MMTIF 20-F
Micromem Technologies Inc (MMTIF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
or
For The Fiscal Year Ended
Or
or
Commission File No.
(Exact name of Registrant as specified in its charter)
Ontario,
(Jurisdiction of incorporation or organization)
Tel: (
Fax: (416) 360-4034
(Address of principal executive offices)
(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares without par value
Securities for which there is a reporting obligation pursuant to Section
None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act:
Yes [ ]
If this report is an annual or transition report, indicate by check mark if the registration is not required to file a report pursuant to section 13 or 15 of the Securities Exchange Act of 1934:
Yes [ ]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large, accelerated filer," accelerator filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer [ ] Accelerated Filer [ ]
Emerging growth company
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicated by check mark whether financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). [ ]
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
|
International Financial Reporting Standards as issued | Other [ ] |
| by the International Accounting Standards Board [X] |
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:
Item 17 [ ] Item 18 [ ]
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If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes [ ] No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange of 1934 subsequent to the distribution of securities under a plan confirmed by the court [ ]
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TABLE OF CONTENTS
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PART I
INTRODUCTION
Abbreviations
Throughout this document, Micromem Technologies Inc. and/or its affiliates are referred to as "Micromem", the "Company", "we", "us" or "our".
Throughout this document, unless otherwise noted or the context otherwise indicates, references to "2025" or "Fiscal 2025" refer to the fiscal year ended October 31, 2025; references to "2024" or "Fiscal 2024" refer to the fiscal year ended October 31, 2024; references to "2023" or "Fiscal 2023" refer to the fiscal year ended October 31, 2023; references to "2022" or "Fiscal 2022" refer to the fiscal year ended October 31, 2022; references to "2021" or "Fiscal 2021" refer to the fiscal year ended October 31, 2021.
Forward Looking and Cautionary Statements
This Form 20-F contains certain forward-looking statements. These forward-looking statements are based on current expectations, estimates and projections about the business of our Company and the industry in which we operate, our management's beliefs, and assumptions made by our management. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks" and "estimates," variations on such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Our actual results could differ materially from those expressed or forecasted in these forward-looking statements as a result of certain factors, including those set forth under Item 3 - Key Information - Risk Factors and elsewhere in this Form 20-F.
Unless otherwise noted or the context otherwise indicates, the forward-looking statements contained herein are provided as of the date hereof, and we do not undertake to update or amend such forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
Selected Financial Data for Fiscal 2025, 2024, 2023, 2022, and 2021
The following table sets forth our selected consolidated financial data in United States dollars as of and for each of the fiscal years ended October 31, 2025, October 31, 2024, October 31, 2023, October 31, 2022 and October 31, 2021. The selected consolidated financial data has been derived from our audited consolidated financial statements. All information contained in the following table should be read in conjunction with our audited consolidated financial statements and the notes thereto in "Item 18-Financial Statements" and "Item 5 - Operating and Financial Review and Prospects" included elsewhere in this Annual Report on Form 20-F.
Our consolidated financial statements for the years ended October 31, 2025, 2024, 2023, 2022 and 2021 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS").
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Selected balance sheet information
(all amounts in U.S. dollars)
| 2025 | 2024 | 2023 | 2022 | 2021 | |||||||||||
| Working Capital (deficiency) | (5,578,407 | ) | (6,693,448 | ) | (4,818,699 | ) | (4,722,878 | ) | (3,452,924 | ) | |||||
| Property & Equipment | 35,445 | 15,272 | 32,767 | 48,092 | 26,012 | ||||||||||
| Total Assets | 308,461 | 282,713 | 168,350 | 99,519 | 225,293 | ||||||||||
| Share Capital | 93,647,444 | 91,678,279 | 90,471,712 | 87,784,725 | 86,815,836 | ||||||||||
| Shareholders' Deficiency | (5,603,266 | ) | (6,722,982 | ) | (4,841,204 | ) | (4,748,000 | ) | (3,471,278 | ) |
Selected statement of operations and deficit information
(all amounts in U.S. dollars)
| 2025 | 2024 | 2023 | 2022 | 2021 | |||||||||||
| Interest and other income | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
| Research and development expenses (recovery) | - | - | - | - | - | ||||||||||
| General and administrative and other expenses (6) | 1,766,618 | 1,199,652 | 1,403,188 | 1,228,516 | 1,020,783 | ||||||||||
| Loss (gain) on revaluation of warrant liabilities | (228,625 | ) | 826,393 | - | - | - | |||||||||
| Loss on debt settlement | 78,345 | 118,784 | - | - | - | ||||||||||
| (Gain) on revaluation of derivative liabilities (1) | (1,360,463 | ) | 78,915 | (658,503 | ) | (409,607 | ) | (2,547,192 | ) | ||||||
| (Gain) Loss on conversion/repayment of debt (2) | 15,305 | 107,788 | 48,363 | 46,449 | (9,506 | ) | |||||||||
| Loss (Gain) on extinguishment of debt (5) | 107,361 | 452,248 | 1,400,823 | 200,650 | 1,018,928 | ||||||||||
| Accretion expense (3) | 290,208 | 272,501 | 279,834 | 1,179,603 | 1,169,921 | ||||||||||
| Stock based compensation (4) | - | 6,517 | 217,965 | 41,484 | 360,044 | ||||||||||
| Loss before income tax provision | (668,749 | ) | (3,062,798 | ) | (2,691,670 | ) | (2,287,095 | ) | (1,012,978 | ) | |||||
| Net Loss and Comprehensive loss | (668,749 | ) | (3,062,798 | ) | (2,691,670 | ) | (2,287,095 | ) | (1,012,978 | ) |
| 1) | (Gain) loss on revaluation of derivative liabilities for 2025, 2024, 2023, 2022 and 2021 above relates to the measurement of the derivative liabilities relating to the outstanding convertible bridge loans. The (gain) loss as reported is a non-cash charge which is calculated in accordance with IFRS. |
| 2) | Loss (gain) on conversion of debt relates to the inducement of additional common shares of the Company (the "common shares") issued to the bridge loan lenders who converted their bridge loans to common shares and any loss recorded on the repayment of convertible debentures. |
| 3) | Accretion expense is a non-cash expense calculated in accordance with IFRS and relates to increasing the carrying value of the debt to the contracted amount over the term of the loan. |
| 4) | Stock based compensation is a non-cash expense calculated in accordance with IFRS using the Black Scholes option pricing model. |
| 5) | Loss (Gain) on extinguishment of debt relates to the replacement of an existing debt instrument at maturity date with a new debt instrument reflecting revised renewal terms at maturity date. |
| 6) | Includes general and administrative expenses, professional fees, other fees, salaries, travel and entertainment expenses, amortization expense, foreign exchange loss (gain), interest expense and financing costs. In 2021 we report a recovery of stale dated accounts payable of $422,982. |
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Currency and Exchange Rates
Our financial statements are all expressed in United States dollars. All other financial data appearing in this Form 20-F are expressed in United States dollars with the exception of certain limited cases when reference is made to instruments denominated in Canadian dollars ("CDN $").
Transactions that were conducted in Canadian dollars or other foreign currencies have been converted into United States dollars using the 3 month average rate of exchange per quarter which rate approximates the rate of exchange prevailing at the date of such transactions. Monetary assets and liabilities denominated in Canadian dollars or other foreign currencies but expressed in this Form 20-F in United States dollars have been converted into United States dollars at the rate of exchange prevailing on the date of the applicable financial statement. Non-monetary assets and liabilities denominated in Canadian dollars but expressed in this Form 20-F in United States dollars have been converted into U.S. dollars at the historical exchange rate at the date of the transaction.
The following table sets forth, for the periods indicated, the high, low, end of period and average for period based on the Noon Buying Rates as published by the Bank of Canada, as expressed in the amount of U.S. Dollars equal to one Canadian dollar.
| 2025 | 2024 | 2023 | 2022 | 2021 | |
| High for period | 0.7376 | 0.7573 | 0.7617 | 0.8031 | 0.8111 |
| Low for period | 0.6848 | 0.7186 | 0.7209 | 0.7217 | 0.7903 |
| End of period | 0.7134 | 0.7186 | 0.7209 | 0.7383 | 0.8075 |
| Average for period | 0.7142 | 0.7347 | 0.7415 | 0.7692 | 0.0841 |
The following table sets forth, for each period indicated, the high and low exchange rates for United States dollars expressed in Canadian dollars on the last day of each month during such period, based on the Noon Buying Rate.
| February | March | April | May | June | July | |
| 2025 | 2025 | 2025 | 2025 | 2025 | 2025 | |
| High | 0.7059 | 0.7009 | 0.7240 | 0.7296 | 0.7376 | 0.7366 |
| Low | 0.6848 | 0.6902 | 0.6970 | 0.7144 | 0.7268 | 0.7223 |
| August | September | October | November | December | January | |
| 2025 | 2025 | 2025 | 2025 | 2025 | 2026 | |
| High | 0.7277 | 0.7274 | 0.7186 | 0.7154 | 0.7313 | 0.7399 |
| Low | 0.7196 | 0.7173 | 0.7118 | 0.7082 | 0.7150 | 0.7188 |
On February 17, 2026 - the spot closing for one Canadian dollar, as quoted by the Bank of Canada, was CDN $1. = U.S. $1.3656.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
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D. Risk Factors
We and our investors face a number of risks, which are described below.
Risk Factors Related to Our Business
The financial statements of our Company have been prepared on a going concern basis.
We have prepared our financial statements on a "going concern" basis which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future.
Our ability to continue as a going concern is dependent upon the successful commercialization of our sensor technology platforms that we currently have under development with our industry partners. Ultimately, we must achieve a profitable level of operation through licensing fees, royalties and the commercial sale of our products. We will require additional financing in the interim to fund our activity.
At October 31, 2025 we had $250,148 of cash on hand. Our working capital deficiency is $5,578,407 at October 31, 2025. Subsequent to October 31, 2025, through to the date of the filing of this Annual Report on Form 20-F, we have raised an additional $82,500 through the issuance of convertible debentures, and $236,005 through private placements.
Our consolidated financial statements, which have been prepared on a going concern basis, do not include any adjustments to the amounts and classifications of the assets and liabilities that might be necessary should we be unable to continue in business. If the going concern assumption was not appropriate for our financial statements then adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
We currently have no operating revenue.
We have not yet reported commercial revenues from licensing fees, royalties or product sales. If we fail to enter into license agreements or if we do not obtain purchase orders from potential customers, we will have no revenues. If we enter into such agreements the amount of the revenues we receive will depend on the terms we are able to secure from each licensee and the ability of licensees to compete in their particular market.
There are market risks relating to the sale of our sensor technology platforms.
We continued to develop applications of our sensor technology in 2025 working with our technical advisors and our strategic development partners. We are pursuing joint development agreements with potential strategic partners with the expectation that we will jointly develop sensor applications for use by these potential strategic partners. We believe that these current initiatives will result in revenues and cash flow to the Company in the future but there can be no assurance when and if such revenues will be achieved.
We may face competition from larger corporations which also sell sensor technology and who have greater financial resources than the Company.
Our success will in part be determined by the following factors which have not yet been fully and completely tested nor measured: the ability of manufacturers to incorporate the technology into existing manufacturing capabilities without significant retooling and material costs, price competitiveness and the differential performance advantages of our technology.
Additionally, our ability to compete successfully will depend on elements outside of our control, including the rate at which customers incorporate our technology into their products, the success of such customers in selling those products, our protection of our intellectual property, the number, nature and success of our competitors and their product introductions and general market and economic conditions. Our success will depend on our ability to protect our intellectual property, to develop, introduce, and license or sell in a timely manner our technology or products incorporating our technology and to compete effectively on the basis of factors such as speed, density, die size and power consumption.
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Failure to secure continued financing will cause our business to suffer.
Since there is no assurance that commercial revenues will be realized in future, we will need additional financing to continue our development and to successfully market our technology to potential licensees and strategic partners.
There can be no assurance that we will be able to continue to raise sufficient financing in the future and the failure to do so would affect our ability to further develop our technology platforms and to market our products to existing and new potential customers.
Because our success and value depends in part on our ownership and use of intellectual property, our failure to protect our property could adversely affect our future growth and success.
Our success will depend, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods to protect our proprietary technology and processes. Despite our efforts to do so, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology, develop similar technology independently or design around our patents. Policing unauthorized use of our products is expensive and difficult, and we cannot be certain that all required steps we have taken will prevent misappropriation or infringement of our intellectual property.
Intellectual property claims against us, no matter how groundless, could cause our business to suffer.
Our future success and competitive position depend in part on our ability to retain rights to our technology, including any improvements that may be made on that technology from time to time by us or on our behalf. Certain of our technology is patented or is subject to pending patent applications in the United States and abroad and we know of no challenge that has been made either against our technology or our rights to it. We have no reason to believe that any such challenge might be made or that the grounds for any such challenge exist. If any intellectual property litigation were to be commenced against us, no matter how groundless, the result could be a significant expense to us, adversely affecting further development, licensing and sales, diverting the efforts of our technical and management personnel and, in the event of an adverse outcome, damages and possible restrictions on the further development, licensing and use of our technology. There can be no assurance that any of our outstanding pending patent applications will be issued as patents or that any issued patent will not be determined to be invalid at a later date.
We have a history of losses, and we may continue to generate losses in future.
To date, we have operated as a product development company and have not been profitable. Unless and until we are able to successfully commercialize our technology applications, we may not be able to generate sufficient revenues in future periods and we may not be able to attain profitability.
The further development of our sensor technology may require significant additional capital which we may have to fund directly if we are unable to secure financing from development partners. Therefore, we may incur expenses without receiving equal and offsetting revenues at least until we are able to license our technology to third parties. This may result in net operating losses until we can generate an acceptable level of revenues. Further, even if we achieve operating revenues, there can be no assurance that such revenues will be sufficient to fund continuing operations.
The likelihood of the success of our business plan must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early stage businesses and the competitive environment in which we operate.
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We will be dependent upon the success of a limited range of products.
The range of products we intend to commercialize is currently limited to applications of our sensor technology. If we are not successful in commercializing our technology platforms, or if there is not adequate demand for such technology or the market for such technology develops less rapidly than we anticipate, we may not have the capability to shift our resources to the development of alternative products on a timely basis. This could limit future revenues and profitability.
We may not realize income from the licensing of our technologies if our licensees fail to commercialize the products that incorporate these technologies.
In order to generate revenues from our sensor technology platforms, we will need to enter into licensing arrangements with third parties who can integrate our technology into products that will gain acceptance in the market. We have not yet entered into any licensing agreements, and there is no assurance that we will be able to do so on acceptable terms in future. To the extent we are successful in licensing our technology; in general we will seek upfront payments plus ongoing royalties based on anticipated commercial sales of the products into which our technology is incorporated. Our ability to realize royalties will thus depend upon the successful manufacture and commercialization of such products, which will be primarily within the control of the licensee. There is no assurance that such licensees will be successful in marketing and selling such products. In addition, licensees could decide to delay or discontinue the commercialization of products for financial or other business reasons. Even if our licensees succeed in developing products that incorporate our technology, in all likelihood a significant amount of development and testing will be required before such products can be introduced to market. Therefore we may not receive royalty income for a substantial period following the commencement of any licensing arrangements. If our licensees are unable to commercialize products on a timely basis, they may lose market share to competing or alternative technologies. Any failure by the companies to which we license our technologies to successfully develop marketable products would have an adverse effect on our future royalty payments and financial condition.
In order to commercialize our future products, we will need to establish a sales and marketing capability.
At present, we have limited sales and marketing capability and our financial resources have been limited. We will need to add marketing and sales expertise and must also develop the necessary supporting distribution channels. Although we believe we can build the required infrastructure either in-house or through strategic relationships, we may not be successful in doing so. Failure to establish a sales force and distribution network would have an adverse effect on our ability to grow our business.
We depend on key personnel.
Our senior managers and employees are Joseph Fuda, who serves as our Chief Executive Officer, and Dan Amadori, who serves as our Chief Financial Officer. We have engaged the services of several engineering/technical consulting firms to assist in converting our development efforts to commercialization. Our success depends on our ability to retain certain of our senior management and key technical personnel, our ability to attract and retain additional highly skilled personnel in the future and to maintain our working relationships with our engineering and technical consulting firms to whom we have historically subcontracted our development work.
A depressed oil and gas sector could place our development projects at risk.
Certain of our development partners are engaged primarily in the oil and gas sector. If market conditions are depressed for this sector, there is a risk that such companies could defer or cancel previously established capital expenditure programs or product development initiatives. If these situations arose with our development partners in this sector, our related development projects could be at risk of delays or cancellation.
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We may be materially affected by global economic, political and other conditions beyond our control.
Our ability to generate revenue may be adversely affected by uncertainty in the global economy and could also be affected by unstable global political conditions. Health epidemics, terrorist attacks or acts of war could significantly disrupt our operations and the operations of our future customers, suppliers, distributors, or resellers. We cannot predict the potential impact on our financial condition or our results of operations should such events occur.
We are pursuing a significant business opportunity in Romania, working with Romgaz, the state-controlled gas company. To date, the war in the Ukraine with Russia, has not impacted our go forward plans in Romania. If the Ukraine war expands into other eastern European countries in future, there could be repercussions to our ongoing business which could be significant.
We may be affected by IT related risks including cybersecurity and artificial intelligence related risks.
The Company utilizes the services of an independent consultant to address IT related issues including security and control over internal data. Our audit committee supervises this process and reports to our Board of Directors as appropriate. We believe our control procedures address such potential risks.
We may be materially affected by rapid technological change and evolving industry standards.
Short product life cycles are inherent in high-technology companies due to rapid technological change and evolving industry standards. Our future financial condition and results of operations depend on our ability to respond effectively to these changes. There can be no assurance that we will be able to successfully do so or adapt our current products to new technologies or new industry standards. In addition, our customers may be reluctant to adopt new technologies and standards or they may prefer competing technologies and standards. Because the technology market changes so rapidly, it is difficult for us to predict the rate of adoption of our technology.
We may be materially affected by risks associated with new product development.
Our new product development is complex and requires us to investigate and evaluate multiple alternatives, as well as plan the design and manufacture of those alternatives selected for further development. Our development efforts could be adversely affected by hardware and software design flaws, product development delays, changes in operating systems and changes in industry standards. The manufacturing of new products involves integrating complex designs and processes, coordinating with suppliers for parts and components and managing manufacturing capacities to accommodate forecasted demand. If we are not successful in meeting these requirements, this could adversely affect our ability to introduce new products on a timely basis.
Our operations may be materially affected by the risks associated with the continued developments and protection of our intellectual property.
There can be no assurance that we will be able to continue to develop new intellectual property or that we will continue to have it developed for us. We rely on a combination of U.S. patent, copyright, trademark, and trade secret laws to protect our intellectual property rights. We previously filed patent and trademark registration applications with certain foreign governments; in 2019 we abandoned certain of these foreign applications. We may not have appropriate coverage in all jurisdictions where we may sell or license our product in future.
We enter into confidentiality and non-disclosure agreements relating to our intellectual property with our employees and consultants. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain or use our intellectual property. Monitoring the unauthorized use of our intellectual property is difficult and we cannot be certain that we will be able to adequately protect our intellectual property in the future.
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There are foreign exchange risks associated with our Company.
Because we have historically raised funds in both U.S. and Canadian markets and a portion of our costs are denominated in Canadian dollars, our funding is subject to foreign exchange risks. A decrease in the value of the U.S. dollar relative to the Canadian dollar could affect our costs and potential future profitability. We do not currently hold forward exchange contracts or other hedging instruments to exchange foreign currencies for U.S. dollars so as to offset potential currency rate fluctuations.
Risk Factors Related to Our Common Shares
Our common shares are subject to the penny stock regulations, which may discourage brokers from effecting transactions in our common shares and adversely affect the market price of our common shares and liquidity.
