Micromem 6K Condensed Consolidated Financial Statements of | MMTIF 29 Sep 15

Condensed Consolidated Financial Statements of

MICROMEM TECHNOLOGIES INC.

For the three and nine months ended July 31, 2015 and 2014

(Expressed in United States Dollars)

MICROMEM TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

1. Reporting Entity and Nature of Business

2. Going Concern

3. Basis of Presentation

4. Continuity of Significant Accounting Policies and Reporting Procedures

5. Deposits and Other Receivables

6. Property and Equipment

7. Deferred Development Costs

8. Intangible Assets and Patents

9. Stock Options, Warrants and Loss per Share

10. Income Taxes

11. Expenses

12. Management Compensation and Related Party Transactions

13. Commitments and Contingencies

14. Prior year Financial Statements

15. Subsequent Events

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

		July 31,			October 31,
		2015			2014
Assets
Current assets:
Cash and short term investments (Note 15)	$	74,808		$	935,987
Deposits and other receivables (Note 5)		137,438			872,766
		212,246			1,808,753

Property and equipment, net (Note 6)		16,197			21,483
Deferred development costs (Note 7)		4,900,327			3,525,456
Intangible assets, net (Note 8)		62,895			77,409
Patents, net (Note 8)		269,090			203,504
	$	5,460,755		$	5,636,605

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities		1,565,334			773,832
	$	1,565,334		$	773,832
Shareholders' Equity
Share capital: (Notes 9 and 15) Authorized: 2,000,000 special preference shares, redeemable, voting Unlimited common shares without par value Issued and outstanding: 194,738,368 common shares (2014: 188,436,724) (Note 9)	$	73,102,919		$	70,802,776
Contributed surplus (Note 9)		27,085,641			27,436,678
Deficit		(96,293,139	)		(93,376,681	)
		3,895,421			4,862,773

	$	5,460,755		$	5,636,605

"Joseph Fuda" (Signed)

Joseph Fuda, Director

"David Sharpless" (Signed)

David Sharpless, Director

See accompanying notes.

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

For the three and nine months ended July 31

		Three Months Ended July 31						Nine Months Ended July 31
		2015			2014			2015			2014

Costs and expenses (income):
Administration	$	56,288		$	68,884		$	298,866		$	251,351
Professional, other fees and salaries (Note 11)		367,306			728,112			1,552,178			1,459,782
Stock - based compensation (Note 9 (b))		603,687			-			603,687			379,253
Development costs (Note 7)		755			670,242			199,391			682,990
Travel and entertainment		58,529			121,945			133,224			273,517
Amortization of property and equipment		1,737			1,869			5,286			5,521
Amortization of intangible assets and patents		67,262			-			67,262			-
Foreign exchange loss		20,142			11,359			56,564			24,303
Net loss before income taxes		(1,175,706	)		(1,602,411	)		(2,916,458	)		(3,076,717	)

Income taxes (Note10)		-			-			-			-

Net loss and comprehensive loss	$	(1,175,706	)	$	(1,602,411	)	$	(2,916,458	)	$	(3,076,717	)

Loss per share - basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

Weighted average number of shares		194,069,303			174,799,523			191,454,573			168,351,746

See accompanying notes.

MICROMEM TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

		Three Months Ended July 31					Nine Months Ended July 31

Cash flows from operating activities:
Net loss		(1,175,706	)	(1,602,411	)		(2,916,458	)	(3,076,717	)
Adjustments to reconcile loss for the period to net cash used in operating activities:
Amortization of patents and intangible assets		67,262		-			67,262		-
Amortization of property and equipment		1,737		1,869			5,286		5,521
Stock based compensation		603,687		-			603,687		379,253
Increase (Decrease) in deposits and other receivables		150,922		(191,975	)		735,328		(311,672	)
(Decrease) Increase in accounts payable and accrued liabilities		183,387		597,386			791,501		566,533
Net cash used in operating activities		(168,711	)	(1,195,131	)		(713,394	)	(2,437,082	)

