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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

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

or

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

For The Fiscal Year Ended October 31, 2013

Or

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

or

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

Date of event requiring this shell report

Commission File No.0-26005MICROMEM TECHNOLOGIES INC.(Exact name of Registrant as specified in its charter)

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

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

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

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

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

Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report: 158,491,425 Common Shares

Indicate by check mark if the registrant is a well-known
seasoned issuer as defined in Rule 405 of the Securities Act:

Yes
[   ]     No [X]

If this report is an annual or transition report, indicate by
check mark if the registration is not required to file a report pursuant to
section 13 or 15 of the Securities Exchange Act of 1934:

Yes [  
]     No [X]

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes [X]     No
[   ]

1

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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

Yes [  
]     No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerator filer in Rule 12b-2 of
the Exchange Act:

|Large Accelerated Filer [   ] | Accelerated Filer [   ] | Non-Accelerated Filer [  
  ]
|----------------------------- | ----------------------- | -----------------------------

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

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

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the Registrant
has elected to follow:

Item 17[   ]    Item 18
[   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes [   ]     No [X]

2

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TABLE OF CONTENTS

|           |                                                                                    | Page
|---------- | ---------------------------------------------------------------------------------- | ----
|**Part I** |                                                                                    |     
|           |                                                                                    |     
|Item 1.    | Identity of
      Directors, Senior Management and Advisors                        | 4   
|Item 2.    | Offer Statistics and Expected
      Timetable                                      | 4   
|Item 3.    | Key Information                                                                    | 4   
|Item 4.    | Information on the Company                                                         | 13  
|Item 4A.   | Unresolved Staff
      Comments                                                    | 19  
|Item 5.    | Operating and Financial Review
      and Prospects                                 | 19  
|Item 6.    | Directors, Senior
      Management and Employees                                   | 26  
|Item 7.    | Major Shareholders and Related
      Party Transactions                            | 31  
|Item 8.    | Financial
      Information                                                        | 32  
|Item 9.    | The Offer and Listing                                                              | 32  
|Item 10.   | Additional
      Information                                                       | 33  
|Item 11.   | Quantitative and Qualitative
      Disclosures about Market Risk                   | 39  
|Item 12.   | Description of
      Securities Other Than Equity Securities                       | 39  
|           |                                                                                    |     
|Part II    |                                                                                    |     
|           |                                                                                    |     
|Item 13.   | Defaults,
      Dividend Arrearages and Delinquencies                              | 39  
|Item 14.   | Material Modifications to the
      Rights of Security Holders and Use of Proceeds | 39  
|Item 15.   | Controls and
      Procedures                                                      | 39  
|Item 16.   | Not Applicable                                                                     | 40  
|Item 16A   | Audit Committee
      Financial Expert                                             | 40  
|Item 16B   | Code of Ethics                                                                     | 40  
|Item 16C   | Principal
      Accountant Fees and Services                                       | 40  
|Item 16D   | Exemptions from the Listing
      Standards for Audit Committees                   | 41  
|Item 16E   | Purchases of
      Equity by the Issuer and Affiliated Purchasers                  | 41  
|Item 16F   | Changes in Registrants
      Certifying Accountant                                | 41  
|Item 16G   | Corporate
      Governance                                                         | 41  
|Item 16H   | Mine Safety Disclosure                                                             | 41  
|           |                                                                                    |     
|Part III   |                                                                                    |     
|           |                                                                                    |     
|Item 17.   | Financial Statements                                                               | 41  
|Item 18    | Financial
      Statements                                                         | 41  
|Item 19.   | Exhibits                                                                           | 42  
|Signatures |                                                                                    | 42  

3

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PART I

INTRODUCTION

Abbreviations

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

Forward Looking and Cautionary Statements

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

ITEM
1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM
2. **OFFER STATISTICS AND EXPECTED TIMETABLE**

Not Applicable.

ITEM
3. **KEY INFORMATION**

A. **Selected Financial Data**

Fiscal Years 2013, 2012 and 2011

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

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

International Financial Reporting Standards

Selected balance sheet information(all
      amounts in U.S. dollars)2013
    
    
    2012
    
    
    2011Working capital (deficiency)
    
    $25,888
    
    
    ($1,793,217
    )
    
    ($2,239,178
    )Capital Assets
    
    13,998
    
    
    5,787
    
    
    10,201Total Assets
    
    2,166,455
    
    
    1,180,278
    
    
    906,346Capital Stock
    
    57,755,613
    
    
    54,728,239
    
    
    51,774,555Shareholders' equity (deficiency)
    
    1,536,319
    
    
    (904,030
    )
    
    (1,409,228
    )


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


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

Fiscal Years 2010 and 2009

The following table sets forth our selected consolidated
financial data in United States dollars as of and for each of the fiscal years
ended October 31, 2010 and October 31, 2009. The selected consolidated financial
data has been derived from our audited consolidated financial statements. These
consolidated financial statements have been prepared in accordance with Canadian
GAAP which differ in certain respects from the principles the Company would have
followed had it consolidated financial statements been prepared in accordance
with U.S. GAAP. The selected consolidated financial information in the IFRS
chart above should not be compared to the information in the Canadian GAAP table
below as the information was prepared using different financial reporting
standards.

Canadian GAAP

Selected balance sheet information(all
      amounts in U.S. dollars)2010
    2009Working capital (deficiency)
    ($1,459,460)
    ($650,044)Capital Assets
    16,686
    24,442Total Assets
    568,336
    2,562,479Capital Stock
    50,102,699
    48,494,180Shareholders' equity (deficiency)
    (1,019,226)
    1,522,839


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Selected statement of operations and
      deficit information(all amounts in U.S. dollars)2010
    
    
    2009Interest and
      other income
    $
    22,886
    
    $
    88,047Research and development
      expenses
    
    (106,007
    )
    
    13,880General and
      administrative and other expenses
    
    4,699,208
    
    
    2,433,537Stock compensation expense
    
    95,038
    
    
    1,951,569Loss before
      income taxes
    
    (4,665,353
    )
    
    (4,310,939
    )Provision for income taxes
      (recovery)
    
    9,508
    
    
    -Net loss
    
    (4,674,861
    )
    
    (4,310,939
    )Loss per share-basic and diluted
    
    (0.05
    )
    
    (0.05
    )Weighted average number of basic and diluted
      shares
    
    92,225,645
    
    
    86,400,439Dividends
    
    -
    
    
    -


Reconciliation between Canadian GAAP and U.S. GAAP:

Canadian GAAP conforms in all material respects with U.S. GAAP
except for how the Company has accounted for development expenditures reported
in the fiscal years ended October 31, 2010 and 2009.

Currency and Exchange Rates

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

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

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

2013
    2012
    2011
    2010
    2009High for period
    1.0164
    1.0281
    1.0583
    1.0039
    0.9716Low for period
    0.9348
    0.9783
    0.9430
    0.9278
    0.7692End of period
    0.9402
    0.9872
    1.0079
    0.9885
    0.9334Average for period
    0.9710
    1.0046
    1.0139
    0.9640
    0.8587


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

February
    March
    April
    May
    June
    July2013
    2013
    2013
    2013
    2013
    2013High
    1.0285
    1.0314
    1.0270
    1.0371
    1.0532
    1.0576Low
    0.9960
    1.0156
    1.0072
    1.0023
    1.0170
    1.0261


August
    September
    October
    November
    December
    January2013
    2013
    2013
    2012
    2012
    2013High
    1.0553
    1.0533
    1.0456
    0.0028
    0.9952
    1.0078Low
    1.0297
    1.0237
    1.0284
    0.9927
    0.9841
    0.9839


On February 17, 2014 the noon buying rate for one Canadian
dollar, as quoted by the Bank of Canada, was CDN $1.098 = U.S. $1.00.

B.Capitalization and Indebtedness

Not Applicable.

C.Reasons for the Offer and Use of Proceeds

Not Applicable.

D.Risk Factors

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

Risk Factors Related to Our Business

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

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

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

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

At October 31, 2013 we had $821,283 cash on hand and our
current monthly cash expenses were approximately $175,000. Our working capital
position is $425,888 at October 31, 2013. Subsequent to October 31, 2013,
through to the date of the filing of this annual report, we have raised an
additional $1,751,924 through the exercise of warrants. Additionally in January
2014 the bridge loan of $290,014 reported as of October 31, 2013 was converted
to common equity.

We currently have no operating revenue.

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

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

We continued to develop applications of our magnetic sensor
technology in 2013 working with our technical advisors, and our strategic
development partners. We are pursuing joint development agreements with
potential strategic partners with the expectation that we will jointly develop
sensor applications for use by these potential strategic partners. We believe
that these current initiatives will result in revenues and cash flow to the
Company in the future but there can be no assurance when and if such revenues
will be achieved.

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

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

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

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

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

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

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

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

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

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

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

8

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

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

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

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

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

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

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

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

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

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

9

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

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

We depend on key personnel.

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

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

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

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

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

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

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

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

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

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

10

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There are foreign exchange risks associated with our
Company.

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

Risk Factors Related to Our Common Shares

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

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

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

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

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

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

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

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

11

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

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

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

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

We do not anticipate paying dividends.

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

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

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

12

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

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

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

ITEM
4. **INFORMATION ON THE COMPANY**

A.History and Development of Our Company

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

The Evolution of Micromem from Memory to Sensor Based Client
Solutions

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

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

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

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

13

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

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

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

- Using a MEMS and/or Nano scale pallet, we are able to combine disparate
  sensor modalities into a common, integrated solution that brings the exact
  tools in play in solving the target issue. Competitive solutions tend to force
  fit less than optimum sensor combinations in an effort to sell their standard
  offerings.
- Although our solutions are custom designed for each client, our processes
  leading to the solution are automated and the end result is a cost effective
  solution with a differentially higher return on investment for our clients.
- Our Open Innovation approach to solving client problems allows us to bring
  together already proven sensor technologies in different market spaces
  allowing us to apply them in new applications in new markets. This
  significantly reduces the time to revenue generation by both MAST and our
  client and it reduces risk of project failure.

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

B.Business Overview

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

Our technology combines the use of semi-conducting
ferromagnetic metals with a sensor. When the magnetization of the magnetic
material changes direction, the sensor senses the change in direction and
records a 0 or 1. In this fashion, a bit is created that is non-volatile,
based on magnetic properties.

14

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C.Profile at October 31, 2013

During 2013, the Company focused on moving its existing
development projects forward, converting projects in its pipeline into
development contracts with customers and establishing its product portfolio in
its current major market verticals.

In 2013 we were successful in having certain of our development
project costs partially funded by companies with whom we have negotiated product
development contracts. We were also successful in securing approximately $3.7
million of new financing consisting of the issuance of unit private placement
and the exercise of warrants. Since October 31, 2013 through to the date of this
Annual Report, we have secured additional financing of $1,751,924 through the
exercise of warrants.

Product Development Cycle:

The product development cycle for each development project that
the Company undertakes can be broken down into distinct phases:

Phase 1:Initial assessment  completion of initial
project plan, cost and volume estimates, product specifications and tolerances,
establishing working principles.

Phase 2:Preliminary design work, specification of
manufacturing processes, evaluation of manufacturing options.

Phase 3:Sensor electronics manufacturing test methods,
completion of initial prototypes for beta testing by client.

Phase 4:Pilot production stage where product is
certified, test protocols are established and quality processes are optimized.

Phase 5:Commercial production.

Product Portfolio:

The core portfolio of products that the Company continues to
develop, in conjunction with strategic development partners, who are paying for
a portion of the development costs, includes:

|1. | Nano particle concentration sensor platforms:The
      initial application is to detect break through water in producing oil
      wells. This platform is at Phase 3 of development and is expected to move
      to Phase 4 in 2014, with commercial production expected by the 2014 fiscal
      year end. The Company has been working on this product with a major
      international oil company since 2010. The Company has billed and collected
      $175,000 of project costs incurred to date under these working
      arrangements.                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | Enhanced secondary oil recovery platform using MAST
      nano particles:The initial application is to accurately measure well
      pressure in oil fields and the degradation of these fields. This platform
      is at Phase 3 of development. The Company initiated the work on Product 2
      in 2012. In mid-2013 it executed a $25.4 million development contract with
      an international oil company for this product. The contract stipulates
      successive milestones to be achieved in order to realize the full contract
      value. In its initial stages, we have invoiced $87,290 of project costs
      incurred. The Company projects receiving payments against achieving
      milestones during 2014.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | Power transformer oil degradation sensor:Designed
      to measure partial electrical discharges and advise on preventive actions
      in real time. This platform is at Phase 1 stage. The Company expects that
      it will advance to Phase 4 during 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company entered into an initial development contract
      with Northeast Utilities in December 2013 for $5.4 million for this
      product. The contract stipulates successive milestones to be achieved in
      order to realize the full contract value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | Integrated Analytical Lab on a Chip in Automotive Oil
      Pan Plug:This platform is at a crossing point between Phase 3 and
      Phase 4. The Company expects to advance to commercial production in 2015
      pending finalization of contractual terms with a major automotive company
      with whom it has been negotiating during 2013.                                                                                                                                                                                                                                                                                                                                                                                  

15

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|5. | Cement integrity sensor platform:The application
      is to have embedded sensor technology to permit direct assessment of the
      condition of cement casings in offshore oil and gas drilling. This
      platform is at Phase 1 stage. Over the next 18 months the Company expects
      to advance it to Phase 4.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                         
|6. | Fracking sensor platform:Nanotechnology sensors
      capable of measuring in three dimensions the coordinates of hydraulic
      fractures created in the fracking process. This platform is at Phase 1
      stage. Over the next 18 months, the Company expects to advance it to Phase
      4.                      
|   |                                                                                                                                                                                                                                                                                                                         
|   | The Company began pursuing discussions on Products 5 and
      6 in 2013 in conjunction with a major international oil company.
      Development contracts are anticipated to develop within 12  18
    months.                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                         
|7. | Corrosion under insulation sensor:Intended to
      measure pervasive corrosion of piping under insulation. This platform is
      at Phase 1 stage. The Company expects to advance it to Phase 4 during
      2014.                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                         
|8. | Sensors to analyze wear materials in lubricating
      fluids:Initial application is directed at vehicle
      microelectromechanical systems. This platform is at Phase 1 stage. The
      Company expects to advance to Phase 4 during 2014.                                                                          

In addition to the above listed suite of products, the Company
has advanced two other product offerings:

| | (a) | The Company has developed a prototype production control
      board intended for GSI Westwind. This product was developed over a period
      of 24 months. In final testing during 2013, it met and exceeded all of the
      tolerance specifications stipulated by GSI. In October 2013 we were
      advised that GSI had decided to cease operations of their high speed DC
      motor development due to competitive technology pressures. Accordingly,
      the Company did not proceed with commercial production orders from GSI. As
      a result, we have decided to assess the broader marketplace for this
      product and have engaged one of our independent directors to conduct a
      detailed market study and an appropriate marketing campaign to engage
      other potential customers for this technology.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | The Company has committed development time and funding
      over the past three years to a sensor based breast cancer detection
      device. The work completed by the Company to date has put this product
      category at a Phase 2 level of development. In 2012 and in early 2013 the
      Company pursued discussions with a Croatian-based group of investors. It
      was intended that this group would fund ongoing development work in 2013
      but those negotiations eventually stalled. Accordingly, at this juncture
      this product is not staged for further development work until the original
      investor group returns or other investors are
identified.                                                                                                                                              

Intellectual Property:

The Company has been active in building its intellectual
property portfolio during 2013. Our new business model of developing unique
sensor platforms for our clients allow for the Company to choose opportunities
that end up with both robust revenue projections and a strong intellectual
property position. We have engaged a Washington, D.C. based law firm to assist
us in these efforts.

