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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 ___________

FORM 20-F/A

[   ] 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, 2009
Or [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [  
] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 Date of event requiring this shell report

Commission File No. 0-26005 ___________

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

Ontario, Canada (Jurisdiction of incorporation or
organization)

777 Bay Street, Suite 1910, Toronto, Ontario M5G
2E4, Canada Tel: (416) 364-6513 Fax: (416) 360-4034
(Address of principal executive offices)

Joseph Fuda; 416-364-6513, JFuda@micromeminc.com, 777 Bay
St., Suite 1910 Toronto, On M5G 2E4 (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: 89,383,003 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 __

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
__


1

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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 by the International Accounting Standards Board ______ | Other
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 17X  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

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TABLE OF CONTENTS

Part IPageItem 1.
    Identity of Directors, Senior
      Management and Advisors
    4Item 2.
    Offer Statistics and Expected Timetable
    4Item 3.
    Key Information
    4Item 4.
    Information on the Company
    14Item 4A.
    Unresolved staff comments
    20Item 5.
    Operating and Financial Review and Prospects
    20Item 6.
    Directors, Senior Management
      and Employees
    29Item 7.
    Major Shareholders and Related Party
      Transactions
    34Item 8.
    Financial Information
    34Item 9.
    The Offer and Listing
    34Item 10.
    Additional Information
    35Item 11.
    Quantitative and Qualitative Disclosures about
      Market Risk
    42Item 12.
    Description of Securities Other
      Than Equity Securities
    42Part IIItem 13.
    Defaults, Dividend Arrearages
      and Delinquencies
    42Item 14.
    Material Modifications to the Rights of
      Security Holders and Use of Proceeds
    43Item 15.
    Controls and Procedures
    43Item 15T.
    Controls and Procedures
    44Item 16.
    Not Applicable
    45Item 16A
    Audit Committee Financial Expert
    45Item 16B
    Code of Ethics
    45Item 16C
    Principal Accountant Fees and Services
    45Item 16D
    Exemptions from the Listing
      Standards for Audit Committees
    46Item 16E
    Purchases of Equity by the Issuer and
      Affiliated Purchasers
    46Item 16F
    Changes in Registrants
      Certifying Accountant
    46Item 16G
    Corporate Governance
    46Part IIIItem 17.
    Financial Statements
    46Item 18
    Financial Statements
    46Item 19.
    Exhibits
    46Signatures
    
    48


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

The following table sets forth our selected consolidated
financial data in United States dollars as of and for each of the five fiscal
years ended October 31, 2009, 2008, 2007, 2006 and 2005. 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 17-Financial Statements and "Item 5 - Operating
and Financial Review and Prospects, included elsewhere in this Annual Report on
Form 20-F.

Selected balance sheet information

2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Working capital (deficiency)
    $
    (650,044
    )
    $
    (338,079
    )
    $
    (1,531,855
    )
    $
    (448,923
    )
    $
    (74,831
    )Capital Assets
    
    24,442
    
    
    26,321
    
    
    -
    
    
    -
    
    
    -Total Assets
    
    2,562,479
    
    
    630,467
    
    
    329,232
    
    
    465,440
    
    
    728,375Capital Stock
    
    48,494,180
    
    
    44,380,134
    
    
    37,166,397
    
    
    36,693,353
    
    
    34,305,087Shareholders' equity (deficiency)
    
    1,522,839
    
    
    (311,758
    )
    
    (1,531,855
    )
    
    (448,923
    )
    
    (74,831
    )


4

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Selected statement of operations and deficit information

2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Interest and other income
    $
    88,047
    
    $
    11,762
    
    $
    2,586
    
    $
    9,930
    
    $
    8,703Research and development expenses
    
    13,880
    
    
    1,063,508
    
    
    682,331
    
    
    368,969
    
    
    362,141General and administrative and other
      expenses
    
    2,433,537
    
    
    3,323,565
    
    
    1,862,417
    
    
    1,640,581
    
    
    1,960,303Stock compensation
      expense
    
    1,951,569
    
    
    1,041,414
    
    
    269,216
    
    
    2,058,560
    
    
    1,721,742Loss before income taxes
    
    (4,310,939
    )
    
    (5,416,725
    )
    
    (2,811,378
    )
    
    (4,058,180
    )
    
    (4,035,483
    )Provision for
      income taxes (recovery)
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Net loss
    
    (4,310,939
    )
    
    (5,416,725
    )
    
    (2,811,378
    )
    
    (4,058,180
    )
    
    (4,035,483
    )Loss per share-basic and diluted
    
    0.05
    
    
    0.07
    
    
    0.04
    
    
    0.06
    
    
    0.07Weighted average number of basic and diluted shares
    
    86,400,439
    
    
    78,012,115
    
    
    70,685,153
    
    
    66,709,353
    
    
    62,155,234Dividends
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -


Reconciliation between Canadian GAAP and U.S. GAAP:

Our consolidated financial statements for the period have been
prepared in accordance with Canadian GAAP which, in our case conforms in all
material respects with U.S. GAAP except for the accounting for development
expenditures reported in the fiscal year ended October 31, 2009 and for the
allocation of proceeds received using the relative fair value method of
accounting for Unit private placements for the fiscal years through October 31,
2008.

Under U.S. GAAP all development expenditures are expensed as
incurred. In 2009, the Company has capitalized $2,000,611 of development costs
under Canadian GAAP.

Until October 31, 2008, for all Unit private placement
financings completed, the Company assigned 100% of the proceeds from these
financings to the common shares and a nil value to the attached warrants. In the
year ended October 31, 2009, the Company changed the estimates that it used to
value the common shares and warrants included in the Unit private placement
financings which it completed in the fiscal year then ended. It assigned the
value to the warrants which formed part of these Unit private placements
calculated in accordance with the Black Scholes option-pricing model. Under U.S.
GAAP, using standards which are analogous, the valuation of the shares and
warrants would be determined using the relative fair value approach. There is no
change in aggregate shareholders equity. A reconciliation between Canadian and
U.S. GAAP has been provided in the footnotes to the 2009 audited financial
statements.

Currency and Exchange Rates

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

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

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

2009
    2008
    2007
    2006
    2005High for period
    1.3000
    1.1848
    1.1853
    0.9134
    0.8690Low for period
    1.0292
    0.9671
    0.9499
    0.8349
    0.7872End of period
    1.0456
    1.2165
    0.9499
    0.8907
    0.8577Average for period
    1.1420
    1.0269
    1.1003
    0.8782
    0.8254


5

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

November
    December
    January
    February
    March
    April2008
    2008
    2009
    2009
    2009
    2009High
    1.2470
    1.2370
    1.2425
    1.2731
    1.2655
    1.1977Low
    1.2323
    1.2112
    1.2244
    1.2635
    1.2518
    1.1875


May
    June
    July
    August
    September
    October2009
    2009
    2009
    2009
    2009
    2009High
    1.1019
    1.1640
    1.0858
    1.1094
    1.0800
    1.0839Low
    1.0898
    1.1511
    1.0763
    1.0933
    1.0672
    1.0713


On February 17, 2010 the noon buying rate for one Canadian
dollar, as quoted by the Bank of Canada, was CDN $1.0455 = 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 significant 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.

We are still in the development stage and have incurred
substantial losses to date. We must raise additional funds for the continued
development, testing and commercial exploitation of our technologies. The
sources of these funds have not yet been identified and there can be no
certainty that sources will be available in the future.

At October 31, 2009 we had approximately $106,000 cash on hand
and our current monthly cash expenses were approximately $250,000. Subsequent to
October 31, 2009, through to the date of this report, we have raised an
additional $1,234,045 through the exercise of stock options and through private
placement financings.

Our ability to continue as a going concern is dependent upon
completing the development of our technology for a particular application,
achieving profitable operations, obtaining additional financing and successfully
bringing our technologies to the market. The outcome of these matters cannot be
predicted at this time. Our consolidated financial statements have been prepared
on a going concern basis and do not include any adjustments to the amounts and
classifications of the assets and liabilities that might be necessary should 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.

We currently have no operating revenue.

We have no revenues and there is no certainty that we will
generate revenues in the near future. 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 get from each
licensee and the ability of each licensee to compete in their particular market.

6

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Our magnetic sensor technology is under development.

We continue to develop prototypes of our magnetic sensor
technology in 2009 working with our industrial foundry partners, 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.

There is no certainty that these current initiatives will
result in revenues and cash flow to the Company in future.

In the event that our magnetic sensor technology is
successfully developed we will face competition from larger corporations who
also sell sensor technology and who have greater financial resources than the
Company.

Our success will be determined by the following factors which
have not yet been tested or 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 memory technology.

After completion of the development of our technology, 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. In addition, our success will depend on our ability 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.

Our MRAM technology is under development.

Our Magnetic Random Access Memory, also referred to herein as
MRAM, which is a non-volatile memory technology that uses magnetic, thin film
elements on a gallium arsenide substrate to store information, is currently
under development and is therefore not yet proven to be commercially viable. As
such, we are unsure if our development efforts will succeed and, accordingly,
significant development work remains to be completed.

In the event our technology is developed, we will face
competition when we are ready to sell or license our products. We will be
required to introduce our technology into a well-developed market and compete
with major corporations who manufacture, sell and license existing memory
products such as DRAM, SRAM, EPROM, EEPROM and Flash memory. The market for
memory technologies is dominated by major corporations who have established
market segments for their memory technologies and products. These corporations
have significantly greater financial resources which are required to design,
develop, manufacture, market, sell and license their products and technologies.
Many of these major corporations have worldwide wafer manufacturing and
integrated circuit production facilities.

Our success will be determined by the following factors which
have not yet been tested or 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 memory technology.

After completion of the development of our technology, 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. In addition, our success will depend on our ability 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.

7

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Our competitors are seeking to develop other magnetic
based memory technologies.

MRAM as a market segment is both crowded and competitive. We
understand that other companies have research and development efforts under way
in connection with non-volatile random access memory, also referred to herein as
RAM. Much work is being done in the MRAM research and development at companies
such as NVE, Cypress, Freescale, Phillips, Motorola and others. Other research
and development efforts at IBM, Hewlett Packard and Nantero are focused on
non-magnetic based non-volatile RAM. While these companies may be considered our
competitors, their focus is on high-density RAM applications. As we anticipate
introducing our product in the less competitive, low-density applications
market, we believe our more direct competitors are Honeywell, Naval Research
Laboratories, Ramtron and NVE. All of these companies have substantial resources
at their disposal.

We may be materially affected by aggressive competitionas the memory and data storage industry is highly competitive and
customers make their decisions based on a number of competitive factors,
including functionality, technology, performance, reliability, system
scalability, price, quality, product availability, customer service and brand
recognition. We must address each of these factors effectively in order to
successfully compete.

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

Since there is no assurance that revenues will be realized in
the near future, we will need additional financing to continue our research and
development and to successfully market our technology to potential licensees and
strategic partners. While we have had sufficient funds thus far to meet our
requirements, there is no assurance we will be able to continue to do so and
failure to raise sufficient funds in the future will affect our ability to
develop and market our technology.

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 exclusive rights to our technology, including any
improvements that may be made on that technology from time to time by us or on
our behalf. While our technology is patented or is subject to pending patent
applications in the United States and we know of no challenge that has been made
either against our technology or our rights to it, and 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 is no assurance that any of our pending patent
applications will be issued as patents or that any issued patent will not be
determined to be invalid at a later date.

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

To date, we have been solely a development company. We have not
been profitable to date. Unless and until we are able to successfully complete
the development of our technology and develop markets for the commercialization
of such technology, we may not be able to generate revenues in future periods
and we may not be able to attain profitability.

The development of non-volatile random access memory products
is a capital intensive business. Therefore, we expect to incur expenses without
corresponding revenues at least until we are able to license our technology to
third parties. This may result in net operating losses, which will increase
until we can generate an acceptable level of revenues, which we may never
attain.

8

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Further, even if we do achieve operating revenues, there can be
no assurance that such revenues will be sufficient to fund continuing
operations. Therefore, we cannot predict whether we ever be able to achieve
profitability.

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 lack manufacturing capacity and will continue to be
dependent on third party manufacturers.

Our success will partially depend upon our ability to secure
manufacturing of our technology in large quantities and at competitive prices.
We have no in-house manufacturing capacity and do not anticipate developing such
capacity. To the extent we are successful in completing the development of our
technology we will likely be required to rely upon contract manufacturers to
produce our products. We may not be able to enter into manufacturing
arrangements on terms that are favorable to us. Moreover, there is no assurance
that any future manufacturers will have the capability to manufacture our
products in sufficient quantities to achieve profitability and within the
quality, price, and technical standards required by our customers. In addition,
because our technologies use semi-conducting materials other than silicon, there
may be a limited number of contract manufacturers capable of producing our
products since most are focusing on silicon-based manufacturing. If any future
manufacturers should cease doing business with us or experience delays,
shortages of supply or excessive demands on their capacity, we may not be able
to obtain adequate quantities of product in a timely manner, or at all.
Manufacturing new products involves integrating complex designs and processes,
coordinating with suppliers for parts and components, and managing manufacturing
capacities to accommodate forecasted demand. Failure to obtain sufficient
quantities of parts and components, as well as other manufacturing delays or
constraints, could adversely affect the timing of new product introductions. Any
manufacturing problem or the loss of a contract manufacturer could be disruptive
to our operations and result in lost sales.

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 non-volatile random access memory technologies and
sensors. Reliance on a limited range of products could restrict our ability to
respond to adverse business conditions. If we are not successful in developing
this specific technology, 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. In such case our business would likely be at a significant
disadvantage to other competitors in the field. As a result, the limited range
of products we intend to develop could limit our 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 MRAM technology, 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 or at all. 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 any eventual licensees' products will be technologically
viable, nor 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 research, 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
affect on our future royalty payments and financial condition.

Our supply of future products could be dependent upon
relationships with key suppliers.

We will be reliant on third parties to supply the raw materials
needed to manufacture our future products. Any reliance on suppliers may involve
several risks, including a potential inability to obtain critical materials and
reduced control over production costs, delivery schedules, reliability and
quality. Any unanticipated disruption to future contract manufacture caused by
problems at suppliers could delay shipment of products, increase our cost of
goods sold and result in lost sales.

9

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

At present, we have limited sales and marketing capability
since our technology is currently in the development stage and our financial
resources are limited. However, if we are successful in completing our
development efforts, we will need to add marketing and sales expertise in the
computer technology business. We must also develop the necessary supporting
distribution channels. Although we believe we can build the required
infrastructure, we may not be successful in doing so if we cannot attract
personnel or generate sufficient capital to fund these efforts. Failure to
establish a sales force and distribution network would have a material adverse
effect on our ability to grow our business.

The rights to certain of our patented technologies are
shared with a third party.

Our earliest technology included a memory design with the
magnetic bit aligned vertically to the substrate, also referred to herein as our
VEMRAM technology. We have abandoned the development of this earliest
technology. We acquired ownership of certain patents and patent applications
covering the VEMRAM technology, as well as certain related rights, pursuant to
an Asset Purchase Agreement dated as of December 10, 2000 with Estancia Limited,
also referred to herein as Estancia. However, under the terms of the Asset
Purchase Agreement we have been required to convey back to Estancia a 40%
undivided interest in the VEMRAM patents, as well as the right to participate in
gross profits and royalties from the license or sale of such patents. This
participation right requires us to pay to Estancia 32% of (i) the gross profit,
less expenses to be agreed by the parties, for each license of the patents sold
or otherwise transferred by us and (ii) all royalties received by us as a result
of the license or sale of the patents less reasonable expenses directly related
to the obtaining of such royalties.

We will be reliant upon contractual rights to use certain
technologies that are material to our business.

Until 2008, certain technologies material to our business have
been developed through collaborative arrangements with the University of
Toronto. We entered into a number of successive Research Collaboration
Agreements with the University of Toronto under which research and development
programs were led by a University research team. We have provided funding,
equipment and background technology to these projects. Certain Canadian
governmental entities are also parties to these agreements and have provided
additional funding. The University of Toronto has ownership rights to all
intellectual property developed under these programs. We have no ownership
rights but have the right to obtain exclusive, world-wide and perpetual
sub-licenses from the governmental participants to use such intellectual
property; the governmental participants in turn have the right to obtain an
exclusive, world-wide license to such technology directly from the University of
Toronto.

Our auditors have previously identified material
weaknesses in our internal accounting control over financial reporting.

We operate as a development stage company and have historically
had only limited accounting personnel and resources with which to address our
internal control procedures.

In the 2009 fiscal year we devoted more internal resources to
the measurement and assessment of our internal accounting controls. We appointed
one of our senior accounting staff, supervised by our Chief Financial Officer
and our Audit Committee, to organize this initiative and provided certain
training to assist that individual with her responsibilities. We designed our
testing to assess all perceived higher risk areas and completed our testing of
the internal controls and procedures in all of these areas over a five month
period through September 2009.

In its Attestation Report dated February 17, 2010, our auditors
identified one material weakness in our internal controls over financial
reporting. This material weakness and managements response is described in Item
15 of this Annual Report.

In its Attestation Report dated February 16, 2009 our auditors
identified three material weaknesses in our internal controls over financial
reporting for the year ended October 31, 2008. These material weaknesses and
managements responses are described in Item 15 of this Annual Report and the
Annual Report for the year ended October 31, 2008.

Although we have implemented compensating controls in our
systems and our procedures which we believe mitigate these risks, 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.

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Management recognizes that any controls and procedures, no
matter how well designed and operated, can only provide reasonable assurance and
not absolute assurance of achieving the desired control objectives. In the
unforeseen event that lapses in the internal controls and procedures occur
and/or mistakes arise, the Company intends to take the necessary steps to
minimize the consequences thereof. If, however, we fail to maintain adequate
controls and procedures, we may not meet the demands that are placed upon us as
a public company, including the requirements of the Sarbanes-Oxley Act of 2002
and our business could accordingly face repercussions.

We depend on key personnel.

Our senior managers and employees are Salvatore Fuda, who
serves as the Chairman of the Board of Directors, Joseph Fuda, who serves as our
Chief Executive Officer, Mr. Steven Van Fleet, who has primary responsibility
for business development and who serves as President of our wholly-owned
subsidiary, MAST Inc. 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. We have also engaged Dreifus Associates Ltd., a technical and
intellectual property consulting firm whose major shareholder, Henry Dreifus,
served as a director of Micromem between March 2008 and June 2009. 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. We cannot provide any assurance that we
will be able to successfully develop, manufacture, and market innovative new
products 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 adoption of our MRAM technology.

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

Our new product research and 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 research and development efforts could be adversely affected by
hardware and software design flaws, product development delays, changes in data
storage technology, 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. Our failure
to obtain sufficient quantities of parts and components or other manufacturing
delays and constraints could adversely affect our ability to timely introduce
new products.

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

We cannot provide any assurance that we will be able to
continue to develop new intellectual property or that we will continue to have
it developed for us.

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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 all of 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.

We may be materially affected if we are unable to
attract, retain and motivate key employees.

Our future success depends, in large part, on our ability to
attract, retain and motivate key employees. We face significant competition for
individuals who possess the skills required to design, develop, manufacture, and
market our technologies. An inability to successfully attract, retain, and
motivate these employees in the future could have an adverse effect on our
future operating and financial performance.

There are foreign exchange risks associated with our
company.

Because we have historically raised funding in U.S. dollars,
and a significant 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 to
offset potential currency rate fluctuations.

Risk Factors Related to Our Common Shares

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

Our common shares constitute penny stock under applicable
regulations of the Securities and Exchange Commission. The penny stock
regulations impose significant restrictions on brokers who sell penny stock to
persons other than established customers and institutional accredited investors.
Broker-dealers participating in sales of our stock will be subject to the so
called penny stock regulations covered by Rule 15g-9 under the Exchange Act.
Under the rule, broker-dealers must furnish to all investors in penny stocks a
risk disclosure document required by the rule, make a special suitability
determination of the purchaser and have received the purchaser's written
agreement to the transaction prior to the sale. In order to approve a person's
account for a transaction in penny stock, the broker or dealer must (i) obtain
information concerning the person's financial situation, investment experience
and investment objectives; (ii) reasonably determine, based on the information
required by paragraph (i) that the transactions in penny stocks are suitable for
the person and that the person has sufficient knowledge and experience in
financial matters that the person reasonably may be expected to be capable of
evaluating the risks of transactions in penny stock; and (iii) deliver to the
person a written statement setting forth the basis on which the broker or dealer
made the determination required by paragraph (ii) in this section, stating in a
highlighted format that it is unlawful for the broker or dealer to effect a
transaction in a penny stock unless the broker or dealer has received, prior to
the transaction, a written agreement to the transaction from the person; and
stating in a highlighted format immediately preceding the customer signature
line that the broker or dealer is required to provide the person with the
written statement and the person should not sign and return the written
statement to the broker or dealer if it does not accurately reflect the person's
financial situation, investment experience and investment objectives, and obtain
from the person a manually signed and dated copy of the written statement. 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:

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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 66 2/3% of the votes cast at a meeting of
shareholders duly called for such purpose being cast in favor of the proposed
matter. Such matters include without limitation: (a) the sale, lease or exchange
of all or substantially all of our assets out of the ordinary course of our
business; and (b) any amendments to our Articles including, but not limited to,
amendments affecting our capital structure such as the creation of new classes
of shares, changing any rights, privileges, restrictions or conditions in
respect of our shares, or changing the number of issued or authorized shares, as
well as amendments changing the minimum or maximum number of directors set forth
in the Articles. Under 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.

