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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

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

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

For The Fiscal Year Ended October 31, 2014Or

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

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

Date of event requiring this shell report

Commission File No. 0-26005

MICROMEM TECHNOLOGIES INC.(Exact name of Registrant as specified in its charter)

Ontario, Canada(Jurisdiction of
incorporation or organization)

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

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

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

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

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

Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report: 188,436,724 Common Shares

Indicate by check mark if the registrant is a well-known
seasoned issuer as defined in Rule 405 of the Securities Act: Yes
[   ]      No [X]

If this report is an annual or transition report, indicate by
check mark if the registration is not required to file a report pursuant to
section 13 or 15 of the Securities Exchange Act of 1934: Yes [  
]      No [X]

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X]     
No [   ]

1

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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [  
]      No [   ]

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

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

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

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the Registrant
has elected to follow: Item 17 [  
]     Item 18 [   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes [   ]      No [X]

2

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TABLE OF CONTENTS

|                 |                                                                                    | Page
|---------------- | ---------------------------------------------------------------------------------- | ----
|**Part
      I** |                                                                                    | 4   
|                 |                                                                                    |     
|Item 1.          | Identity of
      Directors, Senior Management and Advisors                        | 4   
|Item 2.          | Offer Statistics and Expected
      Timetable                                      | 4   
|Item 3.          | Key
      Information                                                              | 4   
|Item 4.          | Information on the Company                                                         | 13  
|Item 4A.         | Unresolved
      Staff Comments                                                    | 20  
|Item 5.          | Operating and Financial
      Review and Prospects                                 | 20  
|Item 6.          | Directors,
      Senior Management and Employees                                   | 26  
|Item 7.          | Major Shareholders and
      Related Party Transactions                            | 31  
|Item 8.          | Financial
      Information                                                        | 33  
|Item 9.          | The Offer and Listing                                                              | 33  
|Item 10.         | Additional
      Information                                                       | 34  
|Item 11.         | Quantitative and Qualitative
      Disclosures about Market Risk                   | 41  
|Item 12.         | Description
      of Securities Other Than Equity Securities                       | 41  
|                 |                                                                                    |     
|Part II          |                                                                                    | 41  
|                 |                                                                                    |     
|Item 13.         | Defaults,
      Dividend Arrearages and Delinquencies                              | 41  
|Item 14.         | Material Modifications to
      the Rights of Security Holders and Use of Proceeds | 41  
|Item 15.         | Controls and
      Procedures                                                      | 41  
|Item 16.         | [Reserved]                                                                         | 42  
|Item 16A         | Audit
      Committee Financial Expert                                             | 42  
|Item 16B         | Code of Ethics                                                                     | 42  
|Item 16C         | Principal
      Accountant Fees and Services                                       | 42  
|Item 16D         | Exemptions from the Listing
      Standards for Audit Committees                   | 43  
|Item 16E         | Purchases of
      Equity by the Issuer and Affiliated Purchasers                  | 43  
|Item 16F         | Changes in Registrants
      Certifying Accountant                                | 43  
|Item 16G         | Corporate
      Governance                                                         | 43  
|Item 16H         | Mine Safety Disclosure                                                             | 43  
|                 |                                                                                    |     
|Part III         |                                                                                    | 43  
|                 |                                                                                    |     
|Item 17.         | Financial Statements                                                               | 43  
|Item 18          | Financial
      Statements                                                         | 43  
|Item 19.         | Exhibits                                                                           | 44  
|Signatures       |                                                                                    | 45  

3

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PART I

INTRODUCTION

Abbreviations

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

Forward Looking and Cautionary Statements

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

ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

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

Not applicable.

ITEM
3. **** KEY
INFORMATION

A. **** Selected
Financial Data

Fiscal Years 2014, 2013, 2012 and 2011

The following table sets forth our selected consolidated
financial data in United States dollars as of and for each of the fiscal years
ended October 31, 2014, October 31, 2013, October 31, 2012 and October 31, 2011.
The selected consolidated financial data has been derived from our audited
consolidated financial statements. All information contained in the following
table should be read in conjunction with our audited consolidated audited
financial statements and the notes thereto in Item 18-Financial Statements and
"Item 5 - Operating and Financial Review and Prospects included elsewhere in
this Annual Report on Form 20-F.

Our consolidated financial statements for the years ended
October 31, 2014, 2013, 2012 and 2011 have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board. Previously the Company prepared
consolidated financial statements in accordance with Canadian generally accepted
accounting principles (Canadian GAAP).

International Financial Reporting Standards

|Selected balance sheet information  |   |            |  |   |            |  |  |             |   |  |             |  
|----------------------------------- | - | ---------- |  | - | ---------- |  |  | ----------- | - |  | ----------- | -
|(all amounts in
      U.S. dollars) |   |            |  |   |            |  |  |             |   |  |             |  
|                                    |   | 2014       |  |   | 2013       |  |  | 2012        |   |  | 2011        |  
|Working capital (deficiency)        | $ | 1,034,921  |  | $ | 425,888    |  |  | ($1,793,217 | ) |  | ($2,239,178 | )
|Capital Assets                      |   | 21,483     |  |   | 13,998     |  |  | 5,787       |   |  | 10 ,201     |  
|Total Assets                        |   | 5,636,605  |  |   | 2,166,455  |  |  | 1,180,278   |   |  | 906,346     |  
|Capital Stock                       |   | 70,802,776 |  |   | 57,755,613 |  |  | 54,728,239  |   |  | 51,774,555  |  
|Shareholders' equity (deficiency)   |   | 4,862,773  |  |   | 1,536,319  |  |  | (904,030    | ) |  | (1,409,228  | )

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Selected statement of operations and deficit information

|(all amounts in U.S. dollars)                                |  |             |   |  |             |   |  |             |   |   |             |  
|------------------------------------------------------------ |  | ----------- | - |  | ----------- | - |  | ----------- | - | - | ----------- | -
|                                                             |  | 2014        |   |  | 2013        |   |  | 2012        |   |   | 2011        |  
|Interest and other income                                    |  | -           |   |  | -           |   |  | -           |   | $ | 963         |  
|Research and development expenses                            |  | 703,671     |   |  | 160,920     |   |  | 229,840     |   |   | (75,896     | )
|General and administrative and
      other expenses          |  | 3,081,947   |   |  | 2,198,466   |   |  | 2,618,792   |   |   | 1,916,981   |  
|(Gain) Loss on revaluation of embedded
      derivatives (1) |  | -           |   |  | 3,205,752   |   |  | (1,504,423  | ) |   | 412,563     |  
|Stock compensation expense (2)                               |  | 379,253     |   |  | 368,790     |   |  | 430,856     |   |   | 928,497     |  
|Loss before income taxes                                     |  | (4,164,871  | ) |  | (5,933,928  | ) |  | (1,775,065  | ) |   | (3,181,182  | )
|Provision for income taxes (recovery)                        |  | -           |   |  | -           |   |  | -           |   |   | 1,205       |  
|Net
      loss                                               |  | (4,164,871  | ) |  | (5,933,928  | ) |  | (1,775,065  | ) |   | 3,182,387   |  
|Loss per share-basic and
      diluted                       |  | (0.02       | ) |  | (0.04       | ) |  | (0.01       | ) |   | (0.03       | )
|Weighted average number of basic and diluted shares          |  | 171,534,969 |   |  | 146,814,466 |   |  | 123,375,510 |   |   | 102,301,168 |  
|Dividends                                                    |  | -           |   |  | -           |   |  | -           |   |   | -           |  

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

Fiscal Year 2010

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

Canadian GAAP

Selected balance sheet information(all amounts in
      U.S. dollars)2010Working capital (deficiency)
    
    ($1,459,460
    )Capital Assets
    
    16,686Total Assets
    
    568,336Capital Stock
    
    50,102,699Shareholders' equity (deficiency)
    
    (1,019,226
    )


5

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


Reconciliation between Canadian GAAP and U.S. GAAP:

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

Currency and Exchange Rates

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

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

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

2014
    2013
    2012
    2011
    2010High for period
    0.9422
    1.0164
    1.0281
    1.0583
    1.0039Low for period
    0.8589
    0.9348
    0.9783
    0.9430
    0.9278End of period
    0.8620
    0.9402
    0.9872
    1.0079
    0.9885Average for period
    0.9054
    0.9710
    1.0046
    1.0139
    0.9640


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

February
    March
    April
    May
    June
    July2014
    2014
    2014
    2014
    2014
    2014High
    1.1148
    1.1057
    1.0980
    1.0870
    1.0697
    1.0930Low
    1.1040
    1.1002
    1.0943
    1.0828
    1.0646
    1.0877


6

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August
    September
    October
    November
    December
    January2014
    2014
    2014
    2014
    2014
    2015High
    1.0876
    1.1219
    1.1332
    1.1444
    1.1607
    1.28Low
    1.0810
    1.1157
    1.1186
    1.1360
    1.1565
    1.2654


On February 25, 2015 the noon buying rate for one Canadian
dollar, as quoted by the Bank of Canada, was CDN $.1.2419 = U.S. $1.00.

**B.** **Capitalization and Indebtedness**

Not applicable.

**C.** **Reasons for the Offer and Use of Proceeds**

Not applicable.

**D.** **Risk Factors**

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

Risk Factors Related to Our Business

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

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

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

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

At October 31, 2014 we had $935,987 cash on hand and our
current monthly cash expenses were approximately $175,000. Our working capital
position is $1,034,921 at October 31, 2014. Subsequent to October 31, 2014,
through to the date of the filing of this Annual Report on Form 20-F, we have
raised an additional $565,714 through the exercise of warrants. Additionally, we
collected $1,392,978 from development partners with respect to our ongoing joint
product development projects with our existing customers.

We currently have no operating revenue.

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

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

We continued to develop applications of our magnetic sensor
technology in 2014 working with our technical advisors, and our strategic
development partners. We are pursuing joint development agreements with
potential strategic partners with the expectation that we will jointly develop
sensor applications for use by these potential strategic partners. We believe
that these current initiatives will result in revenues and cash flow to the
Company in the future but there can be no assurance when and if such revenues
will be achieved.

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

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

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

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

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

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

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

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

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

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

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

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

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

8

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

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

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

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

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

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

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

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

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

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

9

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We depend on key personnel.

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

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

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

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

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

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

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

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

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

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

There are foreign exchange risks associated with our
Company.

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

10

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Risk Factors Related to Our Common Shares

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

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

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

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

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

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

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

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

11

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

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

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

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

We do not anticipate paying dividends.

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

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

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

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

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

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

12

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ITEM
4. **** INFORMATION
ON THE COMPANY

**A.** **History
and Development of Our Company**

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

The Evolution of Micromem from Memory to Sensor Based Client
Solutions

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

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

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

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

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

13

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

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

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

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

**B.** **Business Overview**

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

Profile at October 31, 2014

The Company conceives of, designs and engineers, creates,
develops and delivers extremely unique sensor solutions to our clients. These
sensor solutions are very small, typically employing MEMS or NEMS feature size
technology. These sensor solutions are precisely driven by client requirements,
typically addressing a difficult business and/or process problem. The solution
typically involves integrating multiple different sensor modalities, seen in
disparate market segments, different from the target client use, that addresses
the clients needs. Due to the extremely small size, the final form factor
allows our solutions to be deployed throughout the application space, in
heretofore inaccessible ruggedized environments. The Companys approach is to
take advantage of the revenue opportunity associated with the projected
trillion-sensor market.

Product Development Process

In 2014, the Company substantially advanced our client driven
product development activity, taking advantage of our knowledge from previous
years and leveraging the rapidly changing advances in the MEMS/NEMS technology
landscape. The Company generally enters into Joint Product Development
Agreements with our clients and follows these stages through to
commercialization:

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| | 1. | Our clients provide a list of grand challenges, ie.
      serious business and process challenges that are affecting their business
      and also impacting the larger market segment in which they
  operate.                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 2. | The Company reaches out to its global network of
      resources, leading experts in the various technology domains. Through this
      resource network, we are able to bring the worlds best domain experts to
      the client. This reduces the clients perceived risk of moving forward
      with capital expenditures.                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 3. | The Company performs a patent analysis and freedom to
      commercially operate analysis in the problem space.                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 4. | The Company will solicit third party validation of our
      proposed solution to assess the potential market and revenue opportunity
      for the Company.                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 5. | If this analysis indicates good fundamentals, the Company
      proceeds with presenting the proposed product development solution to the
      client.                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 6. | The Company will fund the initial costs of facilitating a
      Proof of Concept demonstration given that, upon successfully meeting that
      goal, the client participates in the follow-on development costs. The
      Company product development proposal to the client indicates the specific
      funding responsibility the client has in testing the product in the
      targeted environment, and in deriving revenue to the client through
      deployment of the solution into their business.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 7. | The typical phases of the Company product development
      process are:                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | e.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

The Companys expertise is in rapidly completing the Proof of
Concept demonstration. What used to take several months or initially several
years can now be completed in a much shorter timeframe given the experience that
the Company has developed over the past five years.

The joint development process is built upon protecting our
intellectual property in every product development undertaken. The client
routinely participates in the patenting process and the resultant patent is
collaborative and hence protects both the Companys intellectual property rights
in the product and our clients interest to use the product within their
business space.

To date the Company has advanced its current client development
projects to stages 7(a)  7(c) above. It has not yet successfully commercialized products to the stage where it can
realize its goal of securing long term annuity-like revenue streams from royalty
and licensing agreements.

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Product Portfolio

The following is a summary of the products for which the
Company has been engaged and which are in the various stages of the product
development process described above:

| | 1. | Nanoparticle Detector Platform: Joint
      product development was initially contracted to by Saudi Aramco and the
      proof of concept has been approved by the client. The detector platform is
      capable of detecting magnetic nanoparticles in a flowing oil stream at
      concentrations as low as 100 parts per trillion. The next steps will be to
      deliver manufactured versions to oil company laboratories.                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In a parallel product development MAST has begun work on
      ruggedizing the nanoparticle detector platform so that it can be installed
      and operated directly on an oil well.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company anticipates up to $2.0 million in client
      funding in fiscal year 2015 associated with field ruggedization, although
      there can be no assurances that it will generate any such
  revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company has filed provisional patents with the United
      States Patent and Trademark office (USPTO) for this product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 2. | Magnetic Nanoparticle Interwell Tracers: In
      2013 the Company began to work with Chevron Energy Company to develop and
      test fluorescent magnetic nanoparticles capable of behaving in a
      conservative manner in the application of interwell tracers. The product
      development initial phase was successfully completed. The Company
      suggested a parallel product development program aimed at detecting
      existing interwell tracer chemicals in the field with on well real time
      detection platform technology.                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company has filed provisional patents with the USPTO
      for this product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 3. | In Line Real Time Interwell Tracer Detection
      Platform: In 2014 the Company executed a Joint Product Development
      Agreement with Chevron Energy Company to develop a well head real time
      detection platform for the detection of existing interwell tracer
      chemicals to measurement levels of 300 parts per trillion. The Company has
      obtained an exclusive license of the base line cavity ring down technology
      from Entanglement Technologies Inc., for use in interwell tracer detection
      applications.This work will progress with a laboratory demonstration of
      the Companys ability to differentiate between 8-9 interwell tracers
      simultaneously. This will be followed by an in-field demonstration and
      ultimately, if successful, possible deployment of the platform throughout
      the client organization.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company has filed provisional patents with the USPTO
      for this product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company has received $704,478 of funding from the
      client to date and anticipates up to an additional $2.3 million in client funding in
      fiscal year 2015 associated with field-testing, followed by $23 million in
      deployment revenue thereafter, although there can be no assurances that
      the Company will receive such additional funding/revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 4. | IntelliboltTMAutomotive Oil Pan Plug Sensor Suite:In 2014,
      the Company negotiated an exclusive agreement with Flextronics to
      commercialize, test, manufacture and market the Companys patented oil pan
      plug sensor suite to automotive OEMS. The initial licensing agreement
      calls for the Company to receive an estimated $18 million if and when the
      initial deployment occurs, in 2016  2017, although there can be no
      assurances that the product will be deployed or that the Company will
      receiving any related revenues.                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In 2014, one of the Companys six provisional patents
      related to this product was issued by the USPTO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

16

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| | 5. | Real Time Detection of Wear Elements in Lubricating
      Fluids: In 2014 the Company executed a Joint Product Development
      Agreement with Castrol Innoventures to develop a MEMS solution for field
      deployment in ocean going vessels, wind turbine gearboxes, heavy duty
      trucks and automobiles. The goal of product development is a 50 cc form
      factor utilizing laser induced breakdown spectroscopy that will take in
      line real time oil samples and analytically determine, to precise levels
      of detection, the various wear elements in the lubricating fluid. In 2014,
      the Company successfully demonstrated the bench top Proof of
    Concept. To date, the Company has received $488,485 of funding from the
      client for this project. It anticipates that it will receive additional
      client funding in 2015 of up to $1.2 million although there can be no
      assurances that it will receive such additional funding.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The Company has filed provisional patents associated with
      this product with the USPTO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 6. | Transformer Partial Detection and Expert Advise
      Platform:In 2014 the Company successfully demonstrated with
      Northeast Utilities the ability to detect partial discharges inside the
      transformer using very small sensors. Northeast Utilities accepted the
      proof of concept and made a progress payment of $200,000. Product
      development is proceeding into the next phase associated with extended
      engineering prototype evaluation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The Company has filed provisional patents associated with
      this product with the USPTO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 7. | Power Line Condition Monitoring: In 2014
      the Company began development with Northeast Utilities on a low cost power
      line condition-monitoring device that is to be designed for pervasive
      deployment on distribution and transmission catenaries. The Company has
      filed provisional patents associated with this product with the
    USPTO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 8. | Gas Pipeline Corrosion Detection using Autonomous
      Robotics: In 2014 the Company began early development with
      Northeast Utilities on a very small robotic platform integrated with a
      full suite of the Companys sensors and designed to be deployed
      autonomously inside distribution gas pipelines. The sensor platform is
      designed to establish a corrosion profile, along with an electronic
      mapping and database of 100% of the pipe. The Company has filed
      provisional patents associated with this product with the USPTO.                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 9. | Cement Integrity Sensor:In 2014 the
      Company began a joint development project with the Chevron Energy Company
      to develop a sensor platform that can be pumped into oil wells with
      cement. Once in place, these sensors will scavenge the necessary power
      from the environment and communicate to the surface valuable information
      about the ongoing quality of the cement. The Company has filed provisional
      patents associated with this product with the
USPTO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Intellectual Property:

The Company has been active in building its intellectual
property portfolio during 2014. We have engaged a Washington, D.C. based law
firm to assist us in these efforts. The Company incurred $176,381 of related
costs in 2014.