Development Costs:

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

The Company reported $928,077 as deferred development costs in
its consolidated balance sheet as of October 31, 2013. These are costs that it
has incurred with respect to these development projects and contracts that it
continues to pursue in the immediate term and for which it expects to generate
future revenue streams. These costs relate primarily to the following active
projects:

| | a) | The nanoparticle concentration sensor platform (Product
      1);                                 
| | -- | --------------------------------------------------------------------------------------------------
| |    |                                                                                                   
| | b) | The enhanced secondary oil recovery platform (Product
      2);                                   
| |    |                                                                                                   
| | c) | The integrated analytical lab on a chip in the automotive
      oil pan plug platform (Product 3);

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| | d) | The power transformer oil degradation sensor (Product
      4).
| | -- | ---------------------------------------------------------------

The changes in deferred development costs in 2013 are
summarized as below:

Balance reported at October 31, 2012
    $
    718,163Additional project costs incurred in fiscal 2013
    
    677,445Recovery of deferred development costs
    
    (233,290
    )Writedown of project costs
    
    (
      234,241
    )Balance reported at October 31, 2013
    $
    928,077


The costs recovered in 2013 from customers consist primarily of
a $100,000 recovery on Product 1 and an $87,000 recovery on Product 2.

At October 31, 2013, the Company has written down to nominal
value the development costs previously incurred with respect to the GSI Westwind
project which was terminated in October 2013 as it continues to explore
alternative markets for this product. It has also written down the development
costs incurred with respect to the breast cancer detection sensor platform
product which it had been developing for initial use in Eastern Europe and other
costs relating to an aerial survey sensor platform  the Company has decided to
no longer pursue these projects.

Derivative Warrant Liability:

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

Changes to Our Board of Directors and Management:

Our 2012 Annual Meeting of shareholders was held on Friday,
November 29, 2013. Salvatore Fuda, Andrew Brandt, Joseph Fuda, David Sharpless,
Steven Van Fleet, Oliver Nepomuceno, Larry Blue and Alex Dey were reelected to
serve on our Board of Directors. Messrs. Salvatore Fuda, Joseph Fuda, Dan
Amadori and Steven Van Fleet continue to serve as officers of the Company. On
December 1, 2013 Craig Carlson was appointed to serve on our Board of Directors.

Equity Financing Transactions:

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

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

In 2013, the Company repaid one bridge loan of $141,253. At
October 31, 2013, it reports one outstanding bridge loan in the amount of
$290,014. Subsequent to October 31, 2013 this bridge loan was converted into
common shares and common share purchase warrants.

In the 2012 fiscal year, the Company completed a series of
private placement financings with arms length investors. The Company received
gross proceeds of $1,040,899 and issued a total of 6,344,899 common shares. In
addition, a total of 6,344,899 common share purchase warrants with an average
price of $0.17 were attached to the private placements completed during 2012.
All warrants issued in 2012 have a 12 month term from issue date.

The Company extended the expiration date on a total of
15,267,087 common share purchase warrants which would have otherwise expired in
2012. The expiration dates were extended for a period of 6 to 12 months in each
case from the original expiration date. The Company changed the strike price of
429,686 warrants from $1.20 to $0.80 and changed the strike price of 1,666,667
warrants from $0.15 to $0.19. Other strike prices remained unchanged.



17

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In 2012 the Company secured four additional bride loans
totaling $714,359; two of these loans were converted into common shares prior to
October 31, 2012 through the issuance of 1,860,080 common shares valued at
$226,900. At October 31, 2012, the balance outstanding on the two remaining term
loans was $442,934.

Intangible Assets and Patents:

Intangible assets comprise the costs which the Company has
capitalized relating to the technical expertise and know-how that the Company
has developed with respect to the commercialization efforts relating to its
sensor technology. In 2012, the Company determined that it had sufficiently
advanced its expertise and product knowledge relating to the general
commercialization efforts for its sensor technology in multiple industry
vertical applications. We anticipate that we will realize commercial economic
benefits from the exploitation of these intangible assets in future.
Accordingly, we reported $96,761 (2012 = $116,113) of intangible assets at
October 31, 2013, representing direct costs incurred with respect to such assets
less amortization expense.

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

In 2013, we continued our activity with respect to advancing
certain provisional patents relating to projects that are underway with current
assignments and projects with our development partners as described above. We
capitalized $44,825 of legal fees associated with this work.

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

Environmental Matters:

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

D.Organizational Structure

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

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

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

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

18

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E.Property, Plant and Equipment

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

The Company made $13,200 capital expenditures in 2013; no
capital expenditures were made in 2012 or 2011.

ITEM
4A.          UNRESOLVED STAFF
COMMENTS

Not applicable.

ITEM
5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This section of the Form 20-F has been prepared to provide a
more substantive discussion of our business and to assist the reader in
analyzing the audited consolidated financial statements for the years ended
October 31, 2013, October 31, 2012 and October 31, 2011. This discussion and
analysis of financial condition and results of operations should be read in
conjunction with the consolidated financial statements and related notes in this
Annual Report, which are prepared in accordance with IFRS and are stated in
United States dollars.

A.Operating Results

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

Selected statement of operations and deficit information

2013
    
    
    2012
    
    
    2011Interest and other income
    
    -
    
    
    -
    
    
    -Administration
    
    378,497
    
    
    694,617
    
    
    462,827Professional and other fees
      and salaries
    
    1,572,515
    
    
    1,507,891
    
    
    1,064,655Travel and entertainment
    
    210,852
    
    
    150,924
    
    
    91,885Other expenses
    
    197,522
    
    
    495,200
    
    
    221,960Stock compensation expense
    
    368,790
    
    
    430,856
    
    
    928,497(Gain) Loss on derivatives
    
    3,205,752
    
    
    (1,504,423
    )
    
    412,563Loss for the year
    
    5,933,928
    
    
    1,775,065
    
    
    3,182,387Loss per share - basic and diluted
    
    0.04
    
    
    0.01
    
    
    0.03


Selected balance sheet information

2013
    
    
    2012
    
    
    2011Working capital (deficiency)
    $
    425,888
    
    
    (1,793,217
    )
    
    (2,239,178
    )Other Assets
    
    1,110,431
    
    
    889,187
    
    
    829,950Total Assets
    
    2,166,455
    
    
    1,180,278
    
    
    906,346Shareholders equity (deficiency)
    
    1,536,319
    
    
    (904,030
    )
    
    (1,409,228
    )


19

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Fiscal 2013 Compared to Fiscal 2012

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

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

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

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

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

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

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

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

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

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

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

20

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Fiscal 2012 Compared to Fiscal 2011

The Company remained in pre revenue mode at October 31, 2012.
The Company reported no interest income in 2012 (2011: $963). It recorded, but
fully reserved a total of $20,300 (2011: $20,220) of interest income on a
secured promissory note outstanding.

The Company capitalized $71,557 of development costs relating
to several development projects in 2012 (2011: $554,685) and recovered $nil
costs previously reported (2011: $129,600) for a net increase in capitalized
development costs of $71,557 (2011: $425,085). At October 31, 2012 the Company
reported $718,163 of deferred development costs on its balance sheet (2011:
$646,606).

In the fiscal year ended October 31, 2012, the Company reported
$26,650 of additions to its patents (2011: $8,017); in 2011 the Company wrote
down the value of its patents by $129,033 which related to technology that the
Company had no further plans to develop. The Company reported $49,124 of patents
on its balance sheet at October 31, 2012 (2011: $37,678).

The Company reported no expenditures on intangible assets in
2012 (2011: an additional $135,465 relating to costs incurred with respect to
technical expertise for its sensor technology). At October 31, 2012, the Company
reported $116,113 of intangible assets on its balance sheet (2011: $135,465).

In 2012, the Company reported $694,617 of general and
administrative costs compared to $462,827 in 2011. These costs include office
rent, communication costs, insurance, filing fees, costs associated with the
annual general meeting. These specific costs were comparable between years. In
2012, the Company also incurred $72,756 of sponsorship costs (2011: nil) as it
began to explore upgrading its existing status on the Canadian stock exchanges
and reported approximately $188,000 (2011: $12,000) of non - cash accretion
expense relating to the convertible debentures.

Professional and other fees and salaries totaled $1,507,891 in
2012 (2011: $1,064,655). The Company reported the following costs: audit related
fees of $118,475 (2011: $88,937), legal expenses of $48,951 (2011: $64,919),
management fees of $514,262 paid to the Chairman, the CEO and the CFO (2011:
$467,132), staff salaries and benefits of $407,450 (2011: $424,306), other
expenses of $15,594 (2011: $19,114) and consulting fees of $403,158 (2011:
$571). The increase in consulting fees has several components: the Company paid
fees of $104,003 to third party advisors who assisted the Company in investor
relations in 2012 (2011: none); the Company paid the President of MAST a total
of $261,134 in 2012 (in 2011 $180,000 which was capitalized in intangible assets
and deferred development costs, thus no expense reported in 2011); and incurred
costs for assistance in conversion to IFRS reporting of $35,565 in 2012 (nil in
2011); and other of $2,456 (2011: $571).

Stock compensation expense, calculated in accordance with the
Black Scholes option pricing model was $430,856 in 2011 relating to the issuance
of 2 million stock options awarded to directors, officers and staff (2011:
expense of $928,497 relating to the issuance of 7,475,000 stock options).

In 2012 the Company expensed $229,840 of research and
development related costs whereas the Company recovered $75,896 of such costs in
2011 relating to the settlement of supplier invoices at a discount. It recovered
$42,004 of patent costs previously expensed relating to the settlement of legal
expenses settled at a discount (2011: nil).

Travel and entertainment costs increased to $150,924 in 2012
from $91,885 in 2011. The Company incurred higher costs associated with its
dealings with an increasing number of shareholders in 2012.

In 2012 the Company recovered $30,000 of the Unotron promissory
note that it had previously fully reserved (2011: recovery of $110,000). The
remaining balance outstanding on the promissory note at October 31, 2012 is
$101,853 (2011: $111,553) which balance is fully reserved.

In 2011 the Company reported a write down of its patents of
$129,033 and a charge of $185,564 relating to the modification of the conversion
features on several bridge loans that it had previously secured. It reported no
similar expenses in 2012.

Foreign exchange/transaction losses in 2012 were $7,537 (2011:
$43,215). The exchange rate between the U.S. and the Canadian dollar fluctuated
less in 2012 than in 2011.

21

---

Under IFRS, the Company accounts for the outstanding Canadian
dollar denominated warrants as a derivative warrant liability and measures them
using the Black Scholes option pricing model. This liability is revalued at each
quarter end. The Company reported a recovery on revaluation of derivative
warrant liability of $1,327,524 in 2012 (2011: expense of $412,563).

Unaudited quarterly financial information

|(all
      amounts in United States dollars) |  |          |  |  |                   |   |  |                   | 
|-------------------------------------------- |  | -------- |  |  | ----------------- | - |  | ----------------- | 
|Quarter ended                                |  | Total    |  |  | Net Income (Loss) |   |  | Loss Per share    | 
|                                             |  | Revenues |  |  |                   |   |  | Basic and diluted | 
|October 31, 2013                             |  | -        |  |  | ($5,239,307       | ) |  | (0.03)            | 
|July 31, 2013                                |  | -        |  |  | (261,031          | ) |  | -                 | 
|April 30, 2013                               |  | -        |  |  | (17,012           | ) |  | -                 | 
|January 31, 2013                             |  | -        |  |  | (416,078          | ) |  | -                 | 
|                                             |  |          |  |  |                   |   |  |                   | 
|October 31, 2012                             |  | -        |  |  | $1,606,175        |   |  | .01               | 
|July 31, 2012                                |  | -        |  |  | (507,079          | ) |  | -                 | 
|April 30, 2012                               |  | -        |  |  | (2,849,835        | ) |  | (0.02)            | 
|January 31, 2012                             |  | -        |  |  | (24,327           | ) |  | -                 | 
|                                             |  |          |  |  |                   |   |  |                   | 
|October 31, 2011                             |  | -        |  |  | ($1,854,751       | ) |  | (0.02)            | 
|July 31, 2011                                |  | 585      |  |  | (237,795          | ) |  | -                 | 
|April 30, 2011                               |  | 39       |  |  | (507,225          | ) |  | (0.01)            | 
|January 31, 2011                             |  | 339      |  |  | (582,616          | ) |  | (0.01)            | 

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

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

B. Liquidity and Capital Resources:

Liquidity

We have not yet realized commercial revenues from the
exploitation of our technology platforms. We currently have no cash flow from
operations and will have none until we license or directly produce and sell
products utilizing our technology platforms.

We currently have no lines of credit and must obtain equity
financing from investors and from persons who hold outstanding options and
warrants in order to meet our cash flow needs until we can generate revenues. At
October 31, 2013 we had $821,283 cash on hand (2012: $245,029) and our monthly
cash expenses approximated $175,000. Our working capital position at October 31,
2013 was $425,888 (2012: working capital deficiency of ($1,793,217)). Since
October 31, 2013, we have raised an additional $1,751,924 through the exercise
of common share purchase warrants. Additionally the outstanding bridge loan of
$290,014 at October 31, 2013 was converted to common equity in January 2014.

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

We have issued common share purchase warrants as part of the
Unit private placement financings. None of the warrant holders have any
obligation to exercise their warrants which, in general, expire 12 months after
issuance if unexercised. There can be no guarantee that we will realize any
funds from these outstanding warrants.

22

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Capital Resources

We made $13,200 of capital expenditures in 2013 and made no
expenditures on capital equipment during the 2012 and 2011 fiscal years.

C. Research and Development:

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

D.Trend Information:

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

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

E.Off-Balance Sheet Arrangements:

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

F.Tabular Disclosure of Contractual
Obligations:

A summary of our financial commitments as of October 31, 2013
is as below:

Payments due by periodTotal
    Less than 1
    1-3 years
    3-5 years
    More than 5 yearsyearConvertible debt obligations
    290,014
    290,014
    -
    -
    -Operating lease obligations
    204,086
    43,733
    120,253
    -
    -Purchase obligations
    150,000
    150,000
    -
    -
    -Total:
    644,100
    483,747
    120,253
    -
    -


In addition to these financial commitments, the Company has
management agreements with its senior executives which are operative on a month
to month basis. At October 31, 2013 these agreements stipulate the following
monthly obligations for the Companys senior management team:

Chairman
    $
    12,500President
    
    13,333President, MAST
    
    18,000CFO
    
    12,500


23

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G.Critical Accounting Policies:

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

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

We have not yet realized commercial revenues from the
exploitation of our technology. Under IFRS, research costs are expensed in the
period incurred. Development expenses are expensed as incurred unless they meet
the criteria for deferral and amortization under IFRS which is the translation
of research findings or other knowledge into a plan for the technology prior to
commercial production or use. Under U.S. GAAP all development expenditures are
expensed as incurred. As at October 31, 2013, the Company capitalized $928,077
(2012: $718,163) of development costs and capitalized $96,761 (2012: $116,113)
as intangible assets under IFRS.

In the year ended October 31, 2011, the Company modified the
expiration date of warrants which would have otherwise expired in 2011. Under
U.S. GAAP, this amount has been recorded as an increase in paid in capital and a
corresponding offset to retained earnings. Under IFRS, a charge of $293,020 is
included below net loss in the determination of shareholders equity.

In the year ended October 31, 2011, the Company modified the
conversion feature of two bridge loans. Under IFRS, the first loan was
considered an extinguishment and issuance of new debt but no gain or loss was
recognized as the carrying value of the extinguished debt was not materially
different from the modified debt instrument. The second loan did not meet the
criteria for extinguishment and as such was treated as a renegotiation. Under
U.S. GAAP, the Company evaluated whether the change in conversion feature
represented an embedded derivative that required separation. Under U.S. GAAP, no
beneficial conversion feature exists and under IFRS a $185,564 charge was
recorded to retained earnings with an offsetting charge to contributed surplus
to reflect the value of the more favorable conversion feature.

