UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 20-F/A



[   ]
      
      REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
      SECURITIES EXCHANGE ACT OF 1934OR[X]
      
      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934FOR
      THE FISCAL YEAR ENDED OCTOBER 31, 2004OR[  ]
      
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934FOR
      THE TRANSITION PERIOD FROM __________________ TO __________________


Commission file number 0-21392





|MICROMEM TECHNOLOGIES INC.                                
|----------------------------------------------------------
|(Exact
    Name of Registrant as Specified in Its Charter)
|                                                          
|Ontario, Canada                                           
|(Jurisdiction of Incorporation or Organization)           
|                                                          
|777
    Bay Street, Suite 1910                            
|Toronto, Ontario M5G 2E4                                  
|Canada                                                    
|(Address of Principal Executive Offices)                  





SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO
SECTION-12(b) OF THE ACT:





|Title of Each Class |  | Name of Each Exchange
    On Which Registered
|------------------- |  | ---------------------------------------------
|None                |  | None                                         



SECURITIES REGISTERED OR TO BE
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Shares without par value



(Title of Class)



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.

58,063,437 Common Shares



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[ ]

Indicate by check mark which financial statement item the registrant has
elected to follow.

ITEM 17 [X]     ITEM 18 [ ]



TABLE OF CONTENTS

|                                                                                  | Page        
|--------------------------------------------------------------------------------- | ------------
|                                                                                  |             
|EXPLANATORY NOTE                                                                  | 1           
|                                                                                  |             
|PART II                                                                           |             
|Independent Auditors' Report                                                      | 2           
|Comments by Auditors for U.S. Readers on Canada-U.S. Reporting
        Difference | 3           
|Auditors' Report                                                                  | 4           
|Item 17 - Financial
    Statements                                                | F1 -
    F33
|Item 19 - Exhibits                                                                | 34          
|SIGNATURES                                                                        | 35          
|EXHIBIT INDEX                                                                     | 36          



|                             | EXHIBIT
|---------------------------- | -------
|Consent of Ernst & Young LLP | 14.2   





EXPLANATORY NOTE



Pursuant to Rule
12b-15 under the Securities Exchange Act of 1934, Micromem Technologies Inc.
(the "Company") hereby amends its Annual Report on Form 20-F for the fiscal year
ended October 31, 2004, as filed with the U.S. Securities and Exchange
Commission on February 28, 2005 (the "Original Filing"), by setting forth in
Item 17 an Auditor's Report of Ernst & Young LLP that was inadvertently omitted
from the Original Filing.



This amendment
also includes as Exhibit 14.2 a consent of Ernst & Young LLP to the use of their
Auditor's Report in this Annual Report on Form 20-F/A.



This amendment
also amends the list of Exhibits in Item 19 and in the Exhibit Index to reflect
the addition of the consent of Ernst & Young LLP.



Other than for the
purpose of amending the information referred to above, this Amendment No. 1 does
not, and does not purport to, amend, update or restate the information in any
other item of the Original Filing or reflect any events that have occurred after
the date on which such annual report was filed.

1





Item 17 Financial Statements

Independent Auditors' Report

To the Shareholders of Micromem Technologies Inc.

We have audited the accompanying consolidated balance
        sheet of Micromem
        Technologies Inc. (a Development Stage Company)
        as of October 31, 2004 and the related
        consolidated statement of operations and deficit, cash flows and
        shareholders' equity for the year then ended. These financial statements
        are the responsibility of the Company's management. Our responsibility
        is to express an opinion on these financial statements based on our
        audit.



We conducted our audit in accordance audit standards
        generally accepted in Canada and standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan and perform the audit to obtain reasonable assurance about
        whether the financial statements are free of material misstatement. An
        audit includes consideration of internal control over financial
        reporting as a basis for designing audit procedures that are appropriate
        in the circumstances, but not for the purpose of expressing an opinion
        on the effectiveness of the Company's internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements, assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation.  We
        believe that our audit provides a reasonable basis for our opinion.



In our opinion, the consolidated financial statements
        referred to above present fairly, in all material respects, the
        consolidated financial position of
        Micromem Technologies Inc.
        as of October 31, 2004 and the results of their operations and their
        cash flows for the year then ended in conformity with Canadian generally
        accepted accounting principles.

Accounting principles generally accepted in the
        United States of America are consistent with those applicable in Canada
        (see Note 16).



The consolidated financial statements as at October
        31, 2003 and for the year then ended and for the cumulative period from
        September 3, 1997 to October 31, 2003 were audited by other auditors who
        expressed opinions without reservation on those statements in their
        reports dated December 5, 2003, November 16, 2001, December 13, 2000 and
        December 20, 1999.





/s/ GRANT THORNTON LLP

Chartered Accountants

Mississauga, Canada 
        February 11, 2005

2

Comments by Auditors for U.S. Readers on Canada-U.S. Reporting
        Difference
In the United States, reporting standards for
        auditors require the addition of an explanatory paragraph (following the
        opinion paragraph) when the financial statements are affected by
        conditions and events that cast substantial doubt on the Company's
        ability to continue as a going concern, such as those described in note
        2 to the consolidated financial statements. Our report to the
        shareholders dated February 11, 2005 is expressed in accordance with
        Canadian reporting standards which do not permit a reference to such
        events and conditions in the auditors' report when these are adequately
        disclosed in the consolidated financial statements.
        
/s/ GRANT THORNTON LLP
        Chartered Accountants
        Mississauga, Canada 
        February 11, 2005

3





AUDITORS' REPORT



To the Shareholders ofMicromem Technologies Inc.



We have audited the consolidated balance sheets of Micromem Technologies Inc. (a Development Stage Company) as at October 31,
2003 and 2002 and the consolidated statements of operations and deficit, cash
flows and shareholders' equity for the years then ended and for the period from
November 1, 2001 to October 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.



We conducted our audits in accordance with Canadian and
United States generally accepted auditing standards. Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.



In our opinion, these consolidated financial statements
present fairly, in all material respects, the financial position of the Company
as at October 31, 2003 and 2002 and the results of its operations and its cash
flows for the years then ended and for the period from November 1, 2001 to
October 31, 2003 in accordance with Canadian generally accepted accounting
principles.



As discussed in note 3(f) to the consolidated financial
statements, during 2002 the Company changed its method of accounting for patents
and trademarks.

The consolidated financial statements as at October 31, 2001
and for the year then ended and for the cumulative period from September 3, 1997
to October 31, 2001 were audited by other auditors who expressed opinions
without reservation on those statements in their reports dated November 16, 2001
and December 20, 1999.



Toronto, Canada, 
December 5, 2003 [except as to note 4,                                                
"Ernst & Young LLP"
which is as of March 9, 2004].                                                              
Chartered Accountants

4MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

|                                                        |                  |                 
|------------------------------------------------------- | ---------------- | ----------------
|                                                        |                  |                 
|As at,                                                  | October 31, 2004 | October 31, 2003
|                                                        |                  |                 
|Assets                                                  |                  |                 
|Current
    assets:                                     |                  |                 
|Cash and cash
    equivalents                           | $
    350,504    | $
    79,233    
|Term
    deposits                                       | 87,243           | 219,930         
|Deposits and other receivables (Note 5)                 | 33,562           | 47,207          
|                                                        | 471,309          | 346,370         
|Capital
    assets (Note 6)                             | 2,925            | 3,768           
|Patents
    and trademarks (Note 7)                     | -                | -               
|Royalty rights (Note 4 and Note 10)                     | -                | -               
|                                                        | $ 474,234        | $ 350,138       
|                                                        |                  |                 
|Liabilities and Shareholders' Equity                    |                  |                 
|Current
    liabilities:                                |                  |                 
|Accounts payable and accrued liabilities                | $ 436,624        | $ 245,700       
|                                                        |                  |                 
|Shareholders' equity:                                   |                  |                 
|Share
    capital: (Note 8)                             |                  |                 
|Authorized:                                             |                  |                 
|2,000,000 special preference shares, redeemable, voting |                  |                 
|Unlimited common shares without par value               |                  |                 
|Issued
    and outstanding:                             |                  |                 
|58,063,437 common shares (2003 - 48,732,187)            | 32,103,787       | 31,236,287      
|Contributed surplus (Note 9)                            | 588,911          | 578,891         
|Deficit accumulated during the development stage        | (32,655,088)     | (31,710,740)    
|                                                        | 37,610           | 104,438         
|                                                        |                  |                 
|                                                        | $ 474,234        | $ 350,138       
|                                                        |                  |                 

Commitments (Note 13)
Contingencies (Note 14)

See accompanying notes to the consolidated financial
statements.

