and all or a substantial portion of the assets of such persons are located outside the U.S. As a result, should any investor commence an action in the U.S. against Micromem or its directors or executive officers, Micromem or its directors or officers, as the case may be, may be able to insist that any action against them take place in the jurisdiction of the Province of Ontario. In addition, if an investor were to obtain a U.S. judgment against Micromem or its directors or executive officers, there is doubt as to the enforceability of such U.S. judgment in Canada.

We do not anticipate paying dividends.

We have never paid a dividend on our securities and we do not anticipate paying dividends in the foreseeable future.

We may need to issue additional securities which may cause our shareholders to experience dilution.

Our Board of Directors has the authority to issue additional common shares, without par value, or other of our securities without the prior consent or vote of our shareholders. The issuance of additional common shares would dilute the proportionate equity interest and voting power of our shareholders.

The price of our common shares and volume of our common shares may be volatile.

Our shareholders may be unable to sell a significant number of our common shares on the OTC QX without a significant reduction in the market price of the shares.

Furthermore, there can be no assurance that we will be able to meet the listing requirements of, or achieve listing on, any other stock exchange. The market price of the common shares may be affected significantly by factors such as fluctuations in our operating results, announcements of technological innovations or new products by us or our competitors, action by governmental agencies against us or the industry in general, developments with respect to patents or proprietary rights, public concern as to the safety of products developed by us or others, the interest of investors, traders and others in public companies such as ours and general market conditions. In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small capitalization companies, have experienced fluctuations which have not necessarily been related to the operating performance, underlying asset values or business prospects of such companies.

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ITEM 4.             INFORMATION ON THE COMPANY

A.             History and Development of Our Company

Micromem is a corporation formed under the laws of the Province of Ontario, Canada, with principal executive offices at 121 Richmond Street West, Suite 304, Toronto, Ontario M5H 2K1 (416.364.6513) . Micromem was incorporated on October 21, 1985 as Mine Lake Minerals Inc. We subsequently changed our name to Avanti Capital Corp. on June 23, 1988, to Avanti Corp International Inc. on April 30, 1992 and to Micromem Technologies Inc. on January 11, 1999 in connection with our acquisition of Pageant Technologies Incorporated, also referred to herein as Pageant International. Our website address is www.micromeminc.com. The information on our website is not part of this Annual Report on Form 20-F. We have included our website address in this document as an inactive textual reference only.

The Evolution of Micromem from Memory to Sensor Based Client Solutions

Micromem Applied Sensors Technologies, Inc., our wholly-owned subsidiary (“MAST”) was incorporated in 2008 in the State of Delaware. MAST was formed in connection with a contract with BAE Systems in Nashua, New Hampshire. BAE Systems is a Department of Defense trusted facility, which can only do business with U.S. entities (ITAR regulations). BAE Systems’ interest was in the potential to utilize our MRAM technology in a radiation-hardened environment for military applications. At the time of contract, Micromem had not taken the MRAM from the university research environment into a foundry, so the initial contract with BAE Systems was to use the patented MRAM design and manufacture and deliver a memory cell from a GaAs foundry. During this work it was determined that the Hall sensor, which was integral to the MRAM design, had several performance characteristics that by itself, as a product, would potentially create value for MAST.

Frost & Sullivan was contracted by MAST in 2009 to assess the market opportunities for a late entry into the Hall sensor market. The Hall sensor market in 2009 was robust at an estimated $1.9 billion USD. The market barriers were: mature market, declining margins and heavy competition. A decision was taken to not enter the Hall sensor component market for the above reasons. A decision was taken to explore the market opportunities associated with creating unique sensor based solutions that revolved around our patented Hall sensor technology. The MRAM go forward strategy remained with Micromem.

An outside marketing firm was hired to promote the Company. It was quickly learned that the uniqueness of our products made a traditional marketing firm relationship ineffective and that relationship was terminated. Promotion of the Company reverted back to the development of a MAST website and word of mouth marketing at regional technical conferences. Through these endeavors, a decision was taken to internally develop, at our own cost, proof of concepts for products that we had gleaned through our marketing to have potential market value. These included a magnetic gold sensor for drilling plug analysis, an oil condition sensor for automotive use and an oil/gas aerial exploration platform. Provisional patents were created on this work.

A potential revenue-generating opportunity emerged in August 2010 when Lux Research contacted us on behalf of their client, a world leader in oil production. They were looking for companies that could create extremely small foot print magnetic sensor solutions for down hole use in production oil fields. MAST was subsequently engaged by this client to develop a sensor platform for detecting four nanometer magnetic particles in a flowing oil stream at a concentration less than 1 ppb. Another revenue generating opportunity came in 2011 from GSI Westwind, a supplier for high speed air bearing motors. MAST replaced the incumbent Hall sensor supplier and delivered a unique circuit board form factor that incorporated the smallest Hall sensor in the world.

It became clear at this point in the genesis of the Company that MAST had to find an effective means to disseminate its message to a larger market audience. It was now evident that a significant market space existed for companies that could leverage MEMS/Nano fabrication methodologies to create unique combinations of sensors to provide new solutions to business problems. In 2011 MAST became aware of the NineSigma Open Innovation model. Nine sigma’s core services connect innovation-seeking companies to the best solutions, capabilities and partners around the world. MAST's relationship with NineSigma has provided us common ground access to the Global Fortune 1000 companies and has resulted in a robust future sales proposal pipeline and the first time in the Company's history an ability to forecast revenue.

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In 2011 a decision was taken to stop research and development effort in the MRAM market space. This decision was taken in part due to the high capital demand for staying current in the rapidly changing technology and equally important, the MRAM market has not grown at the anticipated growth rates. Micromem has amassed multiple memory patents and in 2013 has begun efforts to value the patent portfolio and arrange for a sale of these assets. Integral to the MRAM design is our patented Hall sensor. MAST is carrying this valuable device forward in many of our sensor platforms.

To date, Micromem has funded virtually all of our research and development. Our main priority is to provide customers with sensor based platform solutions that address their difficult business problems. A recent study by NineSigma states that less than 3% of the Fortune 1000 global companies admit that they have sufficient in house talent and knowledge to be able to take advantage of technologies that can help them improve their business. Our sensor platform solutions address three primary areas of creating value for our clients:

• Using a MEMS and/or Nano scale pallet, we are able to combine disparate sensor modalities into a common, integrated solution that brings the exact tools in play in solving the target issue. Competitive solutions tend to force fit less than optimum sensor combinations in an effort to sell their standard offerings.

• Although our solutions are custom designed for each client, our processes leading to the solution are automated and the end result is a cost effective solution with a differentially higher return on investment for our clients.

• Our Open Innovation approach to solving client problems allows us to bring together already proven sensor technologies in different market spaces allowing us to apply them in new applications in new markets. This significantly reduces the time to revenue generation by both MAST and our client and it reduces risk of project failure.

We intend to pursue specific, definable, market segments with a multi-tiered, multi-channel approach. We intend to leverage our technologies with a licensing agreement in certain key areas and a direct sales and distribution strategy in other areas using established distributors. Our sales and revenue plan includes looking to foreign markets through established distributors or strategic partners.

B.             Business Overview

Prior to 2008 we were engaged in the development of memory technology. We deemphasized these continued efforts at that time and ceased all such activity by 2011. We have been actively developing our sensor technology platforms for multiple commercial applications since 2008. Our technology combines the use of microelectromechanical systems (MEMS) and nanoelectromechanical systems (NEMS) for our sensor platforms.

Profile at October 31, 2014

The Company conceives of, designs and engineers, creates, develops and delivers extremely unique sensor solutions to our clients. These sensor solutions are very small, typically employing MEMS or NEMS feature size technology. These sensor solutions are precisely driven by client requirements, typically addressing a difficult business and/or process problem. The solution typically involves integrating multiple different sensor modalities, seen in disparate market segments, different from the target client use, that addresses the client’s needs. Due to the extremely small size, the final form factor allows our solutions to be deployed throughout the application space, in heretofore inaccessible ruggedized environments. The Company’s approach is to take advantage of the revenue opportunity associated with the projected trillion-sensor market.

Product Development Process

In 2014, the Company substantially advanced our client driven product development activity, taking advantage of our knowledge from previous years and leveraging the rapidly changing advances in the MEMS/NEMS technology landscape. The Company generally enters into Joint Product Development Agreements with our clients and follows these stages through to commercialization:

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	1.	Our clients provide a list of “grand challenges”, ie. serious business and process challenges that are affecting their business and also impacting the larger market segment in which they operate.
	2.	The Company reaches out to its global network of resources, leading experts in the various technology domains. Through this resource network, we are able to bring the world’s best domain experts to the client. This reduces the client’s perceived risk of moving forward with capital expenditures.
	3.	The Company performs a patent analysis and freedom to commercially operate analysis in the problem space.
	4.	The Company will solicit third party validation of our proposed solution to assess the potential market and revenue opportunity for the Company.
	5.	If this analysis indicates good fundamentals, the Company proceeds with presenting the proposed product development solution to the client.
	6.	The Company will fund the initial costs of facilitating a Proof of Concept demonstration given that, upon successfully meeting that goal, the client participates in the follow-on development costs. The Company product development proposal to the client indicates the specific funding responsibility the client has in testing the product in the targeted environment, and in deriving revenue to the client through deployment of the solution into their business.
	7.	The typical phases of the Company product development process are:
		a.	Proof of Concept demonstration: a quick phase designed to demonstrate to the client that the proposed technology will perform as anticipated.
		b.	Engineering Prototype and Extended Test: Product development is refined, engineered and made more robust. The client then places the product into the field for an extended evaluation.
		c.	Pre-Manufacturing Prototype: Based on the client’s initial field test evaluation, changes, if any, are made to the product and it is prepared for manufacturing.
		d.	Manufacturing: The client provides a formal purchase order for initial manufactured product to be permanently deployed in their business and/or process. To date, no products have reached the manufacturing stage.
		e.	Commercialization: Establishment of manufacturing partners, licensing and/or sale of the product to others well suited to take advantage of the global market opportunity. To date, no products have been successfully commercialized, licensed or sold to third parties.

The Company’s expertise is in rapidly completing the Proof of Concept demonstration. What used to take several months or initially several years can now be completed in a much shorter timeframe given the experience that the Company has developed over the past five years.

The joint development process is built upon protecting our intellectual property in every product development undertaken. The client routinely participates in the patenting process and the resultant patent is collaborative and hence protects both the Company’s intellectual property rights in the product and our client’s interest to use the product within their business space.

To date the Company has advanced its current client development projects to stages 7(a) – 7(c) above. It has not yet successfully commercialized products to the stage where it can realize its goal of securing long term annuity-like revenue streams from royalty and licensing agreements.

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Product Portfolio

The following is a summary of the products for which the Company has been engaged and which are in the various stages of the product development process described above:

	1.	Nanoparticle Detector Platform: Joint product development was initially contracted to by Saudi Aramco and the proof of concept has been approved by the client. The detector platform is capable of detecting magnetic nanoparticles in a flowing oil stream at concentrations as low as 100 parts per trillion. The next steps will be to deliver manufactured versions to oil company laboratories.
		In a parallel product development MAST has begun work on ruggedizing the nanoparticle detector platform so that it can be installed and operated directly on an oil well.
		The Company anticipates up to $2.0 million in client funding in fiscal year 2015 associated with field ruggedization, although there can be no assurances that it will generate any such revenues.
		The Company has filed provisional patents with the United States Patent and Trademark office (“USPTO”) for this product.
	2.	Magnetic Nanoparticle Interwell Tracers: In 2013 the Company began to work with Chevron Energy Company to develop and test fluorescent magnetic nanoparticles capable of behaving in a conservative manner in the application of interwell tracers. The product development initial phase was successfully completed. The Company suggested a parallel product development program aimed at detecting existing interwell tracer chemicals in the field with on well real time detection platform technology.
		The Company has filed provisional patents with the USPTO for this product.
	3.	In Line Real Time Interwell Tracer Detection Platform: In 2014 the Company executed a Joint Product Development Agreement with Chevron Energy Company to develop a well head real time detection platform for the detection of existing interwell tracer chemicals to measurement levels of 300 parts per trillion. The Company has obtained an exclusive license of the base line cavity ring down technology from Entanglement Technologies Inc., for use in interwell tracer detection applications.This work will progress with a laboratory demonstration of the Company’s ability to differentiate between 8-9 interwell tracers simultaneously. This will be followed by an in-field demonstration and ultimately, if successful, possible deployment of the platform throughout the client organization.
		The Company has filed provisional patents with the USPTO for this product.
		The Company has received $704,478 of funding from the client to date and anticipates up to an additional $2.3 million in client funding in fiscal year 2015 associated with field-testing, followed by $23 million in deployment revenue thereafter, although there can be no assurances that the Company will receive such additional funding/revenue.
	4.	IntelliboltTM Automotive Oil Pan Plug Sensor Suite: In 2014, the Company negotiated an exclusive agreement with Flextronics to commercialize, test, manufacture and market the Company’s patented oil pan plug sensor suite to automotive OEMS. The initial licensing agreement calls for the Company to receive an estimated $18 million if and when the initial deployment occurs, in 2016 – 2017, although there can be no assurances that the product will be deployed or that the Company will receiving any related revenues.
		In 2014, one of the Company’s six provisional patents related to this product was issued by the USPTO.

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	5.	Real Time Detection of Wear Elements in Lubricating Fluids: In 2014 the Company executed a Joint Product Development Agreement with Castrol Innoventures to develop a MEMS solution for field deployment in ocean going vessels, wind turbine gearboxes, heavy duty trucks and automobiles. The goal of product development is a 50 cc form factor utilizing laser induced breakdown spectroscopy that will take in line real time oil samples and analytically determine, to precise levels of detection, the various wear elements in the lubricating fluid. In 2014, the Company successfully demonstrated the bench top Proof of Concept. To date, the Company has received $488,485 of funding from the client for this project. It anticipates that it will receive additional client funding in 2015 of up to $1.2 million although there can be no assurances that it will receive such additional funding.
		The Company has filed provisional patents associated with this product with the USPTO.
	6.	Transformer Partial Detection and Expert Advise Platform: In 2014 the Company successfully demonstrated with Northeast Utilities the ability to detect partial discharges inside the transformer using very small sensors. Northeast Utilities accepted the proof of concept and made a progress payment of $200,000. Product development is proceeding into the next phase associated with extended engineering prototype evaluation.
		The Company has filed provisional patents associated with this product with the USPTO.
	7.	Power Line Condition Monitoring: In 2014 the Company began development with Northeast Utilities on a low cost power line condition-monitoring device that is to be designed for pervasive deployment on distribution and transmission catenaries. The Company has filed provisional patents associated with this product with the USPTO.
	8.	Gas Pipeline Corrosion Detection using Autonomous Robotics: In 2014 the Company began early development with Northeast Utilities on a very small robotic platform integrated with a full suite of the Company’s sensors and designed to be deployed autonomously inside distribution gas pipelines. The sensor platform is designed to establish a corrosion profile, along with an electronic mapping and database of 100% of the pipe. The Company has filed provisional patents associated with this product with the USPTO.
	9.	Cement Integrity Sensor: In 2014 the Company began a joint development project with the Chevron Energy Company to develop a sensor platform that can be pumped into oil wells with cement. Once in place, these sensors will scavenge the necessary power from the environment and communicate to the surface valuable information about the ongoing quality of the cement. The Company has filed provisional patents associated with this product with the USPTO.

Intellectual Property:

The Company has been active in building its intellectual property portfolio during 2014. We have engaged a Washington, D.C. based law firm to assist us in these efforts. The Company incurred $176,381 of related costs in 2014.

Development Costs:

Under IFRS, the Company capitalizes product development costs incurred on those development projects which it anticipates realizing future commercial revenues. It reports these development costs on its consolidated balance sheet. If the Company determines that the realization value is less than the carrying value reported in the consolidated balance sheet, the Company will write-down the carrying value accordingly.

The Company reported $3,525,456 as deferred development costs in its consolidated balance sheet as of October 31, 2014. These are costs that it has incurred with respect to these development projects and contracts that it continues to pursue in the immediate term and for which it expects to generate future revenue streams. These costs relate primarily to the active projects described above.

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The changes in deferred development costs in 2014 are summarized as below:

The writedown of project costs of $676,790 in 2014 includes a writedown on one project of $645,528. On that project the Company completed the initial development stages and recovered $300,000 from the development partner, $125,000 of which was received in 2014. In the future, should the Company continue to work with this development partner, it will report all revenues and all direct costs in its Consolidated Statements of Income.

Derivative Warrant Liability:

In October 2013 the Company decided to convert all outstanding Canadian denominated warrants to US dollars and, in every case, the warrant holder accepted this conversion. The Company took this step because of the confusion that our shareholders expressed in interpreting the required treatment and reporting of our derivative warrant liability obligations (these are non-cash liabilities) under IFRS reporting. With this change and the decision to only issue warrants in the future which are denominated in US dollars, the derivative warrant liability was eliminated from our consolidated statement of financial position at October 31, 2013.

Changes to Our Board of Directors and Management:

Our 2013 Annual Meeting of Shareholders was held on January 30, 2015. Salvatore Fuda, , Joseph Fuda, David Sharpless, Steven Van Fleet, Oliver Nepomuceno, Larry Blue, Alex Dey, Craig Carlson and Brian Von Herzen were reelected to serve on our Board of Directors. Andrew Brandt did not stand for reelection to our Board of Directors. Messrs. Salvatore Fuda, Joseph Fuda, Dan Amadori and Steven Van Fleet continue to serve as officers of the Company. Craig Carlson was appointed to serve on our Board of Directors in December 2013 and Brian Von Herzen was appointed in February 2014.

Equity Financing Transactions:

In 2014 the Company realized $6,801,619 of proceeds from the exercise of a total of 27,410,717 common share purchase warrants.

In 2014 the Company settled $8,353 of third party accounts payable balances through the issuance of 17,081 common shares.

In 2014 the Company extended for a period of six months the expiration date for 1,405,026 common share purchase warrants which would have otherwise expired in 2014. The exercise price for 1,105,026 of these warrants was changed from $0.41 and $0.45 per warrant to $0.50 per warrant. The strike price remained unchanged for the balance of the warrants at $0.55 per warrant.

In 2013 the Company completed a series of private placement financings with investors pursuant to prospectus and registration exemptions set forth in applicable securities laws. The Company received gross proceeds of $2,910,532 and issued a total of 16,106,957 common shares. Additionally 16,106,957 common share purchase warrants with an average price of $0.24 were attached to the private placements completed during 2013. All warrants issued in 2013 have a 12 month term from issue date.