Our common shares constitute "penny stock" under applicable regulations of the United States Securities and Exchange Commission (the "SEC"). The penny stock regulations impose significant restrictions on brokers who sell penny stock to persons other than established customers and institutional accredited investors. Broker-dealers participating in sales of our stock will be subject to the so called "penny stock" regulations covered by Rule 15g-9 under the Exchange Act of 1934, as amended (the "Exchange Act"). Under the rule, broker-dealers must furnish to all investors in penny stocks a risk disclosure document required by the rule, make a special suitability determination of the purchaser and have received the purchaser's written agreement to the transaction prior to the sale. The penny stock regulations may discourage brokers from effecting transactions in the common shares. This would decrease market liquidity, adversely affect market price and make it difficult for you to use the common shares as collateral.
The rights of our shareholders may differ from the rights typically afforded to shareholders of a U.S. corporation.
We are incorporated under the Business Corporations Act (Ontario), also referred to herein as the "OBCA". The rights of holders of our common shares are governed by the laws of the Province of Ontario, including the OBCA, by the applicable laws of Canada, and by our Articles of Incorporation and all amendments thereto, also referred to herein as the "Articles", and our By-laws. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. The principal differences include without limitation the following:
Under the OBCA, we have a lien on any common share registered in the name of a shareholder or the shareholder's legal representative for any debt owed by the shareholder to us. Under some U.S. state laws, corporations generally are not entitled to any such statutory liens in respect of debts owed by shareholders.
With regard to certain matters, we must obtain approval of our shareholders by way of at least 66 2/3% of the votes cast at a meeting of shareholders duly called for such purpose being cast in favor of the proposed matter. Such matters include without limitation: (a) the sale, lease or exchange of all or substantially all of our assets out of the ordinary course of our business; and (b) any amendments to our Articles including, but not limited to, amendments affecting our capital structure such as the creation of new classes of shares, changing any rights, privileges, restrictions or conditions in respect of our shares, or changing the number of issued or authorized shares, as well as amendments changing the minimum or maximum number of directors set forth in the Articles. Under some U.S. state laws, the sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation generally requires approval by a majority of the outstanding shares, although in some cases approval by a higher percentage of the outstanding shares may be required. In addition, under some U.S. state laws, the vote of a majority of the shares is generally sufficient to amend a company's certificate of incorporation, including amendments affecting capital structure or the number of directors. Under certain circumstances the board of directors may also have the ability to change the number of directors under some U.S. state laws.
Pursuant to our By-laws, two persons present in person or represented by proxy and each entitled to vote thereat shall constitute a quorum for the transaction of business at any meeting of shareholders. Under some U.S. state laws, a quorum generally requires the presence in person or by proxy of a specified percentage of the shares entitled to vote at a meeting, and such percentage is generally not less than one-third of the number of shares entitled to vote.
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Under rules of the Ontario Securities Commission, a meeting of shareholders must be called for consideration and approval of certain transactions between a corporation and any "related party" (as defined in such rules). A "related party" is defined to include, among other parties, directors and senior officers of a corporation, holders of more than 10% of the voting securities of a corporation, persons owning a block of securities that is otherwise sufficient to affect materially the control of the corporation, and other persons that manage or direct, to a substantial degree, the affairs or operations of the corporation. At such shareholders' meeting, votes cast by any related party who holds our common shares and who has an interest in the transaction may not be counted for the purposes of determining whether the minimum number of required votes have been cast in favor of the transaction. Under some U.S. state laws, a transaction between a corporation and one or more of its officers or directors can generally be approved either by the shareholders or a by majority of the directors who do not have an interest in the transaction. Corporations that are listed on a U.S. securities exchange or are quoted on Nasdaq may also be required to have transactions with officers and directors and other related party transactions reviewed by an audit committee comprised of independent directors.
There is no limitation imposed by our Articles or other charter documents on the right of a non-resident to hold or vote our common shares. However, the Investment Canada Act , also referred to herein as the Investment Act, as amended by the World Trade Organization Agreement Implementation Act, also referred to herein as the WTOA Act, generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a "Canadian," as defined in the Investment Act, unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be a net benefit to Canada. An investment in our common shares by a non-Canadian would be reviewable under the Investment Act if it were an investment to acquire direct control of Micromem, and the value of our assets were CDN $5.0 million or more. However, an investment in our shares by a national of a country (other than Canada) that is a member of the World Trade Organization or has a right of permanent residence in such a country (or by a corporation or other entity that is a "WTO Investor-controlled entity" pursuant to detailed rules set out in the Investment Act) would be reviewable at a higher threshold of CDN $344 million in assets, except for certain economic sectors with respect to which the lower threshold would apply. A non-Canadian, whether a national of a WTO member or otherwise, would acquire control of Micromem for purposes of the Investment Act if he or she acquired a majority of our common shares. The acquisition of less than a majority, but at least one-third of our common shares, would also be presumed to be an acquisition of control of Micromem, unless it could be established that Micromem was not controlled in fact by the acquirer through the ownership of voting shares. The United States is a WTO Member for purposes of the Investment Act. Certain transactions involving our common shares would be exempt from the Investment Act, including:
• an acquisition of our common shares if the acquisition were made in connection with the person's business as a trader or dealer in securities.
• an acquisition of control of Micromem in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Act; and
• an acquisition of control of Micromem by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control of Micromem, through the ownership of voting interests, remains unchanged. Under U.S. law, except in limited circumstances, restrictions generally are not imposed on the ability of non- residents to hold a controlling interest in a U.S. corporation.
U.S. shareholders may not be able to enforce civil liabilities against us.
Micromem is incorporated under the laws of the Province of Ontario. Additionally, a number of our directors and executive officers are non-residents of the U.S., and all or a substantial portion of the assets of such persons are located outside the U.S. As a result, should any investor commence an action in the U.S. against Micromem or its directors or executive officers, Micromem or its directors or officers, as the case may be, may be able to insist that any action against them take place in the jurisdiction of the Province of Ontario. Accordingly, it may be difficult for investors to effect service of process on Micromem or these non-United States resident persons within the United States or to rely in the United States upon judgments obtained in the United States based on the civil liability provisions of the U.S. federal securities laws against Micromem or its executive officers and non-United States resident directors. In addition, if an investor were to obtain a U.S. judgment against Micromem or its directors or executive officers, there is doubt as to the enforceability of such U.S. judgment in Canada.
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As a foreign private issuer, we are permitted to file less information with the SEC than a company that is not a foreign private issuer or that files as a domestic issuer.
As a "foreign private issuer" (as defined by 405 of the Securities Act of 1933, as amended (the "Securities Act")), we are exempt from certain rules under the Exchange Act that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as a company that files as a domestic issuer whose securities are registered under the Exchange Act, nor are we generally required to comply with the SEC's Regulation FD, which restricts the selective disclosure of material non-public information. For as long as we are a foreign private issuer we intend to file our annual financial statements on Form 20-F or Form 40-F, as applicable, and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish is not the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a U.S. domestic issuer.
We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur additional legal, accounting and other expenses.
We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. In order to maintain our current status as a foreign private issuer, either (1) a majority of our shares must be either directly or indirectly owned of record by non-residents of the United States or (2) (a) a majority of our executive officers or directors must not be U.S. citizens or residents, (b) more than 50 percent of our assets cannot be located in the United States and (c) our business must be administered principally outside the United States. If we lost this status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We would also be subject to additional restrictions on offers and sales of securities outside the United States and would have to comply with the generally more restrictive Regulation S requirements under the Securities Act that apply to U.S. domestic issuers, which could limit our ability to access capital markets in the future. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs.
Effective March 18, 2026, pursuant to the Holding Foreign Insiders Accountable Act, directors and officers of foreign private issuers, including us, are required to comply with the reporting requirements of Section 16(a) of the Exchange Act. Notwithstanding the foregoing, directors and officers of a “foreign private issuer” remain exempt from Section 16(b) (short-swing profit liability) and Section 16(c) (short sale prohibitions).
We do not anticipate paying dividends.
We have never paid a dividend on our securities and we do not anticipate paying dividends in the foreseeable future.
We are likely a ''passive foreign investment company'' ("PFIC"), which may have adverse U.S. federal income tax consequences for U.S. investors.
We believe that we were classified as a “passive foreign investment company” (“PFIC”) within the meaning of Section 1297(a) of the Internal Revenue Code of 1986, as amended (the “Code”) for our most recently completed tax year, and based on current business plans and financial expectations, we expect that we may be classified as a PFIC for our current tax year and may be classified as a PFIC for subsequent tax years. If we are a PFIC for any year during a U.S. taxpayer’s holding period of our common shares, then such U.S. taxpayer generally will be required to treat any gain realized upon a disposition of our common shares or any so-called “excess distribution” received on our common shares as ordinary income, and to pay an interest charge on a portion of such gain or distribution. In certain circumstances, the sum of the tax and the interest charge may exceed the total amount of proceeds realized on the disposition, or the amount of excess distribution received, by the U.S. taxpayer. Subject to certain limitations, these tax consequences may be mitigated if a U.S. taxpayer makes a timely and effective QEF Election (as defined below) or a Mark-to-Market Election (as defined below). A U.S. taxpayer that makes a timely and effective QEF Election generally must report on a current basis its share of our net capital gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute any amounts with respect to our common shares. However, U.S. taxpayers should be aware that there can be no assurances that we will satisfy the record keeping requirements that apply to a qualified electing fund, or that we will supply U.S. taxpayers with information that such U.S. taxpayers require to report under the QEF Election rules, in the event that we are a PFIC and a U.S. taxpayer wishes to make a QEF Election. Thus, U.S. taxpayers may not be able to make a QEF Election with respect to us or any of our non-U.S. subsidiaries. A U.S. taxpayer who makes the Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of our common shares over the taxpayer’s adjusted tax basis therein. This paragraph is qualified in its entirety by the discussion below under the heading “Certain United States Federal Income Tax Considerations — Passive Foreign Investment Company Rules.” Each potential investor who is a U.S. taxpayer should consult its own tax advisor regarding the tax consequences of the PFIC rules and the acquisition, ownership, and disposition of our common shares.
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We may need to issue additional securities which may cause our shareholders to experience dilution.
Our Board of Directors has the authority to issue additional common shares, without par value, or other of our securities without the prior consent or vote of our shareholders. The issuance of additional common shares would dilute the proportionate equity interest and voting power of our shareholders.
The price of our common shares and volume of our common shares may be volatile.
Our shareholders may be unable to sell a significant number of our common shares on the OTCQB® Venture Market (the "OTCQB") without a significant reduction in the market price of the shares.
Furthermore, there can be no assurance that we will be able to meet the listing requirements of, or achieve listing on, any other stock exchange. The market price of the common shares may be affected significantly by factors such as fluctuations in our operating results, announcements of technological innovations or new products by us or our competitors, action by governmental agencies against us or the industry in general, developments with respect to patents or proprietary rights, public concern as to the safety of products developed by us or others, the interest of investors, traders and others in public companies such as ours and general market conditions. In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small capitalization companies, have experienced fluctuations which have not necessarily been related to the operating performance, underlying asset values or business prospects of such companies.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of Our Company
Micromem is a corporation formed under the laws of the Province of Ontario, Canada, with principal executive offices at 121 Richmond Street West, Suite 602, Toronto, Ontario M5H 2K1 (416.364.6513). Micromem was incorporated on October 21, 1985 as Mine Lake Minerals Inc. We subsequently changed our name to Avanti Capital Corp. on June 23, 1988, to Avanti Corp International Inc. on April 30, 1992 and to Micromem Technologies Inc. on January 11, 1999 in connection with our acquisition of Pageant Technologies Incorporated, also referred to herein as Pageant International. Our website address is www.micromeminc.com. The information on our website is not part of this Annual Report on Form 20-F. We have included our website address in this document as an inactive textual reference only.
The Evolution of Micromem from Memory to Sensor Based Client Solutions
Micromem Applied Sensors Technologies, Inc., our wholly-owned subsidiary ("MAST") was incorporated in 2008 in the State of Delaware. MAST was formed in connection with a contract with BAE Systems in Nashua, New Hampshire. BAE Systems is a Department of Defense trusted facility, which can only do business with U.S. entities (ITAR regulations). BAE Systems' interest was in the potential to utilize our MRAM technology in a radiation-hardened environment for military applications. During this work it was determined that the Hall sensor, which was integral to the MRAM design, had several performance characteristics that by itself, as a product, would potentially create value for MAST.
Frost & Sullivan was contracted by MAST in 2009 to assess the market opportunities for a late entry into the Hall sensor market. The Hall sensor market in 2009 was robust at an estimated $1.9 billion USD. The market barriers were mature market, declining margins and heavy competition. A decision was taken to not enter the Hall sensor component market for the above reasons. A decision was taken to explore the market opportunities associated with creating unique sensor based solutions that revolved around our Hall sensor technology.
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A decision was taken to internally develop, at our own cost, proof of concepts for products that we had gleaned, through our marketing efforts, to have potential market value. These included a magnetic gold sensor for drilling plug analysis, an oil condition sensor for automotive use and an oil/gas aerial exploration platform.
In 2010, MAST was engaged to develop a sensor platform for detecting four nanometer magnetic particles in a flowing oil stream at a concentration less than 1 ppb. Another revenue generating opportunity came in 2011 from a supplier for high speed air bearing motors. MAST replaced the incumbent Hall sensor supplier and delivered a unique circuit board form factor that incorporated the smallest Hall sensor in the world.
In 2011 MAST became aware of the NineSigma Open Innovation model. Nine Sigma's core services connect innovation-seeking companies to the best solutions, capabilities, and partners around the world. MAST's relationship with NineSigma provided us access to the Global Fortune 1000 companies and resulted in a future sales proposal pipeline.
In 2011, a decision was taken to stop research and development effort in the MRAM market space. This decision was taken, in part, due to the high capital demand for staying current in the rapidly changing technology and, equally important, the MRAM market had not grown at the anticipated growth rates. Micromem had amassed multiple memory patents and in 2013 began efforts to value the patent portfolio and attempt to arrange for a sale of these assets.
Until 2014, Micromem funded virtually all of its research and development initiatives. Our main priority was to provide customers with sensor based platform solutions that address their difficult business problems. By 2015 we had advanced a number of our product development initiatives under joint product development agreements with our clients Chevron, Castrol, Flextronics, and Eversource Energy. Our pipeline of development projects expanded.
In 2016 and 2017, we attempted to advance our projects towards field trials. The Flextronics and Eversource projects were ultimately discontinued. We continued with the Chevron and Castrol development projects and began discussions with Repsol SA.
In 2018 the Castrol project was discontinued. We continued to advance our Chevron and Repsol S.A. projects.
In October 2018, Steve Van Fleet filed a lawsuit again the Company and MAST seeking payment of alleged remuneration and expense reimbursements due to him totaling $214,574. The Company denied the allegations and, in turn, interposed counterclaims again Mr. Van Fleet seeking, among other things, damages of not less than $3.0 million. In 2021 the litigation with Mr. Van Fleet was resolved in our favor. See Item 5 - Operating and Financial Review and Prospects - Contingencies.
Recent Developments Prior to Fiscal 2025:
Chevron:
We met most recently with Chevron in their Houston offices in September 2024. Chevron continues to support our initiatives as we advance our project development efforts and requested a "white paper" report on the current state of tracer technology for measurement of multiple attributes in operating oil and gas wells.
In Spring, 2025, the Company submitted the white paper report to Chevron titled "Sensors for Water Contamination Monitoring in Oil Wells and Flood Zones". The report was authored by Professor Harry E. Ruda of the University of Toronto, a distinguished academic in nanotechnology and materials science. The White Paper provides an overview of the existing technologies for measuring contamination in water and the surrounding atmosphere, particularly in flood zones. It explores solutions to address wastewater contamination, ultimately aiming to promote environmental remediation as well as discussing a range of sensor technologies that enable real-time monitoring of pollutants in both water and air, highlighting their potential value for commercial and municipal water management. Our discussions with Chevron continue.
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Romgaz:
We maintain our interest in working with Romgaz and other European-based energy companies.
A senior team of technical advisors was enlisted by Romgaz in 2023 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 is 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. Micromem maintains a dialogue with these technical advisors enlisted by Romgaz in anticipation of moving forward with our go forward work plan.
The Company has previously pursued the ARTRA units - technology that was developed by our technical partner, Entanglement Technologies. The original intention was that this technology would be delivered to Romgaz, our client in Romania.
The technology advances that have been realized at the University of Toronto, as described above, represent current technology which we believe has eclipsed our previous efforts with the ARTRA technology. Accordingly, the Company has decided not to further pursue the ARTRA application. We believe that the UofT technology for gas and liquid licensing will be suitable for use by Romgaz in future.
Capital Expenditures
Micromem reports $2,729 of capital expenditures in 2025 representing computer equipment. In 2024 capital expenditures were nil.
Available Information
The SEC maintains an Internet site at http://www.sec.gov/edgar that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. Information is also available under the Company's profile on SEDAR+ (http://www.sedarplus.ca) or on www.micromeminc.com.
B. Business Overview
Update of Product Development Activity at October 31, 2025
University of Toronto and Department of National Defence:
The Company entered a Research Collaboration Agreement (the "Agreement") with the University of Toronto (UofT) and Department of National Defence (DND) in February 2025. The Agreement is for the project, "Development of a Nanowire Field Effect Transistor Biochemical Sensor" (the "Project") led by Professor Ruda of the UofT. The Project is aimed at the development of sensors for dual civilian and military use with the objective of developing miniaturized (portable), low-cost, efficient, and selective sensors based on InAs nanowires that can be deployed on both aqueous and gas-based platforms for a wide variety of analytes. Upon completion of this Project, Micromem will have the means to construct their own measurement systems for the portable uses, including civilian applications such as detection of volatile organic carbons (VOCs). The Project is being funded by the Natural Sciences and Engineering Council of Canada ("NSERC") and Micromem. A benefit of the technology opportunity with the UofT as described above is that Micromem will own the related intellectual property as it is developed.
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The Company reports on the progress of the UofT Collaboration Agreement at this date:
1. Gas sensing:
The Company has announced the advancement in gas detection with the release of its nanowire-based gas sensor platform, offering a disruptive solution for safety-critical and precision-controlled environments.
The platform employs a proprietary multi-nanowire sensing array capable of detecting trace-level gas concentrations with extreme sensitivity. Notably, the sensor includes an electrical bias control feature that provides tunable amplification-demonstrated at up to 6x-allowing for enhanced detection performance across various gas types and concentration ranges. The sensor platform is fabricated using standard photolithography processes, making it both cost-effective and scalable for high-volume industrial applications. The competitive edge of the Company's nanowire sensor, in markets where precision, compliance, and uptime are non-negotiable, is that it adapts.
This technology gives operators a new level of control and accuracy in gas detection. From leak detection to hazardous gas monitoring, this platform brings a new level of safety and reliability to industrial and environmental applications. The key advantages this technology include:
• High Sensitivity: Demonstrated robust detection of ethanol vapor with a strong, easily measurable response, ideal for volatile organic compound (VOC) monitoring.
• Tunable Amplification: Unique ability to adjust the electrical gate bias, enabling targeted signal amplification and selectivity based on gas type.
• Versatility: Adaptable to detect multiple gases by altering surface functionalization and bias conditions-useful across oil & gas, chemical manufacturing, mining, and clean energy sectors.
• Compact and Scalable: The sensor's solid-state design allows for integration into IoT-enabled smart infrastructure and remote monitoring systems.
Micromem is now advancing with this technology, originally developed under a Department of National Defence initiative, as a commercial platform. The Company is actively seeking strategic partners in the energy, industrial, and environmental sectors to pilot and deploy this military-grade sensing solution in high-impact civilian applications.