F-1

MICROMEM TECHNOLOGIES
            INC.
            (A
            DEVELOPMENT STAGE COMPANY)Consolidated Statements of Operations and Deficit(Expressed
            in United States dollars)
          Twelve-month period ended
            October 31
            2004
            2003
            2002
            Period from
            September 3, 1997to
            October 31, 2004Revenue:Interest
            and other income
            $ 4,746
            $ 20,121
            $ 165,892
            $ 531,384Costs
            and expenses (income):Administration
            157,854
            176,361
            333,964
            2,150,039Professional fees (Note 8 (b ) and 12 (c))
            281,371
            303,222
            262,927
            3,164,966Wages
            and salaries (Note 12 (b))
            31,563
            112,437
            562,532
            9,369,174Research
            and development (Notes 6 and 13)
            378,410
            490,914
            1,601,624
            6,394,692Travel
            and entertainment
            77,616
            17,508
            73,385
            1,067,582Amortization of patents and trademarks
            -
            36,258
            31,338
            67,596Amortization of capital assets (Note 6)
            5,410
            36,921
            40,635
            341,541Operating leases
            -
            -
            -
            109,412Loss on
            sale of investment
            -
            -
            -
            54,606Write-down of investment
            -
            -
            -
            61,020Write-down of royalty rights (Note 10)
            -
            -
            10,000,000
            10,000,000Write-down of patents and trademarks
            (Note 7)
            -
            299,820
            -
            299,820Interest
            expense
            -
            -
            -
            
            75,027Loss on
            sale of capital assets
            -
            58,302
            13,292
            65,460Unrealized foreign exchange loss (gain)
            16,870
            (61,657)
            14,747
            (54,140)949,094
            1,470,086
            12,934,444
            33,166,795Loss before income taxes
            (944,348)
            (1,449,965)
            (12,768,552)
            (32,635,411)Provision for (recovery
            of) income taxes
            (Note 11)
            -
            -
            (35,537)
            19,677Net loss for the period
            (944,348)
            (1,449,965)
            (12,733,015)
            (32,655,088)Deficit accumulated
            during thedevelopment stage,
            beginning of period
            (31,710,740)
            (30,260,775)
            (17,527,760)
            -Deficit accumulated
            during thedevelopment stage, end of
            period
            $(32,655,088)
            $(31,710,740)
            $(30,260,775)
            $(32,655,088)Loss per share - basic
            and diluted (Note 8 (c))
            $ (0.02)
            $ (0.03)
            $ (0.27)
            $ (0.75)Weighted average number
            of shares
            52,958,975
            47,061,810
            46,396,799
            43,528,098

See accompanying notes to the consolidated financial
statements.

F-2

MICROMEM TECHNOLOGIES INC.
        (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS



Twelve-month period ended
      October 31,
      2004
      2003
      2002
      Period from
      September 3, 1997
      to October 31, 2004Cash flows from operating
      activities:Net loss for
      the period
      $ (944,348)
      $ (1,449,965)
      $(12,733,015)
      $(32,655,088)Adjustments to
      reconcile loss for the period to net cash used in operating activities:Amortization
      of patents and trademarks
      -
      36,258
      31,338
      67,596Amortization
      of capital assets
      5,410
      36,921
      170,710
      526,761Loss on sale
      of investment
      -
      -
      -
      49,810Write-down of
      investment
      -
      -
      -
      61,020Loss on
      disposal of capital assets
      -
      58,302
      13,292
      65,460Write-down of
      royalty rights
      -
      -
      10,000,000
      10,000,000Write-down of
      patents and trademarks
      -
      299,820
      -
      299,820Stock option
      expense
      10,020
      -
      -
      10,020Share
      compensation expense
      -
      -
      -
      7,285,696Non-cash wages
      and salaries
      -
      -
      -
      34,000Change in
      non-cash working capital items,Decrease
      (increase) in deposits and other receivables
      13,645
      145,924
      35,012
      (24,965)Increase
      (decrease) in accounts payable and accrued liabilities
      190,924
      54,181
      (138,033)
      330,580Net cash used in operating
      activities
      (724,349)
      (818,559)
      (2,620,696)
      (13,949,290)Cash flows from investing
      activities:Purchase of
      capital assets
      (4,567)
      (2,025)
      (28,580)
      (729,604)Proceeds on
      disposal of capital assets
      -
      1,688
      82,763
      134,458Patents and
      trademarks
      -
      (28,380)
      (6,065)
      (367,416)Sale of
      available-for-sale investment
      -
      -
      -
      260,641Royalty rights
      -
      -
      -
      (2,000,000)Term deposits
      132,687
      (219,930)
      -
      (87,243)Net cash provided by (used in)
      investing activities
      128,120
      (248,647)
      48,118
      (2,789,164)Cash flows from financing
      activities:Issue of
      common shares
      867,500
      162,500
      -
      16,508,233Net proceeds
      from shareholder's Loan
      -
      -
      -
      544,891Loan proceeds
      from Avanticorp International Inc.
      -
      -
      -
      112,031Rights issue
      costs
      -
      -
      -
      (76,197)Net cash provided by (used in)
      financing activities
      867,500
      162,500
      -
      17,088,958Increase (decrease) in cash and
      cash equivalents
      271,271
      (904,706)
      (2,572,578)
      350,504Cash and cash equivalents,
      beginning of period
      79,233
      983,939
      3,556,517
      -Cash and cash equivalents, end
      of period
      $ 350,504
      $ 79,233
      $ 983,939
      $ 350,504Supplemental cash flow
      information:Interest paid
      -
      -
      $ 1,960
      $ 76,987Income taxes
      paid
      -
      -
      11,508
      66,722




See accompanying notes to the consolidated
financial statements

F-3

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)



|Consolidated Statement of Cash Flows (continued)              
|--------------------------------------------------------------
|(Expressed in United States dollars)                          
|                                                              
|Years ended October 31, 2004                                  
|                                                              
|                                                              
|                                                              
|Supplemental information on non-cash investing
    activities:
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              



See accompanying notes to the consolidated financial
statements

F-4

MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



October 31, 2004





|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Number of Shares                                                                                                                                                         | Share 
    Capital                                                                                                                                                                 | Contributed
    Surplus                                                                                                                                           | Deferred Share Compensation                                                                                                     | Deficit
    Accumulated
    During Development 
    Stage                                                                             
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------
|Micromem share capital, October
    31, 1998
    Exercise of director's stock
    options
    Pageant share capital, October
    31, 1998
    Net loss for the year
    Common shares of Pageant,
    December 4, 1998
    Assigned fair value of net assets
    (Note 3(b) (iv))                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 3,490,643
    490,000
    -
    -
    -
    32,000,000                                                                                                                   | $ -
    -
    1
    -
    4,999
    549,140                                                                                                                                        | $ -
    -
    -
    -
    -
    -                                                                                                                                 | $ -
    -
    -
    -
    -
    -                                                                                               | $ -
    -
    -
    (500,992)
    -
    -                                                                                             
|Micromem share capital, September
    11, 1999
    Exercise of common share purchase
    warrants for cash
    Private placement of common
    shares for cash, May 17, 1999
    Shareholder loan forgiven (Note
    9)
    Exercise of stock options for
    cash
    Net loss for the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 35,980,643120,676
    
    350,000
    -
    100,000
    -                                                                                                               | 554,140164,053
    
    1,050,000
    -
    300,000
    -                                                                                                                          | --
    
    -
    544,891
    -
    -                                                                                                                             | --
    
    -
    -
    -
    -                                                                                                 | (500,992)-
    
    -
    -
    -
    (5,207,787)                                                                                     
|Balance, October 31, 1999
    Exercise of common share purchase
    warrants for cash
    Exercise of stock options for
    cash
    Deferred share compensation (Note
    12 (a))
    Private placement of common
    shares for cash, February 10, 2000
    Common shares issued pursuant to
    compensation agreements, March 15, 2000
    Net loss for the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 36,551,319182,087
    100,000
    -
    
    2,000,000
    
    901,110
    -                                                                                            | 2,068,193274,717
    300,000
    -
    
    5,000,000
    
    4,206,447
    -                                                                                                     | 544,891-
    -
    2,711,881
    
    -
    
    -
    -                                                                                                          | --
    -
    (453,219)
    
    -
    
    -
    -                                                                              | (5,708,779)-
    -
    -
    
    -
    
    -
    (7,259,356)                                                                        
|Balance, October 31, 2000
    Exercise of common share purchase
    warrants for cash
    Common shares issued under rights
    offering November 20, 2000
    Exercise of stock options for
    cash
    Deferred share compensation (Note
    12 (a))
    Stock-based compensation (Note
    8(b))
    Exercise of director's stock
    options for cash, January 17, 2001
    Common shares issued pursuant to
    compensatory stock options, at January 17, 2001 (Note 12 (a))
    Adjustment-share compensation
    Expenses (Note 12(a))
    Common shares issued pursuant to
    compensation agreement, January 23, 2001(Note 12 (a))
    Private placement of common
    shares for cash, March 21, 2001
    Common shares issued under asset
    purchase agreement to Estancia Limited, March 14, 2001
    Compensation shares due but not
    issued (Note 12 (a))
    Net loss for the year | 39,734,516362,450
    
    304,674
    800,000
    -
    -
    
    714,686
    
    -
    
    -
    
    11,192
    
    2,000,000
    
    2,007,831
    
    -
    - | 11,849,357554,655
    
    1,119,058
    2,400,000
    -
    -
    
    71,469
    
    1,581,242
    
    -
    
    66,461
    
    4,000,000
    
    8,000,00
    
    -
    - | 3,256,772-
    
    -
    -
    (453,219)
    34,000
    
    -
    
    (1,581,242)
    
    (677,420)
    