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 $223 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;

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- 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, also referred to herein as the common shares,
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 Bulletin Board without a significant reduction in
the market price of the shares.

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

ITEM 4. INFORMATION ON THE COMPANY

A.History and Development of Our Company

Micromem is a corporation formed under the laws of the Province
of Ontario, Canada, with principal executive offices at 777 Bay Street, Suite
1910, Toronto, Ontario M5G 2E4 (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 AvantiCorp 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.

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Research and Development Efforts

The Board of Directors formed a Technical Advisory Committee in
mid 2007 consisting of Larry Blue and Steve Van Fleet, two of its Directors and
both of whom have substantial industry experience and careers in related
technology. To round out the Technical Advisory Committee, the Company recruited
Mr. Henry Dreifus of Dreifus Associates Limited of Orlando, Florida. It
recruited Mr. Dreifus as its candidate of choice, having considered a number of
other technical experts from across North America.

The Technical Advisory Committee took the leadership role in
the Company's technical developments commencing in September, 2007. At the time,
with ongoing assistance provided by Strategic Solutions, the Company engaged
Global Communications Semiconductor Ltd. (GCS) of California to develop
initial prototypes in its California-based foundry. GCS had considerable
experience in dealing with gallium arsenide-based applications which was a
significant consideration in the selection of that foundry.

Between September 2007 and February 2008, the Company announced
a series of development milestones achieved in the GCS foundry. Through the
efforts of our Technical Advisory Committee, the Company determined that it
would pursue the further development of its magnetic sensor market opportunities
in the immediate term while pursuing the longer term goal of also developing its
memory applications.

The Company continues to rely on a number of key advisors
including GCS, Dreifus Associates Ltd. (DAL) and BAE. It has worked
exclusively with Morgan Lewis LLP with respect to its intellectual property
filings with respect to all of this development work.

During 2008  2009, we entered into joint development and/or
manufacturing agreements with BAE Systems (BAE), Unotron Inc. (Unotron),
LifeMed Technologies Inc. (LMTI) and NEMT Ltd. (NEMT) as discussed below:

BAE:In early 2008, BAE expressed initial interest in
the Company's sensor technology. The Company and BAE executed the appropriate
confidentiality material transfer agreements and began discussions with respect
to specific project work to be conducted in BAE's foundries in the United
States. In August 2008, the Company entered into a working agreement with BAE
whereby the Company agreed to commit up to $1 million of funding to BAE-led
development work on its sensor technology. The Company retains exclusive
ownership of any intellectual property that is developed in this initiative. The
end goal of the BAE development work is to identify specific applications where
BAE would incorporate the Company's technology into their product offerings to
their own large defense and aerospace customers.

During 2009, Micromem and BAE Systems successfully completed
the manufacturing of a multi-bit array structure of our memory. The work was
completed in BAEs U.S. Department of Defense (DOD) foundry in Nashua New
Hampshire. Micromem submitted the multi-bit array structure in a reticle design
format to BAE which manufactured the memory using their proprietary high
mobility epi layer and their standard foundry processes. The magnetic processing
steps required in the manufacture of our memory was subcontracted to specialty
manufacturers. Memory testing was completed by a certified third party company.

Micromem and BAE Systems were successful in creating a fully
functioning multi-bit MRAM cell. We believe that we have proved the efficacy of
our memory patent portfolio. Our strategy is to license the memory patent
portfolio to clients that have specific end user requirements that require low
power, high temperature radiation hardened memory.

BAE tested and validated the high sensitivity of our magnetic
sensor. Our strategy is to perform joint business development with BAE to the
DOD and increase the governments interest in our technology, whereupon BAE and
Micromem intend to enter into a licensing agreement whereby our technology will
be transferred to BAE for integration into their product portfolio.

Unotron.: Unotron and Micromem entered into a
manufacturing agreement in 2009 that requires Micromem to develop a magnetic
sensor based keyboard substrate that is to be integrated into Unotrons
waterproof and washable keyboards. These keyboards can be placed within a
commercial dishwasher to prevent diseases from being transmitted on the
keyboard. In 2009, Micromem designed, manufactured, tested and delivered the
initial volume of keyboards to Unotron in Hong Kong. The keyboard are being
tested and submitted for FCC/CE certification. Our strategy is to begin routine
manufacturing of the keyboard substrates in 2010.

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LMTI: In 2009 Micromem and LMTI entered a manufacturing
agreement pursuant to which we received a $30 million Purchase Order. Under the
terms of the agreement, Micromem will design, manufacture prototypes, submit and
obtain FDA 510(K) approval and manufacture a medical device that incorporates
our magnetic sensor technology. The medical device is designed to provide early
detection of abnormalities in womens breasts. We believe the medical device
will be cost effective, easy to use and directed at providing a simple home test
for early breast cancer indication.

The prototype product has been designed and fully tested. The
FDA 510(K) process has begun. Micromem has engaged King and Spaulding in
Washington DC as our FDA attorney. Micromem has contracted with a physician in
New York City who has experience in running clinical trials in the breast cancer
detection area. Our strategy in 2010, pending FDA approval of the product, is to
begin routine manufacturing for LMTI. It is anticipated that LMTI will receive
product from Micromem in 2010.

NEMT: In 2010 Micromem and NEMT entered into a
manufacturing agreement to develop a magnetic device capable of detecting small
changes in the earths magnetic signature. NEMT desires to use this for aerial
exploration in the Bearing Sea for oil and gas reserves. The prototype device
was designed and built and tested in the field by NEMT. In late 2009 NEMT
discovered two oil reserves in 400 meters of water.

Our strategy is to deliver the final product during the first
quarter of 2010 to NEMT, which will use the device to fulfill an exploration
contract they were awarded last year. Upon successful extended operation of the
product, we will consider entering into a licensing and sales agreement with
NEMT.

Changes to Our Board of Directors and Management

At our Annual Meeting of Shareholders held on June 30, 2009,
Salvatore Fuda, Andrew Brandt, Joseph Fuda, David Sharpless, Steven Van Fleet,
Oliver Nepomuceno and Larry Blue were reelected to serve on our Board of
Directors. Henry Dreifus did not stand for reelection but continued as a
consultant to the Company. Messrs. Salvatore Fuda, Joseph Fuda, Dan Amadori and
Steven Van Fleets continue to serve as officers of the Company.

B.Business Overview

We are engaged in the development of memory technology having
the characteristic of non-volatility, which is the ability to retain information
after power has been shut off. Our technology is based on our ability to use
magnetic materials in combination with a sensor to record the state of
magnetization. Each magnetic element stores one bit of data based on its
ability to alternate between states of magnetic polarization, which states are
determined by a sensor. Our technology represents 1s and 0s by the different
polarization of magnets. For example, a magnet oriented north/south is a 1 and
a magnet oriented south/north is a 0. The magnetic field strength and
direction do not decay when power is switched off, and, therefore, the memory is
non-volatile.

Since 2007 we have pursued the further development of our
memory and our sensor technology with the support of two U.S.-based foundries,
GCS in California and BAE in New Hampshire. We have executed joint
development/manufacturing agreements with Unotron, NEMT and LMTI  see Research
and Development Efforts beginning on page 15 of this Annual Report. We continue
to make progress with these parties and believe that initial revenues and/or
license fees will be realized in 2010 by the Company through these and other
initiatives that it is pursuing.

We continue to expand the portfolio of patents and patent
applications protecting the technology that we are developing.

Industry Background

The semiconductor memory industry is principally driven by the
requirements of the computing industry. The nature of the memory manufacturing
industry is that it is capital intensive, cyclical, rapidly changing and it
depends significantly on patent protection.

The semiconductor industry is intensely competitive. Both
low-density and high-density nonvolatile memory products are manufactured and
marketed by major corporations possessing worldwide wafer manufacturing and
integrated circuit production facilities and by specialized product companies.

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Our Company's Technology

The various characteristics of the our technology can be better
understood by describing the three basic types of memory used in present day
computers, Random Access Memory (RAM), Read Only Memory (ROM), and secondary
storage devices. The three types of memory are described below:

Random Access Memory (RAM) is memory that can be
both read and written randomly, which means that its storage locations can be
accessed in any order. Thus, a computer using RAM can find and go directly to
the selected location rather than performing a sequential search. Semiconductor
RAM is usually the primary memory associated with the computer's central
processing unit (CPU), the computational unit of the computer responsible
for interpreting and executing instructions. However, RAM is volatile
which means that all stored information vanishes once the power supply is
removed and must be restored from a secondary storage device each time the power
is resumed.

Two typical examples of RAM are Dynamic Random Access Memory
and Static Random Access Memory. Dynamic Random Access Memory (DRAM) uses
integrated circuits containing capacitors to achieve significant storage
capacity and speed. DRAM can be written and read in the speed range of less than
100 nanoseconds. DRAM has a major drawback in that its capacitors lose their
charge over time and therefore information contained in DRAM must be continually
refreshed. This means that, on average, DRAM must stop operations every 16-30
milliseconds and restore all of the data it contains or the data will disappear.
During this refresh time, the processor has no access to the information being
refreshed. Static Random Access Memory (SRAM) differs from DRAM in that
it stores information in a logic circuit referred to as a flip-flop, rather than
in a capacitor. SRAM memory does not need to be refreshed while the power is on,
but also loses its information once the power is turned off.

Read Only Memory (ROM), like RAM, can be
read randomly, but cannot be written randomly. Unlike RAM, however, it is
non-volatile and therefore does not lose its information when a computer's power
is cut off. ROM is typically employed to store vital program information
required during the first moments after a computer is powered on. It may be used
for such purposes as forcing system test routines, directing the processor to
input/output devices or for controlling access to certain computer subsystems
such as hard drives. EPROMs (erasable programmable read-only
memory) and EEPROMs (electrically erasable read-only memory) are read
only memories that can be erased and rewritten, but must be written en masse,
rather than at the individual word level. Flash memory is a form of EEPROM
that is widely used today in such devices as cell phones, modems and personal
digital assistants. The drawbacks to Flash memory are that write times are
slower, the number of read/write cycles are limited and there is a requirement
for significantly higher power to store data.

Secondary Storage Devices include CDs,
which are light and portable and are written and read by a motor driven
mechanical drive. They normally have a storage capacity in the low megabyte
range and are non-volatile and can be both written and read. However, since they
are serial (as opposed to parallel) devices, they are considerably slower than
RAM.

Our technology combines the use of semi-conducting
ferromagnetic metals with a sensor. When the magnetization of the magnetic
material changes direction, the sensor senses the change in direction and
records a 0 or 1. In this fashion, a bit is created that is non-volatile and
based on magnetic properties. We are developing this form of magnetic random
access memory for low-density applications, such as RFID, that can benefit from
non-volatile data storage.

Competition

We are aware of others conducting research, development and
commercialization in the magnetic non-volatile memory area. These include IBM
Research (San Jose, California), Ovonyx, Inc. (Troy, Michigan), Hewlett-Packard
(Palo Alto, California), Honeywell (Plymouth, Minnesota), Motorola (Phoenix,
Arizona) and Freescale Semiconductor.

Two main centers of MRAM research are at IBM and Infineon. IBM
and Infineon have alternative MRAM technologies based on the giant magneto
resistance principle. This giant magneto resistance principle primarily consists
of two ferromagnetic layers separated by a conductive nonmagnetic interlayer.
The electrical resistance is high in the absence of an external magnetic field.
However, an applied external field forces the initially anti-parallel
magnetization in the coupled films into parallel alignment and the resistance
drops. The high or low resistance determines the data storage state. Magnetic
tunnel junction cells, as they are known, have similar sandwiched structures but
the interlayer is insulating instead of conducting. In contrast to giant magneto
resistance structures, in which the sense current flows parallel to the layers,
the current in magnetic tunnel junction flows perpendicularly to the layers of
the stack.

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Even thought we cite these companies as our competitors,
because they develop MRAM technology, it should be noted that our technology is
significantly different with respect to the device architecture and mechanism of
functioning.

Equity Financing Transactions

On September 16, 2007 the Company secured a 30-day bridge loan
from an arms length investor in the amount of $505,000. The Company paid a 5%
financing fee to arrange the bridge loan and issued 250,000 common share
purchase warrants to acquire common shares at a exercise price of $0.50 per
share. The Company recorded a non-cash expense of $85,484 with respect to these
warrants, calculated in accordance with the Black Scholes option-pricing model.
The warrants have a one-year term and expired in September 2008 unexercised. The
bridge loan was repaid in October 2007.

In October 2007, the Company completed a series of private
placement financings with eight arms length investors pursuant to prospectus
and registration exemptions set forth in applicable securities laws. The Company
received a total of $716,230 subscription proceeds and issued a total of
1,577,368 common shares.

The Company secured a 30 day bridge loan of $200,000 from an
arms length investor in January 2008. The interest rate on the bridge loan was
4% due in 30 days. As additional consideration, the Company issued 100,000
common share purchase warrants at a exercise price of $0.60 per share. The loan
was repaid in February 2008.

During the 2008 fiscal year, the Company completed a series of
private placement financings with arms length investors pursuant to prospectus
and registration exemptions set forth in applicable securities laws. In total,
the Company received proceeds from the issuance of 4,152,296 common shares,
realizing proceeds totaling $2,980,030. In certain of these private placement
financings, common share purchase warrants were attached as follows:

| | (a) | 200,000 warrants issued at a price of $1.17 per warrant issued on July
      31, 2008;     
| | --- | -------------------------------------------------------------------------------------------
| |     |                                                                                            
| | (b) | 75,000 warrants issued at a price of $0.95 per warrant issued on
      August 26, 2008; and
| |     |                                                                                            
| | (c) | 262,128 warrants issued at a price of $1.17 per warrant on September
      2, 2008         

These warrants expire twelve months after issue date if
unexercised.

During the fiscal year ending October 31, 2008 investors
exercised a total of 3,421,318 common share purchase warrants to acquire common
shares at a price of $0.40 per warrant and the Company realized proceeds of
$1,368,527.

In 2008, the holders of the 800,000 common share purchase
warrants that were issued pursuant to certain financial advisory services
agreements exercised these warrants on a cashless basis. The stock price was
$2.09 per share on the date of exercise and the exercise price was $0.40 per
warrant. These warrants were "in the money" to the extent of $1,352,000 and the
Company issued a total of 686,886 common shares to fulfill the obligations under
these agreements.

A total of 1,440,000 common stock options were exercised by
directors, officers and consultants in 2008 and the Company realized proceeds of
$1,010,500.

During the 2009 fiscal year, the Company completed a series of
private placement financings with arms length investors pursuant to prospectus
and registration exemptions set forth in applicable securities laws. In total,
the Company received proceeds of $2,958,842 from the issuances of 4,393,535
common shares. In certain of these financings common share purchase warrants
were attached as follows:

| | a) | 1,153,846 warrants at a price of $0.70 per warrant issued on February
      11, 2009;
| | -- | -------------------------------------------------------------------------------------
| |    |                                                                                      
| | b) | 1,333,333 warrants at a price of $0.75 per warrant issued on April 6,
      2009;    
| |    |                                                                                      
| | c) | 390,624 warrants issued at a price of $1.20 per warrant on May 14,
      2009;       
| |    |                                                                                      
| | d) | 39,062 warrants issued at a price of $1.20 per warrant on May 14,
      2009;        
| |    |                                                                                      
| | e) | 388,980 warrants issued at a price of $1.24 per warrant on May 19,
      2009; and   

18

---

| | f) | 500,000 warrants issued at a price of $0.95 per warrant on August 25,
      2009
| | -- | --------------------------------------------------------------------------------

The warrants issued on May 19, 2009 had a term of four months
and expired unexercised. All other warrants issued in 2009 have a twelve month
term from issue date. 39,062 warrants issued on May 14, 2009 were broker
warrants issued to the financial advisor who secured financing for the Company.
A charge to share capital in the amount of $14,297 has been recorded in
accordance with the Black Scholes option-pricing model with respect to these
broker warrants.

In 2009 warrant holders exercised 200,000 common share purchase
warrants and the Company realized proceeds of $234,000.

Cash proceeds realized during the year ended October 31, 2009
by the Company upon the exercise of 1,652,801 options by officers and directors
and staff totaled $992,417.

Subsequent to October 31, 2009, the Company raised an
additional $1,243,045 through private placements and issued 2,448,720 Units.
Each Unit consists of one common share and one share purchase warrant. Of this
total, Mr. Salvatore Fuda, the Chairman of the Company subscribed for 341,000
Units at a Unit price of $0.44 per Unit and the Company realized proceeds of
$150,000.

Patents and Trademarks

We believe that protection of our intellectual property is
important to our ability to generate revenues from our technology in the future.
We have both issued patents and pending patent applications and 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 will 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.

Our magnetic patent portfolio comprises separate series of
patents and patent applications as follows:

| | (a) | our initial patents covering what is referred to as the Vemram and
      Hemram technologies which the Company has not further pursued since 2002;                                              
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                 
| | (b) | those covering technologies developed pursued to research
      collaboration agreements with the University of Toronto; and                                                                    
| |     |                                                                                                                                                                                                 
| | (c) | those applications covering the technology developments that the
      Company has furthered since it began working with the US-based foundries
      and BAL in September, 2007.               
| |     |                                                                                                                                                                                                 
| | (d) | those applications covering the technology development that the
      Company has furthered in collaboration with DAL, under contract to provide
      technical design services to the Company.

Morgan Lewis LLP has served as our patent attorneys since 2005.
In 2008 and again in 2009, we filed several provisional 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 MAST INC. (MAST)
as a Delaware-based wholly-owned subsidiary. MAST has an office in New York City
and is being managed by Mr. Steven Van Fleet, its President and a director of
Micromem. MAST is pursuing a number of potential strategic joint development
agreements with industry partners. This process is ongoing.

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.

19

---

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

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

D.     Property, Plant and Equipment

We maintain our corporate headquarters in Toronto, Ontario,
Canada. We occupy 3,987 square feet of commercial office space pursuant to a
lease that expires in 2010.

The Company made $9,668 of capital expenditures in 2009. In
2008 we made $31,531 of capital expenditures.

ITEM 4A.     UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS

This section of the Form 20-F has been prepared to provide a
more substantive discussion of our business and to assist the reader in
analyzing the audited consolidated financial statements for the year ended
October 31, 2009. 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 Canadian GAAP and are stated in United States dollars. These
principles are also in conformity in all material respects with U.S. GAAP except
as described in Note 10 to our 2009 audited consolidated financial
statements.

I. OVERVIEW

We are a development stage company that currently operates in a
single segment as a developer of non-volatile magnetic memory and sensor
technology. Non-volatile memory implies the ability to retain information after
power has been shut off. Our technology is based on our ability to use magnetic
materials in combination with a sensor to record a state of magnetization as a
mechanism of data storage.

A.     Operating Results

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

Selected statement of operations and deficit information

(all amounts in United States dollars)

2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Interest and other income
    $
    88,047
    
    $
    11,762
    
    $
    2,586
    
    $
    (9,930
    )
    $
    (8,703
    )Loss for the year
    
    4,310,939
    
    
    5,416,725
    
    
    2,811,378
    
    
    4,058,180
    
    
    4,035,483Loss per share-basic and diluted
    
    0.05
    
    
    0.07
    
    
    0.04
    
    
    0.06
    
    
    0.07


20

---

Selected balance sheet information

(all amounts in United States dollars)

2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Working capital (deficiency)
    $
    (650,044
    )
    $
    (338,079
    )
    $
    (1,531,855
    )
    $
    (448,923
    )
    $
    (74,831
    )Property and equipment
    
    24,422
    
    
    26,321
    
    
    -
    
    
    -
    
    
    -Total Assets
    
    2,562,479
    
    
    630,467
    
    
    329,232
    
    
    465,440
    
    
    728,375Shareholders
      equity (deficiency)
    
    1,522,839
    
    
    (311,758
    )
    
    (1,531,855
    )
    
    (448,923
    )
    
    (74,831
    )


Fiscal 2009 Compared to Fiscal 2008

The Company remained in pre-revenue mode as at October 31,
2009. We reported interest income totaling $88,047 in 2009, of which 11,382 was
relating to interest income compared to $11,762 in 2008. The remaining $76,665
(2008: nil) relates to recoveries under the Scientific Research and Experimental
Development tax program. We earned interest income on temporarily available
surplus funds in 2009 including $5,000 of interest on the Unotron debenture
which we executed in 2009.

In Fiscal Year 2009, the Company made important advances with a
number of strategic development partners. The notable developments include the
Companys agreements with BAE Limited, Unotron Inc., NEMT Inc. and LifeMed
Technologies Inc. Additionally, the Company has developed a pipeline of other
initiatives that it is pursuing and it has made specific strides in the
development of sensor technology for several industrial vertical applications,
including sensors for the oil and the mining sectors.

Significantly, in 2009, and as a result of these advances, the
Company has determined that its continuing activities related to the development
of its memory and sensor technology meet the criteria for deferral of
development costs. Accordingly, the associated costs of these activities have
been capitalized and are reflected in our balance sheet at October 31, 2009. The
total deferred development costs which have been capitalized are
$2,000,611(2008: nil) and include directly related consulting fees, materials
and third party costs. No amortization has been taken to date.

Administration costs increased to $937,148 in 2009 from
$604,203 in 2008. The Company engaged the Investor Relations Group (IRG) of New
York in September 2008. We initially agreed to monthly payments of $13,500 plus
25,000 common shares per month. In May 2009, the agreement was renegotiated to
payments of $7,500 and 12,500 common shares per month. The agreement expired in
September 2009. The Company re-billed certain related companies who share office
space with it and which have certain common officers and directors. At October
31, 2009 the Company has reserved the outstanding accounts receivable less any
amounts collected subsequent to year-end with certain of these parties given the
uncertainty of collection. In 2009 the activity in MAST increased significantly.
The major components of the MAST expense as reported include market research
($140,000) investor relations ($112,000) and travel expenses ($66,000).