2. Liquid-based sensing:
The Company has announced the successful development of its liquid-phase nanowire bio-chemical sensor, engineered to detect disease-associated biomarkers at ultra-low concentrations. This innovation marks a critical milestone in the pursuit of more accurate, earlier medical diagnostics.
The sensor has demonstrated limit-of-detection performance down to 1 picomolar (pM) and 20mV/decade sensitivity, enabling the identification of inflammatory and pathological biomarkers previously undetectable by conventional methods. The sensor platform is fabricated using standard photolithography processes, making it both cost-effective and scalable for high-volume industrial applications.
The initial target analyte is TREM-1 (Triggering Receptor Expressed on Myeloid Cells 1), a key marker known to amplify inflammatory responses and closely associated with a range of diseases including atherosclerosis, cancer, colitis, and fibrosis.
This liquid-phase sensor platform originated from work developed on behalf of the Department of National Defence and is evolving into a commercial diagnostic tool.
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The advantages of this technology include:
• Ultra-Low Detection Thresholds: Achieves pM-level detection, suitable for early-stage disease monitoring.
• Broad Diagnostic Utility: Customizable for other critical biomarkers involved in cancer, autoimmune disease, and systemic inflammation.
• High Signal Clarity: Nanowire-based response delivers real-time, low-noise output with a strong correlation to analyte concentration.
• Compact and Integratable: Ready for deployment in next-generation lab-on-a-chip, point-of-care, or remote diagnostic devices.
• Manufactured via conventional photolithography techniques: the platform supports efficient, low-cost production-critical for widespread adoption in clinical and point-of-care diagnostics.
Micromem is positioning its gas detection technology for integration into industrial and environmental systems through targeted partnerships and pilot initiatives. With the platform now ready for field validation, the Company is seeking co-development and deployment opportunities with strategic industry partners. Micromem is focused on expanding commercial readiness and welcomes pilot deployment opportunities.
Deferred development costs / development expenses
Until October 31, 2016, we capitalized as deferred development costs the expenditures that we incurred on these projects, net of the recoveries of such costs from our development partners. Since November 2016, we have expensed net costs as such costs did not meet the criteria for capitalization based on our impairment analysis.
We have previously reported on the chronology, by customer, of our investment in development costs relating to our various projects which we undertook with our strategic partners. A summary of these costs and recoveries between 2012 and 2019 is provided as below:
Net Costs absorbed by the Company:
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | Total | |
| Cost incurred | 4,499,466 | 225,000 | 2,035,676 | 939,458 | 2,470,329 | 1,129,168 | 522,720 | 11,821,817 |
| Recoveries from development partners | (3,442,050) | (100,000) | (838,500) | (300,000) | (200,000) | - | (46,000) | (4,926,550) |
| Net costs absorbed by the Company | 1,057,416 | 125,000 | 1,197,176 | 639,458 | 2,270,329 | 1,129,168 | 476,720 | 6,895,267 |
1. Chevron (2013-2019)
2. Repsol (2018-2019)
3. Castrol (2014-2018)
4. Saudi Aramco (2012-2013)
5. Northeast Utilities (2013-2015)
6. GM/Flextronics (2012-2015)
7. Other (various) (2011-2014)
The Chevron development project was self-funding after 2016. The Castrol project was suspended in 2018 given that Castrol was not prepared to commit additional funding to the project. The Saudi Aramco contract was completed in 2014. The Northeast Utilities contract was terminated in 2015 given that Northeast Utilities was not prepared to commit additional funding to the project other than in kind consideration. The GM/Flextronics work commenced in 2012; the Company was absorbing all of the costs associated with the development of the prototype product being developed in conjunction with GM/Flextronics. The prototype work was suspended due to the turnover of the GM project team by 2016-2017 and the Company's decision to stop committing additional funding to the project after 2016. The Company has been awarded several patents relating to the work completed on the GM/Flextronics project.
In 2019 the Company incurred $36,051 of expenses with respect to the ongoing costs associated with the Chevron project and recovered $77,597 from Chevron including payments received for certain milestones achieved in 2018.
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The Company remains a pre-revenue entity at October 31, 2025. It did not incur any further development expenses on any project between 2021-2025.
Given the progress and momentum achieved to date with Chevron and with Romgaz, the Company believes it will have commercial orders, although there can be no assurances such purchase orders will be made or that revenues will be achieved in future. In October 2023 we received our first purchase order from Romgaz. We have now completed the initial ARTRA unit. In 2025 further work on the ARTRA unit was discontinued.
We are now engaged with the U of T who assisted us with our white paper report. The initial draft of this report was submitted to Chevron in January 2025.
Intellectual Property
Our intellectual property consists of two components:
a) A series of patents and provisional patents relating to the smart oil pan plug technology (the formal reference is the "multimodal conditional sensor platform and system thereof") originally developed from the work completed on the GM/Flextronics project.
b) A series of older patents relating to the Hall sensor application for magnetic random access memory (MRAM). These patents and the market for MRAM applications have not been pursued by the Company since 2009 and all of the costs associated with these patents were written off by 2013 after unsuccessful attempts to sell or license this intellectual property to other parties.
Beginning in 2018, we began to abandon provisional patent filings in a number of international jurisdictions as a cost cutting initiative. We have not funded any additional patent related activity nor patent filings since 2018.
We believe that the U.S. patents that have been granted for MRAM have sustaining value to be realized in the future. If the Company's financial position improves, it may pursue the exploitation of its patents in this field of endeavors.
Additionally, the current work that is being undertaken at the UofT will result in new IP filings for the Company in the fiscal year ending October 31, 2026.
Our patent costs are summarized below for the fiscal years ending October 31, 2019-2025:
| 2021-2025 | 2020 | 2019 | |
| $ | $ | $ | |
| Patent expenditures: | - | - | - |
| Patent costs capitalized: | - | - | - |
| Amortization expense: | - | 8,123 | 152,962 |
| Impairment Reserve: | - | - | 223,143 |
Share Capital
At October 31, 2025, the Company had 616,090,414 common shares outstanding (2024: 572,985,698 common shares outstanding). Additionally, the Company has 8,750,000 stock options outstanding with a weighted average exercise price of $0.06 per share (2024: 8,750,000 options outstanding with a weighted average exercise price of $0.06 per share).
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Changes to Our Board of Directors and Management:
The Company held its most recent Annual General and Special Meeting of the shareholders for the fiscal years ending 2020, 2021, 2022 and 2023 on April 22, 2024 (the "Annual Meeting"). At the Annual Meeting, Joseph Fuda, Alex Dey and Oliver Nepomuceno were re-elected as directors. Joseph Fuda and Dan Amadori continue in their respective roles of CEO and CFO respectively.
We plan to schedule the next annual general meeting of shareholders to cover the 2024 and 2025 fiscal years to be held prior to June 30, 2026. We will evaluate the opportunities to expand our Board of Directors at this upcoming annual general meeting of shareholders.
Equity Financing Transactions:
In the fiscal year ended October 31, 2025, the Company completed the following transactions:
(a) Pursuant to prospectus and registration exemptions set forth in applicable securities law, the Company completed private placements consisting of common shares, received net proceeds of $560,498 and issued a total of 23,095,983 common shares.
(b) The Company continued its bridge loan financing activities in 2025, specifically:
(i) It issued 4,674,528 common shares for the conversion of bridge loans totaling $162,366.
(ii) It realized net proceeds of $562,000 from the issuance of convertible debentures.
(iii) It repaid $417,915 of bridge loans previously secured.
(iv) Certain of the bridge loans that matured in 2025 were extended at maturity date, ultimately through October 31, 2025, and thereafter.
In the fiscal year ended October 31, 2024, the Company completed the following transactions:
(c) Pursuant to prospectus and registration exemptions set forth in applicable securities law, the Company completed private placements consisting of common shares, received net proceeds of $439,155 and issued a total of 24,478,227 common shares.
(d) The Company continued its bridge loan financing activities in 2024, specifically:
(v) It issued 36,805,300 common shares for the conversion of bridge loans totaling $716,674.
(vi) It realized net proceeds of $417,950 from the issuance of convertible debentures.
(vii) It repaid $287,460 of bridge loans previously secured.
(viii) Certain of the bridge loans that matured in 2024 were extended at maturity date, ultimately through October 31, 2024, and thereafter.
Environmental Matters:
We are subject to various environmental protection regulations imposed by the government in the jurisdiction where we conduct our development work. We are not aware of any current or pending environmental protection laws or regulations that would have a material impact on our capital expenditure requirements or competitive position.
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C. Organizational Structure
In November 2007, the Company incorporated MAST as a Delaware-based wholly-owned subsidiary. MAST had an office in New York City and was being managed by Steven Van Fleet, its then President and a Director of Micromem. We have utilized the services of other consultants to continue the work of MAST since the departure of Mr. Van Fleet in August 2018.
In October 2008, the Company incorporated 7070179 Canada Inc. as a wholly-owned subsidiary. On October 31, 2008, the Company assigned its rights, title, and interest in certain of its intellectual property which it previously held directly to 707179 Canada Inc. in exchange for common shares of this wholly-owned subsidiary.
We have a wholly-owned subsidiary, Pageant International, which was incorporated under the laws of the Turks & Caicos Islands and continued to Barbados on May 25, 2001. Pageant International has a wholly-owned subsidiary, Pageant Technologies (USA) Inc., a corporation incorporated in the State of Utah. Pageant Technologies USA has been inactive since 2002.
We have a wholly-owned subsidiary, Memtech International Inc., incorporated under the laws of the Bahamas, which in turn has a wholly-owned subsidiary, Memtech International (USA) Inc., a corporation incorporated in the State of Delaware. We also have a wholly-owned subsidiary Micromem Holdings (Barbados) Inc. These subsidiaries have been inactive since inception.
D. Property, Plant and Equipment
We maintain our corporate headquarters in Toronto, Ontario, Canada. We occupied 2,500 square feet of commercial office space pursuant to a lease that was extended in February 2017 for five years through July 2022. In August 2022 we moved to a smaller unit in the same commercial building occupying 1,154 square feet pursuant to a lease from August 1, 2022, to July 31, 2025. The lease was extended for 2 years, to July 31, 2027. The Company sublets a portion of its rental space on a month to month basis and realized sublet income of $14,492 in 2025 (2024: $17,205; 2023: $17,682)
In 2025, under the new lease, the Company capitalized $34,972 of right of use assets under IFRS 16 pertaining to its lease for office premises and recorded an equivalent liability in its accounts (2022: $48,408)The Company recorded amortization of $16,618 in 2025 (16,492 in 2024; $16,492 in 2023).
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
This section of the Form 20-F has been prepared to provide a more substantive discussion of our business and to assist the reader in analyzing the audited consolidated financial statements for the years ended October 31, 2025, October 31, 2024, October 31, 2023,October 31, 2022 and October 31, 2021. This discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes in this Annual Report, which are prepared in accordance with IFRS and are stated in United States dollars.
Operating Results:
| 2025 | 2024 | 2023 | 2022 | 2021 | |||||||||||
| $ | $ | $ | $ | $ | |||||||||||
| Administration | 207,212 | 146,636 | 148,616 | 185,366 | 155,504 | ||||||||||
| Professional and other fees and salaries | 668,122 | 391,406 | 610,052 | 647,710 | 424,485 | ||||||||||
| Travel and entertainment | 92,516 | 37,631 | 63,360 | 59,504 | 24,903 | ||||||||||
| Recovery of reserve for litigation costs/stale dated payables | - | - | - | - | (422,982 | ) | |||||||||
| Stock compensation expense | - | 6,517 | 217,965 | 41,484 | 360,044 | ||||||||||
| Interest expense | 614,439 | 604,664 | 540,929 | 469,425 | 495,809 | ||||||||||
| Amortization expense | 16,618 | 16,492 | 16,492 | 29,755 | 36,033 | ||||||||||
| Accretion expense | 290,208 | 272,501 | 279,834 | 1,179,603 | 1,169,921 | ||||||||||
| Loss (Gain) on revaluation of warrant liabilities | (228,625 | ) | 826,393 | - | - | - | |||||||||
| Impairment of Inventory | 126,000 | - | - | - | - | ||||||||||
| Loss on debt settlement | 78,345 | 118,784 | - | - | - | ||||||||||
| (Gain) Loss on conversion of bridge loans | 9,821 | 45,535 | 21,120 | 94,326 | (9,506 | ) | |||||||||
| Loss (Gain) on revaluation of derivatives | (1,360,463 | ) | 78,915 | (658,503 | ) | (409,607 | ) | (2,547,192 | ) | ||||||
| Loss (Gain) on extinguishment/repayment of convertible debentures | 112,845 | 514,501 | 1,428,066 | 200,650 | 1,018,928 | ||||||||||
| Financing costs | 75,124 | 24,227 | 86,352 | 13,233 | 84,478 | ||||||||||
| Foreign exchange loss (gain) | (33,418 | ) | (21,404 | ) | (62,613 | ) | (176,477 | ) | 222,553 | ||||||
| (Loss) for the year | (668,749 | ) | (3,062,798 | ) | (2,691,670 | ) | (2,287,095 | ) | (1,012,978 | ) | |||||
| (Loss) per share - basic and diluted | (0.00 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | 0.00 |
Selected balance sheet information
| 2025 | 2024 | 2023 | 2022 | 2021 | |||||||||||
| $ | $ | $ | $ | $ | |||||||||||
| Working capital (deficiency) | (5,578,407 | ) | (6,693,448 | ) | (4,818,699 | ) | (4,722,878 | ) | (3,452,924 | ) | |||||
| Other Assets | 35,445 | 15,272 | 32,767 | 48,092 | 29,889 | ||||||||||
| Total Assets | 308,461 | 282,713 | 168,350 | 99,519 | 225,293 | ||||||||||
| Long term liabilities | 60,304 | 44,806 | 55,272 | (73,214 | ) | (48,243 | ) | ||||||||
| Shareholders' equity (deficiency) | (5,603,266 | ) | (6,722,982 | ) | (4,841,204 | ) | (4,748,000 | ) | (3,471,278 | ) |
The following table sets forth certain selected financial information of our Company.
23
Fiscal 2025 Compared to Fiscal 2024
a) Administration costs were $207,212 in 2025 (2024: $146,636). These costs include rent and occupancy costs of $19,702 (2024: $18,514), the Company reported sublet income for a portion of its office space in 2025; office insurance costs of $2,599 (2024: $1,986; the Company did not renew its directors' and officers' insurance coverage after 2020), investor relations, listings and filing fees of $45,956 (2024: $77,535), other general and administrative expenses of $138,960 (2024: $48,601).
b) Professional and other fees and salaries costs were $668,122 in 2025 (2024: $391,406). The components of these total costs include legal and audit related expenses of $260,801 in 2025 (2024: $98,412), third party consulting fees were $83,181 in 2025 (2024: $40,977), staff salaries and benefits were $324,140 in 2025 (2024: $252,017).
The CFO received $50,351 of management fees in 2025 (2024: $40,904). The CEO of the Company received $84,560 of compensation in 2025 (2024: $36,919).
c) Travel and entertainment expenses were $92,516 in 2025 (2024: $37,631).
d) In 2025, the Company did not award any stock options to directors, officers, employees and consultants. (2024: nil). In 2024 an expense of $6,517 was reported and was calculated using the Black Scholes option-pricing model.
e) Interest expense was $614,439 in 2025 (2024: $604,664). This represents the actual interest expense obligations incurred by the Company based on the stated interest rates on the convertible debenture notes.
f) Amortization expense was $16,618 in 2025 (2024: $16,492).
g) Financing costs were $75,124 in 2025 (2024: $24,227). These expenses relate to costs associated with the convertible debenture financings which the Company completed in 2025 and 2024.
h) The gain on foreign exchange reported in 2025 was $33,418 (2024: $21,404). This included 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 included the foreign exchange relating to the initiation, renewal, conversion, and repayment of convertible debentures transactions during the fiscal years. The Canadian dollar, relative to the U.S. dollar was $0.7956 at October 31, 2021, $0.7327 at October 31, 2022, $0.7207 at October 31, 2023, $0.7186 at October 31, 2024, and $0.7134 at October 31, 2025.
i) The other expenses reported relate to the convertible debentures. These expenses are all non-cash expenses and compare as follows:
| 2025 | 2024 | Change | |||||||
| Accretion expense | $ | 290,208 | $ | 272,501 | $ | 17,707 | |||
| Loss on conversion of convertible debentures | 9,821 | 45,535 | (35,714 | ) | |||||
| Loss (gain) on revaluation of derivative liabilities | (1,360,463 | ) | 78,915 | (1,439,378 | ) | ||||
| Loss (gain) on extinguishment/repayment of convertible debentures | 112,845 | 514,501 | (401,656 | ) | |||||
| Net expense | $ | (947,589 | ) | $ | 911,452 | $ | (1,859,041 | ) |
24
Fiscal 2024 Compared to Fiscal 2023
a) Administration costs were $146,636 in 2024 versus $148,616 in 2023. These costs include rent and occupancy costs of $18,514 (2023: $17,663), the Company reported sublet income for a portion of its office space in 2024; office insurance costs of $1,986 (2023: $1,930; the Company did not renew its directors' and officers' insurance coverage after 2020), investor relations, listings and filing fees of $77,535 (2023: $52,756), other general and administrative expenses of $48,601 (2023: $70,584).
a) Professional and other fees and salaries costs were $391,406 in 2024 versus $610,052 in 2023. The components of these total costs include legal and audit related expenses of $98,412 in 2024 (2023: $144,244), third party consulting fees were $40,977 in 2024 (2023: $ 67,664), staff salaries and benefits were $252,017 in 2024 (2023: $398,144).
The CFO has received $40,904 of management fees in 2024 (2023: $86,250). The CEO of the Company has received $36,919 of compensation in 2024 (2023: $190,317).
b) Travel and entertainment expenses were $37,631 in 2024 (2023: $63,360).
c) In 2024, the Company did not award any stock options to directors, officers, employees and consultants. (2023: 3,000,000 stock options issued to consultants). In 2024 an expense of $6,517 was reported (2023: $217,965) and was calculated using the Black Scholes option-pricing model.
d) Interest expense was $604,664 in 2024 versus $540,929 in 2023. 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 $16,492 in 2024 relating to Capital Assets (2023: $16,492).
f) Financing costs were $24,227 in 2024 versus $86,352 in 2023. These expenses relate to costs associated with the convertible debenture financings which the Company completed in 2024 and 2023.
g) The gain on foreign exchange reported in 2024 was $21,404 versus a gain of $62,613 in 2023. This included 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 included the foreign exchange relating to the initiation, renewal, conversion, and repayment of convertible debentures transactions during the fiscal years. The Canadian dollar, relative to the U.S. dollar was $0.7596 at October 31, 2020, $0.7956 at October 31, 2021, $0.7327 at October 31, 2022, $0.7207 at October 31, 2023 and $0.7186 at October 31, 2024.
h) The other expenses reported relate to the convertible debentures. These expenses are all non-cash expenses and compare as follows:
| 2024 | 2023 | Change | |||||||
| Accretion expense | $ | 272,501 | $ | 279,834 | $ | (7,333 | ) | ||
| Loss on conversion of convertible debentures | 45,535 | 21,120 | 24,415 | ||||||
| Loss (gain) on revaluation of derivative liabilities | 78,915 | (658,503 | ) | 737,418 | |||||
| Loss (gain) on extinguishment/repayment of convertible debenture | 514,501 | 1,428,066 | (913,565 | ) | |||||
| Net expense | $ | 911,452 | $ | 1,070,517 | $ | (159,065 | ) |
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Unaudited Quarterly Financial Information
| Three months ended (unaudited) |
Revenues $ |
Expenses $ |
Income (loss) in period $ |
Loss per share $ |
||||||||
| October 31, 2025 | - | (375,890 | ) | 375,890 | - | |||||||
| July 31, 2025 | - | 821,351 | (821,351 | ) | - | |||||||
| April 30, 2025 | - | 660,470 | (660,470 | ) | 0.01 | |||||||
| January 31, 2025 | - | (437,452 | ) | 437,452 | - | |||||||
| October 31, 2024 | - | 2,517,964 | (2,517,964 | ) | - | |||||||
| July 31, 2024 | - | 570,496 | (570,496 | ) | - | |||||||
| April 30, 2024 | - | (1,446,174 | ) | 1,446,174 | 0.01 | |||||||
| January 31, 2024 | - | 1,420,512 | (1,420,512 | ) | - |
| Three months ended (unaudited) |
Working capital (deficiency) |
Capital assets at NBV |
Other Assets |
Total Assets | Long term liability |
Shareholders' equity (deficit) |
| October 31, 2025 | (5,578,407) | 35,445 | - | 308,461 | (5,603,266) | |
| July 31, 2025 | (6,253,022) | 40,257 | - | 377,362 | (6,277,691) | |
| April 30, 2025 | (6,199,845) | 6,747 | - | 504,141 | (6,239,317) | |
| January 31, 2025 | (5,928,525) | 11,000 | - | 319,159 | (5,960,940) | |
| October 31, 2024 | (6,693,448) | 15,272 | - | 282,713 | (6,722,982) | |
| July 31, 2024 | (4,532,200) | 19,720 | - | 186,845 | (4,540,961) | |
| April 30, 2024 | (4,426,287) | 24,359 | - | 133,392 | (4,432,080) | |
| January 31, 2024 | (6,100,773) | 28,393 | - | 144,827 | (6,001,984) |
B. Liquidity and Capital Resources:
Liquidity
We have not yet realized commercial revenues from the exploitation of our technology platforms. We currently do not have positive cash flow from operations and will not realize positive cash flow until we license or directly produce and sell products utilizing our technology platforms.