    -
    
    -
    
    -
    
    1,431,545
    - | (453,219)-
    
    -
    -
    453,219
    -
    
    -
    
    -
    
    -
    
    
    -
    
    -
    
    
    -
    - | (12,968,135)-
    
    -
    -
    -
    -
    
    -
    
    -
    
    -
    
    
    -
    
    -
    
    
    -
    (4,559,625)
|Balance, October 31, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 45,935,349                                                                                                                                                               | $29,642,242                                                                                                                                                                        | $2,010,436                                                                                                                                                        | $ -                                                                                                                             | $(17,527,760)                                                                                                                         



See accompanying notes to the consolidated financial
statements

F-5

MICROMEM TECHNOLOGIES INC.
        (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



October 31, 2004







|                                                                                                                                           | Number of Shares          | Share Capital              | Contributed
    Surplus     | Deferred Share Compensation | Deficit
    Accumulated
    During Development Stage
|------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------- | -------------------------- | --------------------------- | --------------------------- | ----------------------------------------------------
|Balance, October 31, 2001
    Shares issued pursuant to
    compensatory agreement, March 26, 2002 (Note 12 (a))
    Net loss for the year | 45,935,349765,588
    -   | $29,642,2421,431,545
    - | $2,010,436(1,431,545)
    - | $ --
    -                  | $(17,527,760)-
    (12,733,015)                     
|Balance, October 31, 2002
    Private placement of common
    shares for cash, August 13, 2003 (Note 8(d))
    Net loss for the year       | 46,700,9372,031,250
    - | 31,073,787162,500
    -    | 578,891-
    -              | --
    -                    | (30,260,775)-
    (1,449,965)                       
|Balance, October 31, 2003                                                                                                                  | 48,732,187                | 31,236,287                 | 578,891                     | -                           | (31,710,740)                                        

|                                                                                             |            |              |          |     |              
|-------------------------------------------------------------------------------------------- | ---------- | ------------ | -------- | --- | -------------
|Private Placement of
    common shares for cash, December 2003 (Note 8 (e) ii)               | 500,000    | 40,000       | -        | -   | -            
|Private Placement of
    common shares for cash, December 2003 (Note 8 (e) i)                | 300,000    | 33,000       | -        | -   | -            
|Exercise of common
    share purchase warrants for cash (Note 8(d), August 2004              | 2,031,250  | 162,500      | -        | -   | -            
|Exercise of common
    share purchase warrants for cash (Note 8 (e) ii), June-September 2004 | 1,000,000  | 80,000       | -        | -   | -            
|Exercise of common
    share purchase warrants for cash (Note 8 (e) i), October 2004         | 200,000    | 22,000       | -        | -   | -            
|Exercise of options
    for cash                                                             | 5,300,000  | 530,000      | -        | -   | -            
|Stock options issued to
    consultant (Note 8 (b))                                          |            |              | 10,020   |     |              
|Net loss for the year                                                                        | -          | -            | -        | -   | (944,348)    
|Balance, October 31, 2004                                                                    | 58,063,437 | $ 32,103,787 | $588,991 | $ - | $(32,655,088)

See accompanying notes to the consolidated financial
statements

F-6

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

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



October 31, 2004




|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Nature of business:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Micromem Technologies Inc. ("Micromem" or the "Company") is
  a corporation incorporated under the laws of the Province of Ontario, Canada.
  By Articles of Amendment dated January 14, 1999, the Company changed its name
  from Avanticorp International Inc. to Micromem Technologies Inc. On January
  11, 1999, the Company acquired all of the outstanding shares of Pageant
  Technologies Inc. ("Pageant"), a company subsisting under the laws of
  Barbados. This acquisition, as described in Note 3(b), was recorded as a
  reverse takeover under Canadian generally accepted accounting principles
  ("Canadian GAAP").
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company currently operates in a single segment as a
  developer of non-volatile magnetic memory technology. To October 31, 2004, the
  Company has not generated significant revenue and is devoting substantially
  all of its efforts to the development of its technology. Accordingly, for
  financial reporting purposes, the Company is a development stage enterprise.                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2. | Going concern:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | These consolidated financial statements have been prepared
  on the "going concern" basis, which presumes that the Company will be able to
  realize its assets and discharge its liabilities in the normal course of
  business for the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company has incurred substantial losses to date. It
  will be necessary to raise additional funds for the continuing development,
  testing and commercial exploitation of its technology. The sources of these
  funds have not yet been identified and there can be no certainty that sources
  will be available in the future.                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company continues to pursue its research initiatives as
  outlined in Note 13 in order to develop its technology for commercial
  applications. Subsequent to October 31, 2004 the Company has raised additional
  funds and has hired a new Chief Technology officer for these purposes (Note
  17).                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company's ability to continue as a going concern is in
  substantial doubt and it is dependent upon completing the development of its
  technology for a particular application, achieving profitable operations,
  obtaining additional financing and successfully bringing its technology to the
  market. The outcome of these matters                                                                                                                                                                                                                                                                                         



F-7

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | cannot be predicted at this time. The consolidated
  financial statements have been prepared on a going concern basis and do not
  include any adjustments to the amounts                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | and classifications of the assets and liabilities that
  might be necessary should the Company be unable to continue in business. If
  the "going concern" assumption were not appropriate for these consolidated
  financial statements then adjustments would be necessary in the carrying value
  of assets and liabilities, the reported expenses and the balance sheet
  classifications used.                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|3. | Summary of significant account policies:                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements have been prepared
  in accordance with Canadian GAAP and are stated in United States dollars.
  These principles are also in conformity in all material respects with United
  States generally accepted accounting principles ("U.S. GAAP") as described in
  Note 16 to the consolidated financial statements. The most significant
  accounting policies are as follows:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     







F-8

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | During the fiscal year ending October 31, 2003, two of
    the Company's subsidiaries, Micromem Technologies B.V. and Micromem
    Technologies S.p.A.                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | were wound up. All significant intercompany balances and
    transactions have been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | c. | Basis of presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | On January 11, 1999, the Company issued 32,000,000 common
    shares and 1,000,000 warrants to acquire all of the issued and outstanding
    shares of Pageant. On that date, the total number of the Company shares
    outstanding was 35,980,643 shares. As a result of this transaction, the
    shareholders of Pageant owned 88.9% of the outstanding common shares of the
    Company and, accordingly, the purchase of Pageant was accounted for as a
    reverse takeover transaction.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Application of reverse takeover accounting results in the
    following:                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | i.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | ii.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | iii.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | iv.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | v.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



F-9

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




> Micromem shares issued to that date with an assigned
>         value equal to the share capital of the continuing consolidated entity
>         at that date as computed below.

The transaction was accounted for by the purchase method
    with the results of operations included in the consolidated financial
    statements from the date of acquisition. Details of the Company's net assets
    acquired and the assigned fair value of net assets at acquisition are as
    follows:







|Cash
    Non-cash current assets
    Investments | $ 168,084
    115,629
    371,471
|------------------------------------------------ | ---------------------------------
|Less current liabilities                         | 655,184
    106,044              
|Assigned fair value of net assets                | $ 549,140                        





| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | d. | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The preparation of consolidated financial statements in
      conformity with Canadian GAAP requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities,
      the disclosure of contingent assets and liabilities at the date of the
      consolidated financial statements and the reported amounts of revenue and
      expenses during the reporting period. Actual results could differ from
      those estimates.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | e. | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Cash and cash equivalents consist of all bank accounts
      and all highly liquid investments with original maturities of three months
      or less at the date of purchase.                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | f. | Capital Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Capital assets are recorded at cost less accumulated
      amortization. Amortization is provided on capital assets on a
      straight-line basis for a period of up to three years. Capital assets are
      reviewed for impairment whenever                                                                                                                                                                                                                                     

F-10

MICROMEM TECHNOLOGIES INC.
      (A DEVELOPMENT STAGE COMPANY)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)

        October 31, 2004

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | events or changes in circumstances indicate that the
      carrying amount may not be recoverable. When circumstances dictate, an
      impairment loss is calculated as equal to the excess of the carrying value
      of the assets over their undiscounted estimated future net cash flow.                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | g. | Patents and trademarks:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Effective November 1, 2001, the Company changed its
      accounting policy for patents and trademarks to be recorded at cost less
      accumulated amortization which is provided on a straight-line basis over
      ten years. In prior years the Company accounted for its patents and
      trademarks at cost and amortization was to commence on an appropriate
      basis to charge off the cost over the future benefit period, not exceeding
      the legal life, when sales commence. There was no material impact on prior
      years' consolidated financial statements and accordingly, the comparative
      consolidated financial statements have not been restated.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | For the year ended October 31, 2002, the change in
      accounting policy resulted in an increase in amortization expense and net
      loss of $31,338 and there was no material impact on net loss per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Patents and trademarks are reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying
      amount may not be recoverable. When circumstances dictate, an impairment
      loss is calculated as equal to the excess of the carrying value of the
      assets over their undiscounted estimated future net cash flow (Note 7).                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | h. | Research and development expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Research costs are expensed in the period incurred.
      Development expenses are expensed as incurred unless they meet the
      criteria for deferral and amortization under Canadian GAAP. The Company
      has determined that no development costs have met these criteria at the
      financial reporting date.                                                                                                                                                                                                                                                                                                                                                                 