Development Costs:

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

The Company reported $3,525,456 as deferred development costs
in its consolidated balance sheet as of October 31, 2014. These are costs that
it has incurred with respect to these development projects and contracts that it
continues to pursue in the immediate term and for which it expects to generate
future revenue streams. These costs relate primarily to the active projects
described above.

17

---

The changes in deferred development costs in 2014 are
summarized as below:

Balance reported at October 31, 2013
    $
    928,077Additional project costs incurred in fiscal 2014
    
    3,936,459Recovery of deferred development costs
    
    (662,290
    )Writedown of project costs
    
    ( 676,790
    )Balance reported at October 31, 2014
    $
    3,525,456


The writedown of project costs of $676,790 in 2014 includes a
writedown on one project of $645,528. On that project the Company completed the
initial development stages and recovered $300,000 from the development partner,
$125,000 of which was received in 2014. In the future, should the Company
continue to work with this development partner, it will report all revenues and
all direct costs in its Consolidated Statements of Income.

Derivative Warrant Liability:

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

Changes to Our Board of Directors and Management:

Our 2013 Annual Meeting of Shareholders was held on January 30,
2015. Salvatore Fuda, , Joseph Fuda, David Sharpless, Steven Van Fleet, Oliver
Nepomuceno, Larry Blue, Alex Dey, Craig Carlson and Brian Von Herzen were
reelected to serve on our Board of Directors. Andrew Brandt did not stand for
reelection to our Board of Directors. Messrs. Salvatore Fuda, Joseph Fuda, Dan
Amadori and Steven Van Fleet continue to serve as officers of the Company. Craig
Carlson was appointed to serve on our Board of Directors in December 2013 and
Brian Von Herzen was appointed in February 2014.

Equity Financing Transactions:

In 2014 the Company realized $6,801,619 of proceeds from the
exercise of a total of 27,410,717 common share purchase warrants.

In 2014 the Company settled $8,353 of third party accounts
payable balances through the issuance of 17,081 common shares.

In 2014 the Company extended for a period of six months the
expiration date for 1,405,026 common share purchase warrants which would have
otherwise expired in 2014. The exercise price for 1,105,026 of these warrants
was changed from $0.41 and $0.45 per warrant to $0.50 per warrant. The strike
price remained unchanged for the balance of the warrants at $0.55 per warrant.

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

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

In 2013, the Company repaid one bridge loan of $141,253. At
October 31, 2013, it reported one outstanding bridge loan in the amount of
$290,014. In January 2014, this bridge loan was converted into 2,517,501 common
shares and 2,517,501 common share purchase warrants.

18

---

Intangible Assets and Patents:

Intangible assets comprise the costs which the Company has
capitalized relating to the technical expertise and know-how that the Company
has developed with respect to the commercialization efforts relating to its
sensor technology. In 2012, the Company determined that it had sufficiently
advanced its expertise and product knowledge relating to the general
commercialization efforts for its sensor technology in multiple industry
vertical applications. We anticipate that we will realize commercial economic
benefits from the exploitation of these intangible assets in future.
Accordingly, we reported $77,409 (2013 = $96,761) of intangible assets at
October 31, 2014, representing direct costs incurred with respect to such assets
less amortization expense.

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

In 2014, we continued our activity with respect to advancing
certain provisional patents relating to projects that are underway with current
assignments and projects with our development partners as described above. We
capitalized $176,381 of legal fees associated with this work.

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

Environmental Matters:

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

C. Organizational Structure

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

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

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

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

19

---

D. Property, Plant and
Equipment

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

The Company made $16,508 capital expenditures in 2014; $14,839
of capital expenditure in 2013; no capital expenditures were made in 2012.

**ITEM
4A.****UNRESOLVED
STAFF COMMENTS**

None.

ITEM
5. **** OPERATING
AND FINANCIAL REVIEW AND PROSPECTS

This section of the Form 20-F has been prepared to provide a
more substantive discussion of our business and to assist the reader in
analyzing the audited consolidated financial statements for the years ended
October 31, 2014, October 31, 2013 and October 31, 2012. This discussion and
analysis of financial condition and results of operations should be read in
conjunction with the consolidated financial statements and related notes in this
Annual Report, which are prepared in accordance with IFRS and are stated in
United States dollars.

**A.** **Operating
Results**

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

Selected statement of operations and deficit information

|                                               |  | 2014      |  |  | 2013      |  |  | 2012       |  
|---------------------------------------------- |  | --------- |  |  | --------- |  |  | ---------- | -
|Interest and other income                      |  | -         |  |  | -         |  |  | -          |  
|Administration                                 |  | 325,453   |  |  | 378,497   |  |  | 694,617    |  
|Professional and other fees
      and salaries |  | 2,360,867 |  |  | 1,572,515 |  |  | 1,507,891  |  
|Travel and entertainment                       |  | 329,779   |  |  | 210,852   |  |  | 150,924    |  
|Other expenses                                 |  | 769,519   |  |  | 197,522   |  |  | 495,200    |  
|Stock compensation expense                     |  | 379,253   |  |  | 368,790   |  |  | 430,856    |  
|(Gain) Loss on derivatives                     |  | -         |  |  | 3,205,752 |  |  | (1,504,423 | )
|Loss for the year                              |  | 4,164,871 |  |  | 5,933,928 |  |  | 1,775,065  |  
|Loss per share - basic and diluted             |  | 0.02      |  |  | 0.04      |  |  | 0.01       |  

Selected balance sheet information

|                                  |   | 2014      |  |   | 2013      |  |  | 2012       |  
|--------------------------------- | - | --------- |  | - | --------- |  |  | ---------- | -
|Working capital (deficiency)      | $ | 1,034,921 |  | $ | 425,888   |  |  | (1,793,217 | )
|Other Assets                      |   | 3,827,852 |  |   | 1,110,431 |  |  | 889,187    |  
|Total Assets                      |   | 5,636,605 |  |   | 2,166,455 |  |  | 1,180,278  |  
|Shareholders equity (deficiency) |   | 4,862,773 |  |   | 1,536,319 |  |  | (904,030   | )

20

---

Fiscal 2014 Compared to Fiscal 2013

The Company reported a loss of $4,164,871 in 2014 versus a loss
of $5,933,928 in 2013. In 2013 the net loss included a non-cash loss on the
revaluation of derivative warrant liability of $3,205,752; excluding this
component, the 2013 loss was $2,728,126.

The increase in loss from operations in 2014 resulted from
several components including:

| | (a) | An increase of $788,352 in professional fees, other fees
      and salaries in 2014 (2014 expense of $2,360,867 versus 2013 expense of
      $1,572,515).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | In 2014 the Company incurred additional legal fees
      relating to contract negotiations with its customers, additional costs
      associated with its audit of internal control over financial reporting,
      which was required in 2014 given the Companys status as an accelerated
      filer and additional salary and fees paid to officers, directors and
      employees of approximately $600,000. Research and development costs
      increased from $160,920 in 2013 to $703,671 in 2014, an increase of
      $542,751.                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) | Travel and entertainment expense increased to $329,779 in
      2014 from $210,852 in 2013. The Company incurred significantly more travel
      related costs in 2014 relating to the increased level of activity that it
      was engaged in with its current clients.                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (c) | Other expenses increased to $769,519 in 2014 from
      $197,522 in 2013. Included in other expenses are amortization costs of
      $7,357 ($24,341 in 2013), foreign exchange expenses of $58,491 ($12,261 in
      2013) and research and development expenses of $703,671 ($160,920 in
      2013). Included in this total in 2014 was the writedown of development
      cost incurred on one project for which it had completed the staged
      development phases for that contract. The Company recovered $300,000 from
      the development partner on this project, $125,000 of which was received in
      2014. The net writedown was $645,528 for this project.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (d) | Stock compensation expense, calculated in accordance with
      the Black Scholes option pricing model, was $379,253 in 2014 relating to
      the issuance of 630,000 stock options awarded to directors, officers and
      staff (2013: expense of $368,790 relating to the issuance of 2,170,000
      stock options).                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (e) | Administration costs include rent, communication costs,
      insurance, filing fees and costs associated with the Annual General
      meeting. These costs were comparable in 2014 and 2013. The Company
      reported nil accretion expense in 2014 ($19,381 in 2013) and interest
      expense of $28,640 ($78,677 in 2013) on convertible
  debentures.                                                                                                                                                                                                                                                                                                                

At October 31, 2014, the Company had working capital of
$1,034,934 compared to $425,888 at October 31, 2013. Included in deposits and
other receivables at October 31, 2014 is a $244,074 advance provided to Mr.
Steven Van Fleet, the President of MAST Inc., the Companys active U.S.
subsidiary. This advance was authorized by the Companys Compensation Committee
in May 2014 and is recoverable by the Company against future compensation.

The Companys investment in deferred development costs
increased to $3,525,456 at October 31, 2014 from $928,077 in 2013, an increase
of $2,597,379. The Companys activities with its customers increased and
progressed on multiple fronts in 2014 as described in Item 4 of this Annual
Report. A reconciliation of the increase in the Companys investment in its
deferred development costs in 2014 is provided as below:

21

---

Balance reported at October 31, 2013
    $
    928,077Project costs incurred in 2014
    
    3,936,459Costs recovered from clients in 2014
    
    (662,290
    )Write down of project costs in 2014
    
    (676,790
    )Balance reported at October 31, 2014
    $
    3,525,456


The write down of project costs in 2014 of $676,790 consists
principally of the deferred costs previously incurred with respect to the
Nanoparticle Detector Platform project for which the Company completed its
initial phases of activity in 2014. See Item 4 of this Annual Report for a
description of this project.

In 2014 the Company realized $6,801,619 from the exercise of
27,410,717 common share purchase warrants by shareholders who had subscribed to
unit private placements in prior years. In 2013 the Company realized $822,391
from the exercise of 5,953,913 common share purchase warrants by shareholders;
additionally, it realized $2,910,532 from the issuance of private placements for
a total of 16,106,957 units, each consisting of one common share and one common
share purchase warrant.

In 2014 the Company converted its remaining outstanding bridge
loan, which was originally obtained in 2011, into 2,517,501 units, each
consisting of one common share and one common share purchase warrant.
Additionally, it settled a third party trade payable balance of $8,353, at the
suppliers request, through the issuance of 17,081 common shares.

Fiscal 2013 Compared to Fiscal 2012

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

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

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

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

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

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

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

22

---

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

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

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

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

Unaudited quarterly financial information

|(all
      amounts in United States dollars) |  |          |  |   |                   |   |  |                   | 
|-------------------------------------------- |  | -------- |  | - | ----------------- | - |  | ----------------- | 
|Quarter ended                                |  | Total    |  |   | Net Income (Loss) |   |  | Loss Per share    | 
|                                             |  | Revenues |  |   |                   |   |  | Basic and diluted | 
|October 31, 2014                             |  | -        |  |   | ($1,088,154       | ) |  | (0.01)            | 
|July 31, 2014                                |  | -        |  |   | (1,602,411        | ) |  | (0.01)            | 
|April 30, 2014                               |  | -        |  |   | (922,183          | ) |  | (0.01)            | 
|January 31, 2014                             |  | -        |  |   | (552,123          | ) |  | -                 | 
|                                             |  |          |  |   |                   |   |  |                   | 
|October 31, 2013                             |  | -        |  |   | ($5,239,307       | ) |  | (0.03)            | 
|July 31, 2013                                |  | -        |  |   | (261,031          | ) |  | -                 | 
|April 30, 2013                               |  | -        |  |   | (17,012           | ) |  | -                 | 
|January 31, 2013                             |  | -        |  |   | (416,078          | ) |  | -                 | 
|                                             |  |          |  |   |                   |   |  |                   | 
|October 31, 2012                             |  | -        |  | $ | 1,606,175         |   |  | .01               | 
|July 31, 2012                                |  | -        |  |   | (507,079          | ) |  | -                 | 
|April 30, 2012                               |  | -        |  |   | (2,849,835        | ) |  | (0.02)            | 
|January 31, 2012                             |  | -        |  |   | (24,327           | ) |  | -                 | 

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

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

23

---

B. Liquidity and Capital Resources:

Liquidity

We have not yet realized commercial revenues from the
exploitation of our technology platforms. We currently do not have positive cash
flow from operations and will not realize positive cash flow until we license or
directly produce and sell products utilizing our technology platforms.

We currently have no lines of credit available. We have, to
date, relied on obtaining equity financing from investors through private
placements and through the exercise by shareholders of common share purchase
warrants in order to meet our cash flow needs until we can generate sustainable
revenues. At October 31, 2014 we had $1,034,921 of working capital (2013:
$425,888) including cash on hand of $935,987 (2013: $821,283) and our monthly
overhead cash expenses approximate $175,000. Since October 31, 2014 we have
raised an additional $565,714 through the exercise of common share purchase
warrants.

During 2014 we recovered $662,290 of costs that the Company
incurred from its customers on the multiple projects that it has been
developing. Since October 31, 2014, the Company has recovered an additional
$942,978 from its customers on these projects. We anticipate that in 2015, our
development projects, in total, will be self-funding.

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

Capital Resources

We made $16,508 of capital expenditures in 2014; in 2013 we
made $14,839 of capital expenditures and made no expenditures on capital
equipment in 2012.

C. Research and Development:

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

D.Trend Information:

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

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

E.Off-Balance Sheet Arrangements:

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

24

---

F.Tabular Disclosure of Contractual
Obligations:

A summary of our financial commitments as of October 31, 2014
is as below:

Payments due by periodTotal
    Less than 1 year
    1-3 years
    3-5 years
    More than 5 yearsOperating lease obligations
    160,353
    43,733
    116,620
    -
    -Purchase obligations
    2,733,000
    1,799,000
    934,000
    -
    -Total:
    2,893,353
    1,842,733
    1,050,620
    -
    -


In addition to these financial commitments, the Company has
management agreements with its senior executives which are operative on a month
to month basis. At October 31, 2014 these agreements stipulate the following
monthly obligations for the Companys senior management team:

Chairman
    $12,500CDN ($10000 US)President
    13,333CDN ($10,666 US)President, MAST
    $15,000 USCFO
    12,500CDN ($10,000 US)


Critical Accounting Policies:

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

Our consolidated financial statements for the period have been
prepared in accordance with IFRS which, in our case conforms in all material
respects with U.S. GAAP except for the accounting for development expenditures
reported, for intangible assets, warrant modification and modification of the
conversion feature of bridge loans reported in the fiscal years ended October
31, 2014, 2013, 2012 and 2011.

We have not yet realized commercial revenues from the
exploitation of our technology. Under IFRS, research costs are expensed in the
period incurred. Development expenses are expensed as incurred unless they meet
the criteria for deferral and amortization under IFRS which is the translation
of research findings or other knowledge into a plan for the technology prior to
commercial production or use. Under U.S. GAAP all development expenditures are
expensed as incurred. As at October 31, 2014, the Company capitalized $3,525,456
(2013: $928,077) of development costs and capitalized $77,409 (2013: $96,761) as
intangible assets under IFRS.