We incurred $3,240,960 of professional fees, other fees and
salaries in 2009 compared to $3,304.771 in 2008. The cash component of this
amount, excluding the Black Scholes value of stock options granted, was
$1,289,391 in 2009 compared to 2,263,357 in 2008. In 2008 we incurred
approximately $125,000 of legal fees pertaining to the termination of Ms.
Cynthia Kuper. The cash compensation paid to our Chairman, Mr. Salvatore Fuda,
was $129,149 in 2009 versus $416,171 in 2008; no incentive-based compensation
was earned under the terms of the employment agreement with Mr. Fuda in 2009. In
2008 we incurred approximately $80,000 of outside consultant costs relating to
the Sarbanes-Oxley Act of 2002 (SOX) review of internal accounting controls.
In 2009, this review was performed internally. Management bonuses were $50,000
in 2008 and nil in 2009. We incurred $300,000 in fees with respect to services
provided by DAL in 2008 versus $77,000 in 2009. Legal expenses with respect to
our patent filings and IP portfolio were $151,000 in 2009 versus $253,000 in
2008.

In 2009, the Company capitalized all but $13,880 of the
development expenses which it incurred; prior to 2009, all of these expenditures
were expensed. The significant research and development expenditures incurred in
2009 included Strategic Solutions, $184,000; BAE, $428,000; GCS, $305,000;
NanoOpto, $405,000; DAL, $351,000; all other $131,000; for a total expenditure
of $1,804,000.

In 2008 the Company paid $38,952 in fees to Professor Harry
Ruda, our Chief Research Scientist at the University of Toronto, who was on a
$5,000 ($CDN) monthly retainer until it was terminated in June 2008. The Company
reported accounts payable and accrued liabilities of $286,430 (CDN) at October
31, 2007 as payable to the University of Toronto; this obligation was settled by total payments in 2008 of $145,000 (CDN) and the issuance of
30,000 common shares valued at issue date at approximately $60,000. The Company
recorded a recovery on final settlement with the University of Toronto of
$76,037.

21

---

Strategic Solutions received a base monthly amount of $45,600
until December 2008 and was paid for additional work completed greater than the
agreed upon base level of contract work. The Company continued to use Strategic
Solutions on a month to month basis in 2009 but has ceased these arrangements in
mid-year.

The payments to BAE are with respect to foundry services
provided in the BAE facilities.

The work performed by GCS relates to the prototype development
work completed in the GCS foundry in 2008 - 2009.

Travel expenses were $223,585 in 2009 versus $398,474 in 2008.
We did not incur any travel expenses relating to our ex-CTO, Strategic Solutions
or DAL in 2009 and made a concerted effort to reduce these costs during the
2009.

The net foreign exchange gain in 2009 was $28,154, compared to
an expense of $52,231 in 2008, attributable to fluctuations in the exchange rate
between the U.S. dollar and the Canadian dollar. In 2009, the U.S. dollar
appreciated against the Canadian dollar whereas in 2008 it depreciated.

We reported a net loss of $4,310,939 in 2009 or $0.05 per share
compared to a net loss of $5,416,725 or $0.07 per share in 2008.

The Company issued a total of 1,345,000 common stock options in
2009 compared to 2,145,000 stock options in 2008.

Fiscal 2008 Compared to Fiscal 2007

The Company remained in pre-revenue mode as at October 31,
2008. We reported interest income totaling $11,762 in 2008 compared to $2,586 in
2007. We earned additional interest income on temporarily available surplus
funds in 2008, a year in which we raised significant additional capital for the
Company.

Administration costs increased to $604,203 in 2008 from
$223,177 in 2007. In 2008 we engaged the services of a New York City based
investor relations firm and incurred $78,000 of related costs. We reserved
$88,000 of doubtful accounts receivable from certain related companies with whom
we have overhead cost sharing agreements. These amounts were reserved due to
uncertainty of collection. With the start-up of operations in MAST INC., our
wholly-owned subsidiary, we incurred incremental direct costs associated with
that entity totaling $31,000. Other administrative costs including telephone,
insurance, rent increased in 2008 given higher level of general activity.

The cash component of professional, management and other
consulting fees totaled $2,021,000 in 2008 versus $1,250,984 in 2007. The major
component of the cost in 2008 included legal costs pertaining to our patent
portfolio of $253,000, other legal costs totaling $287,000 including
approximately $125,000 pertaining to the termination of Cynthia Kuper with the
balance relating to listing fees in Canada and the adoption of a Shareholder
Rights Plan. We reported $794,000 in management fees to our Chairman and key
executives versus $791,000 in 2007. In 2008 we incurred approximately $80,000 of
additional professional fees relating to compliance with SOX. We incurred
$297,000 with respect to services provided by Dreifus Associates Limited (DAL)
(2007 - $46,000) and $138,000 with respect to payments to the President of MAST
INC. (2007 - $33,000) for the latter part of the year. The non-cash component of
these fees total $1,041,414 (2007: $269,000) and related to stock compensation
expense calculated in accordance with the Black Scholes option pricing model.
This compensation expense relates to warrants issued in connection with
financings completed in 2008 and to the vesting of stock options awards to
officers, directors and employees.

Research and development costs total $1,063,508 in 2008
compared to $682,331 in 2007. The largest components of the costs incurred in
2008 included payments to Strategic Solutions totaling $729,000, to BAE totaling
$400,000, and to GCS totaling $192,000. The BAE work began in 2008 and the work
completed by Strategic Solutions accelerated considerably in 2008.

Travel and entertainment costs totaled $398,474 in 2008
compared to $141,200 in 2007. We incurred a substantial amount of additional
travel expense in 2008 in pursuit of multiple potential strategic alliances and
working arrangements with different companies in North America and in Europe.
The bulk of the travel expenses related to costs incurred by Strategic
Solutions, Steven Van Fleet in his capacity as President of MAST and as head of
business development for the Company and, additionally, travel costs incurred by
Henry Dreifus and DAL.

22

---

The Company issued a total of 2,145,000 stock options in
2008.

The foreign exchange loss in 2008 was $52,321 compared to a
loss of $135,947 in 2007. These expenses reflect the significant appreciation of
the Canadian dollar against the US dollar in 2007, a trend which continued
through mid 2008 before the Canadian dollar depreciated against the US dollar in
the second half of the fiscal year.

We reported a net loss of $5,416,725 in 2008 or a loss of $0.07
cents per share, compared to a loss of $2,811,378 or $0.04 cents per share in
2007.

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, 2009                             |  | 81,762   |  |  | 52,936            |   |  | -                 | 
|July 31, 2009                                |  | 113      |  |  | (1,521,958        | ) |  | 0.020             | 
|April 30, 2009                               |  | 536      |  |  | (1,273,450        | ) |  | 0.020             | 
|January 31, 2009                             |  | 5,637    |  |  | (1,583,629        | ) |  | 0.020             | 
|                                             |  |          |  |  |                   |   |  |                   | 
|October 31, 2008                             |  | 4,023    |  |  | (3,588,411        | ) |  | 0.050             | 
|July 31, 2008                                |  | 3,258    |  |  | (1,280,143        | ) |  | 0.020             | 
|April 30, 2008                               |  | 2,988    |  |  | (1,180,108        | ) |  | 0.020             | 
|January 31, 2008                             |  | 1,493    |  |  | (720,055          | ) |  | 0.010             | 

B.     Liquidity and Capital Resources

Liquidity

We are a development stage company. We currently have no cash
flow from operations and will have none until we are in a position to either
license or directly produce and sell products utilizing our Technology.

We currently have no lines of credit in place and must obtain
equity financing from investors and from persons who hold outstanding options
and warrants in order to meet our cash flow needs until we can generate
revenues. At October 31, 2009, we had approximately $106,000 cash on hand and
our monthly cash expenses approximate $250,000. Since October 31, 2009, we have
raised an additional $1,243,045 through the exercise of stock options and
private placements.

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 had no commitments for capital expenditures as of October
31, 2009 or 2008. In 2009 we spent $9,668 on capital equipment.

Critical Accounting Policies

Our significant accounting policies are set forth in Note 3 to
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 Canadian GAAP which, in our case conforms in all
material respects with U.S. GAAP except for the accounting for development
expenditures reported in the fiscal year ended October 31, 2009 and for the
allocation of proceeds received using the relative fair value method of
accounting for Unit private placements for the fiscal years through October 31,
2008.

We are a development stage company. Under Canadian GAAP,
research costs are expensed in the period incurred. Development expenses are
expensed as incurred unless they meet the criteria for deferral and amortization
under Canadian GAAP 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. In 2009, the Company has
capitalized $2,000,611 of development costs under Canadian GAAP.

23

---

Until October 31, 2008, for all Unit private placement
financings completed, the Company assigned 100% of the proceeds from these
financings to the common shares and a nil value to the attached warrants. In the
year ended October 31, 2009, the Company changed the estimates that it used to
value the common shares and warrants included in the Unit private placement
financings which it completed in the fiscal year then ended. It assigned the
value to the warrants which formed part of these Unit private placements
calculated in accordance with the Black Scholes option-pricing model. Under U.S.
GAAP, using standards which are analogist, the valuation of the shares and
warrants would be determined using the relative fair value approach. There is no
change in aggregate shareholders equity. A reconciliation between Canadian and
U.S. GAAP has been provided in the footnotes to the 2009 audited financial
statements.

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 3 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.

Effective November 1, 2004, we have adopted the fair value
method of accounting for employee stock-based compensation costs. The
stock-based compensation expense for options granted during the fiscal years
ending October 31, 2005 - 2009 has been reflected as an expense in the
consolidated statement of operations.

Investment tax credits (ITC) arising from research and
development are recognized when their realization is reasonably assured. The
ITCs are applied against the related costs and expenditures in the year that
they are incurred.

24

---

CommitmentsSummary of commitments:
    Date executed:A. Research collaboration agreements (1)
      Revised Licensed Agreement  University of Toronto
    June 2005B.
      Operating Leases
    2007 
      2010C. Consulting and Employment Contracts
      (1) Chairman of the Board of Directors (2) President (3)
      President, MAST INC. (4) CFO
    May 29, 2005 May 18, 2007 May 18,
      2007 May 18, 2007D. Other Commitments (1) Foundry
      services (2) Technical design services
    September 2008 July 2009


A. Research Collaboration Agreements:

1.

Revised License
Agreement, June 2005:

In June 2005, we signed a new license agreement with the
University of Toronto and the Ontario Centres of Excellence whereby:

a.

Ontario Centres of
Excellence released us and the University of Toronto from the commercialization
obligations set forth in all prior research collaboration agreements.

b.

We acquired exclusive worldwide rights to the technology and
any technology or patent rights under the agreement related to the MRAM
technology developed at the University of Toronto.

c.

We have agreed to
royalties and payments as follows:

1.1

In consideration
for the rights and licenses granted, we agreed to pay to the University of
Toronto:

a.

4% of Net Sales until such time as the University of Toronto
has received from us an aggregate amount of CDN $500,000.

b.

1% of Net Sales
thereafter.

1.2

If we sublicense
any rights granted herein to any non-affiliate:

a.

In combination or
association, the University of Toronto shall receive 10% of any Net Fees and/or
Net Royalties that shall be received by us in respect of any licenses involving
both the rights granted herein and such our intellectual property;

b.

For all other
sublicenses of the rights granted herein to a non-affiliate, the University of
Toronto shall receive 20% of any Net Fees and/or Net Royalties that shall be
received by us in respect of such sublicenses; and

c.

Net Fees and/or Net Royalties shall be paid to the
University of Toronto until such time as it has received an aggregate amount of CDN $500,000; thereafter we shall pay half of the amounts set forth in 1.2 (a)
or (b) as is applicable.

1.3

At any point after which we have paid the University of
Toronto CDN $500,000, we may at our option buy out the obligation to pay
royalties hereunder by paying to the University of Toronto a single lump sum
payment equaling the greater of CDN $500,000 and an amount equal to the total
amount of royalties paid by us to the University of Toronto in the preceding
twenty-four months. We are entitled to exercise such option by providing written
notice to the University of Toronto along with the required payment, after which
time our obligation to pay royalties under Section 4 1.1. or 4 1.2 shall be
waived by the University of Toronto.

25

---

As a condition to entering the license agreement, we have
agreed that we will enter into a further research agreement with a funding
commitment of no less than CDN $500,000 to continue the further research and
development of inventions and our intellectual property. In August 2005, we made
an initial payment of $250,000 and, subsequent to October 31, 2005, we made the
second payment of $250,000 under the terms of this further research agreement.

We believe that there are substantial market opportunities
available to commercialize our technology in conjunction with strategic
partners, and we are currently pursuing such opportunities. We plan to complete
our research initiatives and enter into agreements with strategic partners so as
to commercialize our Technology under licensing and other arrangements.

B.

Operating
leases:

We have operating lease commitments which expire in 2010 for
the lease of our corporate headquarters. The future minimum annual lease
payments are approximately $113,000.

|C. | Consulting and employment contracts:
|-- | ------------------------------------

| | 1. | On May 29, 2005, we entered into a new employment
      agreement with the Chairman of the Board of Directors. The agreement
      commenced on January 1, 2005 and expires on September 30, 2009. During the
      year, the Company extended the agreement to December 31, 2010. Under the
      terms of the agreement, the Chairman of the Board of Directors has been
      retained to provide certain management services to us. We have agreed to
      provide compensation based on a percentage of the increase of the market
      capitalization on a year-over-year basis commencing as of December 31,
      2005. This compensation is subject to a minimum annual amount of $150,000
      Canadian funds or (approximately $138,645 U.S. funds at current exchange
      rates). At our option, we can pay either cash or issue common shares as
      compensation providing that the cumulative maximum number of shares that
      we can issue under the agreement is 2,000,000 common shares. At October
      31, 2009, $129,149 of cash compensation for the 2009 fiscal year has been
      provided for (2008: $416,171). In 2009, the Board of Directors has
      extended the terms of the Chairmans employment agreement through December
      31, 2010.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2. | In May, 2008, we entered into employment agreements with:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| | (a) | Our President, Joseph Fuda. The employment agreement is
      for a two-year term at an annual base amount of $150,000 (CDN).
      Additionally, 100,000 common stock options at an exercise price of $1.60
      per share, vesting on a quarterly basis were issued under the terms of the
      agreement.                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | Our Chief Financial Officer, Dan Amadori for a two-year
      term. The base compensation was $150,000 (CDN). Additionally 100,000
      common stock options at an exercise price of $1.50 per share, vesting
      quarterly, were issued.                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (c) | Steven Van Fleet, the President of our U.S. subsidiary,
      MAST INC. The term of the agreement is for three years and the base amount
      of remuneration is $204,000 per year. In addition 500,000 stock options at
      an exercise price of $1.50 per share were issued with a five-year term,
      vesting in equal quarterly installments from the date of issue.

|D. | Other commitments:
|-- | ------------------

| | 1. | In 2008, the Company entered into an agreement with a
      supplier which provides industrial foundry services whereby the Company
      has committed to pay up to $1 million for production services to be
      provided through 2009. The Company paid $370,000 to this supplier in 2008,
      and an additional $400,000 in 2009. No additional expenditures are
      currently contemplated. In January 2009, the Company received $250,000 of
      insurance proceeds with respect to a shipment of sample prototype boards
      that were damaged in transit from the supplier to a sub-contractor. These
      proceeds have been recorded in the accounts as a reduction of research and
      development costs incurred in 2009.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 2. | In July 2009, the Company executed a purchase order for
      approximately $1 million of services to be provided by a supplier between
      July 2009  April 2010. At October 31, 2009, the Company has paid a total
      of $131,000 to the supplier and reflects $274,000 in outstanding accounts
      payable in respect of these working arrangements.                                                                                                                                                                                                                                                                                                                                                                                  

26

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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. | Certain interests under the Asset Purchase Agreement with
      Estancia Limited reverted to Estancia Limited on March 9, 2004. On this
      basis, to the extent that revenues are generated by us relating directly
      and specifically to the VEMRAM patents, we are obligated to pay Estancia
      Limited 32% of the gross profit realized less expenses agreed to by the
      parties and 32% of any unit royalties realized less direct expenses.

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 3 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.

C.

Research and
Development

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

Investment tax credits (ITC) arising from research and
development are recognized when their realization is reasonably assured. The
ITCs are applied against the related costs and expenditures in the year that
they are recognized.

Our research and development activities have been related
primarily to research and development of a magnetic random access memory device
and the development of our magnetic sensor through research collaboration
agreements. Our research and development expenses for the year ended October 31,
2009 were $13,880 and $1,063,508 in fiscal 2008. We capitalized $2,000,611 of
development expenditures in 2009 and reported these as deferred development
costs on our balance sheet at October 31, 2009 (2008  nil).

D.

Trend
Information

The digital memory industry and, more broadly, the
semiconductor industry, have historically been characterized by wide
fluctuations in demand for and supply of semiconductors and memory technologies.
Prior experience has shown that restructuring of operations, resulting in
significant restructuring charges, may become necessary if an industry downturn
were to occur.

Our prospects for revenues are dependent upon the successful
completion of our technology development and the incorporation of any technology
that may be developed under or pursuant to our research collaboration
agreements.

E.

Off-Balance
Sheet Arrangements

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

27

---

F. Tabular Disclosure of Contractual Obligations

A summary of our financial commitments as of October 31, 2009
is as below:

Payments due by periodTotal
    Less than 1 year
    1-3 years
    3-5 years
    More than 5 yearsLong term debt
      obligations
    -
    -
    -
    -
    -Capital Lease
      obligations
    -
    -
    -
    -
    -Operating lease
      obligations
    113,000
    113,000
    -
    -
    -Purchase
      obligations
    -
    -
    -
    -
    -Management agreements    
      Chairman     CFO    
      President     President MAST INC.
    150,000 75,000 76,000 323,000
    150,000 75,000 76,000 204,000
    - - - 119,000
    - -
    - -All other
    1,160,000
    1,160,000
    -
    -
    -Total:
    1,778,000
    1,778 ,000
    -
    -
    -


Transactions With Related Parties, Directors & Officers

The Company has paid cash and non-cash compensation to its
officers and directors during the 2009 and 2008 fiscal years as follows:

|                       |  |      |  |   | Cash         |  |   | Non-Cash     | 
|---------------------- |  | ---- |  | - | ------------ |  | - | ------------ | 
|                       |  |      |  |   | Compensation |  |   | Compensation | 
|Chairman               |  | 2009 |  | $ | 129,149      |  | $ | 101,760      | 
|                       |  | 2008 |  |   | 416,171      |  |   | -            | 
|                       |  |      |  |   |              |  |   | -            | 
|Officers and Directors |  | 2009 |  | $ | 625,576      |  |   | 407,040      | 
|                       |  | 2008 |  |   | 825,748      |  |   | 637,835      | 

28

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ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.     Directors and Executive Officers

The Directors and Executive Officers of Micromem as at October
31, 2009 are set forth below:

|Name              | Age | Position                                       
|----------------- | --- | -----------------------------------------------
|                  |     |                                                
|Salvatore Fuda    | 74  | Chairman of the Board of
      Directors       
|Joseph Fuda       | 49  | President, Chief Executive Officer and Director
|Dan Amadori       | 58  | Chief Financial Officer                        
|Steven Van Fleet  | 55  | Director and President of MAST, Inc.           
|Andrew Brandt     | 71  | Director                                       
|David Sharpless   | 59  | Director                                       
|Larry Blue        | 53  | Director                                       
|Oliver Nepomuceno | 41  | 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 since that date. He has served as Chairman of the
Board of Directors and as a director of Echo Energy Canada Inc. since June 2002.
He also serves as Chairman of the Board of Leader Capital Corp. He is the father
of Joseph Fuda.

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

Dan Amadorihasserved as Chief Financial Officer
of Micromem since June 2004. He has also served as Chief Financial Officer of
Leader Capital since June 2004. 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 a Chair of the Audit
Committee of Hydrive from 2006-2008. He is President of Lamerac Financial Corp.,
a financial advisory firm and has held that position since October 1988. Mr.
Amadori is a Chartered Accountant and holds an MBA from the Ivey School of
Business.

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

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

David Sharpless is Vice-Chairman of the Board of
Directors of HKMB Hub International Limited (formerly Hunter, Keilty, Muntz
& Beatty Limited), a Toronto-based property and casualty insurance broker.
He was Chairman of the Board of Directors of Hunter, Keilty, Muntz & Beatty
Limited prior to its purchase in January 2008 by Hub International Limited a
Chicago-based property and casualty insurance broker. He also serves as Chairman
of the Board of Directors of Maverick Inc., a family investment and consulting corporation. From 2000 to September
2001, he was President of CIT's Vendor Technology Finance unit. In this
capacity, he was responsible for CIT's international vendor finance business,
covering CIT's operations in Canada, Europe, Latin America, Asia Pacific and
Australia. Prior thereto, Mr. Sharpless was Newcourt Credit Group Inc.'s Deputy
Chairman of the Board of Directors and was responsible for international
operations for Newcourt Financial. Mr. Sharpless is a graduate of Osgoode Hall
Law School and is a member of the bar of Ontario. Mr. Sharpless has served as a
director of Micromem since March 2001.