We currently have no lines of credit available. We have relied on obtaining equity financing from investors through private placements, through the exercise of common stock options by officers and directors, and through bridge loans that the Company has secured in order to meet our cash flow needs until we can generate sustainable revenues. At October 31, 2025, we had a working capital deficiency of $5,578,407 (2024: $6,693,448) including cash on hand of $250,148 (2024: $125,705). Since October 31, 2025, we have raised an additional $82,500 of bridge loan financing and $236,005 of financing from private placements. We have granted to our directors, officers, other employees and consultants a number of options to purchase shares at prices that are at or above market price on the date of grant. None of the optionees have any obligation to exercise their options and there can be no guarantee that we will realize any funds from the exercise of these options.
In 2026, we plan to continue to raise financing as required and we anticipate that we may report initial revenues from our development partners. In our opinion, despite the current working capital deficiency, in consideration of the future financing endeavours, business plan and existing cash resources, we expect the Company to have sufficient financial resources to fund the Company's planned operations through fiscal 2026.
We incurred $2,729 capital expenditures in 2025 (2024: nil).
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C. Research and Development:
Under IFRS, research costs are expensed in the period incurred. Development expenses are expensed as incurred unless they meet the criteria for deferral and amortization under IFRS, which criteria is the translation of research findings or other knowledge into a plan for the technology prior to commercial production or use.
D. Trend Information:
The market applications for "smart" sensors are expanding; there are potential applications that could be utilized in virtually every industry vertical.
Our prospects for commercial revenues are dependent upon the successful completion of milestones in the development contracts that we have initiated to date and upon the customers deciding to proceed with commercial orders once these development contracts are successfully completed.
Off-Balance Sheet Arrangements:
We are not party to any off-balance sheet arrangements. In addition, we have no unconsolidated special purpose financing or partnership entities.
Tabular Disclosure of Contractual Obligations:
A summary of our financial commitments as of October 31, 2025, is as below:
| Payments due by period ($USD) | |||||
| Total | Less than 1 year |
1-5 years | More than 5 years |
||
| Operating lease obligations | $33,136 | $18,935 | $14,201 | - | - |
| Payments due by period ($USD) | |||||
| Total | Less than 30 days |
31-90 days past billing date |
Over 90 days past billing date |
||
| Trade payables | $264,806 | $- | $ 264,806 | $ - | |
| Payments due by period ($USD) | |||||
| Total | Less than 3 months |
Three to six months |
Six to twelve months |
One to five years |
|
| Convertible debentures | $4,642,143 | $ 2,553,796 | $ 1,644,597 | $ 443,750 | $ - |
| Debenture payable | $37,119 | $ 37,119 | $ - | $ - | $ - |
| Warrant liabilities | $753,660 | $- | $- | $- | $753,660 |
| Long-term debt | $49,732 | $- | $- | $- | $49,732 |
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Critical Accounting Policies:
Our significant accounting policies are set forth in our consolidated financial statements, which should be read in conjunction with management's discussion of our critical accounting policies and estimates set forth below.
Our consolidated financial statements have been prepared in accordance with IFRS.
We have not yet realized commercial revenues from the exploitation of our technology. Under IFRS, research costs are expensed in the period incurred. Development expenses are expensed as incurred unless they meet the criteria for deferral and amortization under IFRS which is the translation of research findings or other knowledge into a plan for the technology prior to commercial production or use. As at October 31, 2025, the Company capitalized $nil of development costs and capitalized $nil as intangible assets under IFRS.
Management is required to make estimates and assumptions which can affect the reported balances. In determining estimates of net recoverable amounts and net realizable values, or whether there has been a permanent impairment in value, we rely on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events.
Contingencies:
(1) We have agreed to indemnify our directors and officers and certain of our employees in accordance with our Bylaws.
(2) 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 would accrue 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.
(3) Legal matter: Litigation with Steven Van Fleet
We have previously reported on the litigation matter, which commenced in 2018, relating to Mr. Van Fleet, the former President of MAST.
In 2021, the Supreme Court of the State of New York, County of Dutchess ultimately dismissed all of Mr. Van Fleet's claims, found that he was liable to Micromem and MAST on their counterclaims and ordered an inquest to determine damages. The inquest was held between June 3 - 7, 2021.
On June 16th, 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 29th, 2021, 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. 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. To date Mr. Van Fleet has complied with the terms of the Judgement.
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(4) Legal matter: Litigation with ex-controller
On November 1, 2023, a former employee (the "Plaintiff") filed a statement of claim with the Ontario Superior Court in the amount of $410,000 CDN against the Company relating to employment termination without reasonable notice. The Company filed a statement of defence and counterclaim on November 29, 2023, denying all liability to the former employee, and an amended statement of defence and counterclaim on February 10, 2025.
Discoveries with legal counsel were completed in August 2024. Mediation proceedings were completed in October 2024 and did not result in a resolution. On February 27, 2025 a trial record was served by the Plaintiff. A trial date has been set for December 7, 2026.
No provision has been recorded in these consolidated financial statements as the Company continues to consider the claims of the former employee to be without merit.
Translation of Foreign Currencies:
Our functional and reporting currency is the United States dollar. Accounts recorded in foreign currency have been converted to United States dollars as follows: Monetary assets and liabilities are translated at exchange rates at the consolidated balance sheet dates; non-monetary assets are translated using the historical rate of exchange in effect at the translation dates; revenues and expenses are translated using the average rate of exchange for the year, which rate approximates the rate of exchange prevailing at the transaction dates; and gains and losses resulting from the translation are included in the determination of net loss for the period.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Executive Officers
The Directors and Executive Officers of Micromem of the date of this Annual Report, are sett forth below:
| Name | Age | Position |
| Joseph Fuda | 65 | President, Chief Executive Officer and Director |
| Dan Amadori | 74 | Chief Financial Officer |
| Oliver Nepomuceno | 58 | Director |
| Alex Dey | 82 | Director |
Joseph Fuda has been President, Chief Executive Officer, and Director since February 13, 2002. Previously he served as Manager of Strategic Alliances for Micromem since February 2001. Prior thereto, he served as a consultant to Micromem since November 2000. Prior thereto he served as a Vice-President and a Director of IPO Capital Corp since April 1999. He was a director of Leader Capital Corp. until June 2007 and also served as a director of Echo Energy Canada Inc, and of Echo Power Generational Inc until June 2004.
Dan Amadori has served as Chief Financial Officer of Micromem since June 2004. From January 2018 to December 9, 2020, he served as a member of the Board of Directors and as Chair of the Audit Committee of Nerium Biotechnology Inc. He served as a Director and Chair of the Governance Committee of Invesque Inc. from 2015 through May 2019. He served as Chair of the Board of Kingsway Arms Retirement Residences Inc. from August 2011 through May 2015. Prior to 2010 he served as an officer - director of other public companies including HyDrive Technologies Inc., Luxell Technologies Inc., XGen Ventures Inc., Ontex Resources Ltd and Leader Capital Corp. He is President of Lamerac Financial Corp., a financial advisory firm, and has held that position since October 1988. Mr. Amadori is a Chartered Professional Accountant and holds an MBA from the Ivey School of Business. He received his ICD.D designation from the Rotman School of Business in 2010.
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Oliver Nepomuceno has served as a director of Micromem since June 26, 2006. He is a resident of Switzerland and continues to serve as a financial advisor and is located in Switzerland. He actively assists corporations in the development of new business opportunities in new markets.
Alex Dey is a retired businessman and was elected as a director on September 24, 2010. He was the sole proprietor of Alex Dey, Chartered Accountants until July 31, 2004.
There are no arrangements or understandings between any director and any other person pursuant to which the director was selected as a director or executive officer. Each director holds office until the next annual meeting of shareholders or until his or her successor is elected or appointed, unless his or her office is earlier vacated according to the provisions of our By-laws or the Business Corporations Act (Ontario).
B. Compensation
| Annual | Long-Term | ||||
| Compensation | Compensation | ||||
| Awards | |||||
| Fiscal | Salary | Bonus | Other Annual | Securities | |
| Name and | Year | (US$) | (US$) | Compensation | Under Options |
| Principal Position | (US$) | Granted (#) | |||
| Joseph Fuda | 2023 | 141,120 | - | 22,712 | 340,000 |
| Chief Executive Officer | 2024 | 36,919 | - | - | - |
| 2025 | 84,560 | - | - | - | |
| Dan Amadori | 2023 | 63,769 | - | 22,712 | 340,000 |
| Chief Financial Officer | 2024 | 40,904 | - | - | - |
| 2025 | 50,351 | - | - | - | |
| Oliver Nepomuceno | 2023 | - | - | 22,044 | 330,000 |
| Director | 2024 | - | - | - | - |
| 2025 | - | - | - | - | |
| Alex Dey | 2023 | 9,896 | - | 22,044 | 330,000 |
| Director | 2024 | - | - | - | - |
| 2025 | 4,286 | - | - | - |
Options are offered to directors, executive officers, and employees to purchase our common shares at an exercise price equal to or above the market price for the common shares at the date that the options are granted. These options are approved by the Compensation Committee. None of the directors have agreements that provide for benefits. No options were granted in 2025 or 2024. In 2023 1,340,000 options were granted to directors and officers. The weighted average exercise price was $0.06 per share.
C. Board Practices:
All matters pertaining to our financing, contractual arrangements and Management and Director compensation are approved by the Board of Directors. The members of the Board of Directors are appointed to a one-year term at our Annual Meeting or until such time as the next annual general meeting of shareholders is held.
Our Board of Directors meets on an as required basis during the fiscal year. Our Board of Directors did not meet in person in 2025. The Board was convened as of each quarter end. The CFO reports to the Board at each quarter end and on an as required basis during the year.
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Our Audit Committee met regularly during fiscal 2025 for the purpose of approving and recommending to the Board the quarterly financial statements and our year-end financial statements. In addition, our Audit Committee receives regular periodic reports from management.
Our Compensation Committee met as part of our audit committee meetings in 2025; it receives regular reports from management. Our Compensation Committee approves management and director compensation and all stock option grants for recommendation to the Board of Directors.
The Company held its Annual Meeting on Monday, April 22, 2024 for the fiscal years ending 2020, 2021, 2022 and 2023. At the meeting, the incumbent of directors - Joseph Fuda, Alex Dey and Oliver Nepomuceno were reelected to our Board of Directors.
Audit Committee
The Board of Directors has appointed an Audit Committee consisting of two independent directors. The members of the Audit Committee are Alex Dey (Chairman) and Oliver Nepomuceno, each of whom serves in such capacity until the Board of Directors' next annual meeting. The Audit Committee is responsible for the integrity of our internal accounting and control systems. The committee receives and reviews our financial statements and makes recommendations thereon to the Board of Directors prior to its approval by the full Board of Directors. The Audit Committee communicates directly with our external auditors in order to discuss audit and related matters whenever appropriate. The Audit Committee met formally in January, February, June and September 2025.
Compensation Committee
The Board of Directors has appointed a Compensation Committee which meets on executive compensation matters as and when required. Our Compensation Committee includes Oliver Nepomuceno and Alex Dey as outside directors. The Compensation Committee did not meet separately in 2025 as both members also serve on the Audit Committee.
Disclosure Committee
The Board of Directors has appointed a Disclosure Committee whose primary responsibility is to ensure timely and accurate disclosure of all relevant information in accordance with the various securities regulations. Our Disclosure Committee includes Joseph Fuda, the Company's CEO, and Alex Dey, an outside director.
D. Employees
We have three employees, one of which serves in a management capacity and two of which serve in an administrative capacity. This includes Mr. Fuda, the Chief Executive Officer and President, and two support staff, all of whom work from our executive offices in Toronto, Canada. Mr. Amadori, our CFO, provides services through his management company. All research and development is outsourced to third parties. We consider our relations with our employees to be satisfactory. Our Controller resigned in February 2023 and has since been replaced through a third-party service provider.
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E. Share Ownership
| NAME | COMMON SHARES OWNED1 |
OPTIONS HELD |
OPTION EXERCISE PRICE |
OPTION EXPIRATION DATE |
% OF TOTAL 2 |
| Joseph Fuda Chief Executive Officer and Director |
2,074,335 | 400,000 340,000 1,700,000 |
$0.07 $0.07 $0.05 |
10/08/2026 03/20/2028 12/31/2030 |
0.72% (4,514,335) |
| Dan Amadori Chief Financial Officer |
1,123,8573 | 400,000 340,000 1,700,000 |
$0.07 $0.07 $0.05 |
10/08/2026 03/20/2028 12/31/2030 |
0.57% (3,563,857) |
| Oliver Nepomuceno Director |
1,078,572 | 100,000 330,000 300,000 |
$0.07 $0.07 $0.05 |
10/08/2026 03/20/2028 12/31/2030 |
0.29% (1,808,572) |
| Alex Dey Director |
883,351 |
100,000 330,000 300,000 |
$0.07 $0.07 $0.05 |
10/08/2026 03/20/2028 12/31/2030 |
0.26% (1,613,351) |
| 1. | Common shares beneficially owned as of the date of this Annual Report. | |||||
| 2. | Calculated based on common shares owned plus options held as a percentage total of common shares outstanding as of the date of this Annual Report, plus options held. | |||||
| 3. | 215,716 common shares are held by a corporation controlled by Mr. Amadori. | |||||
| 4. | 254,863 common shares are held by a corporation wholly-owned by Mr. Dey. | |||||
We do not have any arrangements involving the employees in the capital of the Company, except for the grant of stock options pursuant to our 2020 Stock Option Plan, as amended and approved by our shareholders on September 8, 2020, at the discretion of the Board.
F. Disclosure of a Registrant's Actions to Recover Erroneously Awarded Compensation.
Not Applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders:
To our knowledge, no shareholder holds greater than 5% of the common shares outstanding of the Company. As of the date of this Annual Report, approximately 46% of the issued and outstanding common shares are held by Canadian investors; approximately 49% of the issued and outstanding shares are held by U.S. investors; and approximately 5% are held by investors outside of Canada and the U.S.
We are not aware of any arrangement, the operation of which may result in a change of control of the Company.
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B. Related Party Transactions:
The Company reports the following related party transactions:
(a) Management and consulting fees:
Included in professional fees, other fees and salaries as reported are management fees and consulting fees paid or payable to individuals (or Companies controlled by such individuals) who served as officers, directors, and employees of the Company. The total compensation paid to such parties is summarized as follows:
| 2025 | 2024 | 2023 | |||||||
| Cash Compensation | $ | 139,197 | $ | 77,823 | $ | 214,914 | |||
| Stock based compensation | - | - | 82,946 | ||||||
| $ | 139,197 | $ | 77,823 | $ | 297,860 |
The cash compensation paid in 2025 included $50,351 to our CFO, Dan Amadori (2024: $40,904) and $84,560 to our CEO, Joseph Fuda (2024: $36,919).
C. Interests of Experts and Counsel.
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Our consolidated financial statements for the years ended October 31, 2025, 2024 and 2023 have been prepared in accordance with IFRS.
We have never paid a dividend on our securities. We do not anticipate paying dividends in the foreseeable future.
B. Significant Changes
Significant Changes since October 31, 2025, are as presented in Note 22 to the Company's Consolidated Financial Statements. See "Item 18 - Financial Statements".
ITEM 9. THE OFFER AND LISTING
Our common shares are quoted in the United States on the OTCQB under the symbol "MMTIF". Our common shares are traded in Canada on the Canadian Securities Exchange under the symbol "MRM".
On February 17, 2026, the last reported sale price for our common shares on the OTCQB was $0.028.
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ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Our authorized capital consists of an unlimited number of common shares, of which 616,090,414 shares were issued and outstanding as of October 31, 2025, and 2,000,000 special, redeemable, voting preference shares, referred to herein as special shares, none of which were outstanding, as of October 31, 2025.
Additionally, the Company has 8,750,000 stock options outstanding with a weighted average exercise price of $0.06 per share (2024: 8,750,000 options outstanding with a weighted average exercise price of $0.06 per share).
B. Memorandum and Articles of Incorporation
Articles of Incorporation
Details and Objects of Micromem Technologies Inc.
Micromem Technologies Inc. was incorporated under the laws of the Province of Ontario, Canada, on October 21, 1985, as Mine Lake Minerals Inc. We subsequently changed our name to Avanti Capital Corp. by filing Articles of Incorporation of Amendment on June 23, 1988, and to AvantiCorp International Inc. on April 30, 1992 before becoming Micromem Technologies Inc. on January 14, 1999. The Articles of Incorporation place no restrictions on the nature of the business to be carried on by Micromem.
Summary of Directors Powers and Authorities
The rights, duties, powers, and authorities of our Board of Directors are set out in the Articles of Incorporation and By-laws and the statutory provisions of the Business Corporations Act (Ontario). The following is a selected summary of the Articles of Incorporation, By-laws and applicable provisions of the Business Corporations Act (Ontario) as they relate to selected rights, duties, powers and authorities of our Board of Directors.
The Articles of Incorporation provide for a minimum of three and a maximum of 12 directors. The Business Corporations Act (Ontario) prescribes that an offering corporation must have a minimum of three directors, at least twenty five percent (25%), or if they are less than 4, at least one of whom are Canadian residents and at least one third of whom are not officers or employees of us or our affiliates. The Board of Directors may, between annual shareholders meetings, appoint one or more additional directors to serve until the next annual shareholders meeting provided that the number of directors so added may not exceed by one-third (1/3) the number of directors required to have been elected at the last annual meeting of shareholders.
The Chairman of the Board of Directors or any one director may call a meeting upon the provision of forty-eight hours notice to each director in the manner prescribed in our By-laws. Any such notice shall include the items of business to be considered at the meeting. A majority of the directors constitute a quorum provided that half of those directors present are Canadian residents. Business cannot be transacted without a quorum. A quorum of directors may vote on any matter of business properly brought before the meeting provided that where a director is a party to a material contract or proposed material contract or has a material interest in the matter to be considered, such director must disclose his or her interest at the earliest possible date, request the conflict be noted in the minutes of the meeting, and with a few limited exceptions enumerated in the By-laws, refrain from voting on the matter in which the director has a material interest. There is no limitation on the Board of Directors to vote on matters of their remuneration provided such remuneration is disclosed in the financial statements and annual shareholder proxy materials.