F-11

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

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



October 31, 2004




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i. | Stock-based compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company has a stock-based compensation plan, which
      is described in Note 8. Stock-based compensation is recognized by the fair
      value method, whereby compensation is recorded to the extent that the
      exercise price is not based on the market value of the Company's common
      shares at the date of grant. Any compensatory benefit recorded is
      recognized initially as deferred share compensation in the consolidated
      statements of shareholders' equity and then charged against income over
      the contractual or vesting period.                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | For all awards of employee stock-based compensation
      granted after January 1, 2002, the Company recognizes employee stock-based
      compensation costs under the intrinsic value-based method and provides pro
      forma disclosure of net income and earnings per share as if the fair
      value-based method has been applied.                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | j. | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company accounts for income taxes by the liability
      method. Under the liability method, future tax assets and liabilities are
      recognized for the future tax consequences attributable to differences
      between the financial statement carrying amounts of existing assets and
      liabilities and their respective tax bases. Future tax assets and
      liabilities are measured using substantively enacted tax rates and laws
      that are expected to apply when the asset is realized or the liability
      settled. To the extent that it is not considered to be more likely than
      not that a future income tax asset will be realized, a valuation allowance
      is provided.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | k. | Impairment of long-term assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company records the value of the long-term assets
      acquired at cost. Such rights are reviewed for impairment whenever events
      or changes in circumstances indicate that the carrying amount may not be
      recoverable. When circumstances dictate an impairment loss is calculated
      as equal to the excess of the carrying value of the assets over their
      undiscounted estimated future net cash flows.                                                                                                                                                                                                                                                                                   



F-12

MICROMEM TECHNOLOGIES INC.
  (A DEVELOPMENT STAGE COMPANY)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)

        October 31, 2004

|   |                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | l.                                                                                          | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                             | The functional currency of the Company is the United
      States dollar. The Company's wholly-owned subsidiaries are integrated
      foreign operations and therefore, the Company uses the temporal method
      whereby monetary assets and liabilities are translated into United States
      (U.S.) dollars at the rate of exchange in effect at the consolidated
      balance sheet dates. Non-monetary assets and liabilities are translated at
      historical rates. Revenue and expenses are translated using the average
      monthly rate of exchange, which rate approximates the rate of exchange
      prevailing at the transaction dates. Gains or losses resulting from
      translation are included in the determination of net loss for the period.                                                                                                                         
|   |                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                             | The Company's monetary assets and liabilities
      denominated in foreign currencies are translated into United States
      dollars at the exchange rate in effect at the consolidated balance sheet
      dates. Non-monetary assets and liabilities that are denominated in
      currencies other than United States dollars are translated into United
      States dollars using the historical rate of exchange in effect on the date
      the transaction occurred. Revenue and expense items are translated using
      the average monthly rate of exchange, which rate approximates the exchange
      rate at the date of the transaction. Resulting exchange gains or losses
      are included in net loss for the period.                                                                                                                                                             
|   |                                                                                            
|4. | Acquisition of royalty rights and remaining interest in
  technology from Estancia Limited:
|   |                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                             | On December 9, 2000, the Company and its subsidiary,
  Pageant, entered into an Asset Purchase Agreement (the "Agreement") with
  Estancia Limited ("Estancia") and Richard Lienau ("Lienau") to purchase the
  remaining 50% interests in the patents which the Company did not own and a 40%
  gross profit royalty ("Estancia Royalty"), in respect of certain ferromagnetic
  memory technology known as VEMRAM (previously known as MAGRAM) and covered by
  U.S. Patent #5,295,097 and the related patent applications (the "Vemram
  Patents") described in the Agreement and all rights (the "Technology") held by
  Estancia and Lienau under the Joint Ownership and Licensing Agreement dated
  September 17, 1997 among Estancia, Lienau and Pageant. Under the terms of the
  Agreement, the Company was required to pay a maximum purchase price of
  $50,000,000 to Estancia as follows:



F-13

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004








|                                                                                                                                                                                                                                                                                                                                                                                                                     | a.                                                                                                                                                                                                                                                                                                | $10,000,000 was paid on closing (after receipt of
      regulatory approvals), in the form of $8,000,000 in common shares of the
      Company ("Micromem Shares") (based on the price on the closing date) and
      $2,000,000 in cash;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                     | b.                                                                                                                                                                                                                                                                                                | $20,000,000 if and when either (i) certification is
      received from Honeywell Federal Manufacturing & Technologies ("Honeywell")
      that fully integrated, randomly addressable memory matrices of the
      Technology have met certain stipulated performance standards, or (ii) the
      Company or any of its affiliates executes a definitive agreement for the
      sale or licensing of the Technology to an arm's length third party for any commercial purposes
      other than testing or evaluation of the Technology; payable in the form of
      cash and Micromem Shares to be determined by Pageant provided that a
      minimum of 50% of the $20,000,000 shall be paid in Micromem Shares valued
      at the close of trading on the date of receipt of such certification, sale
      or licensing; and
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                     | c.                                                                                                                                                                                                                                                                                                | $20,000,000 if and when the Company or any of its
      affiliates executes a definitive agreement for the sale or licensing with
      respect to any technology (including the Technology) owned by the Company
      to an arm's length third party for any commercial purposes other than
      testing or evaluation of the technology, payable in the form of cash and Micromem Shares to be determined by Pageant provided that a minimum of 50%
      of the $20,000,000 shall be paid in Micromem Shares valued at the close of
      trading on the date of execution of such sale or licensing.                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|During fiscal 2001, the Company paid $2,000,000 in cash and
issued 2,007,831 shares, being the equivalent of $8,000,000, the first
installment payable under the terms described above, on approval by its
shareholders in the annual shareholder meeting held on March 14, 2001. The
$10,000,000 paid was initially recorded as royalty rights in fiscal 2001 and was
written-down to nil in fiscal 2002 (Note 10).
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                     | On March 9, 2004 the third anniversary of the closing date,
  the requirements set out in terms (b) and (c) above were not met and, in
  accordance with the terms of the Agreement, the Company's obligations to pay
  these amounts terminated. The Company thus has had to revert to Estancia:
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                     | 1.                                                                                                                                                                                                                                                                                                | a 40% interest in the Vemram Patents;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



F-14

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)

        October 31, 2004

| |    |                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | a 32% interest in the gross profit, less expenses agreed
    to by the parties, for each license of the Vemram Patents sold or otherwise
    transferred by Pageant; and                               
| |    |                                                                                                                                                                                                        
| | 3. | a 32% interest of any unit royalties received by Pageant
    as a result of the license or sale of the Vemram Patents less reasonable
    expenses directly related to the obtaining of said royalties.

5.    Deposits and other receivables:





|                                                                                             |  | 2004                          | 2003                         
|-------------------------------------------------------------------------------------------- |  | ----------------------------- | -----------------------------
|Sales tax recoverable
    Deposits
    Other receivables with companies under common control |  | $ 2,429
    15,000
    16,133 | $ 7,152
    14,536
    25,519
|                                                                                             |  | $33,562                       | $ 47,207                     





6.





|                                  | 2003     | Additions | 2004    
|--------------------------------- | -------- | --------- | --------
|Cost:
    Computers and equipment | $ 36,781 | $ 4,567   | $ 41,348
|                                  | $ 36,781 | $ 4,567   | $ 41,348







|                                                      | 2003     | Amortization
    Expense | 2004    
|----------------------------------------------------- | -------- | ------------------------ | --------
|Accumulated amortization:
    Computers and equipment | $ 33,013 | $ 5,410                  | $ 38,423
|                                                      | $ 33,013 | $ 5,410                  | $ 38,423







|                                            |         |        
|------------------------------------------- | ------- | -------
|                                            | 2004    | 2003   
|Net book value:
    Computers and equipment | $ 2,925 | $ 3,768
|                                            | $ 2,925 | $ 3,768





F-15

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Included in research and development expense is nil (2003 -
  nil, 2002 - $130,075) of amortization expense.                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | During fiscal 2003, the Company contributed equipment and
  supplies with a net book value of $58,302 under the "Equipment Transfer
  Agreement" to the University of Toronto ("U of T") (Note 13a(4)). The net book
  value of the contributed equipment has been charged to the period as a
  research and development expense.                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|7. | Patents and trademarks:                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company and its subsidiaries have pending patent
  applications relating to its memory technologies and the costs relating to
  legal and filing fees are capitalized as patents.                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In 2003 the Company discontinued a number of patent and
  trademark applications primarily outside the United States and the net book
  value of $130,839 relating to these applications was written off in 2003. The
  Company has also assessed the remaining amounts for patents and trademark
  applications registered in Canada and United States and has expensed the
  residual net book value of $168,981 in 2003 to reflect the uncertain nature of
  future events.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company continues to actively pursue and protect its
  patents and trademarks registered in Canada and the United States.                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|8. | Share Capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



F-16

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




b.         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 13,000,000 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.