29

---

Larry Blueis 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. and was appointed to
the Micromem Board of Directors on November 7, 2005. Previously Mr. Blue had
senior management roles with Hughes Network Systems and with IBM in Research
Triangle Park.

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 and as a member of the Board of Directors of Intel Trust, a
private wealth management company located in Switzerland.

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 CompensationName and Principal Position
    
    
    
    Awards
    PayoutsYear
    Salary (US$)
    Bonus (US$)
    Other Annual Compen sation
      (US$)
    Securities Under Options
      Granted (#)
    Restricted Shares or Restricted
      Share Units ($)
    Long Term Incentive Plan
      Payouts ($)
    All other Compensation
      ($)Joseph Fuda Chief Executive Officer
    2009 2008
    160,266 131,000
    -
    -
    150,0006100,000 1
    -
    -
    -Salvatore Fuda, Chairman of the Board of
      Directors Former Chief Executive Officer and President
    2009 2008
    129,149 461,944
    - -
    - -
    150,0006-
    - -
    - -
    - -Andrew Brandt Director
    2009 2008
    - -
    - -
    - -
    110,000685,000 1
    - -
    - -
    - -David Sharpless Director
    2009 2008
    - -
    - -
    - -
    110,000 675,000 285,000 1
    - - -
    - - -
    - - -Steven Van Fleet Director
    2009 2008
    181,375 140,728
    - -
    - -
    150,000 6100,000 2500,000 1
    - - -
    - - -
    - - -


30

---

Dan Amadori Chief Financial Officer 6
    2009 2008
    154,785 120,316
    - -
    --
    150,0006
      100,0001
    -  -
    --
    - -Cynthia Kuper Chief Technology Officer
    2008
    97,000
    -
    -
    -
    -
    -
    -Larry Blue Director
    2009 2008
    - -
    - -
    --
    110,0006 75,000285,0001
    -  -   -
    - -  -
    -  -  -Henry Dreifus Director
    2009 2008
    351,096 300,1155
    - -
    --
    -  350,0003200,0004
    -  -
    -  -
    - -


Notes:

|1. | Each option entitles the holder to purchase one of our
      common shares at a price of $1.50 per share prior to expiry on August 28,
      2013. These options vested in equal quarterly amounts from August 2008 
      May 2009.                                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | Each option entitles the holder to purchase one of our
      common shares at a price of $1.01 per share prior to expiry on March 3,
      2013.                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3. | Each option entitled the holder to purchase one of our
      common shares at a price of $1.20 per share prior to expiry on March 12,
      2013. 100,000 of these options vested in 4 equal quarterly amounts
      commencing in March 2009; the remaining 250,000 options vested upon
      issuance in March 2008. These options expired in August, 2009, 45 days
      after Mr. Dreifus stepped down as a director of the Company.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4. | Each option entitles the holder to purchase one of our
      common shares at a price of $1.50 per share prior to expiry on August 28,
      2013. These options only vest when the Company reaches certain sales
      milestones. At October 31, 2009, none of these options have vested.                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5. | These payments were made to Dreifus Associates Limited
      (DAL) for consulting services provided. Mr. Dreifus did not stand for
      reelection to the Board of Directors in June 2009 but continues as a
      consultant to the Company.                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | Each option entitled the holder to purchase one of our
      common shares at a price of $1.00 per share prior to expiry on August 10,
      2014.                                                                                                                                                                                                                                                                                      

Directors do not receive cash compensation for serving as
directors. Instead they have been awarded stock options over the years. These
options are set at each annual meeting and approved by the shareholders. None of
the non-employee directors have agreements that provide for benefits upon
termination of service.

We have adopted a stock option plan. 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.

In 2008, we issued 325,000 options at an exercise price of
$1.01 per share to outside directors expiring in March 2013, if unexercised. We
issued 20,000 options to consultants at an exercise price of $1.12 per share
expiring in March 2013 if unexercised. We issued 50,000 options to a consultant
at a price of $2.31 per share which expired in April 2009. We issued 350,000
options to a newly appointed director in March 2008 at an exercise price of
$1.20 per share; of this total 275,000 vested upon issuance with the balance
vesting in three equal amounts in the following three quarters; the options were
to expire in March 2013, if unexercised. These options expired in August 2009,
45 days after Mr. Dreifus stepped down as a director of the Company.

In 2008, we issued 1,400,000 options to officers, directors and
employees at an exercise price of $1.50 per share expiring in August 2013 if
unexercised. 200,000 of these options vest only when the Company realizes
certain revenue milestones which have not been met at October 31, 2009. Of the
balance of 1,200,000 options, these vest in four equal quarterly amounts of
300,000 options per quarter commencing in August 2008 and have fully vested as
of October 31, 2009.

None of the stock options awarded in 2008 have as yet been
exercised.

31

---

In 2009, we issued 1,345,000 options to officers, directors and
employees at an exercise price of $1.00 per share expiring in August 2014 if
unexercised. None of these options have as yet been exercised.

C.     Board of Directors Practices

Our Board of Directors meets on an as required basis during the
fiscal year. In 2009 our Board of Directors met on February 4, 2009 and June 30,
2009.

Our Audit Committee of the Board of Directors has met on a
quarterly basis during fiscal 2009 for the purpose of approving the quarterly
financial statements. In addition, our Audit Committee receives regular periodic
reports from management.

All matters pertaining to our financing, contractual
arrangements and Board of Directors and management compensation are approved by
the Board of Directors. All Board of Directors meeting minutes and directors
resolutions are maintained on an up-to-date basis.

Our Compensation Committee met as required in 2009. Our
Compensation Committee approves all management compensation and all stock option
grants for recommendation to the Board of Directors.

Our Disclosure Committee met as required in 2009 to review our
various press release disclosures and to monitor our general practices relating
to our disclosure requirements

The members of the Board of Directors are appointed to a
one-year term at our annual meeting.

Audit Committee

The Board of Directors has appointed an Audit Committee
consisting of three independent directors. The members of the Audit Committee
are Andrew Brandt, Oliver Nepomuceno and David Sharpless (Chairman) each of whom
shall serve in such capacity until its 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 2009 the Audit Committee met on February 4, 2009, March 26,
2009, June 22, 2009 and September 28, 2009.

Compensation Committee

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

Disclosure Committee

The Board of Directors has appointed a Disclosure Committee
whose primary responsibility is to ensure timely and accurate disclosure of all
relevant information in accordance with the various securities regulations. Our
Disclosure Committee includes Larry Blue, an outside director, who serves as
Chairman, David Sharpless, an outside director (and Chair of our Audit
Committee) and Jason Baun, the Companys Chief Information Officer.

D.     Employees

We have nine employees, four of which serve in a management
capacity and five serve in an administrative capacity. This includes the Chief
Executive Officer and President, the Chief Financial Officer and President of
our wholly-owned subsidiary MAST INC., our Chief Information Officer and four
support staff, all (except for the President of MAST INC.) 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. We had seven employees as of October 31, 2009, 2008 and 2007.

E. Share Ownership

32

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NAME
    SHARES OWED
    OPTIONS HELD
    OPTION EXERCISE
      PRICE
    EXPIRY DATE
    % OF TOTAL1Joseph Fuda Chief Executive Officer
      and Director
    191,500
    1,450,000 900,000
      100,000 150,000
    $0.72 $0.80 $1.50
      $1.00
    05/27/2010 07/6/2011
      08/28/2013 08/25/2014
    3.12% (2,791,500)Salvatore Fuda Chairman of the Board of Directors
      and Director
    1,215,0002
    1,000,000 150,000
    $0.80 $1.00
    07/6/2011 08/25/2014
    2.66% (2,365,000)Henry Dreifus Director
    -
    250,000 100,000
      200,000
    $1.20 $1.20 $1.50
    03/12/2013 03/12/2013
      08/28/2013
    0.66% (550,000)Andrew Brandt Director
    110,000
    290,000 85,000 110,000
    $0.80 $1.50 $1.00
    7/6/2011 08/28/2013 08/25/2014
    0.67% (595,000)David Sharpless Director
    100,000
    300,000 75,000 85,000
      110,000
    $0.80 $1.01 $1.50
      $1.00
    7/6/2011 03/03/2013
      08/28/2013 08/25/2014
    0.75% (670,000)Steven Van Fleet Director
    -
    350,000 300,000 300,000 100,000
      500,000 150,000
    $0.36 $0.72 $0.80 $1.01 $1.50
      $1.00
    4/15/2012 5/27/2010 7/6/2011
      03/03/2013 28/28/2013 08/25/2014
    1.90% (1,700,000)Dan Amadori Chief Financial Officer
    326,801
    177,199 400,000
      100,000 150,000
    $0.72 $0.80 $1.50
      $1.00
    5/27/2010 7/6/2011
      08/28/2013 8/25/2014
    1.29% (1,154,000)Jason Baun Investor Relations
    -
    50,000 200,000 100,000 15,000
      80,000
    $0.63 $0.80 $0.60 $1.50 $1.00
    12/2/2010 7/6/2011 10/25/2012
      08/28/2013 08/25/2014
    0.50% (445,000)Larry Blue Director
    200,000
    100,000 300,000
      75,000 85,000 110,000
    $0.60 $0.80 $1.01
      $1.50 $1.00
    11/3/2010 7/6/2011
      03/03/2013 08/28/2013 08/25/2014
    0.97% (870,000)Oliver Nepomuceno Director
    953,572
    300,000 75,000 75,000 100,000
    $0.80 $1.01 $1.50 $1.00
    7/6/2011 03/03/2013 08/28/2013
      08/25/2014
    1.68% (1,503,572)Stephen Fleming Director of
      Subsidiary
    200,000
    -
    -
    -
    0.22% (200,000)


1 Calculated based on shares owned plus options held
as a percentage total of shares outstanding as of October 31, 2009, plus options
held. 2 These shares are held by a corporation wholly owned by a
trust established for the benefit of members of Salvatore Fuda's family.

33

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

A. Major Shareholders

No shareholder holds greater than 5% of the common shares
outstanding. As of the date of this Annual Report approximately 73% of the
issued and outstanding common shares are held by Canadian investors and
approximately 27% of the issued and outstanding shares are held by U.S.
investors.

B. Other Related Party Transactions

In June 2008, we entered into a six-month agreement with
Dreifus Associates Limited (DAL) whose major shareholder is Henry Dreifus, a
Director of the Company until June 2009. DAL provided a wide range of technical
and business development support to the Company. Our monthly cost under the
agreement was approximately $40,000. In addition, we granted Henry Dreifus
350,000 stock options at an exercise price of $1.20 per share in March 2008
coincident with his appointment as a Director. 275,000 of these options vested
at issue date, the balance vests in three equal quarterly installments of 25,000
options commencing in June 2008. These options expired unexercised in August 29,
2009, 45 days after Mr. Dreifus stepped down as a director. In August 2008, we
issued 200,000 stock options to Mr. Dreifus at our exercise price of $1.50 per
share expiring in August 2013 if unexercised. These options vest only when the
Company has achieved certain revenue milestones.

ITEM 8. FINANCIAL INFORMATION

A.     Consolidated Statements and Other Financial
Information

See Item 17  Financial Statements.

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

As of October 31, 2009 and as of February 17, 2010 there are no
legal proceedings outstanding.

B. Significant Changes

Since October 31, 2009 the Company has raised an additional
$1,243,045 through Unit private placement financings. There has been no other
significant change in our financial position since October 31, 2009.

ITEM 9. THE OFFER AND LISTING

The table below sets forth the high and low sales prices for
common shares in U.S. Dollars as reported for the periods specified. Our fiscal
year ends October 31. Our common shares are not traded in Canada.

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

|Period               | High | Low 
|-------------------- | ---- | ----
|                     |      |     
|Last six months:     |      |     
|February 2010        | 0.57 | 0.48
|January 2010         | 0.65 | 0.50
|December 2009        | 0.66 | 0.51
|November 2009        | 0.79 | 0.60
|October 2009         | 0.90 | 0.67
|September 2009       | 1.00 | 0.70
|Last eight quarters: |      |     
|Q4 2009              | 1.25 | 0.67
|Q3 2009              | 1.60 | 0.81
|Q2 2009              | 1.75 | 0.60
|Q1 2009              | 0.80 | 0.62

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|Q4 2008          | 1.30 | 0.31
|---------------- | ---- | ----
|Q3 2008          | 1.80 | 0.93
|Q2 2008          | 2.46 | 1.52
|Q1 2008          | 0.65 | 0.55
|Last five years: |      |     
|2009             | 1.75 | 0.51
|2008             | 2.60 | 0.31
|2007             | 0.85 | 0.35
|2006             | 1.33 | 0.43
|2005             | 1.15 | 0.37

On February 17, 2010, the last reported sale price for our
common shares on the OTC Bulletin Board was $0.56.

ITEM 10.     ADDITIONAL INFORMATION

A.     Share Capital

Our authorized capital consists of an unlimited number of
common shares, of which 89,383,003 shares were issued and outstanding as of
October 31, 2009, and 2,000,000 special, redeemable, voting preference shares,
referred to herein as special shares, none of which were outstanding, as of
October 31, 2009.

Additionally the Company has 10,022,199 stock options
outstanding with a weighted average exercise price of $.89 (2008: 10,930,000
options outstanding with a weighted average exercise price of $.85) and a total
of 3,416,865 outstanding warrants to acquire common shares with a weighted
average exercise price of $.82 (2008: 637,128 outstanding warrants with a
weighted average exercise price of $1.04) .

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,
a majority 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.

35

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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".

36

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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

|1. | On May 29, 2005, we entered into an employment agreement
      with Mr. Salvatore Fuda, the Chairman of the Board of Directors. The
      agreement commenced on January 1, 2005 and ending on September 30, 2009.
      In 2009 the contract was extended for an additional one year through
      December 2010. Under the terms of the agreement, the Chairman of the Board
      of Directors has been retained to provide certain management services. We
      have agreed to provide compensation based on a percentage of the increase
      of the market capitalization on a year-over-year basis commencing as of
      December 31, 2005 subject to a minimum annual compensation amount of
      $150,000 (CDN)  approximately $138,645 in U.S. dollars at year-end
      exchange rate). At our option, we can pay either cash or issue common
      shares as compensation providing that the cumulative maximum number of
      shares that we can issue under the agreement is 2 million common shares.                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2. | In May 2007, we entered into an agreement with Strategic
      Solutions, a California based engineering consulting firm. The agreement
      was for a term of one year and stipulated monthly payments of $16,000.
      Additionally, we issued 150,000 options to acquire common shares at a
      price of $0.70 per share with a one year term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In March 2008, we revised the terms of the agreement with
      Strategic Solutions and assigned more responsibility and tasks to them. We
      stipulated monthly payments of $45,600 for a ten month period through
      December, 2008. In May 2008, we extended the expiry date on the 150,000
      options granted previously to November 2008. These options expired
      unexercised in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3. | In June 2008, we entered into a six-month agreement with
      Dreifus Associates Limited (DAL) whose major shareholder Henry Dreifus,
      was a Company director. DAL provides a wide range of technical and
      business development support to the Company. Our monthly cost under the
      contract is approximately $40,000. In addition, we have granted Henry
      Dreifus 350,000 stock options at a exercise price of $1.20 per share in
      March 2008 coincident with his appointment as a Director of the Company.
      275,000 of these options vested at issue date, the balance vests in 3
      equal quarterly installments of 25,000 options commencing in June 2008. In
      August 2008, we issued 200,000 stock options to Henry Dreifus at our
      exercise price of $1.50 per share expiring in August 2013 if unexercised.
      These options vest only when the Company has achieved certain revenue
      milestones. These options expired in August 2009, 45 days after Mr.
      Dreifus did not stand for reelection as a director.

|4. | In May 2008 the Company executed the following employment
      contracts with key officers:
|-- | --------------------------------------------------------------------------------------------

| | 1. | A two-year agreement through May 2010 with its President,
      Mr. Joseph Fuda, stipulating annual base remuneration of $160,000 ($CDN)
      per year. In addition, 100,000 common stock options were awarded at a
      exercise price of $1.50 per share vesting in 25,000 share installments
      over four quarters commencing in August 2008 and expiring in August 2013
      if unexercised.                                                                                            
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 2. | A two-year agreement through May 2010 with its CFO, Mr.
      Dan Amadori stipulated annual base remuneration at $150,000 (CDN) per
      year. In addition100,000 common stock options were awarded at a exercise
      price of $1.50 per share vesting in 25,000 share installments over four
      quarters commencing in August 2008 and expiring in August 2013 if
      unexercised.                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 3. | A three-year agreement through May 2011 with the
      President of its wholly-owned subsidiary, MAST INC., Mr. Steven Van Fleet,
      who is also a director of the Company. The agreement stipulates annual
      base remuneration of $204,000 per year. In addition, 500,000 common stock
      options at a price of $1.50 per share were awarded vesting in 125,000
      share installments over four quarters commencing in August 2008 and
      expiring in August 2013 if unexercised.

|5. | In September 2008, the Company entered into a 12 month
      agreement with the Investor Relations Group (IRG) of New York City. Under
      the terms of the contract, the Company pays a monthly amount of $13,500 in
      cash and issues 25,000 common shares to IRG monthly. In May 2009, the
      Company renegotiated the monthly compensation to $7,500 in cash and 2,500
      common shares for the balance of the agreement. The agreement was not
      renewed in September 2009.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|6. | In August 2009, the Company executed a promissory note
      with Unotron Inc. The promissory note is in the principal amount of
      $200,000, bears interest at a rate of 10% payable quarterly and is secured
      by a first lien on the assets of Unotron. The promissory note matures on
      September 30, 2010.                                                                                                                                                                                                                                                                       
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|7. | Unotron Inc. and Micromem entered into a manufacturing
      agreement in 2009 that requires Micromem to develop a magnetic sensor
      based keyboard substrate that is to be integrated into Unotrons
      waterproof and washable keyboards. These keyboards can be placed within a
      commercial dishwasher to prevent diseases from being transmitted on the
      keyboard. In 2009, Micromem designed, manufactured, tested and delivered
      the initial volume of keyboards to Unotron in Hong Kong. The keyboard are
      being tested and submitted for FCC/CE certification.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|8. | In 2009 Micromem and LifeMed Technologies Inc. entered a
      manufacturing agreement pursuant to which we received a $30 million
      Purchase Order. Under the terms of the agreement, Micromem will design,
      manufacture prototypes, submit and obtain FDA 510(K) approval and
      manufacture a medical device that incorporates our magnetic sensor
      technology. The medical device is designed to provide early detection of
      abnormalities in womens breasts.                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|9. | In August 2008, the Company entered into a working
      agreement with BAE Systems whereby the Company agreed to commit up to $1
      million of funding to BAE-led development work on its sensor technology.
      The Company retains exclusive ownership of any intellectual property that
      is developed in this initiative.                                                                                                                                                                                                                                                          

In addition to the aforementioned
material contracts the Company cites several other business dealings which the
Company has undertaken to further validate its technology and which it believes
hold future potential:

| | (a) | In 2010 Micromem and NEMT, Ltd. entered into a
      manufacturing agreement to develop a magnetic device capable of detecting
      small changes in the earths magnetic signature. NEMT desires to use this
      for aerial exploration in the Bearing Sea for oil and gas reserves. The
      prototype device was designed and built and tested in the field by NEMT.
      In late 2009 NEMT discovered two oil reserves in 400 meters of water.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (b) | The Company issued a purchase order to an outside
      contractor in July 2009 for services to be performed between July 2009 
      April 2010 in the amount of $1,000,000. At October 31, 2009, the Company
      has paid a total of $131,000 to the supplier.                                                                                                                                                                                    

D.     Exchange Controls

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

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

E.     Taxation

Certain Canadian Income Tax Consequences

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

38

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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, a and at anytime during the 10 years immediately
preceding, the disposition and the shares were owned by them when they ceased to
be resident in Canada, or the shares formed part of the business property of a
"permanent establishment" that the holder has or had in Canada within the 12
months preceding the disposition.

Certain United States Federal Income Tax Consequences

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

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

39

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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.

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,
2010, 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.

40

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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%, under present law.
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.

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

41

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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 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.gov that 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.com that contains reports, proxy statements,
information statements and other material that are filed through the System for
Electronic Document Analysis and Retrieval (SEDAR).

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

I. Subsidiary Information

Not Applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Not Applicable.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not Applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

Not Applicable.

42

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

Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended, referred to herein as the
Exchange Act) as of October 31, 2009. 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
accumulate 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.

Based on managements evaluation in 2009 our Chief Executive
Officer and Chief Financial Officer concluded that, as of October 31, 2009 our
disclosure controls and procedures were not effective. A material weakness in
our internal control systems was identified by our auditors in their attestation
report dated February 17, 2010 as discussed below.

Managements Annual Report on Internal Control Over
Financial Reporting

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

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

Our Chief Executive Officer and Chief Financial Officer
assessed the effectiveness of Micromems internal control over financial
reporting as of October 31, 2009. 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, 2009, our internal control over financial
reporting was not effective with respect to its procedures to effect the timely
and complete close of its year-end financial statements which resulted in a
series of journal entries posted to finalize the financial statements over the
course of our year-end audit.

The Attestation Report dated February 17, 2010 submitted by the
independent accountants cited one material weakness. The Report is set forth in
Item 17  Financial Statements and this is discussed below along with
managements comments on compensatory procedures that it has in plan to mitigate
the risks associated with this material weakness:

Material Weakness:

In 2009, the Company identified a material weakness in certain
of its procedures to affect the timely and complete close of its year-end
financial statements. A series of journal entries over the course of the audit
were posted to finalize the financial statements. This matter was also
identified as a material weakness in 2008.