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

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

25

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G.Contingencies:

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

H.Translation of Foreign Currencies:

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

**ITEM
6.** **DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES**

**A.** **Directors
and Executive Officers**

The Directors and Executive Officers of Micromem as at February
25, 2015 are set forth below:

|Name              | Age | Position                                             
|----------------- | --- | -----------------------------------------------------
|                  |     |                                                      
|Salvatore Fuda    | 79  | Chairman of the
      Board of Directors             
|Joseph Fuda       | 53  | President, Chief Executive
      Officer and Director
|Dan Amadori       | 63  | Chief Financial
      Officer                        
|Steven Van Fleet  | 60  | Director and President of MAST,
      Inc.           
|David Sharpless   | 64  | Director                                             
|Larry Blue        | 58  | Director                                             
|Oliver Nepomuceno | 45  | Director                                             
|Alex Dey          | 71  | Director                                             
|Craig Carlson     | 59  | Director                                             
|Brian Von Herzen  | 55  | Director                                             

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

Joseph Fuda has been President, Chief Executive Officer
and Director since February 13, 2002. Previously he served as Manager of
Strategic Alliances for Micromem since February 2001. Prior thereto, he served
as a consultant to Micromem since November 2000. Prior thereto he served as a
Vice-President and a Director of IPO Capital Corp since April 1999. He was a
director of Leader Capital Corp. until June 2007 and also served as a director
of Echo Energy Canada Inc, and of Echo Power Generational Inc until June 2004.

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

26

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Steven Van Fleethas been President of MAST since 2008
and a director of Micromem since 2002. He is a 1976 graduate of Miami University
with a BSc. in Applied Science and held several technical positions in the pulp
and paper industry including Reed Paper, MacMillan Bloedel, Weyerhaeuser, Boise
Cascade and International Paper. While at International Paper, he managed the
corporate research and development group responsible for applying emerging
technology to business issues. Mr. Van Fleet was one of the founding directors
for the MIT Auto ID group that was charged with creation of the Internet of
Things and the emergence of a global standard for the application of RFID. He
held business development positions with Sentrol System, a supplier of paper
machine quality systems and the R&V Group, a startup RFID manufacturing
company. For six years he was the owner of a company that served IBM with a
focus on semiconductor clean room tool analytics and automation.

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

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

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

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

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

Brian Von HerzenSince 1993, Dr. Von Herzen has
served as Chief Executive Officer at Rapid Protoypes, Inc. providing turnkey
electronic product design services, including commercial product specifications
and fully functional engineering product prototypes, frequently using
programmable logic devices. Rapid Prototypes is expert in electronic engineering
design technologies designed to minimize time to market for new electronic
products in networking, consumer electronics and other commercial products. The
company has developed some of the worlds fastest commercial FPGA applications.
Dr. Von Herzen also serves on the board of directors of the Climate Foundation
and Bright Energy Storage Technologies, LLP. Dr. Von Herzen has also developed
software and hadware systems ranging from apps on smartphones to multi-GHz
correlating spectrometers for the Caltech Submillimeter Observatory. He has
extensive experience with electronic and optical system development for
commercial electronic products.

27

---

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

Business Corporations Act (Ontario).

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

B.            
Compensation

|                                     | Annual Compensation | Long-Term Compensation
|------------------------------------ | ------------------- | ----------------------
|                                     |                     |                       
|                                     |                     |                       
|                                     |                     |                       
|                                     |                     |                       
|                                     | Fiscal              | Salary                
|Name and                             | Year                | (US$)                 
|Principal Position                   |                     |                       
|Joseph Fuda                          | 2012                | 190,000               
|Chief Executive Officer              | 2013                | 318,000               
|                                     | 2014                | 234,107               
|                                     |                     |                       
|Salvatore Fuda,                      | 2012                | 150,000               
|Chairman of the Board of Directors   | 2013                | 146,599               
|                                     | 2014                | 137,172               
|David Sharpless                      | 2012                | -                     
|Director                             | 2013                | -                     
|                                     | 2014                | -                     
|Steven Van Fleet                     | 2012                | 261,000               
|Director and President of MAST, Inc. | 2013                | 231,000               
|                                     | 2014                | 230,193               
|Dan Amadori                          | 2012                | 175,000               
|Chief Financial Officer              | 2013                | 146,649               
|                                     | 2014                | 151,063               
|Larry Blue                           | 2012                | -                     
|Director                             | 2013                | -                     
|                                     | 2014                | 23,877                
|Oliver Nepomuceno                    | 2012                | -                     
|Director                             | 2013                | -                     
|                                     | 2014                | -                     
|Alex Dey                             | 2012                | -                     
|Director                             | 2013                | -                     
|                                     | 2014                | -                     
|Craig Carlson                        | 2012                | -                     
|Director                             | 2013                | -                     
|                                     | 2014                | 14,866                
|Brian Von Herzen                     | 2012                | -                     
|Director                             | 2013                | -                     
|                                     | 2014                | 1,843,6435            

Notes:

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

28

---

|3. | Each option entitles the holder to purchase one common
      share at a price of $0.35 per share prior to expiration in October
      2018.                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | Each option entitles the holder to purchase one common
      share at a price of $0.64U/$0.70CDN per share prior to expiration in April
      2019.                                                                             
|5. | Brian Von Herzen became a director in February 2014.
      Rapid Prototypes, Inc, a company whose major shareholder is Mr.Von Herzen,
      invoices the Company for engineering, product development and design
      services.

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

In 2014 a total of 630,000 stock options were granted to
officers, directors, employees and outside consultants. The exercise price for
350,000 options in February 2014 was $0.85 per share; the exercise price for
280,000 options issued in April 2014 was $0.64 per share.

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

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

C.Board Practices:

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

Our Board of Directors meets on an as required basis during the
fiscal year. In 2014 our Board of Directors met formally in February 2014. The
Board was also convened informally as of each quarter end.

Our Audit Committee regularly during fiscal 2014 for the
purpose of approving and recommending to the Board the quarterly financial
statements and our yearend financial statements. In addition, our Audit
Committee receives regular periodic reports from management.

Our Compensation Committee met regularly in 2014 and
additionally receive regular reports from management. Our Compensation Committee
approves Management and Director Compensation and all stock option grants for
recommendation to the Board of Directors.

Our Disclosure Committee met as required in 2014 to review our
various press release disclosures and to monitor our general practices relating
to our disclosure requirements.

Audit Committee

The Board of Directors has appointed an Audit Committee
consisting of three independent directors. The members of the Audit Committee
are Alex Dey, Oliver Nepomuceno and David Sharpless (Chairman), each of whom
serves in such capacity until the Board of Directors next annual meeting. The
Audit Committee is responsible for the integrity of our internal accounting and
control systems. The committee receives and reviews our financial statements and
makes recommendations thereon to the Board of Directors prior to its approval by
the full Board of Directors. The Audit Committee communicates directly with our
external auditors in order to discuss audit and related matters whenever
appropriate. In 2014 the Audit Committee met formally in January, February
March, June, September and October.

Compensation Committee

The Board of Directors has appointed a Compensation Committee
which meets on executive compensation matters as and when required. Our
Compensation Committee includes Oliver Nepomuceno and Alex Dey as outside
directors. The Compensation committee met monthly between January  June 2014,
in September 2014 and in January 2015.

29

---

Disclosure Committee

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

D.Employees

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

E. **Share Ownership**

NAME
    SHARES OWNED
    OPTIONS HELD
    OPTION EXERCISE
      PRICE
    EXPIRATION DATE
    % OF TOTAL1Joseph Fuda Chief Executive Officer and Director
    353,947
    2,000,000 30,000
    $0.20 $0.35
    10/31/2016 04/10/2017
    1.25% (2,383,947)Salvatore Fuda Chairman of the Board of Directors
      and Director
    5,198,5012
    1,000,000 110,000 75,000 65,000
    $0.20 $0.35 $0.30 $0.27
    10/31/2016 04/10/2017 01/22/2.18
      09/16/2018
    3.40% (6,448,501)David Sharpless Director
    100,000
    450,000 190,000 75,000 65,000
      25,000
    $0.20 $0.35 $0.30 $0.27 $0.64
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018 04/25/2019
    0.48 % (905,000)Steven Van Fleet Director and President of MAST,
      Inc.
    -
    1,000,000 500,000 75,000 65,000
      35,000
    $0.20 $0.35 $0.30 $0.27 $0.64
    10/31/2016 4/15/2012 01/22/2.18
      09/16/2018 04/25/2019
    0.89 % (1,675,000)Dan Amadori Chief Financial Officer
    612,5173
    1,000,000 190,000 75,000 65,000
      20,000
    $0.20 $0.35 $0.30 $0.27 $0.64
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018 04/25/2019
    1.03 % (1,962,517)Larry Blue Director
    193,600
    500,000 190,000 75,000 65,000
      25,000
    $0.20 $0.35 $0.30 $0.27 $0.64
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018 04/25/2019
    0.55% (1,048,600)Oliver Nepomuceno Director
    953,572
    350,000 190,000 75,000 65,000
      25,000
    $0.20 $0.35 $0.30 $0.27 $0.64
    10/31/2016 04/10/2017 01/22/2018
      09/16/2018 04/25/2019
    0.88% (1,658,572)Alex Dey Director
    693,4254
    125,000 100,000 75,000 65,000
      30,000
    $0.35 $0.20 $0.30 $0.27 $0.64
    04/5/2016 10/31/2016 01/22/2018
      09/16/2018 04/25/2019
    0.58% (1,088,425)Craig Carlson
    -
    300,000 25,000
    $0.35 $0.64
    10/25/2018 04/25/2019
    0.12% (325,000)Brian Von Herzen
    -
    300,000 25,000
    $0.85 $0.64
    02/10/2019 04/25/2019
    0.12% (325,000)


30

---

|1 | Calculated based on shares owned plus options held as a
      percentage total of shares outstanding as of October 31, 2014, plus
      options held.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|2 | 5,003,611 shares are held by a corporation wholly owned
      by a trust established for the benefit of members of Salvatore Fuda's
      family.    
|3 | 215,716 shares are held by a corporation controlled by
      Mr. Amadori.                                                                            
|4 | 254,863 shares are held by a corporation wholly owned by
      Mr. Dey.                                                                              

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

A.Major Shareholders:

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

B.Other Related Party Transactions:

The Company reports the following
related party transactions:

| | (a) | Mr. Salvatore Fuda: Our Chairman of the Board receives
      cash compensation on a month to month basis calculated at an annual rate
      of $150,000 CDN ($120,000 US at current exchange rates).                                                                                                                                                      
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                           
| |     | Mr. Fuda was not granted any stock options in 2014. In
      2013 Mr. Fuda was awarded a total of 140,000 stock options at an average
      exercise price of $0.29 CDN per share (2012 - 100,000 stock options at an
      average exercise price of $0.35 per share).                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                           
| |     | The total compensation paid to our Chairman of the Board
      during the year ended October 31, 2014 was $137,172 of cash compensation
      and zero stock based compensation (2013 - $146,599 of cash compensation
      and $ 21,163 of stock based compensation; 2012 - $149,565 of cash
      compensation and $23,697 of stock based compensation).
| |     |                                                                                                                                                                                                                                                                                                                                                           
| |     | In 2014 the Company provided a short term non-interest
      bearing advance of $38,084 against monthly compensation due to the
      Chairman. This advance was repaid subsequent to October 31,
2014.                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                           
| | (b) | Management and consulting fees and advances:                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                           
| |     | Included in professional fees, other fees and salaries as
      reported are management fees and consulting fees paid or payable to
      individuals (or Companies controlled by such individuals) who served as
      officers, directors and employees of the Company. The total compensation
      paid to such parties is summarized as:             

31

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2014
    
    
    2013
    
    
    2012Cash compensation
    $
    1,482,153
    
    $
    805,574
    
    $
    709,075Less portion capitalizedto deferred development costs
    
    (169,664
    )
    
    (202,820
    )
    
    -1,312,489
    
    
    602,754
    
    
    709,075Stock based compensation
    
    325,074
    
    
    195,720
    
    
    401,773$
    1,637,563
    
    $
    798,474
    
    $
    1,110,848


In 2014 these parties were awarded a total of 540,000 stock
options at an average exercise price of $0.76 CDN per share (2013  1,292,500
stock options at an average price of $0.29 per share; 2012  1,755,000 stock
options at an average exercise price of $0.35 per share)

In 2014 the Company was invoiced $1,843,634 (2013-$391,192;
2012- $94,755) by Rapid Prototypes, Inc (RPI), a company whose major shareholder
is Brian Von Herzen, who has served as a director of the Company since February
2014 and who also serves as our Chief Technology Officer. These charges have
been capitalized as deferred development costs. Included in accounts payable at
October 31,2014 is $208,425 owing to RPI .

In February to March 2014, Mr. Amadori was provided with an
advance of $119,757 against monthly compensation due to him. Interest on the
advance was charged at a rate of 1% per month on the opening monthly balance
outstanding. Mr. Amadori repaid $78,036 through October 31, 2014 and was awarded
a performance based bonus at October 31, 2014 which was applied to the repayment
of the remaining balance of the advance.

In May 2014, Mr. Van Fleet was provided with an advance of
$244,074 against monthly compensation due to him. No interest was charged on the
advance and this balance remained outstanding at October 31, 2014. In February
2015, Mr. Van Fleet was awarded a performance based bonus which was applied to
and eliminated the total amount of the outstanding advance.

In 2014, a senior employee was provided with an advance of
$80,916 against monthly compensation due to the employee. This advance was
non-interest bearing. The advance was repaid subsequent to October 31, 2014.

32

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ITEM
8. **FINANCIAL INFORMATION**

A.Consolidated Statements and Other Financial Information

Our consolidated financial statements for the years ended
October 31, 2014, 2013, 2012 and 2011 have been prepared in accordance with
IFRS. Prior to 2011, the Company prepared consolidated financial statements in
accordance with Canadian GAAP.

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

As of October 31, 2014 there were no legal proceedings
outstanding. In November 2014 the Company commenced an action against a
contractor claiming multiple causes of action and is seeking damages relating to
services provided by the contractor between 2008-2011. At February 25, 2015, the
contractor has denied the allegations and is seeking dismissal of the Companys
claims.

B. **Significant Changes**

Significant Changes since October 31, 2014 are as presented in
Note 23 to the Companys Consolidated Financial Statements. See ITEM 18 
Financial Statements.

ITEM
9. **THE OFFER AND LISTING**

Our common shares are traded in the United States and are
quoted on the OTC QX. The common shares are quoted under the symbol MMTIF. Our
common shares are traded in Canada on the CSE under the symbol MRM.

The table below sets forth the high and low sales prices for
common shares in U.S. Dollars as reported for the periods specified. Our fiscal
year end October 31.

Period
    High
    LowLast six months:February 2015
    0.59
    0.51January 2015
    0.62
    0.497December 2014
    0.75
    0.46November 2014
    0.80
    0.634October 2014
    0.70
    0.4281September 2014
    0.88
    0.4125Last eight quarters:Q1 2015
    0.62
    0.497Q4 2014
    0.70
    0.4281Q3 2014
    0.67
    0.519Q2 2014
    0.78
    0.59Q1 2014
    1.502
    0.608Q4 2013
    0.67
    0.21Q3 2013
    0.22
    0.19Q2 2013
    0.24
    0.16


33

---

Last five years:2014
    1.50
    0.402013
    1.33
    0.162012
    0.49
    0.102011
    0.34
    0.072010
    0.65
    0.13


On February 25, 2015, the last reported sale price for our
common shares on the OTC QX was $0.53.

ITEM
10.           ADDITIONAL
INFORMATION

A.            
Share Capital

Our authorized capital consists of an unlimited number of
common shares, of which 188,436,724 shares were issued and outstanding as of
October 31, 2014, and 2,000,000 special, redeemable, voting preference shares,
referred to herein as special shares, none of which were outstanding, as of
October 31, 2014.

Additionally the Company has 12,105,000 stock options
outstanding with a weighted average exercise price of $0.27 (2013: 11,475,000
options outstanding with a weighted average exercise price of $0.24) and a total
of 4,485,463 outstanding warrants to acquire common shares with a weighted
average exercise price of $0.37 (2013: 29,761,012 outstanding warrants with a
weighted average exercise price of $0.27) .

B.            
Memorandum and Articles of Incorporation

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

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

Summary of Directors Powers and Authorities

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

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

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

34

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

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

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

Securities of Micromem

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

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

Rights and Privileges of Shareholders

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

35

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

C.Material Contracts

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

In 2010 the Company entered into a month to month contract with
Mr. Dan Amadori, its CFO, at the expiration of the employment agreement signed
in 2008. These month to month arrangements continue at October 31, 2014. Under
the terms of the contract, Mr. Amadori receives $12,500 CDN ($10,000 US) in
monthly compensation and additional compensation at the discretion of the
Compensation Committee.

