Micromem Technologies Inc 6-K, filed Mar 26, 2025
Micromem Technologies Inc (MMTIF)
About this 6-K
Micromem Technologies Inc filed this 6-K on March 26, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
March 2025
Commission File Number 0-26005
MICROMEM TECHNOLOGIES INC.
121 Richmond Street West, Suite 602, Toronto, ON M5H 2K1
[Indicate by checkmark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.]
Form 20-F [X] Form 40-F [ ]
[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.]
Yes [ ] No [X]
[If "Yes" is marked, indicate below the file number assigned to the registrant in connection with rule 12g3-2(b): N/A
This report on Form 6-K is hereby incorporated by reference in the registration statement on Form F-3 (Registration No. 333-134309) of Micromem Technologies Inc. and in the prospectus contained therein, and this report on Form 6-K shall be deemed a part of such registration statement from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished by Micromem Technologies Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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MICROMEM TECHNOLOGIES INC. |
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By: /s/ Joseph Fuda |
| Date: March 26, 2025 | Name: Joseph Fuda |
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Title: Chief Executive Officer |
Exhibit Index
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended January 31, 2025 and 2024
(Expressed in United States Dollars)
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Financial Statements
For the three months ended January 31, 2025 and 2024
(Expressed in United States Dollars)
Contents
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Financial Statements
Notice of no auditor review of the condensed interim consolidated financial statements
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the condensed interim consolidated financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim consolidated financial statements of Micromem Technologies Inc. (the "Company") have been prepared by and are the responsibility of the Company's management and
The Company's independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada, for a review of condensed interim consolidated financial statements by an entity's auditor.
March 26, 2025
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Statements of Financial Position
As at January 31, 2025 and October 31, 2024
(Expressed in United States dollars)
| As at | As at | |||||||
| Notes | January 31, 2025 | October 31, 2024 | ||||||
| Assets | ||||||||
| Current | ||||||||
| Cash | 21 | $ | 155,898 | $ | 125,705 | |||
| Prepaid expenses and other receivables | 19(d) | 152,261 | 141,736 | |||||
| Total current assets | 308,159 | 267,441 | ||||||
| Property and equipment | 6 | 11,000 | 15,272 | |||||
| Total assets | $ | 319,159 | $ | 282,713 | ||||
| Liabilities | ||||||||
| Current | ||||||||
| Trade payables and other liabilities | 19(b), 22(d) | $ | 241,605 | $ | 336,575 | |||
| Deposit liability | 20(d) | 63,000 | 63,000 | |||||
| Current lease liability | 9 | 7,120 | 11,980 | |||||
| Debenture payable | 7 | 35,922 | 37,389 | |||||
| Convertible debentures | 10 | 3,822,061 | 3,853,273 | |||||
| Derivative liabilities | 10 | 1,085,588 | 1,570,675 | |||||
| Warrant liabilities | 11 | 981,388 | 1,087,997 | |||||
| Total current liabilities | 6,236,684 | 6,960,889 | ||||||
| Long-term loan | 8 | 43,415 | 44,806 | |||||
| Total liabilities | 6,280,099 | 7,005,695 | ||||||
| Shareholders' Deficiency | ||||||||
| Share capital | 12 | 92,002,869 | 91,678,279 | |||||
| Contributed surplus | 27,079,214 | 27,288,183 | ||||||
| Equity component of convertible debentures | 10 | 905,640 | 696,671 | |||||
| Accumulated deficit | (125,948,663 | ) | (126,386,115 | ) | ||||
| Total shareholders' deficiency | (5,960,940 | ) | (6,722,982 | ) | ||||
| Total liabilities and shareholders' deficiency | $ | 319,159 | $ | 282,713 | ||||
| Going concern | 2 | |||||||
| Contingencies | 20 | |||||||
| Subsequent events | 23 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
| Approved on behalf of the Board of Directors: | ||
| "Joseph Fuda" | "Alex Dey" | |
| Director | Director |
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three months ended January 31, 2025 and 2024
(Expressed in United States dollars)
| Three months ended January 31, | ||||||||
| Notes | 2025 | 2024 | ||||||
| Operating expenses (income) | ||||||||
| General and administrative | 17(a) | $ | 29,540 | $ | 30,576 | |||
| Professional, other fees and salaries | 17(b) | 71,346 | 117,336 | |||||
| Stock-based compensation | 14 | - | 6,517 | |||||
| Travel and entertainment | 4,790 | 6,576 | ||||||
| Depreciation of property and equipment | 6 | 3,858 | 4,150 | |||||
| Foreign exchange loss (gain) | (128,030 | ) | 98,227 | |||||
| Total operating expenses (income) | (18,496 | ) | 263,382 | |||||
| Other expenses (income) | ||||||||
| Accretion expense | 10 | 73,880 | 31,637 | |||||
| Interest expense on convertible debt | 8,10 | 149,710 | 140,408 | |||||
| Other finance expenses | 7,9,11 | 4,457 | 3,715 | |||||
| Loss (gain) on revaluation of warrant liabilities | 11 | (177,668 | ) | - | ||||
| Loss (gain) on revaluation of derivative liabilities | 10 | (295,618 | ) | 584,900 | ||||
| Loss (gain) on conversion of convertible debentures | 10 | - | 10,345 | |||||
| Loss (gain) on repayment of convertible debentures | 10 | (5,298 | ) | 51,663 | ||||
| Loss (gain) on extinguishment of convertible debentures | 10 | (168,419 | ) | 334,462 | ||||
| Total other expenses (income) | (418,956 | ) | 1,157,130 | |||||
| Income (loss) before income tax provision | 437,452 | (1,420,512 | ) | |||||
| Income tax provision | 16 | - | - | |||||
| Net income (loss) and comprehensive income (loss) | $ | 437,452 | $ | (1,420,512 | ) | |||
| Net income (loss) attributable to shareholders | ||||||||
| Basic | 15 | $ | 437,452 | $ | (1,420,512 | ) | ||
| Diluted | 15 | $ | 579,783 | $ | (1,420,512 | ) | ||
| Weighted average number of outstanding shares, basic and diluted | ||||||||
| Basic | 15 | 573,645,335 | 513,580,575 | |||||
| Diluted | 15 | 685,136,067 | 513,580,575 | |||||
| Income (loss) per share | ||||||||
| Basic | 15 | $ | - | $ | - | |||
| Diluted | 15 | $ | - | $ | - | |||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders' Deficiency
For the three months ended January 31, 2025 and 2024
(Expressed in United States dollars)
| Equity component | ||||||||||||||||||||
| Number of | Contributed | of convertible | Accumulated | |||||||||||||||||
| Notes | shares | Share capital | surplus | debentures | deficit | Total | ||||||||||||||
| Balance at November 1, 2024 | 572,985,698 | $ | 91,678,279 | $ | 27,288,183 | $ | 696,671 | $ | (126,386,115 | ) | $ | (6,722,982 | ) | |||||||
| Private placements of shares for cash | 12 | 5,100,000 | 100,535 | - | - | - | 100,535 | |||||||||||||
| Share issuance costs | 12 | - | (2,680 | ) | - | - | - | (2,680 | ) | |||||||||||
| Exercise of warrants | 11,12 | 1,679,800 | 108,325 | - | - | - | 108,325 | |||||||||||||
| Convertible debentures converted into common shares | 10,12 | 4,600,588 | 118,410 | - | - | - | 118,410 | |||||||||||||
| Expiry of convertible debenture conversion option | 10 | - | - | 604,422 | (604,422 | ) | - | - | ||||||||||||
| Renewal of convertible debentures | 10 | - | - | (813,391 | ) | 813,391 | - | - | ||||||||||||
| Net income (loss) and comprehensive income (loss) for the period | - | - | - | - | 437,452 | 437,452 | ||||||||||||||
| Balance at January 31, 2025 | 584,366,086 | $ | 92,002,869 | $ | 27,079,214 | $ | 905,640 | $ | (125,948,663 | ) | $ | (5,960,940 | ) | |||||||
| Balance at November 1, 2023 | 510,368,838 | $ | 90,471,712 | $ | 24,868,843 | $ | 3,220,473 | $ | (123,402,232 | ) | $ | (4,841,204 | ) | |||||||
| Private placements of shares for cash | 12 | 2,400,000 | 112,673 | - | - | - | 112,673 | |||||||||||||
| Share issuance costs | 12 | - | (6,884 | ) | - | - | - | (6,884 | ) | |||||||||||
| Broker warrants issued | 13 | - | (3,208 | ) | 3,208 | - | - | - | ||||||||||||
| Expiry of stock options | 14 | - | - | (1,000 | ) | - | 1,000 | - | ||||||||||||
| Convertible debentures converted into common shares | 10,12 | 3,780,426 | 147,426 | - | - | - | 147,426 | |||||||||||||
| Expiry of convertible debenture conversion option | 10 | - | - | 2,178,358 | (2,178,358 | ) | - | - | ||||||||||||
| Renewal of convertible debentures | 10 | - | - | (2,179,021 | ) | 2,179,021 | - | - | ||||||||||||
| Stock-based compensation | 14 | - | - | 6,517 | - | - | 6,517 | |||||||||||||
| Net income (loss) and comprehensive income (loss) for the period | - | - | - | - | (1,420,512 | ) | (1,420,512 | ) | ||||||||||||
| Balance at January 31, 2024 | 516,549,264 | $ | 90,721,719 | $ | 24,876,905 | $ | 3,221,136 | $ | (124,821,744 | ) | $ | (6,001,984 | ) |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Micromem Technologies Inc.