A summary of the status of the Company's fixed stock option
plan as at October 31, 2004 and 2003 and changes during the years ended on those
dates is as follows:



|                                                                       | 2004                              |                                 | 2003                              |                                          
|---------------------------------------------------------------------- | --------------------------------- | ------------------------------- | --------------------------------- | -----------------------------------------
|                                                                       | Shares in Thousands               | Weighted Average exercise price | Shares in Thousands               | Weighted 
    Average 
    exercise price
|Outstanding, beginning of year
    Granted
    Cancelled
    Exercised | 5,300
    7,270
    -
    (5,300) | $.10
    .31
    -
    .10      | 5,380
    5,300
    (5,380)
    - | $ 4.27
    0.10
    4.27                 
|Outstanding end of year                                                | 7,270                             | $.31                            | 5,300                             | $0.10                                    
|Options exercisable at year end                                        | 7,270                             |                                 | 5,300                             |                                          
|Weighted average price of
    options granted during the year          |                                   | $.31                            |                                   | $0.06                                    



| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | In June 2004, 5,300,000 options were exercised resulting
    in $530,000 of cash proceeds to the Company.
| |                                                                                                          
| | The following table summarizes information about fixed
    options outstanding as at October 31, 2004:   



|Options Outstanding   |                    |                                                                       | Options exercisable                 
|--------------------- | ------------------ | --------------------------------------------------------------------- | ------------------------------------
|Actual exercise price | Number outstanding | Weighted 
    average 
    remaining contractual life 
    (in years) | Weighted
    Average exercise
 price
|$ 0.30                | 7,150,000          | 4.67 years                                                            | $0.30                               
|0.68                  | 120,000            | 1.16 years                                                            | 0.68                                



F-17

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




> The Company does not recognize compensation expense for
>     stock options granted to employees that are exercisable at fair market value
>     at the date of the grant. The table below presents pro forma net loss as if
>     stock options granted to employees had been determined on the fair
>     value-based method. The table includes all stock options granted by the
>     Company.







|                                      | 2004                   | 2003                  | 2002                     | Period from Sept. 3, 1997 -
    Oct. 31, 2004
|------------------------------------- | ---------------------- | --------------------- | ------------------------ | ---------------------------------------------
|Loss applicable to
    Common shares: |                        |                       |                          |                                              
|As Reported
    Compensation expense  | ($ 944,348)(1,369,950) | ($1,449,965)(318,000) | ($12,733,015)(1,832,500) | ($32,655,088)(17,829,459)                    
|Pro forma                             | ($2,314,298)           | ($1,767,965)          | ($14,565,515)            | ($50,484,547)                                







|                                             | 2004  | 2003  | 2002  | Period from Sept. 3,
 1997 -
    Oct. 31, 2003
|-------------------------------------------- | ----- | ----- | ----- | ----------------------------------------------
|Basic and fully diluted loss 
    per share: |       |       |       |                                               
|Reported                                     | (.02) | (.03) | (.27) | (.74)                                         
|Proforma                                     | (.04) | (.04) | (.31) | (1.16)                                        







> The fair value of all options granted during 2004 and
>     2003 were estimated as of the date of grant using the Black Scholes
>     option-pricing model with the following assumptions:





|                        | 2004      | 2003  
|----------------------- | --------- | ------
|Divided yield           | -         | -     
|Expected volatility     | 150%      | 157%  
|Risk free interest rate | 3.25%     | 2.22% 
|Expected option life    | 1.5 Years | 1 Year





> Included in the total of 120,000 options outstanding at
>     an exercise price of $.68 per share are 20,000 options issued to a
>     consultant for services provided during 2004. The Company recorded an
>     expense of $10,020 relating to such options calculated in accordance with
>     the methodology outlined above. This expense is included in professional
>     fees in the consolidated statement of operations.



F-18

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Basic loss per share is calculated by dividing net loss
    by the weighted average number of common shares outstanding during the
    period. Diluted loss per share reflects the dilution that would occur if
    outstanding stock options and share purchase warrants were exercised or
    converted into common shares using the treasury stock method and is
    calculated by dividing net loss applicable to common shares by the sum of
    the weighted average number of common shares outstanding and all additional
    common shares that would have been outstanding if potentially dilutive
    common shares had been issued.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The inclusion of the Company's stock options and share
    purchase warrants in the computation of diluted loss per share would have an
    anti-dilutive effect on loss per share and they are therefore excluded from
    the computation. Consequently, there is no difference between basic loss per
    share and diluted loss per share.                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | d. | Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | On August 13, 2003, the Company issued 2,031,250 First
    Units at $0.08 each. Each First Unit provides the holder with one common
    share and a warrant for one Second Unit at $0.08 each, exercisable for one
    year. Each Second Unit provides the holder with one common share and a
    warrant for one common share at $0.08 each, exercisable for one year.                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | In accordance with the CICA's recommendations, a portion
    of the First Unit should be allocated into separate elements within
    shareholders' equity as the First                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Units contain two equity elements arising from the common
    share and warrants attached. The Company has allocated the closing trading
    value of its shares as at August 13, 2003 to the common shares. Since the
    net proceeds received from the issuance of the common shares attached to the
    First Units equaled the negotiated trading value at that date as authorized
    by the Board of Directors, the warrants were allocated a nil value.                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Between August - October 2004, the holders of the First
    Units exercised the First Unit warrants and the Company thus issued
    2,031,250 common shares and the warrants for the Second Units and realized
    proceeds of $162,500.                                                                                                                                                                                                                                                                                                                                                                                                       



F-19





MICROMEM TECHNOLOGIES INC.
(

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | e.  | Private Placement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | i)  | In December 2003, the Company completed Unit private
    placements to two Canadian private investors pursuant to prospectus and
    registration exemptions set forth in applicable securities laws. Under the
    private placements, the Company received $33,000 as subscription proceeds
    for the sale and issue of 300,000 Units. Each Unit consists of one Common
    Share and one Series A Warrant. Each Series A Warrant entitles the holder to
    purchase one Common Share and one Series B Warrant for $0.11 until expiry 12
    months from the date of issue. Each Series B Warrant entitles the holder to
    purchase one additional Common Share for $0.11 until expiry 12 months from
    the date of issue.    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In October 2004 the private investors exercised 200,000
    Series A warrants and the Company thus issued 200,000 common shares and
    200,000 Series B warrants and realized proceeds of $22,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Subsequent to October 31, 2004 the private investors
    exercised the remaining Series A warrants and the Series B warrants (Note 17
    (a) (i)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ii) | In December 2003, the Company also completed a Unit
    private placement to one Canadian private investor pursuant to prospectus
    and registration exemptions set forth in applicable securities laws. Under
    the private placement, the Company received $40,000 as subscription proceeds
    for the sale and issue of 500,000 Units. Each Unit consists of one Common
    Share and one Series A Warrant. Each Series A Warrant entitles the holder to
    purchase one Common Share and one Series B Warrant for $0.08 until expiry 12
    months from the date of issue. Each Series B Warrant entitles the holder to
    purchase one additional Common Share for $0.08 until expiry 12 months from
    the date of issue.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In June 2004, the private investor exercised the Series A
    warrants and the Company thus issued 500,000 common shares and 500,000
    Series B warrants and realized proceeds of $40,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In September 2004, the private investor exercised the
    Series B warrants and the Company thus issued 500,000 common shares and
    realized proceeds of $40,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



F-20

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




| |    |                                                                               
| | -- | ------------------------------------------------------------------------------
| | f. | Outstanding warrants                                                          
| |    |                                                                               
| |    | The outstanding warrants to acquire common shares are
    summarized as below:





|August 13, 2003 financing (Note 8 (d)):                                                                                               |            
|------------------------------------------------------------------------------------------------------------------------------------- | -----------
|Series A warrants outstanding at October 31, 2003                                                                                     | 2,031,250  
|Series A warrants exercised in fiscal 2004                                                                                            | (2,031,250)
|Series B warrants resulting from exercise of Series A
    warrants                                                                    | 2,031,250  
|Outstanding at October 31, 2004                                                                                                       | 2,031,250  
|                                                                                                                                      |            
|December 2003 financing (Note 8 (e) (i)):                                                                                             |            
|Series A warrants issued                                                                                                              | 300,000    
|Series A warrants exercised                                                                                                           | (200,000)  
|Series B warrants resulting from exercise of Series A
    warrants                                                                    | 200,000    
|Outstanding at October 31, 2004                                                                                                       | 300,000    
|Subsequent to October 31, 2004 the private investors
    exercised
    the remaining Series A and Series B warrants (Note 17 (a) (i)) |            
|                                                                                                                                      |            
|December 2003 financing (Note 8 (e) (ii))                                                                                             |            
|Series A warrants issued                                                                                                              | 500,000    
|Series A warrants exercised                                                                                                           | (500,000)  
|Series B warrants resulting from exercise of Series A
    warrants                                                                    | 500,000    
|Series B warrants exercised                                                                                                           | (500,000)  
|Outstanding at October 31, 2004                                                                                                       | -          