In 2010 the Company entered into a month to month contract with
Mr. Joseph Fuda, its President and CEO, at the expiration of the employment
agreement signed in 2008. These month to month arrangements continue at October
31, 2014. Under the terms of the contract, Mr. Fuda receives $13,333CDN
($10,666US) and additional compensation at the discretion of the Compensation
Committee.

In 2011 the Company entered into a month to month contract with
Mr. Steven Van Fleet, the President of MAST at the expiration of the employment
agreement signed in 2008. This month to month arrangement continues at October
31, 2014. Under the terms of the contract, Mr. Van Fleet receives $15,000US in
monthly compensation and additional compensation at the discretion of the
Compensation Committee.

In 2011 the Company entered into a month to month contract with
its Chairman of the Board, Mr. Salvatore Fuda, at the expiration of the
employment agreement signed in 2005. This month to month arrangement continues
at October 31, 2014. Under the terms of the contract, Mr. Fuda receives
$12,500CDN ($10,000US) in monthly compensation.

The total monthly commitment
under these month to month arrangements is $45,666 at October 31, 2014.

In 2011-2012 the Company, through its wholly-owned subsidiary,
Micromem Applied Sensor Technologies, Inc. entered into consulting and product
development agreements with Rapid Prototypes, Inc. (RPI) whose major shareholder
is Mr. Brian Von Herzen. Mr.Von Herzen was appointed to the Board of Directors
of the Company in February 2014. He also serves as the Companys Chief
Technology Officer. RPI has invoiced the Company for professional engineering
design and product development services since 2011; since becoming a director of
the Company, RPI has invoiced the Company total fees of $1,843,643.

D.Exchange Controls

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

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

36

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E.Taxation

Certain Canadian Income Tax Consequences

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

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

Dividends on common shares and Other Income

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

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

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

Dispositions of Common Shares

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

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

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

37

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Certain United States Federal Income Tax Consequences

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

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

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

CIRCULAR 230 DISCLOSURE

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

US Holders

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

Distributions to US Holders Who Own Common Shares

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

38

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

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

Dispositions of Common Shares of the Company

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

US Anti-Deferral Regimes

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

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

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

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

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

39

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Foreign Tax Credit

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

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

Currency Fluctuations

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

F. **Dividends and Paying Agents**

Not applicable.

G. **Statement by Experts**

Not applicable.

H. **Documents on Display**

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

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

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

40

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I. **Subsidiary Information**

Not Applicable.

ITEM
11. **QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We are exposed to market risks in the ordinary course of our
business. Market risk represents the risk of loss that may impact our financial
position due to adverse changes in financial market prices and rates. Our market
risk exposure is primarily a result of fluctuations in interest rates and
foreign currency exchange rates. We do not hold or issue financial instruments
for trading purposes. See Note 21 to our consolidated financial statements for
our quantitative and qualitative disclosures about market risk.

ITEM
12. **DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES**

Not Applicable.

PART II

ITEM
13. **DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES**

None.

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

None.

ITEM
15. **CONTROLS
AND PROCEDURES**

Disclosure Controls and Procedures Our management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended, referred to herein as the Exchange Act) as of October 31,
2014. Based on management's evaluation in 2014, our Chief Executive Officer and
Chief Financial Officer concluded that, as of October 31, 2014, our disclosure
controls and procedures were effective in that they were designed to ensure that
information required to be disclosed by us in our reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms. Disclosure controls and
procedures are designed to ensure that information required to be disclosed by
the Company in our reports that we file or submit under the Exchange Act are
recorded, processed, summarized and reported within the time periods specified
in the SEC rules and forms. Exchange Act Rule 13a-15(e) also states that
disclosure controls and procedures are designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Act is accumulated and communicated to the issuers management,
including its principal executive and principal financial officers, or person
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.

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

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

41

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Our Chief Executive Officer and Chief Financial Officer
assessed the effectiveness of Micromems internal control over financial
reporting as of October 31, 2014. In making this assessment, they used the
criteria established in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on this assessment the Chief Executive Officer and Chief Financial Officer have
concluded that, as of October 31, 2014, our internal control over financial
reporting were effective.

Attestation Report of the Registered Public Accounting
Firm.Micromems internal control over financial reporting as of October
31, 2014 has been audited by Collins Barrow Toronto LLP, an independent
registered public accounting firm in Toronto, Canada, as stated in their report
which is included under Item 18Financial Statements of this Annual Report.

Changes in Internal Control Over Financial
ReportingNo changes in our internal controls over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, occurred
during the fiscal year ended October 31, 2014 that has materially affected or is
reasonable likely to materially affect, our internal controls over financial
reporting.

ITEM
15T.         Controls and
Procedures

Not applicable.

ITEM
16.           [Reserved]

Not applicable.

ITEM
16A.****
Audit Committee Financial Expert

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

ITEM
16B. **Code of
Ethics**

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

ITEM 16C.        
Principal Accountant Fees and Services

The following table presents fees for professional audit
services rendered by our auditors for the audit of our consolidated financial
statements for the years ended October 31, 2014 and 2013, and fees billed for
other services rendered by our auditors including our offerings of securities
and tax services.

Fiscal 2014
    Fiscal 2013Audit Fees
    $119,000
    $147,000Audit Related Fees
    -
    -Tax Fees
    5,000
    5,000All Other Fees
    -
    -


42

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Audit Fees

In 2014, we paid a total of $119,000 to Collins Barrow Toronto
LLP for audit services; in 2013 we paid a total of $147,000 to Collins Barrow
Toronto LLP for audit services.

Audit Related Fees

None

Tax Fees

We paid $5,000 of tax-related fees for services in 2014 and
2013 to Chiampou Travis LLP.

All other fees

None

Pre-approval policies

The Audit Committee assesses and pre-approves all audit and
non-audit services.

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

Not applicable.

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

None.

ITEM
16F.         Change in Registrants
Certifying Accountant.

None.

ITEM
16G.         Corporate Governance

Not applicable.

ITEM
16H.         Mine Safety Disclosure

Not applicable.

ITEM
17.           Financial
Statements

Not applicable, see Item 18.

ITEM
18.           Financial
Statements

43

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Consolidated Financial Statements of

MICROMEM TECHNOLOGIES INC.

For the years ended October 31, 2014 and 2013

(Expressed in United States Dollars)



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| | Collins Barrow Toronto LLP
| | --------------------------
| | Collins Barrow Place      
| | 11 King Street West       
| | Suite 700, PO Box 27      
| | Toronto, Ontario          
| | M5H 4C7 Canada            
| |                           
| | T. 416.480.0160           
| | F. 416.480.2646           
| |                           
| | www.collinsbarrow.com     

INDEPENDENT AUDITORS REPORT OF REGISTERED PUBLIC ACCOUNTING
FIRM

To the Shareholders of Micromem Technologies Inc.:

We have audited the accompanying consolidated financial
statements of Micromem Technologies Inc. and its subsidiaries, which comprise
the consolidated statements of financial position as at October 31, 2014 and
October 31, 2013 and the consolidated statements of loss and comprehensive loss,
changes in shareholders equity and cash flows for the years ended October 31,
2014, October 31, 2013 and October 31, 2012 and notes comprising a summary of
significant accounting policies and other explanatory information.

Managements Responsibility for the Consolidated Financial
Statements

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

Auditors Responsibility

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

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances. An
audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial position of
Micromem Technologies Inc. and its subsidiaries as at October 31, 2014 and
October 31, 2013, and its consolidated financial performance and its
consolidated cash flows for the years ended October 31, 2014, October 31, 2013
and October 31, 2012 in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.

Emphasis of Matter

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

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

---

Other Matter

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Companys
internal control over financial reporting as of October 31, 2014, based on the
criteria established in Internal Control  Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated February 27, 2015 expressed an unmodified (unqualified) opinion
on the effectiveness of the Companys internal control over financial reporting.

Chartered Professional Accountants Licensed Public
Accountants Toronto, Canada February 27, 2015



---

|                                                              | Collins
      Barrow Toronto LLP
|------------------------------------------------------------- | --------------------------------
|                                                              | Collins
      Barrow Place      
|                                                              | 11 King
      Street West       
|                                                              | Suite 700, PO
      Box 27      
|                                                              | Toronto,
      Ontario          
|                                                              | M5H 4C7
      Canada            
|                                                              |                                 
|                                                              | T.
      416.480.0160           
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM | F.
      416.480.2646           
|                                                              |                                 
|To the Shareholders of Micromem Technologies Inc.:            | www.collinsbarrow.com           

We have audited the internal control over financial reporting
of Micromem Technologies Inc. and subsidiaries (the "Company") as of October 31,
2014, based on criteria established in the Internal ControlIntegrated Framework
(2013)issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included under the heading Disclosure Controls/Internal Controls under the
title Compliance Related Reporting Matters in the accompanying Managements
Discussion and Analysis. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the 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 effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of the effectiveness of the internal control over financial
reporting to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of October 31,
2014, based on criteria established in the Internal Control  Integrated
Framework (2013) issued by Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

We have also audited, in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statements of financial
position of the Company as at October 31, 2014 and 2013 and the consolidated
statements of loss and comprehensive loss, changes in shareholders equity and
cash flows for the years ended October 31, 2014, October 31, 2013 and October
31, 2012, and notes comprising a summary of significant accounting policies and
other explanatory information and our report dated February 27, 2015 expressed
an unqualified audit opinion on those consolidated financial statements.

Chartered Professional Accountants Licensed Public
Accountants Toronto, Canada February 27, 2015

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

---

MICROMEM TECHNOLOGIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|TABLE OF CONTENTS
|-----------------
|                 

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

1

---

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

|                                                                                                                                                                                                                                                                                                                                        |   | October 31, |   |   | October 31, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                                                                                                                        |   | 2014        |   |   | 2013        |  
|                                                                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|Assets                                                                                                                                                                                                                                                                                                                                  |   |             |   |   |             |  
|Current assets:                                                                                                                                                                                                                                                                                                                         |   |             |   |   |             |  
|Cash                                                                                                                                                                                                                                                                                                                                    | $ | 935,987     |   | $ | 821,283     |  
|Deposits and other receivables (Note 8)                                                                                                                                                                                                                                                                                                 |   | 872,766     |   |   | 234,741     |  
|                                                                                                                                                                                                                                                                                                                                        |   | 1,808,753   |   |   | 1,056,024   |  
|                                                                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|Property and equipment, net (Note 9)                                                                                                                                                                                                                                                                                                    |   | 21,483      |   |   | 13,998      |  
|Deferred development costs (Note 10)                                                                                                                                                                                                                                                                                                    |   | 3,525,456   |   |   | 928,077     |  
|Intangible assets, net (Note 11)                                                                                                                                                                                                                                                                                                        |   | 77,409      |   |   | 96,761      |  
|Patents, net (Note 11)                                                                                                                                                                                                                                                                                                                  |   | 203,504     |   |   | 71,595      |  
|                                                                                                                                                                                                                                                                                                                                        | $ | 5,636,605   |   | $ | 2,166,455   |  
|                                                                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|Liabilities and Shareholders' Equity
      (Deficiency)                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                                                                                    |   |             |   |   |             |  
|Bridge loans (Note 14)                                                                                                                                                                                                                                                                                                                  | $ | -           |   | $ | 290,014     |  
|Accounts payable and accrued
      liabilities                                                                                                                                                                                                                                                                                          |   | 773,832     |   |   | 340,122     |  
|                                                                                                                                                                                                                                                                                                                                        | $ | 773,832     |   | $ | 630,136     |  
|Shareholders' Equity (Deficiency)                                                                                                                                                                                                                                                                                                       |   |             |   |   |             |  
|Share capital: (Note
      12)                                                                                                                                                                                                                                                                                                          |   |             |   |   |             |  
|Authorized: 
                              2,000,000
      special preference shares, redeemable,
      voting                           Unlimited
      common shares without par
      value              Issued
      and
      outstanding:                           188,436,724
      common shares (2013: 158,491,425) (Note 12) | $ | 70,802,776  |   | $ | 57,755,613  |  
|Equity component of
      bridge loans (Note 14)                                                                                                                                                                                                                                                                                        |   | -           |   |   | 1,557       |  
|Contributed surplus (Note 15)                                                                                                                                                                                                                                                                                                           |   | 27,436,678  |   |   | 32,822,327  |  
|Deficit                                                                                                                                                                                                                                                                                                                                 |   | (93,376,681 | ) |   | (89,043,178 | )
|                                                                                                                                                                                                                                                                                                                                        |   | 4,862,773   |   |   | 1,536,319   |  
|                                                                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                                        | $ | 5,636,605   |   | $ | 2,166,455   |  

Going Concern (Note 2)Management Compensation and Related
Party Transactions (Note 18)Commitments (Note 19)Contingencies (Note
20)Subsequent Events (Note 23)

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

See accompanying notes.

2

---

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

For the years ended October 31,

|                                                                            |   | 2014        |   |   | 2013        |   |   | 2012        |  
|--------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                                            |   |             |   |   |             |   |   |             |  
|Costs and expenses :                                                        |   |             |   |   |             |   |   |             |  
|Administration (Note 17)                                                    | $ | 325,453     |   | $ | 378,497     |   | $ | 694,617     |  
|Professional, other fees and
      salaries (Note 17)                       |   | 2,360,867   |   |   | 1,572,515   |   |   | 1,507,891   |  
|Stock based compensation (Note 12)                                          |   | 379,253     |   |   | 368,790     |   |   | 430,856     |  
|Research and development (Note
      17)                                    |   | 703,671     |   |   | 160,920     |   |   | 229,840     |  
|Forgiveness of debt                                                         |   | -           |   |   | -           |   |   | (42,004     | )
|Travel and entertainment                                                    |   | 329,779     |   |   | 210,852     |   |   | 150,924     |  
|Amortization of property and equipment (Note
      9)                       |   | 7,357       |   |   | 4,989       |   |   | 4,414       |  
|Amortization of intangible
      assets (Note 11)                           |   | -           |   |   | 19,352      |   |   | 19,352      |  
|Foreign exchange loss                                                       |   | 58,491      |   |   | 12,261      |   |   | 7,537       |  
|Recovery of promissory note
      receivable (Note 8)                       |   | -           |   |   | -           |   |   | (30,000     | )
|Loss from operations                                                        |   | 4,164,871   |   |   | 2,728,176   |   |   | 2,973,427   |  
|                                                                            |   |             |   |   |             |   |   |             |  
|Other Expenses                                                              |   |             |   |   |             |   |   |             |  
|Gain on revaluation of embedded
      derivatives (Note 14)                 |   | -           |   |   | (40,750     | ) |   | (176,899    | )
|Warrants issued on debt settlement (Note 14)                                |   | -           |   |   | -           |   |   | 306,061     |  
|Loss (gain) on revaluation of
      derivative warrants liability (Note 13) |   | -           |   |   | 3,246,502   |   |   | (1,327,524  | )
|                                                                            |   |             |   |   |             |   |   |             |  
|Net loss before income taxes                                                |   | (4,164,871  | ) |   | (5,933,928  | ) |   | (1,775,065  | )
|                                                                            |   |             |   |   |             |   |   |             |  
|Income taxes (Note 16)                                                      |   | -           |   |   | -           |   |   | -           |  
|                                                                            |   |             |   |   |             |   |   |             |  
|Net loss and comprehensive
      loss                                       | $ | (4,164,871  | ) | $ | (5,933,928  | ) | $ | (1,775,065  | )
|                                                                            |   |             |   |   |             |   |   | -           |  
|Loss per share - basic and diluted (Note
      12)                          | $ | (0.02       | ) | $ | (0.04       | ) | $ | (0.01       | )
|                                                                            |   |             |   |   |             |   |   |             |  
|Weighted average number of shares (Note 12)                                 |   | 171,534,969 |   |   | 146,814,466 |   |   | 123,375,510 |  

See accompanying notes.