Unaudited Condensed Interim Consolidated Statements of Cash Flows
For the three months ended January 31, 2025 and 2024
(Expressed in United States dollars)
| Three months ended | ||||||||
| January 31, | ||||||||
| Notes | 2025 | 2024 | ||||||
| Operating activities | ||||||||
| Net income (loss) | $ | 437,452 | $ | (1,420,512 | ) | |||
| Items not affecting cash: | ||||||||
| Depreciation of property and equipment | 6 | 3,858 | 4,150 | |||||
| Government grant | - | (17,868 | ) | |||||
| Accretion expense | 10 | 73,880 | 31,637 | |||||
| Accrued interest | 8,10 | 132,602 | 120,983 | |||||
| Stock-based compensation | 14 | - | 6,517 | |||||
| Loss (gain) on revaluation of warrant liabilities | 11 | (177,668 | ) | - | ||||
| Loss (gain) on conversion of convertible debentures | 10,18 | - | 10,345 | |||||
| Loss (gain) on repayment of convertible debentures | 10,18 | (5,298 | ) | 51,663 | ||||
| Loss (gain) on revaluation of derivative liabilities | 10,18 | (295,618 | ) | 584,900 | ||||
| Loss (gain) on extinguishment of convertible debentures | 10,18 | (168,419 | ) | 271,199 | ||||
| Foreign exchange loss (gain) | (114,554 | ) | 79,179 | |||||
| (113,765 | ) | (277,807 | ) | |||||
| Net changes in non-cash working capital: | ||||||||
| Prepaid expenses and other receivables | (10,525 | ) | 21,754 | |||||
| Trade payables and other liabilities | (94,970 | ) | 25,692 | |||||
| Cash flows used in operating activities | (219,260 | ) | (230,361 | ) | ||||
| Financing activities | ||||||||
| Principal payments on lease liability | 9 | (4,475 | ) | (4,198 | ) | |||
| Private placements of shares and warrants | 12 | 177,248 | 112,673 | |||||
| Share issuance costs | 12 | (2,680 | ) | (6,884 | ) | |||
| Proceeds from the exercise of warrants | 11,12 | 57,360 | - | |||||
| Proceeds from issuance of convertible debentures | 10,18 | 43,000 | 304,501 | |||||
| Repayments of convertible debentures | 10,18 | (21,000 | ) | (173,126 | ) | |||
| Cash flows provided by financing activities | 249,453 | 232,966 | ||||||
| Net change in cash | 30,193 | 2,605 | ||||||
| Cash - beginning of period | 125,705 | 31,584 | ||||||
| Cash - end of period | $ | 155,898 | $ | 34,189 | ||||
| Supplemental cash flow information | ||||||||
| Repayment penalties (classified in operating activites) | 10 | $ | - | $ | 63,263 | |||
| Interest paid (classified in operating activities) | 10 | $ | 17,108 | $ | 17,609 | |||
| Interest converted (classified in operating activities) | 10 | $ | 102,516 | $ | 1,816 | |||
| Interest paid on non-convertible debt (classified in operating activities) | 7 | $ | 2,175 | $ | 2,285 | |||
| Interest paid on lease liability (classified in operating activities) | 9 | $ | 196 | $ | 603 | |||
| Carrying amount of convertible debentures converted into common shares | 10,18 | $ | 118,410 | $ | 147,426 | |||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
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Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
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 January 31, 2025 and is devoting substantially all its efforts to securing commercial revenue opportunities.
2. Going concern
These unaudited condensed interim consolidated financial statements have been prepared with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
There are material uncertainties related to conditions and events that cast substantial doubt about the Company's ability to continue as a going concern and ultimately on the appropriateness of the use of the accounting principles applicable to a going concern. During the three months ended January 31, 2025, the Company reported a net income (loss) and comprehensive income (loss) of $437,452 (2024 - ($1,420,512)) and negative cash flow from operations of $219,260 (2024 - $230,361). The Company's working capital deficiency as at January 31, 2025 was $5,928,525 (October 31, 2024 - $6,693,448).
The Company's success depends on the profitable commercialization of its proprietary sensor technology. Based upon its current operating and financial plans, management of the Company believes that it will have sufficient access to financial resources to fund the Company's planned operations through the next twelve months; however, the ability of the Company to continue as a going concern is dependent upon its ability to secure additional financing and/or to profitably commercialize its technology. There is no assurance that the Company will be successful in the profitable commercialization of its technology, or will be able to secure the necessary additional financing. These unaudited condensed interim consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern. If the going concern assumption was not appropriate for these unaudited condensed interim consolidated financial statements then adjustments could be necessary to the carrying value of assets and liabilities, the reported expenses and the statement of financial position classifications used; in such cases, these adjustments could be material.
3. Basis of presentation
These unaudited condensed interim consolidated financial statements for the three months ended January 31, 2025 and 2024 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. The accounting policies and methods of computation adopted in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company's audited annual consolidated financial statements for the year ended October 31, 2024. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
These unaudited condensed interim consolidated financial statements were authorized for issuance and release by the Company's Board of Directors on March 26, 2025.
(a) Basis of consolidation
These unaudited condensed interim consolidated financial statements include the accounts of Micromem Technologies Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
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 |
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Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
3. Basis of presentation (continued)
(b) Basis of measurement
These unaudited condensed interim consolidated financial statements have been prepared on the historical cost basis, except for financial instruments designated at fair value through profit and loss which are measured at their fair value.
(c) Functional and presentation currency
These unaudited condensed interim consolidated financial statements are presented in United States dollars ("USD"), which is the functional currency of the Company and all of its subsidiaries.
(d) Use of estimates and judgments
The preparation of these unaudited condensed consolidated interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed interim consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are reviewed periodically and adjustments are made as appropriate in the reporting period they become known. Items for which actual results may differ materially from these estimates are described in the following section.
(i) Fair value of options, 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, 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. Depreciation 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 unaudited condensed interim consolidated financial statements reflect management's best estimate of the outcome based on facts known at the reporting date. When the Company anticipates a future income tax payment based on its estimates, it recognizes a liability. The difference between the expected amount and the final tax outcome has an impact on current and deferred taxes when the Company becomes aware of this difference.
When the Company incurs losses for income tax purposes, it assesses the probability of taxable income being available in the future, based on budgeted forecasts. These forecasts are adjusted for certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses. When the forecasts indicate that sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences.
(iv) Going concern assumption
The Company applies judgment in assessing whether material uncertainties exist that would cause doubt as to the whether the Company could continue as a going concern.
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Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
4. New and revised standards and interpretations
Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after November 1, 2024. The Company has adopted these pronouncements as of their effective date, and many are not applicable or do not have a significant impact on the Company and have been excluded.
The following amendments were issued but not yet effective. The Company will adopt these amendments as of their effective dates. The Company is currently assessing the impacts of adoption.
(a) Presentation and Disclosure in Financial Statements (IFRS 18)
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.
5. Patents
| As at | As at | |||||||||||
| November 1, | January 31, | |||||||||||
| 2024 | Additions | Foreign Exchange | 2025 | |||||||||
| Cost | $ | 681,288 | $ | - | $ | - | $ | 681,288 | ||||
| Accumulated amortization | 681,288 | - | - | $ | 681,288 | |||||||
| Net book value | 1,362,576 | - | - | 1,362,576 |
The Company holds several patents in the United States for its Multimodal Fluid Condition Sensor Platform. The patents are fully amortized as at January 31, 2025.
6. Property and equipment
| As at | As at | |||||||||||
| November 1, | January 31, | |||||||||||
| 2024 | Additions | Foreign Exchange | 2025 | |||||||||
| Cost | ||||||||||||
| Computers | $ | 9,510 | $ | - | $ | - | $ | 9,510 | ||||
| Right-of-use assets | 48,408 | - | - | $ | 48,408 | |||||||
| 57,918 | - | - | 57,918 | |||||||||
| Accumulated depreciation | ||||||||||||
| Computers | 6,340 | 216 | $ | 21 | 6,577 | |||||||
| Right-of-use assets | 36,306 | 3,642 | 393 | 40,341 | ||||||||
| 42,646 | 3,858 | 414 | 46,918 | |||||||||
| Net book value | $ | 15,272 | $ | 11,000 |
7. Debenture payable
The Company issued a debenture on March 17, 2020, with a principal amount of $51,500 CAD ($37,126 USD) and an original maturity date of June 17, 2020. The debenture's maturity date was extended by six month intervals on June 17, 2020, December 17, 2020, June 17, 2021, December 17, 2021, June 17, 2022, December 17, 2022, June 17, 2023 and December 17, 2023, June 17, 2024 and December 17, 2024. The most recent extension on December 17, 2024 extended the debenture to June 17, 2025. The extension of the debenture's maturity date resulted in a substantial modification of the existing terms of the debenture and accordingly was accounted for as an extinguishment. The debenture bears interest at a rate of 24% and is unsecured. As at January 31, 2025, the debenture had an outstanding balance of $35,922 ($52,031 CAD) (October 31, 2024 - $37,389 ($52,031 CAD)). During the three months ended January 31, 2025, total interest expense of $2,175 (2024 -$2,285) was recognized in the unaudited condensed interim consolidated statement of operations and comprehensive income (loss).
