MMTIF Micromem Technologies Inc (QB)

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

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

June 2023

Commission File Number 0-26005

MICROMEM TECHNOLOGIES INC.

121 Richmond Street West, Suite 602, Toronto, ON M5H 2K1

[Indicate by checkmark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.]

Form 20-F [X]     Form 40-F [  ]

             [Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.]

Yes [  ]     No [X] 

[If "Yes" is marked, indicate below the file number assigned to the registrant in connection with rule 12g3-2(b):        N/A

This report on Form 6-K is hereby incorporated by reference in the registration statement on Form F-3 (Registration No. 333-134309) of Micromem Technologies Inc. and in the prospectus contained therein, and this report on Form 6-K shall be deemed a part of such registration statement from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished by Micromem Technologies Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934.

SIGNATURES    

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

	MICROMEM TECHNOLOGIES INC.
	By:       /s/ Joseph Fuda
Date: June 29, 2023	Name: Joseph Fuda
	Title:   Chief Executive Officer

 

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Exhibit Index

Exhibit		Description
99.1		Unaudited Condensed Interim Consolidated Financial Statements for the period ended April 30, 2023
99.2		Management's Discussion and Analysis for the period ended April 30, 2023
99.3		Form 52-109F2 Certification of Interim Filings Full Certificate - CEO
99.4		Form 52-109F2 Certification of Interim Filings Full Certificate - CFO

 

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Financial Statements
For the three and six months ended April 30, 2023 and 2022

(Expressed in United States Dollars)

 

 

 

 

 

 

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Financial Statements

For the three and six months ended April 30, 2023 and 2022
(Expressed in United States Dollars)

Contents

Notice to Shareholders	1
Unaudited Condensed Interim Consolidated Financial Statements:
Unaudited Condensed Interim Consolidated Statements of Financial Position	2
Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss)	3
Unaudited Condensed Interim Consolidated Statements of Changes in Equity	4
Unaudited Condensed Interim Consolidated Statements of Cash Flows	5
Notes to the Unaudited Condensed Interim Consolidated Financial Statements	6

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Financial Statements

Notice of no auditor review of the condensed interim consolidated financial statements

 

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the condensed interim consolidated financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim consolidated financial statements of Micromem Technologies Inc. (the "Company") have been prepared by and are the responsibility of the Company's management and approved by the Board of Directors.

The Company's independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada, for a review of condensed interim consolidated financial statements by an entity's auditor.

June 29, 2023

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Statements of Financial Position

As at April 30, 2023 and October 31, 2022

(Expressed in United States dollars)

				As at			As at
	Notes			April 30, 2023			October 31, 2022
Assets
Current
Cash	19(a)(d)		$	215,907		$	33,227
Prepaid expenses and other receivables				54,322			18,200
Total current assets				270,229			51,427
Property and equipment	5			39,466			48,092
Total assets			$	309,695		$	99,519
Liabilities
Current
Trade payables and other liabilities	19(a)(c)		$	145,044		$	287,575
Current lease liability	7			16,454			15,366
Debenture payable	10			38,367			38,001
Convertible debentures	9			3,542,816			3,792,064
Derivative liabilities	9			3,375,051			641,299
Total current liabilities				7,117,732			4,774,305
Non-current lease liability	7			21,254			29,418
Long-term loan	8			44,244			43,796
Total liabilities				7,183,230			4,847,519
Shareholders' Deficiency
Share capital	11			89,742,200			87,784,725
Contributed surplus	12			27,202,443			27,459,730
Equity component of convertible debentures	9			1,073,781			793,140
Accumulated deficit				(124,891,959	)		(120,785,595	)
Total shareholders' deficiency				(6,873,535	)		(4,748,000	)
Total liabilities and shareholders' deficiency			$	309,695		$	99,519
Going concern	2
Contingencies	18
Subsequent events	22

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

Approved on behalf of the Board of Directors:
"Joseph Fuda"		"Alex Dey"
Director		Director

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three and six months ended April 30, 2023 and 2022

(Expressed in United States dollars)

				Three months ended April 30,						Six months ended April 30,
	Notes			2023			2022			2023			2022
Operating expenses
General and administrative	15(a)		$	45,544		$	69,129		$	71,958		$	112,130
Professional, other fees and salaries	15(b)			115,132			140,789			196,302			325,815
Stock-based compensation	12			145,714			-			151,406			952
Travel and entertainment				16,055			8,285			23,860			15,252
Amortization of property and equipment	5			4,076			7,186			8,171			14,372
Amortization of patents	6			-			1,877			-			3,877
Foreign exchange loss (gain)	19(a)			(140,883	)		92,968			(82,379	)		35,124
Total operating expenses				185,638			320,234			369,318			507,522
Other expenses
Accretion expense	9			74,289			431,179			154,051			1,254,943
Interest expense on convertible debt	9			137,204			110,160			268,340			226,096
Other finance expenses	7,10			31,499			3,057			34,751			7,032
Loss (gain) on revaluation of derivative liabilities	9			1,583,394			(1,120,783	)		1,278,545			(1,089,468	)
Loss (gain) on conversion of convertible debentures	9			12,341			130,175			21,120			333,896
Loss (gain) on repayment of convertible debentures	9			(12,715	)		-			(18,382	)		-
Loss (gain) on extinguishment of convertible debentures	9			1,884,384			18,139			2,004,621			44,983
Total other expenses				3,710,396			(428,073	)		3,743,046			777,482
Loss before income tax provision				(3,896,034	)		107,839			(4,112,364	)		(1,285,004	)
Income tax provision	14			-			-			-			-
Net income (loss) and comprehensive income (loss)			$	(3,896,034	)	$	107,839		$	(4,112,364	)	$	(1,285,004	)
Weighted average number of outstanding shares, basic and diluted	13			474,546,633			498,294,138			474,546,633			443,733,006
Income (loss) per share, basic and diluted	13		$	(0.01	)	$	-		$	(0.01	)	$	-

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

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

For the three and six months ended April 30, 2023 and 2022

(Expressed in United States dollars)

												Equity
												component of
			Number of						Contributed			convertible			Accumulated
	Notes		shares			Share capital			surplus			debentures			deficit			Total
Balance at November 1, 2021			435,737,734		$	86,815,836		$	28,197,382		$	14,004		$	(118,498,500	)	$	(3,471,278	)
Private placements of shares for cash	11		3,213,674			143,752			-			-			-			143,752
Subscriptions for private placements	11		-			51,473												51,473
Convertible debentures converted into common shares	9		8,240,025			576,620			-			-			-			576,620
Expiry of convertible debenture conversion option	9		-			-			8,241			(8,241	)		-			-
Renewal of convertible debentures	9		-			-			-			8,241			-			8,241
Stock-based compensation	12		-			-			952			-			-			952
Net loss			-			-			-			-			(1,285,004	)		(1,285,004	)
Balance at April 30, 2022			447,191,433		$	87,587,681		$	28,206,575		$	14,004		$	(119,783,504	)	$	(3,975,244	)
Balance at November 1, 2022			467,607,678		$	87,784,725		$	27,459,730		$	793,140		$	(120,785,595	)	$	(4,748,000	)
Private placements of shares for cash	11		8,660,000			454,377			-			-			-			454,377
Subscriptions for private placements	11		379,500			33,618
Convertible debentures converted into common shares	9		20,811,859			1,385,724			-			(77,052	)		-			1,308,672
Exercise of options	12		750,000			83,756			(45,000	)		-			-			38,756
Expiry of options	12								(6,000	)		-			6,000			-
Expiry of convertible debenture conversion option	9		-			-			793,140			(793,140	)		-			-
Renewal of convertible debentures	9		-			-			(1,150,833	)		1,150,833			-			-
Stock-based compensation	12		-			-			151,406			-			-			151,406
Net loss			-			-			-			-			(4,112,364	)		(4,112,364	)
Balance at April 30, 2023			498,209,037			89,742,200.00		$	27,202,443		$	1,073,781		$	(124,891,959	)	$	(6,907,153	)

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

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Micromem Technologies Inc.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the six months ended April 30, 2023 and 2022

(Expressed in United States dollars)

				Six months ended April 30
	Notes			2023			2022
Operating activities
Net loss			$	(4,112,364	)	$	(1,285,004	)
Items not affecting cash:
Amortization of property and equipment	5			8,171			14,372
Amortization of patents	6			-			3,877
Accretion expense	9,16			154,051			1,254,943
Accrued interest on convertible debentures	9,16			232,887			165,781
Stock-based compensation	12			151,406			952
Loss (gain) on conversion of convertible debentures	9,16			21,120			333,896
Loss (gain) on repayment of convertible debentures	9,16			(18,382	)		-
Loss (gain) on revaluation of derivative liabilities	9,16			1,278,545			(1,089,468	)
Loss (gain) on extinguishment of convertible debentures	9,16			2,004,621			44,983
Foreign exchange loss (gain)	19(a)			(86,014	)		46,270
				(365,959	)		(509,398	)
Net changes in non-cash working capital:
Prepaid expenses and other receivables				(2,504	)		(7,691	)
Trade payables and other liabilities				(142,531	)		(113,459	)
Cash flows used in operating activities				(510,994	)		(630,548	)
Financing activities
Principal payments on lease liability	7			(7,559	)		(16,030	)
Private placements of shares for cash	11			454,377			143,752
Exercise of options	12			38,756			-
Subscription for private placement				-			51,473
Proceeds from issuance of convertible debentures	16			274,600			345,000
Repayments of convertible debentures	16			(66,500	)		(15,000	)
Cash flows provided by financing activities				693,674			509,195
Net change in cash				182,680			(121,353	)
Cash - beginning of period				33,227			171,397
Cash - end of period			$	215,907		$	50,044
Supplemental cash flow information
Interest paid (classified in operating activities)	9		$	30,799		$	60,315
Interest converted (classified in operating activities)	9		$	4,654		$	-
Interest paid on non-convertible debt (classified in operating activities)	10		$	4,578		$	-
Interest paid on lease liability (classified in operating activities)	7		$	1,832		$	-
Private placement of shares for receivable			$	33,618		$	-
Carrying amount of convertible debentures converted into common shares	9		$	1,385,724		$	576,620

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

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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. Micromem is a publicly traded company with its head office located at 121 Richmond Street West, Suite 602, Toronto, Ontario, Canada. The Company's common shares are currently listed on the Canadian Securities Exchange under the trading symbol "MRM" and on the Over the Counter Venture Market under the trading symbol "MMTIF".