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

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

H.Commitments:

Summary of commitments:
    Date executed:A. Research collaboration agreements Revised Licensed
      Agreement, University of Toronto
    June 2005B. Operating Leases
    June 2012C. Consulting and Employment Contracts(1) Chairman of the Board of Directors (a)
    January 2011(2) President (a)
    May 2009(3) President, MAST INC. (a)
    May 2010(4) CFO(a)
    May 2009D. Other Commitments
    None


24

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(a) Month-to-month commitments at October 31, 2013.

Research Collaboration Agreements:

The Company executed a revised license agreement with the
University of Toronto in 2005 relating to research work completed on its (MRAM)
memory technology. The license agreement stipulated royalty payments capped at
$1 million in the event that the Company was successful in generating commercial
revenues from the sale of the licensing of its memory technology to third
parties. To date the Company has not generated any commercial revenues from the
exploitation of its memory technology. It decided in 2011 to suspend any further
pursuit or development of its memory technology.

Currently, the Company is attempting to sell its intellectual
property relating to its memory technology; to date, the Company has been
unsuccessful in doing so. If the Company does realize proceeds on the sale of
this asset it may have an obligation payable to the University of Toronto under
the terms of its 2005 license agreement.

Operating leases:

We have operating lease commitments which expire in June 2017
for the real property lease of our corporate headquarters.

Other commitments:

None.

I.Contingencies:

|A. | We have agreed to indemnify our directors and officers
      and certain of our employees in accordance with our By-laws. We maintain
      insurance policies that may provide coverage against certain
  claims.                                                                                                                                                 
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                    
|B. | As described above, the Company could have obligations to
      the University of Toronto under the Revised License Agreement which it
      executed in 2005.                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                    
|C. | In 2013 the Company recovered $181,780 of accounts
      payable balances, recorded in previous years, relating to third party
      vendors whose accounts the Company has disputed. The Company has concluded
      that these amounts are not payable. In the event it is determined that
      these amounts are payable the Company would incur these
  costs.

J.Translation of Foreign Currencies:

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

25

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ITEM
6.            
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.Directors and Executive Officers

The Directors and Executive Officers of Micromem as at February
18, 2014 are set forth below:

|Name              | Age | Position                                       
|----------------- | --- | -----------------------------------------------
|                  |     |                                                
|Salvatore Fuda    | 79  | Chairman of the Board of
      Directors       
|Joseph Fuda       | 52  | President, Chief Executive Officer and Director
|Dan Amadori       | 62  | Chief Financial Officer                        
|Steven Van Fleet  | 59  | Director and President of MAST, Inc.           
|Andrew Brandt     | 75  | Director                                       
|David Sharpless   | 63  | Director                                       
|Larry Blue        | 57  | Director                                       
|Oliver Nepomuceno | 44  | Director                                       
|Alex Dey          | 70  | Director                                       
|Craig Carlson     | 58  | Director                                       

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

Joseph Fuda has been President, Chief Executive Officer
and Director since February 13, 2002. Previously he served as Manager of
Strategic Alliances for Micromem since February 2001. Prior thereto, he served
as a consultant to Micromem since November 2000. Prior thereto he served as a
Vice-President and a Director of IPO Capital Corp since April 1999. He was a
director of Leader Capital Corp. until June 2007 and currently also serves as a
director of Echo Energy Canada Inc. until June 2009 and of Echo Power
Generational Inc.

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

Steven Van Fleet has served as a technology consultant
to a number of companies. He was the principal of the R&V Group LLC, an RFID
business consulting and technology development company until 1996. Between 1999
and 2003 he served as Program Director for the Silent Commerce/Smart Packaging
Initiative at International Paper Company. From January 1999 to November 1999,
he was Program Director for Process and Product Uniformity and from March 1996
to December 1998 he was the Director for Control Systems Development at
International Paper in Cincinnati, Ohio. He is also presently on the Board of
Overseers for the Massachusetts Institute of Technology Auto ID Center. Mr. Van
Fleet has been a director of Micromem since 2002 and has served as President of
MAST since 2008.

Andrew Brandt was Chairman of the Board of Directors and
Chief Executive Officer of the Liquor Control Board of Ontario from February
1991 to January 2006. Prior to his appointment to the Liquor Control Board of
Ontario, Mr. Brandt served as Leader of the Ontario Progressive Conservative
Party from 1987 to 1990. He has previously served as the Minister of Industry
and Trade, Minister of Environment and Mayor of Sarnia, Ontario. Mr. Brandt has
served as a director of Micromem since June 2000.

David Sharpless is the Chairman and CEO of Maverick
Inc., a private consulting and investment firm and the Chairman and CEO of New
Carbon Economy Venture Management Inc., a private company which manages a number
of investments in green technology companies. He was the Chairman and CEO of TrustMark
Auto Group Inc. a CNSX listed company and the Chairman of Hunter Keilty Muntz
and Beatty Limited, a firm of international insurance brokers based in Toronto
and the Vice Chairman of its successor, HKMB Hub International Ltd. Prior to
joining Hunter Keilty Muntz and Beatty Limited in 2000, his career spanned more
than 25 years as a business lawyer with Blake, Cassels & Graydon and as a
senior leader in international finance. He has served as a director of Micromem
since 2001.

26

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

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

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

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

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

Business Corporations Act (Ontario).

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

27

---

B. Compensation

Annual Compensation
    Long-Term CompensationAwardsFiscal
    Salary
    Bonus
    Other Annual
    SecuritiesName and
    Year
    (US$)
    (US$)
    Compensation
    Under OptionsPrincipal Position
    
    
    
    (US$)
    Granted (#)2011
    160,000
    -
    -
    2,000,0003Joseph Fuda
    2012
    190,000
    -
    -
    30,0001Chief Executive Officer
    2013
    318,000
    -
    -
    -2011
    150,000
    -
    -
    1,000,0003Salvatore Fuda,
    2012
    150,000
    -
    -
    110,0001Chairman of the Board of Directors
    2013
    147,000
    -
    -
    140,000 2Andrew Brandt
    2011
    -
    -
    -
    350,0003Director
    2012
    -
    -
    -
    125,00012013
    -
    -
    -
    140,000 2David Sharpless
    2011
    -
    -
    -
    450,0003Director
    2012
    -
    -
    -
    190,00012013
    -
    -
    -
    140,000 2Steven Van Fleet
    2011
    180,000
    -
    -
    1,000,0003Director and President of MAST, Inc.
    2012
    261,000
    -
    -
    500,00012013
    231,000
    -
    -
    140,000 2Dan Amadori
    2011
    150,000
    -
    -
    1,000,0003Chief Financial Officer
    2012
    175,000
    -
    -
    190,00012013
    180,000
    -
    -
    140,0002Larry Blue
    2011
    -
    -
    -
    500,0003Director
    2012
    -
    -
    -
    190,00012013
    -
    -
    -
    140,0002Oliver Nepomuceno
    2011
    -
    -
    -
    350,0003Director
    2012
    -
    -
    -
    190,00012013
    -
    -
    -
    140,0002Alex Dey
    2011
    -
    -
    -
    225,0003Director
    2012
    -
    -
    -
    -2013
    -
    -
    -
    140,0002Craig Carlson
    2011
    -
    -
    -
    -Director
    2012
    -
    -
    -
    -2013
    -
    -
    -
    300,0004


Notes:

|1. | Each option entitles the holder to purchase one common
      shares at a price of $0.35 per share prior to expiration in April
    2017.                                
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Each option entitles the holder to purchase one common
      share at a price of $0.30-$0.27 CDN per share prior to expiration between
      January and September 2018.
|3. | Each option entitles the holder to purchase one common
      share at a price of $0.20 per share prior to expiration in October
      2016.                             
|4. | Each option entitles the holder to purchase one common
      share at a price of $0.35 per share prior to expiration in October
      2018.                             

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

28

---

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

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

C.Board Practices:

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

Our Board of Directors meets on an as required basis during the
fiscal year. In 2013 our Board of Directors met formally in February 2013. The
Board was also convened informally as of each quarter end.

Our Audit Committee met on a quarterly basis during fiscal 2013
for the purpose of approving and recommending to the Board the quarterly
financial statements and our yearend financial statements. In addition, our
Audit Committee receives regular periodic reports from management.

Our Compensation Committee met informally as required in 2013
and met formally in October 2013. Our Compensation Committee approves Management
and Director compensation and all stock option grants for recommendation to the
Board of Directors.

Our Disclosure Committee met as required in 2013 to review our
various press release disclosures and to monitor our general practices relating
to our disclosure requirements.

Audit Committee

The Board of Directors has appointed an Audit Committee
consisting of three independent directors. The members of the Audit Committee
are Andrew Brandt, Oliver Nepomuceno and David Sharpless (Chairman), each of
whom serves in such capacity until the Board of Directors next annual meeting.
The Audit Committee is responsible for the integrity of our internal accounting
and control systems. The committee receives and reviews our financial statements
and makes recommendations thereon to the Board of Directors prior to its
approval by the full Board of Directors. The Audit Committee communicates
directly with our external auditors in order to discuss audit and related
matters whenever appropriate. In 2013 the Audit Committee met formally on
January 23, 2012, February 24, 2013 and October 1, 2013 and informally in June,
2013.

Compensation Committee

The Board of Directors has appointed a Compensation Committee
which meets on executive compensation matters as and when required. Our
Compensation Committee includes Andrew Brandt, an outside director as Chairman,
Oliver Nepomuceno and Alex Dey, as outside directors.

Disclosure Committee

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

D.Employees

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

29

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E. **Share Ownership**

NAME
    SHARES OWNED
    OPTIONS HELD
    OPTION EXERCISE
      PRICE
    EXPIRATION DATE
    % OF TOTAL1Joseph Fuda Chief Executive Officer and
      Director
    231,947
    2,000,000 30,000
    $0.20 $0.35
    10/31/2016 04/10/2017
    1.43% (2,261,947)Salvatore Fuda Chairman of the Board of Directors
      and Director
    5,198,5012
    1,000,000 110,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2.18
      09/16/2018
    4.10% (6,448,501)Andrew Brandt Director
    16,500
    350,000 125,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2.18
      09/16/2018
    0.40% (631,500)David Sharpless Director
    100,000
    450,000 190,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018
    0.56 % (880,000)Steven Van Fleet Director and President of
      MAST, Inc.
    -
    1,000,000 500,000 75,000 65,000
    $0.20 $0.35 0.30 $0.27
    10/31/2016 4/15/2012 01/22/2.18
      09/16/2018
    1.00 % (1,640,000)Dan Amadori Chief Financial Officer
    612,5173
    1,000,000 190,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018
    1.20 % (1,942,517)Larry Blue Director
    193,600
    500,000 190,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018
    0.65% (1,023,600)Oliver Nepomuceno Director
    953,572
    350,000 190,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018
    1.00% (1,633,572)Alex Dey Director
    693,4254-
    125,000 100,000 75,000 65,000
    $0.35 $0.20 $0.30 $0.27
    04/5/2016 10/31/2016 01/22/2018
      09/16/2018
    0.67% (1,058,425)Craig Carlson
    -
    300,000
    $0.35
    10/25/2018
    0.02% (300,000)


|1 | Calculated based on shares owned plus options held as a
      percentage total of shares outstanding as of October 31, 2013, plus
      options held.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|2 | 5,103,611 shares are held by a corporation wholly owned
      by a trust established for the benefit of members of Salvatore Fuda's
      family.    
|3 | 285,716 shares are held by a corporation controlled by
      Mr. Amadori.                                                                            
|4 | 254,863 shares are held by a corporation wholly owned by
      Mr. Dey.                                                                              

30

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ITEM
7. **MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

A.Major Shareholders:

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

B.Other Related Party Transactions:

The Company reports the following related party transactions:

|(a) | Chairman: The Chairman receives cash compensation on a
      month to month basis calculated at an annual rate of $150,000
  CDN.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In 2013 the Chairman was awarded a total of 140,000 stock
      options at an average price of $0.29 CDN per share (2012 - 100,000 stock
      options at an average price of $0.35 per share; 2011  1,000,000 stock
      options at an average price of $0.20 per share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The total compensation paid to the Chairman during the
      year ended October 31 was $146,599 of cash compensation and $21,163 of
      stock based compensation (2012 - $149,565 of cash compensation and $
      23,697 of stock based compensation; 2011 - $152,326 of cash compensation
      and $118,038 of stock based compensation).                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In August 2011 the Chairman converted $112,500 of
      compensation received to a unit private placement consisting of one common
      share and one common share purchase warrant. A total of 703,125 units were
      issued under this private placement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) | Management and consulting fees:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Included in professional fees, other fees and salaries as
      reported are management and consulting fees paid or payable to individuals
      (or companies controlled by such individuals) who served as officers and
      directors of the Company. The total compensation paid to such parties
      during the year ended October 31, 2013 was $729,369 (of which $202,820 was
      capitalized to deferred development costs) of cash compensation and
      $148,141 of stock based compensation (2012 - $625,831 of cash compensation
      and $352,225 of stock based compensation; 2011 - $494,806 (of which
      $90,000 was capitalized to intangible assets) of cash compensation and
      $678,721 of stock based compensation.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In 2013 these parties were awarded a total of 980,000
      options at an average price of $0.29 CDN per share (2012  1,525,000
      options at an average price of $0.35 per share; 2011  5,750,000 options
      at an average price of $0.20 per share)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In 2011 the Company assigned the promissory note
      receivable to an officer of the Company in conjunction with outstanding
      and unpaid fees due to that officer. During 2012, a total of $30,000
      received from the borrower was paid directly to that officer under the
      assignment agreement. The balance owing to the officer of the Company at
      October 31, 2012 was $56,500, which was paid in fiscal 2013.                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In February 2012 an officer subscribed for $50,000 as a
      Unit private placement consisting of one common share (at a price of $0.35
      per share) and one common share purchase warrant (at a price of $0.44 per
      share). A total of 142,858 Units were subscribed
for.                                                                                                                                                                                                                                                                                                                                                                                                                                                                

31

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ITEM
8. **FINANCIAL INFORMATION**

A.Consolidated Statements and Other Financial Information

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

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

As of October 31, 2013 and as of February 19, 2014 there were
no legal proceedings.

B. **Significant Changes**

Since October 31, 2013 the Company has raised an additional
$1,751,924 through Unit private placement financings and through the exercise of
warrants. There has been no other significant change in our financial position
since October 31, 2013. Additionally the bridge loan outstanding at October 31,
2013 was converted to common equity in January 2014.

ITEM
9.
THE OFFER AND LISTING

The table below sets forth the high and low sales prices for
common shares in U.S. Dollars as reported for the periods specified. Our fiscal
year ends October 31. Our common shares are traded in Canada on the CNSX under
the symbol MRM.

Our common shares are traded in the United States and are
quoted on the OTC Bulletin Board. The common shares are quoted under the symbol
MMTIF.OTCBB.

Period
    High
    LowLast six months:February 2014
    1.06
    0.67January 2014
    1.45
    0.75December 2013
    1.33
    0.46November 2013
    0.52
    0.44October 2013
    0.582
    0.22September 2013
    0.22
    0.18Last eight quarters:Q1 2014
    1.45
    0.44Q4 2013
    0.582
    0.18Q3 2013
    0.22
    0.16Q2 2013
    0.25
    0.16Q1 2013
    0.20
    0.14Q4 2012
    0.24
    0.14Q3 2012
    0.33
    0.14Q2 2012
    0.32
    0.13Last five years:2013
    1.33
    0.162012
    0.49
    0.102011
    0.34
    0.072010
    0.65
    0.132009
    1.75
    0.132008
    2.60
    0.31


On February 14, 2014, the last reported sale price for our
common shares on the OTC Bulletin Board was $0.85.