In 2013 the Company extended the expiration date on a total of 11,829,029 common share purchase warrants which would have otherwise expired in 2013. These warrants were extended for a period of 12 months in each case. The Company changed the strike price on 3,673,032 warrants extended from $0.17 to $0.21 and other strike prices remained unchanged.

In 2013, the Company repaid one bridge loan of $141,253. At October 31, 2013, it reported one outstanding bridge loan in the amount of $290,014. In January 2014, this bridge loan was converted into 2,517,501 common shares and 2,517,501 common share purchase warrants.

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Intangible Assets and Patents:

Intangible assets comprise the costs which the Company has capitalized relating to the technical expertise and know-how that the Company has developed with respect to the commercialization efforts relating to its sensor technology. In 2012, the Company determined that it had sufficiently advanced its expertise and product knowledge relating to the general commercialization efforts for its sensor technology in multiple industry vertical applications. We anticipate that we will realize commercial economic benefits from the exploitation of these intangible assets in future. Accordingly, we reported $77,409 (2013 = $96,761) of intangible assets at October 31, 2014, representing direct costs incurred with respect to such assets less amortization expense.

We believe that protection of our intellectual property is important to our ability to generate revenues from our technology in the future. We hold issued patents and pending patent applications have also entered into confidentiality and other agreements with third parties and our employees to protect our intellectual property and trade secrets. We intend to continue to actively pursue the protection of our intellectual property. Our management will determine from time to time the jurisdictions where protection is appropriate. This determination will be based on a number of factors including the state of development of our technology, the importance of a particular market for our technology, the costs of pursuing patent protection in a jurisdiction and our financial position at the time.

In 2014, we continued our activity with respect to advancing certain provisional patents relating to projects that are underway with current assignments and projects with our development partners as described above. We capitalized $176,381 of legal fees associated with this work.

With respect to our memory related patents for which we have no immediate plans to further develop, we began in 2013 to attempt to monetize these through the potential sale of such patents.

Environmental Matters:

We are subject to various environmental protection regulations imposed by the government in the jurisdiction where we conduct our development work. We are not aware of any current or pending environmental protection laws or regulations that would have a material impact on our capital expenditure requirements or competitive position.

     C. Organizational Structure

In November, 2007, the Company incorporated Micromem Applied Sensors Technology, Inc. (“MAST”) as a Delaware-based wholly-owned subsidiary. MAST has an office in New York City and is being managed by Steven Van Fleet, its President and a director of Micromem. MAST is pursuing a number of potential strategic joint development agreements with industry partners.

In October, 2008, the Company incorporated 7070179 Canada Inc. as a wholly-owned subsidiary. On October 31, 2008, the Company assigned its rights, title and interest in certain of its intellectual property which it previously held directly to 707179 Canada Inc. in exchange for common shares of this wholly-owned subsidiary.

We have a wholly-owned subsidiary, Pageant International, which was incorporated under the laws of the Turks & Caicos Islands and continued to Barbados on May 25, 2001. Pageant International has a wholly-owned subsidiary, Pageant Technologies (USA) Inc., a corporation incorporated in the State of Utah. Pageant Technologies USA has been inactive since 2002.

We have a wholly-owned subsidiary, Memtech International Inc., incorporated under the laws of the Bahamas, which in turn has a wholly-owned subsidiary, Memtech International (USA) Inc., a corporation incorporated in the State of Delaware. We also have a wholly-owned subsidiary Micromem Holdings (Barbados) Inc. These subsidiaries have been inactive since inception.

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D. Property, Plant and Equipment

We maintain our corporate headquarters in Toronto, Ontario, Canada. We occupy 2,500 square feet of commercial office space pursuant to a lease that we executed in 2012 and which extends for five years through 2017.

The Company made $16,508 capital expenditures in 2014; $14,839 of capital expenditure in 2013; no capital expenditures were made in 2012.

ITEM 4A.          UNRESOLVED STAFF COMMENTS

None.

ITEM 5.             OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This section of the Form 20-F has been prepared to provide a more substantive discussion of our business and to assist the reader in analyzing the audited consolidated financial statements for the years ended October 31, 2014, October 31, 2013 and October 31, 2012. This discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes in this Annual Report, which are prepared in accordance with IFRS and are stated in United States dollars.

A.             Operating Results

The following table sets forth certain selected financial information of our Company:

Selected statement of operations and deficit information

		2014			2013			2012
Interest and other income		-			-			-
Administration		325,453			378,497			694,617
Professional and other fees and salaries		2,360,867			1,572,515			1,507,891
Travel and entertainment		329,779			210,852			150,924
Other expenses		769,519			197,522			495,200
Stock compensation expense		379,253			368,790			430,856
(Gain) Loss on derivatives		-			3,205,752			(1,504,423	)
Loss for the year		4,164,871			5,933,928			1,775,065
Loss per share - basic and diluted		0.02			0.04			0.01

Selected balance sheet information

		2014			2013			2012
Working capital (deficiency)	$	1,034,921		$	425,888			(1,793,217	)
Other Assets		3,827,852			1,110,431			889,187
Total Assets		5,636,605			2,166,455			1,180,278
Shareholders’ equity (deficiency)		4,862,773			1,536,319			(904,030	)

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Fiscal 2014 Compared to Fiscal 2013

The Company reported a loss of $4,164,871 in 2014 versus a loss of $5,933,928 in 2013. In 2013 the net loss included a non-cash loss on the revaluation of derivative warrant liability of $3,205,752; excluding this component, the 2013 loss was $2,728,126.

The increase in loss from operations in 2014 resulted from several components including:

	(a)	An increase of $788,352 in professional fees, other fees and salaries in 2014 (2014 expense of $2,360,867 versus 2013 expense of $1,572,515).
		In 2014 the Company incurred additional legal fees relating to contract negotiations with its customers, additional costs associated with its audit of internal control over financial reporting, which was required in 2014 given the Company’s status as an accelerated filer and additional salary and fees paid to officers, directors and employees of approximately $600,000. Research and development costs increased from $160,920 in 2013 to $703,671 in 2014, an increase of $542,751.
	(b)	Travel and entertainment expense increased to $329,779 in 2014 from $210,852 in 2013. The Company incurred significantly more travel related costs in 2014 relating to the increased level of activity that it was engaged in with its current clients.
	(c)	Other expenses increased to $769,519 in 2014 from $197,522 in 2013. Included in other expenses are amortization costs of $7,357 ($24,341 in 2013), foreign exchange expenses of $58,491 ($12,261 in 2013) and research and development expenses of $703,671 ($160,920 in 2013). Included in this total in 2014 was the writedown of development cost incurred on one project for which it had completed the staged development phases for that contract. The Company recovered $300,000 from the development partner on this project, $125,000 of which was received in 2014. The net writedown was $645,528 for this project.
	(d)	Stock compensation expense, calculated in accordance with the Black Scholes option pricing model, was $379,253 in 2014 relating to the issuance of 630,000 stock options awarded to directors, officers and staff (2013: expense of $368,790 relating to the issuance of 2,170,000 stock options).
	(e)	Administration costs include rent, communication costs, insurance, filing fees and costs associated with the Annual General meeting. These costs were comparable in 2014 and 2013. The Company reported nil accretion expense in 2014 ($19,381 in 2013) and interest expense of $28,640 ($78,677 in 2013) on convertible debentures.

At October 31, 2014, the Company had working capital of $1,034,934 compared to $425,888 at October 31, 2013. Included in deposits and other receivables at October 31, 2014 is a $244,074 advance provided to Mr. Steven Van Fleet, the President of MAST Inc., the Company’s active U.S. subsidiary. This advance was authorized by the Company’s Compensation Committee in May 2014 and is recoverable by the Company against future compensation.

The Company’s investment in deferred development costs increased to $3,525,456 at October 31, 2014 from $928,077 in 2013, an increase of $2,597,379. The Company’s activities with its customers increased and progressed on multiple fronts in 2014 as described in Item 4 of this Annual Report. A reconciliation of the increase in the Company’s investment in its deferred development costs in 2014 is provided as below:

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The write down of project costs in 2014 of $676,790 consists principally of the deferred costs previously incurred with respect to the Nanoparticle Detector Platform project for which the Company completed its initial phases of activity in 2014. See Item 4 of this Annual Report for a description of this project.

In 2014 the Company realized $6,801,619 from the exercise of 27,410,717 common share purchase warrants by shareholders who had subscribed to unit private placements in prior years. In 2013 the Company realized $822,391 from the exercise of 5,953,913 common share purchase warrants by shareholders; additionally, it realized $2,910,532 from the issuance of private placements for a total of 16,106,957 units, each consisting of one common share and one common share purchase warrant.

In 2014 the Company converted its remaining outstanding bridge loan, which was originally obtained in 2011, into 2,517,501 units, each consisting of one common share and one common share purchase warrant. Additionally, it settled a third party trade payable balance of $8,353, at the supplier’s request, through the issuance of 17,081 common shares.

Fiscal 2013 Compared to Fiscal 2012

The Company reported a loss of $5,933,928 in 2013 versus a loss of $ 1,775,065 in 2012. The increased loss was primarily the result of a non-cash loss on derivatives of $3,205,752 (2012: a non cash gain on derivatives of $1,504,423).

The Company’s working capital position improved significantly in 2013 in comparison to the prior year. This is the result of the Company’s success in raising additional financing in 2013, in reducing its expenses and also the result of eliminating the derivative warrant liability from its consolidated balance sheet in 2013.

The Company capitalized $677,445 of development costs relating to several development projects in 2013 (2012: $71,557) and recovered $233,290 of costs incurred from customers. At October 31, 2013 the Company reported $928,077 of deferred development costs on its balance sheet (2012: $718,163).

In the fiscal year ended October 31, 2013, the Company reported net additions of $44,825 to its patents (2012: $26,650). The Company reported $71,595 of patents on its consolidated balance sheet at October 31, 2013 (2012: $49,124).

The Company reported no expenditures on intangible assets in 2013 (2012: Nil). At October 31, 2013, the Company reported $96,761 of intangible assets on its consolidated balance sheet (2012: $116,113).

The Company reported no interest income in 2013 (2012: nil). It recorded, but fully reserved a total of $20,105 (2012: $20,300) of interest income on a secured promissory note outstanding.

Administration costs include office rent, communication costs, insurance, filing fees and costs associated with the Annual General Meeting. These costs were comparable in 2013 and 2012. In 2013, the Company also reported $19,381 of accretion expense relating to its convertible debentures versus $187,671 in 2012 - the Company began phasing out of its convertible debentures in 2013. Finally, the Company incurred $72,756 in 2012 with respect to preliminary costs associated with upgrading its listing status in Canada; it incurred no such costs in 2013.

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Professional and other fees and salaries totaled $1,572,515 in 2013 (2012: $1,507,891). These costs include: audit related fees of $149,478 (2012: $118,475), legal expenses of $154,340 (2012: $48,951), management fees of $637,011 paid to the Chairman, the CEO and the CFO (2012: $514,262), staff salaries and benefits of $443,078 (2012: $407,450), other expenses of $7,512 (2012: $15,594) and consulting fees of $181,096 (2012: $403,158). Consulting fees have several significant components: the Company paid fees of $140,790 to third party advisors who assisted the Company in investor relations in 2013 (2012: $104,003); it paid the President of MAST a total of $230,896 in 2013, of which approximately $27,000 has been expensed in 2013; the balance of the total expenditure has been capitalized in several projects and these costs are included in deferred development costs (in 2012, $183,000 of costs were expensed ); and assistance in IFRS reporting of $23,238 ($35,565 in 2012).

Stock compensation expense, calculated in accordance with the Black Scholes option pricing model was $368,790 in 2013 relating to the issuance of 2,170,000 stock options awarded to directors, officers and staff (2012: expense of $430,856 relating to the issuance of 2,000,000 stock options).

In 2013 other expenses included amortization costs relating to property, equipment, patents and intangible assets of $24,341 (2012: $23,766) foreign exchange expense of $12,261 (2012: $7,537) and the Company expensed $160,920 of project development costs incurred (2012: $229,840). In 2012 the Company recovered a total of $72,004 of costs previously expensed relating to patents and to the promissory note receivable; in 2013 no such recoveries were reported.

Under IFRS the Company accounts for the outstanding Canadian denominated warrants and the conversion feature on its bridge loans as embedded derivative liabilities, measuring these liabilities using the Black Scholes option pricing model. These liabilities are revalued at each quarter end. In 2013, the Company reported a net (non-cash) expense of $3,205,752 (2012 a net (non-cash) gain of $1,504,423) on these embedded derivatives.

Unaudited quarterly financial information

(all amounts in United States dollars)
Quarter ended		Total			Net Income (Loss)			Loss Per share
		Revenues						Basic and diluted
October 31, 2014		-			($1,088,154	)		(0.01)
July 31, 2014		-			(1,602,411	)		(0.01)
April 30, 2014		-			(922,183	)		(0.01)
January 31, 2014		-			(552,123	)		-
October 31, 2013		-			($5,239,307	)		(0.03)
July 31, 2013		-			(261,031	)		-
April 30, 2013		-			(17,012	)		-
January 31, 2013		-			(416,078	)		-
October 31, 2012		-		$	1,606,175			.01
July 31, 2012		-			(507,079	)		-
April 30, 2012		-			(2,849,835	)		(0.02)
January 31, 2012		-			(24,327	)		-

The net income (loss) has varied significantly between quarters in 2012 and in 2013, the result of the required re-measurement of derivative warrant liability at each quarter end under IFRS reporting, which re-measurement is a non-cash item.

In October 2013 the derivative warrant liability was eliminated. The Company recorded a non-cash charge of $5,225,000 relating to the elimination of this derivative warrant liability in the quarter ended October 31, 2013.

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B. Liquidity and Capital Resources:

Liquidity

We have not yet realized commercial revenues from the exploitation of our technology platforms. We currently do not have positive cash flow from operations and will not realize positive cash flow until we license or directly produce and sell products utilizing our technology platforms.

We currently have no lines of credit available. We have, to date, relied on obtaining equity financing from investors through private placements and through the exercise by shareholders of common share purchase warrants in order to meet our cash flow needs until we can generate sustainable revenues. At October 31, 2014 we had $1,034,921 of working capital (2013: $425,888) including cash on hand of $935,987 (2013: $821,283) and our monthly overhead cash expenses approximate $175,000. Since October 31, 2014 we have raised an additional $565,714 through the exercise of common share purchase warrants.

During 2014 we recovered $662,290 of costs that the Company incurred from its customers on the multiple projects that it has been developing. Since October 31, 2014, the Company has recovered an additional $942,978 from its customers on these projects. We anticipate that in 2015, our development projects, in total, will be self-funding.

We have granted to our directors, officers and other employees a number of options to purchase shares at prices that are at or above market price on the date of grant. None of the optionees has any obligation to exercise their options and there can be no guarantee that we will realize any funds from these options.

Capital Resources

We made $16,508 of capital expenditures in 2014; in 2013 we made $14,839 of capital expenditures and made no expenditures on capital equipment in 2012.

C. Research and Development:

Under IFRS, research costs are expensed in the period incurred. Development expenses are expensed as incurred unless they meet the criteria for deferral and amortization under IFRS, which criteria is the translation of research findings or other knowledge into a plan for the technology prior to commercial production or use.

D. Trend Information:

The market applications for “smart” sensors are expanding; there are potential applications that could be utilized in virtually every industry vertical.

Our prospects for commercial revenues are dependent upon the successful completion of all milestones in the development contracts that we have renewed to date, obtaining additional development contracts with new customers and upon the customers deciding to proceed with commercial orders once these development contracts are successfully completed.

E. Off-Balance Sheet Arrangements:

We are not party to any off-balance sheet arrangements except for operating lease commitments. In addition, we have no unconsolidated special purpose financing or partnership entities.

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F. Tabular Disclosure of Contractual Obligations:

A summary of our financial commitments as of October 31, 2014 is as below:

In addition to these financial commitments, the Company has management agreements with its senior executives which are operative on a month to month basis. At October 31, 2014 these agreements stipulate the following monthly obligations for the Company’s senior management team:

     Critical Accounting Policies:

Our significant accounting policies are set forth in our consolidated financial statements, which should be read in conjunction with management's discussion of our critical accounting policies and estimates set forth below.

Our consolidated financial statements for the period have been prepared in accordance with IFRS which, in our case conforms in all material respects with U.S. GAAP except for the accounting for development expenditures reported, for intangible assets, warrant modification and modification of the conversion feature of bridge loans reported in the fiscal years ended October 31, 2014, 2013, 2012 and 2011.

We have not yet realized commercial revenues from the exploitation of our technology. Under IFRS, research costs are expensed in the period incurred. Development expenses are expensed as incurred unless they meet the criteria for deferral and amortization under IFRS which is the translation of research findings or other knowledge into a plan for the technology prior to commercial production or use. Under U.S. GAAP all development expenditures are expensed as incurred. As at October 31, 2014, the Company capitalized $3,525,456 (2013: $928,077) of development costs and capitalized $77,409 (2013: $96,761) as intangible assets under IFRS.

Management is required to make estimates and assumptions which can affect the reported balances. In determining estimates of net recoverable amounts and net realizable values, or whether there has been a permanent impairment in value, we rely on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events.

Accounts recorded in foreign currency have been converted to United States dollars as follows: current assets and current liabilities at the prevailing exchange rates at the end of the year; other assets at historical rates; revenues and expenses are translated at the three month average monthly exchange rate per quarter which rate approximates the rate of exchange prevailing at the transaction dates; and gains and losses resulting from the fluctuation of foreign exchange rates are included in the determination of income.

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G. Contingencies:

A.	We have agreed to indemnify our directors and officers and certain of our employees in accordance with our By-laws. We maintain insurance policies that may provide coverage against certain claims.
B.	In 2013 the Company recovered $181,780 of accounts payable balances, recorded in previous years, relating to third party vendors whose accounts the Company has disputed. The Company has concluded that these amounts are not payable. In the event it is determined that these amounts are payable the Company would incur these costs.

H. Translation of Foreign Currencies:

Our functional and reporting currency is the United States dollar. Accounts recorded in foreign currency have been converted to United States dollars as follows: Monetary assets and liabilities are translated at exchange rates at the consolidated balance sheet dates; non-monetary assets are translated using the historical rate of exchange in effect at the translation dates; revenues and expenses are translated using the three month average rate of exchange per quarter, which rate approximates the rate of exchange prevailing at the transaction dates; and gains and losses resulting from the translation are included in the determination of net loss for the period.