The Company develops, based upon proprietary technology, customized sensor applications for companies (referred to as "Development Partners") operating internationally in various industry segments. The Company has not generated commercial revenues through April 30, 2023 and is devoting substantially all its efforts to securing commercial revenue opportunities.

2. Going concern

These unaudited condensed interim consolidated financial statements have been prepared with the assumption 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 substantial doubt about the Company's ability to continue as a going concern and ultimately on the appropriateness of the use of the accounting principles applicable to a going concern. During the six months ended April 30, 2023, the Company reported a net loss and comprehensive loss of $4,112,364 (2022 - $1,285,004) and negative cash flow from operations of $510,994 (2022 - $630,548). The Company's working capital deficiency as at April 30, 2023 was $6,847,503 (October 31, 2022 - $4,722,878).

The Company's success depends on the profitable commercialization of its proprietary sensor 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 the next twelve months; however, the ability of the Company to continue as a going concern is dependent upon its ability to secure additional financing and/or to profitably commercialize its technology. There is no assurance that the Company will be successful in the profitable commercialization of its technology, or will be able to secure the necessary additional financing. These unaudited condensed interim consolidated 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 was not appropriate for these unaudited condensed interim consolidated financial statements then adjustments could be necessary to the carrying value of assets and liabilities, the reported expenses and the statement of financial position classifications used; in such cases, these adjustments could be material.

3. Basis of presentation

These unaudited condensed interim consolidated financial statements for the three and six months ended April 30, 2023 and 2022 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. The accounting policies and methods of computation adopted in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company's audited annual consolidated financial statements for the year ended October 31, 2022. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

These unaudited condensed interim consolidated financial statements were authorized for issuance and release by the Company's Board of Directors on June 29, 2023.

(a) Basis of consolidation

These unaudited condensed interim consolidated financial statements include the accounts of Micromem Technologies Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

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3. Basis of presentation (continued)

(a) Basis of consolidation (continued)

The Company's wholly-owned subsidiaries include:

(b) Basis of measurement

These unaudited condensed interim 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 measured at their fair value.

(c) Functional and presentation currency

These unaudited condensed interim consolidated financial statements are presented in United States dollars ("USD"), which is the functional currency of the Company and all of its subsidiaries.

(d) Use of estimates and judgments

The preparation of these unaudited condensed consolidated interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed interim consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are reviewed periodically and adjustments are made as appropriate in the reporting period they become known. Items for which actual results may differ materially from these estimates are described in the following section.

(i) Fair value of options and conversion features

The Company makes estimates and utilizes assumptions in determining the fair value for stock options and conversion features based on the application of the Black-Scholes option pricing model or the binomial option pricing model, depending on the circumstances. These pricing models require management to make various assumptions and estimates that are susceptible to uncertainty, including the volatility of the share price, expected dividend yield, expected term, risk-free interest rate, and exercise price in the binomial option pricing model.

(ii) Useful lives and recoverability of long-lived assets

Long-lived assets consist of property and equipment and patents. Amortization is dependent upon estimates of useful lives and impairment is dependent upon estimates of recoverable amounts. These are determined through the exercise of judgment and are dependent upon estimates that take into account factors such as economic and market conditions, frequency of use, anticipated changes in laws, and technological improvements.

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3. Basis of presentation (continued)

(d) Use of estimates and judgments (continued)

(iii) Income taxes

Income taxes and tax exposures recognized in the unaudited condensed interim consolidated financial statements reflect management's best estimate of the outcome based on facts known at the reporting date. When the Company anticipates a future income tax payment based on its estimates, it recognizes a liability. The difference between the expected amount and the final tax outcome has an impact on current and deferred taxes when the Company becomes aware of this difference.

When the Company incurs losses for income tax purposes, it assesses the probability of taxable income being available in the future, based on budgeted forecasts. These forecasts are adjusted for certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses. When the forecasts indicate that sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences.

(iv) Going concern assumption

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.

4. New and revised standards and interpretations

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after November 1, 2022. The Company has adopted these pronouncements as of their effective date, and many are not applicable or do not have a significant impact on the Company and have been excluded.

The following amendments were issued but not yet effective. The Company will adopt these amendments as of their effective dates. The Company is currently assessing the impacts of adoption.

(a) Amendments to IAS 1, Presentation of Financial Statements

IAS 1 was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company's right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company's own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023.

In February 2021, the IASB issued 'Disclosure of Accounting Policies' with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The amendments are effective for year ends beginning on or after January 1, 2023.

(b) Amendment to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors

In February 2021, the International Accounting Standards Board ("IASB") issued 'Definition of Accounting Estimates' to help entities distinguish between accounting policies and accounting estimates. The amendment is effective for annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted.

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4. New and revised standards and interpretations (continued)

(c) Amendments to IAS 12, Income Taxes

In May 2021, the IASB issued 'Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction' that clarifies how entities account for deferred tax on transactions such as leases and decommissioning obligations. The amendments are effective for year ends beginning on or after January 1, 2023.

(d) Amendments to IFRS 10, Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures

IFRS 10 and IAS 28 were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. The effective date of these amendments is yet to be determined, however early adoption is permitted.

5. Property and equipment

6. Patents

The Company holds several patents in the United States for its Multimodal Fluid Condition Sensor Platform. In prior years, the Company had negotiated with a major automotive company and a Tier 1 manufacturer for the development and commercial exploitation of this patented technology. The Company maintains that there remains significant potential value in its existing patents in terms of potential licensing agreements and royalty fees once it begins to exploit this asset class in the future.

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7. Leases

(a) Continuity schedule of lease obligation

The lease obligation relates to the use of office space in Toronto, Ontario. On May 26, 2022, a new lease agreement was entered into for a term from August 1, 2022 to July 31, 2025 for office space in another location in Toronto, Ontario. The present value of the lease obligation was calculated using a discount rate of 9%.

(b) Maturity analysis of lease obligations

The following represents a maturity analysis of the Company's undiscounted contractual lease obligations as at April 30, 2023:

8. Long-term loan

As at April 30, 2023, the Company has a $60,000 CDN ($44,244 USD) (October 31, 2022 - $60,000 CDN, $43,796 USD) interest-free loan from the Government of Canada under the Canada Emergency Business Account ("CEBA") program to cover its operating costs. The term loan matures on December 31, 2025. Repaying the balance of the loan on or before December 31, 2023 will result in a loan forgiveness of $20,000 CDN ($14,748 USD). Effective January 1, 2024, any outstanding balance on the term loan shall bear interest at a rate of 5% per annum. As the Company does not yet know whether they will be able to meet the terms of forgiveness, no amount has been recognized in income.

9. Convertible debentures

The Company issues three types of convertible debentures: USD denominated convertible debentures with an equity component, Canadian dollar ("CDN") denominated convertible debentures with an embedded derivative due to variable consideration payable upon conversion caused by foreign exchange, and USD denominated convertible debentures with an embedded derivative caused by variable conversion prices.

During the three and six months ended April 30, 2023, the Company incurred $nil (2022 - $nil) financing costs. All loan principal amounts and conversion prices are expressed in original currency and all remaining dollar amounts are expressed in USD. 