The Board of Directors has broad borrowing powers and may, without authorization from the shareholders:
• borrow money on the credit of Micromem:
• issue, re-issue, sell or pledge debt obligations of Micromem;
• subject to restrictions respecting financial assistance prescribed in the Business Corporations Act (Ontario), give a guarantee on behalf of Micromem to secure the performance of an obligation of any person; and
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• mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of Micromem, owned or subsequently acquired, to secure any obligation of Micromem.
A person is qualified to be or stand for election as a director provided such person is at least 18 years of age, is not a bankrupt and is not found to be of unsound mind by a court in Canada or elsewhere. There is no requirement for a director to hold common shares.
Securities of Micromem
Holders of our common shares will be entitled to receive notice of, attend and vote at all meetings of the shareholders of Micromem. Each common share carries one vote at such meetings. In the event of the voluntary or involuntary liquidation, dissolution or winding-up of Micromem, after payment of all outstanding debts, the remaining assets of Micromem available for distribution will be distributed to the holders of our common shares. Dividends may be declared and paid on our common shares in such amounts and at such times as the directors shall determine in their discretion in accordance with the Business Corporations Act (Ontario). There are no pre-emptive rights, conversion rights, redemption provisions or sinking fund provisions attaching to the common shares. Common shares are not liable to further calls or to assessment by Micromem; provided, however, that pursuant to the provisions of the Business Corporations Act (Ontario), Micromem has a lien on any common share registered in the name of a shareholder or the shareholder's legal representative for a debt owed by the shareholder to Micromem.
Holders of special redeemable shares are entitled to receive notice of, attend and vote at all meetings of the shareholders of Micromem. Each special share carries one vote at such meetings. In the event of the voluntary or involuntary liquidation, dissolution or winding-up of Micromem, after payment of all outstanding debts, the holders of the special shares shall be entitled to receive, before any distribution of any part of the assets of Micromem among the holders of any other shares, the amount paid up on the special shares. The special shares are redeemable at the option of Micromem for the amount paid up on the shares. Dividends may not be declared or paid on the special shares and transfer of the Special Shares is restricted without the approval of the Directors of Micromem and the prior written consent of the Ontario Securities Commission. The number of special shares that may be issued and outstanding at any time is limited to 500,000. There are no pre-emptive rights, conversion rights or sinking fund provisions attaching to the special shares. Special shares are not liable to further calls or to assessment by Micromem; provided, however, that pursuant to the provisions of the Business Corporations Act (Ontario), Micromem has a lien on any special shares registered in the name of a shareholder or the shareholder's legal representative for a debt owed by the shareholder.
Rights and Privileges of Shareholders
Only the registered holders of our common shares and special preference shares on the record date are entitled to receive notice of and vote at annual and special meetings of shareholders. Where the items of business affect the rights of shareholders other than the holders of common shares, a special majority of two-thirds of the votes cast by the affected shareholders at the meeting called for such purpose is required to approve the item of business. Beneficial holders of common shares and special shares are also entitled to receive proxy materials in respect of meetings of shareholders in accordance with Canadian Securities Administrators National Instrument 54-101, provided that such proxies are limited in scope to instructing the registered shareholder (usually a brokerage house) on how to vote on behalf of the beneficial shareholder. There are no restrictions on the number of shares that may be held by non-residents other than restrictions set out in the Investment Canada Act (Canada). See "Additional Information - D. Exchange Controls".
There are no provisions in the By-laws regarding public disclosure of individual shareholdings. Notwithstanding this, applicable Canadian securities legislation requires certain public disclosure of persons owning or acquiring common shares in excess of 10% of a corporation's issued and outstanding share capital.
C. Material Contracts
None. The agreements referred to in Item 4.B - Business Overview - Equity Financing Transaction are in the ordinary course of business.
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D. Exchange Controls
As of the date hereof, we are not aware of any governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including, but not limited to, foreign exchange controls, or that affect the remittance of dividends or other payments to nonresident holders of our common shares.
We are not aware of any limitations under the laws of Canada or the Province of Ontario, or in the Articles of Incorporation or any other of our constituent documents on the right of nonresidents of Canada or persons who are not Canadian citizens to hold and/or vote common shares.
E. Taxation
Certain Canadian Income Tax Consequences
This discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of common shares for a shareholder who is not a resident of Canada but is a resident of the United States and who will acquire and hold a common share as capital property for the purposes of the Income Tax Canada, also referred to as the Canadian Tax Act. This summary does not apply to a shareholder who carries on business in Canada through a permanent establishment situated in Canada or performs independent personal services in Canada through a fixed base in Canada if the shareholder is effectively connected with such permanent establishment or fixed base. This summary is based on the provisions of the Canadian Tax Act and the regulations there under and on an understanding of the administrative practices of Canada Customs & Revenue Agency, and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of the date hereof. It has been assumed that there will be no other relevant amendments of any governing law although no assurance can be given in this respect. This discussion is general only and is not a substitute for independent advice from a shareholder's own Canadian and US tax advisors.
The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended.
Dividends on common shares and Other Income
Under the Canadian Income Tax Act, a non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25 percent on dividends paid or deemed to have been paid to him or her by a corporation resident in Canada. We are responsible for the withholding of tax at the source. The Canada-United States Income Tax Convention (1980) limits the rate to 15 percent if the shareholder is a resident of the United States and the dividends are beneficially owned by and paid to such shareholder, and to 5 percent if the shareholder is also a corporation that beneficially owns at least 10 percent of the voting stock of the payor corporation.
The amount of a stock dividend (for tax purposes) would generally be equal to the amount of our paid up or stated capital and increased by reason of the payment of such dividend. We will furnish additional tax information to shareholders in the event of such a dividend. Interest paid or deemed to be paid on our debt securities held by non-Canadian residents may also be subject to Canadian withholding tax, depending upon the terms and provisions of such securities and any applicable tax treaty.
The Canada-United States Income Tax Convention (1980) generally exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational, or charitable organization or to an organization constituted and operated exclusively to administer a pension, retirement or employee benefit fund or plan, if the organization is a resident of the United States and is exempt from income tax under the laws of the United States.
Dispositions of Common Shares
Under the Canadian Income Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses, realized on a disposition of "taxable Canadian property". common shares will constitute taxable Canadian property of a shareholder at a particular time if the shareholder used the shares in carrying on business in Canada, or if at any time in the five years immediately preceding the disposition 25 percent or more of the issued shares of any class or series in the capital stock of Micromem belonged to one or more persons in a group comprising the shareholder and persons with whom the shareholder did not deal at "arm's length" and in certain other circumstances.
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The Canada-United States Income Tax Convention (1980) relieves United States residents from liability for Canadian tax on capital gains derived on a disposition of shares unless:
the value of the shares is derived principally from "real property" in Canada, including the right to explore for or exploit natural resources and rights to amounts computed by reference to production, the shareholder was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by them when they ceased to be resident in Canada, or the shares formed part of the business property of a "permanent establishment" that the holder has or had in Canada within the 12 months preceding the disposition.
Certain United States Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of our common shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership or disposition of our common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax considerations applicable to such U.S. Holder, including specific tax considerations applicable to a U.S. Holder under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any particular U.S. Holder. This summary does not address the U.S. federal net investment income tax, U.S. federal alternative minimum tax, U.S. federal estate and gift tax, U.S. state and local tax, or non-U.S. tax considerations applicable to U.S. Holders of the acquisition, ownership and disposition of our common shares. In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax advisors regarding the U.S. federal, U.S. state and local and non-U.S. tax considerations relating to the acquisition, ownership and disposition of our common shares.
No opinion from legal counsel or ruling from the Internal Revenue Service (the "IRS") has been requested, or will be obtained, regarding the U.S. federal income tax considerations applicable to U.S. Holders as discussed in this summary. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions in this summary.
This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed) promulgated under the Code, published rulings of the IRS, published administrative positions of the IRS, the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital of 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.
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U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of our common shares that is, for U.S. federal income tax purposes:
• an individual who is a citizen or resident of the United States;
• a corporation organized under the laws of the United States, any state thereof or the District of Columbia;
• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
• a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders that: (a) are governmental organizations, tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are banks, financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) are brokers, broker-dealers, dealers or traders in securities or currencies or are traders in securities that elect to apply a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e) own our common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale or other integrated transaction; (f) acquire our common shares in connection with the exercise or cancellation of employee stock options or otherwise as compensation for services; (g) hold our common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) are partnerships and other “pass-through” entities (and investors in such partnerships and entities); (i) are S corporations (and shareholders thereof); (j) are subject to special tax accounting rules; (k) own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of our outstanding shares; (l) are U.S. expatriates or former long-term residents of the United States; or (m) hold our common shares in connection with a trade or business, permanent establishment, or fixed base outside the United States. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. state and local and non-U.S. tax considerations applicable to the acquisition, ownership and disposition of our common shares.
If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax considerations applicable to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of such entity or arrangement and the status of such partners (or other owners or participants). This summary does not address the tax considerations applicable to any such entity or arrangement or partner (or other owner or participant). Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as other “pass-through” entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax considerations arising from and relating to the acquisition, ownership and disposition of our common shares.
Passive Foreign Investment Company Rules
If we were to constitute a “passive foreign investment company” within the meaning of Section 1297(a) of the Code (a “PFIC”) at any time during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax considerations applicable to a U.S. Holder of the acquisition, ownership and disposition of our common shares.
We believe that we were classified as a PFIC for our most recently completed tax year, and based on current business plans and financial expectations, we expect that we may be classified as a PFIC for our current tax year and may be a PFIC for subsequent tax years. No opinion of legal counsel or ruling from the IRS concerning our status as a PFIC has been obtained or is currently planned to be requested. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the income, assets and nature of the activities of such corporation over the course of each such tax year and, as a result, our PFIC status and the PFIC status of each of our non-U.S. subsidiaries for the current tax year or any future tax year cannot be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by us (or each of our non-U.S. subsidiaries) in respect of our PFIC status (or the PFIC status of each of our non-U.S. subsidiaries). If we are a PFIC for any tax year during which a U.S. Holder holds our common shares, we will continue to be treated as a PFIC with respect to such U.S. Holder, regardless of whether we cease to be a PFIC in one or more subsequent tax years. Each U.S. Holder should consult its own tax advisors regarding our status as a PFIC and the PFIC status of each of our non-U.S. subsidiaries.
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In any year in which we are classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621 annually.
We generally will be a PFIC for any tax year in which (a) 75% or more of our gross income for such tax year is passive income (the “PFIC income test”) or (b) 50% or more of the value of our assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the “PFIC asset test”). “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation’s commodities are stock in trade or other inventory, depreciable property used in its trade or business or supplies regularly used or consumed in the ordinary course of its trade or business and certain other requirements are satisfied.
For purposes of the PFIC income test and PFIC asset test described above, if we own, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, we will be treated as if we (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued by us from certain “related persons” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.
Under certain attribution rules, if we are a PFIC, U.S. Holders will generally be deemed to own their proportionate share of our direct or indirect equity interest in any company that is also a PFIC (a “Subsidiary PFIC”), and will generally be subject to U.S. federal income tax under the default PFIC rules discussed below on their proportionate share of (i) any “excess distributions” as described below, on the shares of a Subsidiary PFIC and (ii) a disposition or deemed disposition of shares of a Subsidiary PFIC by us or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of our common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of our common shares are made.
Default PFIC Rules Under Section 1291 of the Code
If we are a PFIC for any tax year during which a U.S. Holder owns our common shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition, ownership and disposition of our common shares will depend on whether and when such U.S. Holder makes elections to treat us and each Subsidiary PFIC, if any, as a “qualified electing fund” (or “QEF”) under Section 1295 of the Code (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to our common shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election (a “Non-Electing U.S. Holder”) will be subject to tax as described below.
A Non-Electing U.S. Holder will be subject to the default rules of Section 1291 of the Code described below with respect to: (a) any gain recognized on the sale or other taxable disposition of our common shares and (b) any “excess distribution” received on our common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions with respect to our common shares received in the current tax year) exceeds 125% of the average annual distributions such U.S. Holder has received from us during the three preceding tax years (or during a U.S. Holder’s holding period for our common shares, if shorter).
Under Section 1291 of the Code, if we were to constitute a PFIC during a Non-Electing U.S. Holder’s holding period, any gain recognized on the sale or other taxable disposition of our common shares (including an indirect disposition of shares of a Subsidiary PFIC), and any “excess distribution” received on such common shares (or a distribution by a Subsidiary PFIC to its shareholder that is deemed to be received by a U.S. Holder) must be ratably allocated to each day in the Non-Electing U.S. Holder’s holding period for the respective common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferential tax rates). The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.
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If we cease to be a PFIC, a Non-Electing U.S. Holder may terminate ongoing deemed PFIC status with respect to our common shares by electing to recognize gain (which will be taxed under the default rules of Section 1291 of the Code as discussed above), but not loss, as if such common shares were sold on the last day of the last tax year for which we were a PFIC.
QEF Election
A U.S. Holder that makes a timely and effective QEF Election with respect to us for the first tax year in which the holding period of our common shares begins generally will not be subject to the default rules of Section 1291 of the Code discussed above with respect to its common shares. A U.S. Holder that makes a timely and effective QEF Election with respect to us will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) our net capital gain, which will be taxed as long-term capital gain to such U.S. Holder, and (b) our ordinary earnings, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election with respect to us will be subject to U.S. federal income tax on such amounts for each tax year in which we are a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by us. However, for any tax year in which we are a PFIC and have no net income or gain, U.S. Holders that have made a QEF Election with respect to us would not have any income inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.
A U.S. Holder that makes a timely and effective QEF Election with respect to us generally (a) may receive a tax-free distribution from us to the extent that such distribution represents our “earnings and profits” that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of our common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for our common shares in which we are a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election with respect to us for the first year in the U.S. Holder’s holding period for the common shares, the U.S. Holder may still be able to make a timely and effective QEF Election with respect to us in a subsequent year if such U.S. Holder meets certain requirements and makes a “purging” election to recognize gain (which will be taxed under the default rules of Section 1291 of the Code discussed above) as if such common shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. Holder makes a QEF Election but does not make a “purging” election to recognize gain as discussed in the preceding sentence, then such U.S. Holder will be subject to the QEF Election rules and will continue to be subject to tax under the default rules of Section 1291 of the Code discussed above with respect to our common shares. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.
A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, we cease to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which we are not a PFIC. Accordingly, if we become a PFIC again in a later tax year, the QEF Election will still be effective, and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which we qualify as a PFIC.
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A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed U.S. federal income tax return. However, if we do not provide the required information with regard to us or any Subsidiary PFICs, U.S. Holders will not be able to make a QEF Election for such entity and will continue to be subject to the default rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.
U.S. Holders should be aware that there can be no assurances that we will satisfy the record keeping requirements that apply to a QEF, or that we will supply U.S. Holders with a PFIC Annual Information Statement or other information that such U.S. Holders are required to report under the QEF rules, in the event we or any of our non-U.S. subsidiaries are a PFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to us or any of our non-U.S. subsidiaries. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a QEF Election.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election with respect to our common shares only if our common shares are marketable stock. Our common shares generally will be “marketable stock” if our common shares are regularly traded on (a) a national securities exchange that is registered with the SEC, (b) the national market system established pursuant to Section 11A of the U.S. Exchange Act or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. U.S. Holders should consult their own tax advisors regarding the marketable stock rules.
A U.S. Holder that makes a Mark-to-Market Election with respect to our common shares generally will not be subject to the default rules of Section 1291 of the Code discussed above with respect to such common shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for our common shares for which we are a PFIC and such U.S. Holder has not made a timely QEF Election, the default rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, our common shares.
A U.S. Holder that makes a timely and effective Mark-to-Market Election will include in ordinary income, for each tax year in which we are a PFIC, an amount equal to the excess, if any, of (a) the fair market value of our common shares held by such U.S. Holder, as of the close of such tax year over (b) such U.S. Holder’s adjusted tax basis in our common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in our common shares, over (ii) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).
A U.S. Holder that makes a timely and effective Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of our common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations.
A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed U.S. federal income tax return. A timely Mark-to-Market Election applies to the tax year for which such Mark-to-Market Election is made and to each subsequent tax year, unless our common shares cease to be “marketable stock” or the IRS consents to the revocation of such election. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.
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Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to our common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or distributions from a Subsidiary PFIC to its shareholder.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of our common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations) in the event that we are a PFIC during a U.S. Holder’s holding period for the relevant common shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which our common shares are transferred.
If finalized in their current form, the proposed Treasury Regulations applicable to PFICs would be effective for transactions occurring on or after April 1, 1992. Because the proposed Treasury Regulations have not yet been adopted in final form, they are not currently effective, and there is no assurance that they will be adopted in the form and with the effective date proposed. Nevertheless, the IRS has announced that, in the absence of final Treasury Regulations, taxpayers may apply reasonable interpretations of the Code provisions applicable to PFICs and that it considers the rules set forth in the proposed Treasury Regulations to be reasonable interpretations of those Code provisions. The PFIC rules are complex, and the implementation of certain aspects of the PFIC rules requires the issuance of Treasury Regulations which in many instances have not been promulgated and which, when promulgated, may have retroactive effect. U.S. Holders should consult their own tax advisors about the potential applicability of the proposed Treasury Regulations.
Certain additional adverse rules may apply with respect to a U.S. Holder if we are a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses our common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.
In addition, a U.S. Holder who acquires our common shares from a decedent will not receive a “step up” in tax basis of such common shares to fair market value unless such decedent had a timely and effective QEF Election in place.
Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.
The PFIC rules are complex, and each U.S. Holder should consult its own tax advisor regarding the PFIC rules (including the availability and advisability of making a QEF Election or Mark-to-Market Election) and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.
General Rules Applicable to the Ownership and Disposition of Common Shares
The following discussion is subject in its entirety to the special rules described above under the heading “Passive Foreign Investment Company Rules.”
Distributions on Common Shares
We do not anticipate making distributions with respect to our common shares in the foreseeable future. A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a common share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of our current and accumulated “earnings and profits”, as computed in accordance with U.S. federal income tax principles. To the extent that a distribution exceeds our current and accumulated “earnings and profits”, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s adjusted tax basis in our common shares and thereafter as gain from the sale or exchange of such common shares (See “Sale or Other Taxable Disposition of Common Shares” below). However, we do not intend to maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distributions by us with respect to our common shares will constitute dividend income. Dividends received on our common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction”. Subject to applicable limitations and provided we are eligible for the benefits of the Canada-U.S. Tax Convention, or our common shares are readily tradable on a United States securities market, dividends paid by us to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that we not be classified as a PFIC in the tax year of distribution or in the preceding tax year. A dividend generally will be taxed to a U.S. Holder at ordinary income rates (rather than preferential rates for qualified dividend income to the extent otherwise applicable) if we are a PFIC for the tax year of such distribution or were a PFIC for the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules.
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Sale or Other Taxable Disposition of Common Shares
Upon the sale or other taxable disposition of our common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference, if any, between (a) the U.S. dollar value of any cash received plus the fair market value of any property received, and (b) such U.S. Holder’s adjusted tax basis in such common shares sold or otherwise disposed of. A. U.S. Holder’s initial tax basis will generally equal the purchase price paid for such common shares. Gain or loss recognized on such sale or other taxable disposition generally will be long-term capital gain or loss if, at the time of the sale or other taxable disposition, our common shares have been held for longer than one year. Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.
Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign currency or on the sale, exchange or other taxable disposition of our common shares generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt or, if applicable, the date of settlement if the common shares are traded on an established securities market (regardless of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the day of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S.-source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Dividends paid on our common shares will be treated as foreign-source income, and generally will be treated as “passive category income” or “general category income” for U.S. foreign tax credit purposes. Any gain or loss recognized on a sale or other disposition of common shares generally will be U.S.-source gain or loss. Certain U.S. Holders that are eligible for the benefits of the Canada-U.S. Tax Convention may elect to treat such gain or loss as Canadian-source gain or loss for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers. In addition, Treasury Regulations that apply to taxes paid or accrued (the “Foreign Tax Credit Regulations”) impose additional requirements for Canadian withholding taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied. The Treasury Department has released guidance temporarily pausing the application of certain of the Foreign Tax Credit Regulations.
Subject to the PFIC rules and the Foreign Tax Credit Regulations, each as discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on our common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year. The foreign tax credit rules are complex and involve the application of rules that depend on a U.S. Holder’s particular circumstances. Accordingly, each U.S. Holder should consult its own tax advisors regarding the foreign tax credit rules.
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Information Reporting; Backup Withholding Tax
Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. U. S. Holders may be subject to these reporting requirements unless our common shares held by such U.S. Holder are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of our common shares generally may be subject to information reporting and backup withholding tax, currently at the rate of 24%, if a U.S. Holder (a) fails to furnish its correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that it has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons, such as U.S. Holders that are corporations, generally are excluded from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules generally will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We have filed the documents referred to herein and other information with the SEC, the Ontario Securities Commission and the Alberta Securities Commission. You may inspect and copy such material at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of such material from the SEC at prescribed rates by writing to the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
The SEC maintains an Internet website at http://www.sec.gov/edgar that contains reports, proxy statements, information statements and other material that are filed through EDGAR. Documents filed with the Ontario Securities Commission and the Alberta Securities Commission can be accessed through an Internet website at http://www.sedarplus.ca that contains reports, proxy statements, information statements and other material that are filed through the SEDAR+.
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Additional information is also available on our website at www.micromeminc.com. Such information on our website is not part of this Form 20-F.
I. Subsidiary Information
Not Applicable.
J. Annual Report to Security Holders
Not Applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. See Note 22 to our consolidated financial statements for our quantitative and qualitative disclosures about market risk.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
A. to D.
None.
E.
Not Applicable
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of October 31, 2025. Based on management's evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2025, our disclosure controls and procedures were effective in that they were designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in our reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Exchange Act Rule 13a-15(e) also states that disclosure controls and procedures are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control over Financial Reporting
Micromem's Board of Directors and executive management are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.
All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of Micromem's internal control over financial reporting as of October 31, 2025. In making this assessment, they used the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment the Chief Executive Officer and Chief Financial Officer have concluded that, as of October 31, 2025, our internal control over financial reporting were effective.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or 240.15d-15 that occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [Reserved]
ITEM 16A. Audit Committee Financial Expert
Our Board of Directors has determined that a member of the Board of Directors, Alex Dey, is an audit committee financial expert and that he is independent, as defined in the Marketplace Rules of the Nasdaq Stock Market.
The SEC has indicated that the designation or identification of a person as an audit committee financial expert does not make such person an "expert" for any purpose, impose any duties, obligations or liability on such person that are greater than those imposed on members of the audit committee and the Board of Directors who do not carry this designation or identification, or affect the duties, obligations or liability of any other member of the audit committee or the Board of Directors.
ITEM 16B. Code of Ethics
We have adopted a Code of Ethics to impose certain policies relating to ethical conduct on all of our Directors and employees, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer and persons performing similar functions. We undertake to provide a copy of our Code of Ethics to any holder of our securities upon request, without charge.
ITEM 16C. Principal Accountant Fees and Services
The following table presents fees for professional audit services rendered by our auditors for the audit of our consolidated financial statements for the years ended October 31, 2024 and 2022, and fees billed for other services rendered by our auditors including our offerings of securities and tax services.
| 2025 | 2024 | |
| Audit Fees | $100,800 | $98,000 |
| Audit Related Fees | - | - |
| Tax Fees | - | - |
| All Other Fees | - | - |
Audit Fees
In 2025 we incurred $100,800 and in 2024 we incurred $98,000, in audit fees to MNP LLP.
Audit Related Fees
In 2025 and 2024 we paid $nil in audit-related fees.
Tax Fees
We paid $5,000 in 2025 and $5,000 in 2024, of tax-related fees for services to Chiampou Travis LLP.
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All Other Fees
None.
Pre-approval policies
The Audit Committee assesses and pre-approves all audit and non-audit services.
ITEM 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
ITEM 16E. Purchases of Equity by the Issuer and Affiliated Purchasers.
None.
ITEM 16F. Change in Registrants Certifying Accountant.
Not Applicable.
ITEM 16G. Corporate Governance
Not applicable.
ITEM 16H. Mine Safety Disclosure
Not applicable.
ITEM 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
ITEM 16J. Insider Trading Policies
The Company has
ITEM 16K. Cybersecurity
Cybersecurity Risk Management and Strategy
The IT consultant also monitors the prevention, detection, mitigation and remediation of cybersecurity risks and incidents through various means, which may include threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged, and alerts and reports produced by security tools deployed in the IT environment.
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Cybersecurity Governance
In Fiscal 2025, the Company did not experience any “cybersecurity threat” (as defined in Item 106(a) of Regulation S-K) or “cybersecurity incident” (as defined in Item 106(a) of Regulation S-K) that materially affected or was reasonably likely to materially affect the Company’s business strategy, results of operations or financial condition.
PART III
ITEM 17. Financial Statements
See Item 18.
ITEM 18. Financial Statements
The Consolidated Financial Statements and schedules appear on pages F-1 through F-28 of this Annual Report and are incorporated herein by reference. Our audited financial statements as prepared by our management and approved by the Board of Directors include:
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1930)
Consolidated Financial Statements:
Consolidated Statements of Financial Position
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
All the above statements are available on the Company's website at www.micromeminc.com or under the Company's profile on SEDAR+ at http://www.sedarplus.ca.
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Micromem Technologies Inc.
Consolidated Financial Statements
For the years ended October 31, 2025, 2024 and 2023
(Expressed in United States Dollars)
Micromem Technologies Inc.
Consolidated Financial Statements
For the years ended October 31, 2025, 2024 and 2023
(Expressed in United States Dollars)
Contents
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Directors and Shareholders of Micromem Technologies Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Micromem Technologies Inc. (the "Company") as of October 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, changes in shareholders' deficiency, and cash flows for each of the years in the three-year period ended October 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of October 31, 2025 and 2024, and the results of its consolidated operations and its consolidated cash flows for each of the years in the three-year period ended October 31, 2025, in conformity with IFRS® Accounting Standards as issued by the International Accounting Standards Board.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses and comprehensive losses, negative cash flows from operations and has a net working capital deficiency which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the "Critical Audit Matters" section of our report.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
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| 1 Adelaide Street East, Suite 1900, Toronto ON, M5C 2V9 | 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern
Critical Audit Matter Description
As described in Note 2, the Company's operations are mainly funded with debt financing, which is dependent upon many external factors and may be difficult to raise when required. The Company may not have sufficient cash to fund its operations, and therefore, will require additional funding, which if not raised, may result in the delay, postponement or curtailment of some or all of its activities. Management has prepared future cash flow forecasts, which involves judgment and estimation of key variables, such as planned capital and operating expenditures, and market conditions. Future economic conditions and effects of key events subsequent to the year end, such as debt financing, also impacted management's judgments and estimates. We identified the Company's ability to continue as a going concern as a critical audit matter because auditing the Company's going concern assessment is complex and involves a high degree of auditor judgment to assess the reasonableness of the cash flow forecasts, planned refinancing actions and other assumptions used in the Company's going concern analysis. This matter is also described in the "Material Uncertainty Related to Going Concern" section of our report.
Audit Response
We responded to this matter by performing procedures over management's assessment of the Company's ability to continue as a going concern. Our audit work in relation to this included, but was not restricted to, the following:
• We evaluated the cash flow forecasts prepared by management and evaluated the integrity and arithmetical accuracy of the model.
• We evaluated the key assumptions used in the model to estimate future cash flows for a reasonable period of time, of at least 12 months from the date of the Statement of Financial Position, by comparing assumptions used by management against historical performance, budgets, economic and industry indicators and publicly available information.
• We evaluated the key assumptions pertaining to estimated cash flows from operating activities and expected cash flows from financing activities, comparing these to available market data, underlying agreements, private placement raises and subsequent events thereafter.
• We assessed the adequacy of the going concern disclosures included in Note 2 of the consolidated financial statements and consider these to appropriately reflect the assessments that management has performed.
Valuation of Financial Instruments
Critical Audit Matter Description
As described in Note 11 to the consolidated financial statements, for the year ended October 31, 2025, the Company has various convertible debentures some of which result in the recognition of derivative liabilities or equity components. Management measured the fair value of the embedded derivative liability and the fair value of host loans using valuation techniques that require management to make several assumptions related to the inputs into those models. Auditing management's fair value calculations was challenging due to the complexity of accounting for the instruments, the related valuation models and the inputs into those models, which are highly sensitive to changes, such as volatility, risk free rates, variable conversion price and discount rate.
| 1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca |
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Audit Response
We responded to this matter by performing procedures over valuation of debt instruments. Our audit work in relation to this included, but was not restricted to:
• We obtained and reviewed management's calculations related to the financial instruments, including the assessment of the conversion features and the valuation methodology.
• We obtained signed copies of all agreements, including renewals, conversions and any new issuances and confirmed the balances and terms for a sample of the financial instruments.
• We obtained support for cash receipts related to a sample of newly issued financial instruments and cash disbursements related to a sample of repayments, and, for a sample of conversions, obtained support such as conversion notices and share issuances as confirmed with the transfer agent.
• We involved internal professionals with specialized skills and knowledge to assist in developing an independent implied interest rate range for a similar liability without a convertible feature and to assess the prepayment option embedded in the loans.
• We tested the mathematical accuracy of the valuation model and agreed certain inputs including volatility, risk free rates, variable conversion rates and discount rate to underlying source information.
Chartered Professional Accountants
Licensed Public Accountants
February 4, 2026
We have served as the Company's auditor since 2017.
| 1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca |
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Micromem Technologies Inc.
Consolidated Statements of Financial Position
As at October 31, 2025 and 2024
(Expressed in United States dollars)
| As at | As at | ||||||
| Notes | October 31, 2025 | October 31, 2024 | |||||
| Assets | |||||||
| Current | |||||||
| Cash | 23(a) | $ | $ | ||||
| Prepaid expenses and other receivables | 21(d) | ||||||
| Total current assets | |||||||
| Property and equipment | 7 | ||||||
| Total assets | $ | $ | |||||
| Liabilities | |||||||
| Current | |||||||
| Trade payables and other liabilities | 20(b), 23(d) | $ | $ | ||||
| Deposit liability | 21(d) | ||||||
| Current lease liability | 10 | ||||||
| Debenture payable | 8 | ||||||
| Convertible debentures | 11,23 | ||||||
| Derivative liabilities | 11,23 | ||||||
| Warrant liabilities | 12 | ||||||
| Total current liabilities | |||||||
| Non-current lease liability | 10 | ||||||
| Long-term loan | 9 | ||||||
| Total liabilities | |||||||
| Shareholders' Deficiency | |||||||
| Share capital | 13 | ||||||
| Contributed surplus | |||||||
| Equity component of convertible debentures | 11 | ||||||
| Accumulated deficit | ( |
) | ( |
) | |||
| Total shareholders' deficiency | ( |
) | ( |
) | |||
| Total liabilities and shareholders' deficiency | $ | $ | |||||
| Going concern | 2 | ||||||
| Commitments and Contingencies | 21 | ||||||
| Subsequent events | 24 |
The accompanying notes are an integral part of these consolidated financial statements.
| Approved on behalf of the Board of Directors: | ||
| "Joseph Fuda" | "Alex Dey" | |
| Director | Director |
F-4
Micromem Technologies Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the years ended October 31, 2025, 2024, and 2023
(Expressed in United States dollars)
| Years ended October 31, | |||||||||||
| Notes | 2025 | 2024 | 2023 | ||||||||
| Operating expenses | |||||||||||
| General and administrative | 16(a) | $ | $ | $ | |||||||
| Professional, other fees and salaries | 16(b) | ||||||||||
| Stock-based compensation | 15 | ||||||||||
| Travel and entertainment | |||||||||||
| Depreciation of property and equipment | 7 | ||||||||||
| Foreign exchange loss (gain) | ( |
) | ( |
) | ( |
) | |||||
| Total operating expenses | |||||||||||
| Other expenses (income) | |||||||||||
| Accretion expense | 11 | ||||||||||
| Interest expense | 9,11 | ||||||||||
| Other finance expenses | 8,10,11,13 | ||||||||||
| Loss (gain) on revaluation of warrant liabilities | 12 | ( |
) | ||||||||
| Loss (gain) on debt settlement | 13 | ||||||||||
| Impairment of inventory | 21(d) | ||||||||||
| Loss (gain) on revaluation of derivative liabilities | 11 | ( |
) | ( |
) | ||||||
| Loss (gain) on conversion of convertible debentures | 11 | ||||||||||
| Loss (gain) on repayment of convertible debentures | 11 | ||||||||||
| Loss (gain) on extinguishment of convertible debentures | 11 | ||||||||||
| Total other expenses (income) | ( |
) | |||||||||
| Loss before income tax provision | ( |
) | ( |
) | ( |
) | |||||
| Income tax provision | 19 | ||||||||||
| Net loss and comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Weighted average number of outstanding shares, basic and diluted | 17 | ||||||||||
| Loss per share, basic and diluted | 17 | $ | $ | ( |
) | $ | ( |
) | |||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Micromem Technologies Inc.
Consolidated Statements of Changes in Shareholders' Deficiency
For the years ended October 31, 2025, 2024, and 2023
(Expressed in United States dollars)
| Equity component | ||||||||||||||||||||
| Number of | Share | Contributed | of convertible | Accumulated | ||||||||||||||||
| Notes | shares | capital | surplus | debentures | deficit | Total | ||||||||||||||
| Balance at November 1, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||
| Private placements of shares for cash | 13 | - | - | - | ||||||||||||||||
| Share issuance costs | 13 | - | ( |
) | - | - | - | ( |
) | |||||||||||
| Convertible debentures converted into common shares | 11 | - | ( |
) | - | |||||||||||||||
| Exercise of stock options | 15 | ( |
) | - | - | |||||||||||||||
| Expiry of stock options | 15 | - | - | ( |
) | - | - | |||||||||||||
| Expiry of convertible debenture conversion option | 11 | - | - | ( |
) | - | - | |||||||||||||
| Renewal of convertible debentures | 11 | - | - | ( |
) | - | - | |||||||||||||
| Stock-based compensation | 15 | - | - | - | - | |||||||||||||||
| Net loss and comprehensive loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance at October 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||
| Private placements of shares for cash | 13 | - | - | - | ||||||||||||||||
| Cash share issuance costs | 13 | - | ( |
) | - | - | - | ( |
) | |||||||||||
| Broker warrants issued | 13 | - | ( |
) | - | - | - | |||||||||||||
| Shares issued on settlement of accounts payable | 13 | - | - | - | ||||||||||||||||
| Convertible debentures converted into common shares | 11 | - | ( |
) | ||||||||||||||||
| Expiry of stock options | 15 | - | - | ( |
) | - | - | |||||||||||||
| Expiry of convertible debenture conversion option | 11 | - | - | ( |
) | - | - | |||||||||||||
| Renewal of convertible debentures | 11 | - | - | ( |
) | - | - | |||||||||||||
| Stock-based compensation | 15 | - | - | - | - | |||||||||||||||
| Net loss and comprehensive loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance at October 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||
| Private placements of shares for cash | 13 | - | - | - | ||||||||||||||||
| Cash share issuance costs | 13 | - | ( |
) | - | - | - | ( |
) | |||||||||||
| Shares issued on settlement of debt | 13 | - | - | - | ||||||||||||||||
| Exercise of warrants classified as liability | 13 | - | - | - | ||||||||||||||||
| Exercise of broker warrants | 14 | ( |
) | - | - | |||||||||||||||
| Convertible debentures converted into common shares | 11 | - | - | - | ||||||||||||||||
| Expiry of convertible debenture conversion option | 11 | - | - | ( |
) | - | - | |||||||||||||
| Renewal of convertible debentures | 11 | - | - | ( |
) | - | - | |||||||||||||
| Net loss and comprehensive loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance at October 31, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Micromem Technologies Inc.
Consolidated Statements of Cash Flows
For the years ended October 31, 2025, 2024, and 2023
(Expressed in United States dollars)
| Years ended October 31, | |||||||||||
| Notes | 2025 | 2024 | 2023 | ||||||||
| Operating activities | |||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Items not affecting cash: | |||||||||||
| Depreciation of property and equipment | 7 | ||||||||||
| Accretion expense | 11 | ||||||||||
| Accrued interest | 9,11 | ||||||||||
| Stock-based compensation | 15 | ||||||||||
| Loss (gain) on revaluation of warrant liabilities | 12 | ( |
) | ||||||||
| Loss (gain) on debt settlement | 13 | ||||||||||
| Impairment of inventory | 23 (d) | ||||||||||
| Loss (gain) on revaluation of derivative liabilities | 11,18 | ( |
) | ( |
) | ||||||
| Loss (gain) on conversion of convertible debentures | 11,18 | ||||||||||
| Loss (gain) on repayment of convertible debentures | 11,18 | ||||||||||
| Loss (gain) on extinguishment of convertible debentures | 11,18 | ( |
) | ||||||||
| Foreign exchange loss (gain) | ( |
) | ( |
) | ( |
) | |||||
| ( |
) | ( |
) | ( |
) | ||||||
| Net changes in non-cash working capital: | |||||||||||
| Prepaid expenses and other receivables | ( |
) | ( |
) | ( |
) | |||||
| Deposit liability | |||||||||||
| Trade payables and other liabilities | ( |
) | ( |
) | |||||||
| Cash flows used in operating activities | ( |
) | ( |
) | ( |
) | |||||
| Investing activity | |||||||||||
| Purchase of property and equipment | 7 | ( |
) | ( |
) | ||||||
| Cash flows used in investing activity | ( |
) | ( |
) | |||||||
| Financing activities | |||||||||||
| Principal payments on lease liability | 10 | ( |
) | ( |
) | ( |
) | ||||
| Proceeds from private placements of shares and warrants | 13 | ||||||||||
| Share issuance costs | 13 | ( |
) | ( |
) | ( |
) | ||||
| Proceeds from the exercise of options | 15 | ||||||||||
| Proceeds from the exercise of warrants | 13 | ||||||||||
| Proceeds from issuance of convertible debentures | 11,18 | ||||||||||
| Repayments of convertible debentures | 11,18 | ( |
) | ( |
) | ( |
) | ||||
| Cash flows provided by financing activities | |||||||||||
| Net change in cash | ( |
) | |||||||||
| Cash - beginning of period | |||||||||||
| Cash - end of period | $ | $ | $ | ||||||||
| Supplemental cash flow information | |||||||||||
| Repayment penalties paid (classified in operating activities) | 11 | $ | $ | $ | |||||||
|
Interest paid on convertible debt (classified in operating activities) |
11 | $ | $ | $ | |||||||
| Interest converted on convertible debt (classified in operating activities) | 11 | $ | $ | $ | |||||||
| Interest paid on non-convertible debt (classified in operating activities) | 8 | $ | $ | $ | |||||||
| Interest on lease liability (classified in operating activities) | 10 | $ | $ | $ | |||||||
| Carrying amount of convertible debentures converted into common shares | 13,18 | $ | $ | $ | |||||||
| Cash issuance costs (classified in operating activities) | 13 | $ | $ | $ | |||||||
| Shares issued on settlement of accounts payable & convertible debt | 13,18 | $ | $ | $ | |||||||
| ROU asset and lease liability recognized | 10 | $ | $ | $ | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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 October 31, 2025 and is devoting substantially all its efforts to securing commercial revenue opportunities.