ITEM 6.             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.             Directors and Executive Officers

The Directors and Executive Officers of Micromem as at February 25, 2015 are set forth below:

Name	Age	Position
Salvatore Fuda	79	Chairman of the Board of Directors
Joseph Fuda	53	President, Chief Executive Officer and Director
Dan Amadori	63	Chief Financial Officer
Steven Van Fleet	60	Director and President of MAST, Inc.
David Sharpless	64	Director
Larry Blue	58	Director
Oliver Nepomuceno	45	Director
Alex Dey	71	Director
Craig Carlson	59	Director
Brian Von Herzen	55	Director

Salvatore Fuda has served as Chairman of the Board of Directors of Micromem since January 11, 1999 and a Director of Micromem since 1992. He served as President and Chief Executive Officer from June 2000 through to February 13, 2002. From 1992 to January 11, 1999 he also served as Secretary of Micromem. He served as President and Chief Executive Officer of Ontex Resources Limited (TSE) from 1986 to December 1998 and as Chairman of the Board of Ontex Resources Limited until 2008. He has served as Chairman of the Board of Directors and as a director of Echo Energy Canada Inc. from 2002 - 2009. He also served as Chairman of the Board of Leader Capital Corp. He is the father of Joseph Fuda.

Joseph Fuda has been President, Chief Executive Officer and Director since February 13, 2002. Previously he served as Manager of Strategic Alliances for Micromem since February 2001. Prior thereto, he served as a consultant to Micromem since November 2000. Prior thereto he served as a Vice-President and a Director of IPO Capital Corp since April 1999. He was a director of Leader Capital Corp. until June 2007 and also served as a director of Echo Energy Canada Inc, and of Echo Power Generational Inc until June 2004.

Dan Amadori has served as Chief Financial Officer of Micromem since June 2004. He has also served as Chief Financial Officer of Leader Capital from June 2004 – March 2009. He served as a Director and Chair of the Audit Committee of Ontex Resources between September 2003 and March 2005. He served as CFO of Echo Power Generation Inc. from June 2004 - March 2008. He served as a director of Hydrive Technologies Inc. from 2004-2008 and as Chair of the Audit Committee of Hydrive from 2006-2008. He served as a Director and CFO of XGEN Ventures Inc. between November 2005 and September 2009. He was appointed as Chairman of Kingsway Arms Retirement Residences in August 2011. He is President of Lamerac Financial Corp., a financial advisory firm and has held that position since October 1988. Mr. Amadori is a Chartered Accountant and holds an MBA from the Ivey School of Business.

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Steven Van Fleet has been President of MAST since 2008 and a director of Micromem since 2002. He is a 1976 graduate of Miami University with a BSc. in Applied Science and held several technical positions in the pulp and paper industry including Reed Paper, MacMillan Bloedel, Weyerhaeuser, Boise Cascade and International Paper. While at International Paper, he managed the corporate research and development group responsible for applying emerging technology to business issues. Mr. Van Fleet was one of the founding directors for the MIT Auto ID group that was charged with creation of the Internet of Things and the emergence of a global standard for the application of RFID. He held business development positions with Sentrol System, a supplier of paper machine quality systems and the R&V Group, a startup RFID manufacturing company. For six years he was the owner of a company that served IBM with a focus on semiconductor clean room tool analytics and automation.

David Sharpless is the Chairman and CEO of Maverick Inc., a private consulting and investment firm and the Chairman and CEO of New Carbon Economy Venture Management Inc., a private company which manages a number of investments in “green” technology companies. He was the Chairman and CEO of TrustMark Auto Group Inc. a CNSX listed company and the Chairman of Hunter Keilty Muntz and Beatty Limited, a firm of international insurance brokers based in Toronto and the Vice Chairman of its successor, HKMB Hub International Ltd. Prior to joining Hunter Keilty Muntz and Beatty Limited in 2001, his career spanned more than 25 years as a business lawyer with Blake, Cassels & Graydon and as a senior leader in international finance. He has served as a director of Micromem since 2001.

Larry Blue is an independent consultant on emerging technologies. Currently he serves as Executive Vice President and Chief Operating Officer of Bell and Howell Ltd. Previously he was the President of New Vision Display, Inc., responsible for Global Sales and Marketing. NVD was spun out of Multek Technologies Inc., a subsidiary of Flextronics, where he was a Vice President and General Manager of their Printed Electronics business. Previously he was President of Hi-G-Tek Inc. a privately-held technology company based in Maryland. Previously he was the Vice President and General Manager of Symbol Technologies Inc. Previously Mr. Blue had senior management roles with Hughes Network Systems and with IBM in Research Triangle Park. He has served as a Director of the Company since 2005.

Oliver Nepomuceno has served as a director of Micromem since June 26, 2006. He is a resident of Switzerland and continues to serve as a Financial Advisor with a private wealth management company located in Switzerland.

Alex Dey is a retired business man and was elected as a director on September 24, 2010. He was the sole proprietor of Alex Dey, Chartered Accountants until July 31, 2004.

Craig Carlson is the Managing Director of the Carlson Group LLC, an advisory group based in Boston Massachusetts serving the global automotive industry. Previously he was the CEO and Managing Director of S.I.Automotive LLC between 2003 - 2006. He was a senior vice president with Arthur D Little, a Global Management and Technology Consulting organization, between 1989-2003. Previously he was a district/zone manager with General Motors Corporation between 1977-1989. He joined the Micromem Board of Directors on December 1, 2013.

Brian Von Herzen
Since 1993, Dr. Von Herzen has served as Chief Executive Officer at Rapid Protoypes, Inc. providing turnkey electronic product design services, including commercial product specifications and fully functional engineering product prototypes, frequently using programmable logic devices. Rapid Prototypes is expert in electronic engineering design technologies designed to minimize time to market for new electronic products in networking, consumer electronics and other commercial products. The company has developed some of the world’s fastest commercial FPGA applications. Dr. Von Herzen also serves on the board of directors of the Climate Foundation and Bright Energy Storage Technologies, LLP. Dr. Von Herzen has also developed software and hadware systems ranging from apps on smartphones to multi-GHz correlating spectrometers for the Caltech Submillimeter Observatory. He has extensive experience with electronic and optical system development for commercial electronic products.

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There are no arrangements or understandings between any director and any other person pursuant to which the director was selected as a director or executive officer. Each director holds office until the next annual meeting of shareholders or until his or her successor is elected or appointed, unless his or her office is earlier vacated according to the provisions of our By-laws or the

Business Corporations Act (Ontario).

Other than a father/son relationship between Salvatore Fuda (father) and Joseph Fuda (son), there is no family relationship between any director or executive officer and any other director or executive officer.

B.             Compensation

	Annual Compensation			Long-Term Compensation
				Awards
	Fiscal	Salary	Bonus	Other Annual	Securities
Name and	Year	(US$)	(US$)	Compensation	Under Options
Principal Position				(US$)	Granted (#)
Joseph Fuda	2012	190,000	-	-	30,0001
Chief Executive Officer	2013	318,000	-	-	-
	2014	234,107	534,398	-	-
			-
Salvatore Fuda,	2012	150,000	-	-	110,0001
Chairman of the Board of Directors	2013	146,599	-	-	140,000 2
	2014	137,172	-	-	-
David Sharpless	2012	-	-	-	190,0001
Director	2013	-	-	-	140,000 2
	2014	-	-	-	25,000
Steven Van Fleet	2012	261,000	-	-	500,0001
Director and President of MAST, Inc.	2013	231,000	-	-	140,000 2
	2014	230,193	-	-	35,0004
Dan Amadori	2012	175,000	-	-	190,0001
Chief Financial Officer	2013	146,649	33,589	-	140,0002
	2014	151,063	53,982	-	20,0004
Larry Blue	2012	-	-	-	190,0001
Director	2013	-	-	-	140,0002
	2014	23,877	-	-	25,0004
Oliver Nepomuceno	2012	-	-	-	190,0001
Director	2013	-	-	-	140,0002
	2014	-	-	-	25,0004
Alex Dey	2012	-	-	-	-
Director	2013	-	-	-	140,0002
	2014	-	-	-	30,0004
Craig Carlson	2012	-	-	-	-
Director	2013	-	-	-	300,0003
	2014	14,866	-	-	25,0004
Brian Von Herzen	2012	-	-	-	-
Director	2013	-	-	-	-
	2014	1,843,6435	-	-	25,0004

Notes:

1.	Each option entitles the holder to purchase one common shares at a price of $0.35 per share prior to expiration in April 2017.
2.	Each option entitles the holder to purchase one common share at a price of $0.30-$0.27 CDN per share prior to expiration between January and September 2018.

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3.	Each option entitles the holder to purchase one common share at a price of $0.35 per share prior to expiration in October 2018.
4.	Each option entitles the holder to purchase one common share at a price of $0.64U/$0.70CDN per share prior to expiration in April 2019.
5.	Brian Von Herzen became a director in February 2014. Rapid Prototypes, Inc, a company whose major shareholder is Mr.Von Herzen, invoices the Company for engineering, product development and design services.

Options are offered to directors, executive officers and employees to purchase our common shares at an exercise price equal to or above the market price for the common shares at the date that the options are granted. These options are approved by the Compensation Committee. None of the directors have agreements that provide for benefits upon termination of service.

In 2014 a total of 630,000 stock options were granted to officers, directors, employees and outside consultants. The exercise price for 350,000 options in February 2014 was $0.85 per share; the exercise price for 280,000 options issued in April 2014 was $0.64 per share.

In 2013, a total of 610,000 options were forfeited and cancelled. In 2013 options were granted to directors, officers and employees as follows: in January 2013, 1,090,000 options were granted at an exercise price of $0.30 per share; in September 2013, 780,000 options were granted at an exercise price of $0.27 per share; in October 2013, 300,000 options were granted to a consultant at an exercise price of $0.35 per share.

In March 2012, 2,720,000 options were cancelled. In April 2012 a total of 2,000,000 options were granted to directors, officers and employees at an exercise price of $0.35 per share.

C.             Board Practices:

All matters pertaining to our financing, contractual arrangements and Management and Director compensation are approved by the Board of Directors. The members of the Board of Directors are appointed to a one-year term at our Annual General Meeting.

Our Board of Directors meets on an as required basis during the fiscal year. In 2014 our Board of Directors met formally in February 2014. The Board was also convened informally as of each quarter end.

Our Audit Committee regularly during fiscal 2014 for the purpose of approving and recommending to the Board the quarterly financial statements and our yearend financial statements. In addition, our Audit Committee receives regular periodic reports from management.

Our Compensation Committee met regularly in 2014 and additionally receive regular reports from management. Our Compensation Committee approves Management and Director Compensation and all stock option grants for recommendation to the Board of Directors.

Our Disclosure Committee met as required in 2014 to review our various press release disclosures and to monitor our general practices relating to our disclosure requirements.

Audit Committee

The Board of Directors has appointed an Audit Committee consisting of three independent directors. The members of the Audit Committee are Alex Dey, Oliver Nepomuceno and David Sharpless (Chairman), each of whom serves in such capacity until the Board of Directors’ next annual meeting. The Audit Committee is responsible for the integrity of our internal accounting and control systems. The committee receives and reviews our financial statements and makes recommendations thereon to the Board of Directors prior to its approval by the full Board of Directors. The Audit Committee communicates directly with our external auditors in order to discuss audit and related matters whenever appropriate. In 2014 the Audit Committee met formally in January, February March, June, September and October.

Compensation Committee

The Board of Directors has appointed a Compensation Committee which meets on executive compensation matters as and when required. Our Compensation Committee includes Oliver Nepomuceno and Alex Dey as outside directors. The Compensation committee met monthly between January – June 2014, in September 2014 and in January 2015.

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Disclosure Committee

The Board of Directors has appointed a Disclosure Committee whose primary responsibility is to ensure timely and accurate disclosure of all relevant information in accordance with the various securities regulations. Our Disclosure Committee includes Salvatore Fuda, the Company’s Chairman, and Alex Dey, an outside director.

D.             Employees

We have six employees, three of which serve in a management capacity and three of which serve in an administrative capacity. This includes the Chief Executive Officer and President, the Chief Financial Officer and the President of MAST and three support staff, all (except for the President of MAST) of whom work from our executive offices in Toronto, Canada. All research and development is outsourced to third parties. We consider our relations with our employees to be satisfactory.

E.             Share Ownership

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1	Calculated based on shares owned plus options held as a percentage total of shares outstanding as of October 31, 2014, plus options held.
2	5,003,611 shares are held by a corporation wholly owned by a trust established for the benefit of members of Salvatore Fuda's family.
3	215,716 shares are held by a corporation controlled by Mr. Amadori.
4	254,863 shares are held by a corporation wholly owned by Mr. Dey.

ITEM 7.             MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.             Major Shareholders:

No shareholder holds greater than 5% of the common shares outstanding. As of the date of this Annual Report approximately 58% (94,832,406) of the issued and outstanding common shares are held by Canadian investors; approximately 21% (34,335,872) of the issued and outstanding shares are held by U.S. investors; and approximately 21% (34,335,871) are held by investors outside of Canada and the U.S.

B.             Other Related Party Transactions:

The Company reports the following related party transactions:

	(a)	Mr. Salvatore Fuda: Our Chairman of the Board receives cash compensation on a month to month basis calculated at an annual rate of $150,000 CDN ($120,000 US at current exchange rates).
		Mr. Fuda was not granted any stock options in 2014. In 2013 Mr. Fuda was awarded a total of 140,000 stock options at an average exercise price of $0.29 CDN per share (2012 - 100,000 stock options at an average exercise price of $0.35 per share).
		The total compensation paid to our Chairman of the Board during the year ended October 31, 2014 was $137,172 of cash compensation and zero stock based compensation (2013 - $146,599 of cash compensation and $ 21,163 of stock based compensation; 2012 - $149,565 of cash compensation and $23,697 of stock based compensation).
		In 2014 the Company provided a short term non-interest bearing advance of $38,084 against monthly compensation due to the Chairman. This advance was repaid subsequent to October 31, 2014.
	(b)	Management and consulting fees and advances:
		Included in professional fees, other fees and salaries as reported are management fees and consulting fees paid or payable to individuals (or Companies controlled by such individuals) who served as officers, directors and employees of the Company. The total compensation paid to such parties is summarized as:

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In 2014 these parties were awarded a total of 540,000 stock options at an average exercise price of $0.76 CDN per share (2013 – 1,292,500 stock options at an average price of $0.29 per share; 2012 – 1,755,000 stock options at an average exercise price of $0.35 per share)

In 2014 the Company was invoiced $1,843,634 (2013-$391,192; 2012- $94,755) by Rapid Prototypes, Inc (RPI), a company whose major shareholder is Brian Von Herzen, who has served as a director of the Company since February 2014 and who also serves as our Chief Technology Officer. These charges have been capitalized as deferred development costs. Included in accounts payable at October 31,2014 is $208,425 owing to RPI .

In February to March 2014, Mr. Amadori was provided with an advance of $119,757 against monthly compensation due to him. Interest on the advance was charged at a rate of 1% per month on the opening monthly balance outstanding. Mr. Amadori repaid $78,036 through October 31, 2014 and was awarded a performance based bonus at October 31, 2014 which was applied to the repayment of the remaining balance of the advance.

In May 2014, Mr. Van Fleet was provided with an advance of $244,074 against monthly compensation due to him. No interest was charged on the advance and this balance remained outstanding at October 31, 2014. In February 2015, Mr. Van Fleet was awarded a performance based bonus which was applied to and eliminated the total amount of the outstanding advance.

In 2014, a senior employee was provided with an advance of $80,916 against monthly compensation due to the employee. This advance was non-interest bearing. The advance was repaid subsequent to October 31, 2014.

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ITEM 8.             FINANCIAL INFORMATION

A.             Consolidated Statements and Other Financial Information

Our consolidated financial statements for the years ended October 31, 2014, 2013, 2012 and 2011 have been prepared in accordance with IFRS. Prior to 2011, the Company prepared consolidated financial statements in accordance with Canadian GAAP.

We have never paid a dividend on our securities. We do not anticipate paying dividends in the foreseeable future.

As of October 31, 2014 there were no legal proceedings outstanding. In November 2014 the Company commenced an action against a contractor claiming multiple causes of action and is seeking damages relating to services provided by the contractor between 2008-2011. At February 25, 2015, the contractor has denied the allegations and is seeking dismissal of the Company’s claims.

B.             Significant Changes

Significant Changes since October 31, 2014 are as presented in Note 23 to the Company’s Consolidated Financial Statements. See “ITEM 18 – Financial Statements”.

ITEM 9.             THE OFFER AND LISTING

Our common shares are traded in the United States and are quoted on the OTC QX. The common shares are quoted under the symbol MMTIF. Our common shares are traded in Canada on the CSE under the symbol MRM.

The table below sets forth the high and low sales prices for common shares in U.S. Dollars as reported for the periods specified. Our fiscal year end October 31.

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On February 25, 2015, the last reported sale price for our common shares on the OTC QX was $0.53.

ITEM 10.           ADDITIONAL INFORMATION

A.             Share Capital

Our authorized capital consists of an unlimited number of common shares, of which 188,436,724 shares were issued and outstanding as of October 31, 2014, and 2,000,000 special, redeemable, voting preference shares, referred to herein as special shares, none of which were outstanding, as of October 31, 2014.

Additionally the Company has 12,105,000 stock options outstanding with a weighted average exercise price of $0.27 (2013: 11,475,000 options outstanding with a weighted average exercise price of $0.24) and a total of 4,485,463 outstanding warrants to acquire common shares with a weighted average exercise price of $0.37 (2013: 29,761,012 outstanding warrants with a weighted average exercise price of $0.27) .

B.             Memorandum and Articles of Incorporation

Articles of Incorporation
Incorporation Details and Objects of Micromem Technologies Inc.

Micromem Technologies Inc. was incorporated under the laws of the Province of Ontario, Canada, on October 21, 1985 as Mine Lake Minerals Inc. We subsequently changed our name to Avanti Capital Corp. by filing Articles of Incorporation of Amendment on June 23, 1988 and to AvantiCorp International Inc. on April 30, 1992 before becoming Micromem Technologies Inc. on January 14, 1999. The Articles of Incorporation of Incorporation place no restrictions on the nature of the business to be carried on by Micromem.

Summary of Directors Powers and Authorities

The rights, duties, powers and authorities of our Board of Directors are set out in the Articles of Incorporation and By-laws and the statutory provisions of the Business Corporations Act (Ontario). The following is a selected summary of the Articles of Incorporation, By-laws and applicable provisions of the Business Corporations Act (Ontario) as they relate to selected rights, duties, powers and authorities of our Board of Directors.