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9. Convertible debentures (continued)

(a) Current period information presented in the unaudited condensed interim consolidated financial statements

Convertible debentures outstanding as at April 30, 2023:

		USD
		(equity			CDN (embedded			USD (embedded
		component)			derivative)			derivative)			Total
Loan principal outstanding	$	1,146,002		$	2,095,813		$	278,500
Terms of loan
Annual stated interest rate		12% - 24%			12% - 24%			2% - 4%
Effective annual interest rate		24%			22 - 131%			24% - 5675%
Conversion price to common shares		$0.03 - $0.07			$0.05 - $0.08			(i) - (ii)
Remaining life (in months)		0 - 12			0 - 10			0 - 9
Unaudited Condensed Interim Consolidated Statement of Financial Position
Carrying value of loan principal	$	1,144,501		$	1,475,468		$	100,026		$	2,719,995
Interest payable		355,713			440,407			26,701			822,821
Convertible debentures	$	1,500,214		$	1,915,875		$	126,727		$	3,542,816
Derivative liabilities	$	-		$	3,240,785		$	134,266		$	3,375,051
Equity component of convertible debentures	$	1,073,781		$	-		$	-		$	1,073,781

For the six months ended April 30, 2023:

		USD
		(equity			CDN (embedded			USD (embedded
		component)			derivative)			derivative)			Total
Unaudited Condensed Interim Consolidated Statement of Operations and Comprehensive Loss
Accretion expense	$	13,772		$	124,923		$	15,356		$	154,051
Interest expense	$	138,994		$	123,503		$	5,843		$	268,340
(Gain) loss on revaluation of derivative liabilities	$	-		$	1,351,268		$	(72,723	)	$	1,278,545
(Gain) loss on conversion of convertible debentures	$	-		$	-		$	21,120		$	21,120
(Gain) loss on repayment of convertible debentures	$	-		$	-		$	(18,382	)	$	(18,382	)
(Gain) loss on extinguishment of convertible debentures	$	(14,004	)	$	1,936,228		$	82,397		$	2,004,621
Unaudited Condensed Interim Consolidated Statement of Changes in Equity
Amount of principal converted to common shares	$	200,000		$	300,000		$	232,700
Amount of interest converted to common shares	$	56,964		$	36,685		$	4,654
Number of common shares issued on conversion of convertible debentures		5,263,158			6,000,000			9,548,701			20,811,859
Unaudited Condensed Interim Consolidated Statement of Cash Flows
Amount of principal repaid in cash	$	-		$	-		$	66,500		$	66,500
Amount of interest repaid in cash	$	5,819		$	24,049		$	931		$	30,799

⁽ⁱ⁾ Conversion price defined as 75% multiplied by the average of the lowest 3 closing stock prices for the 10 trading days prior to conversion date.

⁽ⁱⁱ⁾ Conversion price defined as 75% multiplied by the lowest stock price for the 20 trading days prior to conversion date.

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9. Convertible debentures (continued)

(a) Current period information presented in the unaudited condensed interim consolidated financial statements (continued)

For the three months ended April 30, 2023:

		USD
		(equity			CDN (embedded			USD (embedded
		component)			derivative)			derivative)			Total
Unaudited Condensed Interim Consolidated Statement of Operations and Comprehensive Loss
Accretion expense	$	6,906		$	65,880		$	1,503		$	74,289
Interest expense	$	72,690		$	61,996		$	2,518		$	137,204
(Gain) loss on revaluation of derivative liabilities	$	-		$	1,607,062		$	(23,668	)	$	1,583,394
(Gain) loss on conversion of convertible debentures	$	-		$	-		$	12,341		$	12,341
(Gain) loss on repayment of convertible debentures	$	-		$	-		$	(12,715	)	$	(12,715	)
(Gain) loss on extinguishment of convertible debentures	$	(2,801	)	$	1,827,515		$	59,670		$	1,884,384

(b) Comparative information presented in the unaudited condensed interim consolidated financial statements

Convertible debentures outstanding as at October 31, 2022:

		USD
		(equity			CDN (embedded			USD (embedded
		component)			derivative)			derivative)			Total
Loan principal outstanding	$	1,205,144		$	2,321,755		$	347,700
Terms of loan
Annual stated interest rate		12% - 24%			12% - 24%			2% - 4%
Effective annual interest rate		24%			22% - 131%			24% - 5803%
Conversion price to common shares		$0.03 - $0.07			$0.05 - $0.08			(i) - (ii)
Remaining life (in months)		0 - 6			0 - 10			0 - 11
Unaudited Condensed Interim Consolidated Statement of Financial Position
Carrying value of loan principal	$	1,203,478		$	1,661,742		$	130,424		$	2,995,644
Interest payable		380,360			389,617			26,443			796,420
Convertible debentures	$	1,583,838		$	2,051,359		$	156,867		$	3,792,064
Derivative liabilities	$	-		$	439,194		$	202,105		$	641,299
Equity component of convertible debentures	$	793,140		$	-		$	-		$	793,140

⁽ⁱ⁾ Conversion price defined as 75% multiplied by the average of the lowest 3 closing stock prices for the 10 trading days prior to conversion date.

⁽ⁱⁱ⁾ Conversion price defined as 75% multiplied by the lowest stock price for the 20 trading days prior to conversion date.

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9. Convertible debentures (continued)

(b) Comparative information presented in the unaudited condensed interim consolidated financial statements (continued)

For the six months ended April 30, 2022

		USD
		(equity			CDN (embedded			USD (embedded
		component)			derivative)			derivative)			Total
Unaudited Condensed Interim Consolidated Statement of Operations and Comprehensive Loss
Accretion expense	$	13,953		$	1,236,016		$	4,974		$	1,254,943
Interest expense	$	114,857		$	111,851		$	(612	)	$	226,096
(Gain) loss on revaluation of derivative liabilities	$	-		$	(1,092,959	)	$	3,491		$	(1,089,468	)
(Gain) loss on conversion of convertible debentures	$	-		$	-		$	333,896		$	333,896
(Gain) loss on repayment of convertible debentures	$	-		$	-		$	-		$	-
(Gain) loss on extinguishment of convertible debentures	$	-		$	53,483		$	(8,500	)	$	44,983
Unaudited Condensed Interim Consolidated Statement of Changes in Equity
Amount of principal converted to common shares	$	-		$	-		$	297,600
Amount of interest converted to common shares	$	-		$	-		$	5,780
Number of common shares issued on conversion of convertible debentures		-			-			8,240,025			8,240,025
Unaudited Condensed Interim Consolidated Statement of Cash Flows
Amount of principal repaid in cash	$	-		$	-		$	-		$	-
Amount of interest repaid in cash	$	66,934		$	55,699		$	3,805		$	126,438

For the three months ended April 30, 2022:

		USD			CDN (embedded			USD (embedded			Total
Unaudited Condensed Interim Consolidated Statement of Operations and Comprehensive Loss
Accretion expense	$	7,087		$	420,635		$	3,457		$	431,179
Interest expense	$	59,239		$	56,622		$	(5,701	)	$	110,160
(Gain) loss on revaluation of derivative liabilities	$	-		$	(1,008,840	)	$	(111,943	)	$	(1,120,783	)
(Gain) loss on conversion of convertible debentures	$	-		$	-		$	130,175		$	130,175
(Gain) loss on repayment of convertible debentures	$	-		$	-		$	-		$	-
(Gain) loss on extinguishment of convertible debentures	$	-		$	26,639		$	(8,500	)	$	18,139

(c) Fair value of derivative liabilities outstanding

	As at		As at
	April 30,		October 31,
	2023		2022
Share price	$0.11		$0.03
Exercise price	$0.03 - $0.09		$0.02 - $0.07
Volatility factor (based on historical volatility)	105%-233%		140% - 232%
Risk free interest rate	4.45% - 4.76%		3.09% - 4.28%
Expected life of conversion features (in months)	0 - 11		0 - 11
Expected dividend yield	0%		0%
CDN to USD exchange rate (as applicable)	0.7374		0.7299
Call value	$0.02 - $0.09		$0.00 - $0.02

Volatility was estimated using the historical volatility of the Company's stock prices for common shares.

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10. Debenture payable

This debenture was issued on March 17, 2020 with an original maturity date of June 17, 2020 with a principal amount of $51,500 CAD. On June 17, 2020, December 17, 2020, June 17, 2021, December 17, 2021, June 17, 2022, and December 17, 2022, the debenture was extended for six month intervals. The most recent extension on December 17, 2022, extended the debenture to June 17, 2023. The debenture bears interest at an annual rate of 24% and is unsecured. Interest expense on this debenture of $2,286 USD and $4,578 USD has been recognized during the three and six months ended April 30, 2023 (2022 - $2,286 USD and $4,578 for the three and six month periods).

11. Share capital

(a) Authorized and outstanding shares

The Company has two classes of shares as follows:

(i) Special redeemable voting preference shares - 2,000,000 authorized, nil issued and outstanding.

(ii) Common shares without par value - an unlimited number authorized. The holders of the common shares are entitled to receive dividends which may be declared from time to time, and are entitled to one vote per share at shareholder meetings of the Company. All common shares are ranked equally with regards to the Company's residual assets.

(b) Private placements

During the six months ended April 30, 2023, the Company completed 20 private placements (2022 - 4 private placements), pursuant to prospectus and registration exemptions set forth in applicable securities law. The Company received net proceeds of $454,377 (2022 - $143,752) and issued a total of 8,660,000 (2022 - 3,213,674) common shares. During the six months ended April 30, 2023, the Company also received $33,618 in subscriptions for 2 private placements for a total of 379,500 common shares (2022 - $51,473).

12. Stock options

(a) Stock option plan

Under the Company's fixed stock option plan (the "Plan"), the Company can grant up to 27,500,000 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.