32

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ITEM
10.            
ADDITIONAL INFORMATION

A.            
Share Capital

Our authorized capital consists of an unlimited number of
common shares, of which 158,491,425 shares were issued and outstanding as of
October 31, 2013, and 2,000,000 special, redeemable, voting preference shares,
referred to herein as special shares, none of which were outstanding, as of
October 31, 2013.

Additionally the Company has 11,475,000 stock options
outstanding with a weighted average exercise price of $0.24 (2012: 9,915,000
options outstanding with a weighted average exercise price of $0.24) and a total
of 29,761,012 outstanding warrants to acquire common shares with a weighted
average exercise price of $0.28 (2012: 19,692,968 outstanding warrants with a
weighted average exercise price of $0.27) .

B.            
Memorandum and Articles of Incorporation

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

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

Summary of Directors Powers and Authorities

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

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

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

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

- borrow money on the credit of Micromem;
- issue, re-issue, sell or pledge debt obligations of Micromem;
- subject to restrictions respecting financial assistance prescribed in the
  Business Corporations Act (Ontario), give a guarantee on behalf of Micromem to
  secure the performance of an obligation of any person; and
- mortgage, hypothecate, pledge or otherwise create a security interest in
  all or any property of Micromem, owned or subsequently acquired, to secure any
  obligation of Micromem.

33

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

Securities of Micromem

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

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

Rights and Privileges of Shareholders

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

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

34

---

C.Material Contracts

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

In 2010 the Company entered into a month to month contract with
its President and CFO at the expiration of the contract signed in 2008. These
month to month arrangements continue at October 31, 2013.

In 2011 the Company entered into a month to month contract with
the President of MAST at the expiration of the contract signed in 2008. This
month to month arrangement continues at October 31, 2013.

In 2011 the Company entered into a month to month contract with
its Chairman at the expiration of the contract signed in 2005. This month to
month arrangement continues at October 31, 2013.

The total monthly commitment under these month to month
arrangements is $56,333 at October 31, 2013.

D.Exchange Controls

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

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

E.Taxation

Certain Canadian Income Tax Consequences

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

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

Dividends on common shares and Other Income

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

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

35

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

Dispositions of Common Shares

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

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

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

Certain United States Federal Income Tax Consequences

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

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

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

CIRCULAR 230 DISCLOSURE

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

36

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US Holders

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

Distributions to US Holders Who Own Common Shares

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

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

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

Dispositions of Common Shares of the Company

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

US Anti-Deferral Regimes

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

37

---

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

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

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

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

Foreign Tax Credit

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

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

Currency Fluctuations

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

F. **Dividends and Paying Agents**

Not applicable.

38

---

G. **Statement by Experts**

Not Applicable.

H.Documents on Display

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

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

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

I.Subsidiary Information

Not Applicable.

ITEM
11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM
12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II

ITEM
13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

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

None.

ITEM
15.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended, referred to herein as the
Exchange Act) as of October 31, 2013. Based on management's evaluation in
2013, our Chief Executive Officer and Chief Financial Officer concluded that, as
of October 31, 2013, our disclosure controls and procedures were effective in
that they were designed to ensure that information required to be disclosed by
us in our reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures are designed to ensure
that information required to be disclosed by the Company in our reports that we
file or submit under the Exchange Act are recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms. Exchange
Act Rule 13a-15(e) also states that disclosure controls and procedures are
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Act is accumulated and communicated
to the issuers management, including its principal executive and principal
financial officers, or person performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.

39

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Managements Annual Report on Internal Control over
Financial Reporting

Micromems Board of Directors and executive management are
responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control system was designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation and fair presentation of its published consolidated financial
statements.

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

Our Chief Executive Officer and Chief Financial Officer
assessed the effectiveness of Micromems internal control over financial
reporting as of October 31, 2013. In making this assessment, they used the
criteria established in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on this assessment the Chief Executive Officer and Chief Financial Officer have
concluded that, as of October 31, 2013, our internal control over financial
reporting were effective.

Changes in Internal Control Over Financial
ReportingNo changes in our internal controls over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, occurred
during the fiscal year ended October 31, 2013 that has materially affected or is
reasonable likely to materially affect, our internal controls over financial
reporting.

ITEM 15T.    Controls and Procedures

Not applicable

ITEM 16.       (Reserved)

Not Applicable.

ITEM 16A.    Audit Committee Financial
Expert

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

ITEM 16B.    Code of Ethics

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

ITEM 16C.    Principal Accountant Fees and
Services

The following table presents fees for professional audit
services rendered by our auditors for the audit of our consolidated financial
statements for the years ended October 31, 2013 and 2012, and fees billed for
other services rendered by our auditors including our offerings of securities
and tax services.

40

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Fiscal 2013
    Fiscal 2012Audit Fees
    $100,000
    $121,000Audit Related Fees
    -
    -Tax Fees
    5,000
    5,000All Other Fees
    -
    28,000


Audit Fees

In 2012, we paid a total of $121,000 to Collins Barrow Toronto
LLP for audit services; in 2013 we paid a total of $100,000 to Collins Barrow
Toronto LLP for audit services.

Audit Related Fees None Tax Fees

We paid $5,000 of tax-related fees for services in 2013 and
$5,000 of tax-related fees in 2012 to Chiampou Travis Besaw & Kershner LLP.

All other fees

We paid $28,000 in 2012 to Collins Barrow Toronto LLP for
services relating to our quarterly filings (2013: nil). Pre-approval
policies The Audit Committee assesses and pre-approves all audit and
non-audit services.

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

Not applicable.

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

Not applicable.

ITEM 16F.    Change in Registrants Certifying
Accountant.

Not applicable.

ITEM 16G.    Corporate Governance

Not applicable

ITEM 16H.    Mine Safety Disclosure

Not applicable

ITEM 17.      Financial
Statements

We have elected to provide financial statements pursuant to
Item 18.

ITEM 18.      Financial Statements

41

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Consolidated Financial Statements of

MICROMEM TECHNOLOGIES INC.

For the years ended October 31, 2013 and 2012

(Expressed in United States Dollars)





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

INDEPENDENT AUDITORS REPORT

To the Shareholders of Micromem Technologies Inc.:

We have audited the accompanying consolidated financial
statements of Micromem Technologies Inc. and its subsidiaries, which comprise
the consolidated statements of financial position as at October 31, 2013 and
October 31, 2012 and the consolidated statements of loss and comprehensive loss,
changes in shareholders equity and cash flows for the years ended October 31,
2013, October 31, 2012 and October 31, 2011 and a summary of significant
accounting policies and other explanatory information.

Managements Responsibility for the Consolidated Financial
Statements

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

Auditors Responsibility

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

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entitys internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the
consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Micromem
Technologies Inc. and its subsidiaries as at October 31, 2013 and October 31,
2012, and its financial performance and its cash flows for the years ended
October 31, 2013, October 31, 2012 and October 31, 2011 in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board.

Emphasis of Matter

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



Chartered Accountants 
Licensed Public Accountants 
Toronto, Ontario 
February 19, 2014

|This office is independently owned and
      operated by Collins Barrow Toronto LLPThe Collins
      Barrow trademarks are used under License. | 1 | 
|---------------------------------------------------------------------------------------------------------------------------------------------- | - | 

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|MICROMEM TECHNOLOGIES INC.                      
|------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS
|                                                
|TABLE OF CONTENTS                               
|                                                

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

2

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

|                                                                                                                                                                                                                                                                                                                                            |   | October 31, |   |   | October 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                                                                                                                            |   | 2013        |   |   | 2012        |  
|                                                                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|Assets                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |             |  
|Current assets:                                                                                                                                                                                                                                                                                                                             |   |             |   |   |             |  
|Cash                                                                                                                                                                                                                                                                                                                                        | $ | 821,283     |   | $ | 245,029     |  
|Deposits and other
      receivables                                                                                                                                                                                                                                                                                                        |   | 234,741     |   |   | 46,062      |  
|Promissory note receivable (Note 8)                                                                                                                                                                                                                                                                                                         |   | -           |   |   | -           |  
|                                                                                                                                                                                                                                                                                                                                            |   | 1,056,024   |   |   | 291,091     |  
|                                                                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|Property and equipment, net (Note 9)                                                                                                                                                                                                                                                                                                        |   | 13,998      |   |   | 5,787       |  
|Deferred development costs (Note 10)                                                                                                                                                                                                                                                                                                        |   | 928,077     |   |   | 718,163     |  
|Intangible assets, net (Note 11)                                                                                                                                                                                                                                                                                                            |   | 96,761      |   |   | 116,113     |  
|Patents, net (Note 11)                                                                                                                                                                                                                                                                                                                      |   | 71,595      |   |   | 49,124      |  
|                                                                                                                                                                                                                                                                                                                                            | $ | 2,166,455   |   | $ | 1,180,278   |  
|                                                                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|Liabilities and Shareholders' Equity
      (Deficiency)                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|Bridge loans (Note 14)                                                                                                                                                                                                                                                                                                                      | $ | 290,014     |   | $ | 442,934     |  
|Accounts
      payable and accrued liabilities                                                                                                                                                                                                                                                                                              |   | 340,122     |   |   | 579,830     |  
|Derivative warrant
      liability (Note 13)                                                                                                                                                                                                                                                                                                |   | -           |   |   | 1,061,544   |  
|                                                                                                                                                                                                                                                                                                                                            | $ | 630,136     |   | $ | 2,084,308   |  
|Shareholders' Equity (Deficiency)                                                                                                                                                                                                                                                                                                           |   |             |   |   |             |  
|Share
      capital: (Note 12)                                                                                                                                                                                                                                                                                                              |   |             |   |   |             |  
|Authorized:                            2,000,000
      special preference shares, redeemable,
      voting                            Unlimited
      common shares without par
      value                   Issued
      and
      outstanding:                            158,491,425
      common shares (2012 - 136,430,555) (Note 12) | $ | 57,755,613  |   | $ | 54,728,239  |  
|Equity
      component of bridge loans (Note 14)                                                                                                                                                                                                                                                                                            |   | 1,557       |   |   | 1,557       |  
|Contributed surplus (Note
      15)                                                                                                                                                                                                                                                                                                         |   | 32,822,327  |   |   | 26,634,177  |  
|Deficit                                                                                                                                                                                                                                                                                                                                     |   | (89,043,178 | ) |   | (82,268,003 | )
|                                                                                                                                                                                                                                                                                                                                            |   | 1,536,319   |   |   | (904,030    | )
|                                                                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                                            | $ | 2,166,455   |   | $ | 1,180,278   |  
|                                                                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|Going Concern (Note 2)                                                                                                                                                                                                                                                                                                                      |   |             |   |   |             |  
|Related Party Transactions (Note 18)                                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|Commitments (Note 19)                                                                                                                                                                                                                                                                                                                       |   |             |   |   |             |  
|Contingencies (Note 20)                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|Subsequent Events (Note 23)                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  

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

See accompanying notes.

3

---

MICROMEM TECHNOLOGIES INC.STATEMENTS OF
CONSOLIDATED LOSS AND COMPREHENSIVE LOSS(Expressed in United States
dollars)For the years ended October 31,

|                                                                                  |   | 2013        |   |   | 2012        |   |   | 2011        |  
|--------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                                                  |   |             |   |   |             |   |   |             |  
|Costs and expenses (income):                                                      |   |             |   |   |             |   |   |             |  
|Administration (Note 17)                                                          | $ | 378,497     |   | $ | 694,617     |   | $ | 462,827     |  
|Professional, other fees and salaries (Note 17)                                   |   | 1,572,515   |   |   | 1,507,891   |   |   | 1,064,655   |  
|Stock based compensation (Note 12)                                                |   | 368,790     |   |   | 430,856     |   |   | 928,497     |  
|Research and development (recovery) (Note 17)                                     |   | 160,920     |   |   | 229,840     |   |   | (75,896     | )
|Forgiveness of debt                                                               |   | -           |   |   | (42,004     | ) |   | -           |  
|Travel and entertainment                                                          |   | 210,852     |   |   | 150,924     |   |   | 91,885      |  
|Amortization of property and
      equipment (Note 9)                             |   | 4,989       |   |   | 4,414       |   |   | 6,469       |  
|Amortization of intangible assets and patents (Note
      11)                     |   | 19,352      |   |   | 19,352      |   |   | 43,333      |  
|Foreign exchange loss                                                             |   | 12,261      |   |   | 7,537       |   |   | 43,215      |  
|Write-down of patents (Note 11)                                                   |   | -           |   |   | -           |   |   | 129,033     |  
|Recovery of promissory note
      receivable (Note 8)                             |   | -           |   |   | (30,000     | ) |   | (110,000    | )
|Interest and other income                                                         |   | -           |   |   | -           |   |   | (963        | )
|Loss from operations                                                              |   | 2,728,176   |   |   | 2,973,427   |   |   | 2,583,055   |  
|                                                                                  |   |             |   |   |             |   |   |             |  
|Other Expenses                                                                    |   |             |   |   |             |   |   |             |  
|Adjustment for modification of conversion feature of
      bridge loans (Note 14) |   | -           |   |   | -           |   |   | 185,564     |  
|(Gain) loss on revaluation of
      embedded derivatives (Note 14)                |   | (40,750     | ) |   | (176,899    | ) |   | 1,979       |  
|Warrants issued on debt settlement (Note 14)                                      |   | -           |   |   | 306,061     |   |   | -           |  
|Loss (Gain) on revaluations of
      derivative warrant liability (Note 13)       |   | 3,246,502   |   |   | (1,327,524  | ) |   | 410,584     |  
|                                                                                  |   |             |   |   |             |   |   |             |  
|Net loss before income taxes                                                      |   | (5,933,928  | ) |   | (1,775,065  | ) |   | (3,181,182  | )
|                                                                                  |   |             |   |   |             |   |   |             |  
|Income taxes (Note 16)                                                            |   | -           |   |   | -           |   |   | 1,205       |  
|                                                                                  |   |             |   |   |             |   |   |             |  
|Net loss and comprehensive
      loss                                             | $ | (5,933,928  | ) | $ | (1,775,065  | ) | $ | (3,182,387  | )
|                                                                                  |   |             |   |   |             |   |   |             |  
|Loss per share - basic and diluted (Note
      12)                                | $ | (0.04       | ) | $ | (0.01       | ) | $ | (0.03       | )
|                                                                                  |   |             |   |   |             |   |   |             |  
|Weighted average number of shares (Note 12)                                       |   | 146,814,466 |   |   | 123,375,510 |   |   | 102,301,168 |  

See accompanying notes.