The Articles of Incorporation provide for a minimum of three and a maximum of 12 directors. The Business Corporations Act (Ontario) prescribes that an offering corporation must have a minimum of three directors, at least twenty five percent (25%), or if they are less than 4, at least one of whom are Canadian residents and at least one third of whom are not officers or employees of us or our affiliates. The Board of Directors may, between annual shareholders meetings, appoint one or more additional directors to serve until the next annual shareholders meeting provided that the number of directors so added may not exceed by one-third (1/3) the number of directors required to have been elected at the last annual meeting of shareholders.

The Chairman of the Board of Directors or any one director may call a meeting upon the provision of forty-eight hours notice to each director in the manner prescribed in our By-laws. Any such notice shall include the items of business to be considered at the meeting. A majority of the directors constitute a quorum provided that half of those directors present are Canadian residents. Business cannot be transacted without a quorum. A quorum of directors may vote on any matter of business properly brought before the meeting provided that where a director is a party to a material contract or proposed material contract or has a material interest in the matter to be considered, such director must disclose his or her interest at the earliest possible date, request the conflict be noted in the minutes of the meeting, and with a few limited exceptions enumerated in the By-laws, refrain from voting on the matter in which the director has a material interest. There is no limitation on the Board of Directors to vote on matters of their remuneration provided such remuneration is disclosed in the financial statements and annual shareholder proxy materials.

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The Board of Directors has broad borrowing powers and may, without authorization from the shareholders:

• borrow money on the credit of Micromem;

• issue, re-issue, sell or pledge debt obligations of Micromem;

• subject to restrictions respecting financial assistance prescribed in the Business Corporations Act (Ontario), give a guarantee on behalf of Micromem to secure the performance of an obligation of any person; and

• mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of Micromem, owned or subsequently acquired, to secure any obligation of Micromem.

A person is qualified to be or stand for election as a director provided such person is at least 18 years of age, is not a bankrupt and is not found to be of unsound mind by a court in Canada or elsewhere. There is no requirement for a director to hold common shares.

Securities of Micromem

Holders of our common shares will be entitled to receive notice of, attend and vote at all meetings of the shareholders of Micromem. Each common share carries one vote at such meetings. In the event of the voluntary or involuntary liquidation, dissolution or winding-up of Micromem, after payment of all outstanding debts, the remaining assets of Micromem available for distribution will be distributed to the holders of our common shares. Dividends may be declared and paid on our common shares in such amounts and at such times as the directors shall determine in their discretion in accordance with the Business Corporations Act (Ontario). There are no pre-emptive rights, conversion rights, redemption provisions or sinking fund provisions attaching to the common shares. Common shares are not liable to further calls or to assessment by Micromem; provided, however, that pursuant to the provisions of the Business Corporations Act (Ontario), Micromem has a lien on any common share registered in the name of a shareholder or the shareholder's legal representative for a debt owed by the shareholder to Micromem.

Holders of special shares are entitled to receive notice of, attend and vote at all meetings of the shareholders of Micromem. Each special share carries one vote at such meetings. In the event of the voluntary or involuntary liquidation, dissolution or winding-up of Micromem, after payment of all outstanding debts, the holders of the special shares shall be entitled to receive, before any distribution of any part of the assets of Micromem among the holders of any other shares, the amount paid up on the special shares. The special shares are redeemable at the option of Micromem for the amount paid up on the shares. Dividends may not be declared or paid on the special shares and transfer of the Special Shares is restricted without the approval of the Directors of Micromem and the prior written consent of the Ontario Securities Commission. The number of special shares that may be issued and outstanding at any time is limited to 500,000. There are no pre-emptive rights, conversion rights or sinking fund provisions attaching to the special shares. Special shares are not liable to further calls or to assessment by Micromem; provided, however, that pursuant to the provisions of the Business Corporations Act (Ontario), Micromem has a lien on any special shares registered in the name of a shareholder or the shareholder's legal representative for a debt owed by the shareholder.

Rights and Privileges of Shareholders

Only the registered holders of our common shares and special preference shares on the record date are entitled to receive notice of and vote at annual and special meetings of shareholders. Where the items of business affect the rights of shareholders other than the holders of common shares, a special majority of two-thirds of the votes cast by the affected shareholders at the meeting called for such purpose is required to approve the item of business. Beneficial holders of common shares and special shares are also entitled to receive proxy materials in respect of meetings of shareholders in accordance with Canadian Securities Administrators National Instrument 54-101, provided that such proxies are limited in scope to instructing the registered shareholder (usually a brokerage house) on how to vote on behalf of the beneficial shareholder. There are no restrictions on the number of shares that may be held by non-residents other than restrictions set out in the Investment Canada Act (Canada). See "Additional Information - D. Exchange Controls".

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There are no provisions in the By-laws regarding public disclosure of individual shareholdings. Notwithstanding this, applicable Canadian securities legislation requires certain public disclosure of persons owning or acquiring common shares in excess of 10% of a corporation's issued and outstanding share capital.

C.             Material Contracts

The Company originally negotiated employment contracts with its Chairman of the Board in 2005 and its senior management team in 2008.

In 2010 the Company entered into a month to month contract with Mr. Dan Amadori, its CFO, at the expiration of the employment agreement signed in 2008. These month to month arrangements continue at October 31, 2014. Under the terms of the contract, Mr. Amadori receives $12,500 CDN ($10,000 US) in monthly compensation and additional compensation at the discretion of the Compensation Committee.

In 2010 the Company entered into a month to month contract with Mr. Joseph Fuda, its President and CEO, at the expiration of the employment agreement signed in 2008. These month to month arrangements continue at October 31, 2014. Under the terms of the contract, Mr. Fuda receives $13,333CDN ($10,666US) and additional compensation at the discretion of the Compensation Committee.

In 2011 the Company entered into a month to month contract with Mr. Steven Van Fleet, the President of MAST at the expiration of the employment agreement signed in 2008. This month to month arrangement continues at October 31, 2014. Under the terms of the contract, Mr. Van Fleet receives $15,000US in monthly compensation and additional compensation at the discretion of the Compensation Committee.

In 2011 the Company entered into a month to month contract with its Chairman of the Board, Mr. Salvatore Fuda, at the expiration of the employment agreement signed in 2005. This month to month arrangement continues at October 31, 2014. Under the terms of the contract, Mr. Fuda receives $12,500CDN ($10,000US) in monthly compensation.

The total monthly commitment under these month to month arrangements is $45,666 at October 31, 2014.

In 2011-2012 the Company, through its wholly-owned subsidiary, Micromem Applied Sensor Technologies, Inc. entered into consulting and product development agreements with Rapid Prototypes, Inc. (RPI) whose major shareholder is Mr. Brian Von Herzen. Mr.Von Herzen was appointed to the Board of Directors of the Company in February 2014. He also serves as the Company’s Chief Technology Officer. RPI has invoiced the Company for professional engineering design and product development services since 2011; since becoming a director of the Company, RPI has invoiced the Company total fees of $1,843,643.

D.             Exchange Controls

As of the date hereof, we are not aware of any governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including, but not limited to, foreign exchange controls, or that affect the remittance of dividends or other payments to nonresident holders of our common shares.

We are not aware of any limitations under the laws of Canada or the Province of Ontario, or in the Articles of Incorporation or any other of our constituent documents on the right of nonresidents of Canada or persons who are not Canadian citizens to hold and/or vote common shares.

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E.             Taxation

Certain Canadian Income Tax Consequences

This discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of common shares for a shareholder who is not a resident of Canada but is a resident of the United States and who will acquire and hold a common share as capital property for the purposes of the Income Tax Canada, also referred to as the Canadian Tax Act. This summary does not apply to a shareholder who carries on business in Canada through a permanent establishment situated in Canada or performs independent personal services in Canada through a fixed base in Canada if the shareholder is effectively connected with such permanent establishment or fixed base. This summary is based on the provisions of the Canadian Tax Act and the regulations there under and on an understanding of the administrative practices of Canada Customs & Revenue Agency, and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of the date hereof. It has been assumed that there will be no other relevant amendments of any governing law although no assurance can be given in this respect. This discussion is general only and is not a substitute for independent advice from a shareholder's own Canadian and US tax advisors.

The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended.

Dividends on common shares and Other Income

Under the Canadian Tax Act, a non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25 percent on dividends paid or deemed to have been paid to him or her by a corporation resident in Canada. We are responsible for the withholding of tax at the source. The Canada-United States Income Tax Convention (1980) limits the rate to 15 percent if the shareholder is a resident of the United States and the dividends are beneficially owned by and paid to such shareholder, and to 5 percent if the shareholder is also a corporation that beneficially owns at least 10 percent of the voting stock of the payor corporation.

The amount of a stock dividend (for tax purposes) would generally be equal to the amount of our paid up or stated capital and increased by reason of the payment of such dividend. We will furnish additional tax information to shareholders in the event of such a dividend. Interest paid or deemed to be paid on our debt securities held by non-Canadian residents may also be subject to Canadian withholding tax, depending upon the terms and provisions of such securities and any applicable tax treaty.

The Canada-United States Income Tax Convention (1980) generally exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization constituted and operated exclusively to administer a pension, retirement or employee benefit fund or plan, if the organization is a resident of the United States and is exempt from income tax under the laws of the United States.

Dispositions of Common Shares

Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses, realized on a disposition of "taxable Canadian property". common shares will constitute taxable Canadian property of a shareholder at a particular time if the shareholder used the shares in carrying on business in Canada, or if at any time in the five years immediately preceding the disposition 25 percent or more of the issued shares of any class or series in the capital stock of Micromem belonged to one or more persons in a group comprising the shareholder and persons with whom the shareholder did not deal at "arm's length” and in certain other circumstances.

The Canada-United States Income Tax Convention (1980) relieves United States residents from liability for Canadian tax on capital gains derived on a disposition of shares unless:

the value of the shares is derived principally from "real property" in Canada, including the right to explore for or exploit natural resources and rights to amounts computed by reference to production, the shareholder was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by them when they ceased to be resident in Canada, or the shares formed part of the business property of a "permanent establishment" that the holder has or had in Canada within the 12 months preceding the disposition.

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Certain United States Federal Income Tax Consequences

The following is a general summary of certain United States federal income tax consequences, under current law, generally applicable to a US Holder (as defined below). This summary does not address all potentially relevant United States federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of United States federal income tax law, such as those described below as excluded from the definition of a US Holder. United States alternative minimum tax considerations are not addressed in this summary. In addition, this summary does not cover any state, local or foreign tax consequences, nor any U.S. federal gift, estate or generation-skipping transfer tax consequences. (Certain, but not all, foreign tax consequences are described above under “Taxation - Certain Canadian Income Tax Consequences.”)

The following summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS, and court decisions that are currently applicable, any of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This summary does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied (possibly on a retroactive basis) at any time (including, without limitation, changes in applicable tax rates).

This summary is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares, and no opinion or representation with respect to the United States federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares should consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

CIRCULAR 230 DISCLOSURE

ANY TAX STATEMENT MADE HEREIN REGARDING ANY U.S. FEDERAL TAX IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR PURPOSES OF AVOIDING ANY PENALTIES. ANY SUCH STATEMENT HEREIN IS WRITTEN IN CONNECTION WITH THE MARKETING OR PROMOTION OF THE TRANSACTION TO WHICH THE STATEMENT RELATES. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

US Holders

As used herein, a “US Holder” means an owner of common shares who is a citizen or individual resident (as defined under United States tax laws) of the United States; a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or of any political subdivision thereof; an estate the income of which is taxable in the United States irrespective of source; or a trust if (a) a court within the United States is able to exercise primary supervision over the trust's administration and one or more United States persons have the authority to control all of the substantial decisions of the trust or (b) the trust was in existence on August 20, 1996 and has properly elected to continue to be treated as a United States person. This summary does not address the tax consequences to, and “US Holder” does not include, tax-exempt persons or organizations; qualified retirement plans, individual retirement accounts and other tax-deferred accounts; financial institutions; insurance companies; real estate investment trusts; regulated investment companies; entities subject to the U.S. corporate conversion rules; broker-dealers; U.S. tax expatriates; non-resident alien individuals or entities; persons or entities that have a “functional currency” other than the US dollar; persons who hold common shares as part of a straddle, hedging or conversion transaction; and persons who acquire their common shares as compensation for services. This summary is limited to US Holders who own common shares as capital assets and who hold the common shares directly (e.g., not through an intermediary entity such as a corporation, partnership, LLC or trust). This summary does not address the consequences to a person or entity of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

Distributions to US Holders Who Own Common Shares

Subject to the discussion below concerning the potential status of the Company (or any of its subsidiaries that are classified as corporations for United States federal income tax purposes (“Related Entities”)) as a “passive foreign investment company” (“PFIC”), the gross amount of any distribution by the Company (including any Canadian taxes withheld therefrom) with respect to common shares generally should be included in the gross income of a US Holder as foreign source dividend income to the extent such distribution is paid out of current or accumulated earnings and profits of the Company, as determined under United States federal income tax principles. To the extent that the amount of any distribution exceeds the Company's current and accumulated earnings and profits in that taxable year, the distribution is treated as a tax-free return of capital to the extent of the US Holder's adjusted tax basis in the common shares. Thereafter, to the extent that such distribution exceeds the US Holder's adjusted tax basis in the common shares, it is taxed as a capital gain.

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Dividends received by non-corporate US Holders may be subject to United States federal income tax at lower rates (generally 15%) than other types of ordinary income in taxable years beginning on or before December 31, 2013, if certain conditions are met. These conditions include neither the Company nor a Related Entity being classified as a PFIC (discussed below), the Company being a “qualified foreign corporation”, the US Holder's satisfaction of a holding period requirement, and the US Holder not treating the distribution as “investment income” for purposes of the investment interest deduction rules.

In the case of US Holders that are corporations, distributions from the Company generally are not eligible for the dividends received deduction.

Dispositions of Common Shares of the Company

Subject to the discussion below regarding PFICs, gain or loss, if any, realized by a US Holder on the sale or other disposition of common shares generally is subject to United States federal income taxation as capital gain or loss in an amount equal to the difference between the US Holder's adjusted tax basis in the common shares and the amount realized on the disposition. Net capital gain (i.e., capital gain in excess of capital loss) recognized by a non-corporate US Holder upon a sale or other disposition of common shares that have been held for more than one year is generally subject to a maximum United States federal income tax rate of 15% in taxable years beginning on or before December 31, 2013. Deductions for capital losses are subject to limitations.

US Anti-Deferral Regimes

There are two regimes applicable to foreign corporations under United States federal income tax law that potentially may apply to the Company - the “controlled foreign corporation” (“CFC”) regime and the PFIC regime.

Generally, a foreign corporation is not a CFC unless more than fifty percent (by vote or value) of its stock is owned by “U.S. Shareholders” (generally, United States persons who have ten percent or more of the votes of the foreign corporation). This classification generally results in the inclusion of certain income of the CFC in the U.S. Shareholders' income as a deemed dividend. If the Company were a CFC, the United States federal tax consequences summarized herein could be materially and adversely different.

PFIC status is not conditioned on a certain level of ownership of the foreign corporation by United States persons, however. The Company or any Related Entity would be considered a PFIC if during any taxable year, 75% or more of its gross income consists of certain types of “passive” income, or if the average value during a taxable year of its “passive assets” (generally, assets that generate passive income) is 50% or more of the average value of all assets held by it. Passive income generally includes items such as dividends, interest, rents and royalties, although there are various “look through” rules that treat dividends from related persons, for example, as non-passive under certain conditions.

If the Company is classified as a PFIC, a US Holder is subject to increased United States federal income tax liability in respect of gain recognized on the disposition of his, her or its common shares or upon the receipt of certain distributions, unless such person makes a “qualified electing fund” election to be taxed currently on his, or her or its pro rata portion of the Company's income and gain (whether or not such income or gain is distributed in the form of dividends or otherwise), and the Company provides certain annual statements which include the information necessary to determine inclusions and assure compliance with the PFIC rules. As an alternative to the foregoing rules, a US Holder may make a “mark-to-market” election to include in income each year as ordinary income an amount equal to the increase in value of his, her or its common shares for that year or to claim a deduction for any decrease in value (but only to the extent of previous mark-to-market gains).

The CFC and PFIC rules are very complex. The Company offers no opinion or representations as to its status as a CFC or PFIC for the current or any prior or future tax years. US Holders should consult their own U.S. tax advisors with respect to the CFC and PFIC issues and their applicability to such Holder’s particular situation.

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Foreign Tax Credit

A US Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership or disposition of the common shares may be entitled, at the option of the US Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the US Holder during that year.

There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the US Holder’s United States Federal income tax liability that the US Holder's foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific “baskets” of income. Foreign taxes assigned to a particular basket generally cannot offset United States tax on income assigned to another basket. Unused foreign tax credits can generally be carried back one year and carried forward ten years. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and US Holders should consult their own U.S. tax advisors regarding their ability to utilize foreign tax credits in light of their individual circumstances.

Currency Fluctuations

For United States federal income tax purposes, the amount received by a US Holder as payment with respect to a distribution on, or disposition of common shares, if paid in Canadian dollars, is the US dollar value at the date of the payment, regardless of whether the payment is later converted into US dollars. In such case, the US Holder may recognize additional ordinary income or loss as a result of currency fluctuations between the date on which the payment is made and the date the payment is converted into US dollars.

F.             Dividends and Paying Agents

Not applicable.

G.             Statement by Experts

Not applicable.

H.             Documents on Display

We have filed the documents referred to herein and other information with the SEC, the Ontario Securities Commission and the Alberta Securities Commission. You may inspect and copy such material at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of such material from the SEC at prescribed rates by writing to the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.

The SEC maintains an Internet website at www.sec.gov that contains reports, proxy statements, information statements and other material that are filed through the SEC's Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. Documents filed with the Ontario Securities Commission and the Alberta Securities Commission can be accessed through an Internet website at www.sedar.com that contains reports, proxy statements, information statements and other material that are filed through the System for Electronic Document Analysis and Retrieval (“SEDAR”).

Additional information is also available on our website at www.micromeminc.com. Such information on our website is not part of this Form 20-F.

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I.             Subsidiary Information

Not Applicable.

ITEM 11.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. See Note 21 to our consolidated financial statements for our quantitative and qualitative disclosures about market risk.

ITEM 12.           DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II

ITEM 13.           DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14.           MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15.           CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to herein as the “Exchange Act”) as of October 31, 2014. Based on management's evaluation in 2014, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2014, our disclosure controls and procedures were effective in that they were designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in our reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Exchange Act Rule 13a-15(e) also states that disclosure controls and procedures are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting
Micromem’s Board of Directors and executive management are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.

All internal control systems no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of Micromem’s internal control over financial reporting as of October 31, 2014. In making this assessment, they used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment the Chief Executive Officer and Chief Financial Officer have concluded that, as of October 31, 2014, our internal control over financial reporting were effective.