(b) Summary of changes

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12. Stock options (continued)

(b) Summary of changes (continued)

(i) The fair value of the options granted were determined in accordance with the Black-Scholes option-pricing model. The underlying assumptions are as follows:

Share price	$0.07-$0.12
Exercise price	$0.07-$0.12
Volatility factor (based on historical volatility)	175%-184%
Risk free interest rate	2.79%-3.58%
Expected life of conversion features (in months)	12-60
Expected dividend yield	0%
Forfeiture rate	0%

(c) Stock options outstanding at April 30, 2023

									Weighted average
			Options			Options						Remaining
Date of issue	Expiry date		outstanding			exercisable			Exercise price			contractual life
June 29, 2018	June 29, 2023		2,100,000			2,100,000		$	0.10			0.16
November 13, 2020	November 13, 2025		5,750,000			5,750,000			0.05			2.54
October 8, 2021	October 8, 2026		1,000,000			1,000,000			0.07			3.44
December 15, 2021	December 15, 2023		25,000			25,000			0.07			0.63
October 11, 2022	October 11, 2023		2,000,000			1,500,000			0.07			0.45
March 20, 2023	March 20, 2028		2,000,000			2,000,000			0.07			4.89
April 6, 2023	April 6, 2024		1,000,000			250,000			0.12			0.94
As at April 30, 2023			13,875,000			12,625,000		$	0.07			2.17

During the three and six months ended April 30, 2023, the Company recorded an expense of $145,714 and $151,406 respectively for the vesting of stock options (2022 - $nil and $952).

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13. Loss per share

Basic and diluted loss per share are calculated using the following numerators and denominators:

		Three months ended April 30,						Six months ended April 30,
Numerator		2023			2022			2023			2022
Net loss attributable to common shareholders and used in computation of basic income (loss) per share	$	(3,896,034	)	$	107,839		$	(4,112,364	)	$	(1,285,004	)
Add: adjustments for dilutive effects		-			73,814			-			-
Net loss attributable to common shareholders and used in computation diluted income (loss) per share	$	(3,896,034	)	$	181,653		$	(4,112,364	)	$	(1,285,004	)
Denominator
Weighted average number of common shares for computation of basic income (loss) per share		474,546,633			445,480,827			474,546,633			443,733,006
Dilutive effects of convertible features (Note 9) and stock options (Note 12)		-			52,813,311			-			-
Weighted average number of common shares for computation of diluted income (loss) per share		474,546,633			498,294,138			474,546,633			443,733,006

Basic income (loss) per share amounts are calculated by dividing the net income (loss) attributable to common shareholders for the periods by the weighted average number of common shares outstanding during the periods.

14. Income taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

As at April 30, 2023, the Company has non-capital losses of approximately $32 million, $27.6 million in Canada and $4.4 million in other foreign jurisdictions, available to reduce future taxable income. Non-capital losses expire commencing in 2026. In addition, the Company has available capital loss carry forwards of approximately $1.2 million to reduce future taxable capital gains. Capital losses carry forward

As at April 30, 2023, and October 31, 2022, the Company assessed that it is not probable that sufficient taxable income will be available to use deferred income tax assets based on operating losses in prior years; therefore, there are no balances recognized in the unaudited condensed interim consolidated statements of financial position for such assets.

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15. Operating expenses

(a) General and administration

The components of general and administration expenses are as follows:

(b) Professional, other fees and salaries

The components of professional, other fees and salaries expenses are as follows:

16. Supplemental cash flow information

The following provides a reconciliation of the cash flows from convertible debentures and derivative liabilities :

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17. Key management compensation and related party transactions

The Company reports the following related party transactions:

(a) Key management compensation

Key management personnel are persons responsible for planning, directing and controlling activities of the Company, including officers and directors. Compensation paid or payable to these individuals (or companies controlled by such individuals) are summarized as follows:

During the three and six months ended April 30, 2023, key management was awarded 680,000 stock options (2022 - nil).

(b) Trade payables and other liabilities

Included in accounts payable is $5,150 CDN (USD - $3,798) payable to a corporation controlled by an officer of the Company as at April 30, 2023 (October 31, 2022 - $5,650 CDN (USD - $4,139)).

18. Contingencies

(a) 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) The Company has previously reported on the lawsuit filed by Mr. Steven Van Fleet against Micromem, the Company's response to the lawsuit and its counterclaims against Mr. Van Fleet.

On April 29, 2021 the matter was resolved in Micromem's favor when the Court dismissed Mr. Van Fleet's claims and ruled that he was liable to the Company and to MAST on their counterclaims. On June 16, 2021, the Court ruled that Micromem and MAST had established damages totaling $765,579 representing the full amount that had been requested; furthermore, the Court awarded costs and statutory prejudgment interest from May 9, 2017. On June 29, 2021 the Court entered a judgement in favor of Micromem and MAST for a total amount of $1,051,739.

With respect to the Company's efforts to collect on that Judgement, a settlement ("Settlement") was reached during October 2021. Pursuant to the Settlement, the Company received an initial one-time payment and is entitled to additional monthly payments over a period of up to six years. The Company will record those payments as and when they are received. The total amount to be received by the Company if Mr. Van Fleet makes all the required payments under the terms of the Settlement will be less than the amount of the Judgement obtained by the Company, but if Mr. Van Fleet does not comply with the terms of the Settlement, it also provides the Company a means of enforcing a larger judgement against Mr. Van Fleet that is substantially in line with the Judgement. Mr. Van Fleet has made the prescribed monthly payments each month since October 2021.

The Company is now pursuing collection of the judgement award. It will report the recovery of this contingent asset as funds are received. During the six months ended April 30, 2023, the Company has recorded a recovery of $2,400 received in the period as a reduction of legal expenses (2022 - $2,400).

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19. Financial risk management

(a) Currency risk

Currency risk is the risk that the fair value of, or future cash flows from, the Company's financial instruments will significantly fluctuate due to changes in foreign exchange rates. The Company is exposed to currency risk to the extent that it incurs expenses and issues convertible debentures denominated in Canadian dollars (CDN). The Company manages currency risk by monitoring the Canadian dollar position of these monetary financial instruments on a periodic basis throughout the course of the reporting period.

As at April 30, 2023, and October 31, 2022, balances that are denominated in CDN are as follows:

A 10% strengthening of the US dollar against the CDN would decrease net loss and comprehensive loss by $472,422 as at April 30, 2023, (October 31, 2022 - decrease net loss and comprehensive loss by $257,995). A 10% weakening of the USD against the CDN would have the opposite effect of the same magnitude.

(b) Interest rate risk

Interest rate risk is the risk that the fair value of, or future cash flows from, the Company's financial instruments will significantly fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk on its interest-bearing convertible debentures. This exposure is limited due to the short-term nature of the convertible debentures.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's policy is to review liquidity resources and ensure that sufficient funds are available to meet financial obligations as they become due. Further, the Company's management is responsible for ensuring funds exist and are readily accessible to support business opportunities as they arise. With the exception of the long-term loan, all financial liabilities are due within 1 year as at April 30, 2023.

(i) Trade payables

The following represents an analysis of the maturity of trade payables:

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19. Financial risk management (continued)

(c) Liquidity risk (continued)

(ii) Convertible debentures and derivative liabilities

The following represents an analysis of the maturity of the convertible debentures and derivative liabilities:

		As at April 30,									As at October 31,
		2023									2022
		Convertible			Derivative			Debenture			Convertible			Derivative			Debenture
		debentures			liabilities			payable			debentures			liabilities			payable
Less than three months	$	2,139,046		$	1,220,318		$	-		$	2,440,840		$	162,380		$	-
Three to six months		1,293,013			1,936,609			-			1,204,783			257,933			-
Six to twelve months		110,757			218,124			38,367			146,441			220,986			38,001
	$	3,542,816		$	3,375,051		$	38,367		$	3,792,064		$	641,299		$	38,001

(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. The maximum exposure to credit risk is the carrying value of these financial assets, which amounted to $215,907 as at April 30, 2023 (October 31, 2022 - $33,227). The Company reduces its credit risk by assessing the credit quality of counterparties, taking into account their financial position, past experience and other factors.

(i) Cash

The Company held cash of $215,907 as at April 30, 2023 (October 31, 2022 - $33,227). The cash is held with central banks and financial institution counterparties that are highly rated. The Company has assessed no significant change in credit risk and an insignificant loss allowance.

20. Fair value hierarchy

Assets and liabilities recorded at fair value in the unaudited condensed interim consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets and liabilities. There are no assets or liabilities in this category in these unaudited condensed interim consolidated financial statements.

Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. In these unaudited condensed interim consolidated financial statements, derivative liabilities are included in this category.

Level 3 - valuation techniques using the inputs for the asset or liability that are not based on observable market data. There are no assets or liabilities in this category in these unaudited condensed interim consolidated financial statements.

The Company's policy for determining when transfers between levels of fair value hierarchy occur is based on the date of the event or changes in circumstances that caused the transfer. During the three and six months ended April 30, 2023 and 2022, there were no transfers between levels.

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21. Capital risk management

The Company's objectives when managing capital are to (i) maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, (ii) ensure it has sufficient cash resources to further develop and market its technologies and (iii) maintain its ongoing operations. The Company defines its capital as its net assets, i.e. total assets less total liabilities. In order to secure the additional capital necessary to pursue these objectives, the Company may attempt to raise additional funds through the issuance of equity or convertible debentures 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 three and six month periods ended April 30, 2023.

22. Subsequent events

Subsequent to April 30, 2023:

(a) The Company secured a private placement with an investor consisting of common shares with no warrants pursuant to prospectus and registrations set forth in applicable securities law. It realized net proceeds of $21,000 USD and issued a total of 200,000 common shares.

(b) The Company extended convertible debentures that were within 3 months of maturity date from April 30, 2023 for an additional six (6) months.

(c) The Company secured $80,937 USD in a convertible debenture with a 12 month term and conversion features which become effective six months after initiation date.