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Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
8. Long-term loan
The Company was granted a $60,000 CAD ($41,424 USD) unsecured, interest-free loan from the Government of Canada under the Canada Emergency Business Account ("CEBA") program to cover its operating costs (the "CEBA Loan"). If the Company were to have repaid $40,000 CAD ($27,616 USD) of the aggregate amount advanced on or before January 18, 2024, the repayment of the remaining $20,000 CAD would have been forgiven. The balance was not paid by January 18, 2024, and as a result, on January 19, 2024 the CEBA loan was converted to a 3-year term loan, bearing interest at 5% per annum, paid monthly. The total principal balance plus any accrued and unpaid interest is payable in full on December 31, 2026. The amount of interest expense incurred during the three months ended January 31, 2025 is $375 (2024 - $nil).
The continuity of the long-term loan is summarized as follows:
| Balance, October 31, 2024 | $ | 44,806 | |
| Accrued interest | 375 | ||
| Foreign exchange | (1,766 | ) | |
| Balance, January 31, 2025 | $ | 43,415 |
9. Leases
(a) As a lessee
The lease obligation relates to the use of office space in Toronto, Ontario. The lease agreement has a term of August 1, 2022 to July 31, 2025. The present value of the lease obligation was calculated using a discount rate of 9%.
The lease liability is summarized as follows:
| Balance, October 31, 2024 | $ | 11,980 | |
| Interest expense | 196 | ||
| Lease payments | (4,671 | ) | |
| Foreign exchange | (385 | ) | |
| Balance, January 31, 2025 | $ | 7,120 |
The following represents a maturity analysis of the Company's undiscounted contractual lease obligations as at January 31, 2025:
| USD | |||
| Less than one year | $ | 7,635 |
(b) As a lessor
The Company sub-leases a portion of its office space under a lease agreement for a term of three years, expiring July 31, 2025. 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 three months ended January 31, 2025, the Company recognized a total of $3,561 (2024 - $4,557) as rental income which has been recorded as a reduction to general and administrative expenses on the condensed interim consolidated statement of operations and comprehensive income (loss).
The following represents a maturity analysis of the Company's lease payments to be received after January 31, 2025:
| USD | |||
| Less than one year | $ | 5,844 |
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Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
10. 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.
During the three months ended January 31, 2025, the Company incurred $nil of financing costs (2024 - $63,263) which primarily consisted of early repayment and administrative fees. 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 unaudited condensed interim consolidated financial statements
Convertible debentures outstanding as at January 31, 2025:
| *Denominated in CAD | USD (equity component) |
CAD (embedded derivative) |
USD (embedded derivative) |
Total | ||||||||
| Loan principal outstanding | $ | 1,492,826 | $ | 2,155,013 | * | $ | 283,750 | |||||
| Terms of loan | ||||||||||||
| Annual stated interest rate | 12% - 24% | 12% - 24% | 2% - 4% | |||||||||
| Effective annual interest rate | 24% | 13% - 270% | 24% - 215% | |||||||||
| Conversion price to common shares | $0.03 - $0.04 | $0.05 - $0.10 | * | (i) - (ii) | ||||||||
| Remaining life (in months) | 1 - 6 | 0 - 6 | 0 - 11 | |||||||||
| Unaudited Condensed Interim Consolidated Statement of Financial Position | ||||||||||||
| Carrying value of loan principal | $ | 1,491,376 | $ | 1,457,967 | $ | 136,716 | $ | 3,086,059 | ||||
| Interest payable | 274,459 | 426,611 | 34,932 | 736,002 | ||||||||
| Convertible debentures | $ | 1,765,835 | $ | 1,884,578 | $ | 171,648 | $ | 3,822,061 | ||||
| Derivative liabilities | $ | - | $ | 900,198 | $ | 185,390 | $ | 1,085,588 | ||||
| Equity component of convertible debentures | $ | 905,640 | $ | - | $ | - | $ | 905,640 | ||||
For the three months ended January 31, 2025:
| USD | ||||||||||||
| (equity | CAD (embedded | USD (embedded | Total | |||||||||
| component) | derivative) | derivative) | ||||||||||
| Unaudited Condensed Interim Consolidated Statement of Operations and Comprehensive Income (Loss) | ||||||||||||
| Accretion expense | $ | 1,368 | $ | 49,463 | $ | 23,049 | $ | 73,880 | ||||
| Interest expense | $ | 84,176 | $ | 62,868 | $ | 2,291 | $ | 149,335 | ||||
| Loss (gain) on revaluation of derivative liabilities | $ | - | $ | (329,883 | ) | $ | 34,265 | $ | (295,618 | ) | ||
| Loss (gain) on repayment of convertible debentures | $ | - | $ | - | $ | (5,298 | ) | $ | (5,298 | ) | ||
| Loss (gain) on extinguishment of convertible debentures | $ | (2,818 | ) | $ | (165,601 | ) | $ | - | $ | (168,419 | ) | |
| Unaudited Condensed Interim Consolidated Statement of Changes in Equity | ||||||||||||
| Amount of principal converted to common shares | $ | - | $ | 66,000 | * | $ | - | |||||
| Amount of interest converted to common shares | $ | 44,106 | $ | 84,000 | * | $ | - | |||||
| Number of common shares issued on conversion of | ||||||||||||
| convertible debentures | 1,600,588 | 3,000,000 | - | 4,600,588 | ||||||||
| Unaudited Condensed Interim Consolidated Statement of Cash Flows | ||||||||||||
| Amount of principal repaid in cash | $ | 16,000 | $ | - | $ | 5,000 | $ | 21,000 | ||||
| Amount of interest repaid in cash | $ | 3,029 | $ | 14,079 | $ | - | $ | 17,108 | ||||
(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.
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
10. Convertible debentures (continued)
(b) Comparative information presented in the unaudited condensed interim consolidated financial statements
Convertible debentures outstanding as at October 31, 2024:
| *Denominated in CAD | USD (equity component) |
CAD (embedded derivative) |
USD (embedded derivative) |
Total | ||||||||
| Loan principal outstanding | $ | 1,413,245 | $ | 1,523,657 | * | $ | 231,250 | |||||
| Terms of loan | ||||||||||||
| Annual stated interest rate | 24% | 12% - 24% | 2% - 4% | |||||||||
| Effective annual interest rate | 24% | 14% - 270% | 24% - 176% | |||||||||
| Conversion price to common shares | $0.03 - $0.04 | $0.05 - $0.10 | (i) - (ii) | |||||||||
| Remaining life (in months) | 0 - 4 | 0 - 6 | 0 - 12 | |||||||||
| Unaudited Condensed Interim Consolidated Statement of Financial Position | ||||||||||||
| Carrying value of loan principal | $ | 1,413,245 | $ | 1,461,356 | $ | 106,347 | $ | 2,980,948 | ||||
| Interest payable | 333,000 | 506,685 | 32,640 | 872,325 | ||||||||
| Convertible debentures | $ | 1,746,245 | $ | 1,968,041 | $ | 138,987 | $ | 3,853,273 | ||||
| Derivative liabilities | $ | - | $ | 1,444,932 | $ | 125,743 | $ | 1,570,675 | ||||
| Equity component of convertible debentures | $ | 696,671 | $ | - | $ | - | $ | 696,671 | ||||
(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 three months ended January 31, 2024: | ||||||||||||
| USD | ||||||||||||
| *Denominated in CAD | (equity | CAD (embedded | USD (embedded | |||||||||
| component) | derivative) | derivative) | Total | |||||||||
| Unaudited Condensed Interim Consolidated Statement of Operations and Comprehensive Income (Loss) | ||||||||||||
| Accretion expense | $ | 1,368 | $ | 20,083 | $ | 10,033 | $ | 31,484 | ||||
| Interest expense | $ | 75,562 | $ | 61,130 | $ | 3,716 | $ | 140,408 | ||||
| Loss (gain) on revaluation of derivative liabilities | $ | - | $ | 661,303 | $ | (76,403 | ) | $ | 584,900 | |||
| Loss (gain) on conversion of convertible debentures | $ | - | $ | - | $ | 10,345 | $ | 10,345 | ||||
| Loss (gain) on repayment of convertible debentures | $ | - | $ | - | $ | 51,663 | $ | 51,663 | ||||
| Loss (gain) on extinguishment of convertible debentures | $ | - | $ | 252,269 | $ | 82,193 | $ | 334,462 | ||||
| Unaudited Condensed Interim Consolidated Statement of Changes in Equity | ||||||||||||
| Amount of principal converted to common shares | $ | - | $ | 60,000 | * | $ | 93,600 | |||||
| Amount of interest converted to common shares | $ | - | $ | 197 | * | $ | 1,872 | |||||
| Number of common shares issued on conversion of | ||||||||||||
| convertible debentures | - | 1,203,945 | 2,576,481 | 3,780,426 | ||||||||
| Unaudited Condensed Interim Consolidated Statement of Cash Flows | ||||||||||||
| Amount of principal repaid in cash | $ | - | $ | - | $ | 173,126 | $ | 173,126 | ||||
| Amount of interest repaid in cash | $ | 3,614 | $ | 13,995 | $ | - | $ | 17,609 | ||||
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
10. Convertible debentures (continued)
(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 January 31, | As at October 31, | ||
| 2025 | 2024 | ||
| Volatility factor (based on historical volatility) | 162% - 215% | 140% - 203% | |
| Risk free interest rate | 2.75% - 2.90% | 3.18% - 3.50% | |
| Expected life of conversion features (in months) | 0 - 11 | 0 - 12 | |
| Expected dividend yield | 0% | 0% | |
| CAD to USD exchange rate (as applicable) | 0.6904 | 0.7186 | |
| Call value | $0.00 - $0.03 | $0.02 - $0.04 |
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.