Attestation Report of the Registered Public Accounting Firm.
Micromem’s internal control over financial reporting as of October 31, 2014 has been audited by Collins Barrow Toronto LLP, an independent registered public accounting firm in Toronto, Canada, as stated in their report which is included under “Item 18—Financial Statements” of this Annual Report.

Changes in Internal Control Over Financial Reporting
No changes in our internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, occurred during the fiscal year ended October 31, 2014 that has materially affected or is reasonable likely to materially affect, our internal controls over financial reporting.

ITEM 15T.         Controls and Procedures

Not applicable.

ITEM 16.           [Reserved]

Not applicable.

ITEM 16A.         Audit Committee Financial Expert

Our Board of Directors has determined that a member of the Board of Directors, David Sharpless, is an audit committee financial expert and that he is independent, as defined in the Marketplace Rules of the Nasdaq Stock Market.

ITEM 16B.         Code of Ethics

We have adopted a Code of Ethics to impose certain policies relating to ethical conduct on all of our Directors and employees, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer and persons performing similar functions. We undertake to provide a copy of our Code of Ethics to any holder of our securities upon request, without charge.

ITEM 16C.         Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered by our auditors for the audit of our consolidated financial statements for the years ended October 31, 2014 and 2013, and fees billed for other services rendered by our auditors including our offerings of securities and tax services.

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Audit Fees

In 2014, we paid a total of $119,000 to Collins Barrow Toronto LLP for audit services; in 2013 we paid a total of $147,000 to Collins Barrow Toronto LLP for audit services.

Audit Related Fees

None

Tax Fees

We paid $5,000 of tax-related fees for services in 2014 and 2013 to Chiampou Travis LLP.

All other fees

None

Pre-approval policies

The Audit Committee assesses and pre-approves all audit and non-audit services.

ITEM 16D.         Exemptions from the Listing Standards for Audit Committees

Not applicable.

ITEM 16E.         Purchases of Equity by the Issuer and Affiliated Purchasers.

None.

ITEM 16F.         Change in Registrants Certifying Accountant.

None.

ITEM 16G.         Corporate Governance

Not applicable.

ITEM 16H.         Mine Safety Disclosure

Not applicable.

ITEM 17.           Financial Statements

Not applicable, see Item 18.

ITEM 18.           Financial Statements

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Consolidated Financial Statements of

MICROMEM TECHNOLOGIES INC.

For the years ended October 31, 2014 and 2013

(Expressed in United States Dollars)

 

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	Collins Barrow Toronto LLP
	Collins Barrow Place
	11 King Street West
	Suite 700, PO Box 27
	Toronto, Ontario
	M5H 4C7 Canada
	T. 416.480.0160
	F. 416.480.2646
	www.collinsbarrow.com

INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Micromem Technologies Inc.:

We have audited the accompanying consolidated financial statements of Micromem Technologies Inc. and its subsidiaries, which comprise the consolidated statements of financial position as at October 31, 2014 and October 31, 2013 and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the years ended October 31, 2014, October 31, 2013 and October 31, 2012 and notes comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Micromem Technologies Inc. and its subsidiaries as at October 31, 2014 and October 31, 2013, and its consolidated financial performance and its consolidated cash flows for the years ended October 31, 2014, October 31, 2013 and October 31, 2012 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2 in the consolidated financial statements which describes the material uncertainties that cast significant doubt about Micromem Technologies Inc.’s ability to continue as a going concern.

This office is independently owned and operated by Collins Barrow Toronto LLP The Collins Barrow trademarks are used under License.

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Other Matter

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of October 31, 2014, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2015 expressed an unmodified (unqualified) opinion on the effectiveness of the Company’s internal control over financial reporting.

Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 27, 2015

 

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	Collins Barrow Toronto LLP
	Collins Barrow Place
	11 King Street West
	Suite 700, PO Box 27
	Toronto, Ontario
	M5H 4C7 Canada
	T. 416.480.0160
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F. 416.480.2646
To the Shareholders of Micromem Technologies Inc.:	www.collinsbarrow.com

We have audited the internal control over financial reporting of Micromem Technologies Inc. and subsidiaries (the "Company") as of October 31, 2014, based on criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included under the heading “Disclosure Controls/Internal Controls” under the title “Compliance Related Reporting Matters” in the accompanying Management’s Discussion and Analysis. Our responsibility is to express an opinion on the Company's internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2014, based on criteria established in the Internal Control — Integrated Framework (2013) issued by Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of the Company as at October 31, 2014 and 2013 and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the years ended October 31, 2014, October 31, 2013 and October 31, 2012, and notes comprising a summary of significant accounting policies and other explanatory information and our report dated February 27, 2015 expressed an unqualified audit opinion on those consolidated financial statements.

Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 27, 2015

This office is independently owned and operated by Collins Barrow Toronto LLP The Collins Barrow trademarks are used under License.

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MICROMEM TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

	1.	Reporting Entity and Nature of Business
	2.	Going Concern
	3.	Basis of Presentation
	4.	Summary of Significant Accounting Policies
	5.	New Standards and Interpretations Issued but not yet Adopted
	6.	Fair Value Disclosures
	7.	Capital Risk Management
	8.	Deposits and Other Receivables
	9.	Property and Equipment
	10.	Deferred Development Costs
	11.	Intangible Assets and Patents
	12.	Share Capital, Stock Options and Loss per Share
	13.	Private Placements, Derivative Warrant Liability and Common Share Purchase Warrants
	14.	Bridge Loans
	15.	Contributed Surplus
	16.	Income Taxes
	17.	Expenses
	18.	Management Compensation and Related Party Transactions
	19.	Commitments
	20.	Contingencies
	21.	Financial Risk Management
	22.	Segmented Information
	23.	Subsequent Events

1

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MICROMEM TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in United States dollars)

		October 31,			October 31,
		2014			2013
Assets
Current assets:
Cash	$	935,987		$	821,283
Deposits and other receivables (Note 8)		872,766			234,741
		1,808,753			1,056,024
Property and equipment, net (Note 9)		21,483			13,998
Deferred development costs (Note 10)		3,525,456			928,077
Intangible assets, net (Note 11)		77,409			96,761
Patents, net (Note 11)		203,504			71,595
	$	5,636,605		$	2,166,455
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Bridge loans (Note 14)	$	-		$	290,014
Accounts payable and accrued liabilities		773,832			340,122
	$	773,832		$	630,136
Shareholders' Equity (Deficiency)
Share capital: (Note 12)
Authorized:                            2,000,000 special preference shares, redeemable, voting                            Unlimited common shares without par value               Issued and outstanding:                            188,436,724 common shares (2013: 158,491,425) (Note 12)	$	70,802,776		$	57,755,613
Equity component of bridge loans (Note 14)		-			1,557
Contributed surplus (Note 15)		27,436,678			32,822,327
Deficit		(93,376,681	)		(89,043,178	)
		4,862,773			1,536,319
	$	5,636,605		$	2,166,455

Going Concern (Note 2)
Management Compensation and Related Party Transactions (Note 18)
Commitments (Note 19)
Contingencies (Note 20)
Subsequent Events (Note 23)

"Joseph Fuda" (Signed)
Joseph Fuda, Director
"David Sharpless" (Signed)
David Sharpless, Director

See accompanying notes.

2

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MICROMEM TECHNOLOGIES INC.
STATEMENTS OF CONSOLIDATED LOSS AND COMPREHENSIVE LOSS
(Expressed in United States dollars)

For the years ended October 31,

		2014			2013			2012
Costs and expenses :
Administration (Note 17)	$	325,453		$	378,497		$	694,617
Professional, other fees and salaries (Note 17)		2,360,867			1,572,515			1,507,891
Stock based compensation (Note 12)		379,253			368,790			430,856
Research and development (Note 17)		703,671			160,920			229,840
Forgiveness of debt		-			-			(42,004	)
Travel and entertainment		329,779			210,852			150,924
Amortization of property and equipment (Note 9)		7,357			4,989			4,414
Amortization of intangible assets (Note 11)		-			19,352			19,352
Foreign exchange loss		58,491			12,261			7,537
Recovery of promissory note receivable (Note 8)		-			-			(30,000	)
Loss from operations		4,164,871			2,728,176			2,973,427
Other Expenses
Gain on revaluation of embedded derivatives (Note 14)		-			(40,750	)		(176,899	)
Warrants issued on debt settlement (Note 14)		-			-			306,061
Loss (gain) on revaluation of derivative warrants liability (Note 13)		-			3,246,502			(1,327,524	)
Net loss before income taxes		(4,164,871	)		(5,933,928	)		(1,775,065	)
Income taxes (Note 16)		-			-			-
Net loss and comprehensive loss	$	(4,164,871	)	$	(5,933,928	)	$	(1,775,065	)
								-
Loss per share - basic and diluted (Note 12)	$	(0.02	)	$	(0.04	)	$	(0.01	)
Weighted average number of shares (Note 12)		171,534,969			146,814,466			123,375,510

See accompanying notes.

3

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MICROMEM TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)

For the years ended October 31,
		2014			2013			2012
Cash flows from operating activities:
Net loss	$	(4,164,871	)	$	(5,933,928	)	$	(1,775,065	)
Adjustments to reconcile loss for the period to net cash used in operating activities:
Amortization of intangible assets		-			19,352			19,352
Amortization of property and equipment		7,357			4,989			4,414
Research and development		676,790			52,461			206,780
Accretion expense		-			19,381			187,671
Stock based compensation		379,253			368,790			430,856
Forgiveness of debt		-			-			(42,004	)
(Increase) in deposits and other receivables		(235,757	)		(188,679	)		(13,728	)
Increase (decrease) in accounts payable and accrued liabilities		454,149			(63,433	)		(393,896	)
Loss (gain) on revaluation of derivative warrant liability		-			3,246,502			(1,327,524	)
(Gain) on revaluation of embedded derivatives		-			(40,750	)		(176,899	)
Warrants issued on settlement of debt		-			-			306,061
Net cash used in operating activities		(2,883,079	)		(2,515,315	)		(2,573,982	)
Cash flows from investing activities:
Purchase of property and equipment		(14,842	)		(13,200	)		-
Patents		(176,381	)		(44,825	)		(26,650	)
Deferred development costs		(3,872,635	)		(655,093	)		(263,133	)
Recovery of deferred development costs		662,290			233,290			-
Net cash used in investing activities		(3,401,568	)		(479,828	)		(289,783	)
Cash flows from financing activities:
Issue of common shares		6,801,619			3,697,441			2,524,155
Bridge loans advances		-			-			714,359
Bridge loan repayments		-			(126,044	)		(173,782	)
Advances to related parties		(480,304	)		-			-
Repayments from related parties		78,036			-			-
Net cash provided by financing activities		6,399,351			3,571,397			3,064,732
Increase in cash		114,704			576,254			200,967
Cash, beginning of year		821,283			245,029			44,062
Cash, end of year	$	935,987		$	821,283		$	245,029
Supplemental cash flow information:
Interest paid (classified in operating activities)		17,071			83,493			75,142
Income taxes paid		-			-			-

See accompanying notes.

4

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MICROMEM TECHNOLOGIES INC.
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in United States dollars)

		Number of			Share capital			Contributed surplus			Equity component			Deficit			Total
		Shares									0f Bridge loan
Balance as at November 01, 2011		116,149,718		$	51,774,555		$	25,986,276		$	-		$	(79,170,059	)	$	(1,409,228	)
Private placement of units for cash		6,344,899			1,040,899			-			-			-			1,040,899
Financing costs		-			(16,457	)		-			-			-			(16,457	)
Stock based compensation		-			-			430,856			-			-			430,856
Warrants issued on private placements		-			(356,364	)		66,997			-			-			(289,367	)
Warrants extended		-			-			358,983			-			(1,322,879	)		(963,896	)
Warrants exercised		12,075,858			1,499,713			-			-			-			1,499,713
Fair value of warrants exercised		-			558,993			(208,935	)		-			-			350,058
Equity portion of bridge loan		-			-			-			1,557			-			1,557
Shares issued on conversion of bridge loan		1,860,080			226,900			-			-			-			226,900
Net loss and comprehensive loss		-			-			-			-			(1,775,065	)		(1,775,065	)
Balance at October 31, 2012		136,430,555			54,728,239			26,634,177			1,557			(82,268,003	)		(904,030	)
Private placement of units for cash (Note 13)		16,106,957			2,910,532			-			-			-			2,910,532
Financing costs		-			(35,482	)		-			-			-			(35,482	)
Stock based compensation (Note 12)		-			-			368,790			-			-			368,790
Warrants issued on private placements (Note 13)		-			(863,863	)		377,234			-			-			(486,629	)
Warrants extended (note 13)		-			-			264,938			-			(841,247	)		(576,309	)
Warrants exercised (Note 13)		5,953,913			822,391			-			-			-			822,391
Fair value of warrants exercised		-			193,796			(47,675	)		-			-			146,121
Warrants modified (Note 13)		-			-			5,224,863			-			-			5,224,863
Net loss and comprehensive loss		-			-			-			-			(5,933,928	)		(5,933,928	)
Balance at October 31, 2013		158,491,425		$	57,755,613		$	32,822,327		$	1,557		$	(89,043,178	)	$	1,536,319
Stock based compensation (Note 12)		-			-			379,253			-			-			379,253
Warrants extended (note 13)		-			-			168,632			-			(168,632	)		-
Warrants exercised (Note 13)		27,410,717			6,801,619			-			-			-			6,801,619
Fair value of warrants exercised		-			6,078,497			(6,078,497	)		-			-			-
Bridge loan converted (Note 14)		2,517,501			302,100			1,557			(1,557	)		-			302,100
Warrants issued on conversion of bridge loan (Note 14)		-			(143,406	)		143,406			-			-			-
Shares issued on settlement of accounts payable		17,081			8,353			-			-			-			8,353
Net loss and comprehensive loss		-			-			-			-			(4,164,871	)		(4,164,871	)
Balance at October 31, 2014		188,436,724		$	70,802,776		$	27,436,678			-		$	(93,376,681	)	$	4,862,773

See accompanying notes.

5

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

1.	REPORTING ENTITY AND NATURE OF BUSINESS
	Micromem Technologies Inc. (“Micromem” or the “Company”) is incorporated under the laws of the Province of Ontario, Canada. The principal business address of the Company is 121 Richmond Street West, Suite 304, Toronto, Ontario, Canada.
	The Company develops, based upon proprietary technology, customized magnetic sensor applications for companies (referred to as “development partners”) operating internationally in various industry segments. The Company has not generated commercial revenues through October 31, 2014 and is devoting substantially all its efforts to securing commercial revenue opportunities.
	These consolidated financial statements include the accounts of the Company and its wholly- owned subsidiaries:
	(i)	Micromem Applied Sensors Technology, Inc. (“MAST”) incorporated in November 2007 and domiciled in Delaware, United States. MAST has the primary responsibility for the exploitation of the Company’s technologies in conjunction with various strategic partners and customers.
	(ii)	7070179 Canada Inc., incorporated in October 2008 under the Canada Business Corporations Act in Ontario, Canada. The Company has assigned to this entity its rights, title and interests in certain patents which it previously held, directly in exchange for common shares of this entity.
	(iii)	Memtech International Inc., Bahamas; Memtech International (USA) Inc., Delaware, United States; Pageant Technologies (USA) Inc., United States; Pageant Technologies Inc., Barbados; and Micromem Holdings (Barbados) Inc., Barbados. All of these entities are inactive.

These consolidated financial statements were authorized for issuance and release by the Company’s Board of Directors on February 27, 2015.

6

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

2.	GOING CONCERN
	These consolidated financial statements have been prepared on the “going concern” basis in accordance with International Financial Reporting Standards (“IFRS”), which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
	There are material uncertainties related to conditions and events that cast significant doubt about the Company’s ability to continue as a going concern for a reasonable period of time in future. During the year ended October 31, 2014, the Company reported a net loss and comprehensive loss of $4,164,871 (2013 - $5,933,928; 2012 - $1,775,065) and negative cash flow from operations of $2,883,079 (2013-$2,515,315; 2012 $2,573,982). The Company’s working capital position as at October 31, 2014 is $1,034,921 (2013 – $425,888).
	The Company’s success depends on the profitable commercialization of its proprietary magnetic sensor technology. There is no assurance that the Company will be successful in the profitable commercialization of its technology. Based upon its current operating and financial plans, management of the Company believes that it will have sufficient access to financial resources to fund the Company’s planned operations through fiscal 2015; however, the ability of the Company to continue as a going concern is dependent upon its ability to secure additional financing and/or profitably commercialize its technology. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
	If the “going concern” assumption were not appropriate for these consolidated financial statements then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used; in such cases, these adjustments could be material.

7

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

3.	BASIS OF PRESENTATION
	a)	Statement of compliance:
		These consolidated financial statements have been prepared in accordance with IFRS and its interpretations adopted by International Accounting Standards Board (“IASB”).
	b)	Basis of measurement:
		The consolidated financial statements have been prepared on the historical cost basis, except for financial instruments designated at fair value through profit and loss, which are stated at their fair value.
	c)	Functional and presentation currency:
		These consolidated financial statements are presented in United States dollars (“U.S. dollars”), which is also the Company’s functional currency.
	d)	Use of estimates and judgments:
		The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
		Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
		Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment are as follows:
		i)	The Company makes estimates and utilizes assumptions in determining the fair value for stock based compensation expense, warrants, the (gain) loss on the revaluation of the derivative warrant liability, the (gain) loss on the revaluation of the embedded derivatives relating to bridge loans and the bifurcation of convertible debt.

8

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

3.	BASIS OF PRESENTATION (Cont’d)

	d)	Use of estimates and judgments: (Cont’d)
		ii)	The Company makes estimates related to the recovery of deferred development costs based on the expectation and assumption of realizing revenues from future commercial agreements that it anticipates will develop with the companies for whom these projects have been undertaken. Changes in these expectations and assumptions could result in a change in the recoverable amount calculated.
		iii)	The Company applies judgement when establishing whether the capitalization criteria under IAS 38, Intangible Assets, for internally developed intangible assets.
		iv)	The Company makes estimates related to the useful lives of property and equipment, patents and intangible assets and the related amortization. The Company also periodically assesses the recoverability of long-lived assets. The recoverability analysis requires the Company to make assumptions about future operations. Changes to one or more assumptions would result in a change in the recoverable amount calculated and/or amortization expensed.
		v)	Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax assets and unused tax losses can be utilized. At October 31, 2014, the Company has assessed that it is not probable that sufficient taxable profit will be available to use deferred income tax assets based on operating losses in prior years, therefore, there are no balances carried in the consolidated statements of financial position for such assets.
		vi)	The Company applies judgment in assessing whether material uncertainties exist that would cause doubt as to the whether the Company could continue as a going concern.
		vii)	The Company applies judgment in assessing the functional currency of each entity consolidated in these financial statements.