(d) The Company converted $265,855 CDN of convertible debentures through the issuance of 5,317,100 common shares.

(e) The Company issued 800,000 common shares for a total of $104,000 CDN for the exercise of stock options.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

NOTICE TO READER

The Management's Discussion and Analysis ("MD&A") report for Micromem Technologies Inc. for the three months ending April 30, 2023, as attached, is dated as of June 29, 2023, consistent with the date of the Independent Registered Public Accounting Firm report and with the original 52-109 CEO and CFO certification filings related thereto.

/s/ Dan Amadori	/s/ Joseph Fuda
Dan Amadori, CFO	Joseph Fuda, CEO
June 29, 2023	June 29, 2023

 

 

 

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

INTRODUCTION

The following sets out the Management's Discussion and Analysis ("MD&A") of the financial position and result of operations for the three months ending April 30, 2023, of Micromem Technologies Inc. (the "Company", "Micromem", or "we"). The MD&A should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes for the fiscal years ending October 31, 2022, and 2021 which are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Additional information regarding the Company is available on the SEDAR website at www.sedar.com.

The Company's shares are traded on the OTCQB under the symbol MMTIF and on the Canadian Securities Exchange ("CSE") under the symbol MRM. Micromem has  several  wholly-owned  subsidiaries including Micromem Applied  Sensor Technologies Inc ("MAST").  MAST was active until August 2018 and has been inactive since then. All of the Company's other subsidiaries  have  been inactive since  inception.

Certain information provided by the Company in this MD&A and in other documents publicly filed throughout the year that are not recitation of historical facts may constitute forward-looking statements. The words "may", "would", "could", "will", "likely", "estimate", "believe", "expect", "forecast" and similar expressions are intended to identify forward-looking statements.

Readers are cautioned that such statements are only predictions, and the actual events or results may differ materially. In evaluating such forward-looking statements, readers should specifically consider the various factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements.

FORWARD LOOKING STATEMENTS

This MD&A contains forward-looking statements and forward-looking information within the meaning of applicable Canadian securities legislation ("forward looking statements"). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, potentials, future events or performance (often, but not always, using words or phrases such as "believes", "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", or "intends" or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken or achieved) are not statements of historical fact, but are "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or developments in the Company's business or in its industry, to differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such forward-looking statements. Forward-looking statements include disclosure regarding possible events, conditions or results of operations that are based on assumptions about future conditions, courses of action and consequences. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions, or circumstances. The Company cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things, the successful commercialization of our technology, comments about potential future revenues, joint development agreements and expectations of signed contracts with customers, etc. A number of inherent risks, uncertainties and factors affect the operations, performance and results of the Company and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. Some of these risks and uncertainties include the risk of not securing required capital in future, the risks of not successfully concluding agreements with potential partners on a timely basis and the risks associated with commercializing and bringing to market our technology. These risks are affected by certain factors that are beyond the Company's control: the existence of present and possible future government regulation, competition that exists in the Company's business, uncertainty of revenues, markets and profitability, as well as those other factors discussed in this MD&A report. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements and reference should also be made to the Company's Annual Information Form (prepared and filed in the form of a Form 20-F Annual Report pursuant to The Securities Exchange Act of 1934) for a description of risk factors.

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Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities law.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

TABLE OF CONTENTS:

1. OVERVIEW
2.  BUSINESS DEVELOPMENTS, QUARTER ENDED APRIL 30, 2023
3.  FINANCING
4.  DISCUSSION OF OPERATING RESULTS
5.  RISKS AND UNCERTAINTIES
6.  GOING CONCERN
7.  OTHER MATTERS
8.  SUBSEQUENT EVENTS
APPENDIX 1.  COMMENTARY ON CONVERTIBLE DEBENTURES

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

1. OVERVIEW

Micromem is actively pursuing business opportunities in Romania.  It has been engaged in discussions with Romgaz, the state-controlled gas company in Romania for the past 18 months.  Under the Romgaz umbrella, the Company has also been pursuing discussions to complete multiple projects with Petrom, the state-controlled oil company and with Transelectrica, the major public utility and interconnection company in Romania.

The Company has previously completed a successful interwell tracer program with Chevron, utilizing a technology application for interwell tracing in operating oil wells.  The technology was developed in conjunction with a Silicon Valley-based design and engineering group who developed the technology which is, hereinafter, referred to as ARTRA.  The testing of a prototype analyzer was completed in Lost Hills, California with Chevron in 2019-2020.  The Company and Chevron committed approximately $5 million to this initiative.  We met most recently with Chevron personnel in May 2023 and we are maintaining an active dialogue with Chevron relating to our current undertakings in Romania and with respect to future business opportunities with Chevron.

The Company continues to raise capital for its ongoing operations; working capital continues to be constrained.  The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS").  Under IFRS we report our complex financial instruments (convertible debentures) with quarterly remeasurement of the debentures and the related derivative liabilities.  The result in such quarterly remeasurements is that the Company reports significant non-cash expenses in each quarter which have a material impact on our financial statement presentation.  This matter is more fully addressed in the body and in Appendix 1 of this MD&A report.

Our litigation with Steve Van Fleet, a former officer of the Company, was resolved in our favour in 2021.  Micromem was awarded $1.058 million in settlement of this litigation.  The Company has been receiving monthly payments from Mr. Van Fleet as part of the settlement agreement that was struck; these monthly payments are scheduled to continue through September, 2027.

The Company has navigated through the Covid-19 era and is now returning to more normalized operations.  We relocated our offices to smaller, less expensive premises in 2022.  We have four personnel who manage the Company's operations including Joseph Fuda, our President & CEO and Dan Amadori, our Chief Financial Officer, both of whom are our named executives.

The Company is scheduling the next Annual General Meeting of Shareholders for fall 2023.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE FISCAL THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

2. BUSINESS DEVELOPMENTS  IN QUARTER ENDING APRIL 30, 2023:

Romgaz: At April 30, 2023 and as of the date of this report, the Company has had positive developments with respect to its working arrangements with Romgaz.  These developments include:

a) A senior team of technical advisors has been enlisted by Romgaz to assist in the execution of our go forward workplan.  This development team includes representation from the University of Oil and Gas of Ploiesti in Romania ("the University").  This team will be directed by Professor Dan Ioan Gheorghui, PhD. who serves as the President of the Romanian chapter of the World Energy Council.  The team also includes Professor Alin Dinita, PhD. who serves as the Head of Development Strategies and the Faculty of Mechanical and Electrical Engineering at the University of Ploiesti and Professor Alin Dinita, PhD. who serves as Pro-Dean of the Faculty of Electrical Engineering.

b) Micromem anticipates that it will finalize agreements with respect to three phases of go forward activity with Romgaz in July 2023.  The 3 phases, as have been previously reported include:

i. An initial purchase order for 2 ARTRA units.  The University will evaluate these initial units and develop all required specifications for a well-mounted device that incorporates all required analytics software.  Upon completion, Micromem will receive a second purchase order for 20 of these upgraded units for infield testing by Romgaz.  If these units perform successfully, an order for up to 3,800 units for gas wells and 1,200 units for oil wells will be forthcoming.  These commercial units will be fabricated in Romania.

ii. The concurrent development of analytics software for the ARTRA units and for broader applications. The software  is to be customized for use by Romgaz and Petrom in their respective gas and oil well operations.  Micromem will maintain a 50% interest in the jointly developed analytics software which is intended to provide comprehensive real time data and analysis for operating wells. Micromem will realize  recurring revenues as this software is utilized. 

iii. The concurrent development of powerline monitoring solutions for the transmission and interconnection hardware currently in place in Romania's electric grid system. Micromem will work with its Romanian partners to develop both the powerline monitoring devices and the analytics software for the grid system. 

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(c) Micromem has now received the initial draft of the two-unit purchase order from Romgaz and the initial draft of the proposed joint venture agreement between Micromem and Romgaz who is purposed to develop the analytics software applications, the powerline monitoring technology applications and other initiatives going forward.

In anticipation of these developments in 2023, Micromem has planned for its business activity to include the following components: 

(i) Continuance of its working relationship with the developer of the ARTRA technology which Chevron has successfully tested in onsite testing of operating oil wells.

(ii) We have established a Toronto-based engineering/product development team in cooperation with an established manufacturing and engineering group whom we expect to have a role in future as a strategic partner to Micromem.

(iii) We will plan to add additional senior management to the Micromem team in the project management, engineering, and financial reporting areas of discipline. We will also look to recruit additional corporate directors to our Board.

(b) Chevron:

We  met  with Chevron  in their  Houston  offices  in May 2023 to  advise  them of our  current progress in  our  dealings  with Romgaz.  Chevron continues to support these initiatives as we advance our development efforts.  We are maintaining an active dialogue with Chevron regarding our current undertakings in Romania and with respect to future business opportunities with Chevron.

We also met with the developer of the original technology that Chevron deployed in the testing which they completed in Lost Hills California in 2019-2020. That developer will continue to work with Micromem in our current dealings with Romgaz.

(c) Covid  19  update:

The impact on the Company's operations of the COVID-19 pandemic has been discussed in previous reports.  The pandemic has previously resulted in delays in rolling out our Romgaz program.  We have now returned to more normalized operations in 2023.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE FISCAL THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

3. FINANCING

In Q2 2023 the Company secured $330,492 of financing from private placements (Q2 2022: $19,867) and received proceeds of $149,000 (Q2 2022: $156,000) from the issuance of convertible debentures (referred to interchangeably as "debentures" or "convertible loans" or "loans" throughout this document). The Company issued 16,218,279 common shares relating to the conversion by debenture holders of their debentures totaling $1,026,217 during Q2 2023 (Q2 2022: issued 3,646,545 common shares relating to conversion of debentures totaling $217,133).