11. Warrant liability
During the three months ended January 31, 2025, the Company issued warrants in connection with private placements and in arrangements with convertible debt. See note 12.
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 28, 2025 | ||||||
| January 2, 2025 | January 7, 2025 | (Immediately prior | ||||
| (Grant Date) | (Grant Date) | to exercise) | ||||
| Share price | $0.02 ($0.03 CAD) | $0.02 ($0.03 CAD) | $0.04 ($0.055 CAD) | |||
| Exercise price | $0.04 ($0.05 CAD) | $0.04 ($0.05 CAD) | $0.04 ($0.05 CAD) | |||
| Volatility factor (based on historical volatility) | 157% | 157% | 157% | |||
| Risk free interest rate | 2.92% | 2.92% | 2.66% | |||
| Expected life (in years) of warrant | 3.0 | 3.0 | 2.5 | |||
| Expected dividend yield | 0% | 0% | 0% |
As at January 31, 2025, the Company re-valued the warrant liability with the following range of inputs, assumptions and results, respectively:
| January 31, 2025 | |
| Share price | $0.04 ($0.06 CAD) |
| Exercise price | $0.04 ($0.05 CAD) |
| Volatility factor (based on historical volatility) | 157% - 161% |
| Risk free interest rate | 2.66% |
| Expected life (in years) of warrant | 2.5 - 3.0 |
| Expected dividend yield | 0% |
The following summarizes the warrant activity for the three months ended January 31, 2025:
| Number of | Grant date | Fair value as at | Weighted average | |||||||||
| warrants | fair value | period end | exercise price | |||||||||
| Outstanding at October 31, 2024 | 22,095,553 | $ | 261,604 | $ | 1,087,997 | $ | 0.04 | |||||
| Issued in a private placement (note 12 (b)) | 5,100,000 | 76,713 | 179,040 | 0.04 | ||||||||
| Issued on conversion of convertible debts (note 12 (c)) | 3,000,000 | 45,311 | 105,318 | 0.04 | ||||||||
| Exercise of warrants (note 12 (d)) | (1,679,800 | ) | - | (50,965 | ) | 0.04 | ||||||
| Loss (gain) on revaluation of outstanding warrant liabilities | - | - | (340,002 | ) | 0.04 | |||||||
| Outstanding at January 31, 2025 | 28,515,753 | $ | 383,628 | $ | 1,321,390 | $ | 0.04 | |||||
During the three months ended January 31, 2025, the Company allocated share issuance costs totalling $2,086 to the warrants issued, which were included in other finance expenses in the statement of operations and comprehensive income (loss). See note 12.
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
12. Share capital
(a) Authorized and outstanding shares
The Company has two classes of shares as follows:
(i) Special redeemable voting preference shares - 2,000,000 authorized, nil issued and outstanding.
(ii) Common shares without par value - an unlimited number authorized. The holders of the common shares are entitled to receive dividends which may be declared from time to time, and are entitled to one vote per share at shareholder meetings of the Company. All common shares are ranked equally with regards to the Company's residual assets.
(b) Private placements
On January 2, 2025, the Company completed a non-brokered private placement and issued 5,100,000 units at $0.04 ($0.05 CAD) per unit for gross proceeds of $177,248. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.04 (CAD $0.05) for a period of 3 years following the issue date of the units. The Company has estimated the fair value of these warrants at $76,713 using the Black-Scholes option pricing model. See note 10. All securities issued are subject to a 4 month hold period expiring May 2, 2025. There were no finder's fee paid in connection with the financing. The Company incurred cash share issuance costs totalling $4,766 and allocated $2,680 to the common shares and $2,086 to the warrants issued.
(c) Arrangements with convertible debt
On January 2, 2025, the Company converted convertible debentures in the amount of $91,903 ($110,261 CAD) and issued 2,205,211 units. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.04 (CAD $0.05) for a period of 3 years following the issue date of the units. The Company has estimated the fair value of these warrants at $33,170 using the Black-Scholes option pricing model, and $58,733 was recorded to share capital. See note 11. All securities issued are subject to a 4 month hold period expiring May 2, 2025. There were no finder's fee paid in connection with the financing.
On January 7, 2025, the Company converted convertible debentures in the amount of $27,712 ($39,739 CAD) and issued 794,789 units. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.04 (CAD $0.05) for a period of 3 years following the issue date of the units. The Company has estimated the fair value of these warrants at $12,141 using the Black-Scholes option pricing model, and $15,571 was recorded to share capital. See note 11. All securities issued are subject to a 4 month hold period expiring May 7, 2025. There were no finder's fee paid in connection with the financing.
(d) Exercise of warrants
On January 28, 2025, 1,679,800 warrants were exercised for proceeds of $57,360 ($83,082 CAD). The warrants were valued immediately prior to exercise at $50,965 and transferred to share capital.
13. Warrants
The following summarizes the broker warrants activity for the three months ended January 31, 2025:
| Number of | Grant date | Weighted average | |||||||
| warrants | fair value | exercise price | |||||||
| Outstanding at October 31, 2024 | 247,000 | $ | 3,909 | $ | 0 | ||||
| Outstanding at January 31, 2025 | 247,000 | $ | 3,909 | $ | 0 |
The following table summarizes the warrants outstanding and exercisable as at January 31, 2025:
| Expiry | Number of | Exercise | Remaining | |||||||
| date | warrants | price | contractual life | |||||||
| December 22, 2025 | 63,000 | $0.07 ($0.095 CAD) | 0.89 | |||||||
| July 18, 2027 | 184,000 | $0.04 ($0.05 CAD) | 2.46 | |||||||
| 247,000 |
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
14. Stock options
(a) Stock option plan
Under the Company's fixed stock option plan (the "Plan"), the Company could grant up to 27,500,000 shares of common stock to directors, officers, employees or consultants of the Company and its subsidiaries. The exercise price of each option is equal to or greater than the market price of the Company's shares on the date of grant unless otherwise permitted by applicable securities regulations. An option's maximum term under the Plan is 10 years. Stock options are fully vested upon issuance by the Company unless the Board of Directors stipulates otherwise by Directors' resolution.
(b) Summary of changes
| Number of | Weighted average | |||||
| options | exercise price | |||||
| Outstanding at October 31, 2024 | 8,750,000 | $ | 0.06 | |||
| Outstanding at January 31, 2025 | 8,750,000 | $ | 0.06 |
(c) Stock options outstanding at January 31, 2025
| Weighted average | |||||||||||||
| Options | Options | Remaining | |||||||||||
| Date of issue | Expiry date | outstanding | exercisable | Exercise price | contractual life | ||||||||
| November 13, 2020 | November 13, 2025 | 5,750,000 | 5,750,000 | 0.05 | 0.8 | ||||||||
| October 8, 2021 | October 8, 2026 | 1,000,000 | 1,000,000 | 0.07 | 1.7 | ||||||||
| March 20, 2023 | March 20, 2028 | 2,000,000 | 2,000,000 | 0.07 | 3.1 | ||||||||
| As at January 31, 2025 | 8,750,000 | 8,750,000 | $ | 0.06 | 1.4 | ||||||||
During the three months ended January 31, 2025, the Company recorded an expense of $nil for the vesting of stock options (2024 - $6,517).
15. Income (loss) per share
Basic and diluted income (loss) per share are calculated using the following numerators and denominators:
| Three months ended January 31, | ||||||
| Numerator | 2025 | 2024 | ||||
| Net income (loss) attributable to common shareholders and used in computation of basic and diluted income (loss) per share | $ | 437,452 | $ | (1,420,512 | ) | |
| Add: adjustments for dilutive effects | 142,331 | - | ||||
| Net income (loss) attributable to common shareholders and used in computation of diluted income (loss) per share | $ | 579,783 | $ | (1,420,512 | ) | |
| Denominator | ||||||
| Weighted average number of common shares for computation of basic and diluted income (loss) per share | 573,645,335 | 513,580,575 | ||||
| Dilutive effects of convertible features (note 10) | 111,490,732 | - | ||||
| Weighted average number of common shares for computation of diluted income (loss) per share | 685,136,067 | 513,580,575 | ||||
For the three months ended January 31, 2025, all CAD (embedded derivative) convertible debentures, stock options, and warrants were anti-dilutive and, therefore, are excluded from the calculation of diluted loss per share.
For the three months ended January 31, 2024, all convertible debentures, stock options and warrants were anti-dilutive and, therefore, are excluded from the calculation of diluted loss per share.
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
16. Income taxes
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.
As at January 31, 2025, the Company has non-capital losses of approximately $33.7 million, $29.3 million in Canada and $4.4 million in other foreign jurisdictions, available to reduce future taxable income. Non-capital losses expire commencing in 2026. In addition, the Company has available capital loss carry forwards of approximately $1.2 million to reduce future taxable capital gains. Capital losses carry forward indefinitely.
As at January 31, 2025, and October 31, 2024, the Company assessed that it is not probable that sufficient taxable income will be available to use deferred income tax assets based on operating losses in prior years; therefore, there are no balances recognized in the unaudited condensed interim consolidated statements of financial position for such assets.