Cash flows from investing activities:
Purchase of property and equipment		-		(962	)		-		(16,808	)
Patents		(68,483	)	(21,101	)		(158,384	)	(148,206	)
Deferred development costs		(861,804	)	(529,481	)		(3,117,453	)	(1,631,896	)
Deferred development costs billed		423,358		-			1,782,632		-
Net cash used in investing activities		(506,929	)	(551,544	)		(1,493,205	)	(1,796,910	)

Cash flows from financing activities:
Issue of common shares		580,142		1,090,889			1,345,419		3,976,991
Bridge loans advances		-		-			-		29,157
Bridge loan repayments		-		-			-		(17,071	)
Net cash provided by financing activities		580,142		1,090,889			1,345,419		3,989,077

Increase (decrease) in cash		(95,498	)	(655,786	)		(861,180	)	(244,915	)

Cash, beginning of period		170,306		1,232,454			935,987		821,283

Cash, end of period	$	74,808 $		576,668		$	74,807 $		576,368

Supplemental cash flow information:
Interest paid (classified in operating activities)		-		-			-		28,640

MICROMEMTECHNOLOGIES INC.
CondensedConsolidatedStatements ofChanges inShareholders'Equity
(Expressed inUnitedStatesdollars)

	Number of		Share capital			Contributed Equity component						Deficit			Total
	Shares					Surplus			0f Bridge loan

Balance as at November 1, 2013	158,491,425	$	57,755,613		$	32,822,327		$	1,557		$	(89,043,178	)	$	1,536,319

Stock based compensation	-		-			379,253			-			-			379,253
Warrants extended	-		-			168,632			-			(168,632	)		-
Warrants exercised	27,410,717		6,801,619			-									6,801,619
Fair value of warrants exercised	-		6,078,497			(6,078,497	)		-			-			-
Bridge loan converted	2,517,501		302,100			1,557			(1,557	)		-			302,100
Warrants issued on conversion of bridge loan	-		(143,406	)		143,406			-			-			-
Shares issued on conversion of bridge loan	17,081		8,353			-			-			-			8,353
Net loss and comprehensive loss	-		-			-			-			(4,164,871	)		(4,164,871	)
Balance at October 31, 2014	188,436,724		70,802,776			27,436,678			-			(93,376,681	)		4,862,773

Balance as at November 01, 2014	188,436,724		70,802,776			27,436,678			-			(93,376,681	)		4,862,773

Private placement of units for cash	122,768		55,000			-			-			-			55,000
Warrants exercised	2,988,876		565,777			-			-			-			565,777
Fair value of warrants exercised	-		271,553			(271,553	)		-			-			-
Options exercised	2,740,000		724,642			-			-			-			724,642
Fair value of options exercised	-		462,671			(462,671	)		-			-			-
Stock based compensation and options	450,000		220,500			383,187			-			-			603,687
Net loss and comprehensive loss	-		-			-			-			(2,916,458	)		(2,916,458	)
Balance at July 31, 2015	194,738,368		73,102,919			27,085,641			-			(96,293,139	)		3,895,421

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

1.	REPORTING ENTITY AND NATURE OF BUSINESS

Micromem Technologies Inc. (“Micromem” or the “Company”) is incorporated under the laws of the Province of Ontario, Canada. The principal business address of the Company is 121 Richmond Street West, Suite 304, Toronto, Ontario, Canada.

The Company develops, based upon proprietary technology, customized sensor applications for companies operating internationally in a variety of industries.

These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries:

	(i)	Micromem Applied Sensors Technology, Inc. (“MAST”) incorporated in November 2007 and domiciled in Delaware, United States. MAST has the primary responsibility for the exploitation of the Company’s technologies in conjunction with various strategic partners and customers.

	(ii)	7070179 Canada Inc., incorporated in October 2008 under the Canada Business Corporations Act in Ontario, Canada. The Company has assigned to this entity its rights, title and interests in certain patents which it previously held, directly in exchange for common shares of this entity.

	(iii)	Memtech International Inc., Bahamas; Memtech International (USA) Inc., Delaware, United States; Pageant Technologies (USA) Inc., United States; Pageant Technologies Inc., Barbados; and Micromem Holdings (Barbados) Inc., Barbados. All of these entities are inactive.