The Company's convertible debt structure is complex with 3 broad categories of such debt: (i) $CDN denominated debt with fixed conversion prices; (ii) $US denominated debt with fixed conversion prices, and (iii) $US denominated debt with variable conversion prices.  The term of the debt in each instance is typically between 4 months and 12 months.  To  date , the Company has repaid certain convertible loans at maturity when due as requested by the debenture holder or converted the debenture into common shares at the request of the debenture holder or extended the term of the debenture through negotiations with the debenture holder - in this latter case, certain terms of the loan - interest rate and/or conversion price - have, in some instances, been adjusted as part of the extension.

Under IFRS reporting, such loans require quarterly remeasurements.  The application of the remeasurement methodology is very specific. This is more fully discussed in Appendix 1; in summary, there are several non-cash related income and expense charges that arise from such remeasurements.  We recorded the following non-cash charges in the period ending April 30, 2023 and 2022 none of which impact the Company's cash flows:

For the 6 months ended April 30		2023			2022			Change
Accretion expense	$	431,179		$	1,254,943		$	(823,764	)
Loss on conversion of convertible debentures		130,175			333,896			(203,721	)
Loss on revaluation of derivative liabilities		(1,120,783	)		(1,089,468	)		(31,315	)
Loss (gain) on extinguishment of convertible debentures		18,139			44,983			(26,844	)
Net expense (income)	$	(541,290	)	$	544,354		$	(1,085,644	)

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE FISCAL THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

4.  DISCUSSION OF OPERATING RESULTS:

(a)  Financial Position as at April 30, 2023:

		April 30, 2023			October 31, 2022
		(US $000)			(US $000)
Assets:
Cash		216			34
Prepaid expenses and other receivables		54			18
		270			52
Property and equipment, net		40			48
Patents, at value		-			-
		310			100
Liabilities:
Accounts payable and accrued liabilities		145			288
Current lease liability		16			15
Debenture Payable		38			38
Convertible debentures		3,543			3,792
Derivative liabilities		3,375			642
		7,117			4,775
Long-term lease liability		22			29
Long-term loan		45			44
		7,184			4,848
Shareholders'  Equity:
Share capital		89,742			-
Contributed surplus		27,202			27,460
Equity component of bridge loans		1,074			793
Deficit		(124,892	)		(120,786	)
		(6,874	)		(4,748	)
		310			100

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Commentary:

1. The Company's working capital deficiency is $6,847,503  on April 30, 2023 (at October 31,2022: deficiency of $4,722,878). 

A non-IFRS presentation of the current working capital deficiency as of April 30, 2023 is presented as follows:

The equivalent revised working capital deficiency at April 30, 2022 was $(4,081,579).

The convertible debentures as reported at April 30, 2023 totaled $3,542,816 which accounts for all of the revised working capital deficiency as above.  In this regard, the Company has successfully managed its convertible debenture obligations to date.  It continues to secure extensions on the term of these debentures which have matured; in certain cases it has repaid the debentures at maturity date and in other, multiple cases, the Company has been successful in having the debentures converted to common shares at maturity dates.

The Company believes that it is successfully managing its working capital requirements and that it will continue to do so in future.

2. Included in prepaid expenses and other receivables at April 30, 2023 is a share subscription receivable in the amount of $33,618 (October 31, 2022: nil).  This receivable was collected after April 30, 2023.

3. For financial reporting purposes the Company has fully amortized the historical cost of its investment in patents.   The Company believes that its patents remain as an asset to be exploited in future through the pursuit of licensing agreements with potential strategic partners.

4. The Company continued to secure additional financing in 2023 through convertible bridge loans. Given the terms of the debentures, the Company has measured, as appropriate, the prescribed accounting treatment for these loans and the related derivatives.  These loans are typically of a short-term nature and have, in many cases, renewed on multiple occasions; the related financial reporting has become progressively more complex. Refer to Appendix 1 of this report for additional commentary.

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The balance reported as convertible loans at April 30, 2023, is $3,542,816 (at October 31, 2022: $3,792,064) and the related derivative liability balance is $3,375,051 (at October 31, 2022: $641,299).

5. The Company also reports a non-convertible debenture in the amount of $38,367 at April 30, 2023 (October 31, 2022: $38,001); interest is payable at a rate of 2% per month.  The original loan was secured in 2021 and has since been renewed for successive six month terms.

The Company reports the following charges to the consolidated statements of income:

a) Accretion expense on these debentures of $74,289 for the quarter ended April 30, 2023 (year ended October 31, 2022: $1,1,179,603; quarter ended April 30, 2022: $431,179).

b) A foreign exchange gain of $140,883 for the quarter ended April 30, 2023.  The $CDN has dropped in value relative to the $US for the 3 and 6 months ended April 30, 2023.  Accordingly, the $CDN denominated convertible debentures as reported have been adjusted resulting in the gain as reported.

c) A loss on the conversion of bridge loans to share capital of $12,341 for the quarter ended April 30, 2023 (year ended October 31, 2022: gain of $9,506; for the quarter ended April 30, 2022: loss of $130,175).

d) A loss on the revaluation of the derivative liabilities of $1,583,394 for the quarter ended April 30, 2023 (a gain on revaluation of $409,607 for the year ended October 31, 2022; a gain on revaluation of $1,120,783 for the quarter ended April 30, 2022). 

The gain or loss on revaluation is a function of the volatility of the stock price and the term of the underlying debentures.  The Q1 gain as reported was due to an unchanged stock price between October 31, 2022 and January 31, 2023 and a reduced time frame on the maturity dates of the loans. The Q2 loss was due to the significant change of the stock price from $0.03 per share at January 31, 2023 to $0.11 at April 30, 2023. 

These gains/losses as reported are non-cash charges.

e) A net loss on extinguishment of convertible debentures of $1,884,384 for the quarter ended April 30, 2023 (a loss of $200,650 for the year ended October 31, 2022; a loss of $18,139 for the quarter ended April 30, 2022).

The Company reports a loss on extinguishment of debentures whenever a loan is renewed.  There were a significant number of such renewals in Q2.  The losses as reported are non-cash charges.

Management generally employs a Black Scholes valuation model although, for certain of the loan transactions contracted for, it uses a binomial measurement model.

Management acknowledges that the cost of financing to the Company is significant; interest on the convertible debentures is substantial. We reported interest expense of $137,204 for the quarter ended April 30, 2023 (interest expense of $469,425 for the year ended  October 31, 2022; interest  expense of $110,160 for  the quarter ended April 30, 2022).

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6. The Company secured funding from various sources; the significant components include: 

		3 months ended			12 months ended			3 months ended
		April 30, 2023			October 31, 2022			April 30, 2022
Private placements	$	330,492		$	207,588		$	19,867
Bridge loan financing		149,000			765,671			156,000
Bridge loan settlements for shares		1,026,217			764,432			217,113
	$	1,505,709		$	1,737,691		$	392,980

Operating Results:

The following table summarizes the Company's operating results for the three months ended April 30, 2023, and 2022:

Discussion of operating Results

	Quarter ended April 30,
	2023 ($000)	2022 ($000)
Administration	46	69
Professional fees and salaries	115	141
Stock-based compensation	146	-
Travel and entertainment	16	8
Amortization of property and equipment	4	7
Amortization of patents	-	2
Foreign exchange (gain)  loss	(141)	94
Accretion expense	74	431
Interest expense convertible debt	137	110
Other financing costs	31	3
Loss (gain) on revaluation of derivatives liabilities	1,583	(1,121)
Loss on conversion of convertible debentures, net	-	130
Loss on extinguishment of convertible debentures	1,885	18
Net expenses (income)	3,896	(108)
Net  comprehensive (income) loss	3,896	(108)
Income (loss per share)	(0.01)	-

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A non-IFRS presentation of the net loss and comprehensive loss for the 3 and 6 months ended April 30, 2023 is presented as follows:

The comparable revised net loss for the 3 months ended April 30, 2022 is ($433,231) and for the 6 months ended April 30, 2022 is ($740,650).

The Company's monthly cash requirements to cover its operating expenses is, based on the above, approximately $110,000-$120,000 per month.  As operations expand with our projects in Romania, we expect that we will begin to report revenues and that our monthly operating expenses will increase.

Quarter ended April 30, 2023 compared to Quarter ended April 30, 2022

a) Administration costs were $45,414 versus $69,129 in 2022.  These costs include rent and occupancy cost, investor relations, listings and filing fees and other general and administrative expenses.

b) Professional and other fees and salaries costs were $115,132 in 2023 versus $140,789 in 2022. The components of these total costs include legal and audit related expenses of $39,169 (2022: $30,857), consulting fees of $37,238 (2022: $55,503), staff salaries and benefits of $38,725 (2022: $54,429); the Company hired 2 engineering coop students commencing in June, 2021 to August 31, 2022.