17. Operating expenses
(a) General and administration
The components of general and administration expenses are as follows:
| Three months ended January 31, | ||||||||
| Notes | 2025 | 2024 | ||||||
| General and administration | 6 | $ | 17,295 | $ | 8,493 | |||
| Investor relations, listing and filing fees | 8,202 | 20,466 | ||||||
| Telephone | 4,043 | 1,617 | ||||||
| $ | 29,540 | $ | 30,576 | |||||
(b) Professional, other fees and salaries
The components of professional, other fees and salaries expenses are as follows:
| Three months ended January 31, | ||||||
| 2025 | 2024 | |||||
| Professional and consulting fees | $ | 29,163 | $ | 69,701 | ||
| Salaries and benefits | 42,183 | 47,635 | ||||
| $ | 71,346 | $ | 117,336 | |||
18. Supplemental cash flow information
The following provides a reconciliation of the cash flows from convertible debentures and derivative liabilities :
| Three months ended January 31, | ||||||
| 2025 | 2024 | |||||
| Balance - beginning of period | $ | 5,423,948 | $ | 4,627,452 | ||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of convertible debentures | 43,000 | 304,501 | ||||
| Repayments of convertible debentures | (21,000 | ) | (173,126 | ) | ||
| Non-cash changes: | ||||||
| Accretion expense | 73,880 | 31,484 | ||||
| Accrued interest on convertible debentures | 132,602 | 120,983 | ||||
| Loss (gain) on repayment of convertible debentures | (5,298 | ) | 51,663 | |||
| Loss (gain) on conversion of convertible debentures | - | 10,345 | ||||
| Loss (gain) on revaluation of derivative liabilities | (295,618 | ) | 584,900 | |||
| Loss (gain) on extinguishment of convertible debt | (168,419 | ) | 271,199 | |||
| Convertible debentures converted into common shares | (118,410 | ) | (147,426 | ) | ||
| Convertible debentures converted into warrants | (45,311 | ) | - | |||
| Foreign exchange loss | (111,725 | ) | 75,271 | |||
| Balance - end of period | $ | 4,907,649 | $ | 5,757,246 | ||
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
19. Key management compensation and related party transactions
The Company reports the following related party transactions:
(a) Key management compensation
Key management personnel are persons responsible for planning, directing and controlling activities of the Company, including officers and directors. Compensation paid or payable to these individuals (or companies controlled by such individuals) are summarized as follows:
| Three months ended January 31, | ||||||
| 2025 | 2024 | |||||
| Professional, other fees, and salaries | $ | 25,492 | $ | 29,658 | ||
| $ | 25,492 | $ | 29,658 | |||
During the three months ended January 31, 2025 and 2024, key management were not awarded any options.
(b) Trade payables and other liabilities
Included in accounts payable at January 31, 2025 is $26,665 payable to a corporation controlled by an officer of the Company (October 31, 2024 - $28,161). In addition, at January 31, 2025, accounts payable includes $2,340 payable to a director (October 31, 2024 - $2,436).
20. Contingencies
(a) The Company has agreed to indemnify its directors and officers and certain of its employees in accordance with the Company's by-laws. The Company maintains insurance policies that may provide coverage against certain claims.
(b) The Company has previously reported on the lawsuit filed by Mr. Steven Van Fleet against Micromem, the Company's response to the lawsuit and its counterclaims against Mr. Van Fleet.
On April 29, 2021 the matter was resolved in Micromem's favor when the Court dismissed Mr. Van Fleet's claims and ruled that he was liable to the Company and to MAST on their counterclaims. On June 16, 2021, the Court ruled that Micromem and MAST had established damages totaling $765,579 representing the full amount that had been requested; furthermore, the Court awarded costs and statutory prejudgment interest from May 9, 2017. On June 29, 2021 the Court entered a judgement in favor of Micromem and MAST for a total amount of $1,051,739.
With respect to the Company's efforts to collect on that Judgement, a settlement ("Settlement") was reached during October 2021. Pursuant to the Settlement, the Company received an initial one-time payment and is entitled to additional monthly payments over a period of up to six years. The Company will record those payments as and when they are received. The total amount to be received by the Company if Mr. Van Fleet makes all the required payments under the terms of the Settlement will be less than the amount of the Judgement obtained by the Company, but if Mr. Van Fleet does not comply with the terms of the Settlement, it also provides the Company a means of enforcing a larger judgement against Mr. Van Fleet that is substantially in line with the Judgement. Mr. Van Fleet has made the prescribed monthly payments each month since October 2021.
The Company reports the recovery of this contingent asset as funds are received. During the three months ended January 31, 2025, the Company has recorded a recovery of $1,002 received in the period as a reduction of legal expenses (2024 - $2,400).
(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 interim condensed 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 equipments and the Company will provide all engineering support and expertise as required. As at January 31, 2025, a formal agreement relating to the Project has not been executed.
As at January 31, 2025, the Company received total advances of $63,000 from the Parties and has paid $126,000 to a third party for the construction of the hardware equipment. The Company has recorded the total advances as a deposit liability and the third party payments as a prepaid expense on the interim condensed consolidated statement of financial position.
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
21. Capital risk management
The Company's objectives when managing capital are to (i) maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, (ii) ensure it has sufficient cash resources to further develop and market its technologies and (iii) maintain its ongoing operations. The Company defines its capital as its net assets, i.e. total assets less total liabilities. In order to secure the additional capital necessary to pursue these objectives, the Company may attempt to raise additional funds through the issuance of equity or convertible debentures or by securing strategic partners. The Company is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy during the three month period ended January 31, 2025.
22. 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 January 31, 2025, and October 31, 2024, balances that are denominated in CAD are as follows:
| As at | As at | |||||
| January 31, | October 31, | |||||
| 2025 | 2024 | |||||
| CAD | CAD | |||||
| Cash | $ | 46,625 | $ | 34,362 | ||
| Other receivables | $ | 32,209 | $ | 10,182 | ||
| Trade payables and other liabilities | $ | 184,136 | $ | 439,667 | ||
| Convertible debentures | $ | 2,729,690 | $ | 2,738,716 | ||
| Debenture payable | $ | 52,031 | $ | 52,031 | ||
| Derivative liabilities | $ | 1,303,879 | $ | 2,010,760 | ||
| Warrant liabilities | $ | 1,421,477 | $ | 1,514,051 | ||
| Long-term loan | $ | 63,107 | $ | 62,351 |
A 10% strengthening of the US dollar against the CAD would decrease net income (loss) and comprehensive income (loss) by $392,000 as at January 31, 2025 (October 31, 2024 - decrease net income (loss) and comprehensive income (loss) by $487,000). A 10% weakening of the USD against the CAD would have the opposite effect of the same magnitude.
(b) Interest rate risk
Interest rate risk is the risk that the fair value of, or future cash flows from, the Company's financial instruments will significantly fluctuate due to changes in market interest rates. The Company is exposed to interest rate risk on its interest-bearing convertible debentures. This exposure is limited due to the short-term nature of the convertible debentures.
(c) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's cash. The maximum exposure to credit risk is the carrying value of these financial assets, which amounted to $155,898 as at January 31, 2025 (October 31, 2024 - $125,705). The Company reduces its credit risk by assessing the credit quality of counterparties, taking into account their financial position, past experience and other factors.
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.
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
22. 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 January 31, 2025.
(i) Trade payables
The following represents an analysis of the maturity of trade payables:
| As at | As at | |||||
| January 31, | October 31, | |||||
| 2025 | 2024 | |||||
| Less than 30 days past billing date | $ | 53,583 | $ | - | ||
| 31 to 90 days past billing date | 27,799 | - | ||||
| Over 90 days past billing date | 160,223 | 336,575 | ||||
| $ | 241,605 | $ | 336,575 |
(ii) Convertible debentures and derivative liabilities
The following represents an analysis of the maturity of the convertible debentures and derivative liabilities:
| As at January 31, | As at October 31, | |||||||||||
| 2025 | 2024 | |||||||||||
| Convertible debentures |
Debenture payable | Convertible debentures |
Debenture payable | |||||||||
| Less than three months | $ | 2,206,809 | $ | 35,922 | $ | 2,492,556 | $ | 37,389 | ||||
| Three to six months | 1,564,877 | - | 1,376,673 | - | ||||||||
| Six to twelve months | 228,750 | - | 171,250 | - | ||||||||
| $ | 4,000,436 | $ | 35,922 | $ | 4,040,479 | $ | 37,389 | |||||
(iii) Warrant liabilities
The following represents an analysis of the maturity of warrant liabilities:
| As at | As at | |||||
| January 31, | October 31, | |||||
| 2025 | 2024 | |||||
| Less than one year | $ | - | $ | - | ||
| Between one to five years | 981,388 | 1,087,997 | ||||
| Greater than five years | - | - | ||||
| $ | 981,388 | $ | 1,087,997 |
(iv) Long-term debt
The following represents an analysis of the maturity of long-term debt:
| As at | As at | |||||
| January 31, | October 31, | |||||
| 2025 | 2024 | |||||
| Less than one year | $ | - | - | |||
| Between one to five years | 47,535 | 49,477 | ||||
| Greater than five years | - | - | ||||
| $ | 47,535 | 49,477 |
|
Micromem Technologies Inc. Notes to the Unaudited Condensed Interim Consolidated Financial Statements (Expressed in United States dollars, unless otherwise noted) |
23. Subsequent events
Subsequent to January 31, 2025:
(a) The Company secured one private placement with an investor consisting of common shares and warrants pursuant to prospectuses and registrations set forth in applicable securities law. It realized net proceeds of $125,000 ($179,075 CAD) and issued a total of 2,595,290 common shares.