4

---

MICROMEM TECHNOLOGIES INC.CONSOLIDATED STATEMENTS
OF CASH FLOWS(Expressed in United States dollars)For the years
ended October 31,

|                                                                                             |   | 2013       |   |   | 2012       |   |   | 2011       |  
|-------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash flows from operating
      activities:                                                  |   |            |   |   |            |   |   |            |  
|Net loss                                                                                     | $ | (5,933,928 | ) | $ | (1,775,065 | ) | $ | (3,182,387 | )
|Adjustments to reconcile
      loss for the period to net cash used in operating activities: |   |            |   |   |            |   |   |            |  
|Amortization of intangible assets and patents                                                |   | 19,352     |   |   | 19,352     |   |   | 43,333     |  
|Amortization of property and equipment                                                       |   | 4,989      |   |   | 4,414      |   |   | 6,469      |  
|Research
      and development                                                               |   | 52,461     |   |   | 206,780    |   |   | -          |  
|Accretion expense                                                                            |   | 19,381     |   |   | 187,671    |   |   | 12,447     |  
|Stock based
      compensation                                                               |   | 368,790    |   |   | 430,856    |   |   | 928,497    |  
|Forgiveness of debt                                                                          |   | -          |   |   | (42,004    | ) |   | -          |  
|(Decrease)
      increase in deposits and other receivables                                  |   | (188,679   | ) |   | (13,728    | ) |   | 69,729     |  
|Decrease in accounts payable and accrued liabilities                                         |   | (63,433    | ) |   | (393,896   | ) |   | (58,756    | )
|Loss (gain)
      on revaluation of derivative warrant liability                             |   | 3,246,502  |   |   | (1,327,524 | ) |   | 410,584    |  
|Adjustment for modification of conversion feature of bridge loans                            |   | -          |   |   | -          |   |   | 185,564    |  
|(Gain) loss
      on revaluation of embedded derivatives                                     |   | (40,750    | ) |   | (176,899   | ) |   | 1,979      |  
|Warrants issued on debt settlement                                                           |   | -          |   |   | 306,061    |   |   | -          |  
|Write-down
      of patents                                                                  |   | -          |   |   | -          |   |   | 129,033    |  
|Net cash used in operating
      activities                                                  |   | (2,515,315 | ) |   | (2,573,982 | ) |   | (1,453,508 | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash flows from investing
      activities:                                                  |   |            |   |   |            |   |   |            |  
|Purchase of property and equipment                                                           |   | (13,200    | ) |   | -          |   |   | -          |  
|Patents                                                                                      |   | (44,825    | ) |   | (26,650    | ) |   | (8,017     | )
|Deferred development costs                                                                   |   | (655,093   | ) |   | (263,133   | ) |   | (425,085   | )
|Intangible assets                                                                            |   | -          |   |   | -          |   |   | (135,465   | )
|Recovery of deferred development costs                                                       |   | 233,290    |   |   | -          |   |   | -          |  
|Net cash used in investing
      activities                                                  |   | (479,828   | ) |   | (289,783   | ) |   | (568,567   | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash flows from financing
      activities:                                                  |   |            |   |   |            |   |   |            |  
|Issuance of common shares                                                                    |   | 3,697,441  |   |   | 2,524,155  |   |   | 2,446,432  |  
|Bridge loans
      advances                                                                  |   | -          |   |   | 714,359    |   |   | 496,813    |  
|Bridge loan repayments                                                                       |   | (126,044   | ) |   | (173,782   | ) |   | (903,147   | )
|Net cash provided by financing
      activities                                              |   | 3,571,397  |   |   | 3,064,732  |   |   | 2,040,098  |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Increase in cash                                                                             |   | 576,254    |   |   | 200,967    |   |   | 18,023     |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash, beginning of year                                                                      |   | 245,029    |   |   | 44,062     |   |   | 26,039     |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash, end of year                                                                            | $ | 821,283    |   | $ | 245,029    |   | $ | 44,062     |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Supplemental cash flow information:                                                          |   |            |   |   |            |   |   |            |  
|Interest paid (classified in operating
      activities)                                     |   | 83,493     |   |   | 75,142     |   |   | 211,264    |  
|Income taxes paid                                                                            |   | -          |   |   | -          |   |   | 10,713     |  

See accompanying notes.

5

---

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

|                                                            |  | Number of   |  |   | Share capital |   |   | Contributed |   |   | **Equity component of** |   |       | **Deficit**     |       |       | Total          |  
|----------------------------------------------------------- |  | ----------- |  | - | ------------- | - | - | ----------- | - | - | ----------------------- | - | ----- | --------------- | ----- | ----- | -------------- | -
|                                                            |  | shares      |  |   |               |   |   | **surplus** |   |   | of
      bridge loan    |   |       |                 |       |       |                |  
|                                                            |  |             |  |   |               |   |   |             |   |   |                         |   |       |                 |       |       |                |  
|Balance as at November 01, 2010                             |  | 95,324,511  |  | $ | 50,102,699    |   | $ | 24,498,736  |   | $ | 5,784                   |   | $     | (75,694,652     | )     | **$** | **(1,087,433** | )
|                                                            |  |             |  |   |               |   |   |             |   |   |                         |   |       |                 |       |       |                |  
|Private placement of units for cash                         |  | 20,825,207  |  |   | 2,478,681     |   |   | -           |   |   |                         |   |       |                 |       |       | 2,478,681      |  
|Financing costs                                             |  |             |  |   | (32,247       | ) |   | -           |   |   |                         |   |       |                 |       |       | (32,247        | )
|Stock based compensation (Note 12)                          |  | -           |  |   | -             |   |   | 928,497     |   |   | -                       |   |       | -               |       |       | 928,497        |  
|Warrants issued on private placements                       |  | -           |  |   | (774,578      | ) |   | 254,311     |   |   | -                       |   |       | -               |       |       | (520,267       | )
|Warrants extended (Note 13)                                 |  | -           |  |   | -             |   |   | 113,384     |   |   | -                       |   |       | (293,020        | )     |       | (179,636       | )
|Modification of bridge loans                                |  |             |  |   |               |   |   | 185,564     |   |   |                         |   |       |                 |       |       | 185,564        |  
|Equity portion of bridge loan                               |  | -           |  |   | -             |   |   | 5,784       |   |   | (5,784                  | ) |       | -               |       |       | -              |  
|Net loss and comprehensive loss                             |  | -           |  |   | -             |   |   | -           |   |   |                         |   |       | (3,182,387      | )     |       | (3,182,387     | )
|Balance as at October 31, 2011                              |  | 116,149,718 |  |   | 51,774,555    |   |   | 25,986,276  |   |   | -                       |   |       | (79,170,059     | )     |       | (1,409,228     | )
|                                                            |  |             |  |   |               |   |   |             |   |   |                         |   |       |                 |       |       |                |  
|Private placement of units for cash (Note
      13)         |  | 6,344,899   |  |   | 1,040,899     |   |   |             |   |   |                         |   |       |                 |       |       | 1,040,899      |  
|Financing costs                                             |  |             |  |   | (16,457       | ) |   |             |   |   |                         |   |       |                 |       |       | (16,457        | )
|Stock based compensation (Note 12)                          |  | -           |  |   | -             |   |   | 430,856     |   |   | -                       |   |       | -               |       |       | 430,856        |  
|Warrants issued on private placements (Note 13)             |  | -           |  |   | (356,364      | ) |   | 66,997      |   |   | -                       |   |       | -               |       |       | (289,367       | )
|Warrants extended (Note 13)                                 |  | -           |  |   | -             |   |   | 358,983     |   |   | -                       |   |       | (1,322,879      | )     |       | (963,896       | )
|Warrants exercised (Note 13)                                |  | 12,075,858  |  |   | 1,499,713     |   |   | -           |   |   | -                       |   |       | -               |       |       | 1,499,713      |  
|Fair value of warrants exercised                            |  | -           |  |   | 558,993       |   |   | (208,935    | ) |   | -                       |   |       | -               |       |       | 350,058        |  
|Equity portion of bridge loan (Note 14)                     |  | -           |  |   | -             |   |   | -           |   |   | 1,557                   |   |       | -               |       |       | 1,557          |  
|Shares issued on conversion of bridge loans
      (Note 14) |  | 1,860,080   |  |   | 226,900       |   |   | -           |   |   | -                       |   |       | -               |       |       | 226,900        |  
|Net loss and comprehensive loss                             |  |             |  |   |               |   |   |             |   |   |                         |   |       | (1,775,065      | )     |       | (1,775,065     | )
|Balance at October 31, 2012                                 |  | 136,430,555 |  |   | 54,728,239    |   |   | 26,634,177  |   |   | 1,557                   |   |       | (82,268,003     | )     |       | (904,030       | )
|                                                            |  |             |  |   |               |   |   |             |   |   |                         |   |       |                 |       |       |                |  
|Private placement of units for cash (Note
      13)         |  | 16,106,957  |  |   | 2,910,532     |   |   | -           |   |   | -                       |   |       | -               |       |       | 2,910,532      |  
|Financing costs                                             |  | -           |  |   | (35,482       | ) |   | -           |   |   | -                       |   |       | -               |       |       | (35,482        | )
|Stock based compensation (Note 12)                          |  | -           |  |   |               |   |   | 368,790     |   |   | -                       |   |       | -               |       |       | 368,790        |  
|Warrants issued on private placements (Note 13)             |  | -           |  |   | (863,863      | ) |   | 377,234     |   |   | -                       |   |       | -               |       |       | (486,629       | )
|Warrants extended (Note 13)                                 |  | -           |  |   |               |   |   | 264,938     |   |   | -                       |   |       | (841,247        | )     |       | (576,309       | )
|Warrants exercised (Note 13)                                |  | 5,953,913   |  |   | 822,391       |   |   | -           |   |   | -                       |   |       | -               |       |       | 822,391        |  
|Fair value of warrants exercised                            |  | -           |  |   | 193,796       |   |   | (47,675     | ) |   | -                       |   |       | -               |       |       | 146,121        |  
|Warrants modified (Note 13)                                 |  | -           |  |   |               |   |   | 5,224,863   |   |   | -                       |   |       | -               |       |       | 5,224,863      |  
|Net loss and comprehensive loss                             |  | -           |  |   |               |   |   |             |   |   | -                       |   |       | (5,933,928      | )     |       | (5,933,928     | )
|Balance at October 31, 2013                                 |  | 158,491,425 |  | $ | 57,755,613    |   | $ | 32,822,327  |   | $ | 1,557                   |   | **$** | **(89,043,178** | **)** | $     | 1,536,319      |  

6

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|1. | REPORTING ENTITY AND NATURE OF BUSINESS                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | Micromem Technologies Inc. (Micromem or the Company)
      is a incorporated under the laws of the Province of Ontario, Canada. The
      principal business address of the Company is 121 Richmond Street West,
      Suite 304, Toronto, Ontario, Canada.                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | The Company develops, based upon proprietary technology,
      customized magnetic sensor applications for companies operating
      internationally in a variety industries. The Company has not generated
      commercial revenues through October 31, 2013 and is devoting substantially
      all its efforts securing commercial revenue opportunities.
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | These consolidated financial statements include the
      accounts of the Company and its wholly- owned subsidiaries:                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | (i)                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | (ii)                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | (iii)                                                                                                                                                                                                                                                                                                                                                        

These consolidated financial statements
were authorized for issuance and release by the Companys Board of Directors on
February 19, 2014.

7

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|2. | GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | These consolidated financial statements have been
      prepared on the going concern basis in accordance with International
      Financial Reporting Standards (IFRS), which presumes that the Company
      will be able to realize its assets and discharge its liabilities in the
      normal course of business for the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | There are uncertainties related to conditions and events
      that cast doubt about the Companys ability to continue as a going concern
      for a reasonable period of time in future. During the year ended October
      31, 2013, the Company reported a loss from operations of $5,933,928 (2012
      - $1,775,065; 2011 - $3,182,387) of which $3,670,725 (2012 - $391,293;
      2011 - $1,717,906) of this loss are non-cash losses (2012  gains; 2011 -
      losses) and negative cash flows from operations of $2,515,315 (2012 -
      $2,573,982; 2011 - $1,453,508). The Companys working capital position as
      at October 31, 2013 is $425,888 (2012  working capital deficiency of
      $1,793,217).                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Companys success depends on the profitable
      commercialization of its proprietary magnetic sensor technology. There is
      no assurance that the Company will be successful in the profitable
      commercialization of its technology. Based upon its current operating and
      financial plans, management of the Company believes that it will have
      sufficient access to financial resources to fund the Companys planned
      operations through fiscal 2014; however, if the Company is not able to
      complete its financial plans and/or is not able to profitably
      commercialize its technology then there is doubt the Company can continue
      as a going concern. Accordingly, the financial statements do not include
      any adjustments to reflect the possible future effects on the
      recoverability and classification of assets or the amounts and
      classifications of liabilities that may result from the possible inability
      of the Company to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | If the going concern assumption were not appropriate
      for these consolidated financial statements then adjustments would be
      necessary to the carrying value of assets and liabilities, the reported
      expenses and the balance sheet classifications used; in such cases, these
      adjustments could be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

8

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|3. | BASIS OF PRESENTATION
|-- | ---------------------
|   |                      
|   | a)                   
|   |                      
|   |                      
|   |                      
|   | b)                   
|   |                      
|   |                      
|   |                      
|   | c)                   
|   |                      
|   |                      
|   |                      
|   | d)                   
|   |                      
|   |                      
|   |                      
|   |                      
|   |                      
|   |                      
|   |                      
|   |                      

9

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|3. | BASIS OF PRESENTATION (Contd)
|-- | ------------------------------
|   |                               
|   | d)                            
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               

10

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
|-- | --------------------------------------------

| | a) | Basis of consolidation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Subsidiaries are legal entities controlled by the
      Company. Control exists when the Company has the power, directly or
      indirectly to govern the financial and operating policies of an entity so
      as to obtain benefits from its activities. The financial statements of the
      subsidiaries are included in the consolidated financial statements from
      the date that control commences until the date control ceases.                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries. All significant
      inter-company transactions and balances have been eliminated. The
      accounting policies have been consistently applied by the Companys
      subsidiaries.                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | b) | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | IFRS requires that the functional currency of each entity
      in the consolidated entity be determined separately in accordance with
      specific indicators and should be measured using the currency of the
      primary economic environment in which the entity operates (the functional
      currency). As a result of an assessment of the primary indicators,
      management assessed the functional currency of the Comp+any and its
      subsidiaries to be U.S. dollar (USD). The consolidated financial
      statements of the Company are prepared and presented using the USD.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Foreign currency transactions denominated in other than
      U.S. dollars are translated into the functional currency on the following
      basis:                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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

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

11

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | c)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

12

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------

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

13

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | e)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

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

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

14

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------

| | f) | Derivative Liability (Contd)
| | -- | -----------------------------
| |    |                              
| |    | i)                           
| |    |                              
| |    |                              
| |    |                              
| |    |                              
| |    |                              
| |    | ii)                          
| |    |                              
| |    |                              

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

15

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------

| | f) | Derivative Liability (Contd)
| | -- | -----------------------------

| | (ii.3) | The conversion feature is revalued at the end of the
      reporting period and any adjustment is reflected in the statement of loss
      and comprehensive loss if the conversion feature is in CDN.
| | ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Computers
    30% declining balance basisOffice equipment
    30% declining balance basis


16

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | j)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

17

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | k)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   | l)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   | m)                                                       
|   |                                                          
|   |                                                          

18

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | n)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   | o)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

19

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | o)                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

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

20

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|5. | NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET
      ADOPTED                                                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                             
|   | Certain new standards, interpretations, amendments and
      improvements to existing standards were issued by the IASB or
      International Financial Reporting Interpretations Committee (IFRIC) that
      are mandatory for future accounting periods. The standard impacted that is
      applicable to the Company are as follows:
|   |                                                                                                                                                                                                                                                                                                                                             
|   | a)                                                                                                                                                                                                                                                                                                                                          

| |  | Amortized cost and                      
| | - | ----------------------------------------
| |  | Fair value through profit and
      loss

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

Requirements for financial liabilities
were added in October 2010 and largely carried forward existing requirements in
IAS 39, Financial Instruments  Recognition and Measurement, except that fair
value changes due to credit risk for liabilities designated at fair value
through profit or loss would generally be recorded in other comprehensive
income.

The effective date of IFRS 9 is yet to
be determined.