3

---

MICROMEM TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS

(Expressed in United States dollars)

|For the years ended October 31,                                                              |   |            |   |   |            |   |   |            |  
|-------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                                             |   |            |   |   |            |   |   |            |  
|                                                                                             |   | 2014       |   |   | 2013       |   |   | 2012       |  
|Cash flows from
      operating activities:                                                  |   |            |   |   |            |   |   |            |  
|Net loss                                                                                     | $ | (4,164,871 | ) | $ | (5,933,928 | ) | $ | (1,775,065 | )
|Adjustments to
      reconcile loss for the period to net cash used in operating activities: |   |            |   |   |            |   |   |            |  
|Amortization of intangible assets                                                            |   | -          |   |   | 19,352     |   |   | 19,352     |  
|Amortization of property and equipment                                                       |   | 7,357      |   |   | 4,989      |   |   | 4,414      |  
|Research and development                                                                     |   | 676,790    |   |   | 52,461     |   |   | 206,780    |  
|Accretion expense                                                                            |   | -          |   |   | 19,381     |   |   | 187,671    |  
|Stock based compensation                                                                     |   | 379,253    |   |   | 368,790    |   |   | 430,856    |  
|Forgiveness of debt                                                                          |   | -          |   |   | -          |   |   | (42,004    | )
|(Increase) in deposits and other receivables                                                 |   | (235,757   | ) |   | (188,679   | ) |   | (13,728    | )
|Increase (decrease) in accounts payable and
      accrued liabilities                        |   | 454,149    |   |   | (63,433    | ) |   | (393,896   | )
|Loss (gain) on revaluation of derivative warrant liability                                   |   | -          |   |   | 3,246,502  |   |   | (1,327,524 | )
|(Gain) on revaluation of embedded derivatives                                                |   | -          |   |   | (40,750    | ) |   | (176,899   | )
|Warrants issued on settlement of debt                                                        |   | -          |   |   | -          |   |   | 306,061    |  
|Net cash used in
      operating activities                                                  |   | (2,883,079 | ) |   | (2,515,315 | ) |   | (2,573,982 | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash flows from
      investing activities:                                                  |   |            |   |   |            |   |   |            |  
|Purchase of
      property and equipment                                                     |   | (14,842    | ) |   | (13,200    | ) |   | -          |  
|Patents                                                                                      |   | (176,381   | ) |   | (44,825    | ) |   | (26,650    | )
|Deferred
      development costs                                                             |   | (3,872,635 | ) |   | (655,093   | ) |   | (263,133   | )
|Recovery of deferred development costs                                                       |   | 662,290    |   |   | 233,290    |   |   | -          |  
|Net cash used in investing
      activities                                                  |   | (3,401,568 | ) |   | (479,828   | ) |   | (289,783   | )
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash flows from financing
      activities:                                                  |   |            |   |   |            |   |   |            |  
|Issue of common shares                                                                       |   | 6,801,619  |   |   | 3,697,441  |   |   | 2,524,155  |  
|Bridge
      loans advances                                                                  |   | -          |   |   | -          |   |   | 714,359    |  
|Bridge loan repayments                                                                       |   | -          |   |   | (126,044   | ) |   | (173,782   | )
|Advances to
      related parties                                                            |   | (480,304   | ) |   | -          |   |   | -          |  
|Repayments from related parties                                                              |   | 78,036     |   |   | -          |   |   | -          |  
|Net cash provided by financing
      activities                                              |   | 6,399,351  |   |   | 3,571,397  |   |   | 3,064,732  |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Increase in cash                                                                             |   | 114,704    |   |   | 576,254    |   |   | 200,967    |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash, beginning of year                                                                      |   | 821,283    |   |   | 245,029    |   |   | 44,062     |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Cash, end of year                                                                            | $ | 935,987    |   | $ | 821,283    |   | $ | 245,029    |  
|                                                                                             |   |            |   |   |            |   |   |            |  
|Supplemental cash flow information:                                                          |   |            |   |   |            |   |   |            |  
|Interest paid (classified in operating activities)                                           |   | 17,071     |   |   | 83,493     |   |   | 75,142     |  
|Income taxes paid                                                                            |   | -          |   |   | -          |   |   | -          |  

See accompanying notes.

4

---

MICROMEMTECHNOLOGIESINC.ConsolidatedStatementsofChangesinShareholders'Equity(ExpressedinUnitedStatesdollars)

|                                                       |  | Number of   |  |   | Share capital |   |   | Contributed surplus |   |   | **Equity component** |   |   | Deficit     |   |   | Total      |  
|------------------------------------------------------ |  | ----------- |  | - | ------------- | - | - | ------------------- | - | - | -------------------- | - | - | ----------- | - | - | ---------- | -
|                                                       |  | Shares      |  |   |               |   |   |                     |   |   | 0f Bridge loan       |   |   |             |   |   |            |  
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|Balance as at November 01, 2011                        |  | 116,149,718 |  | $ | 51,774,555    |   | $ | 25,986,276          |   | $ | -                    |   | $ | (79,170,059 | ) | $ | (1,409,228 | )
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|Private placement of units for cash                    |  | 6,344,899   |  |   | 1,040,899     |   |   | -                   |   |   | -                    |   |   | -           |   |   | 1,040,899  |  
|Financing costs                                        |  | -           |  |   | (16,457       | ) |   | -                   |   |   | -                    |   |   | -           |   |   | (16,457    | )
|Stock based compensation                               |  | -           |  |   | -             |   |   | 430,856             |   |   | -                    |   |   | -           |   |   | 430,856    |  
|Warrants issued on private placements                  |  | -           |  |   | (356,364      | ) |   | 66,997              |   |   | -                    |   |   | -           |   |   | (289,367   | )
|Warrants extended                                      |  | -           |  |   | -             |   |   | 358,983             |   |   | -                    |   |   | (1,322,879  | ) |   | (963,896   | )
|Warrants exercised                                     |  | 12,075,858  |  |   | 1,499,713     |   |   | -                   |   |   | -                    |   |   | -           |   |   | 1,499,713  |  
|Fair value of warrants exercised                       |  | -           |  |   | 558,993       |   |   | (208,935            | ) |   | -                    |   |   | -           |   |   | 350,058    |  
|Equity portion of bridge loan                          |  | -           |  |   | -             |   |   | -                   |   |   | 1,557                |   |   | -           |   |   | 1,557      |  
|Shares issued on conversion of bridge loan             |  | 1,860,080   |  |   | 226,900       |   |   | -                   |   |   | -                    |   |   | -           |   |   | 226,900    |  
|Net loss and comprehensive loss                        |  | -           |  |   | -             |   |   | -                   |   |   | -                    |   |   | (1,775,065  | ) |   | (1,775,065 | )
|Balance at October 31, 2012                            |  | 136,430,555 |  |   | 54,728,239    |   |   | 26,634,177          |   |   | 1,557                |   |   | (82,268,003 | ) |   | (904,030   | )
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|Private placement of units for cash (Note 13)          |  | 16,106,957  |  |   | 2,910,532     |   |   | -                   |   |   | -                    |   |   | -           |   |   | 2,910,532  |  
|Financing costs                                        |  | -           |  |   | (35,482       | ) |   | -                   |   |   | -                    |   |   | -           |   |   | (35,482    | )
|Stock based compensation (Note 12)                     |  | -           |  |   | -             |   |   | 368,790             |   |   | -                    |   |   | -           |   |   | 368,790    |  
|Warrants issued on private placements (Note
      13)  |  | -           |  |   | (863,863      | ) |   | 377,234             |   |   | -                    |   |   | -           |   |   | (486,629   | )
|Warrants extended (note 13)                            |  | -           |  |   | -             |   |   | 264,938             |   |   | -                    |   |   | (841,247    | ) |   | (576,309   | )
|Warrants exercised (Note 13)                           |  | 5,953,913   |  |   | 822,391       |   |   | -                   |   |   | -                    |   |   | -           |   |   | 822,391    |  
|Fair value of warrants exercised                       |  | -           |  |   | 193,796       |   |   | (47,675             | ) |   | -                    |   |   | -           |   |   | 146,121    |  
|Warrants modified (Note 13)                            |  | -           |  |   | -             |   |   | 5,224,863           |   |   | -                    |   |   | -           |   |   | 5,224,863  |  
|Net loss and comprehensive loss                        |  | -           |  |   | -             |   |   | -                   |   |   | -                    |   |   | (5,933,928  | ) |   | (5,933,928 | )
|Balance at October 31, 2013                            |  | 158,491,425 |  | $ | 57,755,613    |   | $ | 32,822,327          |   | $ | 1,557                |   | $ | (89,043,178 | ) | $ | 1,536,319  |  
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|                                                       |  |             |  |   |               |   |   |                     |   |   |                      |   |   |             |   |   |            |  
|Stock based compensation (Note 12)                     |  | -           |  |   | -             |   |   | 379,253             |   |   | -                    |   |   | -           |   |   | 379,253    |  
|Warrants extended (note 13)                            |  | -           |  |   | -             |   |   | 168,632             |   |   | -                    |   |   | (168,632    | ) |   | -          |  
|Warrants exercised (Note 13)                           |  | 27,410,717  |  |   | 6,801,619     |   |   | -                   |   |   | -                    |   |   | -           |   |   | 6,801,619  |  
|Fair value of warrants exercised                       |  | -           |  |   | 6,078,497     |   |   | (6,078,497          | ) |   | -                    |   |   | -           |   |   | -          |  
|Bridge loan converted (Note 14)                        |  | 2,517,501   |  |   | 302,100       |   |   | 1,557               |   |   | (1,557               | ) |   | -           |   |   | 302,100    |  
|Warrants issued on conversion of bridge loan (Note 14) |  | -           |  |   | (143,406      | ) |   | 143,406             |   |   | -                    |   |   | -           |   |   | -          |  
|Shares issued on settlement of accounts
      payable  |  | 17,081      |  |   | 8,353         |   |   | -                   |   |   | -                    |   |   | -           |   |   | 8,353      |  
|Net loss and comprehensive loss                        |  | -           |  |   | -             |   |   | -                   |   |   | -                    |   |   | (4,164,871  | ) |   | (4,164,871 | )
|Balance at October 31, 2014                            |  | 188,436,724 |  | $ | 70,802,776    |   | $ | 27,436,678          |   |   | -                    |   | $ | (93,376,681 | ) | $ | 4,862,773  |  

See accompanying notes.

5

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|1. | REPORTING ENTITY AND NATURE OF BUSINESS                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Micromem Technologies Inc. (Micromem or the Company)
      is incorporated under the laws of the Province of Ontario, Canada. The
      principal business address of the Company is 121 Richmond Street West,
      Suite 304, Toronto, Ontario, Canada.                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company develops, based upon proprietary technology,
      customized magnetic sensor applications for companies (referred to as
      development partners) operating internationally in various industry
      segments. The Company has not generated commercial revenues through
      October 31, 2014 and is devoting substantially all its efforts to securing
      commercial revenue opportunities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | These consolidated financial statements include the
      accounts of the Company and its wholly- owned subsidiaries:                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                              

These consolidated financial statements
were authorized for issuance and release by the Companys Board of Directors on
February 27, 2015.

6

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|2. | GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These consolidated financial statements have been
      prepared on the going concern basis in accordance with International
      Financial Reporting Standards (IFRS), which presumes that the Company
      will be able to realize its assets and discharge its liabilities in the
      normal course of business for the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | There are material uncertainties related to conditions
      and events that cast significant doubt about the Companys ability to
      continue as a going concern for a reasonable period of time in future.
      During the year ended October 31, 2014, the Company reported a net loss
      and comprehensive loss of $4,164,871 (2013 - $5,933,928; 2012 -
      $1,775,065) and negative cash flow from operations of $2,883,079
      (2013-$2,515,315; 2012 $2,573,982). The Companys working capital position
      as at October 31, 2014 is $1,034,921 (2013  $425,888).                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Companys success depends on the profitable
      commercialization of its proprietary magnetic sensor technology. There is
      no assurance that the Company will be successful in the profitable
      commercialization of its technology. Based upon its current operating and
      financial plans, management of the Company believes that it will have
      sufficient access to financial resources to fund the Companys planned
      operations through fiscal 2015; however, the ability of the Company to
      continue as a going concern is dependent upon its ability to secure
      additional financing and/or profitably commercialize its technology. The
      financial statements do not include any adjustments to reflect the
      possible future effects on the recoverability and classification of assets
      or the amounts and classifications of liabilities that may result from the
      possible inability of the Company to continue as a going
concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | If the going concern assumption were not appropriate
      for these consolidated financial statements then adjustments would be
      necessary to the carrying value of assets and liabilities, the reported
      expenses and the balance sheet classifications used; in such cases, these
      adjustments could be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

7

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

8

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | d) | Use of estimates and judgments: (Contd)
| | -- | ----------------------------------------
| |    |                                         
| |    | ii)                                     
| |    |                                         
| |    | iii)                                    
| |    |                                         
| |    | iv)                                     
| |    |                                         
| |    | v)                                      
| |    |                                         
| |    | vi)                                     
| |    |                                         
| |    | vii)                                    

9

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|4. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
|-- | --------------------------------------------
|   |                                             
|   | a)                                          
|   |                                             
|   |                                             
|   |                                             
|   |                                             
|   |                                             
|   | b)                                          
|   |                                             
|   |                                             
|   |                                             
|   |                                             

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

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

10

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

11

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

12

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

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

13

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

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

14

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| | ii) | Conversion Feature of Bridge Loans
  (Contd)
| | --- | ---------------------------------------------

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

| | g) | Loan Impairment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Impaired loans are accounted for at their face amount net
      of the allowance for loan impairment. When a loan is deemed to be
      impaired, its carrying amount is reduced to its estimated realizable
      amount which is measured by discounting the expected future cash flows at
      the effective interest rate inherent in the loan. The amount initially
      recognized as an impairment loan, together with any subsequent change, is
      charged to the allowance as an adjustment. A write-off of the loan will
      occur when the loan is believed to have no reasonable expectation of
      collectability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | h) | Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Costs for the general development of the Companys sensor
      technology are expensed unless they meet the criteria for deferral.
      Expenditures are capitalized if the Company can demonstrate each of the
      following criteria: (i) the technical feasibility of completing the
      intangible asset so that it will be available for use or sale, (ii) its
      intention to complete the intangible asset and use or sell it, (iii) its
      ability to use or sell the intangible asset, (iv) how the intangible asset
      will generate probable future economic benefits, (v) the availability of
      adequate technical, financial and other resources to complete the
      development and to use or sell the intangible asset, and (vi) its ability
      to measure reliably the expenditure attributable to the intangible asset
      during its development; otherwise, they are expensed as incurred.
      Commencing in 2011, the Company determined that these costs met the
      criteria and, accordingly, these costs have been capitalized and are
      tested in each reporting period for impairment. Amortization is provided
      on a 7 year straight-line basis. Commencing in 2014 amortization expense
      of intangible assets is capitalized as deferred development costs as these
      charges are directly related to development.

15

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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


| | j) | Impairment of Long-lived Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Long-lived assets consist of property and equipment,
      patents, intangible assets, and deferred development costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The carrying amounts of property and equipment, patents,
      intangible assets and deferred development costs, are reviewed for
      impairment when events or changes in circumstances indicate that the
      carrying amounts may not be recoverable When the carrying amount exceeds
      the estimated recoverable amount, the assets are written down to their
      recoverable amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The recoverable amount of long-lived assets is the
      greater of fair value less costs of disposal and value in use. In
      assessing value in use, estimated future cash flows are discounted to
      their present value using a pre-tax discount rate that reflects current
      market assessments of the time value of money and the risks specific to
      the asset. Impairment losses are recognized in the consolidated statements
      of loss and comprehensive loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | An assessment is made at each reporting date as to
      whether there is any indication that previously recognized impairment
      losses may no longer exist or may have decreased. If such indication
      exists, the recoverable amount is estimated. A previously recognized
      impairment loss is reversed only if there has been a change in the
      estimates used to determine the assets recoverable amount since the last
      impairment loss was recognized. If that is the case, the carrying amount
      of the asset is increased to its recoverable amount. That increased amount
      cannot exceed the carrying amount that would have been determined, net of
      amortization, had no impairment loss been recognized for the asset in
      prior years. Such reversal is recognized in the consolidated statements of
      loss and comprehensive loss. Following the recognition or reversal of an
      impairment loss, the amortization charge applicable to the asset is
      adjusted prospectively in order to systematically allocate the revised
      carrying amount, net of any residual value, over the estimated useful
      life.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Gains or losses on the disposal of property and
      equipment, patents and intangible assets represent the difference between
      the net proceeds and the carrying value at the date of
  sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

16

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

17

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

18

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | o) | Income Taxes: (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Deferred tax is recognized in respect of temporary
      differences between the carrying amounts of assets and liabilities for
      financial reporting purposes and the amounts used for taxation purposes.
      Deferred tax is not recognized for the following temporary differences:
      the initial recognition of assets or liabilities in a transaction that is
      not a business combination and that affects neither accounting nor taxable
      income or loss and differences relating to investments in subsidiaries and
      jointly controlled entities to the extent that it is probable that they
      will not reverse in the foreseeable future. In addition, deferred tax is
      not recognized for taxable temporary differences arising on the initial
      recognition of goodwill.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Deferred tax is measured at the tax rates that are
      expected to be applied to temporary differences when they reverse, based
      on the rates that have been enacted or substantively enacted by the
      reporting date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Deferred tax assets and liabilities are offset if there
      is a legally enforceable right to offset current tax liabilities and
      assets and they relate to income taxes levied by the same tax authority on
      the same taxable entity, or on different tax entities, but they intend to
      settle current tax liabilities and assets on a net basis or their tax
      assets and liabilities will be realized simultaneously.                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | A deferred tax asset is recognized for unused tax losses,
      tax credits and deductible temporary differences, to the extent that it is
      probable that future taxable profits will be available against which they
      can be utilized. Deferred tax assets are reviewed at each reporting date
      and are reduced to the extent that it is no longer probable that the
      related tax benefit will be realized.                                                                                                                                                                                                                                                                                                                                                                                        

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

19

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | q) | Changes in Accounting Standards:                                                                                                                                                                      
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                       
| |    | On November 1, 2013, the Company adopted the following
      new standards, amendments to standards and interpretations which are
      effective for periods beginning on or after January 1,
  2013:


    IFRS 10  Consolidated Financial
      Statements
    IFRS 11  Joint Arrangements
    IFRS 12  Disclosures of
      Interests in Other Entities
    IFRS 13  Fair Value Measurement
    IAS 27  Separate financial
      statements
    IAS 28  Investment in Associates
      and Joint Ventures


The adoption of these accounting
standards had no impact on the consolidated financial statements previously
filed by the Company. As a result no reconciliations are provided for the
adoption of these new standards.