Managements Response:

The Companys Audit Committee met on a regular basis during the
2009 fiscal year and met at each quarter-end for the purpose of approving the
quarterly financial statements. In each case, the quarterly financial statements
were reviewed in light of the Companys current business initiatives and in accordance with
required US & Canadian generally accepted accounting principles. Management
acknowledges that a more rigorous assessment and process of determining and
evaluating required adjustments on a quarterly basis is required, perhaps in
conjunction with our external accountants, to ensure that any potential
adjustments are addressed on a timely basis. However, this matter was not
corrected in 2009 and remained a material weakness as of October 31, 2009.

43

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Managements Conclusions:

|a) | Management acknowledges the material weakness cited by
      our auditors in conducting their year-end audit work.                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                      
|b) | Management will formalize the procedures and controls
      required as part of our quarterly and annual reporting process to ensure
      that procedures to effect the timely and complete close of our financial
      statements.

2008 Report:

For the fiscal year ended October 31, 2008, the Attestation
Report submitted by the independent accountants cited three material
weaknesses.

Management has considered these material weaknesses and
introduced changes to its procedures and controls in 2009. The material
weaknesses cited in the 2008 Attestation Report and the procedures which
management adopted in 2009 are discussed below:

| | i.   | In 2008, the first material weakness cited by our
      independent accountants was that the Company did not have a formal
      schedule of authority for approval of various expenditures based on the
      nature of the transaction. Our independent accountants suggested that we
      create a formal schedule of authority providing financial and
      non-financial limits and listing all individuals of authority to approve
      the transactions in contract management, travel and entertainment,
      purchases, payables, payments, investments, cash management and sales
      receipts and receivables. In 2009, we assigned individuals on our staff to
      address all of these issues, we made a number of changes in our
      authorities schedule and senior management played a more proactive role in
      reviewing and approving these transactions.                                                                             
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ii.  | In 2008, the second material weakness cited was that
      there was inadequate segregation of duties in the travel and entertainment
      payment cycle, in the payables, purchases and cash cycles and in the
      approval of related party cross- charges for common overheads. The
      recommendations were that there should be more effective segregation of
      the duties relating to the handling of cheques, posting of payments and
      posting of invoices. In 2009, management did develop a more formalized
      travel and entertainment policy and we have reallocated certain job
      responsibilities within the accounting and office staff so as to realize
      better segregation of duties, while acknowledging the limitations of our
      ability to effect full segregation of duties given our small staff
      complement.                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iii. | In 2008, the third material weakness cited by the
      independent accountants was that the Companys procedures to effect the
      timely and complete close of its year-end financial statements prior to
      commencement of the year-end external audit. A series of journal entries
      over the course of the audit were posted to finalize the financial
      statements. The risk cited was that there could be reporting errors that
      could be undetected by management. In 2009, senior management, working
      with the accounting staff, conducted more extensive and in-depth reviews
      of our reporting package on a quarterly basis and conducted a more
      extensive review of our year-end internal reporting package prior to
      commencement of the audit. Nonetheless during the audit of our financial
      statements at October 31, 2009, this issue remained as a material weakness
      in 2009 as described above.

Changes in Internal Control Over Financial Reporting

Other then as stated above, no other 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, 2009
that has materially affected or is reasonable likely to materially affect, our
internal controls over financial reporting.

Item 15T.     Controls and Procedures

Not applicable

44

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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

In May 2009 the Audit Committee of the Board of Directors
dismissed Schwartz Levitsky Feldman LLP as our independent auditors and engaged
Collins Barrow Toronto LLP as our independent auditors.

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, 2009 and 2008, and fees billed for
other services rendered by our auditors including our offerings of securities
and tax services.

|                         |   | 2008   |  |   | 2009   | 
|------------------------ | - | ------ |  | - | ------ | 
|                         |   |        |  |   |        | 
|Audit Fees               | $ | 75,000 |  | $ | 60,000 | 
|Audit Related Fees (SOX) |   | 30,000 |  |   | 35,000 | 
|Tax Fees                 |   | 35,000 |  |   | 10,000 | 
|All Other Fees           |   | -      |  |   | 5,000  | 

Audit Fees

In 2008 we paid a total of $75,000 to Schwartz Levitsky Feldman
LLP for audit services. In 2009 we paid a total of $60,000 to Collins Barrow
Toronto LLP for audit services.

Audit Related Fees

We paid $30,000 of audit related fees to Schwartz Levitsky
Feldman LLP in 2008 relating to our SOX compliance audit. We paid $35,000 of
audit related fees to Collins Barrow Toronto LLP in 2009 relating to our SOX
compliance audit.

Tax Fees

We paid 35,000 of tax related fees to Schwartz Levitsky Feldman
LLP for services in 2008. We paid $10,000 of tax-related fees to Collins Barrow
Toronto LLP for services in 2009.

Pre-approval policies

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

45

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

Not applicable.

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

Not applicable.

Item 16F.     Change in Registrants Certifying Accountant

On June 30, 2009 Schwartz Levitsky Feldman LLP (SLF) was
dismissed as our independent auditors for the Company. On June 30, 2009, the
Company engaged Collins Barrow LLP (Collins Barrow) as its principal
independent accountant. This decision to dismiss SLF and to engage Collins
Barrow was approved by the Audit Committee.

Management of the Company has not had any disagreements with
SLF related to any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. For the fiscal years ended
October 31, 2008 and 2007 and any subsequent interim period through SLFs
termination on June 30, 2009, there has been no disagreement between the Company
and SLF on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of SLF would have caused it to make a reference to the
subject matter of the disagreement in connection with its reports for such
years.

SLFs report on the Companys financial statements as of
October 31, 2008 and 2007 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.

For the fiscal years ended October 31, 2008 and 2007, and for
the subsequent interim period through June 30, 2009 there were no reportable
events as described in Item 16F(a)(1)(v). The Company requested that SLF furnish
it with a letter addressed to the SEC stating whether or not it agrees with the
above statements. A copy of such letter is filed as an Exhibit to this Form
20-F.

Item 16G.     Corporate Governance

Not applicable

Item 17.     Financial Statements

---

Consolidated Financial Statements of

MICROMEM TECHNOLOGIES INC.

Years ended October 31, 2009 and 2008

---







|Report of Independent Registered
      Chartered Accountants
|------------------------------------------------------------

To the Board of Directors and Shareholders of Micromem
Technologies Inc.

We have audited the accompanying consolidated balance sheet of
Micromem Technologies Inc. (the Company) as at October 31, 2009, and the
related consolidated statements of operations and deficit and cash flows for the
year ended October 31, 2009. These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit of the Companys financial statements 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 plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. A financial statement audit also includes assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provide a
reasonable basis for our opinion.

The consolidated financial statements as at and for the years
ended October 31, 2008 and 2007 and were audited by other auditors who expressed
opinions without reservation on those consolidated financial statements in their
report dated February 16, 2009.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as at October 31, 2009 and the results of its operations and its cash
flows for the year ended October 31, 2009 in accordance with Canadian generally
accepted accounting principles.

We also have audited, Micromem Technologies Inc.'s internal
control over financial reporting as of October 31, 2009, based on criteria
established in Internal Control  Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) and issued our
report dated February 17, 2010.



Collins Barrow Toronto LLPChartered Accountants
Licensed Public Accountants

Toronto, Ontario 
  February 17, 2010

| | F-1 | 
| | --- | 

---





Comments by Auditors for Readers on Canada  U.S. Reporting
Differences

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) when
the financial statements are affected by conditions and events that cast
substantial doubt on the Companys ability to continue as a going concern, such
as those described in Note 2 to the consolidated financial statements. Our
report to the shareholders dated February 17, 2010 is expressed in accordance
with Canadian reporting standards which do not permit a reference to such events
and conditions in the auditors report when these are adequately disclosed in
the financial statements.

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) in
the report of Independent Registered Chartered Accountants on the consolidated
financial statements which references the type of opinion the auditor provided
on the internal control over financial reporting. In line with this reporting
standard we would report that we provided a qualified opinion on the internal
controls over financial reporting. However, our report to the board of directors
and shareholders dated February 17, 2010 is expressed in accordance with
Canadian reporting standards which do not require a reference to the type of
opinion provided by the auditor on the internal controls over financial
reporting.

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) in
the report of Independent Registered Chartered Accountants on the internal
control over financial reporting which references the type of opinion the
auditor provided on the consolidated financial statements. In line with this
reporting standard we would report that we provided an unqualified opinion on
the consolidated financial statements. However, our report to the board of
directors and shareholders dated February 17, 2010 is expressed in accordance
with Canadian reporting standards which do not require a reference to the type
of opinion provided by the auditor on the consolidated financial statements.





Collins Barrow Toronto LLPChartered Accountants
Licensed Public Accountants

Toronto, Ontario 
  February 17, 2010

| | F-2 | 
| | --- | 

---



| |  | 
| |  | 

Report of Independent Registered Chartered Accountants

To the Board of Directors and Shareholders of Micromem Technologies
  Inc.

We have audited Micromem Technologies Inc.s internal control
over financial reporting as at October 31, 2009, based on criteria established
in Internal Control  Integrated Framework 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 in the accompanying Managements Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial
reporting 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. An audit of internal control over financial reporting includes
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, and performing such other procedures as we consider 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 generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and
procedures that: (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) 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 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.



| | F-3 | 
| | --- | 



---

A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the Companys annual
financial statements will not be prevented or detected on a timely basis. As at
October 31, 2009 a material weakness was identified in certain of the Companys
procedures to affect the timely and complete close of its year-end financial
statement which resulted in a series of journal entries being posted over the
course of the audit to finalize the October 31, 2009 consolidated financial
statements.

We considered this material weakness in determining the nature,
timing, and extent of audit tests applied in our audit of the October 31, 2009
consolidated financial statements, and our opinion regarding the effectiveness
of the Companys internal control over financial reporting does not affect our
opinion on those consolidated financial statements.

In our opinion, the Company did not maintain, in all material
respects, effective internal control over financial reporting as at October 31,
2009 based on criteria established in Internal Control  Integrated Framework
issued by the 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 financial statements of
Micromem Technologies Inc. and issued our report dated February 17, 2010.

We do not express an opinion or any form of assurance on
managements assessment with regard to corrective measures that will be
implemented to address the material weakness relating to reconciliation between
Canadian generally accepted accounting principles and accounting principles
generally accepted in the United States of America, in the financial reporting
process.



Collins Barrow Toronto LLPChartered Accountants
Licensed Public Accountants

Toronto, Ontario February 17, 2010



| | F-4 | 
| | --- | 

---



INDEPENDENT AUDITORS REPORT

To the Shareholders of 
Micromem Technologies Inc. 
(A Development Stage Company)

We have audited the consolidated balance sheets of Micromem
Technologies Inc. (the "Company") as at October 31, 2008 and 2007, and the
consolidated statements of operations, comprehensive loss and deficit and cash
flows for each of the years in the three-year period ended October 31, 2008.
These consolidated financial statements are the responsibility of the Company's
management. 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 with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements
present fairly, in all material respects, the financial position of the Company
as of October 31, 2008 and 2007 and the results of its operations and its cash
flows for each of the years in the three year period ended October 31, 2008 in
accordance with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles may vary in
certain significant respects from US generally accepted accounting principles.
Information relating to the nature and effects of such changes is presented in
note 18 to the consolidated financial statements.

The consolidated statement of operations, comprehensive loss
and deficit, cash flows and shareholders deficiency for the cumulative period
from September 3, 1997 to October 31, 2004 were audited by other auditors who
expressed opinions without reservation on those statements in their reports
dated February 11, 2007, December 5, 2003, January 27, 2003, November 16, 2001,
December 13, 2000, February 25, 2000 and December 20, 1999.



|                  | /s/ SCHWARTZ LEVITSKY FELDMAN LLP
|----------------- | ---------------------------------
|                  | SCHWARTZ LEVITSKY FELDMAN LLP    
|Toronto Ontario   | Chartered Accountants            
|February 16, 2009 | Licensed Public Accountants      



| | 1167 Caledonia Road 
    Toronto, Ontario M6A 2X1 
    Tel: 416 785 5353 
    Fax: 416 785 5663
| | -----------------------------------------------------------------------------------------------

F-5

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MICROMEM TECHNOLOGIES INC. 
  (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS(Expressed in United
States dollars)

|As at                                                         |   | October 31, 2009 |   |   | October 31, 2008 |  
|------------------------------------------------------------- | - | ---------------- | - | - | ---------------- | -
|                                                              |   |                  |   |   |                  |  
|                                                              |   |                  |   |   |                  |  
|Assets                                                        |   |                  |   |   |                  |  
|Current assets:                                               |   |                  |   |   |                  |  
|Cash and
      cash equivalents (Note 20)                     | $ | 106,110          |   | $ | 475,235          |  
|Deposits and other
      receivables                          |   | 83,486           |   |   | 128,911          |  
|Promissory note
      receivable (Note 7)                     |   | 200,000          |   |   | -                |  
|                                                              |   | 389,596          |   |   | 604,146          |  
|                                                              |   |                  |   |   |                  |  
|Property and equipment, net (Note 8)                          |   | 24,422           |   |   | 26,321           |  
|Deferred development costs (Note 9)                           |   | 2,000,611        |   |   | -                |  
|Patents, net
      (Note 10)                                  |   | 147,850          |   |   | -                |  
|                                                              | $ | 2,562,479        |   | $ | 630,467          |  
|                                                              |   |                  |   |   |                  |  
|Liabilities and Shareholders' Equity
      (Deficiency)       |   |                  |   |   |                  |  
|Current liabilities:                                          |   |                  |   |   |                  |  
|Accounts payable and
      accrued liabilities                |   | 1,039,640        |   |   | 942,225          |  
|                                                              |   |                  |   |   |                  |  
|Shareholders' Equity (Deficiency):                            |   |                  |   |   |                  |  
|Share capital: (Note 11)                                      |   |                  |   |   |                  |  
|Authorized:                                                   |   |                  |   |   |                  |  
|2,000,000 special preference shares,
      redeemable, voting |   |                  |   |   |                  |  
|Unlimited common shares
      without par value               |   |                  |   |   |                  |  
|Issued and outstanding:                                       |   |                  |   |   |                  |  
|89,383,003 common shares (
      2008: 82,936,667)            |   | 48,494,180       |   |   | 44,380,134       |  
|Contributed surplus
      (Notes 12)                          |   | 24,145,911       |   |   | 22,114,421       |  
|Deficit accumulated
      during the development stage        |   | (71,117,252      | ) |   | (66,806,313      | )
|                                                              |   | 1,522,839        |   |   | (311,758         | )
|                                                              | $ | 2,562,479        |   | $ | 630,467          |  
|                                                              |   |                  |   |   |                  |  
|Going Concern (Note 2)                                        |   |                  |   |   |                  |  
|Related Party Transactions (Note 14)                          |   |                  |   |   |                  |  
|Commitments (Note 15)                                         |   |                  |   |   |                  |  
|Contingencies (Note 16)                                       |   |                  |   |   |                  |  
|Subsequent Events (Note 20)                                   |   |                  |   |   |                  |  



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

See accompanying notes.

F-6

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MICROMEM TECHNOLOGIES INC. 
  (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS AND
DEFICIT(Expressed in United States dollars)

For the year ended October 31, 2009 (with comparative data)

|                                                                          |   |                  |   |   |                  |   |   |                  |   |   | Period from               |  
|------------------------------------------------------------------------- | - | ---------------- | - | - | ---------------- | - | - | ---------------- | - | - | ------------------------- | -
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   | September 3, 1997         |  
|                                                                          |   | October 31, 2009 |   |   | October 31, 2008 |   |   | October 31, 2007 |   |   | to October
      31, 2009 |  
|                                                                          |   | (12 mos          | ) |   | (12 mos          | ) |   | (12 mos          | ) |   |                           |  
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Costs and expenses (income):                                              |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Administration                                                            | $ | 937,146          |   | $ | 604,203          |   | $ | 223,177          |   | $ | 4,503,191                 |  
|Professional, other fees, and salaries (Note
      14)                    |   | 3,240,960        |   |   | 3,304,771        |   |   | 1,631,309        |   |   | 44,967,259                |  
|Research and development (Note
      9)                                   |   | 13,880           |   |   | 1,063,508        |   |   | 682,331          |   |   | 8,885,520                 |  
|Travel and entertainment                                                  |   | 223,586          |   |   | 398,474          |   |   | 141,200          |   |   | 2,196,186                 |  
|Amortization of property and
      equipment (Note 8)                     |   | 11,567           |   |   | 5,210            |   |   | -                |   |   | 361,243                   |  
|Foreign exchange loss (gain)                                              |   | (28,153          | ) |   | 52,321           |   |   | 135,947          |   |   | 103,647                   |  
|Amortization of patents and
      trademarks                              |   | -                |   |   | -                |   |   | -                |   |   | 67,596                    |  
|Operating leases                                                          |   | -                |   |   | -                |   |   | -                |   |   | 109,412                   |  
|Loss on sale of investment                                                |   | -                |   |   | -                |   |   | -                |   |   | 54,606                    |  
|Write-down of investment                                                  |   | -                |   |   | -                |   |   | -                |   |   | 61,020                    |  
|Write-down of royalty rights                                              |   | -                |   |   | -                |   |   | -                |   |   | 10,000,000                |  
|Write-down of patents and trademarks                                      |   | -                |   |   | -                |   |   | -                |   |   | 299,820                   |  
|Interest expense                                                          |   | -                |   |   | -                |   |   | -                |   |   | 75,027                    |  
|Loss
      on sale of property and equipment                              |   | -                |   |   | -                |   |   | -                |   |   | 65,460                    |  
|Loss before under noted                                                   |   | 4,398,986        |   |   | 5,428,487        |   |   | 2,813,964        |   |   | 71,749,987                |  
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Interest and other income                                                 | $ | (88,047          | ) | $ | (11,762          | ) | $ | (2,586           | ) | $ | (652,412                  | )
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Loss before income taxes                                                  |   | (4,310,939       | ) |   | (5,416,725       | ) |   | (2,811,378       | ) |   | (71,097,575               | )
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Income taxes (Note 13)                                                    |   | -                |   |   | -                |   |   | -                |   |   | 19,677                    |  
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Net loss for the year                                                     |   | (4,310,939       | ) |   | (5,416,725       | ) |   | (2,811,378       | ) |   | (71,117,252               | )
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Deficit accumulated during the development stage,
      beginning of year |   | (66,806,313      | ) |   | (61,389,588      | ) |   | (58,578,210      | ) |   | -                         |  
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Deficit accumulated during the development stage, end of
      year       | $ | (71,117,252      | ) | $ | (66,806,313      | ) | $ | (61,389,588      | ) | $ | (71,117,252               | )
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Loss per share - basic and diluted                                        |   | (0.05            | ) |   | (0.07            | ) |   | (0.04            | ) |   | (1.28                     | )
|                                                                          |   |                  |   |   |                  |   |   |                  |   |   |                           |  
|Weighted average number of shares                                         |   | 86,400,439       |   |   | 78,012,115       |   |   | 70,685,153       |   |   | 55,774,305                |  

See accompanying notes.