21

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|5. | NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET
      ADOPTED (Contd)
|-- | ---------------------------------------------------------------------------

| | b) | IFRS 10  Consolidated Financial Statements, requires an
      entity to consolidate an investee when it is exposed, or has rights, to
      variable returns from its involvement with the investee and has the
      ability to affect those returns through its power over the investee. Under
      existing IFRS, consolidation is required when an entity has the power to
      govern the financial and operating policies of an entity so as to obtain
      live entertainment from its activities. IFRS 10 replaces SIC-12,
      Consolidation  Special Purpose Entities and parts of IAS 27, Consolidated
      and Separate Financial Statements.                             
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | This standard is required to be applied for accounting
      periods beginning on or after January 1, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | c) | IFRS 11  Joint Arrangements, requires a venturer to
      classify its interest in a joint arrangement as a joint venture or joint
      operation. Joint ventures will be accounted for using the equity method of
      accounting whereas for a joint operation the venturer will recognize its
      share of the assets, liabilities, revenue and expenses of the joint
      operation. Under existing IFRS, entities have the choice to
      proportionately consolidate or equity account for interests in joint
      ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures and
      SIC-13, Jointly Controlled EntitiesNonmonetary Contributions by
      Venturers.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | This standard is required to be applied for accounting
      periods beginning on or after January 1, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | d) | IFRS 12  Disclosure of Interests in Other Entities, such
      as joint arrangements, associates, special purpose vehicles and off
      balance sheet vehicles. The standard carries forward existing disclosures
      and also introduces significant additional disclosure requirements that
      address the nature of, and risks associated with, an entitys interests in
      other entities.                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | This standard is required to be applied for accounting
      periods beginning on or after January 1, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

22

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|5. | NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET
      ADOPTED (Contd)
|-- | ---------------------------------------------------------------------------

| | e) | IFRS 13  Fair Value Measurement, is a comprehensive
      standard for fair value measurement and disclosure requirements for use
      across all IFRS standards. The new standard clarifies that fair value is
      the price that would be received to sell an asset, or paid to transfer a
      liability in an orderly transaction between market participants, at the
      measurement date. It also establishes disclosures about fair value
      measurement. Under existing IFRS, guidance on measuring and disclosing
      fair value is dispersed among the specific standards requiring fair value
      measurements and in many cases does not reflect a clear measurement basis
      or consistent disclosures.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | This standard is required to be applied for accounting
      periods beginning on or after January 1, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | f) | In addition, there have been amendments to existing
      standards including IAS 27, Separate Financial Statements, and IAS 28,
      Investments in Associates and Joint Ventures. IAS 27 addresses accounting
      for subsidiaries, jointly controlled entities and associates in non -
      consolidated financial statements. IAS 28 has been amended to include
      joint ventures in its scope and to address the changes in IFRS 10 to IFRS
      12.                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | This standard is required to be applied for accounting
      periods beginning on or after January 1, 2013, provided that IFRS 10, IFRS
      11 and IFRS 12 are adopted at the same time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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

23

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

24

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|7. | CAPITAL RISK MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Companys objective when managing capital is to
      maintain its ability to continue as a going concern in order to provide
      returns for shareholders and benefits for other stakeholders. The Company
      includes equity, comprised of issued share capital, equity component of
      bridge loans, contributed surplus and deficit, in the definition of
      capital. The Companys primary objective with respect to its capital
      management is to ensure that it has sufficient cash resources to further
      develop and market its technologies and to maintain its ongoing
      operations. To secure the additional capital necessary to pursue these
      plans, the Company may attempt to raise additional funds through the
      issuance of equity and warrants or by securing strategic partners. The
      Company is not subject to externally imposed capital requirements and
      there has been no change with respect to the overall capital risk
      management strategy during the year ended October 31, 2013.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|8. | PROMISSORY NOTE RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In April 2009, the Company advanced $200,000 to a private
      company incorporated in New Jersey, which, at that time, was also a
      strategic development partner of the Company. The Company and the private
      Company executed a promissory note with respect to the $200,000 advance
      stipulating the following terms and
conditions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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

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

25

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|8. | PROMISSORY NOTE RECEIVABLE (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | At October 31, 2013 the gross balance outstanding was
      $121,958 including outstanding principal plus accrued interest and this
      amount has been fully reserved. The Company served notice to the private
      company that it was demanding payments under the terms of the promissory
      note and the security agreement and has received judgment in its favor
      during the year ended October 31, 2012. The Company continues to pursue
      collection of this fully reserved note.

Gross
    
    
    NetBalance outstanding at November 01,
      2010
    $
    206,333
    
    $
    5,000Interest accrued
    
    20,220
    
    
    20,220Reserved
    
    -
    
    
    (20,220
    )Repayment
    
    (115,000
    )
    
    (115,000
    )Recovery of reserved amount
    
    -
    
    
    110,000Balance outstanding at October 31, 2011
    $
    111,553
    
    $
    -Interest accrued
    
    20,300
    
    
    20,300Reserved
    
    -
    
    
    (20,300
    )Repayment
    
    (30,000
    )
    
    -Balance outstanding at October 31, 2012
    
    101,853
    
    
    -Interest accrued
    
    20,105
    
    
    20,105Reserved
    
    -
    
    
    (20,105
    )Repayment
    
    -
    
    
    -Balance
      outstanding at October 31, 2013
    $
    121,958
    
    $
    -


26

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|9. | PROPERTY AND EQUIPMENT
|-- | ----------------------

| |                                   |   | Computers |   |   | Furniture and |  |   | Total  |  
| | --------------------------------- | - | --------- | - | - | ------------- |  | - | ------ | -
| |                                   |   |           |   |   | Equipment     |  |   |        |  
| | Cost                              |   |           |   |   |               |  |   |        |  
| |                                   |   |           |   |   |               |  |   |        |  
| | At November 1, 2010               | $ | 40,734    |   | $ | 25,989        |  | $ | 66,723 |  
| | Additions                         |   | -         |   |   | -             |  |   | -      |  
| | Year ended October 31, 2011       | $ | 40,734    |   | $ | 25,989        |  | $ | 66,723 |  
| |                                   |   |           |   |   |               |  |   |        |  
| | At November 1, 2011               | $ | 40,734    |   | $ | 25,989        |  | $ | 66,723 |  
| | Additions                         |   | -         |   |   | -             |  |   | -      |  
| | Year ended October 31, 2012       | $ | 40,734    |   | $ | 25,989        |  | $ | 66,723 |  
| |                                   |   |           |   |   |               |  |   |        |  
| | At November 1, 2012               | $ | 40,734    |   |   | 25,989        |  | $ | 66,723 |  
| | Additions                         |   | 14,839    |   |   | -             |  | $ | 14,839 |  
| | Disposals                         |   | (6,360    | ) |   | -             |  | $ | (6,360 | )
| | Year ended
      October 31, 2013 | $ | 49,213    |   | $ | 25,989        |  | $ | 75,202 |  

| | Accumulated amortization                 |   | Computers |   |   | **Furniture and** |  |   | Total  |  
| | ---------------------------------------- | - | --------- | - | - | ----------------- |  | - | ------ | -
| |                                          |   |           |   |   | Equipment         |  |   |        |  
| | At November 1, 2010                      | $ | 24,048    |   | $ | 25,989            |  | $ | 50,037 |  
| | Amortization for the year                |   | 6,469     |   |   | -                 |  |   | 6,469  |  
| | Impact of foreign exchange               |   | 16        |   |   | -                 |  |   | 16     |  
| | Year ended
      October 31, 2011        | $ | 30,533    |   | $ | 25,989            |  | $ | 56,522 |  
| |                                          |   |           |   |   |                   |  |   |        |  
| | At November 1, 2011                      | $ | 30,533    |   | $ | 25,989            |  | $ | 56,522 |  
| | Amortization for the year                |   | 4,414     |   |   | -                 |  |   | 4,414  |  
| | Year ended
      October 31, 2012        | $ | 34,947    |   | $ | 25,989            |  | $ | 60,936 |  
| |                                          |   |           |   |   |                   |  |   |        |  
| | At November 1, 2012                      | $ | 34,947    |   |   | 25,989            |  | $ | 60,936 |  
| | Amortization for the year                |   | 4,989     |   |   | -                 |  |   | 4,989  |  
| | Adjustment for
      disposals/write off |   | (4,721    | ) |   | -                 |  |   | (4,721 | )
| | Year ended October 31, 2013              | $ | 35,215    |   | $ | 25,989            |  | $ | 61,204 |  
| |                                          |   |           |   |   |                   |  |   |        |  
| | Net book value at October 31, 2011       | $ | 10,201    |   |   | -                 |  | $ | 10,201 |  
| | Net book value at October 31, 2012       | $ | 5,787     |   |   | -                 |  | $ | 5,787  |  
| | Net book value at October 31, 2013       | $ | 13,998    |   |   | -                 |  | $ | 13,998 |  

27

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

CostAt November 1, 2011
    $
    646,606Additions
    
    71,557Year ended October 31, 2012
    $
    718,163At November 1, 2012
    $
    718,163Additions
    
    677,445Recovery of deferred development costs
    
    (233,290
    )Writedown of
      projects costs
    
    (234,241
    )Year ended October 31, 2013
    $
    928,077


|    | Additions to deferred development costs includes patent
      amortization of $22,354 (2012 - $15,204; 2011 - $Nil).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | To date, the Company has recovered from its development
      partners a portion of the costs it has incurred as deferred development
      costs coincident with meeting milestones as stipulated in development
      contracts.                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In 2013, the Company provided a reserve against deferred
      development costs previously incurred with respect to three development
      projects, reducing the carrying value in each case to a nominal amount. In
      each case, the Company has decided not to pursue these development
      projects.                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|11. | INTANGIBLE ASSETS AND PATENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Intangible assets comprise the costs which the Company
      has capitalized relating to the technical expertise and know-how that the
      Company has developed with respect to the commercialization efforts
      relating to its sensor technology. In 2011, the Company determined that it
      had sufficiently advanced its expertise and product knowledge relating to
      the general commercialization efforts for its sensor technology in
      multiple industry vertical applications. It anticipates that it will
      realize commercial economic benefits from the exploitation of these
      intangible assets in future.

28

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|11. | INTANGIBLE ASSETS AND PATENTS
  (Contd)
|--- | ----------------------------------------

Intangible AssetsCostAt November 1, 2010
    $
    -Additions
    
    135,465Year ended October 31, 2011
    $
    135,465At November 1, 2011
    $
    135,465Additions
    
    -Year ended
      October 31, 2012
    $
    135,465At November 1, 2012
    $
    135,465Additions
    
    -Year ended October 31, 2013
    $
    135,465Accumulated amortizationAt November 1, 2010
    $
    -Amortization for
      the year
    
    -Year ended October 31, 2011
    $
    -At November 1, 2011
    $
    -Amortization for the year
    
    19,352Year ended
      October 31, 2012
    $
    19,352At November 1, 2012
    $
    19,352Amortization for
      the year
    
    19,352Year ended October 31, 2013
    $
    38,704Net book value at October 31, 2011
    $
    135,465Net book value at October 31, 2012
    $
    116,113Net book value at October 31, 2013
    $
    96,761


29

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|11. | INTANGIBLE ASSETS AND PATENTS
  (contd)
|--- | ----------------------------------------

PatentsCostAt November 1, 2010
    $
    230,294Additions
    
    8,017Write-down
    
    (175,614
    )Year ended
      October 31, 2011
    $
    62,697At November 1, 2011
    $
    62,697Additions
    
    26,650Year ended October 31, 2012
    $
    89,347At November 1, 2012
    $
    89,347Additions
    
    44,825Year ended
      October 31, 2013
    $
    134,172Accumulated amortizationAt November 1, 2010
    $
    28,267Amortization for the year
    
    43,333Write-down
    
    (46,581
    )Year ended October 31, 2011
    $
    25,019At November 1, 2011
    $
    25,019Amortization for the year
    
    15,204Year ended
      October 31, 2012
    $
    40,223At November 1, 2012
    $
    40,223Amortization for
      the year
    
    22,354Year ended October 31, 2013
    $
    62,577Net book value at October 31, 2011
    $
    37,678Net book value at October 31, 2012
    $
    49,124Net book value at October 31, 2013
    $
    71,595


In the fiscal year ended October 31,
2011, the Company wrote-down the value of its patents by $129,033 relating to
technology the Company has no immediate plans to develop.

Amortization for the years ended
October 31, 2013 and 2012 was capitalized to deferred development costs.
Amortization for the year ended October 31, 2011 was expensed.

30

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|12. | SHARE CAPITAL, STOCK OPTIONS AND LOSS PER
    SHARE
|--- | ---------------------------------------------------

| | a) | Share Capital                                      
| | -- | ---------------------------------------------------
| |    |                                                    
| |    | Authorized and outstanding:                        
| |    |                                                    
| |    | The Company has two classes of shares as
  follows:

| | i)  | Special redeemable voting preference shares, 2,000,000
      authorized, none are issued and outstanding.
| | --- | ---------------------------------------------------------------------------------------------------------
| |     |                                                                                                          
| | ii) | Common shares without par value  an unlimited number
      authorized.                                  

| |                                                            |  | Number of   |  |   | Amount     |  
| | ---------------------------------------------------------- |  | ----------- |  | - | ---------- | -
| |                                                            |  | Shares      |  |   | $          |  
| | Balance at November 1, 2011                                |  | 116,149,718 |  | $ | 51,774,555 |  
| |                                                            |  |             |  |   |            |  
| | Private placement of units for cash (Note
      13)        |  | 6,344,899   |  |   | 1,040,899  |  
| | Warrants exercised                                         |  | 12,075,858  |  |   | 1,499,713  |  
| | Warrants issued on private placements (Note
      13)      |  | -           |  |   | (356,364   | )
| | Fair value of warrants exercised                           |  | -           |  |   | 558,993    |  
| | Share issued on conversion of bridge loans
      (Note 14) |  | 1,860,080   |  |   | 226,900    |  
| | Financing costs                                            |  | -           |  |   | (16,457    | )
| | Balance at October 31, 2012                                |  | 136,430,555 |  | $ | 54,728,239 |  
| |                                                            |  |             |  |   |            |  
| | Private placement of units for cash (Note
      13)        |  | 16,106,957  |  |   | 2,910,532  |  
| | Warrants exercised                                         |  | 5,953,913   |  |   | 822,391    |  
| | Warrants issued on private placements (Note
      13)      |  | -           |  |   | (863,863   | )
| | Fair value of warrants exercised                           |  | -           |  |   | 193,796    |  
| | Financing costs                                            |  | -           |  |   | (35,482    | )
| |                                                            |  |             |  |   |            |  
| | Balance at October 31, 2013                                |  | 158,491,425 |  | $ | 57,755,613 |  

31

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|12. | SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE
      (Contd)
|--- | --------------------------------------------------------------

| | b) | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Stock option plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Company has a fixed stock option plan. Under the
      Companys stock option plan (the Plan), the Company may grant options
      for up to 15,600,000 shares of common stock to directors, officers,
      employees or consultants of the Company and its subsidiaries. The exercise
      price of each option is equal to or greater than the market price of the
      Companys shares on the date of grant unless otherwise permitted by
      applicable securities regulations. An options maximum term under the Plan
      is 10 years. Stock options are fully vested upon issuance by the Company
      unless the Board of Directors stipulates otherwise by Directors
      resolution.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | A summary of the status of the Companys fixed stock
      option plan through October 31, 2013 and changes during the periods is as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                |  | Options (000 | ) |  | Weighted       |  
| | ------------------------------ |  | ------------ | - |  | -------------- | -
| |                                |  |              |   |  | average        |  
| |                                |  |              |   |  | exercise price |  
| | Outstanding, November 01, 2011 |  | 11,175       |   |  | 0.47           |  
| | Granted                        |  | 2,000        |   |  | 0.35           |  
| | Expired                        |  | (540         | ) |  | (0.44          | )
| | Forfeited                      |  | (2,720       | ) |  | (1.20          | )
| | Outstanding, October 31, 2012  |  | 9,915        |   |  | 0.24           |  
| | Granted                        |  | 2,170        |   |  | 0.30           |  
| | Expired                        |  | (315         | ) |  | (0.55          | )
| | Forfeited                      |  | (295         | ) |  | (0.23          | )
| | Outstanding, October 31, 2013  |  | 11,475       |   |  | 0.24           |  

During the year ended October 31, 2013
the Company issued a total of 2,170,000 (2012 2,000,000) stock options to
officers and directors (1,120,000 (2012  1,525,000)), employees (750,000 (2012
 475,000)) and consultants (300,000 (2012  Nil)). The Company has the
following stock options outstanding at October 31, 2013:

32

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|12. | SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE
      (Contd)
|--- | --------------------------------------------------------------

| | b) | Stock Options(Contd)
| | -- | ---------------------

WeightedaverageremaininglifeDate of
      issue
    #
      Issued
    Strike Price
    
    (in years)
    Expiry DateApril 5, 2011
    125,000
    0.35
    
    2.4
    April 5, 2016October 31, 2011
    7,275,000
    0.20
    
    3.0
    October 31, 2016April 10, 2012
    1,905,000
    0.35
    
    3.4
    April 10, 2017January 22, 2013
    1,090,000
    0.30
    CDN
    4.2
    January 22, 2018September 16, 2013
    780,000
    0.27
    CDN
    4.9
    September 16,
      2018October 17, 2013
    300,000
    0.35
    
    5.0
    October 17, 201811,475,000


All outstanding options at October 31,
2013 are exercisable. In 2013, the Company recorded a total expense of $368,790
(2012 - $430,856; 2011 - $928,497) with respect to the issuance of options
issued during the year, calculated in accordance with the Black Scholes
option-pricing model.