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

20

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

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

21

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

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

22

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|7. | CAPITAL RISK MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Companys objective when managing capital is to
      maintain its ability to continue as a going concern in order to provide
      returns for shareholders and benefits for other stakeholders. The Company
      includes equity, comprised of issued share capital, equity component of
      bridge loans, contributed surplus and deficit, in the definition of
      capital. The Companys primary objective with respect to its capital
      management is to ensure that it has sufficient cash resources to further
      develop and market its technologies and to maintain its ongoing
      operations. To secure the additional capital necessary to pursue these
      plans, the Company may attempt to raise additional funds through the
      issuance of equity and warrants or by securing strategic partners. The
      Company is not subject to externally imposed capital requirements and
      there has been no change with respect to the overall capital risk
      management strategy during the year ended October 31, 2014.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|8. | DEPOSITS AND OTHER RECEIVABLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The balance reported as Deposits and Other Receivables
      consists of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                                         |  | 2014    |  |  | 2013    |  | 
| | ------------------------------------------------------- |  | ------- |  |  | ------- |  | 
| |                                                         |  |         |  |  |         |  | 
| | Amounts receivable (a)                                  |  | 450,000 |  |  | 187,290 |  | 
| | Advances to Officers, Directors and Employees
      (b) |  | 386,031 |  |  | -       |  | 
| | Prepaid Insurance and other                             |  | 36,735  |  |  | 47,451  |  | 
| | Promissory note receivable (c)                          |  | -       |  |  | -       |  | 
| |                                                         |  | 872,766 |  |  | 234,741 |  | 

| | (a) | Amounts receivable relate to milestones met at October
      31, 2014 per development contracts. These amounts are recorded as
      recoveries of deferred development costs.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                               
| | (b) | At October 31, 2014 Advances to Officers, Directors and
      Employees consisted of:                                                                                         
| |     |                                                                                                                                                                               
| |     | (i)                                                                                                                                                                           
| |     |                                                                                                                                                                               
| |     | (ii)                                                                                                                                                                          

The advances in (i) and (ii) above are
non interest bearing, unsecured and due on demand.

23

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|8. | DEPOSITS AND OTHER RECEIVABLES
  (Contd)
|-- | -----------------------------------------

| | (b) | At October 31, 2014 Advances to Officers, Directors and
      Employees consisted of: (Contd)
| | --- | ----------------------------------------------------------------------------------------------

| | (iii) | An advance of $244,074 to the President of MAST (Refer to
      Note 18 for the terms of this advance and to Note 23 for settlement).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------

| | (c) | In April 2009, the Company advanced $200,000 to a private
      company incorporated in New Jersey, which, at that time, was also a
      strategic development partner of the Company. The Company and the private
      Company executed a promissory note with respect to the $200,000 advance
      stipulating the following terms and
conditions:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

At October 31, 2014 the gross balance
outstanding was $145,815 including outstanding principal plus accrued interest
and this amount has been fully reserved. The Company served notice to the
private company that it was demanding payments under the terms of the promissory
note and the security agreement and has received judgment in its favor during
the year ended October 31, 2012. The Company continues to pursue collection of
this fully reserved note.

| |                                                |  | Gross   |   |  | Net     |   | 
| | ---------------------------------------------- |  | ------- | - |  | ------- | - | 
| | Balance outstanding at
      November 01, 2011 |  | 111,553 |   |  | -       |   | 
| | Interest accrued                               |  | 20,300  |   |  | 20,300  |   | 
| | Reserved                                       |  | -       |   |  | (20,300 | ) | 
| | Repayment                                      |  | (30,000 | ) |  | -       |   | 
| | Balance outstanding at
      October 31, 2012  |  | 101,853 |   |  | -       |   | 
| | Interest accrued                               |  | 20,105  |   |  | 20,105  |   | 
| | Reserved                                       |  | -       |   |  | (20,105 | ) | 
| | Repayment                                      |  | -       |   |  | -       |   | 
| | Balance outstanding at
      October 31, 2013  |  | 121,958 |   |  | -       |   | 
| | Interest accrued                               |  | 23,857  |   |  | 23,857  |   | 
| | Reserved                                       |  | -       |   |  | (23,857 | ) | 
| | Repayment                                      |  | -       |   |  | -       |   | 
| | Balance outstanding at October 31, 2014        |  | 145,815 |   |  | -       |   | 

24

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| |                                          |   | Computers |   |   | Furniture and |  |   | Total   |  
| | ---------------------------------------- | - | --------- | - | - | ------------- |  | - | ------- | -
| |                                          |   |           |   |   | Equipment     |  |   |         |  
| | Cost                                     |   |           |   |   |               |  |   |         |  
| |                                          |   |           |   |   |               |  |   |         |  
| | At November 1, 2011                      | $ | 40,734    |   | $ | 25,989        |  | $ | 66,723  |  
| | Additions                                |   | -         |   |   | -             |  |   | -       |  
| | Year ended October 31, 2012              | $ | 40,734    |   | $ | 25,989        |  | $ | 66,723  |  
| |                                          |   |           |   |   |               |  |   |         |  
| | At November 1, 2012                      | $ | 40,734    |   |   | 25,989        |  | $ | 66,723  |  
| | Additions                                |   | 14,839    |   |   | -             |  | $ | 14,839  |  
| | Disposals                                |   | (6,360    | ) |   | -             |  | $ | (6,360  | )
| | Year ended October 31, 2013              | $ | 49,213    |   | $ | 25,989        |  | $ | 75,202  |  
| |                                          |   |           |   |   |               |  |   |         |  
| | At November 1, 2013                      | $ | 49,213    |   |   | 25,989        |  | $ | 75,202  |  
| | Additions                                |   | 16,508    |   |   | -             |  | $ | 16,508  |  
| | Disposals                                |   | (13,436   | ) |   | -             |  | $ | (13,436 | )
| | Year ended October 31, 2014              | $ | 52,285    |   | $ | 25,989        |  | $ | 78,274  |  
| |                                          |   |           |   |   |               |  |   |         |  
| |                                          |   |           |   |   |               |  |   |         |  
| | Accumulated
      amortization           |   | Computers |   |   | Furniture and |  |   | Total   |  
| |                                          |   |           |   |   | Equipment     |  |   |         |  
| | At November 1, 2011                      | $ | 30,533    |   | $ | 25,989        |  | $ | 56,522  |  
| | Amortization for the year                |   | 4,414     |   |   | -             |  |   | 4,414   |  
| | Year ended October 31, 2012              | $ | 34,947    |   | $ | 25,989        |  | $ | 60,936  |  
| |                                          |   |           |   |   |               |  |   |         |  
| | At November 1, 2011                      | $ | 34,947    |   |   | 25,989        |  | $ | 60,936  |  
| | Amortization for the year                |   | 4,989     |   |   | -             |  |   | 4,989   |  
| | Adjustment for disposals                 |   | (4,721    | ) |   | -             |  |   | (4,721  | )
| | Year ended October 31, 2013              | $ | 35,215    |   | $ | 25,989        |  | $ | 61,204  |  
| |                                          |   |           |   |   |               |  |   |         |  
| | At November 1, 2013                      | $ | 35,215    |   |   | 25,989        |  | $ | 61,204  |  
| | Amortization for the year                |   | 7,357     |   |   | -             |  |   | 7,357   |  
| | Adjustment for disposals                 |   | (11,770   | ) |   | -             |  |   | (11,770 | )
| | Year ended October 31, 2014              | $ | 30,802    |   | $ | 25,989        |  | $ | 56,791  |  
| |                                          |   |           |   |   |               |  |   |         |  
| | Net book value at November
      1, 2012 | $ | 5,787     |   |   | -             |  | $ | 5,787   |  
| | Net book value at October
      31, 2013 | $ | 13,998    |   |   | -             |  | $ | 13,998  |  
| | Net book value at October 31, 2014       | $ | 21,483    |   |   | -             |  | $ | 21,483  |  

25

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| |                                        |   | 2014      |   |   | 2013     |   | 
| | -------------------------------------- | - | --------- | - | - | -------- | - | 
| |                                        |   |           |   |   |          |   | 
| | Opening balance                        | $ | 928,077   |   | $ | 718,163  |   | 
| | Additional project costs incurred      |   | 3,936,459 |   |   | 677,445  |   | 
| | Recovery of deferred development costs |   | (662,290  | ) |   | (233,290 | ) | 
| | Writedown of project costs             |   | (676,790  | ) |   | (234,241 | ) | 
| | Closing balance                        | $ | 3,525,456 |   | $ | 928,077  |   | 

|    | Additions to deferred development costs includes patent
      amortization of $44,472 (2013 - $22,354; 2012 - $15,204), and also
      includes intangible asset amortization of $19,352 (2013 and 2012 -
      $nil).                                                                                                                                                                                                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | To date, the Company has recovered from its development
      partners a portion of the costs it has incurred as deferred development
      costs coincident with meeting milestones as stipulated in development
      contracts.                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In 2014, the Company provided a reserve against
      cumulative development costs incurred on one development project in that
      it completed the staged development phases for that contract and there was
      no formal commitment as of October 31, 2014 from the development partner
      to move forward with this project. In total, the Company recovered
      $300,000 from the development partner on this project, $125,000 of which
      was received in 2014; the net writedown in 2014 was $645,528 on this
      project, to reduce the carrying value to a nominal amount.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In 2013, the Company provided a reserve against deferred
      development costs previously incurred with respect to three development
      projects, reducing the carrying value in each case to a nominal amount. In
      each case, the Company had decided not to pursue these development
      projects.                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|11. | INTANGIBLE ASSETS AND PATENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Intangible assets comprise the costs which the Company
      has capitalized relating to the technical expertise and know-how that the
      Company has developed with respect to the commercialization efforts
      relating to its sensor technology. In 2011, the Company determined that it
      had sufficiently advanced its expertise and product knowledge relating to
      the general commercialization efforts for its sensor technology in
      multiple industry vertical applications.                                                                                         

26

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|11. | INTANGIBLE ASSETS AND PATENTS (Contd)                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                             
|    | It anticipates that it will realize commercial economic
      benefits from the exploitation of these intangible assets in the
      future.

Intangible Assets

Cost

| | At November 01, 2011               | $ | 135,465 |  | 
| | ---------------------------------- | - | ------- |  | 
| | Additions                          |   | -       |  | 
| | Year ended October 31, 2012        | $ | 135,465 |  | 
| |                                    |   |         |  | 
| | At November 01, 2012               | $ | 135,465 |  | 
| | Additions                          |   | -       |  | 
| | Year ended October 31, 2013        | $ | 135,465 |  | 
| |                                    |   |         |  | 
| | At November 01, 2013               | $ | 135,465 |  | 
| | Additions                          |   | -       |  | 
| | Year ended October 31, 2014        | $ | 135,465 |  | 
| |                                    |   |         |  | 
| | Accumulated amortization           |   |         |  | 
| |                                    |   |         |  | 
| | At November 01, 2011               | $ | -       |  | 
| | Amortization for
      the year    |   | 19,352  |  | 
| | Year ended October 31, 2012        | $ | 19,352  |  | 
| |                                    |   |         |  | 
| | At November 01, 2012               | $ | 19,352  |  | 
| | Amortization for
      the year    |   | 19,352  |  | 
| | Year ended October 31, 2013        | $ | 38,704  |  | 
| |                                    |   |         |  | 
| | At November 01, 2013               | $ | 38,704  |  | 
| | Amortization for
      the year    |   | 19,352  |  | 
| | Year ended October 31, 2014        | $ | 58,056  |  | 
| |                                    |   |         |  | 
| | Net book value at October 31, 2012 | $ | 116,113 |  | 
| | Net book value at October 31, 2013 | $ | 96,761  |  | 
| | Net book value at October 31, 2014 | $ | 77,409  |  | 

27

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|11. | INTANGIBLE ASSETS AND PATENTS (contd)                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                             
|    | Amortization of intangible assets for the year ended
      October 31, 2014 was capitalized to deferred development
  costs.

Patents

Cost

| | At November 1, 2011                | $ | 62,697  |  | 
| | ---------------------------------- | - | ------- |  | 
| | Additions                          |   | 26,650  |  | 
| | Year ended October 31, 2012        | $ | 89,347  |  | 
| |                                    |   |         |  | 
| | At November 1, 2012                | $ | 89,347  |  | 
| | Additions                          |   | 44,825  |  | 
| | Year ended October 31, 2014        | $ | 134,172 |  | 
| |                                    |   |         |  | 
| | At November 1, 2013                | $ | 134,172 |  | 
| | Additions                          |   | 176,381 |  | 
| | Year ended October 31, 2014        | $ | 310,553 |  | 
| |                                    |   |         |  | 
| | Amortization                       |   |         |  | 
| |                                    |   |         |  | 
| | At November 1, 2011                | $ | 25,019  |  | 
| | Amortization for
      the year    |   | 15,204  |  | 
| | Year ended October 31, 2012        | $ | 40,223  |  | 
| |                                    |   |         |  | 
| | At November 1, 2012                | $ | 40,223  |  | 
| | Amortization for
      the year    |   | 22,354  |  | 
| | Year ended October 31, 2013        | $ | 62,577  |  | 
| |                                    |   |         |  | 
| | At November 1, 2013                | $ | 62,577  |  | 
| | Amortization for
      the year    |   | 44,472  |  | 
| | Year ended October 31, 2014        | $ | 107,049 |  | 
| |                                    |   |         |  | 
| | Net book value at October 31, 2012 | $ | 49,124  |  | 
| | Net book value at October 31, 2013 | $ | 71,595  |  | 
| | Net book value at October 31, 2014 | $ | 203,504 |  | 

Amortization of patents was capitalized
to deferred development costs for the above years.

28

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| |                                                              |  | Number of   |  |   | Amount     |  
| | ------------------------------------------------------------ |  | ----------- |  | - | ---------- | -
| |                                                              |  | Shares      |  |   | $          |  
| |                                                              |  |             |  |   |            |  
| | Balance at November 1,
      2012                            |  | 136,430,555 |  | $ | 54,728,239 |  
| |                                                              |  |             |  |   |            |  
| | Private placement of units
      for cash (Note 13)          |  | 16,106,957  |  |   | 2,910,531  |  
| | Warrants exercised (Note 13)                                 |  | 5,953,913   |  |   | 822,392    |  
| | Warrants issued on private
      placements (Note 13)        |  | -           |  |   | (863,863   | )
| | Fair value of warrants exercised                             |  | -           |  |   | 193,796    |  
| | Financing costs                                              |  | -           |  |   | (35,482    | )
| | Balance at October 31, 2013                                  |  | 158,491,425 |  | $ | 57,755,613 |  
| |                                                              |  |             |  |   |            |  
| | Warrants exercised (Note 13)                                 |  | 27,410,717  |  |   | 6,801,619  |  
| | Fair value of warrants
      exercised                       |  | -           |  |   | 6,078,497  |  
| | Shares issued on conversion of bridge loans
      (Note 14)  |  | 2,517,501   |  |   | 302,100    |  
| | Warrants issued on conversion
      of bridge loan (Note 14) |  | -           |  |   | (143,406   | )
| | Shares issued on settlement of accounts payable              |  | 17,081      |  |   | 8,353      |  
| |                                                              |  |             |  |   |            |  
| | Balance at October 31, 2014                                  |  | 188,436,724 |  | $ | 70,802,776 |  

29

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| |                                      |  | Options |   |  | Weighted |   | 
| | ------------------------------------ |  | ------- | - |  | -------- | - | 
| |                                      |  | (000    | ) |  | average  |   | 
| |                                      |  |         |   |  | exercise |   | 
| |                                      |  |         |   |  | price    |   | 
| |                                      |  |         |   |  | $        |   | 
| |                                      |  |         |   |  |          |   | 
| | Outstanding, November 01,
      2012 |  | 9,915   |   |  | 0.24     |   | 
| | Granted                              |  | 2,170   |   |  | 0.30     |   | 
| | Expired                              |  | (315    | ) |  | (0.55    | ) | 
| | Forfeited                            |  | (295    | ) |  | (0.23    | ) | 
| | Outstanding, November 01,
      2013 |  | 11,475  |   |  | 0.24     |   | 
| | Granted                              |  | 630     |   |  | 0.76     |   | 
| | Outstanding, October 31, 2014        |  | 12,105  |   |  | 0.27     |   | 

30

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

WeightedaverageremaininglifeDate of
      issue
    #
      Issued
    Strike Price
    (in years)
    Expiry DateApril 5, 2011
    125,000
    0.35
    1.4
    April 5, 2016October 31, 2011
    7,275,000
    0.20
    2.0
    October 31, 2016April 10, 2012
    1,905,000
    0.35
    2.4
    April 10, 2017January 22, 2013
    1,090,000
    0.30 CDN
    3.2
    January 22, 2018September 16, 2013
    780,000
    0.27 CDN
    3.9
    September 16, 2018October 17, 2013
    300,000
    0.35
    4.0
    October 17, 2018February 10, 2014
    350,000
    0.85
    4.3
    February 10, 2019April 25, 2014
    280,000
    0.64
    4.5
    April
      25, 201912,105,000


All outstanding options at October 31,
2014 are exercisable. In 2014, the Company recorded a total expense of $379,253
(2013 - $368,790; 2012 - $430,856) with respect to the issuance of options
issued during the year, calculated in accordance with the Black Scholes
option-pricing model.