These consolidated financial statements were authorized for issuance and release by the Company’s Board of Directors on September 29, 2015.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

2.	GOING CONCERN

These consolidated financial statements have been prepared on the “going concern” basis in accordance with International Financial Reporting Standards (“IFRS”), which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

There are uncertainties related to conditions and events that cast doubt about the Company’s ability to continue as a going concern for a reasonable period of time in future. During the nine months ended July 31, 2015, the Company reported a loss from operations of $2,916,458 (2014: $3,076,717).

The Company reports working capital of $(1,353,088) at July 31, 2015 compared to $1,034,921 at October 31, 2014.

The Company’s future 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 fiscal 2015; however, if the Company is not able to complete its financial plans and/or is not able to profitably commercialize its technology, then there is doubt the Company can continue as a going concern.

If the “going concern” assumption were not appropriate for these consolidated financial statements then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used; in such cases, these adjustments would be material.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

3.	BASIS OF PRESENTATION

	a)	Statement of compliance:

		These condensed interim quarterly consolidated financial statements have been prepared in accordance with IFRS and its interpretations adopted by International Accounting Standards Board (“IASB”) and comply with the requirements of IAS standard 34, Interim Financial Reporting.

	b)	Basis of measurement:

		The consolidated financial statements have been prepared on the historical cost basis, except for financial instruments designated at fair value through profit and loss, which are stated at their fair value.

	c)	Functional and presentation currency:

		These consolidated financial statements are presented in United States dollars (“U.S. dollars”), which is also the Company’s functional currency.

	d)	Use of estimates and judgments:

		The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

		Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

		Information about assumptions and estimation uncertainties that have a risk of resulting in a material adjustment are as follows:

The Company makes estimates and utilizes assumptions in determining the fair value for stock based compensation expense, warrants and unit private placements.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

3.	BASIS OF PRESENTATION (Cont’d)

Use of estimates and judgments: (Cont’d)

	ii)	The Company makes estimates related to the recovery of deferred development costs based on the expectation and assumption of realizing revenues from commercial agreements with the companies for whom these projects have been undertaken. Changes in these expectations and assumptions could result in a change in the recoverable amount calculated.

	iii)	The Company makes estimates related to the useful lives of property and equipment, patents and intangible assets and the related amortization. The Company also periodically assesses the recoverability of long-lived assets. The recoverability analysis requires the Company to make assumptions about future operations. Changes to one or more assumptions would result in a change in the recoverable amount calculated and/or amortization expensed.

	iv)	Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax assets and unused tax losses can be utilized. At July 31, 2015, the Company has assessed that it may not be probable that sufficient taxable profit will be available to use deferred income tax assets based on operating losses in prior years, therefore, there are no balances carried in the consolidated statements of financial position for such assets.

	v)	The Company applies judgment in assessing the functional currency of each entity consolidated in these financial statements.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

4.	CONTINUITY OF SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PROCEDURES

	e)	Accounting Policies:

		These unaudited interim condensed consolidated financial statements follow the same accounting policies and methods of application as set in the audited consolidated financial statements for the year ended October 31, 2014 and should be read in conjunction with the audited consolidated financial statements. There have been no changes in accounting policies or methods of application of accounting policies in the period ending July 31, 2015.

	f)	New Standards:

		Certain new standards, interpretations and amendments to existing standards have been issued by the IASB or the IFRS Interpretations Committee that are mandatory for future accounting periods. These include: IFRS 2, Share Based Payments; IFRS 15, Revenues from Contracts with Customers; IAS 32 Financial Instruments; IFRS 9 - Financial Instruments. The Company is currently assessing the impact of these standards – there is neither effect nor impact on the Company’s financial statements for the period ending July 31, 2015.

	g)	Fair Values:

		There were no changes in the methods and assumptions used in estimating the fair value of the Company’s financial instruments and no changes to the classification of financial instruments in terms of the levels of financial hierarchy during the period ending July 31, 2015 from that which was reported at October 31, 2014.

	h)	Capital Management:

		There have been no changes to the objectives, policies and procedures that the Company has adopted and implemented with respect to capital management during the period ending July 31, 2015 from those disclosed at October 31, 2014.

	i)	Financial Risks:

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

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

5.	DEPOSITS AND OTHER RECEIVABLES

The balance reported as Deposits and other receivables consists of:

	July 31,	October 31,
	2015	2014
Accounts receivable under development contracts with clients	-	450,000

Advances to Officers, Directors and employees	71,019	386,031

Prepaid insurance and other	66,419	36,735

	137,438	872,766

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

6.	PROPERTY AND EQUIPMENT

		Computers			Furniture and		Total
					Equipment
Cost

At November 1, 2013	$	49,213			25,989	$	75,202
Additions		16,508			-		16,508
Disposals		(13,436	)		-		(13,436	)
Year ended October 31, 2014	$	52,285		$	25,989	$	78,274

At November 1, 2014	$	52,285			25,989	$	78,274
Additions		-			-		-
Disposals		-			-		-
Nine months ended July 31, 2015	$	52,285		$	25,989	$	78,274

Accumulated amortization		Computers			Furniture and		Total
					Equipment

At November 1, 2013	$	35,215			25,989	$	61,204
Amortization for the year		7,357			-		7,357
Adjustment for disposals		(11,770	)		-		(11,770	)
Year ended October 31, 2014	$	30,802		$	25,989	$	56,791

At November 1, 2014	$	30,802			25,989	$	56,791
Amortization for the period		5,286			-		5,286
Nine months ended July 31, 2015	$	36,088		$	25,989	$	62,077

Net book value at October 31, 2014	$	21,483			-	$	21,483
Net book value at July 31, 2015	$	16,197			-	$	16,197

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

7.	DEFERRED DEVELOPMENT COSTS

The breakdown of development costs that have been capitalized is as follows:

		July			October
		2015			2014

Opening balance	$	3,525,456		$	928,077
Additional project costs incurred		3,164,081			3,936,459
Recovery of deferred development costs		(1,783,632	)		(662,290	)
Writedown of project costs		(5,578	)		(676,790	)
Closing balance	$	4,900,327		$	3,525,456

Additions to deferred development costs includes patent amortization of $39,405 (2014 - $44,375).

To date, the Company has recovered from its development partners a portion of the costs it has incurred as deferred development costs coincident with meeting milestones as stipulated in development agreements with its development partners.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

8.	INTANGIBLE ASSETS AND PATENTS

Cost

At November 01, 2013	$	135,465
Additions		-
Year ended October 31, 2014	$	135,465

At November 01, 2014	$	135,465
Additions		-
Nine months ended July 31, 2015	$	135,465

Accumulated amortization


At November 01, 2013	$	38,704
Amortization for the year		19,352
Year ended October 31, 2014	$	58,056

At November 01, 2014	$	58,056
Amortization for the period		14,514
Nine months ended July 31, 2015	$	72,570

Net book value at October 31, 2014	$	77,409
Net book value at July 31, 2015	$	62,895

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

8.	INTANGIBLE ASSETS AND PATENTS (Cont’d)

Cost

At November 1, 2013	$	134,172
Additions		176,381
Year ended October 31, 2014	$	310,553

At November 1, 2014	$	310,553
Additions net,	$	138,868
Nine months ended July 31, 2015	$	449,421

Amortization

At November 1, 2013	$	62,577
Amortization for the year		44,472
Year ended October 31, 2014	$	107,049

At November 1, 2014	$	107,049
Amortization for the period		73,282
Nine months ended July 31, 2015	$	180,331

Net book value at October 31, 2014	$	203,504
Net book value at July 31, 2015	$	269,090

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

9.	STOCK OPTIONS, WARRANTS AND LOSS PER SHARE

Stock Options and Stock Compensation Expense:

In June 2015, the Company issued 975,000 stock options to directors and recorded stock compensation expense of $383,187 (in April 2014, the Company issued a total of 630,000 stock options to officers, directors and employees and recorded stock-based compensation expense of $379,253).