9

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	a)	Basis of consolidation:
		Subsidiaries are legal entities controlled by the Company. Control exists when the Company is exposed, or has rights to variable returns from an investee and has the ability to affect those returns through its power over the investee. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases.
		These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated. The accounting policies have been consistently applied by the Company’s subsidiaries.
	b)	Foreign currency translation:
		IFRS requires that the functional currency of each entity in the consolidated entity be determined separately in accordance with specific indicators and should be measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). As a result of an assessment of the primary indicators, management assessed the functional currency of the Company and its subsidiaries to be U.S. dollar (“USD”). The consolidated financial statements of the Company are prepared and presented using the USD.
		Foreign currency transactions denominated in other than U.S. dollars are translated into the functional currency on the following basis:

	i)	Monetary assets and liabilities are translated at the rates of exchange prevailing at the statement of financial position date.
	ii)	Non-monetary assets and liabilities that are measured at historical cost are translated using the exchange rate at the date of the transaction.
	iii)	Income and expenses for each income statement line item presented are translated at average exchange rates during the quarter in which they are recognized.

Exchange differences resulting from the settlement of foreign currency transactions are recognized directly in the consolidated statement of loss and comprehensive loss in the period in which incurred.

10

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
	c)	Financial Instruments: Recognition, Measurement, Disclosure and Presentation:
		The Company initially recognizes loans and receivables and deposits on the date that they are originated. All other financial assets including assets designated at fair value through profit or loss (FVTPL) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
		The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire.
		Financial assets and liabilities are offset and the net amount presented in the statement of financial position only when the Company has the legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
		The Company’s financial assets consist of cash and deposits and other receivables and the Company’s financial liabilities consist of accounts payable and accrued liabilities, bridge loans, derivative warrant liability and embedded derivatives in bridge loans.
		All financial assets and financial liabilities, including derivatives, are initially measured in the statement of financial position at fair value, except for loans and receivables, investments held-to maturity and other financial liabilities, which are measured at amortized cost. Measurement in subsequent periods depends on whether the financial instrument had been classified as FVTPL, available-for-sale, held-to-maturity, loans and receivables, or other liabilities.
		FVTPL financial assets are measured at fair value and all gains and losses are included in the statement of loss and comprehensive loss in the period in which they arise. Available- for-sale financial assets are measured at fair value with revaluation gains and losses included in other comprehensive income until the assets are removed from the statement of financial position.

11

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
	c)	Financial Instruments: Recognition, Measurement, Disclosure and Presentation: (Cont’d)
		The Company classifies cash as FVTPL. Deposits and other receivables are classified as loans and receivables, and are initially measured at fair value and subsequently at amortized cost using the effective interest rate method. Accounts payable and accrued liabilities and bridge loans are classified as other liabilities, and initially measured at fair value and subsequently at amortized cost using the effective interest rate method. The derivative warrant liability and embedded derivatives in bridge loans are classified at FVTPL and are measured at fair value with unrealized gains or losses reported in the consolidated statement of loss and comprehensive loss.
	d)	Compound Financial Instruments
		Compound financial instruments issued by the Company comprise convertible notes that can be converted to share capital at the option of the holder and the number of shares to be issued does not vary with changes in their fair value.
		The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option.
		The equity component, if the conversion feature of the convertible note is in US dollars, is recognized initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
		Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest rate method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
		Interest, dividends, losses and gains relating to the financial liability are recognized in profit or loss except for borrowing costs on qualifying assets which are added to asset cost. Distributions to the equity holders are recognized in equity, net of any tax effect.

12

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
	e)	Hybrid Financial Instruments:
		Financial instruments with embedded derivative liabilities are accounted for as hybrid financial instruments. The Company has hybrid financial instruments when the embedded derivative conversion option right of the convertible notes gives the right to the holder to convert into common shares in Canadian dollars (“CDN”).
		An embedded derivative is a feature within a contract, such that the cash flows associated with that feature behave in a similar fashion to a stand-alone derivative. An embedded derivative is separated from its host contract and accounted for as a derivative only when three criteria are satisfied:

	•	When the economic risks and characteristics of the embedded derivatives are not closely related to those of the host contract;
	•	A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
	•	The entire instrument is not measured at fair value with changes in fair value recognized in the income statement.

		Subsequent to initial recognition, the embedded derivative component is re-measured each reporting period using the Black Scholes option-pricing model with the change in fair value recognized in statement of loss and comprehensive loss.
	f)	Derivative Liability
		The Company’s derivative financial instruments consist of derivative liabilities in relation to its share purchase warrants.

13

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

	f)	Derivative Liability (Cont’d)
		i)	Derivative Warrant Liability:
			The Company has issued share purchase warrants in conjunction with private placements for the purchase of common shares of the Company. Until October 2013 (Note 13(b)), a number of these share purchase warrants were issued with an exercise price in CDN, rather than USD (the reporting and functional currency of the Company). Such share purchase warrants are considered to be derivative instruments and the Company is required to re-measure the fair value of these at each reporting date. The fair value of these CDN share purchase warrants are re-measured at each financial position date using the Black Scholes option-pricing model using the exchange rates at the financial position date and measured over their remaining life. Adjustments to the fair value of the derivative warrant liability as at the financial position date are recorded in the statement of loss and comprehensive loss as (gain) loss on revaluation of derivative warrant liability. Share purchase warrants that have expired or have been forfeited are adjusted to the statement of loss and comprehensive loss as (gain) loss on revaluation of derivative warrant liability.
			Consideration received upon the exercise of warrants is credited to share capital and the related amount is transferred from contributed surplus (USD warrants) or derivative warrant liability (CDN warrants) to share capital.
		ii)	Conversion Feature of Bridge Loans
			The conversion feature on the bridge loans allows the holder of the option to convert the outstanding principal and interest from time to time to common equity. The Company, using the Black Scholes option-pricing model, accounts for bridge loans as follows:

	(ii.1)	At date of origination, the bifurcation of the total balance of the loan as debt and equity is calculated. If the conversion feature of the bridge loan is in CDN there is no equity component, resulting in an embedded derivative. Accretion expense is recorded over the term of the loan.
	(ii.2)	The total loan proceeds are allocated between the bridge loans and the related embedded derivative based on their relative fair value. The embedded derivative conversion feature is included under the bridge loans in the statement of financial position.

14

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

f)

Derivative Liability (Cont’d)

ii)

Conversion Feature of Bridge Loans (Cont’d)

(ii.3)

The conversion feature is revalued at the end of the reporting period and any adjustment is reflected in the statement of loss and comprehensive loss if the conversion feature is in CDN.

	g)	Loan Impairment:
		Impaired loans are accounted for at their face amount net of the allowance for loan impairment. When a loan is deemed to be impaired, its carrying amount is reduced to its estimated realizable amount which is measured by discounting the expected future cash flows at the effective interest rate inherent in the loan. The amount initially recognized as an impairment loan, together with any subsequent change, is charged to the allowance as an adjustment. A write-off of the loan will occur when the loan is believed to have no reasonable expectation of collectability.
	h)	Intangible Assets
		Costs for the general development of the Company’s sensor technology are expensed unless they meet the criteria for deferral. Expenditures are capitalized if the Company can demonstrate each of the following criteria: (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale, (ii) its intention to complete the intangible asset and use or sell it, (iii) its ability to use or sell the intangible asset, (iv) how the intangible asset will generate probable future economic benefits, (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and (vi) its ability to measure reliably the expenditure attributable to the intangible asset during its development; otherwise, they are expensed as incurred. Commencing in 2011, the Company determined that these costs met the criteria and, accordingly, these costs have been capitalized and are tested in each reporting period for impairment. Amortization is provided on a 7 year straight-line basis. Commencing in 2014 amortization expense of intangible assets is capitalized as deferred development costs as these charges are directly related to development.

15

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
	i)	Property and Equipment:
		Property and equipment are recorded at cost and are amortized over their estimated useful lives at the following annual rates and methods:

	j)	Impairment of Long-lived Assets:
		Long-lived assets consist of property and equipment, patents, intangible assets, and deferred development costs.
		The carrying amounts of property and equipment, patents, intangible assets and deferred development costs, are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable When the carrying amount exceeds the estimated recoverable amount, the assets are written down to their recoverable amount.
		The recoverable amount of long-lived assets is the greater of fair value less costs of disposal and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognized in the consolidated statements of loss and comprehensive loss.
		An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statements of loss and comprehensive loss. Following the recognition or reversal of an impairment loss, the amortization charge applicable to the asset is adjusted prospectively in order to systematically allocate the revised carrying amount, net of any residual value, over the estimated useful life.
		Gains or losses on the disposal of property and equipment, patents and intangible assets represent the difference between the net proceeds and the carrying value at the date of sale.

16

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
	k)	Research and Development Costs:
		Research costs are expensed in the period incurred. Development costs are expensed as incurred unless they meet the criteria for deferral. Expenditures during the development phase are capitalized if the Company can demonstrate each of the following criteria: (i) the technical feasibility of completing the asset so that it will be available for use or sale, (ii) its intention to complete the asset and use or sell it, (iii) its ability to use or sell the asset, (iv) how the asset will generate probable future economic benefits, (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset, and (vi) its ability to measure reliably the expenditure attributable to the asset during its development; otherwise, these costs are expensed as incurred. Commencing in 2009, the Company determined that its continuing activities related to the application of its sensor technology to projects met the deferral criteria and, accordingly, these costs have been capitalized and are tested in each reporting period for recoverability. Development costs will be amortized on an appropriate basis at the time each of the developed assets is available for use.
		Payments received from development partners on projects are recorded to deferred development costs as a recovery of cost incurred.
	l)	Patents:
		Patents are recorded at cost and are amortized on a straight line basis over their estimated useful lives of 5 years. Patents are recorded net of accumulated amortization with amortization expense capitalized as deferred development costs since the patents are directly related to development.
	m)	Unit Private Placements:
		The Company uses the relative fair value approach in accounting for the value assigned to the common shares and the common share purchase warrants which it had made available in the unit private placement financings that it secured, calculated in accordance with the Black Scholes option-pricing model.

17

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
	n)	Stock based Compensation and Other Stock based Payments:
		The Company applies the fair value based method of accounting for all stock based payments to employees and non-employees and all direct awards of stock. Where share based payments are issued to non-employees, they are recorded at the fair value of the goods or services received in the statement of loss and comprehensive loss. If the fair value is not readily determinable the amount is based on the fair value of the equity instrument granted. Stock based compensation is charged to operations over the vesting period and the offset is credited to contributed surplus.
		Consideration received upon the exercise of stock options is credited to share capital and the related amount is transferred from contributed surplus.
		The fair value of stock options and warrants is determined by the Black Scholes option- pricing model with assumptions for risk free interest rates, dividend yields, volatility factors of the expected market price of the Company’s common shares and an expected life of the option or warrant issued. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest. In the event that vested stock options expire, previously recognized stock based compensation is not reversed. In the event that stock options are forfeited, previously recognized stock based compensation associated with the unvested portion of the stock options forfeited is reversed. The fair value of direct awards of stock is determined by the quoted market price of the Company’s stock.
	o)	Income Taxes:
		Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
		Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.

18

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

	o)	Income Taxes: (Cont’d)
		Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income or loss and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.
		Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the rates that have been enacted or substantively enacted by the reporting date.
		Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
		A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

	p)	Earnings or Loss Per Share:
		Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by adjusting the weighted average number of number of common shares outstanding for the effects of all dilutive potential common shares, which are comprised of outstanding warrants, conversion options and vested stock options. Diluted earnings (loss) per common share assumes that any proceeds received for in-the-money warrants and options would be used to buy common shares at the average market price for the period.

19

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

	q)	Changes in Accounting Standards:
		On November 1, 2013, the Company adopted the following new standards, amendments to standards and interpretations which are effective for periods beginning on or after January 1, 2013:

The adoption of these accounting standards had no impact on the consolidated financial statements previously filed by the Company. As a result no reconciliations are provided for the adoption of these new standards.

5.	NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED
	Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or the IFRS Interpretations Committee that are mandatory for future accounting periods. The standards impacted that are applicable to the Company are as follows:
	a)	IFRS 2 Share-based Payments, the amendments to IFRS 2, issued in December 2013 clarifies the definition of “vesting conditions”, and separately defines a “performance condition” and a “service condition”. A performance condition requires the counterparty to complete a specified period of service and to meet a specified performance target during the service period. A service condition solely requires the counterparty to complete a specified period of service. The amendments are effective for share-based payment transactions for which the grant date is on or after July 1, 2014.

20

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

5.	NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED (Cont’d)
	b)	IFRS 15 – Revenue from Contracts with Customers, which will replace IAS 11 – Construction Contracts, IAS 18 – Revenue, IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfer of Assets from Customers, and SIC 31 Revenue – Barter Transactions Involving Advertising Services. The new standard will be mandatorily effective for fiscal years beginning on or after January 1, 2017, and interim periods within that year. Earlier application is permitted.
		The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple deliverable arrangements. The Corporation is assessing the new standard to determine its impact of the Corporation’s financial statements.
	c)	IAS 32 – Financial instruments – presentation (“IAS 32”) was amended to clarify the criteria that should be considered in determining whether an entity has a legally enforceable right of set off in respect of its financial instruments. Amendments to IAS 32 are applicable to annual periods beginning on or after January 1, 2014 with retrospective application required.
	d)	IFRS 9 – Financial Instruments, was issued in November 2009 and contained requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39, Financial Instruments – Recognition and Measurement, for debt instruments with a new mixed measurement model having only two categories:

	•	Amortized cost and
	•	Fair value through profit and loss

IFRS 9 also replaces the models for measuring equity instruments, and such instruments are either recognized at fair value through earnings or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends, to the extent not clearly representing a return of investment, are recognized in earnings; however, other gains and losses (including impairments) associated with such instruments remain in accumulated other comprehensive income indefinitely.

21

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

5.	NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED (Cont’d)
	d)	(Cont’d)
		Requirements for financial liabilities were added in October 2010 and largely carried forward existing requirements in IAS 39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit or loss would generally be recorded in other comprehensive income.
		The effective date of IFRS 9 is for annual periods beginning on or after January 1, 2018.

The Company is currently assessing the impact of the above standards.

6.	FAIR VALUE DISCLOSURES
	The following summarizes the methods and assumptions used in estimating the fair value of the Company's financial instruments where measurement is required. The fair value of financial instruments consisting of cash, deposits and other receivables, promissory note receivable, accounts payable and accrued liabilities and bridge loans approximate their carrying amounts due to the relatively short period to maturity. Fair value amounts represent point-in-time estimates and may not reflect fair value in the future. The measurements are subjective in nature, involve uncertainties and are a matter of significant judgment. The methods and assumptions used to develop fair value measurements, for those financial instruments where fair value is recognized in the statement of financial position, have been prioritized into three levels of the fair value hierarchy as follows:
	Level 1: Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
	Level 2: Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
	Level 3: Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
	The Company's financial instruments measured at fair value on the statement of financial position date consist of cash, derivative warrant liability and the conversion feature on bridge loans. Cash is measured at Level 1 of the fair value hierarchy. Derivative warrant liability and the conversion feature on bridge loans are measured at Level 2 of the fair value hierarchy.

22

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

7.	CAPITAL RISK MANAGEMENT
	The Company’s objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. The Company includes equity, comprised of issued share capital, equity component of bridge loans, contributed surplus and deficit, in the definition of capital. The Company’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to further develop and market its technologies and to maintain its ongoing operations. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity and warrants or by securing strategic partners. The Company is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy during the year ended October 31, 2014.
8.	DEPOSITS AND OTHER RECEIVABLES
	The balance reported as Deposits and Other Receivables consists of:

			2014			2013
	Amounts receivable (a)		450,000			187,290
	Advances to Officers, Directors and Employees (b)		386,031			-
	Prepaid Insurance and other		36,735			47,451
	Promissory note receivable (c)		-			-
			872,766			234,741

	(a)	Amounts receivable relate to milestones met at October 31, 2014 per development contracts. These amounts are recorded as recoveries of deferred development costs.
	(b)	At October 31, 2014 Advances to Officers, Directors and Employees consisted of:
		(i)	Advances to the Chairman of $38,084 and to a senior employee of $80,916. These advances were repaid subsequent to October 31, 2014 (Note 23).
		(ii)	An advance to the Controller of $22,957.

The advances in (i) and (ii) above are non interest bearing, unsecured and due on demand.

23

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

8.	DEPOSITS AND OTHER RECEIVABLES (Cont’d)

(b)

At October 31, 2014 Advances to Officers, Directors and Employees consisted of: (Cont’d)

(iii)

An advance of $244,074 to the President of MAST (Refer to Note 18 for the terms of this advance and to Note 23 for settlement).

(c)

In April 2009, the Company advanced $200,000 to a private company incorporated in New Jersey, which, at that time, was also a strategic development partner of the Company. The Company and the private Company executed a promissory note with respect to the $200,000 advance stipulating the following terms and conditions:

	i)	Maturity date of September 30, 2010.
	ii)	Interest payable on a quarterly basis in arrears calculated from August 1, 2009 at a rate of 10%. In July 2011, the interest rate on the promissory note increased to 18%.
	iii)	Secured by a first priority security interest over all of the assets of the private company.

In 2012 the Company received payments totaling $30,000 against the amounts previously reserved.

At October 31, 2014 the gross balance outstanding was $145,815 including outstanding principal plus accrued interest and this amount has been fully reserved. The Company served notice to the private company that it was demanding payments under the terms of the promissory note and the security agreement and has received judgment in its favor during the year ended October 31, 2012. The Company continues to pursue collection of this fully reserved note.