F-21

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004






|9.  | Contributed surplus:                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Included in contributed surplus of $588,991 at October 31,
  2004 (October 31, 2003: $578,891) is an amount of $544,891 representing
  forgiveness of Pageant indebtedness during fiscal 1999 by Ataraxia Corp, the
  former parent company of Pageant. This forgiven debt was treated as
  contributed surplus, a separate component of shareholders' equity, as this
  balance was between related parties.
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|10. | Restructuring and write-down of royalty rights:                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | On July 29, 2002, the Company restructured its operations
  by closing its research and development facility and adopted a plan to focus
  its current resources to outsource its research and development activities as
  described in Note 13(a). No major costs were associated with this
  restructuring.                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | As a result of the restructuring, the Company determined
  that there was significant uncertainty that any amounts would be payable to
  Estancia in the foreseeable future in respect of the Estancia Royalty as
  described in Note 4, and accordingly, the Estancia Royalty rights acquired in
  the amount of $10,000,000 were written off in fiscal 2002.                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|11. | Income Taxes:                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company has non-capital losses of approximately
  $6,551,000 available to reduce future taxable income, the benefit of which has
  not been recognized in these consolidated financial statements. As at October
  31, 2004, the tax losses expire as follows:                                                                                                                                           





|             | Canada      | Other Foreign | Total      
|------------ | ----------- | ------------- | -----------
|2006         | $ 268,000   | $ -           | $268,000   
|2007         | 1,632,000   | -             | 1,632,000  
|2008         | 1,363,000   | -             | 1,363,000  
|2009         | 1,062,000   | -             | 1,062,000  
|2010         | 932,000     | 265,000       | 1,197,000  
|2011         | -           | 207,000       | 207,000    
|2014         | 727,000     | -             | 727,000    
|2023         | -           | 73,000        | 73,000     
|2024         | -           | 22,000        | 22,000     
|Total losses | $ 5,984,000 | $567,000      | $ 6,551,000



F-22

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




The reconciliation of income tax attributable to continuing
  operations computed at the statutory tax rates to income tax expense is as
  follows:





|                                                 | 2004        | 2003         
|------------------------------------------------ | ----------- | -------------
|Consolidated accounting loss before income taxes | $ (944,348) | $ (1,449,965)
|Statutory rates                                  | 36%         | 38%          
|                                                 |             |              
|Expected income tax recovery                     | (339,965)   | (550,987)    
|Tax benefit not recognized                       | 339,965     | 550,987      
|                                                 | $ -         | $ -          







Future income taxes reflect the net tax effect of temporary
  differences between the carrying amount of assets and liabilities for
  financial reporting purposes and the amounts used for income tax purposes.
  Significant components of the Company's future tax assets and liabilities as
  at October 31 are as follows:







|                                                        | 2004        | 2003       
|------------------------------------------------------- | ----------- | -----------
|                                                        |             |            
|Unused capital losses                                   | $ 47,566    | $ 47,566   
|Unused non-capital losses                               | 2,244,996   | 1,975,066  
|Alternative minimum tax credit                          | 142,091     | 142,091    
|Research and development credit                         | 118,720     | 118,720    
|Tax basis of capital assets in excess of carrying value | 13,680      | 109,789    
|Total future tax assets                                 | 2,567,053   | 2,393,232  
|Valuation allowance                                     | (2,567,053) | (2,393,232)
|Net future tax assets                                   | $ -         | $ -        





F-23

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004








|12. | Management compensation and related party transactions:
|--- | -------------------------------------------------------
|    |                                                        
|    | a.                                                     
|    |                                                        
|    |                                                        
|    |                                                        
|    |                                                        
|    |                                                        
|    |                                                        
|    |                                                        
|    |                                                        



F-24

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004






|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     | Company that would be outstanding on the close of
          business on January 2, 2001, at a price of $0.10 per incentive share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     | Pursuant to this agreement, deferred share
          compensation for the Chairman for the period from January 2, 2000 to
          January 2, 2001 in the amount of $2,711,811, representing an estimate
          of the intrinsic value of the options to be granted on January 2,
          2001, was recorded as contributed surplus within shareholders' equity.
          Of this amount, $2,258,592 was recorded as compensation expense in the
          year-ended October 31, 2000. On January 17, 2001, the Chairman
          exercised his options and 714,686 common shares of the Company were
          issued with an aggregate value of $1,581,242 which was recorded as
          share capital. The difference between the actual value of the shares
          and the estimate recorded in 2000 of $677,420 was recorded as a
          recovery of compensation expense in the year ended October 31, 2001.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | iv. | On January 29, 1999 and March 10, 1999, the Company
          entered into two consulting agreements with the Chairman and a company
          controlled by the former President, respectively. Consideration for
          services rendered by the Chairman and the former President were
          settled by issue of common shares. The Company issued 454,292 shares
          to the Chairman and 448,452 shares to a company controlled by the
          former President during fiscal 2000. The balance of 11,192 shares
          ($66,461) due to a company controlled by the former President were
          issued in fiscal 2001.                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|b. | In the normal course of business, the Company has entered
    into transactions with other companies under common control. These
    transactions relate to salaries, rent and other expenses which are shared
    amongst the companies. For the fiscal year ending October 31, 2004, Micromen
    paid a total of approximately $92,000 in rent, $116,000 in salaries and
    $5,000 of other expenses and recovered a total of $182,000 of these costs
    from other companies under common control (2003: rent



F-25

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |              | payment of $126,000, salary payments of $28,000, other
    payments of $5,000 recoveries of $47,000).                                                                                                                                                               
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | c.           | Included in professional fees as reported are management
    and consulting fee payments made to various companies whose shareholders
    serve as officers and directors of the Company. Such payments totaled
    approximately $72,000 in 2004 (2003 - $201,000).
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|13. | Commitments:
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | a.           | Research Collaboration and Infrastructure Agreements:                                                                                                                                                                                                               
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |              | 1.                                                                                                                                                                                                                                                                   | Materials and Manufacturing Ontario:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |              |                                                                                                                                                                                                                                                                      | On October 24, 2002, Micromem entered into a two year
      Research Collaboration Agreement with Material and Manufacturing Ontario
      ("MMO"), a not-for-profit organization funded by the provincial
      government, the University of Toronto ("U of T") and a researcher employed
      by U of T to fund the research on Magnetic Structure development for Hall
      effect memory devices.                                                                                                                                  
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |              |                                                                                                                                                                                                                                                                      | Under the terms of the agreement, the Company has
      committed to contribute $87,432 (Cdn $136,175) and $18,000 (Cdn $28,000)
      in cash and in-kind contribution, respectively, per year to fund the
      research. As at October 31, 2004, the Company has met all of its
      obligations under this agreement.                                                                                                                                                                                                                
|    |              |                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |              |                                                                                                                                                                                                                                                                      | On November 12, 2003, Micromem entered into a second
      research collaboration agreement with MMO and the U of T for research and
      development associated with magnetic memory devices. Under the second
      agreement, in the first year and upon renewal in the second year, MMO will
      grant $58,900 (equivalent to Cdn. $85,000) in cash funding and Micromem
      will contribute $56,130 (equivalent to Cdn. $81,000 in cash funding and
      additionally will make $30,770 (equivalent to Cdn. $44,400) of in-kind



F-26

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |    | contributions, all towards the research collaboration,
      each year. At October 31, 2004, the Company has met all of its obligations
      under the agreement. Micromem will have sublicensing rights for the use of
      any new technology developed ("Technology Developed") under this research
      with an annual royalty payable in perpetuity to MMO based on a percentage
      of revenues from the sale of products incorporating the Technology
      Developed.                                                                                                                                                                                                            
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | 2. | University of Toronto:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    | On November 1, 2002, the Company entered into an
      Infrastructure Agreement with U of T to fund the assembly of a magnetic
      memory facility ("MMF") for research, development and fabrication of
      magnetic memory. U of T has agreed to use the MMF in connection with,
      among other things, research to be conducted pursuant to collaborations
      between Micromem and U of T.                                                                                                                                                                                                                                                                                        
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    | The terms of the agreement provide that Micromem is to
      contribute $249,463 (equivalent to Cdn. $360,000) in cash to fund the
      direct costs of the MMF. The contribution has been included as a research
      and development expense in the consolidated statements of operations and
      deficit.                                                                                                                                                                                                                                                                                                                                                                              
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | 3. | Communications and Information Technology Ontario:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    | On December 10, 2002, Micromem entered into a two year
      Collaborative Research Agreement with Communications and Information
      Technology Ontario ("CITO") U of T and Dr. Harry Ruda. For the first year,
      CITO provided funding of $106,715 (equivalent to Cdn. $154,000) and
      Micromem contributed $31,875 (equivalent to Cdn. $46,000). For the second
      year, CITO provide funding of a further $107,715 (equivalent to Cdn.
      $154,000) and Micromem provided funding of a further $31,875 (equivalent
      to Cdn. $46,000). Micromem has further provided $67,632 (equivalent to Cdn
      $97,600) of in-kind contributions to the research collaboration.
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | 4. | Equipment Transfer Agreement:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    | On March 1, 2003, Micromem entered into an agreement
      with U of T whereby Micromem has contributed equipment and supplies with
      an estimated value of $200,000 (Note 6). The equipment was previously used
      by                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