(b) The Company secured $82,500 ($118,300 CAD) in convertible debentures with a 12-month term and conversion features which become effective six months after initiation date.
(c) The Company converted $101,250 ($145,180 CAD) of convertible debentures through the issuance of 3,013,393 common shares.
(d) The Company issued 9,803,739 common shares upon an exercise of warrants realizing net proceeds of $338,327 ($490,187 CAD)
(e) The Company extended convertible debentures that were within 3 months of maturity date at January 31, 2025 for an additional three (3) to six (6) months.
|
MICROMEM TECHNOLOGIES INC. |
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
FOR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025. |
|
|
NOTICE TO READER
The Management's Discussion and Analysis ("MD&A") report for Micromem Technologies Inc. for the three months ended January 31, 2025, as attached, is dated as of March 26, 2025, consistent with the date of the Independent Registered Public Accounting Firm report and with the original 52-109 CEO and CFO certification filings related thereto.
| /s/ Dan Amadori | /s/ Joseph Fuda |
| Dan Amadori, CFO | Joseph Fuda, CEO |
| March 26, 2025. | March 26, 2025. |
| MICROMEM TECHNOLOGIES INC. |
| MANAGEMENT'S DISCUSSION AND ANALYSIS |
| FOR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025. |
INTRODUCTION
The following sets out the Management's Discussion and Analysis ("MD&A") of the financial position and result of operations for the three months ended January 31, 2025, of Micromem Technologies Inc. (the "Company", "Micromem" or "we"). The MD&A should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes for the fiscal years ending October 31, 2024 and 2023, which are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Additional information regarding the Company is available on the SEDAR website at www.sedar.com.
The Company's shares are traded on the OTCQB under the symbol MMTIF and on the Canadian Securities Exchange ("CSE") under the symbol MRM. In November 2007, the Company incorporated Micromem Applied Sensor Technologies Inc. ("MAST") for the purpose of moving forward with the planned commercialization of its technology.
Certain information provided by the Company in this MD&A and in other documents publicly filed throughout the year that are not recitation of historical facts may constitute forward-looking statements. The words "may", "would", "could", "will", "likely", "estimate", "believe", "expect", "forecast" and similar expressions are intended to identify forward-looking statements.
Readers are cautioned that such statements are only predictions, and the actual events or results may differ materially. In evaluating such forward-looking statements, readers should specifically consider the various factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements.
FORWARD LOOKING STATEMENTS
This MD&A contains forward-looking statements and forward-looking information within the meaning of applicable Canadian securities legislation ("forward looking statements"). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, potentials, future events or performance (often, but not always, using words or phrases such as "believes", "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", or "intends" or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken or achieved) are not statements of historical fact, but are "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or developments in the Company's business or in its industry to differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such forward-looking statements. Forward-looking statements include disclosure regarding possible events, conditions or results of operations that are based on assumptions about future conditions, courses of action and consequences. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions, or circumstances. The Company cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things, the successful commercialization of our technology, comments about potential future revenues, joint development agreements and expectations of signed contracts with customers, etc. A number of inherent risks, uncertainties and factors affect the operations, performance and results of the Company and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. Some of these risks and uncertainties include the risk of not securing the required capital in future, the risks of not successfully concluding agreements with potential partners on a timely basis and the risks associated with commercializing and bringing to market our technology. These risks are affected by certain factors that are beyond the Company's control: the existence of present and possible future government regulation, competition that exists in the Company's business, uncertainty of revenues, markets and profitability, as well as those other factors discussed in this MD&A report. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements and reference should also be made to the Company's Annual Information Form (prepared and filed in the form of a Form 20-F Annual Report pursuant to The Securities Exchange Act of 1934) for a description of risk factors.
Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities law.
**********
|
MICROMEM TECHNOLOGIES INC. |
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
FOR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025. |
TABLE OF CONTENTS:
| MICROMEM TECHNOLOGIES INC. |
| MANAGEMENT'S DISCUSSION AND ANALYSIS |
| FOR THE THREE MONTHS ENDED JANUARY 31, 2025 |
| PREPARED AS OF MARCH 26, 2025. |
1. OVERVIEW
The Company has previously completed a successful interwell tracer program with Chevron, utilizing a technology application for interwell tracing in operating oil wells. The technology was developed in conjunction with a Silicon Valley-based design and engineering group who developed the technology which is, hereinafter, referred to as ARTRA. The testing of a prototype analyzer was completed in Lost Hills, California with Chevron in 2019-2020. The Company and Chevron committed approximately $5 million to this initiative. We met most recently with Chevron personnel in September 2024 in their Houston offices. Chevron requested a "white paper" report on tracer technologies. Micromem engaged the research team at the University of Toronto in December 2024 to prepare this white paper report and the Company has recently submitted this report to Chevron.
Additionally, Micromem entered a new collaboration with the University of Toronto, Defence Research and Development Canada ("DRDC") and the Natural Sciences and Engineering Research Council of Canada ("NSERC"). The primary objectives and goals of this collaboration ("the Project") are to develop cutting-edge technology for military and industrial applications, specifically in the field of state-of-the-art biochemical sensors ("the Technology"). This program was initiated in 2023 at the University of Toronto and has, to date, made significant strides in advancing the Technology. NSERC is providing a portion of the funding for the Project.
Micromem will have an exclusive worldwide license to the intellectual property and any patents created through the Project, which is expected to have application for both military and commercial use. Notable progress to date includes the development of artificial intelligence and machine learning capabilities.
Micromem continues to pursue business opportunities in Romania. It has been engaged in discussions with Romgaz, the state-controlled gas company in Romania for the past 21 months. Under the Romgaz umbrella, the Company has also been pursuing discussions to complete multiple projects with Petrom, the state-controlled oil company and with Transelectrica, the major public utility and interconnection company in Romania.
Our ongoing discussions are with the University of Ploiesti who conducts all of the research and development efforts for oil and gas technology applications on behalf of the national energy companies in Romania.
The Company continues to raise capital for its ongoing operations; working capital continues to be constrained. The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Under IFRS Micromem reports our complex financial instruments (convertible debentures) with quarterly remeasurement of the debentures and the related derivative liabilities. The result in such quarterly remeasurements is that the Company reports significant non-cash expenses in each quarter which have a material impact on our financial statement presentation. This matter is more fully addressed in the body of this MD&A report.
Our litigation with Steve Van Fleet, a former officer of the Company, was resolved in our favour in 2021. The Company has been receiving monthly payments from Mr. Van Fleet as part of the settlement agreement that was struck; these monthly payments are scheduled to continue through September, 2027.
Micromem relocated their offices to smaller, less expensive premises in 2022. The Company has four personnel managing the Company's operations including Joseph Fuda, our President & CEO and Dan Amadori, our Chief Financial Officer, both of whom are our named executives.
The Company held its Annual General Meeting of Shareholders on Monday, April 22, 2024 for the fiscal years through October 31, 2023. At the meeting, the incumbent directors - Joseph Fuda, Alex Dey and Oliver Nepomuceno were reelected to our Board of Directors.
2. BUSINESS DEVELOPMENTS IN 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). 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.
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. Micromem engaged in discussions with a Houston-based oil recovery company and with the research team at the University of Toronto.
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.
Romgaz:
As previously reported, a senior team of technical advisors has been enlisted by Romgaz to assist in the execution of our go forward workplan. This development team includes representation from the University of Oil and Gas of Ploiesti in Romania ("the University"). This team 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 work plan developed more slowly than originally anticipated during 2024. The Company did receive a purchase order for the first two of the ARTRA units. The first of these units has been built by our engineering subcontractor, Entanglement Technologies, and delivered to Toronto where it is currently held for shipment to Romania. Micromem has received an initial payment of 50% of the total purchase price from Romgaz for the first unit and expects the balance of payment in the second quarter of 2025.
Micromem is now evaluating hardware enhancements for the initial unit received to make this unit fully functional for oil and gas well in field measurements. The Company continues to pursue the automated sampler system application with Chevron and with other industry participants including the lead engineer involved in the original sampler design and patent application. It is intended that the automated sampler will be integrated with the ARTRA unit for field installation on a natural gas well, advancing the development of the second configuration of the Unit as a well-mounted and fully automated unit, tailored specifically for gas wells.
Once the initial unit is sent to the University, it will be assessed and tested, and the Company expects the unit will be certified. Pending such certification, Micromem anticipates that it will receive additional orders for up to 20 more units for infield testing by Romgaz.
Micromem's goal is to complete this phase of development and product sales to Romgaz in the 2025 fiscal year. If we are successful in doing so, we would thereafter partner with Romgaz in the full commercial rollout of this technology on a broader scale in Romania where the national energy companies operate an estimated 3,800 gas wells and 1,200 oil wells.
We have previously referenced the opportunities to work with the national energy companies in Romania to:
i. develop enhanced software analytics for gas and oil well operators, and,
ii. develop powerline monitoring solutions for the transmission and interconnection hardware in use in Romania's electrical grid.
These initiatives were not advanced during 2024 while the initial ARTRA program was underway. These opportunities remain available; it is expected that we will develop initial plans for such undertakings during 2025.
Our relationship with the Toronto based engineering/product development group, as previously announced, remains intact and positive. We held several technical meetings with this group in 2024; this group has taken delivery in Toronto of the first ARTRA unit that has been built by our engineering subcontractor, Entanglement Technologies.