			Gross			Net
	Balance outstanding at November 01, 2011		111,553			-
	Interest accrued		20,300			20,300
	Reserved		-			(20,300	)
	Repayment		(30,000	)		-
	Balance outstanding at October 31, 2012		101,853			-
	Interest accrued		20,105			20,105
	Reserved		-			(20,105	)
	Repayment		-			-
	Balance outstanding at October 31, 2013		121,958			-
	Interest accrued		23,857			23,857
	Reserved		-			(23,857	)
	Repayment		-			-
	Balance outstanding at October 31, 2014		145,815			-

24

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

9.	PROPERTY AND EQUIPMENT

			Computers			Furniture and			Total
						Equipment
	Cost
	At November 1, 2011	$	40,734		$	25,989		$	66,723
	Additions		-			-			-
	Year ended October 31, 2012	$	40,734		$	25,989		$	66,723
	At November 1, 2012	$	40,734			25,989		$	66,723
	Additions		14,839			-		$	14,839
	Disposals		(6,360	)		-		$	(6,360	)
	Year ended October 31, 2013	$	49,213		$	25,989		$	75,202
	At November 1, 2013	$	49,213			25,989		$	75,202
	Additions		16,508			-		$	16,508
	Disposals		(13,436	)		-		$	(13,436	)
	Year ended October 31, 2014	$	52,285		$	25,989		$	78,274
	Accumulated amortization		Computers			Furniture and			Total
						Equipment
	At November 1, 2011	$	30,533		$	25,989		$	56,522
	Amortization for the year		4,414			-			4,414
	Year ended October 31, 2012	$	34,947		$	25,989		$	60,936
	At November 1, 2011	$	34,947			25,989		$	60,936
	Amortization for the year		4,989			-			4,989
	Adjustment for disposals		(4,721	)		-			(4,721	)
	Year ended October 31, 2013	$	35,215		$	25,989		$	61,204
	At November 1, 2013	$	35,215			25,989		$	61,204
	Amortization for the year		7,357			-			7,357
	Adjustment for disposals		(11,770	)		-			(11,770	)
	Year ended October 31, 2014	$	30,802		$	25,989		$	56,791
	Net book value at November 1, 2012	$	5,787			-		$	5,787
	Net book value at October 31, 2013	$	13,998			-		$	13,998
	Net book value at October 31, 2014	$	21,483			-		$	21,483

25

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

10.	DEFERRED DEVELOPMENT COSTS
	The breakdown of development costs that have been capitalized is as follows:

			2014			2013
	Opening balance	$	928,077		$	718,163
	Additional project costs incurred		3,936,459			677,445
	Recovery of deferred development costs		(662,290	)		(233,290	)
	Writedown of project costs		(676,790	)		(234,241	)
	Closing balance	$	3,525,456		$	928,077

	Additions to deferred development costs includes patent amortization of $44,472 (2013 - $22,354; 2012 - $15,204), and also includes intangible asset amortization of $19,352 (2013 and 2012 - $nil).
	To date, the Company has recovered from its development partners a portion of the costs it has incurred as deferred development costs coincident with meeting milestones as stipulated in development contracts.
	In 2014, the Company provided a reserve against cumulative development costs incurred on one development project in that it completed the staged development phases for that contract and there was no formal commitment as of October 31, 2014 from the development partner to move forward with this project. In total, the Company recovered $300,000 from the development partner on this project, $125,000 of which was received in 2014; the net writedown in 2014 was $645,528 on this project, to reduce the carrying value to a nominal amount.
	In 2013, the Company provided a reserve against deferred development costs previously incurred with respect to three development projects, reducing the carrying value in each case to a nominal amount. In each case, the Company had decided not to pursue these development projects.
11.	INTANGIBLE ASSETS AND PATENTS
	Intangible assets comprise the costs which the Company has capitalized relating to the technical expertise and know-how that the Company has developed with respect to the commercialization efforts relating to its sensor technology. In 2011, the Company determined that it had sufficiently advanced its expertise and product knowledge relating to the general commercialization efforts for its sensor technology in multiple industry vertical applications.

26

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

11.	INTANGIBLE ASSETS AND PATENTS (Cont’d)
	It anticipates that it will realize commercial economic benefits from the exploitation of these intangible assets in the future.

Intangible Assets

Cost

	At November 01, 2011	$	135,465
	Additions		-
	Year ended October 31, 2012	$	135,465
	At November 01, 2012	$	135,465
	Additions		-
	Year ended October 31, 2013	$	135,465
	At November 01, 2013	$	135,465
	Additions		-
	Year ended October 31, 2014	$	135,465
	Accumulated amortization
	At November 01, 2011	$	-
	Amortization for the year		19,352
	Year ended October 31, 2012	$	19,352
	At November 01, 2012	$	19,352
	Amortization for the year		19,352
	Year ended October 31, 2013	$	38,704
	At November 01, 2013	$	38,704
	Amortization for the year		19,352
	Year ended October 31, 2014	$	58,056
	Net book value at October 31, 2012	$	116,113
	Net book value at October 31, 2013	$	96,761
	Net book value at October 31, 2014	$	77,409

27

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

11.	INTANGIBLE ASSETS AND PATENTS (cont’d)
	Amortization of intangible assets for the year ended October 31, 2014 was capitalized to deferred development costs.

Patents

Cost

	At November 1, 2011	$	62,697
	Additions		26,650
	Year ended October 31, 2012	$	89,347
	At November 1, 2012	$	89,347
	Additions		44,825
	Year ended October 31, 2014	$	134,172
	At November 1, 2013	$	134,172
	Additions		176,381
	Year ended October 31, 2014	$	310,553
	Amortization
	At November 1, 2011	$	25,019
	Amortization for the year		15,204
	Year ended October 31, 2012	$	40,223
	At November 1, 2012	$	40,223
	Amortization for the year		22,354
	Year ended October 31, 2013	$	62,577
	At November 1, 2013	$	62,577
	Amortization for the year		44,472
	Year ended October 31, 2014	$	107,049
	Net book value at October 31, 2012	$	49,124
	Net book value at October 31, 2013	$	71,595
	Net book value at October 31, 2014	$	203,504

Amortization of patents was capitalized to deferred development costs for the above years.

28

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

12.	SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE

	a)	Share Capital
		Authorized and outstanding:
		The Company has two classes of shares as follows:
		i)	Special redeemable voting preference shares, 2,000,000 authorized, none are issued and outstanding.
		ii)	Common shares without par value – an unlimited number authorized.

			Number of			Amount
			Shares			$
	Balance at November 1, 2012		136,430,555		$	54,728,239
	Private placement of units for cash (Note 13)		16,106,957			2,910,531
	Warrants exercised (Note 13)		5,953,913			822,392
	Warrants issued on private placements (Note 13)		-			(863,863	)
	Fair value of warrants exercised		-			193,796
	Financing costs		-			(35,482	)
	Balance at October 31, 2013		158,491,425		$	57,755,613
	Warrants exercised (Note 13)		27,410,717			6,801,619
	Fair value of warrants exercised		-			6,078,497
	Shares issued on conversion of bridge loans (Note 14)		2,517,501			302,100
	Warrants issued on conversion of bridge loan (Note 14)		-			(143,406	)
	Shares issued on settlement of accounts payable		17,081			8,353
	Balance at October 31, 2014		188,436,724		$	70,802,776

29

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

12.	SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE (Cont’d)
	b)	Stock Options
		Stock option plan:
		The Company has a fixed stock option plan. Under the Company’s stock option plan (the “Plan”), the Company may grant options for up to 15,600,000 shares of common stock to directors, officers, employees or consultants of the Company and its subsidiaries. The exercise price of each option is equal to or greater than the market price of the Company’s shares on the date of grant unless otherwise permitted by applicable securities regulations. An option’s maximum term under the Plan is 10 years. Stock options are fully vested upon issuance by the Company unless the Board of Directors stipulates otherwise by Directors’ resolution.
		A summary of the status of the Company’s fixed stock option plan through October 31, 2014 and changes during the periods is as follows:

			Options			Weighted
			(000	)		average
						exercise
						price
						$
	Outstanding, November 01, 2012		9,915			0.24
	Granted		2,170			0.30
	Expired		(315	)		(0.55	)
	Forfeited		(295	)		(0.23	)
	Outstanding, November 01, 2013		11,475			0.24
	Granted		630			0.76
	Outstanding, October 31, 2014		12,105			0.27

30

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

12.	SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE (Cont’d)
	b)	Stock Options (Cont’d)
		During the year ended October 31, 2014 the Company issued a total of 630,000 stock options (2013 – 2,170,000). All options vest immediately upon issuance. This total consisted of 520,000 stock options issued to directors and officers (2013 – 1,120,000), 110,000 stock options issued to employees (2013 – 750,000) and no stock options to outside consultants (2013 – 300,000). The Company has the following stock options outstanding at October 31, 2014:

All outstanding options at October 31, 2014 are exercisable. In 2014, the Company recorded a total expense of $379,253 (2013 - $368,790; 2012 - $430,856) with respect to the issuance of options issued during the year, calculated in accordance with the Black Scholes option-pricing model.

In the absence of a reliable measurement of the services received from a consultant, the services have been measured at the fair value of the options granted.

The underlying assumptions in the Black Scholes option-pricing model were as follows:

		2014	2013	2012
	Share price	$ 0.63 - 0.85	$ 0.20 - 0.36	$ 0.30
	Volatility factor (based on historical volality)	112% - 113%	105% - 110%	99%
	Risk free interest rate	1.60%	1.37% - 1.84%	1.31%
	Expected life	5 years	5 years	5 years
	Dividend yield	0%	0%	0%
	Forfeiture rate	0%	0%	0%

31

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

12.	SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE (Cont’d)
	c)	Loss Per Share
		The calculation of basic and diluted loss per share for the year ended October 31, 2014 was based on the loss attributable to common shareholders of $4,164,871 (2013 - $5,933,928; 2012 - $1,775,065) divided by the weighted average number of common shares outstanding of 171,534,969 (2013 – 146,814,466; 2012 - 123,375,510).
		Diluted loss per share did not include the effect of 12,105,000 stock options and 4,485,463 warrants outstanding (Note 13(c)) as they are anti-dilutive.

13.	PRIVATE PLACEMENTS, DERIVATIVE WARRANT LIABILITY AND COMMON SHARE PURCHASE WARRANTS

a)

Private Placements

	i)	In 2013 the Company completed a series of private placement financings with investors pursuant to prospectus and registration exemptions set forth in applicable securities law. The Company received gross proceeds $2,910,532 and issued a total of 16,106,957 (10,200,743 CDN; 5,906,214 US) common shares. 16,106,957 common share purchase warrants with an average strike price of $0.22 CDN; $0.27 USD were attached to the private placement completed during 2013. All warrants issued in 2013 have a 12 month term from issue date.
	ii)	In 2013 the Company extended the expiry dates on a total of 11,829,029 (7,315,808 CDN; 4,513,221 US) common share purchase warrants which would have otherwise expired in 2013. These warrants were extended for a period of 12 months in each case. The Company changed the strike price of 3,673,032 CDN of these warrants from $0.205 CDN to $0.215 CDN and the strike price remained unchanged for the balance of these warrants. The strike price remained unchanged for all other warrants ranging from $0.20 CDN to $0.80 CDN, $0.24 USD to $0.80 USD per warrant.
	iii)	In 2013 the Company calculated the relative fair value of the share purchase warrants issued in connection with private placements in accordance with the Black Scholes option-pricing model. The Company reported a total charge to share capital of $863,863 and an offsetting charge to contributed surplus of $377,234 for US dollar share purchase warrants issued and $486,629 to derivative warrants liability for CDN share purchase warrants issued.

32

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

13.	PRIVATE PLACEMENTS, DERIVATIVE WARRANT LIABILITY AND COMMON SHARE PURCHASE WARRANTS (Cont’d)

	a)	Private Placements (Cont’d)
			The relative fair value of these share purchase warrants was estimated using the Black Scholes option-pricing model with the following assumptions:

		2013
	Share price	$0.17 - $0.58
	Volatility factor (based on historical volality)	75 - 136%
	Risk free interest rate	0.97 - 1.09%
	Dividend yield	0%
	Expected life	1 year

	iv)	The Company did not complete any private placements in 2014.
	v)	In 2014 the Company extended the expiry date on a total of 1,405,026 common share purchase warrants which would have otherwise expired in the period. These warrants were extended for a period of three to six months in each case. The strike price of 1,105,026 of these warrants was changed from $0.41 and $0.45 per warrant to $0.50 per warrant. The strike price remained unchanged for the balance of the warrants at $0.55 per warrant.
		The Company calculated the charge associated with the extension of warrants in accordance with the Black Scholes option-pricing model. The Company reported a total charge to deficit of $168,632 (2013 - $841,247; 2012 - $1,322,879) and an offsetting charge to contributed surplus of $168,632 (2013 - $264,938; 2012 - $358,983) for US dollar warrants extended and $nil (2013 - $576,309; 2012 – $963,896) to derivative warrant liability for Canadian warrants extended.
		The incremental fair value of these warrants extended was estimated using the Black Scholes option-pricing model with the following assumptions:

		2014	2013	2012
	Share price	$0.50	$0.19 - $0.53	$0.12 - $0.30
	Volatility factor (based on historical volality)	124 - 157%	75 - 161%	109 - 144%
	Risk free interest rate	1.01 - 1.02%	1.00 - 1.11%	0.91 - 1.14%
	Dividend yield	0%	0%	0%
	Expected life	0.25 - 0.53 year	1 year	0.33-1.0 year

33

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

13.	PRIVATE PLACEMENTS, DERIVATIVE WARRANT LIABILITY AND COMMON SHARE PURCHASE WARRANTS (Cont’d)

	b)	Derivative Warrant Liability
		The following summarizes the change in derivative warrant liability:

			October 31,			October 31,			October 31,
			2014			2013			2012
	Balance, beginning of year	$	-		$	1,061,544		$	1,178,691
	Fair value assigned in warrants in units issuances		-			486,629			289,367
	Fair value assigned in warrants extended		-			576,309			963,896
	Fair value assigned to warrants issued on settlements of debt (Note 14)		-			-			306,061
	Fair value transferred to share capital for warrants exercised		-			(146,121	)		(348,947	)
	CDN warrants converted to USD		-			(5,224,863	)		-
	Loss (Gain) on revaluation of warrants		-			3,246,502			(1,327,524	)
		$	-		$	-		$	1,061,544

On October 28, 2013 the exercise price of all outstanding Canadian denominated warrants was converted from CDN to USD. As a result, these warrants are no longer considered a derivative warrants liability. These warrants were revalued on October 28, 2013 in the amount of $5,224,863 and this value was removed from derivative warrant liability and recorded to contributed surplus. Until October 28, 2013, the difference between the carrying amount of these CDN warrants and the revalued amount was recorded as loss on revaluation of derivative warrants liability in the amount of $3,246,502.

The derivative warrant liability was revalued at October 28, 2013 (2012 – October 31) using the Black Scholes option-pricing model with the following assumptions:

		2013	2012
	Share price	$0.46	$0.21
	Volatility factor (based on historical volality)	106 - 255%	81 - 153%
	Risk free interest rate	1.03 - 1.09%	1.01 - 1.03%
	Dividend yield	0%	0%
	Expected life	0.14 - 1.13 year	0.25 - 1 year

34

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

13.	PRIVATE PLACEMENTS, DERIVATIVE WARRANT LIABILITY AND COMMON SHARE PURCHASE WARRANTS (Cont’d)

c)

Share Purchase Warrants

						Weighted
						average exercise			Proceeds
			Warrants			price			Realized
	Balance outstanding at October 31,2012		19,692,968		$	0.27
	Exercised		(5,953,913	)		($0.14	)		822,391
	Expired		(85,000	)		($0.15	)
	Granted		16,106,957		$	0.24
	Balance outstanding at October 31, 2013		29,761,012		$	0.27			-
	Exercised		(27,410,717	)		(0.25	)		6,801,619
	Expired		(382,333	)		(0.48	)		-
	Granted		2,517,501			0.12			-
	Balance at October 31, 2014		4,485,463			0.37

The weighted average share price on the date of exercise was $0.71 (2013 - $0.22) .

14.	BRIDGE LOANS

	a)	On December 2, 2011, the Company secured $285,000 CDN of bridge (“Loan 1”) from a group of arm’s length investors with maturities of six months. The loans were unsecured, bearing interest at a rate of 2% per month (effective interest rate – 26%) and convertible at the holders’ option at $0.12 USD per unit. Each unit upon conversion included one common share and one common share purchase warrant with a one year expiry and an exercise price of $0.12 USD. The term of the loans were extended on a month to month basis in July 2012. In January 2014 these loans was converted to equity by the issuance of 2,517,501 common shares and 2,517,501 common share purchase warrants. The common share purchase warrants have a one year term and an exercise price of $0.12 USD per warrant (Note 23).
	b)	On September 4, 2012, the Company secured $125,000 CDN of bridge loans (“Loan 2”) from a group of arm’s length investors with maturities of six months. The loans were unsecured, bearing interest at a rate of 2% per month (effective interest rate – 32%) and convertible at the holders’ option at $0.18 CDN per unit. Each unit, upon conversion, included one common share and one common share purchase warrant with a one year expiry and an exercise price of $0.22 CDN. This loan was repaid in the quarter ended April 30, 2013.

35

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

14.	BRIDGE LOANS

	b.	(Cont’d)
		A breakdown of the outstanding bridge loans at October 31, 2013 is summarized as follows:

			Loan 1			Loan 2			Total
	Loan (initial value)		284,514			81,194			365,708
	Embedded derivative		-			44,850			44,850
	Interest Accrued		130,686			15,209			145,895
	Interest Paid		(125,186	)		(15,209	)		(140,395	)
	Accretion Expense		1,557			44,850			46,407
	Gain on revaluation of embedded derivative		-			(44,850	)		(44,850	)
	Equity Portion of Bridge Loan - Conversion Feature		(1,557	)		-			(1,557	)
	Repayments		-			(126,044	)		(126,044	)
	Carrying value at October 31, 2013		290,014			-			290,014

In fiscal 2013 and 2014, no bridge loans were issued.

As Loan 2 was repaid during 2013 the embedded derivative recognized in fiscal 2012 of $44,850 was revalued to be $nil at the time of repayment and a gain on revaluation of $40,750 (2012 – $176,899) was recognized in the statements of consolidated loss and comprehensive loss in 2013.