F-27

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | b. | Technology development agreement:                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |    | On March 14, 2001, the Company's subsidiary, Pageant,
    entered into a three-year technology development agreement with Estancia and
    Lienau to continue the development of the Technology. Under the terms of the
    agreement, Pageant committed to pay Estancia $215,000 per year, payable on a
    monthly basis in arrears, and committed to incur expenditures in connection
    with the development expenses of up to a maximum of $500,000 per agreement
    year.
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |    | On April 23, 2002, the technology development agreement
    was amended to extend its term for an additional eight-month period through
    November 2004. The go-forward payments were renegotiated as $62,707 between
    May - October 2002, $197,086 during fiscal 2003 and $143,330 during fiscal
    2004.                                                                                                                                                                 
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |    | The development efforts under this agreement ceased in
    July 2002. The Company reports approximately $287,000 in accounts payable
    and accrued liabilities with respect to this agreement as of October 31,
    2004 (at October 31, 2003: $143,000).                                                                                                                                                                                                                      
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | c. | Operating leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |    | The Company has operating lease commitments which expire
    in 2006 in respect of its head office. The future minimum annual lease
    payments are approximately as follows:                                                                                                                                                                                                                                                                                                   





|     |          
|---- | ---------
|2005 | $ 93,500 
|2006 | 15,500   
|     | $ 109,000





F-28

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|14. | Contingencies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|    | Pageant Technologies (U.S.A.) Inc. has been named as a
  defendant in legal actions relating to tenant improvements on a leased
  property, including an action claiming damages of approximately $887,000
  alleging breach of contract under a construction contract entered into by
  Clear Blue Laboratories, Inc. ("Clear Blue"). The landlord of the leased
  property is also claiming damages from Pageant Technologies (U.S.A.) Inc.
  Pageant Technologies (U.S.A.) Inc. assigned its rights under the lease to
  Clear Blue, however, Pageant Technologies (U.S.A.) Inc. is allegedly obligated
  to pay the lease payments should the assignee default under the contract. The
  landlord is claiming damages of approximately $887,000.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|    | The outcome of these actions is uncertain and Pageant
  Technologies (U.S.A.) Inc. is vigorously defending all actions in which it is
  named as a defendant. It is, therefore, not possible to provide an estimate of
  the financial effects, if any, of the actions. No losses related to these
  actions have been accrued in these consolidated financial statements. It is
  possible that the outcome of these claims could represent a material amount.                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|    | In the normal course of business, the Company and its
  subsidiaries are involved in various legal actions. In management's opinion,
  the ultimate disposition of these actions, individually or in aggregate, will
  not have a material adverse effect on the financial condition of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|    | The Company has agreed to indemnify its directors and
  officers and certain of its employees in accordance with the Company's
  by-laws. The Company maintains insurance policies that may provide coverage
  against certain claims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|    | Under the terms of the Research Collaboration and
  Infrastructure Agreements with MMO (Note 13 (1)) the University of Toronto
  (Note 13 (2)) and Communications and Information Technology Ontario (Note 13
  (3)), the Company is committed to potential royalty payments in each case when
  a license agreement is finalized with respect to the technology relating to
  such agreements. As and when the research work is completed the Company will
  enter into a license agreement whereby:                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                              | 
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | The collaboration partner in each case shall retain a
      non-exclusive royalty free worldwide perpetual license to use the
      Intellectual Property for its research, teaching and administrative
      purposes only.

F-29

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                          | The collaboration partner shall receive an annual
      royalty payment calculated as:                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             | i.                                                                                                                                                   | 4% of the revenues generated by the Company from the
        manufacture and sale of products to the extent that such products
        directly and specifically pertain to the related Intellectual Property.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             | ii.                                                                                                                                                  | A maximum of 20% of the revenues generated by the Company
        from the sublicensing of the related Intellectual Property,                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    | subject to an overall total payment of $500,000. Once the
  overall payments equal $500,000, then the future royalty rate is reduced to 1%
  in each of case (i) and (ii) above.                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    | As outlined in Note 4, certain interests under the
  Agreement with Estancia reverted to Estancia on March 9, 2004. On this basis,
  to the extent that revenues are generated by the Company relating directly and
  specifically to the Vemram Patents, the Company is obligated to pay Estancia
  32% of the gross profit realized less expenses agreed to by the parties and
  32% of any unit royalties realized less direct expenses.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|15. | Financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                          | Fair values                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             | The fair values for all financial assets and liabilities
    are considered to approximate their carrying values due to their short-term
    nature.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                          | Foreign items                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             | The consolidated financial statements include
    balances/transactions that are denominated in foreign currencies as follows:                      







|            | 2004 Canadian Dollars | 2003 Canadian Dollars
|----------- | --------------------- | ---------------------
|Assets      | $ 270,999             | $ 343,144            
|Liabilities | 122,561               | 60,046               
|Revenue     | 6,241                 | 8,976                
|Expenses    | 973,615               | 1,574,943            



F-30

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | 
|16. | Reconciliation between Canadian GAAP and U.S. GAAP:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 
|    | The Company's consolidated financial statements have been
  prepared in accordance with Canadian GAAP which, in the case of the Company,
  conform in all material respects with U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Stock-Based compensation:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 
|    | The Company has chosen to account for employee stock-based
  compensation using the intrinsic value method prescribed in Accounting
  Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
  Under this method, compensation expense is recorded if the market value
  exceeds the exercise price at the date of grant. The compensation expense, if
  any, is recognized at the date of option grants or when the option shares are
  earned, when future performance is required, in the consolidated statements of
  operations and deficit.                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 
|    | For the purposes of reporting under U.S. GAAP, companies
  are required under Statement of Financial Accounting Standard (SFAS) No. 123
  to calculate and disclose on a pro forma basis, the compensation expense
  related to the fair value of the stock options granted during the year in the
  notes to the consolidated financial statements. Accordingly, for the purpose
  of reporting under U.S. GAAP, the Company's net loss applicable to common
  shares and loss per common share would be increased to the pro forma amounts
  as disclosed in Note 8(b).                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 
|    | In December 2004, the Financial Accounting Standards Board
  (FASB) issued SFAS No. 123 (revised 2004), "Share-Based Payments". SFAS No.
  123(R) would require the Company to measure all employee stock-based
  compensation awards using a fair-value method and record such expense in its
  consolidated financial statements. SFAS No. 123(R) is effective beginning in
  the quarter ending January 31, 2005. The effect of the adoption of SFAS No.
  123(R) is expected to be comparable to the effect disclosed on a pro forma
  basis as a result of applying the current fair-value recognition provisions of
  SFAS No. 123 as shown in 8(b) herein.



F-31





MICROMEM TECHNOLOGIES INC.
(

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Consolidated statement of comprehensive income
              (loss):                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Comprehensive income (loss) includes all changes in equity
  during the periods presented except shareholder transactions. For the purpose
  of reporting under U.S. GAAP, the components of comprehensive income and total
  comprehensive income are reported in the consolidated statements of changes in
  shareholders' equity, below net loss in the consolidated statements of
  operations and deficit and in a separate consolidated statement of
  comprehensive income. For the periods presented, accumulated other
  comprehensive loss equals net loss.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|17. | Subsequent events:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Since October 31, 2004, the Company has secured
    additional financing as follows:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | i.                                                                                   | $44,000 of proceeds realized on the exercise of
        warrants as outlined in Note 8(e) (i).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ii.                                                                                  | In December 2004 the Company completed a Unit private
        placement to several U.S. investors pursuant to prospectus and
        registration exemptions set forth in applicable securities laws. Under
        the private placement, the Company has received $617,000 as subscription
        proceeds for the sale and issue of 1,028,344 Units. Each Unit consists
        of one Common Share and one Series A Warrant. Each Series A Warrant
        entitles the holder to purchase one Common Share and one Series B
        warrant for $.60 until expiry 12 months from the date of issue. Each
        Series B Warrant entitles the holder to purchase one additional Common
        Share for $.60 until expiry 12 months from the date of issue.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | iii.                                                                                 | In January 2005, the Company arranged a Unit private
        placement to several investors pursuant to prospectus and registration
        exemptions set forth in applicable securities laws. Under the private
        placement the Company is scheduled to receive up to approximately
        $883,000 by February 28, 2005 as subscription proceeds for the sale of
        up to 1,346,490 Units. Each Unit consists of one Common Share and one
        Series A Warrant. Each Series A Warrant entitles the holder to purchase
        one Common Share and one Series B Warrant for $.65 until expiry 12
        months from the issue date. Each Series B Warrant entitles the holder to
        purchase                                              

F-32

MICROMEM TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



October 31, 2004




|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | one additional Common Share for $.65 until expiry 12
        months from the date of issue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                | iv.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | In February 2005 the Company completed a Unit private
        placement to one Canadian investor pursuant to prospectus and
        registration exemptions set forth in applicable securities laws. Under
        the private placement, the Company received $10,500 as subscription
        proceeds for the sale and issue of 14,000 Units. Each Unit consists of
        one Common Share and one Series A Warrant. Each Series A Warrant
        entitles the investor to purchase one Common Share and one Series B
        Warrant for $.75 until expiry 12 months from the date of issue. Each
        Series B Warrant entitles the holder to purchase one additional common
        share for $.75 until expiry 12 months from the date of issue.
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | b.                                                                                                                                                                             | In January 2005 the Company entered into an employment
    agreement with an arm's length individual for her services as Chief
    Technology Officer of the Company. The agreement extends for 2 years with a
    cancellation clause which can be executed by the Company at any time with 4
    months notice provided. The base remuneration stipulated in the agreement is
    $260,000 per year. The company also granted the Chief Technology Officer
    300,000 in options exercisable at $0.80 per share, expiring 45 days after
    the end of the above noted employment agreement.
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | c.                                                                                                                                                                             | On February 10, 2005 the Board approved a resolution to
    issue 100,000 options under the Company's Stock Option Plan with an exercise
    price of $0.91 per share. These options were awarded to an officer and an
    employee of the Company.                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|18. | Comparative consolidated financial statements:                                                                                                                                
|    |                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Comparative consolidated financial statements have been
  reclassified from statements previously presented to conform to the
  presentation of the 2004 financial statements.