F-7

---

MICROMEM TECHNOLOGIES INC. 
  (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in
United States dollars)

For the year ended October 31, 2009 (with comparative
data)

|                                                                                                           |   |              |   |   |              |   |   |              |   |   | Period from            |  
|---------------------------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | - | - | ---------------------- | -
|                                                                                                           |   |              |   |   |              |   |   |              |   |   | September 03, 1997     |  
|                                                                                                           |   | Oct.31, 2009 |   |   | Oct.31, 2008 |   |   | Oct.31, 2007 |   |   | to Oct.
      31, 2009 |  
|                                                                                                           |   | (12 mos      | ) |   | (12 mos      | ) |   | (12 mos      | ) |   |                        |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|Cash flows from operating activities:                                                                      |   |              |   |   |              |   |   |              |   |   |                        |  
|Net loss for the period                                                                                    | $ | (4,310,939   | ) | $ | (5,416,725   | ) | $ | (2,811,378   | ) | $ | (71,117,252            | )
|Adjustments to reconcile
      loss for the period 
             to net cash used in operating activities: |   |              |   |   |              |   |   |              |   |   |                        |  
|Amortization of
      patents and trademarks                                                               |   |              |   |   | -            |   |   |              |   |   | 67,596                 |  
|Amortization of property and equipment                                                                     |   | 11,567       |   |   | 5,210        |   |   |              |   |   | 546,463                |  
|Stock option
      expense                                                                                 |   | 1,951,569    |   |   | 1,041,414    |   |   | 269,216      |   |   | 24,881,980             |  
|Loss on sale of investment                                                                                 |   | -            |   |   | -            |   |   |              |   |   | 54,606                 |  
|Write down of
      investment                                                                             |   | -            |   |   | -            |   |   |              |   |   | 61,020                 |  
|Loss on disposal of property and equipment                                                                 |   | -            |   |   | -            |   |   |              |   |   | 65,460                 |  
|Shares paid to
      supplier                                                                              |   | 173,125      |   |   | -            |   |   |              |   |   | 173,125                |  
|Write-down of royalty rights                                                                               |   | -            |   |   | -            |   |   |              |   |   | 10,000,000             |  
|Write-down of
      patents and trademarks                                                                 |   | -            |   |   | -            |   |   |              |   |   | 299,820                |  
|Share compensation expense                                                                                 |   | -            |   |   | -            |   |   |              |   |   | 7,285,696              |  
|Non-cash wages and
      salaries                                                                          |   | -            |   |   | -            |   |   |              |   |   | 34,000                 |  
|Increase in deposits and other receivables                                                                 |   | (154,575     | ) |   | (44,254      | ) |   | (25,919      | ) |   | (274,889               | )
|Increase (decrease) in accounts payable 
                     
      and accrued liabilities               |   | 97,415       |   |   | (673,809     | ) |   | 946,724      |   |   | 1,173,855              |  
|Net cash used in operating activities                                                                      |   | (2,231,838   | ) |   | (5,088,164   | ) |   | (1,621,357   | ) |   | (26,748,520            | )
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|Cash flows from investing activities:                                                                      |   |              |   |   |              |   |   |              |   |   |                        |  
|Purchase of property and equipment                                                                         |   | (9,668       | ) |   | (31,531      | ) |   |              |   |   | (770,803               | )
|Proceeds on disposal of
      property and equipment                                                       |   | -            |   |   | -            |   |   |              |   |   | 134,458                |  
|Patents and trademarks                                                                                     |   | (147,850     | ) |   | -            |   |   |              |   |   | (515,266               | )
|Deferred development
      costs                                                                           |   | (2,000,611   | ) |   |              |   |   |              |   |   | (2,000,611             | )
|Sale of available-for-sale Investment                                                                      |   | -            |   |   | -            |   |   |              |   |   | 260,641                |  
|Royalty rights                                                                                             |   | -            |   |   | -            |   |   |              |   |   | (2,000,000             | )
|Net cash used in
      investing activities                                                                |   | -2,158,129   |   |   | -31,531      |   |   |              |   |   | -4,891,581             |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|Cash flows from financing activities:                                                                      |   |              |   |   |              |   |   |              |   |   |                        |  
|Issue of common shares                                                                                     |   | 4,020,842    |   |   | 5,350,355    |   |   | 1,459,230    |   |   | 30,566,800             |  
|Subscriptions received                                                                                     |   | -            |   |   | -            |   |   |              |   |   | 598,686                |  
|Net proceeds from shareholder's loan                                                                       |   | -            |   |   | -            |   |   |              |   |   | 544,891                |  
|Loan proceeds from
      Avanticorp International Inc.                                                     |   | -            |   |   | -            |   |   |              |   |   | 112,031                |  
|Rights issue costs                                                                                         |   | -            |   |   | -            |   |   |              |   |   | (76,197                | )
|Net cash provided by financing activities                                                                  |   | 4,020,842    |   |   | 5,350,355    |   |   | 1,459,230    |   |   | 31,746,211             |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|Increase (decrease) in cash and cash
      equivalents                                                     |   | (369,125     | ) |   | 230,660      |   |   | (162,127     | ) |   | 106,110                |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|Cash and cash equivalents, beginning of year                                                               |   | 475,235      |   |   | 244,575      |   |   | 406,702      |   |   | -                      |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   | -                      |  
|Cash and cash equivalents, end of year                                                                     | $ | 106,110      |   | $ | 475,235      |   | $ | 244,575      |   | $ | 106,110                |  
|                                                                                                           |   |              |   |   |              |   |   |              |   |   |                        |  
|Supplemental cash flow information:                                                                        |   |              |   |   |              |   |   |              |   |   |                        |  
|Interest paid                                                                                              |   | -            |   |   | -            |   |   | -            |   |   | 76,987                 |  
|Income taxes paid                                                                                          |   | -            |   |   | -            |   |   | -            |   |   | 66,722                 |  

See accompanying notes.

F-8

---

MICROMEM TECHNOLOGIES INC. 
  (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(DEFICIENCY)(Expressed in United States dollars)

|For the year ended
      October 31, 2009 (with comparative data)                             |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|--------------------------------------------------------------------------------------------- |  | ---------- |  | - | ------------- |  | - | ----------- | - | - | -------------- | - | - | ------------------------- | -
|                                                                                              |  | Number of  |  |   | Share Capital |  |   | Contributed |   |   | Deferred Share |   |   | Deficit
      Accumulated |  
|                                                                                              |  | Shares     |  |   |               |  |   | Surplus     |   |   | Compensation   |   |   | During                    |  
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   | Development stage         |  
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Micromem share capital, October 31, 1998                                                      |  | 3,490,643  |  | $ | -             |  | $ | -           |   | $ | -              |   | $ | -                         |  
|Exercise of directors stock options                                                          |  | 490,000    |  |   | -             |  |   | -           |   |   | -              |   |   | -                         |  
|Pageant share capital, October 31, 1998                                                       |  | -          |  |   | 1             |  |   | -           |   |   | -              |   |   | -                         |  
|Net loss for the year                                                                         |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (500,992                  | )
|Common shares of Pageant, December 4, 1998                                                    |  | -          |  |   | 4,999         |  |   | -           |   |   | -              |   |   | -                         |  
|Assigned fair
      value of net assets                                                       |  | 32,000,000 |  |   | 549,140       |  |   | -           |   |   | -              |   |   | -                         |  
|Micromem share capital, September 11, 1999                                                    |  | 35,980,643 |  |   | 554,140       |  |   | -           |   |   | -              |   |   | (500,992                  | )
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Exercise of common share purchase warrants
      for cash                                     |  | 120,676    |  |   | 164,053       |  |   | -           |   |   | -              |   |   | -                         |  
|Private placement of common shares for cash, May 17, 1999                                     |  | 350,000    |  |   | 1,050,000     |  |   | -           |   |   | -              |   |   | -                         |  
|Shareholder loan forgiven                                                                     |  | -          |  |   | -             |  |   | 544,891     |   |   | -              |   |   | -                         |  
|Exercise of stock options for cash                                                            |  | 100,000    |  |   | 300,000       |  |   | -           |   |   | -              |   |   | -                         |  
|Net loss for the year                                                                         |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (5,207,787                | )
|Balance, October 31, 1999                                                                     |  | 36,551,319 |  |   | 2,068,193     |  |   | 544,891     |   |   | -              |   |   | (5,708,779                | )
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Exercise of common share purchase warrants for cash                                           |  | 182,087    |  |   | 274,717       |  |   | -           |   |   | -              |   |   | -                         |  
|Exercise of stock options for cash                                                            |  | 100,000    |  |   | 300,000       |  |   | -           |   |   | -              |   |   | -                         |  
|Deferred share compensation                                                                   |  | -          |  |   | -             |  |   | 2,711,881   |   |   | (453,219       | ) |   | -                         |  
|Private placement of common shares for
      cash, February 10, 2000                          |  | 2,000,000  |  |   | 5,000,000     |  |   | -           |   |   | -              |   |   | -                         |  
|Common shares issued pursuant to compensation agreements,
      March 15, 2000                |  | 901,110    |  |   | 4,206,447     |  |   | -           |   |   | -              |   |   | -                         |  
|Stock options issued to
      directors/consultants                                           |  | -          |  |   | -             |  |   | 9,681,257   |   |   | -              |   |   | -                         |  
|Net loss for the
      year                                                                   |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (16,940,613               | )
|Balance, October 31, 2000                                                                     |  | 39,734,516 |  |   | 11,849,357    |  |   | 12,938,029  |   |   | (453,219       | ) |   | (22,649,392               | )
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Exercise of common share purchase warrants
      for cash                                     |  | 362,450    |  |   | 554,655       |  |   | -           |   |   | -              |   |   | -                         |  
|Common shares issued under rights offering November 20,
      2000                            |  | 304,674    |  |   | 1,119,058     |  |   | -           |   |   | -              |   |   | -                         |  
|Exercise of stock options for cash                                                            |  | 800,000    |  |   | 2,400,000     |  |   | -           |   |   | -              |   |   | -                         |  
|Deferred share compensation                                                                   |  | -          |  |   | -             |  |   | (453,219    | ) |   | 453,219        |   |   | -                         |  
|Stock-based compensation                                                                      |  | -          |  |   | -             |  |   | 34,000      |   |   | -              |   |   | -                         |  
|Exercise of directors stock options for cash, January 17,
      2001                         |  | 714,686    |  |   | 71,469        |  |   | -           |   |   | -              |   |   | -                         |  
|Common shares issued pursuant to
      compensatory stock options, at                         |  | -          |  |   | 1,581,242     |  |   | (1,581,242  | ) |   | -              |   |   | -                         |  
|Adjustment-share compensation expenses                                                        |  | -          |  |   | -             |  |   | (677,420    | ) |   | -              |   |   | -                         |  
|Common shares issued pursuant to
      compensation agreement, January 23, 2001               |  | 11,192     |  |   | 66,461        |  |   | -           |   |   | -              |   |   | -                         |  
|Private placement of common shares for cash, March 21, 2001                                   |  | 2,000,000  |  |   | 4,000,000     |  |   | -           |   |   | -              |   |   | -                         |  
|Common shares issued under asset purchase
      agreement to Estancia Limited, March 14, 2001 |  | 2,007,831  |  |   | 8,000,000     |  |   | -           |   |   | -              |   |   | -                         |  
|Compensation shares due but not issued                                                        |  | -          |  |   | -             |  |   | 1,431,545   |   |   | -              |   |   | -                         |  
|Stock options issued to
      directors/consultants                                           |  | -          |  |   | -             |  |   | 4,627,752   |   |   | -              |   |   | -                         |  
|Net loss for the
      year                                                                   |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (9,187,377                | )
|Balance, October 31, 2001                                                                     |  | 45,935,349 |  |   | 29,642,242    |  |   | 16,319,445  |   |   | -              |   |   | (31,836,769               | )
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Stock options issued to
      directors/consultants                                           |  | -          |  |   | -             |  |   | 1,832,500   |   |   | -              |   |   | -                         |  
|Shares issued pursuant to compensatory agreement, March 26,
      2002                        |  | 765,588    |  |   | 1,431,545     |  |   | (1,431,545  | ) |   | -              |   |   | -                         |  
|Net loss for the year                                                                         |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (14,565,515               | )
|Balance, October 31, 2002                                                                     |  | 46,700,937 |  |   | 31,073,787    |  |   | 16,720,400  |   |   | -              |   |   | (46,402,284               | )
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Private placement of common shares for cash, August 13,
      2003                            |  | 2,031,250  |  |   | 162,500       |  |   | -           |   |   | -              |   |   | -                         |  
|Net loss for the year                                                                         |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (1,767,965                | )
|Stock options
      issued to directors/consultants                                           |  |            |  |   |               |  |   | 318,000     |   |   |                |   |   |                           |  
|Balance, October 31, 2003                                                                     |  | 48,732,187 |  |   | 31,236,287    |  |   | 17,038,400  |   |   | -              |   |   | (48,170,249               | )
|                                                                                              |  |            |  |   |               |  |   |             |   |   |                |   |   |                           |  
|Private placement                                                                             |  | 800,000    |  |   | 73,000        |  |   | -           |   |   | -              |   |   | -                         |  
|Exercise of common share warrants                                                             |  | 3,231,250  |  |   | 264,500       |  |   | -           |   |   | -              |   |   | -                         |  
|Exercise of options for cash                                                                  |  | 5,300,000  |  |   | 530,000       |  |   | -           |   |   | -              |   |   | -                         |  
|Stock options issued to consultant                                                            |  | -          |  |   | -             |  |   | 1,379,970   |   |   | -              |   |   | -                         |  
|Net loss for the year                                                                         |  | -          |  |   | -             |  |   | -           |   |   | -              |   |   | (2,314,298                | )
|Balance at October 31, 2004                                                                   |  | 58,063,437 |  | $ | 32,103,787    |  | $ | 18,418,370  |   | $ | -              |   | $ | (50,484,547               | )

F-9

---

MICROMEM TECHNOLOGIES INC. 
  (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(DEFICIENCY)(Expressed in United States dollars)

|For the year ended
      October 31, 2009 (with comparative data)      |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|---------------------------------------------------------------------- |  | ---------- |  | - | ------------- | - | - | ----------- | - | - | -------------- |  | - | ----------------------- | -
|                                                                       |  | Number of  |  |   | Share Capital |   |   | Contributed |   |   | Deferred Share |  |   | Deficit
    Accumulated |  
|                                                                       |  | Shares     |  |   |               |   |   | Surplus     |   |   | Compensation   |  |   | During                  |  
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   | Development stage       |  
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|Balance, October 31, 2004                                              |  | 58,063,437 |  | $ | 32,103,787    |   | $ | 18,418,370  |   | $ | -              |  | $ | (50,484,547             | )
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|Exercise of common share purchase warrants
      for cash              |  | 2,431,250  |  |   | 206,500       |   |   | -           |   |   | -              |  |   | -                       |  
|Private placement of common shares for cash                            |  | 2,342,334  |  |   | 1,472,500     |   |   | -           |   |   | -              |  |   | -                       |  
|Exercise of stock options                                              |  | 1,820,000  |  |   | 553,600       |   |   | -           |   |   | -              |  |   | -                       |  
|Settlement of accounts payable for common shares                       |  | 62,428     |  |   | 43,700        |   |   | -           |   |   | -              |  |   | -                       |  
|Stock options issued to
      consultants/employees                    |  | -          |  |   | -             |   |   | 1,721,742   |   |   | -              |  |   | -                       |  
|Legal expenses relating to private placements                          |  | -          |  |   | (75,000       | ) |   | -           |   |   | -              |  |   | -                       |  
|Net loss                                                               |  | -          |  |   | -             |   |   | -           |   |   | -              |  |   | (4,035,483              | )
|Transfer to
      contributed surplus (restatement)                    |  | -          |  |   | (264,000      | ) |   | 264,000     |   |   | -              |  |   | -                       |  
|Balance at October 31, 2005                                            |  | 64,719,449 |  |   | 34,041,087    |   |   | 20,404,112  |   |   | -              |  |   | (54,520,030             | )
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|Exercise of stock options                                              |  | 3,550,000  |  |   | 1,064,980     |   |   | -           |   |   | -              |  |   | -                       |  
|Stock options issued to consultants/employees                          |  | -          |  |   | -             |   |   | 2,058,560   |   |   | -              |  |   | -                       |  
|Private placement of common shares for cash                            |  | 150,000    |  |   | 75,000        |   |   | -           |   |   | -              |  |   | -                       |  
|Exercise of common share purchase warrants for cash                    |  | 771,850    |  |   | 485,548       |   |   | -           |   |   | -              |  |   | -                       |  
|Net loss                                                               |  | -          |  |   | -             |   |   | -           |   |   | -              |  |   | (4,058,180              | )
|Transfer to
      contributed surplus (restatement)                    |  | -          |  |   | 1,026,738     |   |   | (1,026,738  | ) |   | -              |  |   | -                       |  
|Balance at October 31, 2006                                            |  | 69,191,299 |  |   | 36,693,353    |   |   | 21,435,934  |   |   |                |  |   | (58,578,210             | )
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|Exercise of stock options                                              |  | 1,700,000  |  |   | 552,000       |   |   | -           |   |   | -              |  |   | -                       |  
|Transfer from contributed surplus                                      |  | -          |  |   | 340,122       |   |   | (340,122    | ) |   | -              |  |   | -                       |  
|Price adjustment on outstanding warrants                               |  | -          |  |   | (1,326,308    | ) |   | 1,326,308   |   |   | -              |  |   | -                       |  
|Stock options issued to consultants/employees                          |  | -          |  |   | -             |   |   | 86,787      |   |   | -              |  |   | -                       |  
|Stock options issued to Directors                                      |  | -          |  |   | -             |   |   | 96,945      |   |   | -              |  |   | -                       |  
|Warrants issued to consultants                                         |  | -          |  |   | -             |   |   | 85,484      |   |   | -              |  |   | -                       |  
|Exercise of common share purchase warrants
      for cash              |  | 477,500    |  |   | 191,000       |   |   | -           |   |   | -              |  |   | -                       |  
|Private placement of common shares for cash                            |  | 1,577,368  |  |   | 716,230       |   |   | -           |   |   | -              |  |   | -                       |  
|Net loss                                                               |  | -          |  |   | -             |   |   | -           |   |   | -              |  |   | (2,811,378              | )
|Balance at October 31, 2007                                            |  | 72,946,167 |  |   | 37,166,397    |   |   | 22,691,336  |   |   |                |  |   | (61,389,588             | )
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|Warrants issued to consultants                                         |  | -          |  |   | -             |   |   | 23,814      |   |   | -              |  |   | -                       |  
|Private placement of common shares for cash                            |  | 4,152,296  |  |   | 2,980,031     |   |   | -           |   |   | -              |  |   | -                       |  
|Exercise of stock options                                              |  | 1,440,000  |  |   | 1,010,500     |   |   | -           |   |   | -              |  |   | -                       |  
|Exercise of common share purchase warrants
      for cash              |  | 3,671,318  |  |   | 1,493,527     |   |   | -           |   |   | -              |  |   | -                       |  
|Transfer from contributed surplus for stock options
      exercised    |  | -          |  |   | 537,494       |   |   | (537,494    | ) |   | -              |  |   | -                       |  
|Transfer from contributed surplus for
      warrants exercised         |  | -          |  |   | 1,411,792     |   |   | (1,411,792  | ) |   | -              |  |   | -                       |  
|Stock options issued to directors/consultants                          |  | -          |  |   | -             |   |   | 1,017,600   |   |   | -              |  |   | -                       |  
|Settlement of accounts payable for common
      shares.                |  | 30,000     |  |   | 59,100        |   |   | -           |   |   | -              |  |   | -                       |  
|Cashless exercise of warrants for common shares (Note
      12(g)(ii)) |  | 646,886    |  |   | -             |   |   | -           |   |   | -              |  |   | -                       |  
|Warrants issued for private placement                                  |  | -          |  |   | (330,957      | ) |   | 330,957     |   |   | -              |  |   | -                       |  
|Common shares for services                                             |  | 50,000     |  |   | 52,250        |   |   | -           |   |   | -              |  |   | -                       |  
|Net loss                                                               |  | -          |  |   | -             |   |   | -           |   |   | -              |  |   | (5,416,725              | )
|Balance at October 31, 2008                                            |  | 82,936,667 |  |   | 44,380,134    |   |   | 22,114,421  |   |   | -              |  |   | (66,806,313             | )
|                                                                       |  |            |  |   |               |   |   |             |   |   |                |  |   |                         |  
|Private placement of units for cash                                    |  | 4,393,535  |  |   | 2,305,215     |   |   | 653,627     |   |   | -              |  |   | -                       |  
|Exercise of stock options                                              |  | 1,652,801  |  |   | 992,417       |   |   | -           |   |   | -              |  |   | -                       |  
|Transfer from contributed surplus for stock options
      exercised    |  | -          |  |   | 573,706       |   |   | (573,706    | ) |   | -              |  |   | -                       |  
|Common shares for services                                             |  | 200,000    |  |   | 173,125       |   |   | -           |   |   | -              |  |   | -                       |  
|Financing cost paid                                                    |  | -          |  |   | (164,417      | ) |   | -           |   |   | -              |  |   | -                       |  
|Stock options issued to
      directors/consultants                    |  | -          |  |   | -             |   |   | 1,951,569   |   |   | -              |  |   | -                       |  
|Exercise of common share purchase warrants for cash                    |  | 200,000    |  |   | 234,000       |   |   | -           |   |   | -              |  |   | -                       |  
|Net loss                                                               |  | -          |  |   | -             |   |   | -           |   |   | -              |  |   | (4,310,939              | )
|Balance at
      October 31, 2009                                      |  | 89,383,003 |  | $ | 48,494,180    |   | $ | 24,145,911  |   | $ | -              |  | $ | (71,117,252             | )

See accompanying notes.