3. FINANCING
In Q1 2025 the Company received gross proceeds of $100,535 from private placements and issued 5,100,000 common shares (2024: $112,673 and issued 2,400,000 common shares).
The Company issued 4,600,588 common shares relating to the conversion by debenture holders of their debentures totaling $118,410 during the year (2024: issued 3,780,426 common shares relating to conversion of debentures totaling $147,426).
The Company's convertible debt structure is complex with 3 broad categories of such debt: (i) $CDN denominated debt with fixed conversion prices; (ii) $US denominated debt with fixed conversion prices, and (iii) $US denominated debt with variable conversion prices. The term of the debt in each instance is typically between 4 months and 12 months. The Company has repaid certain convertible loans at maturity when due as requested by the debenture holder or converted the debenture into common shares at the request of the debenture holder or extended the term of the debenture through negotiations with the debenture holder - in this latter case, certain terms of the loan - interest rate and/or conversion price - have, in some instances, been adjusted as part of the extension.
Under IFRS reporting, such loans require quarterly remeasurements. The application of the remeasurement methodology is very specific. This is more fully discussed in Section 4; in summary, there are several non-cash related income and expense charges that arise from such remeasurements. We recorded the following non-cash charges in the quarter ending January 31, 2025 and 2024 none of which impact the Company's cash flows:
| For the 3 months ended January 31 | 2025 | 2024 | Change | ||||||
| Accretion expense | $ | 73,880 | $ | 31,637 | $ | 42,243 | |||
| Loss (gain) on revaluation of warrant liabilities | (177,668 | ) | - | (177,668 | ) | ||||
| Loss on conversion of convertible debentures | - | 10,345 | (10,345 | ) | |||||
| Loss (gain) on revaluation of derivative liabilities | (295,618 | ) | 584,900 | (880,518 | ) | ||||
| Loss (gain) on extinguishment/repayment of convertible debentures | (173,717 | ) | 386,125 | (559,842 | ) | ||||
| Net expense (income) | $ | (573,123 | ) | $ | 1,013,007 | $ | (1,586,130 | ) |
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|
MICROMEM TECHNOLOGIES INC. |
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
FOR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025.
|
4. DISCUSSION OF OPERATING RESULTS:
(a) Financial Position as at January 31, 2025:
| ($US 000) | |||||||||
| January 31, 2025 | October 31, 2024 | January 31, 2024 | |||||||
| Assets: | |||||||||
| Cash | 156 | 126 | 34 | ||||||
| Prepaid expenses and other receivables | 152 | 142 | 82 | ||||||
| 308 | 268 | 116 | |||||||
| Property and equipment | 11 | 15 | 29 | ||||||
| Total Assets | 319 | 283 | 145 | ||||||
| Liabilities: | |||||||||
| Accounts payable and other liabilities | 341 | 437 | 298 | ||||||
| Current lease liability | 7 | 12 | 18 | ||||||
| Convertible debentures | 3,822 | 3,853 | 3,764 | ||||||
| Warrant liability | 981 | 1,088 | |||||||
| Derivative liability | 1,086 | 1,571 | 2,032 | ||||||
| 6,237 | 6,961 | 6,112 | |||||||
| Long-term lease liability | - | - | 8 | ||||||
| Long-term loan | 43 | 45 | 27 | ||||||
| Total Liabilities | 6,280 | 7,006 | 6,147 | ||||||
| Shareholders' Deficit: | |||||||||
| Share capital | 92,002 | 91,678 | 90,722 | ||||||
| Contributed surplus | 27,079 | 27,288 | 24,877 | ||||||
| Equity component of convertible debentures | 906 | 697 | 3,221 | ||||||
| Accumulated deficit | - | (126,386 | ) | (124,822 | ) | ||||
| Total Shareholders' Deficit | (5,961 | ) | (6,723 | ) | (6,002 | ) | |||
| 319 | 283 | 145 |
Commentary:
1. The Company's working capital deficiency is $5,928,525 on January 31, 2025 (2024: deficiency of $5,995,773).
2. The Company continued to secure additional financing in 2025 through convertible debentures and also through the exercise of warrants. Given the terms of the convertible debentures, the Company has measured, as appropriate, the prescribed accounting treatment for these convertible debentures and the related derivatives. These loans were typically of a short-term nature and, in many cases, renewed on multiple occasions; the related financial reporting has become progressively more complex.
The balance reported as convertible debentures at January 31, 2025, is $3,822,061 (2024: $3,725,348) and the related derivative liability balance is $1,088,588 (2024: $2,031,898). The Company reports accretion expense on these debentures of $73,880 (2024: $31,637), a loss on the conversion of convertible debentures to share capital of $nil (2024: $10,345), a gain on the revaluation of the underlying derivative liabilities of $295,618 (2024: loss of $584,900) and a gain on extinguishment/repayment of convertible debentures of $173,717 (2024: loss of $386,125). Management generally employs a Black Scholes valuation model although, for certain of the loan transactions contracted for, it uses a binomial measurement model.
Management acknowledges that the cost of financing to the Company is significant; interest on the convertible debentures is substantial. In 2025 we reported $149,710 of interest expense on convertible debt obligations for the 3 months ended January 31, 2025 (2024: $140,408).
During the quarter ended January 31, 2025, the Company secured funding from various sources, the significant components include:
| 2025 | 2024 | |||||
| Exercise of warrants | $ | 108,325 | $ | - | ||
| Private placements of shares for cash consideration | $ | 100,535 | $ | 112,673 | ||
| Bridge loan financing | $ | 118,410 | $ | 147,426 | ||
| $ | 327,270 | $ | 260,099 |
Operating Results:
The following table summarizes the Company's operating results for the quarter ended January 31, 2025 and 2024:
| Quarter Ended January 31 | ||||||
| 2025 | 2024 | |||||
| ($000) | ($000) | |||||
| Administration | 30 | 31 | ||||
| Professional fees and salaries | 71 | 117 | ||||
| Stock-based compensation | - | 7 | ||||
| Travel and entertainment | 5 | 7 | ||||
| Depreciation of property and equipment | 4 | 4 | ||||
| Foreign exchange loss (gain) | (128 | ) | 98 | |||
| Accretion expense | 74 | 32 | ||||
| Interest expense convertible debt | 150 | 140 | ||||
| Other financing costs | 4 | 4 | ||||
| Loss (gain) on revaluation of warrant liabilities | (178 | ) | - | |||
| Gain (loss) on revaluation of derivatives liabilities | (295 | ) | 585 | |||
| Loss on conversion of convertible debentures | - | 10 | ||||
| Loss (gain) on extinguishment/repayment of convertible debentures | (174 | ) | 386 | |||
| Net expenses (income) | (437 | ) | 1,421 | |||
| Net comprehensive loss (income) | (437 | ) | (1,421 | ) | ||
| Loss (income) per share | 0.00 | 0.00 | ||||
Q1 Fiscal 2025 Compared to Q1 Fiscal 2024
a) Administration costs were $29,540 in 2025 versus $30,576 in 2024. These costs include rent and occupancy costs; office insurance costs, investor relations, listings and filing fees and other general and administrative expenses.
b) Professional and other fees and salaries costs were $71,346 in 2025 versus $117,236 in 2024. The components of these total costs include legal and audit related expenses, 3rd party consulting fees and staff salaries and benefits.
The CFO received $9,283 of management fees in 2025 (2024: $12,000). The CEO of the Company received $15,615 of compensation in 2025 (2024: $17,658).
c) Travel and entertainment expenses were $4,790 in 2025 (2024: $6,576).
d) Stock-based compensation was $nil in 2025 (2024: $6,517 calculated using the Black Scholes option-pricing model).
e) Interest expense was $149,710 in 2025 versus $140,408 in 2024. 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 $3,858 in 2025 versus $4,150 in 2024, relating to Capital Assets.
g) Financing costs were $4,457 in 2025 versus $3,715 in 2024. These expenses relate to costs associated with the convertible debenture financings which the Company completed.
h) The gain on foreign exchange reported in 2025 was $114,554 versus a loss of $79,179 in 2024. 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 US dollar was $0.7550 at January 31, 2024, $0.7180 at October 31, 2024, and $0.6876 at January 31, 2025.
i) The other expenses reported relate to the convertible debentures. These expenses are all non-cash expenses and compare as follows:
| For the 3 months ended January 31 | 2025 | 2024 | Change | ||||||
| Accretion expense | $ | 73,880 | $ | 31,637 | $ | 42,243 | |||
| Loss (gain) on revaluation of warrant liabilities | (177,668 | ) | - | (177,668 | ) | ||||
| Loss on conversion of convertible debentures | - | 10,345 | (10,345 | ) | |||||
| Loss (gain) on revaluation of derivative liabilities | (295,618 | ) | 584,900 | (880,518 | ) | ||||
| Loss (gain) on extinguishment/repayment of convertible debentures | (173,717 | ) | 386,125 | (559,842 | ) | ||||
| Net expense (income) | $ | (573,123 | ) | $ | 1,013,007 | $ | (1,586,130 | ) |
C. Unaudited Quarterly Financial Information - Summary
| Three months ended (unaudited) |
Revenues | Expenses | Income (loss) in period |
Loss per share |
||||||||
| $ | $ | $ | $ | |||||||||
| 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 | ) | - | |||||||
| October 31, 2023 | - | (1,271,082 | ) | 1,271,082 | - | |||||||
| July 31, 2023 | - | (149,612 | ) | 149,612 | - | |||||||
| April 30, 2023 | - | 3,896,034 | (3,896,034 | ) | 0.01 |
| Three months ended (unaudited) |
Working capital (deficiency) |
Capital assets at NBV |
Total Assets | Shareholders' equity (deficit) |
||||||||
| 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 | ) | ||||||
| October 31, 2023 | (4,818,699 | ) | 32,767 | 168,350 | (4,841,204 | ) | ||||||
| July 31, 2023 | (6,148,332 | ) | 36,331 | 240,608 | (6,174,904 | ) | ||||||
| April 30, 2023 | (6,847,503 | ) | 39,466 | 309,695 | (6,873,535 | ) |
**********
| MICROMEM TECHNOLOGIES INC. |
| MANAGEMENT'S DISCUSSION AND ANALYSIS |
| FOR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025. |
5. RISKS AND UNCERTAINTIES
There are a number of risks which may individually or in aggregate affect the long-term commercial success of the Company, both known and unknown. An investment in the Company should be considered speculative due to the nature of the Company's activities and its current stage of development.