In June 2015, the Company issued 450,000 common shares to certain directors as compensation and recorded $220,500 as compensation expense (2014: nil).

In the period ended July 31, 2015 the Company realized proceeds of $724,642 from the exercise of 2,740,000 common share purchase options (period ended July 30, 2014 - $nil).

The Company reports the following stock options outstanding at July 31, 2015, all of which are exercisable (note 14):

				Weighted
				average
				remaining
				life
Date of issue	# Issued	Strike Price		(in years)	Expiry Date

April 5, 2011	125,000	0.35		0.7	April 5, 2016
October 31, 2011	5,975,000	0.20		1.3	October 31, 2016
April 10, 2012	910,000	0.35		1.7	April 10, 2017
January 22, 2013	865,000	0.30	CDN	2.5	January 22, 2018
September 16, 2013	585,000	0.27	CDN	3.1	September 16, 2018
October 17, 2013	300,000	0.35		3.2	October 17, 2018
February 10, 2014	350,000	0.85		3.5	February 10, 2019
April 25, 2014	230,000	0.64		3.7	April 25, 2019
June 4, 2015	975,000	0.49		4.8	June 4, 2020
	10,315,000

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

9.	STOCK OPTIONS, WARRANTS AND LOSS PER SHARE (Cont’d)

Share Purchase Warrants:

In the nine month period ended July 31, 2015 the Company realized proceeds of $565,777 from the exercise of 2,988,876 common share purchase warrants (nine month period ended July 31, 2014 - $3,976,991 from the exercise of 16,002,718 common share purchase warrants).

In the quarter ended January 31, 2014 the Company extended the expiry date on a total of 1,405,026 common share purchases warrants which would have otherwise expired in the quarter. These warrants were extended for a period of six months in each case. The strike price of these warrants was changed from $0.41 - $0.45 per warrant to $0.50 to $.55 per warrant. The Company recorded a charge to the Deficit as reported of $168,632 with an offsetting charge to contributed surplus to reflect this extension, calculated in accordance with the Black Scholes option – pricing model.

The assumptions used in applying the Black Scholes model were as follows:

		2014
Share price	$	0.50-$0.55
Volatility factor (based on historical volality)		121-127%
Risk free interest rate		1.02%
Dividend yield		0%
Expected life		6 months

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

9.	STOCK OPTIONS, WARRANTS AND LOSS PER SHARE (Cont’d)

The continuity of outstanding share purchase warrants is as below:

				Weighted
				average		Proceeds
	Warrants			exercise price		Realized

Balance outstanding at October 31,2013	29,761,012		$	0.27
Exercised	(27,410,717	)		($0.25	)	6,801,619
Expired	(382,333	)		($0.48	)
Granted	2,517,501		$	0.12
Balance outstanding at October 31, 2014	4,485,463		$	0.37		-
Exercised	(2,988,876	)		($0.19	)	565,777
Expired	(1,496,587	)		($0.73	)
Balance at July 31, 2015	-			-

Loss Per Share:

The calculation of basic and diluted loss per share for the period ended July 31, 2015 was based on the loss attributable to common shareholders of $2,916,458 (2014 - $3,076,717) divided by the weighted average number of common shares outstanding of 191,454,573 (2014 – 168,351,746). Diluted loss per share did not include the effect of outstanding stock options as they are anti-dilutive.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

10.

INCOME TAXES

The Company has non-capital losses of approximately $25.6 million available to reduce future taxable income, the benefit of which has not been recognized in these consolidated financial statements. As of July 31, 2015 the tax losses expire as follows:

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

In addition the Company has available capital loss carry forwards of approximately $1.5 million to reduce future taxable capital gains, the benefit of which has not been recognized in these consolidated financial statements. These losses carry forward indefinitely.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

11.

EXPENSES

Administration

The components of general and administration expenses are as follows:

		2015			2014

General and administrative	$	117,882		$	47,409
Rent and occupancy cost		57,211			64,448
Bad debt expense		21,392			17,549
Interest income		(21,392	)		(17,549	)
Interest expense		-			28,640
Office insurance		43,101			46,374
Telephone		13,787			17,940
Investor relations, listing and filling fees		66,884			46,540
	$	298,866		$	251,351

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

		2015		2014

Professional fees	$	368,688	$	218,372
Consulting fees		843,955		934,997
Salaries and benefits		339,535		306,413
	$	1,552,178	$	1,459,782

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

12.

MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS

The Company reports the following related party transactions:

	(a)	Chairman:

		The Chairman receives cash compensation on a month to month basis calculated at an annual rate of $150,000 CDN. The total compensation paid to the Chairman for the nine month period ended July 31, 2015 was $91,282 of cash compensation and $nil of stock based compensation (2014 - $103,433 of cash compensation and $nil of stock based compensation).

	(b)	Management and consulting fees:

		Included in professional fees, other fees and salaries as reported are management and consulting fees paid or payable to individuals (or companies controlled by such individuals) who serve as officers and directors of the Company. The total compensation paid to such parties for the nine month period ended July 31, 2015 was $694,400 of cash compensation (2014 - $714,322 of cash compensation and $315,057 of stock based compensation).

	(c)	Directors:

		On February 19, 2014 the Company appointed an individual to serve as its Chief Technology Officer and also to serve as a director of the Company. Since that date this individual, through the company in which he is a major shareholder, has invoiced the Company for engineering and design services totaling $1,843,643 through October 31, 2014 and an additional $1,250,004 for the nine month period ended July 31, 2015. These charges have been capitalized as deferred development costs.

		Additionally, the Company recorded $220,500 of stock compensation expense paid to certain other directors in June 2015 (2014: nil).

	(d)	Advances:

		At July 31, 2015 the Company reports advances due from senior management and staff in the amount of $71,019 (July 31, 2014: $385,514 of advances outstanding). These advances are of a short term nature and are recoverable against future compensation due to these individuals.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

13.

COMMITMENTS AND CONTINGENCIES

The Company secured new leased premises in June 2012. The lease term is for 5 years and stipulates base monthly rental expenses of $3800 CDN. Lease commitments are as follows – commitments for the next twelve months of $45,600 CDN; remaining commitments thereafter total $41,800 CDN.

The Company has open purchase orders outstanding with subcontractors with respect to work to be performed in future and which relate to the client projects reported as deferred development costs. These open purchase orders total approximately $3.9 million at July 31, 2015.

On November 17, 2014, Micromem and MAST, (“Plaintiffs”) commenced a lawsuit in the United States District Court for the Southern District of New York against Dreifus Associates Limited and Henry Dreifus, (“Defendants”). The Plaintiffs’ original complaint contained five causes of action by which they sought money damages, declaratory relief and specific performance relating to certain contracts. On February 24, 2015, the Plaintiffs filed an amended complaint to add a claim for declaratory relief relating to a patent held by the Plaintiffs. The Defendants have responded to the allegations on March 17^th, 2015 There have been no new development since March 17, 2015.

14.

PRIOR YEAR FINANCIAL STATEMENTS

Certain reclassifications have been reflected in the comparative financial statements presented herein for the period ending July 31, 2014, to conform with the current year presentation.

MICROMEM TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)

For the three and nine months ended July 31, 2015 and 2014

15.

SUBSEQUENT EVENTS

The Company reports the following subsequent events:

	a)	A total of 1,010,000 stock options were exercised by directors, officers and employees and the Company realized proceeds of $292,765.

	b)	The Company secured of $524,762 of financing from the issuance of debentures issued to several arms’ length investors. These debentures stipulate interest payments of 2% per month and are secured by a fixed and floating charge on the Company’s assets. The debentures mature on October 31, 2015.

	c)	The Company completed a private placement financing for 300,000 common shares and realized proceeds of $120,000. The private placement was completed pursuant to prospectus and registration exemptions set forth in applicable securities law.

	d)	The Company granted a total of 940,000 common stock options to certain directors, officers and employees. The strike price for these stock options was set at $0.46 per option; the options have a five year term and expire on August 20, 2020.

**************************************

Micromem (MMTIF) 6-KCondensed Consolidated Financial Statements of