2. Going concern
These 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 year ended October 31, 2025, the Company reported a net loss and comprehensive loss of $
The Company's working capital deficiency as at October 31, 2025 was $
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 fiscal 2025; 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 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 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 consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board ("IFRS"). The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
These consolidated financial statements were authorized for issuance and release by the Company's Board of Directors on February 4, 2026.
(a) Basis of consolidation
These consolidated financial statements include the accounts of Micromem Technologies Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
The Company's wholly-owned subsidiaries include:
| (i) | Inactive subsidiaries | Domiciled in | |
| Micromem Applied Sensors Technology Inc. ("MAST") | United States | ||
| 707019 Canada Inc. | Canada | ||
| Memtech International Inc. | Bahamas | ||
| Memtech International (USA) Inc., Pageant Technologies (USA) Inc. | United States | ||
| Pageant Technologies Inc., Micromem Holdings (Barbados) Inc. | Barbados |
(b) Basis of measurement
These 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 consolidated financial statements are presented in United States dollars ("USD"), which is the functional currency of the Company and all of its subsidiaries.
F-8
3. Basis of presentation (continued)
(d) Use of estimates and judgments
The preparation of these consolidated 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 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, warrants and conversion features
The Company makes estimates and utilizes assumptions in determining the fair value for stock options, warrants, and conversion features based on the application of option pricing valuation models, as detailed in note 11, 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.
(ii) Useful lives and recoverability of long-lived assets
Long-lived assets consist of property and equipment and patents. Depreciation and 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.
(iii) Income taxes
Income taxes and tax exposures recognized in the 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 cash flow 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.
(v) Estimated net realizable value of inventory
The net realizable value of inventory is estimated based on management's assessment of expected future use and recoverability in ongoing or planned development activities, taking into account technical feasibility, project status, and estimated costs to complete. Changes in development outcomes or project viability could result in adjustments to the carrying amount of these inventory.
4. Summary of material accounting policies
The material accounting policies applied to the preparation of these consolidated financial statements are set out below:
(a) Foreign currency translation
These consolidated financial statements are presented in USD, which is the functional currency of the Company and all of its subsidiaries. At each reporting date, foreign currency denominated monetary assets and liabilities are translated at year-end exchange rates. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Income, expenses, and cash flows, are translated into USD using average exchange rates for the year. Exchange differences arising from operating transactions are recorded in operating profit or loss for the period; exchange differences related to financing transactions are recognized in finance income or directly in equity.
(b) Financial instruments
All financial instruments are initially recorded at fair value at the time they are entered into. The Company aggregates its financial instruments in accordance with IFRS 9, Financial Instruments , into classes based on their nature and characteristics. Management determines the classification when the instruments are initially recognized, which is normally the date of the transaction. The Company's accounting policy for each class of financial instruments is as follows:
(i) Amortized cost
This category includes financial assets that are held within a business model with the objective to hold the financial assets in order to collect contractual cash flows that meet the solely principal and interest ("SPPI") criterion, and financial liabilities which are not required to be classified as fair value through profit or loss, and for which the Company has not elected to subsequently record at fair value through profit or loss.
F-9
4. Summary of material accounting policies (continued)
(i) Amortized cost (continued)
Financial instruments in this category are initially recognized at fair value plus directly attributable transaction costs. Subsequently, these instruments are measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest over the relevant period. The effective interest rate is the rate that discounts estimated future cash receipts through the expected life of the financial instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Financial assets are adjusted for any expected credit losses.
Financial assets in this category include cash and other receivables. Financial liabilities in this category include trade payables and other liabilities, debenture payable, convertible debentures and long-term loan.
(ii) Fair value through profit or loss ("FVTPL")
This category includes derivative instruments and debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell. These financial instruments are initially recognized at fair value; all transaction costs are recognized immediately in profit or loss. Subsequently, these instruments are recognized at fair value at each reporting date. Any changes in fair value, and gains or losses upon disposition of the financial instruments are recognized in profit or loss. Financial liabilities in this category include the derivative liabilities and warrant liabilities.
(iii) Fair value through other comprehensive income ("FVOCI")
This category only includes equity instruments, which the Company intends to hold for the foreseeable future and which the Company has irrevocably elected to so classify upon initial recognition or transition. Equity instruments in this category are subsequently measured at fair value with changes recognized in other comprehensive income, with no recycling of gains or losses to profit or loss upon derecognition. Dividend income is recognized in earnings. Equity instruments at FVOCI are not subject to an impairment assessment under IFRS 9. The Company has no financial assets in this category.
(c) Convertible debentures and derivative liabilities
The Company issues convertible debentures used as bridge loans, which can be converted into common shares at the option of the holder, into a fixed number of shares for a fixed amount of consideration, or into a fixed number of shares for a variable amount of consideration, or into a variable number of shares.
(i) Initial recognition
For convertible debentures which provide conversion into a fixed number of shares, the liability component is recognized initially at the fair value of a similar, non-convertible liability. The equity component is recognized as the difference between the fair value of the instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
For convertible debentures which provide conversion into a variable number of shares or into a fixed number of shares for a variable amount of consideration, the conversion option is accounted for as an embedded derivative, which is separated from the host contract. Upon initial recognition, the derivative liability is valued at fair value using an option pricing model, as detailed in note 11. The carrying amount of the convertible debenture is recognized as the difference between the fair value of the instrument as a whole and the fair value of the derivative liability. Any directly attributable transaction costs are allocated to the derivative liability and host contract in proportion to their initial carrying amounts.
(ii) Modifications and extinguishments
To the extent there are changes to the terms of outstanding convertible debentures, these changes may be recorded as a modification or an extinguishment. A substantial change in the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows at the original effective interest rate under the new terms is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. For a modification that does not result in derecognition, a gain or loss will be recognised in profit or loss for the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. For a modification that results in derecognition, a gain or loss will be recognised in profit or loss for the difference between the carrying amount of the financial liability extinguished and the fair value of the modified financial liability.
F-10
4. Summary of material accounting policies (continued)
(d) Fair value
Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
Fair value measurement for financial instruments are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Levels 1, 2 or 3). The three levels are defined based on the observability of significant inputs to the measurement, as follows:
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 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 consolidated financial statements, derivative liabilities and warrant 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 consolidated financial statements.
When one is available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument.
A market is regarded as "active" if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Company uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
The derivative liabilities and warrany liabilities are measured at fair value on a recurring basis and categorized as level 2 in the fair value hierachy. The fair value of the derivative liabilities and warrant liabilities at October 31, 2025 are $
(c) and note 12.
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 years ended October 31, 2025 and 2024, there were no transfers between levels.
(e) Property and equipment
Property and equipment are recorded at cost and are depreciated over their estimated useful lives at the following annual rates and methods:
| Method | Rate | ||
| Computers | Declining balance | ||
| Right-of-use asset | Straight-line |
|
(f) Impairment of long-lived assets
The Company follows the guidelines prescribed in IAS 36, Impairment of Assets with respect to the measurement for impairment of assets. The carrying amounts of property and equipment and patents are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. When the carrying amount exceeds the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of long-lived assets is the greater of fair value less costs to sell and value in use. Impairment losses are recognized in the consolidated statements of operations and comprehensive loss.
(g) Development costs
Research costs are expensed in the period incurred. Development costs are expensed as incurred unless they meet the criteria for capitalization. Expenditures during the development phase are capitalized if the Company can demonstrate each of the following criteria: (i) the technical feasibility of completing the asset so that it will be available for use or sale, (ii) its intention to complete the asset and use or sell it, (iii) its ability to use or sell the asset, (iv) how the asset will generate probable future economic benefits, (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset, and (vi) its ability to measure reliably the expenditure attributable to the asset during its development; otherwise, these costs are expensed as incurred. Costs to be recovered from development partners are recorded to development costs receivable. Payments received from development partners on projects are recorded to income as a recovery of costs incurred and reduce the outstanding receivable. There were no development costs incurred or recovery of such costs in 2025, 2024, or 2023.
F-11
4. Summary of material accounting policies (continued)
(h) Patents
Patents are recorded at cost and are amortized on a straight line basis over their estimated useful lives of
(i) Leases
As a lessee
At the inception of a contract, the Company assesses whether a contract is, or contains a lease. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use assets are adjusted for impairment losses, if any. The estimated useful lives and recoverable amounts of right-of-use assets are determined on the same basis as those of property and equipment.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate currently set at 9%. The lease liability is subsequently measured at amortized cost using the effective interest method.
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value as there are none. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
As a lessor
As a lessor, the Company classifies its leases as either a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.
Rental income arising from operating leases is accounted on a straight-line basis over the lease term.
(j) Stock-based compensation and other stock-based payments
Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in net income over the vesting period. Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received. When the value of goods or services received in exchange for the stock-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The cost recognized for all equity-settled stock-based payments is reflected in contributed surplus, until the instruments are exercised. Upon exercise, shares are issued from treasury and the amount previously reflected in contributed surplus along with any proceeds paid upon exercise, are credited to share capital.
(k) Government grants
The Company recognises government grants when there is reasonable assurance of compliance with grant conditions and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods when the related expenses are incurred and are presented in the consolidated financial statements as a reduction of these expenses. A government grant that becomes receivable as compensation for expenses already incurred is recognised in profit or loss of the period in which it becomes receivable.
(l) Provisions
Provision for risks and expenses are recognized for probable outflows of resources that can be estimated and that result from present obligations resulting from past events. In the case where a potential obligation resulting from past events exists, but where occurrence of the outflow of resources is not probable or the estimate is not reliable, these contingencies are disclosed. Provisions, if any, are measured based on management's best estimates of outcomes on the basis of facts known at the reporting date.
(m) Income taxes
The Company accounts for its income taxes using the deferred tax assets and liabilities method. Deferred income tax assets and liabilities are determined based on the difference between the carrying amount and the tax basis of the assets and liabilities. Any change in the net amount of deferred income tax assets and liabilities is included in profit or loss or equity. Deferred income tax assets and liabilities are determined based on enacted or substantively enacted tax rates and laws which are expected to apply to taxable profit for the years in which the assets and liabilities will be recovered or settled. Deferred income tax assets are recognized when it is probable they will be realized. Deferred tax assets and liabilities are not discounted.
F-12
4. Summary of material accounting policies (continued)
(n) Share capital
Share capital is presented at the fair value of the shares issued or the cash amount received. Costs related to the issuance of shares are reported in equity, net of tax, as a deduction from the issuance proceeds.
(o) Earnings or loss per share
The Company presents basic and diluted earnings per share data for its common shares. Basic earnings per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding, for the effects of all potentially dilutive common shares, which comprise stock options and convertible debentures.
(p) Inventory
Inventory is measured at the lower of cost and net realizable value. Cost comprises purchase costs, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition. Net realizable value represents the estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs to sell.
5. New accounting standards and pronouncements
(a) Amendment to IFRS 9, Financial Instruments and IFRS 7,Financial Instruments - Disclosures, Issued but not yet effective
In May 2024, the IASB issued amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments - Disclosures. The amendments clarify the derecognition of financial liabilities and introduces an accounting policy option to derecognize financial liabilities that are settled through an electronic payment system. The amendments also clarify how to asses the contractual cash flow characteristics of financial assets that include environmental, social and governance (ESG)-linked features and other similar contingent features and the treatment of non-recourse assets and contractually linked instruments (CLIs). Further, the amendments mandate additional disclosures in IFRS 7 for financial instruments with contingent features and equity instruments classified at FVOCI. The amendments are effective for annual periods starting on or after January 1, 2026. Retrospective application is required and early adoption is permitted.
(b) IFRS 18 Presentation and Disclosure in Financial Statements, Issued but not yet effective
In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements to improve reporting of financial performance. The new standards replaces IAS 1 Presentation of Financial Statements. IFRS 18 introduces new categories and required subtotals in the statement of profit and loss and also requires disclosure of management-defined performance measures. It also includes new requirements for the location, aggregation and disaggregation of financial information. The standard is effective for annual reporting periods beginning on or after January 1, 2027, including interim financial statements. Retrospective application is required and early adoption is permitted.
(c) Amendment to IFRS 10, Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures, Issued but not yet effective
The amendment addresses a conflict between the requirements of IAS 28 and IFRS 10 and clarifies 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. The Company will adopt the amendment as of the effective date, and does not anticipate any material impact on adoption.
6. Patents
| As at | As at | ||||||||||||||
| November 1, | Foreign | October 31, | |||||||||||||
| 2024 | Additions | Disposition | exchange | 2025 | |||||||||||
| Cost | $ | $ | $ | $ | $ | ||||||||||
| Accumulated amortization | |||||||||||||||
| Net book value | $ | $ | |||||||||||||
| As at | As at | ||||||||||||||
| November 1, | Foreign | October 31, | |||||||||||||
| 2023 | Additions | Disposition | exchange | 2024 | |||||||||||
| Cost | $ | $ | $ | $ | $ | ||||||||||
| Accumulated amortization | |||||||||||||||
| Net book value | $ | $ |
The Company holds several patents in the United States for its Multimodal Fluid Condition Sensor Platform. The patents are fully amortized as at October 31, 2025 and 2024.
F-13
7. Property and equipment
| As at | As at | ||||||||||||||
| November 1, | Foreign | October 31, | |||||||||||||
| 2024 | Additions | Disposition | exchange | 2025 | |||||||||||
| Cost | |||||||||||||||
| Computers | $ | $ | $ | $ | $ | ||||||||||
| Right-of-use assets | ( |
) | |||||||||||||
| ( |
) | ||||||||||||||
| Accumulated depreciation | |||||||||||||||
| Computers | $ | $ | $ | $ | $ | ||||||||||
| Right-of-use assets | ( |
) | |||||||||||||
| ( |
) | ||||||||||||||
| Net book value | $ | $ | |||||||||||||
| As at | As at | ||||||||||||||
| November 1, |
Foreign |
October 31, | |||||||||||||
| 2023 | Additions | Disposition | exchange | 2024 | |||||||||||
| Cost | |||||||||||||||
| Computers | $ | $ | $ | $ | $ | ||||||||||
| Right-of-use assets | |||||||||||||||
| Accumulated depreciation | |||||||||||||||
| Computers | $ | $ | $ | $ | $ | ||||||||||
| Right-of-use assets | |||||||||||||||
| Net book value | $ | $ |
8. Debenture payable
The Company issued a debenture on March 17, 2020, with a principal amount of $
9. Long-term loan
The Company was granted a $
The continuity of the long-term loan is summarized as follows:
| Balance, October 31, 2023 | $ | ||
| Accrued interest | |||
| Foreign exchange | ( |
) | |
| Balance, October 31, 2024 | $ | ||
| Accrued interest | |||
| Foreign exchange | ( |
) | |
| Balance, October 31, 2025 | $ |
The following represents a maturity analysis of the Company's undiscounted contractual loan obligations as at October 31, 2025:
| USD | |||
| Less than one year | $ | ||
| Between one and five years | $ |
F-14
10. Leases
(a) As a lessee
The lease obligation relates to the use of office space in Toronto, Ontario. The original lease agreement had a term of August 1, 2022 to July 31, 2025. On June 16, 2025, the Company entered into a lease extension agreement, whereby the lease term was extended for additional 2 years, expiring July 31, 2027. The lease liability was remeasured at the date of the modification, using an incremental borrowing rate of
The lease liability is summarized as follows:
| Balance, October 31, 2022 | $ | ||
| Interest expense | |||
| Lease payments | ( |
) | |
| Foreign exchange | ( |
) | |
| Balance, October 31, 2023 | |||
| Interest expense | |||
| Lease payments | ( |
) | |
| Foreign exchange | |||
| Balance, October 31, 2024 | |||
| Lease extension | |||
| Interest expense | |||
| Lease payments | ( |
) | |
| Foreign exchange | ( |
) | |
| Balance, October 31, 2025 | $ |
The following represents a maturity analysis of the Company's undiscounted contractual lease obligations as at October 31, 2025:
| USD | |||
| Less than one year | $ | ||
| Between one and five years | $ |
(b) As a lessor
The Company sub-let a portion of its office space under a lease agreement for a term of three years, that expired July 31, 2025. The Company entered into a lease extension agreement, whereby the sublease term was extended for additional 2 years, expiring July 31, 2027. The sub-lease is classified as an operating lease because it does not transfer substantially all of the risks and rewards incidental to ownership of the asset.
For the year ended October 31, 2025, the Company recognized a total of $
The following represents a maturity analysis of the Company's lease payments to be received after October 31, 2025:
| USD | |||
| Less than one year | $ | ||
| Between one and five years | $ |
F-15
11. Convertible debentures
The Company issues three types of convertible debentures: USD denominated convertible debentures with an equity component, Canadian dollar ("CAD") 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.
All loan principal amounts and conversion prices are expressed in original currency and all remaining dollar amounts are expressed in USD.
(a) Current period information presented in the consolidated financial statements
Convertible debentures outstanding as at October 31, 2025:
| *Denominated in CAD | USD (equity | CAD (embedded | USD (embedded | |||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Loan principal outstanding | $ | $ | * | $ | ||||||||
| Terms of loan | ||||||||||||
| Annual stated interest rate | ||||||||||||
| Effective annual interest rate | ||||||||||||
| Conversion price to common shares | $ |
$ |
||||||||||
| Remaining life (in months) |
|
|
|
|||||||||
| Consolidated Statement of Financial Position | ||||||||||||
| Carrying value of loan principal | $ | $ | $ | $ | ||||||||
| Interest payable | ||||||||||||
| Convertible debentures | $ | $ | $ | $ | ||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||
| Equity component of convertible debentures | $ | $ | $ | $ |
| For the year ended October 31, 2025: | ||||||||||||
| USD (equity | CAD (embedded | USD (embedded | ||||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Consolidated Statement of Operations and Comprehensive Loss | ||||||||||||
| Accretion expense | $ | $ | $ | $ | ||||||||
| Interest expense | $ | $ | $ | $ | ||||||||
| Loss (gain) on revaluation of derivative liabilities | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Loss (gain) on conversion of convertible debentures | $ | $ | $ | $ | ||||||||
| Loss (gain) on repayment of convertible debentures | $ | $ | ( |
) | $ | $ | ||||||
| Loss (gain) on extinguishment of convertible debentures | $ | ( |
) | $ | ( |
) | $ | $ | ||||
| Consolidated Statement of Changes in Equity | ||||||||||||
| Amount of principal converted to common shares | $ | $ | * | $ | ||||||||
| Amount of interest converted to common shares | $ | $ | * | $ | ||||||||
| Number of common shares issued on conversion of convertible | ||||||||||||
| debentures |
F-16
11. Convertible debentures (continued)
(a) Current period information presented in the consolidated financial statements
| USD (equity | CAD (embedded | USD (embedded | ||||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Consolidated Statement of Cash Flows | ||||||||||||
| Amount of principal repaid in cash | $ | $ | $ | $ | ||||||||
| Amount of interest repaid in cash | $ | $ | $ | $ |
(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.
(b) Comparative information presented in the consolidated financial statements
Convertible debentures outstanding as at October 31, 2024:
| *Denominated in CAD | USD (equity | CAD (embedded | USD (embedded | |||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Loan principal outstanding | $ | $ | * | $ | ||||||||
| Terms of loan | ||||||||||||
| Annual stated interest rate | ||||||||||||
| Effective annual interest rate | ||||||||||||
| Conversion price to common shares | $ |
$ |
* | (i) - (ii) | ||||||||
| Remaining life (in months) |
|
|
|
|||||||||
| Consolidated Statement of Financial Position | ||||||||||||
| Carrying value of loan principal | $ | $ | $ | $ | ||||||||
| Interest payable | ||||||||||||
| Convertible debentures | $ | $ | $ | $ | ||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||
| Equity component of convertible debentures | $ | $ | $ | $ |
(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.