A breakdown of the outstanding bridge loan at October 31, 2014 is summarized as follows:

			Loan 1
	Principal		284,514
	Interest Accrued		160,358
	Interest Paid		(142,772	)
	Accretion Expense		1,557
	Equity Portion of Bridge Loan - Conversion Feature		(1,557	)
	Conversion to equity in 2014		(302,100	)
	Carrying value at October 31, 2014		-

36

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

14.	BRIDGE LOANS (Cont’d)

	b.	(Cont’d)
		During 2014, Loan 1 was settled by the holder who converted the outstanding balance due; the Company issued 2,517,501 common shares with an assigned value of $302,100. As a result of the conversion, the holder received 2,517,501 common shares purchase warrants exercisable at $0.12 per warrant for a period of 12 months after the conversion date (January 23, 2015). The relative fair value of the common share purchase warrants of $143,406 was calculated using the Black Scholes option pricing model with the following assumptions:

			2014
	Share price	$	1.18
	Volatility factor (based on historical volality)		120%
	Risk free interest rate		1.04%
	Dividend yield		0%
	Expected life		1 Year

In the 2012 fiscal year, bridge loans were settled by the holder converting their amount outstanding with the company issuing 1,860,080 common shares with an assigned value of $226,900. As a result of the conversion the holder received 1,860,080 common share purchase warrants exercisable at a price of $0.12 - $0.20 CDN for a period of 1 year. These common share purchase warrants were valued at $306,061 using the Black Scholes option-pricing model with the following assumptions:

			2012
	Share price	$	0.23 - $0.25
	Volatility factor (based on historical volality)		154 - 156%
	Risk free interest rate		1.03 - 1.24%
	Dividend yield		0%
	Expected life		1 year

37

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

15.	CONTRIBUTED SURPLUS

	Balance outstanding at November 01, 2012	$	26,634,177
	Stock based compensation expense relating to stock options issued (Note 12)		368,790
	Common share purchase warrants
	(a) Issued (Note 13)		377,234
	(b) Extended (Note 13)		264,938
	Warrants modified (Note 13)		5,224,863
	Fair value of warrants exercised		(47,675	)
	Balance at October 31, 2013	$	32,822,327
	Stock based compensation expense relating to stock options issued (Note 12)		379,253
	Common share purchase warrants
	(a) Issued (Note 13)		-
	(b) Extended (Note 13)		168,632
	Transferred from equity component of bridge loan due to conversion		1,557
	Warrants issued on conversion of bridge loan (Note 14)		143,406
	Fair value of warrants exercised		(6,078,497	)
	Balance at October 31, 2014	$	27,436,678

38

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

16.	INCOME TAXES

(a)

The Company has non-capital losses of approximately $25.6 million available to reduce future taxable income, the benefit of which has not been recognized in these consolidated financial statements. As of October 31, 2014 the tax losses expire as follows:

			Canada			Other foreign			Total
	2015	$	2,849,213		$	-		$	2,849,213
	2022					7,301		$	7,301
	2023					9,667		$	9,667
	2025					14,471		$	14,471
	2026		2,131,530			5,254		$	2,136,784
	2027		1,792,449			3,459		$	1,795,908
	2028		9,294			55,519		$	64,813
	2029		1,837,023			463,610		$	2,300,633
	2030		2,478,623			1,886,778		$	4,365,401
	2031		1,493,293			48,808		$	1,542,101
	2032		1,654,957			333,962		$	1,988,919
	2033		2,005,971			160,550		$	2,166,521
	2034		3,148,002			3,206,207		$	6,354,209
		$	19,400,355		$	6,195,586		$	25,595,941

		In addition the Company has available capital loss carry forwards of approximately $1.5 million to reduce future taxable capital gains, the benefit of which has not been recognized in these consolidated financial statements. These losses carry forward indefinitely.
	(b)	Deferred income taxes reflect the net tax effect of temporary differences between carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows.

			October 31, 2014			October 31, 2013			October 31, 2012
	Non-capital losses	$	7,792,685		$	6,334,982		$	5,877,761
	Capital losses		196,505			212,386			221,578
	Property, equipment, intangibles, patents and deferred costs		661,960			1,926,689			1,988,956
	Share issue costs		9,095			15,641			21,497
			8,660,245			8,489,698			8,109,792
	Deferred tax assets not recognized		(8,660,245	)		(8,489,698	)		(8,109,792	)
		$	-		$	-		$	-

39

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

16.	INCOME TAXES (Cont’d)

(c)

The reconciliation of income tax attributed to continuing operation computed at the statutory tax rates to income tax expense is as follows:

			October 31, 2014			October 31, 2013			October 31, 2012
	Loss before income taxes	$	(4,164,871	)	$	(5,933,928	)	$	(1,775,065	)
	Statutory rate		26.50%			26.50%			26.50%
	Expected income tax recovery		(1,103,691	)		(1,572,491	)		(470,392	)
	Effect on income taxes of unrecognized future income
	Tax assets relating to deductible temporary differences on:
	Non deductible expenses and other items		112,727			888,557			(149,207	)
	Share issue costs and other		-			(4,361	)		(4,361	)
	Effect of exchange rate on future tax assets carried forward from previous years		572,542			324,880			3,071
	Expiry of non-capital losses		259,122
	Effect of higher tax rates in foreign jurisdiction		(11,247	)
	Change in deferred income tax rates and other		-			(16,491	)		(393,446	)
	Change in deferred tax rates not recognized		170,547			379,906			1,013,335
		$	-		$	-		$	-

17.	EXPENSES Administration
	The components of general and administration expenses are as follows:

			2014			2013			2012
	General and administrative	$	69,122		$	53,494		$	66,651
	Rent and occupancy cost		84,816			84,179			108,193
	Bad debt expense		24,009			19,954			21,586
	Interest income		(30,129	)		(19,954	)		(20,300	)
	Interest expense		28,640			78,677			106,442
	Accretion expense		-			19,381			187,671
	Office insurance		61,578			61,211			65,394
	Telephone		22,537			17,272			17,380
	Investor relations, listing and filling fees		64,880			64,283			141,600
		$	325,453		$	378,497		$	694,617

40

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

17.	EXPENSES (Cont’d)
	Professional, Other Fees and Salaries
	The components of professional, other fees and salaries expenses are as follows:

			2014			2013			2012
	Professional fees	$	420,902		$	311,330		$	183,021
	Consulting fees		1,535,520			818,106			917,420
	Salaries and benefits		404,445			443,078			407,450
		$	2,360,867		$	1,572,515		$	1,507,891

Research and Development

The components of research and development expenses are as follows:

18.	MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS
	The Company reports the following related party transactions:

	(a)	Chairman: The Chairman receives cash compensation on a month to month basis calculated at an annual rate of $150,000 CDN.
		The Chairman was not granted any stock options in 2014. In 2013 the Chairman was awarded a total of 140,000 stock options at an average price of $0.29 CDN per share (2012 - 100,000 stock options at an average price of $0.35 per share).
		The total compensation paid to the Chairman during the year ended October 31, 2014 was $137,172 of cash compensation and $nil of stock based compensation (2013 - $146,599 of cash compensation and $ 21,163 of stock based compensation; 2012 - $149,565 of cash compensation and $23,697 of stock based compensation).
		The Company provided a short term non-interest bearing advance of $38,084 to the Chairman in 2014. This advance was repaid subsequent to October 31, 2014.

41

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

18.	MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS (Cont’d)

	(b)	Management and consulting fees:
		Included in professional fees, other fees and salaries as reported are management fees and consulting fees paid or payable to individuals (or companies controlled by such individuals) who served as officers, directors and employees of the Company. The total compensation paid to such parties is summarized as:

			2014			2013			2012
	Cash compensation	$	1,482,153		$	805,574		$	709,075
	Less portion capitalized to deferred development costs		(169,664	)		(202,820	)		-
			1,312,489			602,754			709,075
	Stock based compensation		325,074			195,720			401,773
		$	1,637,563		$	798,474		$	1,110,848

		In 2014 these parties were awarded a total of 540,000 options at an average price of $0.76 CDN per share (2013 – 1,292,500 options at an average price of $0.29 per share; 2012 – 1,755,000 options at an average price of $0.35 per share)
	(c)	Related party deferred development cost:
		In 2014 the Company was invoiced $1,843,643 by a company whose major shareholder is a director of the Company and who also serves as its chief technology officer. This individual was elected as a director on February 19, 2014 and these related party transactions disclosed are transactions incurred from this date forward. These charges have been capitalized as deferred development costs. As at October 31, 2014, included in accounts payable and accrued liabilities is $208,425 owing to this company.

42

---

MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

18.	MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS (Cont’d)

	(d)	Advances:
		In 2014 the following advances were provided to officers, directors and employees of the Company.
		(1)	The CFO was advanced $119,757 during February and March 2014. The advance was settled through repayments of $78,036 and a performance bonus awarded at October 31, 2014. The advance was unsecured, due on demand with interest charged at a rate of 1% per month on the opening monthly balance outstanding.
		(2)	The President of MAST Inc was advanced $244,074 on May 30, 2014. The advance was evidenced by a promissory note which included the following terms:

	a.	Non-interest bearing for the first twelve months and, thereafter, interest to be charged at a rate of 1% per month on the opening monthly balance.
	b.	Unsecured for the first 12 months and, thereafter, an assignment of a security interest to the full amount of the outstanding balance in favor of the Company.
	c.	Open to full repayment at any time.
	d.	Eligible for up to full offset against certain performance based incentive compensation within the first twelve months (note 23).

(3)

A senior employee was advanced $80,916 during the year. This advance was non- interest bearing, unsecured, and due on demand. This advance was repaid subsequent to October 31, 2014.

19.	COMMITMENTS
	The Company secured new leased premises in June 2012. The lease term is for 5 years and stipulates base monthly rental expenses of $3,800 CDN. Lease commitments are as follows – commitments less than one year of $44,000 CDN; commitments in years 2-3 total $77,000 CDN.
	The Company has certain outstanding commitments to 3rd party subcontractors with respect to deferred development costs. These commitments are as follows – commitments less than one year of $1,799,000; commitments between years 2-5 total $934,000.

43

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

20.	CONTINGENCIES

	(a)	Legal matters:
		Subsequent to October 31, 2014, the Company commenced a legal action against a former 3rd party consulting firm who previously provided services to the Company (note 23).
		The Company has agreed to indemnify its directors and officers and certain of its employees in accordance with the Company’s by-laws. The Company maintains insurance policies that may provide coverage against certain claims.
	(b)	Disputes with vendors:
		The Company has disputed amounts charged by certain third party vendors during previous fiscal years, one of which is the firm noted in (a) above, against which the Company has taken action (Note 23). The amount charged by the vendors exceeds the amount recorded as a provision by $181,780. No claims have been made by the vendors to date related to the disputed amounts.

21.	FINANCIAL RISK MANAGEMENT

	(a)	Financial Risk Management
		The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including foreign exchange risk and interest rate risk) and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out under policies approved by the Board of Directors. Management is charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the approved policies.
	(b)	Market Risk:

	i.	Foreign Exchange Risk:
		The Company currently incurs expenses in Canadian dollars. Management monitors the Canadian position of these monetary financial instruments on a periodic basis throughout the course of the year.

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

21.	FINANCIAL RISK MANAGEMENT (Cont’d)

(b)

Market Risk: (Cont’d)

	i.	Foreign Exchange Risk:
		The consolidated financial statements include balances that are denominated in Canadian dollars as follows:

		A 10% strengthening of the US dollar against the Canadian dollar would serve to decrease the loss by $31,910 at October 31, 2014 (2013 – decrease the loss by $30,037). A 10% weakening of the US dollar against the Canadian dollar at October 31, 2014 would have had the equal but opposite effect.
	ii.	Interest Rate Risk:
		Cash flow interest rate risk is the risk that the future cash flow of a financial instrument will fluctuate because of changes in market interest rates.
		Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company’s cash and promissory note receivable earn interest at market rates. The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. Fluctuations in market rates of interest may have an impact on the Company’s results of operations.
		The Company is not exposed to interest price risk on its interest bearing bridge loans and related party advances as the interest rate is fixed.

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

21.	FINANCIAL RISK MANAGEMENT (Cont’d)

	(c)	Liquidity Risk:
		Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due.
		The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. Senior management is actively involved in the review and approval of planned expenditures.
		All financial liabilities are due within 1 year from the balance sheet at October 31, 2014.
		As at October 31, 2014, the Company reports working capital of $1,034,921 and has certain financial commitments (Note 19), the majority of which are due within one year. It must continue to raise financing in order to meet its current obligations.
	(d)	Credit Risk:
		Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s cash and deposits and other receivables. The carrying amount of financial assets represents maximum credit exposure. The Company reduces its credit risk by maintaining its primary bank accounts at large financial institutions and assesses the credit quality of counterparties, taking into account their financial position, past experience and other factors.

22.	SEGMENTED INFORMATION
	There is one operating segment of the business being the development and commercialization efforts with respect to the Company's proprietary sensor applications. Currently, the predominant market segment that the Company is pursuing is the North American market for such technology.
	Geographic information – Non-current assets

			October 31,			October 31,
			2014			2013
	Canada	$	632,516		$	415,533
	United States		3,195,336			694,898
		$	3,827,852		$	1,110,431

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MICROMEM TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

For the years ended October 31, 2014, 2013 and 2012

23.	SUBSEQUENT EVENTS
	The Company reports the following as subsequent events:

	(a)	As of February 25, 2015 the Company has raised an additional $565,714 of financing through the exercise of a total of 2,988,876 common share purchase warrants.
	(b)	The Company collected a total of $1,392,978 from development partners with respect to its ongoing joint product development projects. Included in the amounts is the $450,000 recorded as amounts receivable as described in Note 8 (a).
	(c)	The Company settled in full the $244,074 advance from the President of MAST as described in (Note 18 (d) (2)) through the award of additional performance based compensation to that officer in February 2015.
	(d)	The advances to the Chairman and a senior employee described in Note 8(b) (i) and (ii) were repaid to the Company in December 2014.
	(e)	On November 17, 2014, Micromem and MAST (“Plaintiffs”) commenced a lawsuit in the United States District Court for the Southern District of New York against Dreifus Associates Limited and Henry Dreifus (“Defendants”). Plaintiffs original complaint contained five causes of action by which they sought money damages, declaratory relief and specific performance relating to certain contracts. On February 24, 2015, Plaintiffs filed an amended complaint to add a claim for declaratory relief relating to a patent held by Plaintiffs. It is anticipated that Defendants will deny the substantive allegations in the amended complaint and/or seek to have the action transferred to Florida, where Defendants reside and/or maintain an office.
	(f)	At the Annual General and Special Meeting of shareholders held on January 30, 2015, the Company’s stock option plan was revised to increase the maximum number of options in the plan reserved for issuance from 15.6 million to 18.84 million options.

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ITEM 19.           Exhibits

The following exhibits are filed as part of this Annual Report:

Exhibit No. 1.1	Articles of Incorporation of Micromem Technologies Inc. and amendments thereto in effect as of January 11, 2000, (Incorporated herein by reference to the Company's Form 20-F filed with the Commission on January 11, 2000).
Exhibit No. 1.2	Articles of Incorporation of Amendment of Micromem Technologies Inc. dated as of October 17, 2001 amending the Articles of Incorporation of Micromem Technologies Inc. to increase the number of directors to a minimum of three and a maximum of ten (Incorporated herein by reference to the Company's Form 20-F filed with the Commission on March 26, 2003).
Exhibit No. 1.3	Articles of Incorporation of Amendment of Micromem Technologies Inc. dated as of June 24, 2002 amending the Articles of Incorporation of Micromem Technologies Inc. to increase the number of directors to a minimum of 3 and a maximum of 12 (Incorporated herein by reference to the Company's Form 20-F filed with the Commission on March 26, 2003).
Exhibit No. 1.5	By-Laws of Micromem Technologies Inc. in effect as of January 11, 2002, (Incorporated herein by reference to the Company's Form 20-F filed with the Commission on January 11, 2000).
Exhibit No. 1.6	Amendment to the By-Laws of Micromem Technologies Inc. approved by shareholders on June 29, 2000, deleting the requirement from the By-Laws that the President shall be appointed from amongst the directors (Incorporated herein by reference to the Company's Form 20-F filed with the Commission on March 26, 2003).
Exhibit No. 4.1	Employment Agreement by and between Micromem Technologies, Inc. and Salvatore Fuda dated May 29, 2005. (Incorporated herein by reference to the Company's Form 20-F filed with the Commission on February 28, 2006).
Exhibit No. 4.2	Employment Agreement by and between Micromem Technologies and Joseph Fuda dated May 28, 2008 (Incorporated by reference to the Company’s Form 20-F filed with the Commission on February 24, 2009).
Exhibit No. 4.3	Employment Agreement by and between Micromem Technologies and Dan Amadori dated May 28, 2008 (Incorporated by reference to the Company’s Form 20-F filed with the Commission on February 24, 2009).
Exhibit No. 4.4	Employment Agreement by and between Micromem Technologies and Steven Van Fleet dated May 28, 2008 (Incorporated by reference to the Company’s Form 20-F filed with the Commission on February 24, 2009).
Exhibit No. 8.1	List of Subsidiaries (Incorporated by reference to the Company’s Annual Report on Form 20-F filed with the Commission on March 1, 2010)
Exhibit No. 12.1	Officer's Certification pursuant to Section 302 of the Sarbanes Oxley Act, 2002 (filed herewith).
Exhibit No. 12.2	Officer's Certification pursuant to Section 302 of the Sarbanes Oxley Act, 2002 (filed herewith).
Exhibit No. 13.1	Officer's Certification pursuant to Section 906 of the Sarbanes Oxley Act, 2002 (filed herewith).
Exhibit No. 13.2	Officer's Certification pursuant to Section 906 of the Sarbanes Oxley Act, 2002 (filed herewith).

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SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on Form 20-F on its behalf.

MICROMEM TECHNOLOGIES INC.

	By:	/s/ Joseph Fuda
	Name:	Joseph Fuda
	Title:	Chief Executive Officer
	By:	/s/ Dan Amadori
	Name:	Dan Amadori
	Title:	Chief Financial Officer

Dated: February 27, 2015

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Exhibit 12.1

SECTION 302 CERTIFICATION
CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Joseph Fuda, certify that:

1.	I have reviewed this annual report on Form 20-F of Micromem Technologies Inc. for the Fiscal Year Ended October 31, 2014;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

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Exhibit 12.1

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 27, 2015	/s/ Joseph Fuda
	Joseph Fuda
	Chief Executive Officer
	(Principal executive officer)

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Exhibit 12.2

SECTION 302 CERTIFICATION
CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Dan Amadori, certify that:

1.	I have reviewed this annual report on Form 20-F of Micromem Technologies Inc. for the Fiscal Year Ended October 31, 2014;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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Exhibit 12.2

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2015	/s/ Dan Amadori
	Dan Amadori
	Chief Financial Officer
	(Principal financial officer)

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Exhibit 13.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Micromem Technologies Inc. (the “Company”) on Form 20-F for the Fiscal Year Ended October 31, 2014 (the “Report”), I, Joseph Fuda, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, based on my knowledge, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 27, 2015	/s/ Joseph Fuda
	Joseph Fuda
	Chief Executive Officer
	(Principal executive officer)

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Exhibit 13.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Micromem Technologies Inc. (the “Company”) on Form 20-F for the Fiscal Year Ended October 31, 2014 (the “Report”), I, Dan Amadori, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, based on my knowledge, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 27, 2015	/s/ Dan Amadori
	Dan Amadori
	Chief Financial Officer
	(Principal financial officer)

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