F-10

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|1. | NATURE OF BUSINESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Micromem Technologies Inc. (Micromem or the Company)
      is a corporation incorporated under the laws of the Province of Ontario,
      Canada. By Articles of Amendment dated January 14, 1999, the Company
      changed its name from Avanticorp International Inc. to Micromem
      Technologies Inc. On January 11, 1999, the Company acquired all of the
      outstanding shares of Pageant Technologies Inc. (Pageant), a company
      subsisting under the laws of Barbados. This acquisition was recorded as a
      reverse takeover under Canadian generally accepted accounting principles
      (Canadian GAAP) which, except as outlined in Note 18, conforms with
      United States generally accepted accounting principles (U.S.
    GAAP).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company currently operates as a developer of
      non-volatile magnetic memory technology and has developed magnetic sensor
      technology applications. The Company has not generated revenue through
      October 31, 2009 and is devoting substantially all of its efforts to the
      development of its technologies. Accordingly, for financial reporting
      purposes, the Company is a development stage enterprise.                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These consolidated financial statements have been
      prepared on the going concern basis, which presumes that the Company
      will be able to realize its assets and discharge its liabilities in the
      normal course of business for the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Certain principal conditions and events are prevalent
      which indicate that there is doubt about the Companys ability to continue
      as a going concern for a reasonable period of time in future. The Company
      has incurred substantial recurring losses to date; it reports a working
      capital deficiency and a shareholders deficiency at October 31,
    2009.                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company continues to pursue its development
      initiatives in order to develop its technologies for commercial
      applications and continues to raise financing for operations as outlined
      in Note 11.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | It will be necessary for the Company to raise additional
      funds for the continued development, testing and commercial exploitation
      of its technologies. To date the Company has raised financing through
      successive unit private placements, through the exercise of common share
      stock options and through the exercise of common share purchase warrants.
      It has also secured periodic term loans.                                                                                                                                                                                                                                                                                                                                            

F-11

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|2. | GOING CONCERN (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | In the ensuing fiscal year, the Company anticipates that
      (i) it will realize initial revenues from commercialization efforts with
      current strategic development partners, (ii) it will monitor the timing of
      incurring additional expenses in keeping with its ongoing working capital
      position, and (iii) it will continue to secure financing in the same
      manner in which it has raised financing to date.                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The consolidated financial statements have been prepared
      on a going concern basis and do not include any adjustments to the amounts
      and classifications of the assets and liabilities that might be necessary
      should the Company be unable to continue in business. If the going
      concern assumption were not appropriate for these consolidated financial
      statements then adjustments would be necessary to the carrying value of
      assets and liabilities, the reported expenses and the balance sheet
      classifications used.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements have been
      prepared in accordance with Canadian GAAP and are stated in United States
      dollars. These principles are also in conformity in all material respects
      with U.S. GAAP (except as disclosed in Note 18). The most significant
      accounting policies are as follows:                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-12

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------



| | iii. | On October 30, 2008, the Company incorporated 7070179
      Canada Inc. as a wholly- owned subsidiary. On October 31, 2008, the
      Company assigned its rights, title and interests in certain patents which
      it previously held directly to 7070179 Canada Inc. in exchange for common
      shares of this subsidiary.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |    | All intercompany investments, balances and transactions
      have been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b. | Use of Estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The preparation of consolidated financial statements in
      conformity with Canadian GAAP requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities,
      the disclosure of contingent assets and liabilities at the date of the
      consolidated financial statements and the reported amounts of income and
      expenses during the reporting period. Actual results could differ from
      those estimates.                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Significant estimates made by the Company include the
      allowance for doubtful accounts receivable, the value of the promissory
      note receivable, the expected life of property and equipment, the
      valuation of patents, the valuation of deferred development costs
      incurred, the valuation of accrued liabilities and the computation of fair
      values of stock options and warrants using the Black Scholes
      option-pricing model.                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | c. | Financial Instruments  Recognition, Measurement,
      Disclosure and Presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Section 3855 establishes standards for recognizing and
      measuring financial assets, financial liabilities and non-financial
      derivatives. All financial assets and financial liabilities, including
      derivatives, are initially measured in the balance sheet at fair value,
      except for loans and receivables, investments held-to maturity and other
      financial liabilities, which are measured at amortized cost. Measurement
      in subsequent periods depends on whether the financial instrument had been
      classified as held-for trading, available-for-sale, held-to- maturity,
      loans and receivables, or other liabilities.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Held-for-trading financial investments are measured at
      fair value and all gains and losses are included in net income in the
      period in which they arise. Available-for-sale financial instruments are
      measured at fair value with revaluation gains and losses included in other
      comprehensive income until the assets are removed from the balance
      sheet.                                                                                                                                                                                                                                                                                  

F-13

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------



| |    | As a result of the adoption of these standards, the
      Company classifies cash and cash equivalents as held-for-trading.
      Held-for-trading financial assets are measured at fair value with
      unrealized gains and losses recognized in the Consolidated Statement of
      Operations. Accounts receivable initially measured at fair value and
      subsequently measured at amortized cost using the effective interest rate
      method. Accounts payable and accrued liabilities are initially measured at
      fair value and subsequently measured at amortized cost using the effective
      interest rate method.                                                                                                                                                                            
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | d. | Comprehensive Income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Section 1530 requires the presentation of comprehensive
      income, which consists of net income and other comprehensive income
      ("OCI"). Comprehensive income is defined as the change in equity from
      transactions and other events from non-owner sources. OCI refers to items
      recognized in comprehensive income but that are excluded from net income
      calculated in accordance with generally accepted accounting principles.
      The Company does not currently have any other comprehensive income and
      accordingly, a statement of comprehensive income has not been
      presented.                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | e. | Foreign Currency Translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The functional and reporting currency of the Company is
      the United States dollar. The Companys wholly-owned foreign subsidiaries
      are integrated foreign operations and, therefore, the Company uses the
      temporal method whereby monetary assets and liabilities are translated
      into United States dollars at the rate of exchange in effect at the
      consolidated balance sheet dates and non-monetary assets and liabilities
      are translated at historical rates. Income 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.
      Gains or losses resulting from translation are included in the
      determination of net loss for the period.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | f. | Cash and Cash Equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Cash and cash equivalents consist of all bank accounts
      and all highly liquid investments with original maturities of three months
      or less at the date of purchase.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-14

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------
|   |                                                          
|   | g.                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   | h.                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   | i.                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   | j.                                                       
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

F-15

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------



| | k. | Property and Equipment:                                                                                                                               
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                       
| |    | Property and equipment are recorded at cost and are
      amortized over their estimated useful lives at the following annual rates
      and methods:



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




| | l. | Research and Development Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Research costs are expensed in the period incurred.
      Development costs are expensed as incurred unless they meet the criteria
      for deferral. During 2009 the Company determined that its continuing
      activities related to the development of its memory and sensor technology
      met the deferral criteria and, accordingly, these costs have been
      capitalized and are tested annually for recoverability. Development costs
      will be amortized on an appropriate basis at the time the Company enters
      commercial production.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Investment tax credits (ITCs) arising from research and
      development are recognized when their realization is reasonably assured.
      The ITCs are applied against the related costs and expenditures in the
      year that they are incurred.                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | m. | Patents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Patents are recorded at cost and are amortized on a
      straight line basis over their estimated useful lives of 10
  years.                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | n. | Unit Private Placements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Until October 31, 2008, the Company had adopted the
      residual value approach in accounting for the value assigned to the common
      shares and the warrants which it has made available in a number of Unit
      private placement financings. Under this residual value approach, the
      Company assigned 100% of the proceeds from the Unit private placement to
      the common shares and a nil value to the attached
  warrants.                                                                                                                

F-16

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)
|-- | ---------------------------------------------------------



| |    | In the year ended October 31, 2009 the Company changed
      the estimates that it used to value the common shares and the warrants
      included in the Unit private placement financings which it completed in
      the fiscal year then ended. It assigned a value to the warrants which form
      part of these Unit private placements, using the relative fair value
      approach, calculated in accordance with the Black Scholes option pricing
      model.                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | o. | Stock-based Compensation and Other Stock-based
      Payments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The Company applies the fair value based method of
      accounting for all stock-based payments to employees and non-employees and
      all direct awards of stocks. Accordingly, stock-based payments are
      measured at the fair value of the consideration received or the fair value
      of the equity instruments issued or liabilities incurred, whichever is
      more reliably measurable. Stock-based compensation is charged to
      operations over the vesting period and the offset is credited to
      contributed surplus.                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Consideration received upon the exercise of stock options
      and warrants is credited to share capital and the related contributed
      surplus is transferred to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The fair value of stock options and warrants is
      determined by the Black Scholes option- pricing model with assumptions for
      risk free interest rates, dividend yields, volatility factors of the
      expected market price of the Companys common shares and an expected life
      of the option or warrant issued. The fair value of direct awards of stock
      is determined by the quoted market price of the Companys stock.                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | p. | Income Taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The Company accounts for income taxes by the asset and
      liability method. Under the asset and liability method, future tax assets
      and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying
      amounts of existing assets and liabilities and their respective tax bases.
      Future tax assets and liabilities are measured using substantively enacted
      tax rates and laws that are expected to apply when the asset is realized
      or the liability settled. To the extent that it is estimated that a future
      income tax asset will not be realized, a valuation allowance is
      provided.

F-17

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Contd)                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                
|   | q.                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                
|4. | CHANGE IN ACCOUNTING POLICY                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                
|   | Goodwill and Intangible Assets:                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                
|   | Effective November 1, 2008, the Company adopted the
      recommendation of the CICA Handbook Section 3064 released in February
      2008, Goodwill and Intangible Assets, in replacement of Section 3062,
      Goodwill and Other Intangible Assets and Section 3450, Research and
      Development Costs.                           
|   |                                                                                                                                                                                                                                                                                                                                                
|   | Section 3064 establishes the standards for recognizing,
      measuring, presenting and disclosing information applicable to goodwill
      after its initial recognition and to the intangible assets of
      profit-oriented enterprises. With respect to goodwill, Section 3064
      contains the same requirements s former Section 3062.
|   |                                                                                                                                                                                                                                                                                                                                                
|   | Adoption of this standard had no significant impact on
      Companys financial statements.                                                                                                                                                                                                                                                   

F-18

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|5. | RECENT CANADIAN ACCOUNTING PRONOUNCEMENTS NOT YET
      ADOPTED
|-- | ---------------------------------------------------------------
|   |                                                                
|   | a.                                                             
|   |                                                                
|   |                                                                
|   |                                                                
|   |                                                                
|   |                                                                
|   | b.                                                             
|   |                                                                
|   |                                                                

F-19

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|6. | 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 capital stock, 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 twelve months
      ended October 31, 2009.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|7. | PROMISSORY NOTE RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In April 2009, the Company advanced $200,000 out of a
      maximum facility of $500,000 to a private company incorporated in New
      Jersey and a strategic development partner of the Company. On August 1,
      2009, the Company and the private company executed a promissory note with
      respect to the $200,000 advance stipulating the following terms and
      conditions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-20

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|8. | PROPERTY AND EQUIPMENT
|-- | ----------------------



2009Accumulated
    
    
    Net BookCost
    
    
    Amortization
    
    
    ValueComputer
    
    39,882
    
    
    15,460
    
    
    24,422Equipment
    
    25,989
    
    
    25,989
    
    
    -Total
    
    65,871
    
    
    41,449
    
    
    24,422




2008Accumulated
    
    
    Net BookCost
    
    
    Amortization
    
    
    ValueComputer
    
    46,890
    
    
    20,569
    
    
    26,321Equipment
    
    25,989
    
    
    25,989
    
    
    -Total
    
    72,879
    
    
    46,558
    
    
    26,321


In 2009, the Company removed from its
accounts a total of $50,616 of fully amortized assets which had been reflected
in its accounts since 2004. These assets have been disposed of at nil value.

F-21

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|9. | DEFERRED DEVELOPMENT COSTS                                                                                                                                                                                                                                                                                                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                            
|   | In the year ended October 31, 2009, the Company
      capitalized costs in the amount of $2,000,611 (2008  nil) relating to the
      development of its memory and sensor technology for future
      commercialization. Development costs include directly related consulting
      fees, materials and third party costs. No amortization has been taken to
      date.
|   |                                                                                                                                                                                                                                                                                                                                                                            
|   | The breakdown of development costs that have been
      capitalized as follows:                                                                                                                                                                                                                                                                                            



Projects
    
    AmountProject A
    $
    337,237Project B
    
    38,683Project C
    
    587,349Project D
    
    750,367Project E
    
    131,033Project F
    
    155,942$
    2,000,611


F-22

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|10. | PATENTS                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                          
|    | The Company continues to actively pursue, protect and
      expand its patents registered in Canada, the United States and in foreign
      jurisdiction.



| |         |   |         |  |   | 2009         |  |   |          | 
| | ------- | - | ------- |  | - | ------------ |  | - | -------- | 
| |         |   |         |  |   | Accumulated  |  |   | Net Book | 
| |         |   | Cost    |  |   | Amortization |  |   | Value    | 
| |         |   |         |  |   |              |  |   |          | 
| | Patents | $ | 151,641 |  | $ | 3,791        |  | $ | 147,850  | 



|11. | SHARE CAPITAL
|--- | -------------
|    |              
|    | a.           
|    |              
|    |              
|    |              
|    |              
|    |              
|    |              

F-23

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    | b.                    
|    |                       
|    |                       
|    |                       
|    |                       



| |                                     |  | Options |   |  | Weighted Average | 
| | ----------------------------------- |  | ------- | - |  | ---------------- | 
| |                                     |  | (000    | ) |  | exercise price   | 
| | Outstanding, October 31, 2006       |  | 11,550  |   |  | .53              | 
| | Granted                             |  | 775     |   |  | .50              | 
| | Expired                             |  | (300    | ) |  | .80              | 
| | Exercised                           |  | (1,700  | ) |  | .33              | 
| | Outstanding, October
      31, 2007 |  | 10,325  |   |  | .55              | 
| | Granted                             |  | 2,145   |   |  | 1.39             | 
| | Expired                             |  | (100    | ) |  | .72              | 
| | Exercised                           |  | (1,440  | ) |  | .70              | 
| | Outstanding, October
      31, 2008 |  | 10,930  |   |  | .85              | 
| | Granted                             |  | 1,345   |   |  | 1.00             | 
| | Expired                             |  | (600    | ) |  | 1.14             | 
| | Exercised                           |  | (1,653  | ) |  | .60              | 
| | Outstanding, October 31, 2009       |  | 10,022  |   |  | .89              | 

Cash proceeds realized during the year
ended October 31, 2009 by the Company upon the exercise of a total of 1,652,801
options by officers and directors and staff totaled $992,417 (2008: 1,440,000
options exercised for proceeds of $1,010,500).

F-24

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------

The following options have been
granted in the 2008 and 2009 fiscal years:

Date
    
      Number
    
    
      Strike
    
    
    Term
    
    Recipient(s)priceper shareMarch 2008
    
      325,000
    
    
      1.01
    
    
    5 years
    
    DirectorsMarch 2008
    
      20,000
    
    
      1.12
    
    
    5 years
    
    ConsultantsMarch 2008
    
      350,000
    (1)
    
      1.20
    
    
    5 years
    
    New DirectorAugust 2008
    
      1,400,000
    (2)
    
      1.50
    
    
    5 years
    
    Director, officers, employeesApril 2008
    
      50,000
    
    
      2.31
    
    
    1 year
    
    ConsultantsTotal
    
      2,145,000August 2009
    
      1,345,000
    
    
      1.00
    
    
    5 years
    
    Directors, officers, employeesTotal
    
      1,345,000




| | (1) | A total of 100,000 of the 350,000 stock options which
      were issued in March 2008 at a strike price of $1.20 per share included
      vesting provisions on a quarterly basis commencing in March 2008. The
      remaining 250,000 options were fully vested as of the issue date. These
      stock options were issued to a then director of the Company. In 2009, that
      director stepped down as a director and these stock options expired
      unexercised in August 2009.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (2) | A total of 200,000 of these options included vesting
      provisions only when certain performance milestones were achieved by the
      Company. These milestones were not achieved as of October 31, 2009 and no
      vesting of these 200,000 occurred to that date. The remaining 1.2 million
      options included vesting provisions on a quarterly basis commencing in
      August 2008.                                                                                       

The fair value of all options granted
was estimated as of the date of grant using the Black Scholes option-pricing
model with the following assumptions:

| |                                |  | 2009    |  |  | 2008     |  |  | 2007           | 
| | ------------------------------ |  | ------- |  |  | -------- |  |  | -------------- | 
| | Expected dividends             |  | -       |  |  | -        |  |  | -              | 
| | Volatility factor              |  | 85%     |  |  | 86%-106% |  |  | 51% - 97%      | 
| | Risk free interest rate        |  | 2.54%   |  |  | 2%-5%    |  |  | 4.5%  4.75%   | 
| | Weighted average expected life |  | 5 years |  |  | 5 years  |  |  | 1 to 1.5 years | 

F-25

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)                                                                                 
|--- | -------------------------------------------------------------------------------------------------------
|    |                                                                                                        
|    | The current stock compensation expense as reflected in
      the financial statements is summarized as:



Quarter Ending
    
    ExpenseJanuary 31, 2007
    
    1,914,774April 30, 2007
    
    96,945July 31, 2007
    
    33,914October 31, 2007
    
    52,873January 31, 2008
    
    -April 30, 2008
    
    637,254July 31 2008
    
    25,229October 31, 2008
    
    355,117January 31, 2009
    
    355,117April 30, 2009
    
    342,000July 31 2009
    
    342,000October 31, 2009
    
    912,452


The following table summarizes
information about stock options outstanding as at October 31, 2009:

Options
        Outstanding
      
      
      Options exercisableWeighted average
      Weightedremaining
      Average
      
      WeightedActual exercise
      Number
      contractual life (in
      exercise
      Number
      Averageprice
      outstanding
      years)
      price
      Exercisable
      exercise price0.72
      1,927,199
      0.6 years
      0.72
      1,927,199
      0.720.60
      315,000
      3.0
        years
      0.60
      315,000
      0.600.80
      4,290,000
      1.7 years
      0.80
      4,290,000
      0.801.01
      325,000
      3.3
        years
      1.01
      325,000
      1.011.12
      20,000
      3.4 years
      1.12
      20,000
      1.121.50
      1,400,000
      3.8
        years
      1.50
      1,200,000
      1.500.63
      50,000
      1.1 years
      0.63
      50,000
      0.630.36
      350,000
      2.5
        years
      0.36
      350,000
      0.361.00
      1,345,000
      4.8 years
      1.00
      1,345,000
      1.00TOTAL
      10,022,199
      
      0.89
      9,822,199
      0.88


F-26

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    | c.                    
|    |                       
|    |                       
|    |                       
|    | d.                    
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       



Units
        Issued
    
    
      Proceeds Realized1stQuarter
    
      336,053
    
    $
      194,4652ndQuarter
    
      2,777,878
    
    
      1,620,3973rdQuarter
    
      779,604
    
    
      763,9804thQuarter
    
      500,000
    
    
      380,0004,393,535
    
    $
      2,958,842


F-27

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       

The warrants issued on May 19, 2009
had a term of four months and expired unexercised. All other warrants issued in
2009 have a 12 month term from issue date. The 39,062 warrants issued on May
14th are broker warrants issued to the advisor who secured financing
for the Company. A charge to share capital in the amount of $14,297 has been
recorded in the accounts in accordance with the Black Scholes option-pricing
model with respect to these broker warrants.

| | e. | Bridge Loans:
| | -- | -------------
| |    |              
| |    | i.           

F-28

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    |                       



| | iii) | The fair value of the warrants issued with respect to the
      bridge loan was estimated using the Black Scholes option-pricing model
      with the following assumptions:
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                | 2007      | 2008     
| | ------------------------------ | --------- | ---------
| |                                | Loan      | Loan     
| | Expected dividends             | -         | -        
| | Volatility factor              | 51% - 97% | 51% - 97%
| | Risk-free interest rate        | 4.25%     | 4.25%    
| | Weighted average expected life | 1 year    | 1 year   

F-29

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    | f.                    
|    |                       
|    |                       



| |                                                                                 |  |            |   |  | Weighted       |  |   |           | 
| | ------------------------------------------------------------------------------- |  | ---------- | - |  | -------------- |  | - | --------- | 
| |                                                                                 |  |            |   |  | average        |  |   | Proceeds  | 
| |                                                                                 |  | Warrants   |   |  | exercise price |  |   | Realized  | 
| | Issued with respect to 2004-2005 Unit
      private placements (i)              |  | 4,048,818  |   |  | $0.40          |  |   |           | 
| | Issued with
      respect to financial advisory services agreement in 2005 (ii) |  | 800,000    |   |  | $0.40          |  |   |           | 
| | Balance outstanding at October 31, 2006                                         |  | 4,848,818  |   |  | $0.40          |  |   |           | 
| | Exercised in 2007 (i)                                                           |  | (477,500   | ) |  | $0.40          |  | $ | 191,000   | 
| | Expired in 2007 (i)                                                             |  | (150,000   | ) |  | $0.40          |  |   | -         | 
| | Issued in 2007
      (iii)                                                      |  | 250,000    |   |  | $0.50          |  |   |           | 
| | Balance outstanding at October 31, 2007                                         |  | 4,471,318  |   |  | $0.40          |  |   |           | 
| | Exercised in 2008 (i)                                                           |  | (3,421,318 | ) |  | $0.40          |  | $ | 1,368,527 | 
| | (ii)                                                                            |  | (800,000   | ) |  | $0.40          |  |   | nil       | 
| | (iii)                                                                           |  | (250,000   | ) |  | $0.50          |  | $ | 125,000   | 
| | Issued with respect to                                                          |  |            |   |  |                |  |   |           | 
| | 2008 Unit private placement (iv)                                                |  | 537,128    |   |  | $1.14          |  |   |           | 
| | Issued with respect to bridge loan (v)                                          |  | 100,000    |   |  | $0.50          |  |   |           | 
| |                                                                                 |  |            |   |  |                |  |   |           | 
| | Balance outstanding at October 31, 2008                                         |  | 637,128    |   |  | $1.04          |  |   |           | 
| | Exercised (v)                                                                   |  | (200,000   | ) |  | $1.17          |  | $ | 234,000   | 
| | Expired (vi)                                                                    |  | (826,108   | ) |  | $1.10          |  |   |           | 
| | Granted(vii)                                                                    |  | 3,805,845  |   |  | $0.86          |  |   |           | 
| | Balance outstanding at October 31, 2009                                         |  | 3,416,865  |   |  | $0.82          |  |   |           | 

F-30

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       
|    |                       



| | (vi) | These warrants are the warrants issued in 2008 per Note
      12 (f) (ii) and in 2009 per Note 11 (e) (iv) which were unexercised at
      their maturity date and expired.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | Warrants issued as per Note 11 (e)
(iv).
| | ----- | ----------------------------------------



| | g. | Settlement of Accounts Payable:                                                                                                                                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                           
| |    | In June 2008 the Company settled certain accounts payable
      outstanding with an arms length research contractor. It provided cash
      consideration of $125,000 and 30,000 common shares valued at $59,100 to
      fully settle the balance due to the contractor.