The CFO has received $9,174 of management fees in 2023 (2022: $9,449). The CEO of the Company has received $11,292 of cash compensation in 2023 (2022: $24,039). 

c) Travel and entertainment expenses were $16,055 in Q2 2023 (2022: $8,285).

d) Interest expense was $137,204 in Q2 2023 versus $110,160 in Q2 2022. This represents the actual interest expense obligations incurred by the Company based on the stated interest rates on the convertible debenture notes.

e) Amortization expense was $4,076 in Q2 2023 versus $9,063 in Q2 2021.

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f) Financing costs were $31,499 in Q2 2023 versus $3,057 in Q2 2022.  These expenses relate primarily to costs associated with the convertible debenture financings which the Company completed in this time frame. 

g) The (gain) on foreign exchange reported in Q2 2023 was $(140,833) versus a loss of $92,968 in Q2 2022.  This includes the exchange relating to the translation of $CDN denominated transactions during the year and to Canadian denominated assets and liabilities at fiscal quarter and year ends.  It also includes the foreign exchange relating to the initiation, renewal, conversion, and repayment of convertible debentures transactions during the reporting periods.  The Canadian dollar, relative to the US dollar was $0.7365 at April 30, 2023, $0.7327 at October 31, 2022, $0.7921 at April 30, 2022.

h) The other expenses reported relate to the convertible debentures. These expenses are all non-cash expenses and compare as follows:

For the 3 months ended April 30		2023			2022			Change
Accretion expense	$	74,289		$	431,179		$	(356,890	)
Loss on conversion of convertible debentures, net		-			130,175			(130,175	)
Loss on revaluation of derivative liabilities		1,583,194			(1,120,783	)		2,703,977
Loss (gain)on extinguishment of convertible debentures		1,884,384			18,139			1,866,245
Net expense	$	3,541,867		$	(541,290	)	$	4,083,157

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C. Unaudited Quarterly Financial Information - Summary

Three months ended (unaudited)	Revenues $	Expenses $	Income (loss) in period  $	Loss per share  $
April 30, 2023		3,896,034	(3,896,034)	0.01
January 31, 2023	-	216,330	(216,330)	-
October 31, 2022	-	(419,082)	419,082	-
July 31, 2022	-	1,421,173	(1,421,173)	-
April 30, 2022	-	(107,839)	107,839	-
January 31, 2022	-	1,392,843	(1,392,843)	-
October 31, 2021	-	(1,259,196)	1,259,196
July 31, 2021	-	(2,102,701)	2,102,701	-

Three months ended (unaudited)	Working capital (deficiency)	Capital assets at NBV	Other Assets	Total Assets	Shareholders' equity (deficit)
April 30, 2023	(6,847,503)	39,466	-	309,695	(6,873,535)
January 31, 2023	(4,786,678)	43,779	-	105,556	(4,813,784)
October 31, 2022	(4,722,878)	48,092	-	99,519	(4,748,000)
July 31, 2022	(5,421,607)	4,445	-	97,504	(5,463,523)
April 30, 2022	(3,939,361)	11,630	-	93,372	(3,790,399)
January 31, 2022	(4,694,513)	11,816	1,877	93,372	(4,368,574)
October 31, 2021	(3,452,924)	26,012	3,877	225,293	(3,471,278)
July 31, 2021	(4,876,595)	31,283	5,877	223,528	(4,887,324)

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

5.  RISKS AND UNCERTAINTIES

There are a number of risks which may individually or in the aggregate affect the long-term commercial success of the Company, both known and unknown. An investment in the Company should be considered speculative due to the nature of the Company's activities and its current stage of development.

Stage of Development of Technology:

The Company has made strides in advancing its technology and in developing a product portfolio and in engaging customers in joint development projects. There remains the risk that the Company must successfully complete development work on these products to have available commercially viable products which can be licensed or sold.

Customers' Willingness to Purchase:

We have previously  entered into joint development agreements whereby our prototype products are being subjected to rigorous testing by our partners. We expect to be successful in commercializing  our product portfolio. If we are successful in doing so, our partners will then have to decide the extent to which they will adopt our technology for future use for their applications. The future revenue streams for the Company are dependent upon the rate of adoption by our customers and their willingness to do so.

Patent Portfolio:

The Company has previously  committed  time and effort and incurred significant costs with respect to the maintenance and development of our intellectual property portfolio. Commencing  in  2019, it decided to abandon certain provisional patent filings in international jurisdictions which it believes does not impact on the core patent technology that the Company maintains.  Given the nature of IP development, the Company is subject to continuing risks that our patents could be successfully challenged and that our patent pending files may not ultimately be granted full patent status. The Company does not have extensive in-house resources so as to manage its IP portfolio in this environment and has traditionally relied heavily on its patent attorneys for these services.

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Financing:

The Company has successfully raised funding on  a quarterly  basis  to continue to support its development initiatives and fund the Company's corporate structure and overheads. The Company must continue to source financing in order to continue to support its business initiatives.

Competitors:

The Company is subject to competition from other entities that may have greater financial resources and more in-house technical expertise.

Management Structure:

The Company is highly dependent on the services of a small number of senior management team members. If one of these individuals were unavailable, the Company would encounter a difficult transition process.

Foreign Currency Exposure:

The Company expects to sell its products and license technologies in the United States, in Canada and abroad. It has raised financing in both $CDN and $USD. The Company has not hedged its foreign currency exposure.  Foreign currency fluctuations present an ongoing risk to the business.

Project Execution Risks:

The Company is now embarking on its project and joint venture initiatives with Romgaz, as discussed in the body of this MD&A report.

In order to be successful in these initiatives, the Company will have to expand its activities.  It will require the hiring of additional technical staff and program managers.  The Company will add one additional staff person to its four person head office team.  It will likely open a branch office in Bucharest, Romania.

There are operating and execution risks associated with this expansion of our operations.  Our future success is dependent on accomplishing all of the above tasks and in building, monitoring and reporting on our go forward operations.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

6.  GOING CONCERN

The consolidated financial statements have been prepared on the "going concern" basis, 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 three months ended April 30, 2023, the Company reported a net loss and comprehensive loss of $(3,896,034) (Q2 2022: $107,839) and negative cash flow from operations of $510,994 (Q2 2022: $630,548).  The Company's working capital deficiency as at April 30, 2023 is $6,847,503 (October 31, 2022: $4,722,878).

In this context, we reference the comments provided on Non-IFRS measurements with respect to reported working capital and operating results in section 4 of this MD&A report.

The Company's future success depends on the profitable commercialization of its proprietary 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 2022 and beyond; however, the ability of the Company to continue as a going concern is dependent on its ability to secure additional financing and/or to 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 was 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 would be material.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

7.  OTHER MATTERS

(a)  Critical Accounting Policies

The accounting policies the Company believes are critical to the financial reporting process include foreign currency translation, financial instruments, compound and hybrid financial instruments, derivative liabilities, conversion features of bridge loans, patents, impairment of long-lived  assets, patents, deferred development costs, revenue recognition, stock-based compensation, and income taxes.  These critical accounting policies are set forth in Note 4 to our audited consolidated financial statements as of October 31, 2022; there have been no changes to our critical  accounting policies on a year to date basis through April 30, 2023.

(b)  Legal  matters: lawsuit vs Steven Van Fleet 

We have previously reported on the litigation matter relating to Mr. Van Fleet, the former President of MAST, which commenced in 2018. Ultimately, after all legal and court proceedings, on June 16^th, 2021 the court ordered that Micromem and MAST had established damages of $765,579.35, the full amount that had been requested. Additionally , the court awarded  costs  and  statutory  prejudgement  interest  from May 9, 2017. On June 29^th, the court entered  a judgement ("Judgement") in favor of Micromem and MAST and against Mr. Van Fleet  in the amount of $1,051,739.83.

With respect to the Company's efforts to collect on that Judgement, a settlement ("Settlement") was reached during October 2021. Pursuant to the Settlement, the Company received an initial one-time payment and is entitled to additional monthly payments over a period of up to six years through September, 2027. The Company will record those payments as and when they are received. The total amount to be received by the Company if Mr. Van Fleet makes all the required payments under the terms of the Settlement will be less than the amount of the Judgement obtained by the Company, but if Mr. Van Fleet does not comply with the terms of the Settlement, it also provides the Company a means of enforcing a larger judgement against Mr. Van Fleet that is substantially in line with the Judgement. Mr. Van Fleet has made the prescribed monthly payments each month since October 2021.

(c) Contingencies and Commitments

The Company may be subject to litigation, claims and governmental and regulatory proceedings arising in the ordinary course of business.  In such cases, the Company accrues a loss contingency for these matters when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. There are no such accruals reflected in the Company's accounts at April 30, 2023.

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(d) Off-Balance Sheet Arrangements

At April 30, 2023, the Company has no off-balance sheet financial commitments and does not anticipate entering into any contracts of such nature other than the addition of new operating leases for equipment and premises as may be required in the normal course of business.

(e)  Share Capital

At April 30, 2023, the Company reports 498,209,037 common shares outstanding (October 31, 2022: 467,607,678; April 30, 2022: 447,191,433). Additionally, the Company has 13,875,000 stock options outstanding with a weighted average exercise price of $0.06 per share at October 31, 2022: 11,700,000 options outstanding with a weighted average exercise price of $0.06 per share; April 30, 2022: 10,725,000 options outstanding with a weighted average exercise price of $0.06 per share).