For the year ended October 31, 2024:
| USD (equity | CAD (embedded | USD (embedded | ||||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Consolidated Statement of Operations and Comprehensive Loss | ||||||||||||
| Accretion expense | $ | $ | $ | $ | ||||||||
| Interest expense | $ | $ | $ | $ | ||||||||
| Loss (gain) on revaluation of derivative liabilities | $ | $ | $ | ( |
) | $ | ||||||
| Loss (gain) on conversion of convertible debentures | $ | $ | $ | $ | ||||||||
| Loss (gain) on repayment of convertible debentures | $ | $ | ( |
) | $ | $ | ||||||
| Loss (gain) on extinguishment of convertible debentures | $ | ( |
) | $ | $ | $ |
F-17
11. Convertible debentures (continued)
(b) Comparative information presented in the consolidated financial statements
| USD (equity | CAD (embedded | USD (embedded | ||||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Consolidated Statement of Changes in Equity | ||||||||||||
| Amount of principal converted to common shares | $ | $ | * | $ | ||||||||
| Amount of interest converted to common shares | $ | $ | * | $ | ||||||||
| Number of common shares issued on conversion of convertible debentures | ||||||||||||
| Consolidated Statement of Cash Flows | ||||||||||||
| Amount of principal repaid in cash | $ | $ | $ | $ | ||||||||
| Amount of interest repaid in cash | $ | $ | $ | $ |
For the year ended October 31, 2023:
| *Denominated in CAD | USD (equity | CAD (embedded | USD (embedded | |||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Consolidated Statement of Operations and Comprehensive Loss | ||||||||||||
| Accretion expense | $ | $ | $ | $ | ||||||||
| Interest expense | $ | $ | $ | $ | ||||||||
| Loss (gain) on revaluation of derivative liabilities | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||
| Loss (gain) on conversion of convertible debentures | $ | $ | $ | $ | ||||||||
| Loss (gain) on repayment of convertible debentures | $ | $ | $ | $ | ||||||||
| Loss (gain) on extinguishment of convertible debentures | $ | $ | $ | $ | ||||||||
| Consolidated Statement of Changes in Equity | ||||||||||||
| Amount of principal converted to common shares | $ | $ | * | $ | ||||||||
| Amount of interest converted to common shares | $ | $ | * | $ | ||||||||
| Number of common shares issued on conversion of convertible debentures | ||||||||||||
| Consolidated Statement of Cash Flows | ||||||||||||
| Amount of principal repaid in cash | $ | $ | $ | $ | ||||||||
| Amount of interest repaid in cash | $ | $ | $ | $ |
(c) Fair value of derivative liabilities outstanding
The fair value of the derivative liabilities is determined with option pricing models. The underlying assumptions are as follows:
| As at | As at | ||
| October 31, | October 31, | ||
| 2025 | 2024 | ||
| Volatility factor (based on historical volatility) | |||
| Risk free interest rate | |||
| Expected life of conversion features (in months) |
|
|
|
| Expected dividend yield | |||
| CDN to USD exchange rate (as applicable) | |||
| Call value | $ |
$ |
The key unobservable input in these models relates to volatility. Volatility was estimated using the historical volatility of the Company's stock prices for common shares. Changes in these assumptions may affect the fair value estimates of the derivative liabilities.
F-18
12. Warrant liability
During the year ended October 31, 2025, the Company issued warrants as specified in note 13. These warrants were issued in connection with private placements and in debt settlement arrangements. The details of the warrants issued, including the exercise price and expiry date, are disclosed in note 13.
The Company determined that these warrants were exchangeable into a variable number of shares, and as such, the warrants were classified as financial liabilities measured at fair value through profit or loss ("FVTPL"). The Company uses the Black-Scholes pricing model to estimate fair value. Expected volatility has been based on an evaluation of the historical volatility of the Company's share price. The risk-free interest rate for the life of the warrants was based on the yield available on government benchmark bonds with a term approximating the remaining term of the warrants. The life of the warrant is based on the contractual term. The values as at the grant date are as follows:
| January 2, 2025 | January 7, 2025 | June 17, 2025 | October 10, 2025 | |
| (Grant Date) | (Grant Date) | (Grant Date) | (Grant Date) | |
| Share price | $ |
$ |
$ |
$ |
| Exercise price | $ |
$ |
$ |
$ |
| Volatility factor (based on historical volatility) | ||||
| Risk free interest rate | ||||
| Expected life (in years) of warrant |
|
|
|
|
| Expected dividend yield |
| September 26, | ||||
| July 18, 2024 | July 24, 2024 | September 24, 2024 | 2024 | |
| (Grant Date) | (Grant Date) | (Grant Date) | (Grant Date) | |
| Share price | $ |
$ |
$ |
$ |
| Exercise price | $ |
$ |
$ |
$ |
| Volatility factor (based on historical volatility) | ||||
| Risk free interest rate | ||||
| Expected life (in years) of warrant |
|
|
|
|
| Expected dividend yield |
As at October 31, 2025, the Company re-valued the warrant liability with the following inputs, assumptions and results, respectively:
| October 31, 2025 | October 31, 2024 | |
| Share price | $ |
$ |
| Exercise price | $ |
$ |
| Volatility factor (based on historical volatility) | ||
| Risk free interest rate | ||
| Expected life (in years) of warrant |
|
|
| Expected dividend yield |
The following summarizes the activity for warrants classified as a liability for the year ended October 31, 2025:
| Number of | Value | Weighted average | |||||||
| warrants | of warrants | exercise price | |||||||
| Outstanding at October 31, 2023 | $ | $ | |||||||
| Issued in a private placement (note 13 (b)) | |||||||||
| Issued for debt settlement (note 13(b)) | |||||||||
| Loss (gain) on revaluation of outstanding warrant liabilities | |||||||||
| Outstanding at October 31, 2024 | $ | ||||||||
| Issued in a private placement (note 13 (c) (i-iii)) | |||||||||
| Issued for debt settlement (note 13(b)) | |||||||||
| Exercise of warrants (note 13 (d)) | ( |
) | ( |
) | |||||
| Loss (gain) on revaluation of outstanding warrant liabilities | ( |
) | |||||||
| Outstanding at October 31, 2025 | $ | $ |
During the year ended October 31, 2025, the Company allocated cash issuance costs totalling $
F-19
13. Share capital
(a) Authorized
The Company has two classes of shares as follows:
(i) Special redeemable voting preference shares -
(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) Outstanding
| Number | Amount | |||||
| Outstanding at October 31, 2022 | $ | |||||
| Issuance of common shares and units for cash (note 13 (c) (vi)) | ||||||
| Cash share issuance costs | - | ( |
) | |||
| Exercise of stock options | ||||||
| Convertible debentures converted into common shares (note 11) | ||||||
| Outstanding at October 31, 2023 | $ | |||||
| Issuance of common shares and units for cash (note 13 (c) (v)) | ||||||
| Cash share issuance costs | - | ( |
) | |||
| Broker warrants issued | - | ( |
) | |||
| Shares issued on settlement of accounts payable | ||||||
| Convertible debentures converted into common shares (note 11) | ||||||
| Outstanding at October 31, 2024 | $ | |||||
| Issuance of common shares and units for cash (note 13 (c) (i-iii)) | ||||||
| Cash share issuance costs (note 13 (c) (i, ii, iii)) | - | ( |
) | |||
| Shares issued on settlement of debt (note 13 (iv)) | ||||||
| Exercise of warrants classified as liability (note 13 (d)) | ||||||
| Exercise of broker warrants (note 14) | ||||||
| Convertible debentures converted into common shares (note 11) | ||||||
| Outstanding at October 31, 2025 | $ |
(c) Private placements and arrangements with convertible debt
(i) On January 2, 2025, the Company completed a non-brokered private placement and issued
(ii) On June 17, 2025, the Company completed a non-brokered private placement and issued
(iii) On October 10, 2025, the Company closed a brokered private placement of
F-20
13. Share capital (continued)
(c) Private placements and arrangements with convertible debt (continued)
(iv) During the year ended October 31, 2025, $
(v) During the year ended October 31, 2024, the Company completed private placements with investors consisting of common shares with warrants, pursuant to prospectus and registration exemptions set forth in applicable securities law. The Company received net proceeds of $
(vi) During the year ended October 31, 2024, $
(vii) In 2023, the Company completed 26 private placements with investors consisting of common shares with no warrants, pursuant to prospectus and registration exemptions set forth in applicable securities law. The Company received net proceeds of $
(d) Exercise of warrants
On January 28, 2025,
On March 10, 2025,
On May 1, 2025,
14. Warrants
The following summarizes the broker warrants activity for the year ended October 31, 2025:
| Number of | Grant date Fair | Weighted average | |||||||
| warrants | value | exercise price | |||||||
| Outstanding at October 31, 2023 | $ | $ | |||||||
| Granted | |||||||||
| Outstanding at October 31, 2024 | $ | ||||||||
| Exercised | ( |
) | ( |
) | ( |
) | |||
| Outstanding at October 31, 2025 | $ | $ |
The following table summarizes the warrants outstanding and exercisable as at October 31, 2025:
| Expiry | Number of | Exercise | Remaining | |
| date | warrants | price | contractual life | |
| December 22, 2025 | $ |
|
||
| $ |
|
F-21
15. Stock options
(a) Stock option plan
Under the Company's fixed stock option plan (the "Plan"), the Company could grant up to
| (b) Summary of changes | ||||||
| Weighted average | ||||||
| Number of options | exercise price | |||||
| Outstanding at October 31, 2023 | $ | |||||
| Expired | ( |
) | ||||
| Outstanding at October 31, 2024 | $ | |||||
| Outstanding at October 31, 2025 | $ |
(c) Stock options outstanding at October 31, 2025
There were
| Weighted average | |||||||||||
| Remaining | |||||||||||
| Date of issue | Expiry date | Number of options | Exercise price | contractual life | |||||||
| November 13, 2020 |
|
$ |
|
||||||||
| October 8, 2021 |
|
|
|||||||||
| March 20, 2023 |
|
|
|||||||||
| Outstanding at October 31, 2025 | $ |
|
|||||||||
Of the total options outstanding,
During the year ended October 31, 2025, the Company recorded an expense of $
16. Operating expenses
(a) General and administration
The components of general and administration expenses are as follows:
| Notes | 2025 | 2024 | 2023 | ||||||||
| General and administration | $ | $ | $ | ||||||||
| Rent and occupancy | 10 (b) | ||||||||||
| Office insurance | |||||||||||
| Investor relations, listing and filing fees | |||||||||||
| Telephone | |||||||||||
| $ | $ | $ |
(b) Professional, other fees and salaries
The components of professional, other fees and salaries expenses are as follows:
| 2025 | 2024 | 2023 | |||||||
| Professional fees | $ | $ | $ | ||||||
| Consulting fees | |||||||||
| Salaries and benefits | |||||||||
| $ | $ | $ |
F-22
17. Loss per share
Basic and diluted loss per share are calculated using the following numerators and denominators:
| 2025 | 2024 | 2023 | |||||||
| Numerator | |||||||||
| Net loss attributable to common shareholders and used in computation of basic and diluted loss per share | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Denominator | |||||||||
| Weighted average number of common shares for computation of basic and diluted loss per share |
For the years ended October 31, 2025, 2024 and 2023, all stock options, warrants and conversion features were anti-dilutive and, therefore, are excluded from the calculation of diluted loss per share.
18. Supplemental cash flow information
The following provides a reconciliation of the cash flows from convertible debentures and derivative liabilities :
| Years ended October 31, | |||||||||
| 2025 | 2024 | 2023 | |||||||
| Balance - beginning of year | $ | $ | $ | ||||||
| Cash flows from financing activities: | |||||||||
| Proceeds from issuance of convertible debentures | |||||||||
| Repayments of convertible debentures | ( |
) | ( |
) | ( |
) | |||
| Non-cash changes: | |||||||||
| Accretion expense | |||||||||
| Accrued interest on convertible debentures | |||||||||
| Loss (gain) on revaluation of derivative liabilities | ( |
) | ( |
) |
|||||
| Loss (gain) on conversion of convertible debentures | |||||||||
| Loss (gain) on repayment of convertible debentures | |||||||||
| Loss (gain) on extinguishment of convertible debentures | ( |
) | |||||||
| Convertible debentures converted into common shares | ( |
) | ( |
) | ( |
) | |||
| Convertible debentures settled for units | ( |
) | |||||||
| Foreign exchange (gain) loss | ( |
) | ( |
) | ( |
) | |||
| Balance - end of year | $ | $ | $ | ||||||
F-23
19. Income taxes
(a) The reconciliation of income tax attributed to continuing operations computed at the statutory tax rates to income tax expense is as follows:
| 2025 | 2024 | 2023 | |||||||
| Loss before income taxes | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Statutory tax rate | |||||||||
| Expected income tax recovery | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Accretion expense and loss (gain) on convertible debentures and derivative liabilities | ( |
) | |||||||
| Stock-based compensation | |||||||||
| Non-deductible (non-taxable) expenses and financing costs | ( |
) | |||||||
| Effect of changes in exchange rates | |||||||||
| Other | |||||||||
| Change in deferred tax assets not recognized | |||||||||
| $ | $ | $ |
(b) 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. Significant components of the Company's deferred tax assets and liabilities are as follows:
| 2025 | 2024 | 2023 | |||||||
| Non-capital losses | $ | $ | $ | ||||||
| Capital losses | |||||||||
| Property, equipment, patents and deferred costs | |||||||||
| $ | $ | $ | |||||||
| Deferred tax asset not recognized | ( |
) | ( |
) | ( |
) | |||
| $ | $ | $ |
As at October 31, 2025 and 2024, the Company assessed that it is not probable that sufficient taxable profit will be available to use deferred income tax assets based on operating losses in prior years; therefore, there are no balances carried in the consolidated statements of financial position for such assets.
(c) The Company has non-capital losses of approximately $
| Canada | United States | Total | |||||||
| 2026 | $ | $ | $ | ||||||
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| $ | $ | $ |
(d) In addition, the Company has available capital loss carryforwards of approximately $
F-24
20. 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) is summarized as follows:
| 2025 | 2024 | 2023 | |||||||
| Professional, other fees, and salaries | $ | $ | $ | ||||||
| Stock-based compensation | |||||||||
| $ | $ | $ |
During the year ended October 31, 2025 and 2024, there were no options awarded to key management. During the year ended October 31, 2023, key management were awarded
(b) Trade payables and other liabilities
Included in accounts payable at October 31, 2025 is $nil payable to a corporation controlled by an officer of the Company (October 31, 2024 - $
21. Commitments and 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 $
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 reports the recovery of this contingent asset as funds are received. In the year ended October 31, 2025 the Company has recorded a recovery of $
(c) On November 1, 2023, a former employee filed a statement of claim against the Company relating to employment termination without reasonable notice. The Company filed a statement of defence and counterclaim on November 29, 2023 denying all liability to the former employee. In August 2024, management attended legal discoveries and presented the Company's position. The matter proceeded to non-binding arbitration in October 2024 which ended without reaching to an agreement. The Company considers the claim of the former employee to be largely and likely without merit and therefore, no provision has been recorded in these consolidated financial statements.
(d) On March 23, 2023, the Company signed a letter of intent (the "LOI") with companies incorporated in Romania (the "Parties") whereby the Parties intend to collaborate for the development of certain hardware equipment (the "Project"). Under the LOI, the Parties will provide full payment for the hardware equipment and the Company will provide all engineering support and expertise as required. At October 31, 2025 a formal agreement relating to the Project has not been executed.
As at October 31, 2024, the total advances were recorded as a deposit liability and the third party payments were recorded as prepaid expenses. During the year ended October 31, 2025, the hardware equipment was produced, and the amounts transferred to inventory. As at October 31, 2025, the Company determined that the net realizable value was $nil, and the full amount of $
(e) On December 3, 2024, the Company entered into an agreement with a third party to conduct research with the intention to develop intellectual property. If the project is successful, the Company will have the right to obtain a license for use of the intellectual property, the terms of which to be negotiated at that time. As at October 31, 2025, the Company has paid $
F-25
22. 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 year ended October 31, 2025.
23. 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 (CAD). 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 October 31, 2025, and October 31, 2024, balances that are denominated in CAD are as follows:
| As at | As at | |||||
| October 31, | October 31, | |||||
| 2025 | 2024 | |||||
| CAD | CAD | |||||
| Cash | $ | $ | ||||
| Other receivables | $ | $ | ||||
| Trade payables and other liabilities | $ | $ | ||||
| Convertible debentures | $ | $ | ||||
| Debenture payable | $ | $ | ||||
| Derivative liabilities | $ | $ | ||||
| Warrant liabilities | $ | $ | ||||
| Long-term loan | $ | $ |
A
(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, long-term loan and debenture payable. The exposure to interest rates on convertible debentures and the debenture payable is limited due to the short-term nature of these instruments. The Company's long- term loan is at a fixed interest rate. The exposure to interest rates for the Company is considered minimal.
(c) 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. The Company has exposure to credit risk from its cash. The maximum exposure to credit risk is the carrying value of these financial assets, which amounted to $
The risk for cash is mitigated by holding these balances with with central banks and financial institution counterparties that are highly rated. The Company therefore does not expect any credit losses on its cash.
The risk of credit loss on receivable is substantially mitigated by assessing the credit quality of counterparties, taking into account their financial position, past experience and other factors. Management actively monitors the Company's exposure to credit risk under its financial instruments, including with respect to other receivables.
F-26
23. Financial risk management (continued)
(d) 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 October 31, 2025.
(i) Trade payables
The following represents an analysis of the maturity of trade payables:
| As at | As at | |||||
| October 31, | October 31, | |||||
| 2025 | 2024 | |||||
| Over 30 days past billing date | $ | $ | ||||
| $ | $ |
(ii) Convertible debentures and derivative liabilities
The following represents an analysis of the maturity of the convertible debentures and derivative liabilities:
| As at October 31, | As at October 31, | |||||||||||
| 2025 | 2024 | |||||||||||
| Convertible debentures |
Debenture payable | Convertible debentures |
Debenture payable | |||||||||
| Less than three months | $ | $ | $ | $ | ||||||||
| Three to six months | ||||||||||||
| Six to twelve months | ||||||||||||
| $ | $ | $ | $ | |||||||||
(iii) Warrant liabilities
The following represents an analysis of the maturity of warrant liabilities:
| As at | As at | |||||
| October 31, | October 31, | |||||
| 2025 | 2024 | |||||
| Less than one year | $ | $ | ||||
| Between one to five years | ||||||
| Greater than five years | ||||||
| $ | $ |
(iv) Long-term debt
The following represents an analysis of the maturity of long-term debt:
| As at | As at | |||||
| October 31, | October 31, | |||||
| 2025 | 2024 | |||||
| Less than one year | $ | $ | ||||
| Between one to five years | ||||||
| Greater than five years | ||||||
| $ | $ |
F-27
24. Subsequent events
Subsequent to October 31, 2025:
(a) The Company secured three (3) private placements with investors consisting of common shares and warrants pursuant to prospectus and registrations set forth in applicable securities law. The Company realized gross proceeds of $
(b) The Company secured $
(c)
(d) The Company made partial payments of $
(e) .The Company extended convertible debentures that were within 3 months of maturity date October 31, 2025 for an additional six (6) months.
(f) .The Company issued a total of
F-28
ITEM 19. Exhibits
The following exhibits are filed as part of this Annual Report:
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on Form 20-F on its behalf.
| MICROMEM TECHNOLOGIES INC. | ||
| By: | /s/ Joseph Fuda | |
| Name: | Joseph Fuda | |
| Title: | Chief Executive Officer | |
| By: | /s/ Dan Amadori | |
| Name: | Dan Amadori | |
| Title: | Chief Financial Officer | |
Dated: February 20, 2026.
50