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

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

| |                                                  | 2014          | 2013          | 2012   
| | ------------------------------------------------ | ------------- | ------------- | -------
| | Share price                                      | $ 0.63 - 0.85 | $ 0.20 - 0.36 | $ 0.30 
| | Volatility factor (based on historical volality) | 112% - 113%   | 105% - 110%   | 99%    
| | Risk free interest rate                          | 1.60%         | 1.37% - 1.84% | 1.31%  
| | Expected life                                    | 5 years       | 5 years       | 5 years
| | Dividend yield                                   | 0%            | 0%            | 0%     
| | Forfeiture rate                                  | 0%            | 0%            | 0%     

31

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| | a) | Private Placements
| | -- | ------------------

| | i)   | In 2013 the Company completed a series of private
      placement financings with investors pursuant to prospectus and
      registration exemptions set forth in applicable securities law. The
      Company received gross proceeds $2,910,532 and issued a total of
      16,106,957 (10,200,743 CDN; 5,906,214 US) common shares. 16,106,957 common
      share purchase warrants with an average strike price of $0.22 CDN; $0.27
      USD were attached to the private placement completed during 2013. All
      warrants issued in 2013 have a 12 month term from issue date.                            
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ii)  | In 2013 the Company extended the expiry dates on a total
      of 11,829,029 (7,315,808 CDN; 4,513,221 US) common share purchase warrants
      which would have otherwise expired in 2013. These warrants were extended
      for a period of 12 months in each case. The Company changed the strike
      price of 3,673,032 CDN of these warrants from $0.205 CDN to $0.215 CDN and
      the strike price remained unchanged for the balance of these warrants. The
      strike price remained unchanged for all other warrants ranging from $0.20
      CDN to $0.80 CDN, $0.24 USD to $0.80 USD per warrant.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | iii) | In 2013 the Company calculated the relative fair value of
      the share purchase warrants issued in connection with private placements
      in accordance with the Black Scholes option-pricing model. The Company
      reported a total charge to share capital of $863,863 and an offsetting
      charge to contributed surplus of $377,234 for US dollar share purchase
      warrants issued and $486,629 to derivative warrants liability for CDN
      share purchase warrants issued.                                                                                                                  

32

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| |                                                        | 2013          | 
| | ------------------------------------------------------ | ------------- | 
| | Share price                                            | $0.17 - $0.58 | 
| | Volatility factor (based on historical
      volality) | 75 - 136%     | 
| | Risk free interest rate                                | 0.97 - 1.09%  | 
| | Dividend yield                                         | 0%            | 
| | Expected life                                          | 1 year        | 

| | iv) | The Company did not complete any private placements in
      2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | v)  | In 2014 the Company extended the expiry date on a total
      of 1,405,026 common share purchase warrants which would have otherwise
      expired in the period. These warrants were extended for a period of three
      to six months in each case. The strike price of 1,105,026 of these
      warrants was changed from $0.41 and $0.45 per warrant to $0.50 per
      warrant. The strike price remained unchanged for the balance of the
      warrants at $0.55 per warrant.                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company calculated the charge associated with the
      extension of warrants in accordance with the Black Scholes option-pricing
      model. The Company reported a total charge to deficit of $168,632 (2013 -
      $841,247; 2012 - $1,322,879) and an offsetting charge to contributed
      surplus of $168,632 (2013 - $264,938; 2012 - $358,983) for US dollar
      warrants extended and $nil (2013 - $576,309; 2012  $963,896) to
      derivative warrant liability for Canadian warrants extended.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The incremental fair value of these warrants extended was
      estimated using the Black Scholes option-pricing model with the following
      assumptions:                                                                                                                                                                                                                                                                                                                                                         

| |                                                        | 2014             | 2013          | 2012         
| | ------------------------------------------------------ | ---------------- | ------------- | -------------
| | Share price                                            | $0.50            | $0.19 - $0.53 | $0.12 - $0.30
| | Volatility factor (based on historical
      volality) | 124 - 157%       | 75 - 161%     | 109 - 144%   
| | Risk free interest rate                                | 1.01 - 1.02%     | 1.00 - 1.11%  | 0.91 - 1.14% 
| | Dividend yield                                         | 0%               | 0%            | 0%           
| | Expected life                                          | 0.25 - 0.53 year | 1 year        | 0.33-1.0 year

33

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| |                                                                               |   | October 31, |  |   | October 31, |   |   | October 31, |  
| | ----------------------------------------------------------------------------- | - | ----------- |  | - | ----------- | - | - | ----------- | -
| |                                                                               |   | 2014        |  |   | 2013        |   |   | 2012        |  
| |                                                                               |   |             |  |   |             |   |   |             |  
| | Balance, beginning of year                                                    | $ | -           |  | $ | 1,061,544   |   | $ | 1,178,691   |  
| | Fair value assigned in warrants in units
      issuances                      |   | -           |  |   | 486,629     |   |   | 289,367     |  
| | Fair value assigned in
      warrants extended                                |   | -           |  |   | 576,309     |   |   | 963,896     |  
| | Fair value assigned to warrants issued on
      settlements of debt (Note 14) |   | -           |  |   | -           |   |   | 306,061     |  
| | Fair value transferred to
      share capital for warrants exercised          |   | -           |  |   | (146,121    | ) |   | (348,947    | )
| | CDN warrants converted to USD                                                 |   | -           |  |   | (5,224,863  | ) |   | -           |  
| | Loss (Gain) on revaluation of warrants                                        |   | -           |  |   | 3,246,502   |   |   | (1,327,524  | )
| |                                                                               | $ | -           |  | $ | -           |   | $ | 1,061,544   |  

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

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

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

34

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| |                                         |  |             |   |   | Weighted         |   |  |           | 
| | --------------------------------------- |  | ----------- | - | - | ---------------- | - |  | --------- | 
| |                                         |  |             |   |   | average exercise |   |  | Proceeds  | 
| |                                         |  | Warrants    |   |   | price            |   |  | Realized  | 
| |                                         |  |             |   |   |                  |   |  |           | 
| | Balance outstanding at October 31,2012  |  | 19,692,968  |   | $ | 0.27             |   |  |           | 
| | Exercised                               |  | (5,953,913  | ) |   | ($0.14           | ) |  | 822,391   | 
| | Expired                                 |  | (85,000     | ) |   | ($0.15           | ) |  |           | 
| | Granted                                 |  | 16,106,957  |   | $ | 0.24             |   |  |           | 
| | Balance outstanding at October 31, 2013 |  | 29,761,012  |   | $ | 0.27             |   |  | -         | 
| | Exercised                               |  | (27,410,717 | ) |   | (0.25            | ) |  | 6,801,619 | 
| | Expired                                 |  | (382,333    | ) |   | (0.48            | ) |  | -         | 
| | Granted                                 |  | 2,517,501   |   |   | 0.12             |   |  | -         | 
| | Balance at October 31, 2014             |  | 4,485,463   |   |   | 0.37             |   |  |           | 

The weighted average share price on
the date of exercise was $0.71 (2013 - $0.22) .

|14. | BRIDGE LOANS
|--- | ------------

| | a) | On December 2, 2011, the Company secured $285,000 CDN of
      bridge (Loan 1) from a group of arms length investors with maturities
      of six months. The loans were unsecured, bearing interest at a rate of 2%
      per month (effective interest rate  26%) and convertible at the holders
      option at $0.12 USD per unit. Each unit upon conversion included one
      common share and one common share purchase warrant with a one year expiry
      and an exercise price of $0.12 USD. The term of the loans were extended on
      a month to month basis in July 2012. In January 2014 these loans was
      converted to equity by the issuance of 2,517,501 common shares and
      2,517,501 common share purchase warrants. The common share purchase
      warrants have a one year term and an exercise price of $0.12 USD per
      warrant (Note 23).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | b) | On September 4, 2012, the Company secured $125,000 CDN of
      bridge loans (Loan 2) from a group of arms length investors with
      maturities of six months. The loans were unsecured, bearing interest at a
      rate of 2% per month (effective interest rate  32%) and convertible at
      the holders option at $0.18 CDN per unit. Each unit, upon conversion,
      included one common share and one common share purchase warrant with a one
      year expiry and an exercise price of $0.22 CDN. This loan was repaid in
      the quarter ended April 30, 2013.                                                                                                                                                                                                                                                                                                

35

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|14. | BRIDGE LOANS
|--- | ------------

| | b. | (Contd)                                                                                       
| | -- | -----------------------------------------------------------------------------------------------
| |    |                                                                                                
| |    | A breakdown of the outstanding bridge loans at October
      31, 2013 is summarized as follows:

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

In fiscal 2013 and 2014, no bridge
loans were issued.

As Loan 2 was repaid during 2013 the
embedded derivative recognized in fiscal 2012 of $44,850 was revalued to be $nil
at the time of repayment and a gain on revaluation of $40,750 (2012  $176,899)
was recognized in the statements of consolidated loss and comprehensive loss in
2013.

A breakdown of the outstanding bridge
loan at October 31, 2014 is summarized as follows:

| |                                                          |  | Loan 1   |   | 
| | -------------------------------------------------------- |  | -------- | - | 
| |                                                          |  |          |   | 
| |                                                          |  |          |   | 
| | Principal                                                |  | 284,514  |   | 
| | Interest Accrued                                         |  | 160,358  |   | 
| | Interest Paid                                            |  | (142,772 | ) | 
| | Accretion Expense                                        |  | 1,557    |   | 
| | Equity Portion of Bridge Loan - Conversion
      Feature |  | (1,557   | ) | 
| | Conversion to equity in 2014                             |  | (302,100 | ) | 
| | Carrying value at October 31, 2014                       |  | -        |   | 

36

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | b. | (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | During 2014, Loan 1 was settled by the holder who
      converted the outstanding balance due; the Company issued 2,517,501 common
      shares with an assigned value of $302,100. As a result of the conversion,
      the holder received 2,517,501 common shares purchase warrants exercisable
      at $0.12 per warrant for a period of 12 months after the conversion date
      (January 23, 2015). The relative fair value of the common share purchase
      warrants of $143,406 was calculated using the Black Scholes option pricing
      model with the following assumptions:

| |                                                  |   | 2014   |  | 
| | ------------------------------------------------ | - | ------ |  | 
| | Share price                                      | $ | 1.18   |  | 
| | Volatility factor (based on historical volality) |   | 120%   |  | 
| | Risk free interest rate                          |   | 1.04%  |  | 
| | Dividend yield                                   |   | 0%     |  | 
| | Expected life                                    |   | 1 Year |  | 

In the 2012 fiscal year, bridge loans were settled by the
holder converting their amount outstanding with the company issuing 1,860,080
common shares with an assigned value of $226,900. As a result of the conversion
the holder received 1,860,080 common share purchase warrants exercisable at a
price of $0.12 - $0.20 CDN for a period of 1 year. These common share purchase
warrants were valued at $306,061 using the Black Scholes option-pricing model
with the following assumptions:

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

37

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | Balance outstanding at November 01, 2012                                          | $ | 26,634,177 |  
| | --------------------------------------------------------------------------------- | - | ---------- | -
| |                                                                                   |   |            |  
| | Stock based compensation expense relating
      to stock options issued (Note 12) |   | 368,790    |  
| | Common share purchase warrants                                                    |   |            |  
| | (a) Issued (Note
      13)                                                        |   | 377,234    |  
| | (b) Extended (Note 13)                                                            |   | 264,938    |  
| | Warrants modified (Note 13)                                                       |   | 5,224,863  |  
| | Fair value of
      warrants exercised                                            |   | (47,675    | )
| | Balance at October 31, 2013                                                       | $ | 32,822,327 |  
| |                                                                                   |   |            |  
| | Stock based compensation expense relating
      to stock options issued (Note 12) |   | 379,253    |  
| | Common share purchase warrants                                                    |   |            |  
| | (a) Issued (Note
      13)                                                        |   | -          |  
| | (b) Extended (Note 13)                                                            |   | 168,632    |  
| | Transferred from equity component of bridge
      loan due to conversion          |   | 1,557      |  
| | Warrants issued on conversion of bridge loan (Note 14)                            |   | 143,406    |  
| | Fair value of warrants exercised                                                  |   | (6,078,497 | )
| | Balance at
      October 31, 2014                                                 | $ | 27,436,678 |  

38

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|16. | INCOME TAXES
|--- | ------------

| | (a) | The Company has non-capital losses of approximately $25.6
      million available to reduce future taxable income, the benefit of which
      has not been recognized in these consolidated financial statements. As of
      October 31, 2014 the tax losses expire as follows:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |     | In addition the Company has available capital loss carry
      forwards of approximately $1.5 million to reduce future taxable capital
      gains, the benefit of which has not been recognized in these consolidated
      financial statements. These losses carry forward indefinitely.                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                               
| | (b) | Deferred income taxes reflect the net tax effect of
      temporary differences between carrying amount of assets and liabilities
      for financial reporting purposes and the amounts used for income tax
      purposes. Significant components of the Companys deferred tax assets and
      liabilities are as follows.

| |                                                                    |   | October 31, 2014 |   |   | October 31, 2013 |   |   | October 31, 2012 |  
| | ------------------------------------------------------------------ | - | ---------------- | - | - | ---------------- | - | - | ---------------- | -
| | Non-capital losses                                                 | $ | 7,792,685        |   | $ | 6,334,982        |   | $ | 5,877,761        |  
| | Capital losses                                                     |   | 196,505          |   |   | 212,386          |   |   | 221,578          |  
| | Property, equipment,
      intangibles, patents and deferred costs |   | 661,960          |   |   | 1,926,689        |   |   | 1,988,956        |  
| | Share issue costs                                                  |   | 9,095            |   |   | 15,641           |   |   | 21,497           |  
| |                                                                    |   | 8,660,245        |   |   | 8,489,698        |   |   | 8,109,792        |  
| | Deferred tax assets not recognized                                 |   | (8,660,245       | ) |   | (8,489,698       | ) |   | (8,109,792       | )
| |                                                                    | $ | -                |   | $ | -                |   | $ | -                |  

39

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| |                                                                                        |   | October 31, 2014 |   |   | October 31, 2013 |   |   | October 31, 2012 |  
| | -------------------------------------------------------------------------------------- | - | ---------------- | - | - | ---------------- | - | - | ---------------- | -
| |                                                                                        |   |                  |   |   |                  |   |   |                  |  
| | Loss before income taxes                                                               | $ | (4,164,871       | ) | $ | (5,933,928       | ) | $ | (1,775,065       | )
| |                                                                                        |   |                  |   |   |                  |   |   |                  |  
| | Statutory rate                                                                         |   | 26.50%           |   |   | 26.50%           |   |   | 26.50%           |  
| |                                                                                        |   |                  |   |   |                  |   |   |                  |  
| | Expected income tax recovery                                                           |   | (1,103,691       | ) |   | (1,572,491       | ) |   | (470,392         | )
| |                                                                                        |   |                  |   |   |                  |   |   |                  |  
| | Effect on income taxes of
      unrecognized future income                             |   |                  |   |   |                  |   |   |                  |  
| | Tax assets relating to deductible temporary
      differences on:                      |   |                  |   |   |                  |   |   |                  |  
| | Non deductible expenses and
      other items                                          |   | 112,727          |   |   | 888,557          |   |   | (149,207         | )
| | Share issue costs and other                                                            |   | -                |   |   | (4,361           | ) |   | (4,361           | )
| | Effect of exchange rate on
      future tax assets carried forward from previous years |   | 572,542          |   |   | 324,880          |   |   | 3,071            |  
| | Expiry of non-capital losses                                                           |   | 259,122          |   |   |                  |   |   |                  |  
| | Effect of higher tax rates in
      foreign jurisdiction                               |   | (11,247          | ) |   |                  |   |   |                  |  
| | Change in deferred income tax rates and other                                          |   | -                |   |   | (16,491          | ) |   | (393,446         | )
| | Change in deferred tax rates
      not recognized                                      |   | 170,547          |   |   | 379,906          |   |   | 1,013,335        |  
| |                                                                                        |   |                  |   |   |                  |   |   |                  |  
| |                                                                                        | $ | -                |   | $ | -                |   | $ | -                |  