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

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

| |                                                    | 2013          | 2012    | 2011         
| | -------------------------------------------------- | ------------- | ------- | -------------
| | Share price                                        | $ 0.20 - 0.36 | $ 0.30  | $ 0.17 - 0.20
| | Volatility factor (based on historical volatility) | 105% - 110%   | 99%     | 90% - 95%    
| | Risk free interest rate                            | 1.37% - 1.84% | 1.31%   | 1.62% - 2.55%
| | Expected life                                      | 5 years       | 5 years | 2 - 5 years  
| | Dividend yield                                     | 0%            | 0%      | 0%           
| | Forfeiture rate                                    | 0%            | 0%      | 0%           

33

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|12. | SHARE CAPITAL, STOCK OPTIONS AND LOSS PER SHARE
      (Contd)
|--- | --------------------------------------------------------------
|    |                                                               
|    | c)                                                            
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               

|13. | PRIVATE PLACEMENTS, DERIVATIVE WARRANT LIABILITY AND
      COMMON SHARE PURCHASE WARRANTS
|--- | -----------------------------------------------------------------------------------------
|    |                                                                                          
|    | a)                                                                                       
|    |                                                                                          
|    |                                                                                          
|    |                                                                                          
|    |                                                                                          

34

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|13. | PRIVATE PLACEMENTS, DERIVATIVE WARRANT LIABILITY AND
      COMMON SHARE PURCHASE WARRANTS (Contd)
|--- | --------------------------------------------------------------------------------------------------
|    |                                                                                                   
|    | a)                                                                                                
|    |                                                                                                   
|    |                                                                                                   
|    |                                                                                                   
|    |                                                                                                   
|    |                                                                                                   
|    |                                                                                                   
|    |                                                                                                   
|    |                                                                                                   

35

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

| | a) | Private Placements(Contd)
| | -- | --------------------------

The relative fair value of these share
purchase warrants was estimated using the Black Scholes option-pricing model
with the following assumptions:

| |                                                    | 2013          | 2012         
| | -------------------------------------------------- | ------------- | -------------
| | Share price                                        | $0.17 - $0.58 | $0.10 - $0.35
| | Volatility factor (based on historical volatility) | 75 - 136%     | 107 - 156%   
| | Risk free interest rate                            | 0.97 - 1.09%  | 0.91 - 1.24% 
| | Dividend yield                                     | 0%            | 0%           
| | Expected life                                      | 1 year        | 1 year       

The Company calculated the charge
associated with the extension of warrants in accordance with the Black Scholes
option-pricing model. The Company reported a total charge to deficit of $841,247
(2012 - $1,322,879; 2011 - $293,020) and an offsetting charge to contributed
surplus of $264,938 (2012 - $358,983; 2011 - $113,384) for US dollar warrants
extended and $576,309 (2012 - $963,896; 2011  $179,636) to derivative warrant
liability for Canadian warrants extended.

The incremental fair value of these
warrants extended was estimated using the Black Scholes option-pricing model
with the following assumptions:

| |                                                    | 2013          | 2012          | 2011         
| | -------------------------------------------------- | ------------- | ------------- | -------------
| | Share price                                        | $0.19 - $0.53 | $0.12 - $0.30 | $0.12 - $0.24
| | Volatility factor (based on historical volatility) | 75 - 161%     | 109 - 144%    | 112 - 131%   
| | Risk free interest rate                            | 1.00 - 1.11%  | 0.91 - 1.14%  | 1.11 - 1.54% 
| | Dividend yield                                     | 0%            | 0%            | 0%           
| | Expected life                                      | 1 year        | 0.33-1.0 year | 0.5-1.27 year

36

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

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

| |                                                                              |   | 2013       |   |   | 2012       |   |   | 2011      | 
| | ---------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | --------- | 
| |                                                                              |   |            |   |   |            |   |   |           | 
| | Balance, beginning of year                                                   | $ | 1,061,544  |   | $ | 1,178,691  |   | $ | 68,207    | 
| | Fair value assigned in warrants in units issuances                           |   | 486,629    |   |   | 289,367    |   |   | 520,265   | 
| | Fair value assigned in warrants extended                                     |   | 576,309    |   |   | 963,896    |   |   | 179,635   | 
| | Fair value assigned to warrants issued on settlement of
      debt (Note 14) |   | -          |   |   | 306,061    |   |   | -         | 
| | Fair value transferred to share capital for
      warrants exercised         |   | (146,121   | ) |   | (348,948   | ) |   | -         | 
| | Warrants modified                                                            |   | (5,224,863 | ) |   | -          |   |   | -         | 
| | Loss (Gain) on revaluation of warrants                                       |   | 3,246,502  |   |   | (1,327,523 | ) |   | 410,584   | 
| |                                                                              | $ | -          |   | $ | 1,061,544  |   | $ | 1,178,691 | 

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

The derivative warrant liability was
revalued at October 28, 2013 (2012  October 31; 2011  October 31) using the
Black Scholes option-pricing model with the following assumptions:

| |                                                    | 2013             | 2012          | 2011         
| | -------------------------------------------------- | ---------------- | ------------- | -------------
| | Share price                                        | $0.46            | $0.21         | $0.19        
| | Volatility factor (based on historical volatility) | 106 - 255%       | 81 - 153%     | 114 - 148%   
| | Risk free interest rate                            | 1.03 - 1.09%     | 1.01 - 1.03%  | 0.86 - 1.36% 
| | Dividend yield                                     | 0%               | 0%            | 0%           
| | Expected life                                      | 0.14 - 1.13 year | 0.25 - 1 year | 0.75 - 1 year

37

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

| | c) | Share Purchase
Warrants
| | -- | -----------------------

| |                                         |  |             |   |   | Weighted       |   |  |           | 
| | --------------------------------------- |  | ----------- | - | - | -------------- | - |  | --------- | 
| |                                         |  |             |   |   | average        |   |  | Proceeds  | 
| |                                         |  | Warrants    |   |   | exercise price |   |  | Realized  | 
| | Balance outstanding at October 31,2011  |  | 26,672,637  |   | $ | 0.23           |   |  | -         | 
| | Exercised                               |  | (12,075,858 | ) |   | ($0.12         | ) |  | 1,499,713 | 
| | Expired                                 |  | (3,108,792  | ) |   | ($0.15         | ) |  | -         | 
| | Granted                                 |  | 8,204,981   |   | $ | 0.19           |   |  | -         | 
| | Balance outstanding at October 31, 2012 |  | 19,692,968  |   | $ | 0.27           |   |  | -         | 
| | Exercised                               |  | (5,953,913  | ) |   | ($0.14         | ) |  | 822,391   | 
| | Expired                                 |  | (85,000     | ) |   | ($0.15         | ) |  | -         | 
| | Granted                                 |  | 16,106,957  |   | $ | 0.24           |   |  | -         | 
| | Balance outstanding at October 31, 2013 |  | 29,761,012  |   | $ | 0.28           |   |  |           | 

The weighted average share price on
the date of exercise was $0.22 (2012 - $0.23) .

|14. | BRIDGE LOANS
|--- | ------------
|    |             
|    | (a)         

38

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|14. | BRIDGE LOANS (Contd)
|--- | ---------------------
|    |                      
|    | (b)                  
|    |                      
|    | (c)                  
|    |                      
|    | (d)                  
|    |                      
|    | (e)                  

39

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|14. | BRIDGE LOANS (Contd)
|--- | ---------------------
|    |                      
|    | (f)                  
|    |                      
|    |                      
|    |                      
|    |                      
|    |                      
|    |                      

Loan 1
    
    
    Loan 2
    
    
    Loan 3
    
    
    Loan 4
    
    
    Loan 5
    
    
    TotalLoan (initial value)
    
    77,238
    
    
    284,514
    
    
    52,747
    
    
    104,099
    
    
    81,194
    
    
    599,792Embedded derivative
    
    25,138
    
    
    -
    
    
    44,776
    
    
    99,828
    
    
    44,850
    
    
    214,592Interest Accrued
    
    18,495
    
    
    62,403
    
    
    11,767
    
    
    24,606
    
    
    4,816
    
    
    122,087Interest Paid
    
    (12,318
    )
    
    (56,903
    )
    
    -
    
    
    (12,063
    )
    
    -
    
    
    (81,284
    )Accretion Expense
    
    25,702
    
    
    1,557
    
    
    45,313
    
    
    101,962
    
    
    26,161
    
    
    200,695Gain on revaluation of embedded derivative
    
    (25,138
    )
    
    -
    
    
    (44,776
    )
    
    (99,828
    )
    
    (4,101
    )
    
    (173,843
    )Equity Portion of Bridge Loan - Conversion
      Feature
    
    -
    
    
    (1,557
    )
    
    -
    
    
    -
    
    
    -
    
    
    (1,557
    )(Gain) loss on settlement
    
    708
    
    
    
    
    
    
    
    
    (233
    )
    
    -
    
    
    475Repayments
    
    (109,825
    )
    
    -
    
    
    -
    
    
    (117,075
    )
    
    -
    
    
    (226,900
    )Conversion
    
    
    
    
    -
    
    
    (109,827
    )
    
    (101,296
    )
    
    -
    
    
    (211,123
    )Carrying value at October 31, 2012
    
    -
    
    
    290,014
    
    
    -
    
    
    -
    
    
    152,920
    
    
    442,934


40

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|14. | BRIDGE LOANS (Contd)
|--- | ---------------------

A breakdown of the outstanding bridge
loans at October 31, 2013 is summarized as follows:

|                                                   |           |           |          
|-------------------------------------------------- | --------- | --------- | ---------
|                                                   | Loan 2    | Loan 5    | Total    
|                                                   |           |           |          
|                                                   |           |           |          
|Loan (initial value)                               | 284,514   | 81,194    | 365,708  
|Embedded derivative                                | -         | 44,850    | 44,850   
|Interest Accrued                                   | 130,686   | 15,209    | 145,895  
|Interest Paid                                      | (125,186) | (15,209)  | (140,395)
|Accretion Expense                                  | 1,557     | 44,850    | 46,407   
|Gain on revaluation of embedded derivative         | -         | (44,850)  | (44,850) 
|Equity Portion of Bridge Loan - Conversion Feature | (1,557)   | -         | (1,557)  
|Repayments                                         | -         | (126,044) | (126,044)
|Carrying value at October 31, 2013                 | 290,014   | -         | 290,014  

In fiscal 2013, no bridge loans were
issued.

In fiscal 2012, the fair value of the
embedded derivatives for which the conversion price is in CDN, was estimated on
initial recognition using the Black Scholes option-pricing model with the
following assumptions:

2012Share price
    $0.15 - $0.27Volatility factor (based on historical volatility)
    126 - 156%Risk free interest rate
    0.93 - 0.94%Dividend yield
    0%Expected life
    6 Months


The embedded derivative at October 31,
2012 was revalued for loans outstanding in which the conversion price is in CDN
using the following underlying assumptions in the Black Scholes option-pricing
model:

2012Share price
    $0.21Volatility factor (based on historical volatility)
    79%Risk free interest rate
    1.0%Dividend yield
    0%Expected life
    0.34 Years


41

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|14. | BRIDGE LOANS (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | As Loan 5 was repaid during the year the embedded
      derivative recognized in fiscal 2012 of $44,850 was revalued to be nil at
      the time of repayment and a gain on revaluation of $40,750 (2012 
      $176,899; 2011  loss of $1,979) was recognized.                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In the 2012 fiscal year, Loan 3 and a portion of Loan 4
      were settled by the holder converting their amount outstanding with the
      Company issuing 1,860,080 common share with an assigned value of $226,900.
      As a result of the conversion, the holder received 1,860,080 common share
      purchase warrants exercisable at a price of $0.12- $0.20 CDN for a period
      of 1 year. These common share purchase warrants were valued at $306,061
      using the Black Scholes option- pricing model with the following
      assumptions.

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


42

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|15. | CONTRIBUTED SURPLUS
|--- | -------------------

| | Balance outstanding at November 01, 2011                                          | $ | 25,986,276 |  
| | --------------------------------------------------------------------------------- | - | ---------- | -
| |                                                                                   |   |            |  
| | Stock based compensation expense relating
      to stock options issued (Note 12) |   | 430,856    |  
| | Common share purchase warrants                                                    |   |            |  
| | (a) Issued (Note
      13)                                                        |   | 66,997     |  
| | (b) Extended (Note 13)                                                            |   | 358,983    |  
| | Fair value of warrants exercised                                                  |   | (208,935   | )
| | Balance at October 31, 2012                                                       | $ | 26,634,177 |  
| |                                                                                   |   |            |  
| | Stock based compensation expense relating to stock options
      issued (Note 12) |   | 368,790    |  
| | Common share purchase warrants                                                    |   |            |  
| | (a) Issued (Note 13)                                                              |   | 377,234    |  
| | (b) Extended
      (Note 13)                                                      |   | 264,938    |  
| | Warrants modified (Note 13)                                                       |   | 5,224,863  |  
| | Fair value of warrants exercised                                                  |   | (47,675    | )
| | Balance at
      October 31, 2013                                                 | $ | 32,822,327 |  

|16. | INCOME TAXES
|--- | ------------
|    |             
|    | (a)         

43

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|16. | INCOME TAXES (Contd)
|--- | ---------------------

OtherCanada
    
    
    foreign
    
    
    Total2014
    $
    977,818
    
    
    -
    
    $
    977,8182015
    
    3,079,475
    
    
    -
    
    
    3,079,4752022
    
    -
    
    
    7,301
    
    
    7,3012023
    
    -
    
    
    9,667
    
    
    9,6672025
    
    -
    
    
    14,471
    
    
    14,4712026
    
    2,303,792
    
    
    5,254
    
    
    2,309,0462027
    
    1,937,308
    
    
    3,459
    
    
    1,940,7672028
    
    10,045
    
    
    55,519
    
    
    65,5642029
    
    1,985,484
    
    
    463,610
    
    
    2,449,0942030
    
    2,678,936
    
    
    1,886,778
    
    
    4,565,7142031
    
    1,613,975
    
    
    48,808
    
    
    1,662,7832032
    
    1,788,704
    
    
    333,962
    
    
    2,122,6662033
    
    2,197,482
    
    
    235,583
    
    
    2,433,065$
    18,573,019
    
    $
    3,064,412
    
    $
    21,637,431


In addition the Company has available
capital loss carry forwards of approximately $1.6 million to reduce future
taxable capital gains, the benefit of which has not been recognized in these
consolidated financial statements. These losses carry forward indefinitely.