F-31

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|11. | SHARE CAPITAL (Contd)
|--- | ----------------------
|    |                       
|    | h.                    
|    |                       
|    |                       
|    |                       
|12. | CONTRIBUTED SURPLUS   



Balance at October 31, 2006 as previously
      reported
    $
    22,462,672Reclassification
      to share capital relating to exercise of stock options (i)
    
    (1,026,738
    )Balance at October 31, 2006 as revised
    $
    21,435,934Stock compensation expense relating to stock options issued
    
    183,732Stock options exercised
    
    (340,122
    )Common share purchase warrants issued
    
    85,484Charge relating to repricing of warrants (ii)
    
    1,326,308Balance at October 31, 2007
    $
    22,691,336Stock compensation expense relating to
      stock options issued
    
    1,017,600Stock options exercised
    
    (537,494
    )Common share purchase warrants issued
    
    354,771Common share
      purchase warrants exercised
    
    (1,411,792
    )Balance at October 31, 2008
    $
    22,114,421Stock compensation expense relating to stock options issued
    
    1,951,569Stock options exercised
    
    (573,706
    )Common share
      purchase warrants issued
    
    653,627Balance at October 31, 2009
    $
    24,145,911




| | (i) | The Company has restated $1,026,738 from contributed
      surplus to share capital as of October 31, 2006 representing the fair
      value of the stock options exercised in 2005-2006.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-32

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|12. | CONTRIBUTED SURPLUS (Contd)                                                                                                                                                                                     
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                  
|    | The Company recorded this charge to contributed surplus
      with an offset to share capital reflecting the repricing of the warrants
      relating to the 2004-2005 Unit private placements described
  above.
|    |                                                                                                                                                                                                                  
|    | The Company has calculated the charges to contributed
      surplus as presented above using the Black Scholes option pricing
      model.                                                                       
|    |                                                                                                                                                                                                                  
|    | The components of contributed surplus as reported at
      October 31stinclude:                                                                                                                                  



2009
    
    
    2008a.
    Amount relating to loan
      forgiveness at inception of the Company
    $
    544,891
    
    $
    544,891b.
    Stock options compensation
      related
    
    22,507,138
    
    
    21,129,275c.
    Common share purchase warrants
    
    1,093,882
    
    
    440,255$
    24,145,911
    
    $
    22,114,421




|13. | INCOME TAXES
|--- | ------------
|    |             
|    | a.          



Canada
    
    
      Other Foreign
    
    
      Total2010
    
      1,178,000
    
    
      -
    
    
      1,1780002014
    
      943,000
    
    
      -
    
    
      943,0002015
    
      2,968,000
    
    
      -
    
    
      2,968,0002026
    
      2,221,000
    
    
      -
    
    
      2,221,0002027
    
      1,867,000
    
    
      -
    
    
      1,867,0002028
    
      -
    
    
      48,000
    
    
      48,0002029
    
      2,569,000
    
    
      1,740,000
    
    
      4,309,000$
      11,746,000
    
    $
      1,788,000
    
    $
      13,534,000


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

F-33

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|13. | INCOME TAXES (Contd)
|--- | ---------------------
|    |                      
|    | b.                   



| |                           |   | 10/31/09   |   |   | 10/31/08   |   |   | 10/31/07   |  
| | ------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| | Unused non-capital losses | $ | 3,925,000  |   | $ | 3,255,780  |   | $ | 4,375,299  |  
| | Valuation
      allowance |   | (3,925,000 | ) |   | (3,255,780 | ) |   | (4,375,299 | )
| |                           | $ | -          |   | $ | -          |   | $ | -          |  



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



| |                                                  |  | 10/31/09   |   |  | 10/31/08   |   |  | 10/31/07   |  
| | ------------------------------------------------ |  | ---------- | - |  | ---------- | - |  | ---------- | -
| | Consolidated accounting loss before income taxes |  | (4,310,939 | ) |  | (5,416,725 | ) |  | (2,811,378 | )
| | Add non-deductible items                         |  | 2,024,058  |   |  | 1,067,414  |   |  | 440,463    |  
| | Loss for tax purposes                            |  | (2,286,881 | ) |  | (4,349,311 | ) |  | (2,370,915 | )
| | Statutory rates                                  |  | 33%        |   |  | 33%        |   |  | 36%        |  
| | Expected tax recovery                            |  | 757,000    |   |  | 1,435,273  |   |  | 853,529    |  
| | Tax benefit not recognized                       |  | (757,000   | ) |  | (1,435,273 | ) |  | (853,529   | )
| |                                                  |  | -          |   |  | -          |   |  | -          |  

F-34

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|14. | MANAGEMENT COMPENSATION AND RELATED PARTY
      TRANSACTIONS
|--- | ------------------------------------------------------------
|    |                                                             
|    | a.                                                          
|    |                                                             
|    |                                                             
|    |                                                             
|    |                                                             
|    |                                                             
|    |                                                             



Cash
      Compensation
    Stock
      Option Expense2009
    $129,149
    $101,7602008
    416,171
    -2007
    309,232
    -


F-35

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|14. | MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS
      (Contd)
|--- | ---------------------------------------------------------------------
|    |                                                                      
|    | b.                                                                   
|    |                                                                      
|    |                                                                      



Cash
      Compensation
    Stock
      Option Expense2009
    $
      625,576
    $
      407,0402008
    $
      825,748
    $
      637,8352007
    $
      563,000
    $
      105,000


The above-noted compensation has been
included in the Consolidated Statement of Operations, and Deficit under the
caption Professional, Other fees and Salaries, which total amount reported
includes:

| |                             |   | 2009      |  |   | 2008      |  |   | 2007      | 
| | --------------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| | Professional and other fees | $ | 845,533   |  | $ | 2,021,786 |  | $ | 1,250,984 | 
| | Salaries and wages          |   | 443,858   |  |   | 241,571   |  |   | 111,109   | 
| | Stock compensation expense  |   | 1,951,569 |  |   | 1,041,414 |  |   | 269,216   | 
| |                             | $ | 3,240,960 |  | $ | 3,304,771 |  | $ | 1,631,309 | 

F-36

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|14. | MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS
      (Contd)
|--- | ---------------------------------------------------------------------
|    |                                                                      
|    | c.                                                                   
|    |                                                                      
|    |                                                                      
|    |                                                                      
|    |                                                                      



Rent
    Salaries
    Other
    Total2009
    $17,177
    $289,897
    $11,541
    $318,6152008
    30,000
    242,000
    1,000
    273,0002007
    20,000
    121,000
    3,000
    144,000




|    | In 2009 the gross amount of these expenses was $425,560
      and the Company re-billed $106,945 of these costs to these related
      companies. At October 31, 2009 the Company reports $157,774 of balances
      due from such parties for these expenses and has reserved $140,674 due to
      uncertainty of collection.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                
|15. | COMMITMENTS                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                
|    | a.                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                

F-37

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|15. | COMMITMENTS (Contd)
|--- | --------------------
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     



| | i.   | in combination or association with the Companys
      intellectual property, the UofT shall receive 10% of any net fees and/or
      net royalties that shall be received by the Company in respect of any
      licenses involving both the rights granted and such Micromem intellectual
      property;   
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                               
| | ii.  | For all other sublicenses of the rights granted to any
      non-affiliate, the UofT shall receive 20% of any net fees and/or net
      royalties that may be received by the Company in respect of such
      sublicenses.                                                                                   
| |      |                                                                                                                                                                                                                                                                                                               
| | iii. | Net fees and/or net royalties shall be received from the
      Company until such time as the UofT has received from the Company an
      aggregate amount of five hundred thousand Canadian dollars (CDN$500,000);
      thereafter the Company shall pay half of the amounts as otherwise noted
      above.



| |  | At any point after which the Company has paid the UofT
      five hundred thousand Canadian dollars (CDN$500,000), the Company may at
      its option buy out the obligation to pay royalties under the License
      Agreement by paying to the UofT a single lump sum payment equaling the
      greater of five hundred thousand Canadian dollars (CDN$500,000) and an
      amount equal to the total amount of royalties paid by the Company to the
      UofT in the preceding twenty-four months. The Company shall be entitled to
      exercise such option by providing written notice to the UofT along with
      the required payment, after which time the Companys obligation to pay
      royalties as otherwise calculated shall be waived by the UofT.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-38

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|15. | COMMITMENTS (Contd)
|--- | --------------------
|    |                     
|    |                     



| | b. | Operating Leases:                                                                                                                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company has operating lease commitments which expire
      in 2010 in respect of its head office. The future minimum annual lease
      payments in 2010 are approximately $113,000.                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                  
| | c. | Employment and Consulting Contracts:                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company has entered into an employment agreement with
      the Chairman through December 31, 2010 as outlined in Note 14 (a) which
      stipulates an annual minimum obligation of $150,000 Canadian funds
      ($129,149 U.S. at average exchange rates). The Company reported $129,149
      of cash compensation with respect to this employment agreement in
    2009.
| |    |                                                                                                                                                                                                                                                                                                                                                                                  
| |    | In May 2008, the Company entered into agreements with the
      President, the Chief Financial Officer and the President of the Companys
      subsidiary, MAST. These agreements stipulated cash compensation
      obligations as below:                                                                                                                                      



RemainingIndividual
    Term
    Annual ObligationPresident
    6 months
    $76,000 Canadian FundsChief Financial Officer
    6 months
    $75,000 Canadian FundsPresident  MAST
    19 months
    $323,000


F-39

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|15. | COMMITMENTS (Contd)
|--- | --------------------
|    |                     
|    | d.                  
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    | e.                  
|    |                     
|    |                     
|    |                     
|    |                     

F-40

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|16. | CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | 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.                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Certain interests under the Agreement with Estancia
      reverted to Estancia on March 9, 2004. On this basis, to the extent that
      future revenues are generated by the Company relating directly and
      specifically to the Vemram Patents, the Company is obligated to pay
      Estancia 32% of the gross profit realized less expenses agreed to by the
      parties and 32% of any unit royalties realized less direct
  expenses.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|17. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK
      MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  



| |                                          |   | 2009    |  |   | 2008    | 
| | ---------------------------------------- | - | ------- |  | - | ------- | 
| | Cash and cash equivalents                | $ | 90,307  |  | $ | 22,066  | 
| | Deposits and other receivables           |   | 83,486  |  |   | 122,447 | 
| | Accounts payable and accrued liabilities |   | 450,342 |  |   | 923,367 | 

F-41

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|17. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
      (Contd)
|--- | ------------------------------------------------------------------
|    |                                                                   
|    | c.                                                                
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   
|    |                                                                   

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 cash equivalents, 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.

F-42

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|17. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
      (Contd)
|--- | ------------------------------------------------------------------

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.

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 cash equivalents, deposit and other receivables. The carrying
amount of financial assets represents maximum credit exposure.

As at October 31, 2009, the Company
reports a working capital deficiency of $650,044 and has certain financial
commitments (Note 15), the majority of which are due within one year. It must
continue to raise financing in order to meet its current obligations.

|18. | RECONCILIATION BETWEEN CANADIAN GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES (CANADIAN GAAP) AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                            
|    | The Companys consolidated financial statements have been
      prepared in accordance with Canadian GAAP which, in the case of the
      Company, conforms in all material respects with U.S. GAAP except for the
      accounting for development costs and prior valuations of Unit private
      placements. These are discussed below:



| | a. | Development costs:                                                                                                                                                  
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                     
| |    | Under U.S. GAAP, all development costs are expensed as
      incurred. Under Canadian GAAP, development costs that meet criteria for
      deferral are capitalized.

F-43

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|18. | RECONCILIATION BETWEEN CANADIAN GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES (CANADIAN GAAP) AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (Contd)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                         
|    | b.                                                                                                                                                                                      
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    | c.                                                                                                                                                                                      
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    | d.                                                                                                                                                                                      



| | Balance sheet                            |   |             |   |   | 2009       |   |   |                 |   |   |             |   |   | 2008       |   |   |                 |  
| | ---------------------------------------- | - | ----------- | - | - | ---------- | - | - | --------------- | - | - | ----------- | - | - | ---------- | - | - | --------------- | -
| |                                          |   | Balance     |   |   |            |   |   | Balance         |   |   | Balance     |   |   |            |   |   | Balance         |  
| |                                          |   | Camadian    |   |   |            |   |   |                 |   |   | Candian     |   |   |            |   |   |                 |  
| |                                          |   | GAAP        |   |   | Adjustment |   |   | U.S.
      GAAP |   |   | GAAP        |   |   | Adjustment |   |   | U.S.
      GAAP |  
| |                                          |   |             |   |   |            |   |   |                 |   |   |             |   |   |            |   |   |                 |  
| | Current assets                           | $ | 389,596     |   | $ | -          |   | $ | 389,596         |   | $ | 604,146     |   | $ | -          |   | $ | 604,146         |  
| | Property and equipment                   |   | 24,422      |   |   | -          |   |   | 24,422          |   |   | 26,321      |   |   | -          |   |   | 26,321          |  
| | Deferred development costs               |   | 2,000,611   |   |   | (2,000,611 | ) |   | -               |   |   | -           |   |   | -          |   |   | -               |  
| | Patents                                  |   | 147,850     |   |   | -          |   |   | 147,850         |   |   | -           |   |   | -          |   |   | -               |  
| |                                          | $ | 2,562,479   |   | $ | (2,000,611 | ) | $ | 561,868         |   | $ | 630,467     |   | $ | -          |   | $ | 630,467         |  
| |                                          |   |             |   |   |            |   |   |                 |   |   |             |   |   |            |   |   |                 |  
| | Accounts payable and accrued liabilities |   | 1,039,640   |   |   | -          |   |   | 1,039,640       |   |   | 942,225     |   |   | -          |   |   | 942,225         |  
| |                                          |   |             |   |   |            |   |   |                 |   |   |             |   |   |            |   |   |                 |  
| | Share capital                            |   | 48,494,180  |   |   | (400,659   | ) |   | 48,093,521      |   |   | 44,380,134  |   |   | (463,194   | ) |   | 43,916,940      |  
| | Contributed surplus                      |   | 24,145,911  |   |   | 400,659    |   |   | 24,546,570      |   |   | 22,114,421  |   |   | 463,194    |   |   | 22,577,615      |  
| | Deficit                                  |   | (71,117,252 | ) |   | (2,000,611 | ) |   | (73,117,863     | ) |   | (66,806,313 | ) |   | -          |   |   | (66,806,313     | )
| |                                          | $ | 2,562,479   |   | $ | (2,000,611 | ) | $ | 561,868         |   | $ | 630,467     |   | $ | -          |   | $ | 630,467         |  

F-44

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|18. | RECONCILIATION BETWEEN CANADIAN GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES (CANADIAN GAAP) AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
(Contd)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Loss for the
      years                                    |   | 2009       |   |   | 2008       |   |   | 2007       |  
| | ----------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| |                                                             |   |            |   |   |            |   |   |            |  
| | Net loss for the year - Canadian GAAP                       | $ | (4,310,939 | ) | $ | (5,416,725 | ) | $ | (2,811,378 | )
| | Development cost
      expensed per U.S. GAAP               |   | (2,000,611 | ) |   | -          |   |   | -          |  
| | Net loss for the year year - U.S. GAAP                      | $ | (6,311,550 | ) | $ | (5,416,725 | ) | $ | (2,811,378 | )
| | Loss per share -
      basic and dilluted under U.S. GAAP   |   | (0.07      | ) |   | (0.07      | ) |   | (0.04      | )
| |                                                             |   |            |   |   |            |   |   |            |  
| |                                                             |   |            |   |   |            |   |   |            |  
| | Cash flows                                                  |   | 2009       |   |   | 2008       |   |   | 2007       |  
| | Cash flow from operating activities per
      Canadian GAAP | $ | (2,231,838 | ) | $ | (5,088,164 | ) | $ | (1,621,357 | )
| | Expenditure of development costs per U.S. GAAP              |   | (2,000,611 | ) |   | -          |   |   | -          |  
| | Cash flow from operating activities per U.S. GAAP           | $ | (4,232,449 | ) | $ | (5,088,164 | ) | $ | (1,621,357 | )
| |                                                             |   |            |   |   |            |   |   |            |  
| | Cash flow from investing activities per
      Canadian GAAP | $ | (2,158,129 | ) | $ | (31,531    | ) | $ | -          |  
| | Expenditure of development costs per U.S. GAAP              |   | 2,000,611  |   |   | -          |   |   | -          |  
| | Cash flow from investing activities per U.S. GAAP           | $ | (157,518   | ) | $ | (31,531    | ) | $ | -          |  

F-45

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|18. | RECONCILIATION BETWEEN CANADIAN GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES (CANADIAN GAAP) AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (Contd)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                         
|    | e.                                                                                                                                                                                      
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         
|    |                                                                                                                                                                                         

F-46

---



MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|18. | RECONCILIATION BETWEEN CANADIAN GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES (CANADIAN GAAP) AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
(Contd)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | Accounting for uncertainty in income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | FIN 48, Accounting for Uncertainty in Income Taxes  an
      interpretation of FASB Statement No. 109 (FIN 48), clarifies the
      accounting for uncertainty in income taxes recognized in an entitys
      financial statements in accordance with SFAS No. 109, Accounting for
      Income Taxes (SFAS 109). The interpretation prescribes a recognition
      threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be
      taken in a tax return. FIN 48 also provides accounting guidance on
      de-recognition, classification, interest and penalties, accounting in
      interim periods, disclosure and transition. The evaluation of tax
      positions under FIN 48 is a two-step process, whereby (1) the Company
      determines whether it is more likely than not that the tax positions will
      be sustained based on the technical merits of the position and (2) for
      those tax positions that meet the more-likely-than-not recognition
      threshold, the Company would recognize the largest amount of tax benefit
      that is greater than fifty percent likely of being realized upon ultimate
      settlement with the related tax authority. The Company has not adopted FIN
      48 for Canadian GAAP purposes. Based on the Companys assessment, the
      adoption of FIN 48 would not have a significant impact on the Companys
      financial statements for purposes of reconciling Canadian GAAP to U.S.
      GAAP.



|19. | SEGMENTED INFORMATION                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                             
|    | There is one operating segment of the business being the
      development and commercialization efforts with respect to the Company's
      proprietary memory and sensor application. There is one predominant market
      segment being the North American market for such
  technology.

F-47

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MICROMEM TECHNOLOGIES INC.(A DEVELOPMENT STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Expressed in United States dollars)October 31, 2009 and 2008




|20. | SUBSEQUENT EVENTS                                                       
|--- | ------------------------------------------------------------------------
|    |                                                                         
|    | The following subsequent events are noted as of February
      17, 2010:
|    |                                                                         
|    | a)                                                                      
|    |                                                                         
|    | b)                                                                      



|21. | COMPARATIVE FIGURES                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                
|    | Certain comparative figures have been reclassified to
      conform with the current year's financial statement
  presentation.

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

F-48

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Item 18.     Financial Statements

Not applicable.

Item 19.     Exhibits

The following exhibits are filed as part of this registration
statement and attached hereto:

|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).        

46

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|Exhibit No. 1.5  | By-Laws of Micromem Technologies Inc. in effect as of
      January 11, 2002, (Incorporated herein by reference to the Company's Form
      20-F filed with the Commission on January 11, 2000).                                                                                                                                               
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. 1.6  | Amendment to the By-Laws of Micromem Technologies Inc.
      approved by shareholders on June 29, 2000, deleting the requirement from
      the By-Laws that the President shall be appointed from amongst the
      directors (Incorporated herein by reference to the Company's Form 20-F
      filed with the Commission on March 26, 2003).
|Exhibit No. 4.1  | Employment Agreement by and between Micromem
      Technologies, Inc. and Salvatore Fuda dated May 29, 2005. (Incorporated
      herein by reference to the Company's Form 20-F filed with the Commission
      on February 28, 2006).                                                                                                         
|Exhibit No. 4.2  | Employment Agreement by and between Micromem Technologies
      and Joseph Fuda dated May 28, 2008 (Incorporated by reference to the
      Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                
|Exhibit No. 4.3  | Employment Agreement by and between Micromem Technologies
      and Dan Amadori dated May 28, 2008 (Incorporated by reference to the
      Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                                
|Exhibit No. 4.4  | Employment Agreement by and between Micromem Technologies
      and Steven Van Fleet dated May 28, 2008 (Incorporated by reference to the
      Companys Form 20-F filed with the Commission on February 24, 2009).                                                                                                                           
|Exhibit No. 4.5  | Agreement with Investor Relations Group dated September
      1, 2008 (Incorporated by reference to   the Companys Form
      20-F filed with the Commission on February 24, 2009).                                                                                                                                                           
|Exhibit No. 4.6  | Agreement with Dreifus Associates Limited (DAL) dated
      June 1, 2008 (Incorporated by reference to the Companys Form 20-F
      filed with the Commission on February 24, 2009).                                                                                                                                                          
|Exhibit No. 4.7  | Unotron Promissory Note dated August 1, 2009 (previously
      filed).                                                                                                                                                                                                                                                                         
|Exhibit No. 4.8  | Agreement with LifeMed Technologies Inc. (previously
      filed).                                                                                                                                                                                                                                                                             
|Exhibit No. 4.9  | Unotron Manufacturing Agreement dated April 2009 (filed
      herewith).                                                                                                                                                                                                                                                                       
|Exhibit No. 8.1  | List of Subsidiaries (previously filed)                                                                                                                                                                                                                                                                                                        
|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).                                                                                                                                                                                                                                        
|Exhibit No. 14.1 | Letter from Schwartz Levitsky Feldman LLP to the
      Securities and Exchange Commission (filed herewith).                                                                                                                                                                                                                                    

47

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SIGNATURES

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

MICROMEM TECHNOLOGIES INC.By:
    /s/ Joseph
      FudaName:
    Joseph FudaTitle:
    Chief Executive OfficerBy:
    /s/ Dan
      AmadoriName:
    Dan AmadoriTitle:
    Chief Financial Officer


Dated: February 25, 2011

48

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