F-33

Item 19 Exhibits

Exhibits filed as part of this annual report:
Exhibit No. 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/A filed with the Commission on January 11,
2000).
Exhibit No. 2 Articles of Amendment of Micromem Technologies Inc. dated as of
October 17, 2001 amending the Articles 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/A filed with the Commission on
March 20, 2003);
Exhibit No. 3 Articles of Amendment of Micromem Technologies Inc. dated as of
June 24, 2002 amending the Articles 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/A filed with the Commission on
March 20, 2003);
Exhibit No. 4 By-Laws of Micromem Technologies Inc. in effect as of January
11, 2002, (Incorporated herein by reference to the Company's Form 20-F/A filed
with the Commission on January 11, 2000);
Exhibit No. 5 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/A filed with the Commission on March 20,
2003);
Exhibit No. 6* Research Collaboration Agreement among Micromem Technologies
Inc., the University of Toronto, Dr. Harry Ruda and Materials and Manufacturing
Ontario dated October 24, 2002 (referred to in this Annual Report at Item 4.B 
Business Overview  Recent Developments) (Incorporated herein by reference to
the Company's Form 20-F/A filed with the Commission on March 20, 2003);
Exhibit No. 7 Asset Purchase Agreement among Micromem Technologies Inc.,
Pageant Technologies Incorporated, Estancia Limited and Richard Lienau dated
December 10, 2000 (referred to in this Annual Report at Item 4.B  Business
Overview  Recent Developments), (Incorporated herein by reference to the
Company's Form 40-F filed with the Commission on February 2, 2001);
Exhibit No. 8 Technology Development Agreement among Pageant Technologies
Incorporated, Estancia Limited and Richard Lienau dated March 9, 2001 (referred
to in this Annual Report at Item 4.B  Business Overview  Recent Developments),
(Incorporated herein by reference to the Company's Form 40-F filed with the
Commission on February 2, 2001);
Exhibit No. 9Infrastructure Agreement between Micromem Technologies
Inc. and he University of Toronto dated November 1, 2002 (referred to in this
Annual Report at Item 4.B  Business Overview  Recent Developments)
(Incorporated herein by reference to the Company's Form 20-F/A filed with the
Commission on March 20, 2003);
Exhibit No. 10 A second 2-year research research collaboration agreement
dated November 12, 2003, among Micromem, Materials and Manufacturing Ontario and
the University of Toronto (referred to in this Annual Report at "Item 10.C 
Material Contracts"), (Incorporated herein by reference to the Company's Form
20F filed with the Commission on March 19, 2004);
Exhibit No. 11 Equipment Transfer Agreement dated March 1, 2003 between
Micromem and the Governing Council of the University of Toronto (referred to in
this Annual Report at Item 10.C  Material Contracts"), (Incorporated herein by
reference to the Company's Form 20F filed with the Commission on March 19,
2004);
Exhibit No. 12 Collaborative Research Agreement dated December 10, 2002 among
Micromem, Communications and Information Technology Ontario ("CITO"), the
University of Toronto and Dr. Harry Ruda (referred to in this Annual Report at
"Item 10.C  Material Contracts"), (Incorporated herein by reference to the
Company's Form 20F filed with the Commission on March 19, 2004);
Exhibit No. 12.1 Officer's Certification pursuant to Section 302 of the
Sarbanes Oxley Act, 2002 (1)
Exhibit No. 12.2 Officer's Certification pursuant to Section 302 of the
Sarbanes Oxley Act, 2002 (1)
Exhibit No. 13.1 Officer's Certification pursuant to Section 906 of the
Sarbanes Oxley Act, 2002 (1)
Exhibit No. 13.2 Officer's Certification pursuant to Section 906 of the
Sarbanes Oxley Act, 2002 (1)
Exhibit No. 14.1 Independent Auditors' Consent of Grant Thornton LLP (2)
Exhibit No. 14.2 Auditor's Consent of Ernst & Young LLP (1)
*Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
(1) Filed herewith.
(2) Previously filed as an exhibit to the Company's Annual Report on Form
20-F for the year ended October 31, 2004, filed with the Securities and Exchange
Commission on February 28, 2005.
34SIGNATURES

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

|By:                     | /s/ Dan Amadori   | 
|----------------------- | ----------------- | 
|Dan Amadori             |                  
|Chief Financial Officer |                  
|                        |                  
|Date:                   | June 22,
    2005 | 



35



EXHIBIT INDEX





Exhibit No. 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/A filed with the Commission on January 11,
2000).

Exhibit No. 2 Articles of Amendment of Micromem Technologies Inc. dated as of
October 17, 2001 amending the Articles 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/A filed with the Commission on
March 20, 2003);

Exhibit No. 3 Articles of Amendment of Micromem Technologies Inc. dated as of
June 24, 2002 amending the Articles 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/A filed with the Commission on
March 20, 2003);

Exhibit No. 4 By-Laws of Micromem Technologies Inc. in effect as of January
11, 2002, (Incorporated herein by reference to the Company's Form 20-F/A filed
with the Commission on January 11, 2000);

Exhibit No. 5 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/A filed with the Commission on March 20,
2003);

Exhibit No. 6* Research Collaboration Agreement among Micromem Technologies
Inc., the University of Toronto, Dr. Harry Ruda and Materials and Manufacturing
Ontario dated October 24, 2002 (referred to in this Annual Report at Item 4.B 
Business Overview  Recent Developments) (Incorporated herein by reference to
the Company's Form 20-F/A filed with the Commission on March 20, 2003);

Exhibit No. 7 Asset Purchase Agreement among Micromem Technologies Inc.,
Pageant Technologies Incorporated, Estancia Limited and Richard Lienau dated
December 10, 2000 (referred to in this Annual Report at Item 4.B  Business
Overview  Recent Developments), (Incorporated herein by reference to the
Company's Form 40-F filed with the Commission on February 2, 2001);

Exhibit No. 8 Technology Development Agreement among Pageant Technologies
Incorporated, Estancia Limited and Richard Lienau dated March 9, 2001 (referred
to in this Annual Report at Item 4.B  Business Overview  Recent Developments),
(Incorporated herein by reference to the Company's Form 40-F filed with the
Commission on February 2, 2001);

Exhibit No. 9Infrastructure Agreement between Micromem Technologies
Inc. and he University of Toronto dated November 1, 2002 (referred to in this
Annual Report at Item 4.B  Business Overview  Recent Developments)
(Incorporated herein by reference to the Company's Form 20-F/A filed with the
Commission on March 20, 2003);

Exhibit No. 10 A second 2-year research research collaboration agreement
dated November 12, 2003, among Micromem, Materials and Manufacturing Ontario and
the University of Toronto (referred to in this Annual Report at "Item 10.C 
Material Contracts"), (Incorporated herein by reference to the Company's Form
20F filed with the Commission on March 19, 2004);

Exhibit No. 11 Equipment Transfer Agreement dated March 1, 2003 between
Micromem and the Governing Council of the University of Toronto (referred to in
this Annual Report at Item 10.C  Material Contracts"), (Incorporated herein by
reference to the Company's Form 20F filed with the Commission on March 19,
2004);

Exhibit No. 12 Collaborative Research Agreement dated December 10, 2002 among
Micromem, Communications and Information Technology Ontario ("CITO"), the
University of Toronto and Dr. Harry Ruda (referred to in this Annual Report at
"Item 10.C  Material Contracts"), (Incorporated herein by reference to the
Company's Form 20F filed with the Commission on March 19, 2004);

Exhibit No. 12.1 Officer's Certification pursuant to Section 302 of the
Sarbanes Oxley Act, 2002 (1)

Exhibit No. 12.2 Officer's Certification pursuant to Section 302 of the
Sarbanes Oxley Act, 2002 (1)

Exhibit No. 13.1 Officer's Certification pursuant to Section 906 of the
Sarbanes Oxley Act, 2002 (1)

Exhibit No. 13.2 Officer's Certification pursuant to Section 906 of the
Sarbanes Oxley Act, 2002 (1)

Exhibit No. 14.1 Independent Auditors' Consent of Grant Thornton LLP (2)

Exhibit No. 14.2 Auditor's Consent of Ernst & Young LLP (1)

*Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.

(1) Filed herewith.

(2) Previously filed as an exhibit to the Company's Annual Report on Form
20-F for the year ended October 31, 2004, filed with the Securities and Exchange
Commission on February 28, 2005.

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