44

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|16. | INCOME TAXES (Contd)
|--- | ---------------------
|    |                      
|    | (b)                  

| |                                                                                          |   | 2013       |   |   | 2012       |   |   | 2011       |  
| | ---------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| |                                                                                          |   |            |   |   |            |   |   |            |  
| | Non-capital losses and other                                                             | $ | 6,334,982  |   | $ | 5,877,761  |   | $ | 4,959,149  |  
| | Capital losses                                                                           |   | 212,386    |   |   | 221,578    |   |   | 210,319    |  
| | Property, equipment, intangibles, patents
      and deferred development costs and other |   | 1,926,689  |   |   | 1,988,956  |   |   | 1,898,201  |  
| | Share issue costs                                                                        |   | 15,641     |   |   | 21,497     |   |   | 28,788     |  
| |                                                                                          |   | 8,489,698  |   |   | 8,109,792  |   |   | 7,096,457  |  
| | Deferred tax
      assets not recognized                                                 |   | (8,489,698 | ) |   | (8,109,792 | ) |   | (7,096,457 | )
| |                                                                                          | $ | -          |   | $ | -          |   | $ | -          |  

| | (c) | The reconciliation of income tax attribute to continuing
      operation computed at the statutory tax rates to income tax expense is as
      follows:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                        |   | 2013       |   |   | 2012       |   |   | 2011       |  
| | ---------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| |                                                                                                                        |   |            |   |   |            |   |   |            |  
| | Loss before income taxes                                                                                               | $ | (5,933,928 | ) | $ | (1,775,065 | ) | $ | (3,181,182 | )
| | Statutory rate                                                                                                         |   | 26.50%     |   |   | 26.50%     |   |   | 28.53%     |  
| |                                                                                                                        |   |            |   |   |            |   |   |            |  
| | Expected income tax recovery                                                                                           |   | (1,572,491 | ) |   | (470,392   | ) |   | (907,591   | )
| | Effect on income taxes of unrecognized
      future income tax assets relating to deductible temporary defferences on: |   |            |   |   |            |   |   |            |  
| | Non-deductible expenses and other items                                                                                |   | 888,557    |   |   | (148,207   | ) |   | 439,774    |  
| | Share issue costs and other                                                                                            |   | (4,361     | ) |   | (4,361     | ) |   | (8,062     | )
| | Effect of exchange rate on deferred tax assets carried
      forward from previous years                               |   | 324,880    |   |   | 3,071      |   |   | (183,451   | )
| | Change in deferred income tax rates and
      other                                                                    |   | (16,491    | ) |   | (393,446   | ) |   | (181,726   | )
| | Change in deferred
      tax assets not recognized                                                                     |   | 379,906    |   |   | 1,013,335  |   |   | 842,261    |  
| |                                                                                                                        | $ | -          |   | $ | -          |   | $ | 1,205      |  

45

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

| |                                             |   | 2013    |   |   | 2012    |   |   | 2011    |  
| | ------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
| |                                             |   |         |   |   |         |   |   |         |  
| | General and administrative                  | $ | 53,494  |   | $ | 66,651  |   | $ | 25,988  |  
| | Rent and occupancy cost                     |   | 84,179  |   |   | 108,193 |   |   | 60,396  |  
| | Bad debt expense                            |   | 19,954  |   |   | 21,586  |   |   | 67,049  |  
| | Interest income                             |   | (19,954 | ) |   | (20,300 | ) |   | (20,220 | )
| | Interest expense                            |   | 78,677  |   |   | 106,442 |   |   | 139,732 |  
| | Accretion expense                           |   | 19,381  |   |   | 187,671 |   |   | 12,447  |  
| | Office insurance                            |   | 61,211  |   |   | 65,394  |   |   | 78,246  |  
| | Telephone                                   |   | 17,272  |   |   | 17,380  |   |   | 18,741  |  
| | Investor relations, listing and filing fees |   | 64,283  |   |   | 141,600 |   |   | 80,448  |  
| |                                             | $ | 378,497 |   | $ | 694,617 |   | $ | 462,827 |  

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

| |                       |   | 2013      |  |   | 2012      |  |   | 2011      | 
| | --------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| |                       |   |           |  |   |           |  |   |           | 
| | Professional fees     | $ | 311,330   |  | $ | 183,021   |  | $ | 173,217   | 
| | Consulting fees       |   | 818,107   |  |   | 917,420   |  |   | 467,132   | 
| | Salaries and benefits |   | 443,078   |  |   | 407,450   |  |   | 424,306   | 
| |                       | $ | 1,572,515 |  | $ | 1,507,891 |  | $ | 1,064,655 | 

Research and developmentThe
components of research and development expenses are as follows:

| |                                       |   | 2013    |   |   | 2012    |  |   | 2011    |  
| | ------------------------------------- | - | ------- | - | - | ------- |  | - | ------- | -
| | Project expenses incurred (recovered) | $ | (73,321 | ) | $ | 229,840 |  | $ | (75,896 | )
| | Write-down of deferred development    |   |         |   |   |         |  |   |         |  
| | costs on specific projects            |   | 234,241 |   |   | -       |  |   | -       |  
| |                                       |   |         |   |   |         |  |   |         |  
| |                                       | $ | 160,920 |   | $ | 229,840 |  | $ | (75,896 | )

46

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|18. | MANAGEMENT COMPENSATION AND RELATED PARTY
      TRANSACTIONS       
|--- | -------------------------------------------------------------------
|    |                                                                    
|    | The Company reports the following related party
      transactions:
|    |                                                                    
|    | (a)                                                                
|    |                                                                    
|    |                                                                    
|    |                                                                    
|    |                                                                    
|    |                                                                    
|    |                                                                    
|    |                                                                    
|    | (b)                                                                
|    |                                                                    
|    |                                                                    
|    |                                                                    
|    |                                                                    

47

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|18. | MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS
      (Contd)
|--- | ---------------------------------------------------------------------

| | (b) | Management and consulting fees (Contd):                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | In 2011 the Company assigned the promissory note
      receivable (Note 8) to an officer of the Company in conjunction with
      outstanding and unpaid fees due to that officer. During 2012, a total of
      $30,000 received from the borrower was paid directly to that officer under
      the assignment agreement. The balance owing to the officer of the Company
      at October 31, 2012 was $56,500, which was paid in fiscal 2013.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | In February 2012 an officer subscribed for $50,000 as a
      Unit private placement consisting of one common share (at a price of $0.35
      per share) and one common share purchase warrant (at a price of $0.44 per
      share). A total of 142,858 Units were subscribed
for.                                                                                                                                                             

|19. | COMMITMENTS                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                         
|    | The Company secured new leased premises in June 2012. The
      lease term is for 5 years and stipulates base monthly rental expenses of
      $3,800 CDN. Lease commitments are as follows  commitments less than one
      year of $44,000; commitment between years 2-5 of $121,000.
|    |                                                                                                                                                                                                                                                                                         
|20. | CONTINGENCIES                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                         
|    | (a)                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                         
|    | (b)                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                         

48

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|20. | CONTINGENCIES (Contd)
|--- | ----------------------
|    |                       
|    | (b)                   
|    |                       
|    |                       
|    |                       
|    | (c)                   
|    |                       
|    |                       

|21. | FINANCIAL RISK MANAGEMENT
|--- | -------------------------
|    |                          
|    | (a)                      
|    |                          
|    |                          
|    |                          
|    | (b)                      

| | i. | Foreign Exchange Risk:                                                                                                                                                                                                                                                                              
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                     
| |    | The Company currently incurs expenses in Canadian
      dollars. The total monetary financial instruments are in a net positive
      position. Management monitors the Canadian position of these monetary
      financial instruments on a periodic basis throughout the course of the
      year.
| |    |                                                                                                                                                                                                                                                                                                     
| |    | The consolidated financial statements include balances
      that are denominated in Canadian dollars as
follows:                                                                                                                                                                                   

49

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|21. | FINANCIAL RISK
MANAGEMENT
|--- | -------------------------

| | (b) | Market Risk:(Contd)
| | --- | --------------------

| | i. | Foreign Exchange Risk:
(Contd)
| | -- | -------------------------------

2013
    
    
    2012Cash
    $
    461,727
    
    $
    263,383Deposits and other receivables
    
    49,477
    
    
    46,016Accounts payable and accrued
      liabilities
    
    210,827
    
    
    267,098Bridge loan
    
    -
    
    
    159,902


| | ii.  | Foreign Exchange Risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | A 10% strengthening of the US dollar against the Canadian
      dollar would have decreased the equity by $30,037 (2012  increased the
      equity by $10,695) due to a reduction in the value of net liability
      balance. A 10% weakening of the US dollar against the Canadian dollar at
      October 31, 2013 would have had the equal but opposite effect.                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | iii. | Interest Rate Risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Cash flow interest rate risk is the risk that the future
      cash flow of a financial instrument will fluctuate because of changes in
      market interest rates.                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Financial assets and financial liabilities with variable
      interest rates expose the Company to cash flow interest rate risk. The
      Companys cash and promissory note receivable earn interest at market
      rates. The Company manages its interest rate risk by maximizing the
      interest income earned on excess funds while maintaining the liquidity
      necessary to conduct operations on a day-to-day basis. Fluctuations in
      market rates of interest may have an impact on the Companys results of
      operations.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | The Company is not exposed to interest price risk on its
      interest bearing bridge loans as the interest rate is
  fixed.                                                                                                                                                                                                                                                                                                                                                                                                                        

50

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|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

|21. | FINANCIAL RISK MANAGEMENT (Contd)
|--- | ----------------------------------
|    |                                   
|    | (c)                               
|    |                                   
|    |                                   
|    |                                   
|    |                                   
|    |                                   
|    |                                   
|    |                                   
|    | (d)                               
|    |                                   
|    |                                   
|    |                                   
|    |                                   

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

2013
    
    
    2012Canada
    $
    415,533
    
    $
    665,430United States
    
    694,898
    
    
    223,757$
    1,110,431
    
    $
    889,187


51

---

|MICROMEM TECHNOLOGIES INC.                   
|---------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   
|(Expressed in United States dollars)         
|                                             
|For the years ended October 31, 2013 and 2012
|                                             

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

| | i)   | The Company realized proceeds of $1,751,924 from the
      exercise of a total of 7,133,354 common share purchase warrants previously
      issued.                                                                                                                                                                                                                            
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                
| | ii)  | The Company extended the expiry dates of a total of
      1,105,026 common share purchase warrants. These warrants were extended for
      a period of 6 months in each case. The strike price was changed from $0.41
      and $0.45 to $0.50 in each case. These warrants would have otherwise
      expired in November 2013.                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                
| | iii) | The Company announced an initial development contract
      with a strategic partner in the amount of $5.4 million, tied to
      development milestones.                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                
| | iv)  | The bridge loan that was reported at October 31, 2013, in
      the amount of $290,014, has since been converted in 2,517,501 equity
      units. Each unit consists of one common share and one common share
      purchase warrant. The warrants have a strike price of $0.12 per common
      share and will expire on January 27, 2015 if not exercised by that
      date.

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

52

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ITEM 19. Exhibits

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

|Exhibit No. 1.1 | Articles of Incorporation of Micromem Technologies Inc.
      and amendments thereto in effect as of January 11, 2000, (Incorporated
      herein by reference to the Company's Form 20-F filed with the Commission
      on January 11, 2000).                                                                                                                                               
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.2 | Articles of Incorporation of Amendment of Micromem
      Technologies Inc. dated as of October 17, 2001 amending the Articles of
      Incorporation of Micromem Technologies Inc. to increase the number of
      directors to a minimum of three and a maximum of ten (Incorporated herein
      by reference to the Company's Form 20-F filed with the Commission on March
      26, 2003).
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.3 | Articles of Incorporation of Amendment of Micromem
      Technologies Inc. dated as of June 24, 2002 amending the Articles of
      Incorporation of Micromem Technologies Inc. to increase the number of
      directors to a minimum of 3 and a maximum of 12 (Incorporated herein by
      reference to the Company's Form 20-F filed with the Commission on March
      26, 2003).        
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.5 | By-Laws of Micromem Technologies Inc. in effect as of
      January 11, 2002, (Incorporated herein by reference to the Company's Form
      20-F filed with the Commission on January 11, 2000).                                                                                                                                                                                              
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.6 | Amendment to the By-Laws of Micromem Technologies Inc.
      approved by shareholders on June 29, 2000, deleting the requirement from
      the By-Laws that the President shall be appointed from amongst the
      directors (Incorporated herein by reference to the Company's Form 20-F
      filed with the Commission on March 26, 2003).                                               
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.1 | Employment Agreement by and between Micromem
      Technologies, Inc. and Salvatore Fuda dated May 29, 2005. (Incorporated
      herein by reference to the Company's Form 20-F filed with the Commission
      on February 28, 2006).                                                                                                                                                        
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.2 | Employment Agreement by and between Micromem Technologies
      and Joseph Fuda dated May 28, 2008 (Incorporated by reference to the
      Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                                                               
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.3 | Employment Agreement by and between Micromem Technologies
      and Dan Amadori dated May 28, 2008 (Incorporated by reference to the
      Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                                                               
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.4 | Employment Agreement by and between Micromem Technologies
      and Steven Van Fleet dated May 28, 2008 (Incorporated by reference to the
      Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                                                          
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.5 | Agreement with Investor Relations Group dated September
      1, 2008 (Incorporated by reference to the Companys Form 20-F filed with
      the Commission on February 24, 2009).                                                                                                                                                                                                            
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.6 | Agreement with Dreifus Associates Limited (DAL) dated
      June 1, 2008 (Incorporated by reference to the Companys Form 20-F filed
      with the Commission on February 24, 2009).                                                                                                                                                                                                         
|                |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.7 | Unotron Promissory Note dated August 1, 2009
      (Incorporated by reference to the Companys Annual Report on Form 20-F
      filed with the Commission on March 1, 2010)                                                                                                                                                                                                                   
|.               |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.8 | Agreement with Life Med Technologies Inc. (Incorporated
      by reference to the Companys Annual Report on Form 20-F filed with the
      Commission on March 1, 2010)                                                                                                                                                                                                                      

42

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Exhibit No. 4.9
    Manufacturing Supply Agreement with Unotron.
      (Incorporated by reference to the Companys Annual Report on Form 20-F/A
      filed with the Commission on February 25, 2011)Exhibit No. 8.1
    List of Subsidiaries (Incorporated by reference to the
      Companys Annual Report on Form 20-F filed with the Commission on March 1,
      2010)Exhibit No. 12.1
    Officer's Certification pursuant to Section 302 of the
    Sarbanes Oxley Act, 2002 (filed herewith).Exhibit No. 12.2
    Officer's Certification pursuant to Section 302 of the
      Sarbanes Oxley Act, 2002 (filed herewith).Exhibit No. 13.1
    Officer's Certification pursuant to Section 906 of the
      Sarbanes Oxley Act, 2002 (filed herewith).Exhibit No. 13.2
    Officer's Certification pursuant to Section 906 of the
      Sarbanes Oxley Act, 2002 (filed herewith).


SIGNATURES

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

| | MICROMEM TECHNOLOGIES INC.
| | --------------------------
| |                           
| | By:                       
| | Name:                     
| | Title:                    
| |                           
| | By:                       
| | Name:                     
| | Title:                    

Dated: February 19, 2014

43

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