Stage of Development of Technology:
The Company has made strides in advancing its technology and in developing a product portfolio and in engaging customers in joint development projects. There remains the risk that the Company must successfully complete development work on these products to have available commercially viable products which can be licensed or sold.
Customers' Willingness to Purchase:
We have previously entered into joint development agreements whereby our prototype products are subjected to rigorous testing by our partners. We expect to be successful in commercializing our product portfolio. If we are successful in doing so, our partners will then have to decide the extent to which they will adopt our technology for future use for their applications. The future revenue streams for the Company are dependent upon the rate of adoption by our customers and their willingness to do so.
Financing:
The Company has successfully raised funding each year to continue to support its development initiatives and fund the Company's corporate structure and overheads. The Company must continue to source financing in order to continue to support its business initiatives.
Competitors:
The Company is subject to competition from other entities that may have greater financial resources and more in-house technical expertise.
Management Structure:
The Company is highly dependent on the services of a small number of senior management team members. If one of these individuals was unavailable, the Company could encounter a difficult transition process.
Foreign Currency Exposure:
The Company expects to sell its products and license technologies in the United States, in Canada and abroad. It has raised financing in both $CDN and $USD. The Company has not hedged its foreign currency exposure. Foreign currency fluctuations present an ongoing risk to the business.
***************************
| MICROMEM TECHNOLOGIES INC. |
| MANAGEMENT'S DISCUSSION AND ANALYSIS |
| FOR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025. |
6. GOING CONCERN
The consolidated financial statements have been prepared on a "going concern" basis, which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
There are material uncertainties related to conditions and events that cast significant doubt about the Company's ability to continue as a going concern for a reasonable period of time in future. In the quarter ending January 31, 2025, the Company reported a net income and comprehensive income of $437,452 (2024: loss of $1,420,512) and negative cash flow from operations of $219,260 and (2024: $(230,361)). The Company's working capital deficiency as at January 31, 2025, is $5,927,525 (2024: $5,995,773).
The Company's future success depends on the profitable commercialization of its proprietary sensor technology. There is no assurance that the Company will be successful in the profitable commercialization of its technology. Based upon its current operating and financial plans, management of the Company believes that it will have sufficient access to financial resources to fund the Company's planned operations through fiscal 2025 and beyond; however, the ability of the Company to continue as a going concern is dependent on its ability to secure additional financing and/or to profitably commercialize its technology. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
If the "going concern" assumption was not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used; in such cases, these adjustments would be material.
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| MICROMEM TECHNOLOGIES INC. |
| MANAGEMENT'S DISCUSSION AND ANALYSIS |
| OR THE THREE MONTHS ENDED JANUARY 31, 2025 PREPARED AS OF MARCH 26, 2025. |
7. OTHER MATTERS
(a) Critical Accounting Policies
The accounting policies the Company believes are critical to the financial reporting process include foreign currency translation, financial instruments, convertible debentures and derivative liabilities, convertible debentures, fair value, property and equipment, impairment of long-lived assets, patents, deferred development costs, lease, stock-based compensation, and income taxes. These critical accounting policies are set forth in Note 3 to our consolidated financial statements as of January 31, 2025.
(b) Legal matters: lawsuit vs Steven Van Fleet
We have previously reported on the litigation matter relating to Mr. Van Fleet, the former President of MAST, which commenced in 2018.
In 2021, the court 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 $765,580, 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 $1,051,740.
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. To date, Mr. Van Fleet has complied with the terms of the Settlement. 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.
(c) Legal Matter
On November 1, 2023, a former employee (the "Plaintiff") 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, 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.
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.
(d) Contingencies and Commitments
The Company may be subject to litigation, claims and governmental and regulatory proceedings arising in the ordinary course of business. In such cases, the Company accrues a loss contingency for these matters when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. There are no such accruals reflected in the Company's accounts at January 31, 2025.
The Company signed a lease from August 1, 2022, to July 31, 2025. The lease stipulates base monthly and additional rental expense of $3,943 CDN. Lease commitments are as follows - commitments less than one year of $23,658 CDN; 1 year to 5 years: $nil.
(e) Off-Balance Sheet Arrangements
At January 31, 2025, the Company has no off-balance sheet financial commitments and does not anticipate entering into any contracts of such nature other than the addition of new operating leases for equipment and premises as may be required in the normal course of business.
(f) Share Capital
At January 31, 2025, the Company reports 584,366,086 common shares outstanding (2024: 516,549,264). The Company has 8,750,000 stock options outstanding with a weighted average exercise price of $0.06 per share (2024: 9,750,000 options outstanding with a weighted average exercise price of $0.06 per share). Additionally, the Company has 247,000 warrants outstanding with a weighted average exercise price of $0.048 per warrant.
(f) Management and Board of Directors
At our most recent Annual Meeting of Shareholders held on April 22, 2024, Joseph Fuda, Oliver Nepomuceno, and Alex Dey were re-elected to serve on our Board of Directors. Joseph Fuda and Dan Amadori continue to serve as officers of the Company.
Our management team and directors, along with their Q1 2025 remuneration, is presented as below:
| Q1 2025 remuneration | ||||||||||
| Individual | Position | Cash | Options | Total | ||||||
| Joseph Fuda | President, Director | 15,615 | - | 15,615 | ||||||
| Oliver Nepomuceno | Director | - | - | - | ||||||
| Alex Dey | Director | - | - | - | ||||||
| Dan Amadori | CFO | 9,283 | - | 9,283 | ||||||
| Total | 24,898 | - | 24,898 | |||||||
(g) Transactions with Related Parties
The Company reports the following related party transactions:
Key management compensation:
Key management personnel are persons responsible for planning, directing and controlling activities of the Company, including several employees, officers and directors. Compensation paid or payable to these individuals (or companies controlled by such individuals) is summarized as:
| 2025 | 2024 | |||||
| Professional, other fees and salaries | $ | 71,346 | $ | 117,336 | ||
| Stock based compensation | - | 6,517 | ||||
| $ | 71,346 | $ | 123,853 |
(h) Liquidity and Capital Resources
Liquidity:
We currently report negative cash flow from operations. This result will only change once we are generating sufficient revenue from either license fees, royalties or the sale of products utilizing our technology. In 2024 and subsequent to the end of the fiscal year, the Company continued to raise additional financing.
We currently have no lines of credit in place. We must continue to obtain financing from investors or from clients in support of our development projects.
We have granted to our directors, officers, and employee's options to purchase shares at prices that are at or above market price on the date of grant. At January 31, 2025 there are 8,750,000 options outstanding at a weighted average exercise price of $0.06 per share.
Capital Resources: We have no commitments for capital expenditures as of January 31, 2025.
8. SUBSEQUENT EVENTS
Subsequent to January 31, 2025:
(a) The Company secured one private placement with an investor consisting of common shares and warrants pursuant to prospectuses and registrations set forth in applicable securities law. It realized net proceeds of $125,000 ($179,075 CAD) and issued a total of 2,595,290 common shares.
(b) The Company secured $82,500 ($118,300 CAD) in convertible debentures with a 12-month term and conversion features which become effective six months after initiation date.
(c) The Company converted $101,250 ($145,180 CAD) of convertible debentures through the issuance of 3,013,393 common shares.
(d) The Company issued 9,803,739 common shares upon an exercise of warrants realizing net proceeds of $338,327 ($490,187 CAD)
(e) The Company extended convertible debentures that were within 3 months of maturity date at January 31, 2025 for an additional three (3) to six (6) months.
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Joseph Fuda, President and Chief Executive Officer of Micromem Technologies Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together the "interim filings") of Micromem Technologies Inc., (the Issuer) for the interim period ended January 31, 2025.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) Designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) Material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) Information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) Designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control of framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission or "COSO". The Company is utilizing the guidance for smaller public companies published by COSO.
5.2 not applicable
5.3 not applicable
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on November 1, 2024 to January 31, 2025 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: March 26, 2025
/s/ Joseph Fuda
___________________________________________
Joseph Fuda
President and Chief Executive Officer
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Dan Amadori, Chief Financial Officer of Micromem Technologies Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together the "interim filings") of Micromem Technologies Inc., (the issuer) for the interim period ended January 31, 2025.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) Designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) Material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) Information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) Designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control of framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission or "COSO". The Company is utilizing the guidance for smaller public companies published by COSO.
5.2 not applicable
5.3 not applicable
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on November 1, 2024 to January 31, 2025 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: March 26, 2025
/s/ Dan Amadori
___________________________________________
Dan Amadori
Chief Financial Officer