(f)  Management and Board of Directors

At our most recent Annual Meeting of Shareholders held on September 8, 2020, Joseph Fuda, Oliver Nepomuceno, and Alex Dey were re-elected to serve on our Board of Directors. Joseph Fuda and Dan Amadori continue to serve as officers of the Company.

Our management team and directors, along with their Q2 quarterly remuneration, is presented as below:

	2023 remuneration
Individual	Position		Cash			Options			Total
Joseph Fuda	President, Director		11,292			-			11,292
Oliver Nepomuceno	Director		-			-			-
Alex Dey	Director		-			-			-
Dan Amadori	CFO		9,174			-			9,174
Total			20,466			-			20,466
	2022 remuneration
Individual	Position		Cash			Options			Total
Joseph Fuda	President, Director		23,653			-			23,653
Oliver Nepomuceno	Director		-			-			-
Alex Dey	Director		-			-			-
Dan Amadori	CFO		9,449			-			9,449
Total			33,102			-			33,102

(g)  Transactions with Related Parties

The Company reports the following related party transactions:

Key management compensation:

Key management personnel are persons responsible for planning, directing, and controlling activities of the Company, including officers and directors. Quarterly compensation paid or payable to these individuals  is summarized as above.             

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Trade payables and other liabilities:

As at April 30, 2023, there were no balances reported as trade payables and other liabilities due to related parties (April 30, 2022: Nil).                           

(h) Liquidity and Capital Resources

Liquidity:

We currently report negative cash flow from operations. This result will only change once we are generating sufficient revenue from either license fees, royalties or the sale of products utilizing our technology. In 2023 and through to the date of this report, the Company has continued to raise additional financing.

We currently have no lines of credit in place. We must continue to obtain financing from investors or from clients in support of our development projects.

We have granted to our directors, officers, and employee's options to purchase shares at prices that are at or above market price on the date of grant. At April 30, 2023, there are 13,875,000 stock options outstanding at an average exercise price of $0.06 per share.

Capital Resources:   We have no commitments for capital expenditures as of April 30, 2023.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

8. SUBSEQUENT EVENTS

`

Subsequent to April 30, 2023:

a) The Company secured a private placement with an investor consisting of common shares with no warrants pursuant to prospectus and registrations set forth in applicable securities law. It realized net proceeds of $21,000 USD and issued a total of 200,000 common shares.       

b) The Company extended convertible debentures that were within 3 months of maturity date from April 30, 2023 for an additional six (6) months. 

c) The Company secured $ 80,937USD in a convertible debenture with a 12 month term and conversion features which become effective six months after initiation date.

d) The Company converted $265,855 CDN of convertible debentures through the issuance of  5,317,100 common shares.

e) The Company issued 800,000 common shares for a total of $104,000 CDN for the exercise of stock options.

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MICROMEM TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED APRIL 30, 2023 PREPARED AS OF JUNE 29, 2023

APPENDIX 1

COMMENTARY ON CONVERTIBLE DEBENTURES:

This section of the report is intended to provide readers with additional information as to the nature of the reporting requirements, procedures, and impact of the convertible debt financings    that the Company has completed. The objective is to facilitate the reader's understanding of this complex aspect of the Company's financial statements.

(1) Overview: convertible debenture reporting

(a) We are required under IFRS reporting standards to measure the components of our convertible debt including the debt, the derivative liability, and the equity component of the face value of the debt, as appropriate, upon execution of the loan agreement with the lender.

(b) The measurement methodology that we employ is in accordance with prescribed guidelines under IFRS and International Accounting Guidelines. This methodology is either a Black Scholes pricing model or a binomial distribution measurement model, depending on which model is more suitable in each case. That determination is based on a subjective assessment by the Company.

(c) When we secure a convertible debenture from an investor, the terms which are finalized through negotiation with the investor will vary on a case-by-case basis in terms of the following aspects:

(i) Term (typically 2 months to 12 months).

(ii) Interest rate (typically 1 to 2% per month but, in some cases, between 5% - 10% per annum; in yet  one  other case,  the interest  rate  is  2%  per annum).

(iii) Conversion price which may be fixed at initiation date or fixed after 6 months based on a formulaic calculation, denominated in Canadian dollars or U.S. Dollars, the latter being the functional currency of the Company and its subsidiaries.

(iv) The option for the Company to prepay the loan during the entire term of the loan or within an initial period of the term of the loan (typically up to 6 months).

(d) At the maturity date of the debenture, the debenture holder may agree to extend the term of the loan for an additional period of time, either on the same basic terms as already exist or on renegotiated terms.

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(2) Accounting measurements and periodic reporting of convertible debentures:

(a) To the extent that there is a derivative liability that arises in the initial measurement (1(b) above), we are required to revalue the derivative liability at each quarter end using prescribed Black Scholes or binomial methodology. Then, on a quarterly basis, we are required to report this gain or loss on the revaluation in our quarterly consolidated statements of income.

(b) To the extent that the face value of the loan - which is due at the maturity date - is greater than the amount that is assigned to the loan component of the total amount at inception of the loan (1(a) above), then this difference must be accreted over the term of the loan.  Typically, the loan term is from 2 months to 12 months.  Thus, over the term of the loan, we are required to report this accretion amount as an expense in our quarterly consolidated statements of income.

(c) To the extent that a loan is converted into common shares by the debenture holder, we will close out the loan at that point, record remaining accretion expense up to the date of conversion, remeasure the derivative liability to nil and calculate a net gain or loss on conversion of the loan.  The net gain or loss is reported in our consolidated statements of income.

(3) Impact on financial reporting:

The realities and complexities of these prescribed accounting treatments give rise to complicated disclosures in our financial statements and footnotes:

(a) We report substantial accretion expense in our periodic  financial statements.

(b) Over time, barring significant volatility in the share price, we generally report a gain on the settlement of the derivative liabilities. However, the  quarterly revaluations  of the derivative liabilities  can  result  in significant  quarterly  fluctuations. 

(c) The calculated effective interest rate on debt can be substantial. To illustrate,(for example) if the reported  fair value of the debt is a small fraction of the face value at inception and it must be accreted to face value over the term (for example 2 months) then the effective rate of interest will be as high (in these reported financials) as 5,803% or higher, representing the rate that would be required  to step up the  reported value to the face value in the short period of the term of the loan.

It is essential, when reviewing our periodic consolidated financial statements, to bear in mind the following:

a) Accretion expense is a non- cash item.

b) Gain or loss on revaluation of derivatives in a non -cash item.

c) Gain or loss on extinguishment of debentures is a non -cash item.

d) Gain or loss on conversion of debentures to common shares is a non -cash item.

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The total non-cash expense (income) relating to items (a) - (d) above reported in the quarter ended April 30, 2023 was $541,290; (April 30, 2022: $(544,354)).

(4) Additional Comments:

The Company notes the following:

a) We have had to resort to convertible debentures financing as a primary means of securing financing over the past several years in order to continue our operations.

b) The actual interest expense on our convertible debentures, which is interest paid to the debenture holders, is at a coupon rate ranging between 1% and 2% per month (in one  case  at  a rate  of 2% per annum). The effective rate referenced above is an accounting measurement metric, not a payable obligation.

c) The use of convertible debentures has served to increase our outstanding number of shares over the past few years. In the quarter ended April 30, 2023, the Company issued 16,218,279 common shares in settlement of $1,026,217 of debentures which were converted to common shares by the debenture holders (quarter ended April 30, 2022: 3,646,545 shares issued to settle $217,113).

d) The total actual amount that the Company reports as outstanding for debentures at April 30, 2023 is $3,792,064 including principal and accrued interest (April 30, 2022: $3,105,682).

At April 30, 2023 we report a total of 498,209,037 common shares outstanding (April 30, 2022: 447,191,433 common shares).

The Company plans to deemphasize or eliminate this complex and expensive source of financing in future as it develops and grows its business and is better able to secure more conventional, lower cost financing.

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FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Joseph Fuda, President and Chief Executive Officer of Micromem Technologies Inc., certify the following:

1. Review:  I have reviewed the interim financial report and interim MD&A (together the "interim filings") of Micromem Technologies Inc., (the Issuer) for the interim period ended April 30, 2023.

2. No misrepresentations:  Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation:  Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility:  The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5. Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) Designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) Material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) Information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) Designed ICFR, or caused it 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 the issuer's GAAP.

5.1 Control of framework:  The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission or "COSO".  The Company is utilizing the guidance for smaller public companies published by COSO.

5.2 not applicable

5.3 not applicable

6. Reporting changes in ICFR:  The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on November 1, 2022 to April 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date:  June 29, 2023

/s/ Joseph Fuda
Joseph Fuda
President and Chief Executive Officer

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FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Dan Amadori, Chief Financial Officer of Micromem Technologies Inc., certify the following:

1. Review:  I have reviewed the interim financial report and interim MD&A (together the "interim filings") of Micromem Technologies Inc., (the issuer) for the interim period ended April 30, 2023.

2. No misrepresentations:  Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation:  Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility:  The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5. Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) Designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) Material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) Information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) Designed ICFR, or caused it 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 the issuer's GAAP.

5.1 Control of framework:  The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission or "COSO".  The Company is utilizing the guidance for smaller public companies published by COSO.

5.2 not applicable

5.3 not applicable

6. Reporting changes in ICFR:  The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on November 1, 2022 to April 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date:  June 29, 2023

/s/ Dan Amadori
Dan Amadori
Chief Financial Officer

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