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

| |                                              |   | 2014    |   |   | 2013    |   |   | 2012    |  
| | -------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
| |                                              |   |         |   |   |         |   |   |         |  
| | General and administrative                   | $ | 69,122  |   | $ | 53,494  |   | $ | 66,651  |  
| | Rent and occupancy cost                      |   | 84,816  |   |   | 84,179  |   |   | 108,193 |  
| | Bad debt expense                             |   | 24,009  |   |   | 19,954  |   |   | 21,586  |  
| | Interest income                              |   | (30,129 | ) |   | (19,954 | ) |   | (20,300 | )
| | Interest expense                             |   | 28,640  |   |   | 78,677  |   |   | 106,442 |  
| | Accretion expense                            |   | -       |   |   | 19,381  |   |   | 187,671 |  
| | Office insurance                             |   | 61,578  |   |   | 61,211  |   |   | 65,394  |  
| | Telephone                                    |   | 22,537  |   |   | 17,272  |   |   | 17,380  |  
| | Investor relations, listing and filling fees |   | 64,880  |   |   | 64,283  |   |   | 141,600 |  
| |                                              | $ | 325,453 |   | $ | 378,497 |   | $ | 694,617 |  

40

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|17. | EXPENSES (Contd)                                                                     
|--- | --------------------------------------------------------------------------------------
|    |                                                                                       
|    | Professional, Other Fees and Salaries                                                 
|    |                                                                                       
|    | The components of professional, other fees and salaries
      expenses are as follows:

| |                       |   | 2014      |  |   | 2013      |  |   | 2012      | 
| | --------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| |                       |   |           |  |   |           |  |   |           | 
| | Professional fees     | $ | 420,902   |  | $ | 311,330   |  | $ | 183,021   | 
| | Consulting fees       |   | 1,535,520 |  |   | 818,106   |  |   | 917,420   | 
| | Salaries and benefits |   | 404,445   |  |   | 443,078   |  |   | 407,450   | 
| |                       | $ | 2,360,867 |  | $ | 1,572,515 |  | $ | 1,507,891 | 

Research and Development

The components of research and
development expenses are as follows:

2014
    
    
    2013
    
    
    2012Project expenses incurred (recovered)
    
    26,882
    
    
    (73,321
    )
    
    229,840Write-down of deferred development costs on specific projects
    
    676,789
    
    
    234,241
    
    
    -703,671
    
    
    160,920
    
    
    229,840


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

| | (a) | Chairman: The Chairman receives cash compensation on a
      month to month basis calculated at an annual rate of $150,000
  CDN.                                                                                                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                 
| |     | The Chairman was not granted any stock options in 2014.
      In 2013 the Chairman was awarded a total of 140,000 stock options at an
      average price of $0.29 CDN per share (2012 - 100,000 stock options at an
      average price of $0.35 per share).                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                 
| |     | The total compensation paid to the Chairman during the
      year ended October 31, 2014 was $137,172 of cash compensation and $nil of
      stock based compensation (2013 - $146,599 of cash compensation and $
      21,163 of stock based compensation; 2012 - $149,565 of cash compensation
      and $23,697 of stock based compensation).
| |     |                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company provided a short term non-interest bearing
      advance of $38,084 to the Chairman in 2014. This advance was repaid
      subsequent to October 31, 2014.                                                                                                                                                                          

41

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | (b) | Management and consulting fees:                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                              
| |     | Included in professional fees, other fees and salaries as
      reported are management fees and consulting fees paid or payable to
      individuals (or companies controlled by such individuals) who served as
      officers, directors and employees of the Company. The total compensation
      paid to such parties is summarized as:

| |                                                              |   | 2014      |   |   | 2013     |   |   | 2012      | 
| | ------------------------------------------------------------ | - | --------- | - | - | -------- | - | - | --------- | 
| | Cash compensation                                            | $ | 1,482,153 |   | $ | 805,574  |   | $ | 709,075   | 
| | Less portion capitalized to deferred
      development costs |   | (169,664  | ) |   | (202,820 | ) |   | -         | 
| |                                                              |   | 1,312,489 |   |   | 602,754  |   |   | 709,075   | 
| |                                                              |   |           |   |   |          |   |   |           | 
| | Stock based compensation                                     |   | 325,074   |   |   | 195,720  |   |   | 401,773   | 
| |                                                              |   |           |   |   |          |   |   |           | 
| |                                                              | $ | 1,637,563 |   | $ | 798,474  |   | $ | 1,110,848 | 

| |     | In 2014 these parties were awarded a total of 540,000
      options at an average price of $0.76 CDN per share (2013  1,292,500
      options at an average price of $0.29 per share; 2012  1,755,000 options
      at an average price of $0.35 per share)                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (c) | Related party deferred development cost:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | In 2014 the Company was invoiced $1,843,643 by a company
      whose major shareholder is a director of the Company and who also serves
      as its chief technology officer. This individual was elected as a director
      on February 19, 2014 and these related party transactions disclosed are
      transactions incurred from this date forward. These charges have been
      capitalized as deferred development costs. As at October 31, 2014,
      included in accounts payable and accrued liabilities is $208,425 owing to
      this company.

42

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | (d) | Advances:                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------
| |     |                                                                                                        
| |     | In 2014 the following advances were provided to officers,
      directors and employees of the Company.
| |     |                                                                                                        
| |     | (1)                                                                                                    
| |     |                                                                                                        
| |     | (2)                                                                                                    

| | a. | Non-interest bearing for the first twelve months and,
      thereafter, interest to be charged at a rate of 1% per month on the
      opening monthly balance.            
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                           
| | b. | Unsecured for the first 12 months and, thereafter, an
      assignment of a security interest to the full amount of the outstanding
      balance in favor of the Company.
| |    |                                                                                                                                                                           
| | c. | Open to full repayment at any time.                                                                                                                                       
| |    |                                                                                                                                                                           
| | d. | Eligible for up to full offset against certain
      performance based incentive compensation within the first twelve months
      (note 23).                             

| | (3) | A senior employee was advanced $80,916 during the year.
      This advance was non- interest bearing, unsecured, and due on demand. This
      advance was repaid subsequent to October 31,
2014.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19. | COMMITMENTS                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                               
|    | The Company secured new leased premises in June 2012. The
      lease term is for 5 years and stipulates base monthly rental expenses of
      $3,800 CDN. Lease commitments are as follows  commitments less than one
      year of $44,000 CDN; commitments in years 2-3 total $77,000 CDN.
|    |                                                                                                                                                                                                                                                                                               
|    | The Company has certain outstanding commitments to
      3rdparty subcontractors with respect to deferred development
      costs. These commitments are as follows  commitments less than one year
      of $1,799,000; commitments between years 2-5 total
  $934,000.                     

43

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

|20. | CONTINGENCIES
|--- | -------------

| | (a) | Legal matters:                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Subsequent to October 31, 2014, the Company commenced a
      legal action against a former 3rdparty consulting firm who
      previously provided services to the Company (note 23).                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | The Company has agreed to indemnify its directors and
      officers and certain of its employees in accordance with the Companys
      by-laws. The Company maintains insurance policies that may provide
      coverage against certain claims.                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | Disputes with vendors:                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | The Company has disputed amounts charged by certain third
      party vendors during previous fiscal years, one of which is the firm noted
      in (a) above, against which the Company has taken action (Note 23). The
      amount charged by the vendors exceeds the amount recorded as a provision
      by $181,780. No claims have been made by the vendors to date related to
      the disputed amounts.

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

| | (a) | Financial Risk Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The Company is exposed to a variety of financial risks by
      virtue of its activities: market risk (including foreign exchange risk and
      interest rate risk) and liquidity risk. The overall risk management
      program focuses on the unpredictability of financial markets and seeks to
      minimize potential adverse effects on financial performance. Risk
      management is carried out under policies approved by the Board of
      Directors. Management is charged with the responsibility of establishing
      controls and procedures to ensure that financial risks are mitigated in
      accordance with the approved policies.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) | Market Risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | i. | Foreign Exchange Risk:                                                                                                                                                                                               
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                      
| |    | The Company currently incurs expenses in Canadian
      dollars. Management monitors the Canadian position of these monetary
      financial instruments on a periodic basis throughout the course of the
      year.

44

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

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

| | i. | Foreign Exchange Risk:                                                                                           
| | -- | -----------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                  
| |    | The consolidated financial statements include balances
      that are denominated in Canadian dollars as
follows:

2014
    
    
    2013Cash and cash equivalents
    $
    328,797
    
    $
    461,727Deposits and other receivables
    
    201,403
    
    
    49,477Accounts payable and accrued liabilities
    
    211,091
    
    
    210,827


| |     | A 10% strengthening of the US dollar against the Canadian
      dollar would serve to decrease the loss by $31,910 at October 31, 2014
      (2013  decrease the loss by $30,037). A 10% weakening of the US dollar
      against the Canadian dollar at October 31, 2014 would have had the equal
      but opposite effect.                                                                                                                                                                                                                       
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ii. | Interest Rate Risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Cash flow interest rate risk is the risk that the future
      cash flow of a financial instrument will fluctuate because of changes in
      market interest rates.                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Financial assets and financial liabilities with variable
      interest rates expose the Company to cash flow interest rate risk. The
      Companys cash and promissory note receivable earn interest at market
      rates. The Company manages its interest rate risk by maximizing the
      interest income earned on excess funds while maintaining the liquidity
      necessary to conduct operations on a day-to-day basis. Fluctuations in
      market rates of interest may have an impact on the Companys results of
      operations.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company is not exposed to interest price risk on its
      interest bearing bridge loans and related party advances as the interest
      rate is fixed.                                                                                                                                                                                                                                                                                                                                                                                         

45

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | (c) | Liquidity Risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Liquidity risk is the risk that the Company will not be
      able to meet its obligations as they fall due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Company manages its liquidity risk by forecasting
      cash flows from operations and anticipated investing and financing
      activities. Senior management is actively involved in the review and
      approval of planned expenditures.                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | All financial liabilities are due within 1 year from the
      balance sheet at October 31, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | As at October 31, 2014, the Company reports working
      capital of $1,034,921 and has certain financial commitments (Note 19), the
      majority of which are due within one year. It must continue to raise
      financing in order to meet its current obligations.                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | Credit Risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Credit risk is the risk of financial loss to the Company
      if a customer or counterparty to a financial instrument fails to meet its
      contractual obligations, and arises principally from the Companys cash
      and deposits and other receivables. The carrying amount of financial
      assets represents maximum credit exposure. The Company reduces its credit
      risk by maintaining its primary bank accounts at large financial
      institutions and assesses the credit quality of counterparties, taking
      into account their financial position, past experience and other
      factors.

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

| |               |   | October 31, |  |   | October 31, |  | 
| | ------------- | - | ----------- |  | - | ----------- |  | 
| |               |   | 2014        |  |   | 2013        |  | 
| |               |   |             |  |   |             |  | 
| | Canada        | $ | 632,516     |  | $ | 415,533     |  | 
| | United States |   | 3,195,336   |  |   | 694,898     |  | 
| |               | $ | 3,827,852   |  | $ | 1,110,431   |  | 

46

---

|MICROMEM TECHNOLOGIES INC.                         
|---------------------------------------------------
|                                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         
|(Expressed in United States dollars)               
|                                                   
|For the years ended October 31, 2014, 2013 and 2012
|                                                   

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

| | (a) | As of February 25, 2015 the Company has raised an
      additional $565,714 of financing through the exercise of a total of
      2,988,876 common share purchase warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b) | The Company collected a total of $1,392,978 from
      development partners with respect to its ongoing joint product development
      projects. Included in the amounts is the $450,000 recorded as amounts
      receivable as described in Note 8 (a).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (c) | The Company settled in full the $244,074 advance from the
      President of MAST as described in (Note 18 (d) (2)) through the award of
      additional performance based compensation to that officer in February
      2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (d) | The advances to the Chairman and a senior employee
      described in Note 8(b) (i) and (ii) were repaid to the Company in December
      2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (e) | On November 17, 2014, Micromem and MAST (Plaintiffs)
      commenced a lawsuit in the United States District Court for the Southern
      District of New York against Dreifus Associates Limited and Henry Dreifus
      (Defendants). Plaintiffs original complaint contained five causes of
      action by which they sought money damages, declaratory relief and specific
      performance relating to certain contracts. On February 24, 2015,
      Plaintiffs filed an amended complaint to add a claim for declaratory
      relief relating to a patent held by Plaintiffs. It is anticipated that
      Defendants will deny the substantive allegations in the amended complaint
      and/or seek to have the action transferred to Florida, where Defendants
      reside and/or maintain an office.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (f) | At the Annual General and Special Meeting of shareholders
      held on January 30, 2015, the Companys stock option plan was revised to
      increase the maximum number of options in the plan reserved for issuance
      from 15.6 million to 18.84 million options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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

47

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ITEM
19.           Exhibits

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

|Exhibit No. 1.1  | Articles of Incorporation of Micromem Technologies Inc.
      and amendments thereto in effect as of January 11, 2000, (Incorporated
      herein by reference to the Company's Form 20-F filed with the Commission
      on January 11, 2000).                                                                                                                                               
|---------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.2  | Articles of Incorporation of Amendment of Micromem
      Technologies Inc. dated as of October 17, 2001 amending the Articles of
      Incorporation of Micromem Technologies Inc. to increase the number of
      directors to a minimum of three and a maximum of ten (Incorporated herein
      by reference to the Company's Form 20-F filed with the Commission on March
      26, 2003).
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.3  | Articles of Incorporation of Amendment of Micromem
      Technologies Inc. dated as of June 24, 2002 amending the Articles of
      Incorporation of Micromem Technologies Inc. to increase the number of
      directors to a minimum of 3 and a maximum of 12 (Incorporated herein by
      reference to the Company's Form 20-F filed with the Commission on March
      26, 2003).        
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.5  | By-Laws of Micromem Technologies Inc. in effect as of
      January 11, 2002, (Incorporated herein by reference to the Company's Form
      20-F filed with the Commission on January 11, 2000).                                                                                                                                                                                              
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 1.6  | Amendment to the By-Laws of Micromem Technologies Inc.
      approved by shareholders on June 29, 2000, deleting the requirement from
      the By-Laws that the President shall be appointed from amongst the
      directors (Incorporated herein by reference to the Company's Form 20-F
      filed with the Commission on March 26, 2003).                                               
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.1  | Employment Agreement by and between Micromem
      Technologies, Inc. and Salvatore Fuda dated May 29, 2005. (Incorporated
      herein by reference to the Company's Form 20-F filed with the Commission
      on February 28, 2006).                                                                                                                                                        
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.2  | Employment Agreement by and between Micromem Technologies
      and Joseph Fuda dated May 28, 2008 (Incorporated by reference to the
    Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                                                                 
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.3  | Employment Agreement by and between Micromem Technologies
      and Dan Amadori dated May 28, 2008 (Incorporated by reference to the
    Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                                                                 
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 4.4  | Employment Agreement by and between Micromem Technologies
      and Steven Van Fleet dated May 28, 2008 (Incorporated by reference to the
    Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                                                            
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 8.1  | List of Subsidiaries (Incorporated by reference to the
      Companys Annual Report on Form 20-F filed with the Commission on March 1,
      2010)                                                                                                                                                                                                                                           
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 12.1 | Officer's Certification pursuant to Section 302 of the
  Sarbanes Oxley Act, 2002 (filed herewith).                                                                                                                                                                                                                                                                                           
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 12.2 | Officer's Certification pursuant to Section 302 of the
      Sarbanes Oxley Act, 2002 (filed herewith).                                                                                                                                                                                                                                                                                       
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 13.1 | Officer's Certification pursuant to Section 906 of the
      Sarbanes Oxley Act, 2002 (filed herewith).                                                                                                                                                                                                                                                                                       
|                 |                                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit No. 13.2 | Officer's Certification pursuant to Section 906 of the
      Sarbanes Oxley Act, 2002 (filed herewith).                                                                                                                                                                                                                                                                                       

44

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SIGNATURES

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

MICROMEM TECHNOLOGIES INC.

| |        |                        
| | ------ | -----------------------
| | By:    | /s/ Joseph Fuda        
| | Name:  | Joseph Fuda            
| | Title: | Chief Executive Officer
| |        |                        
| | By:    | /s/ Dan Amadori        
| | Name:  | Dan Amadori            
| | Title: | Chief Financial Officer

Dated: February 27, 2015

45

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