UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
October, 2012
Commission File Number 0-26005
MICROMEM TECHNOLOGIES INC.
777 Bay Street, Suite 1910, Toronto, ON M5G 2C8
[Indicate by checkmark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.]
Form 20-F [X] Form 40-F [ ]
[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.]
Yes [ ] No [X]
[If "Yes" is marked, indicate below the file number assigned to the registrant in connection with rule 12g3-2(b): N/A
This report on Form 6-K is hereby incorporated by reference in the registration statement on Form F-3 (Registration No. 333-134309) of Micromem Technologies Inc. and in the prospectus contained therein, and this report on Form 6-K shall be deemed a part of such registration statement from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished by Micromem Technologies Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MICROMEM TECHNOLOGIES INC. |
|
|
By: /s/ Joseph Fuda |
Date: October 1, 2012 | Name: Joseph Fuda |
|
Title: Chief Executive Officer |
FOR IMMEDIATE RELEASE | October 1, 2012 |
Micromem Technologies Inc. Begins Routine Production
of Patented Speed Control Product
Toronto, New York, October 1, 2012: Micromem Technologies Inc. (the Company) (CNSX: MRM, OTCBB: MMTIF) through its wholly owned subsidiary, Micromem Applied Sensor Technologies Inc. (MAST), announces they released to commercial production the customized speed control circuit designed specifically for GSI Westwind. Manufacturing has started on the initial volume requirements of the client. Fully validated production volume will begin to arrive at our client within 8 weeks.
Steven Van Fleet, President of MAST, tasked with designing and commercializing this product states: Bringing this technology to market and having our client begin to use it routinely in their day to day order has been exciting for us. Our design team has worked collaboratively with GSI Westwinds team to solve difficult high-speed control problems and challenging available space requirements. Our patented Hall sensors, the smallest in the world, allowed us to position them deep within the clients air bearing motor, eliminating the traditional hysteresis and delay that normally results in speed limitation and overshooting when ramping up the motor speed.
To view MAST's High Speed Control Circuit, featuring the world's smallest Hall sensors (Product SKU 1167-088-001) visit: http://files.newswire.ca/651/Micromemphoto.png
Steve Hockley, Project Manager for GSI Westwind states: The challenges associated with designing and manufacturing ultra-high speed PCB drilling spindles are considerable, and necessitate using cutting edge technology. GSI Westwind is impressed with MASTs efforts in providing an effective technical solution, which will enable market launch of the next generation and highest rotational speed ever, PCB drilling spindles.
Joseph Fuda states: This important milestone demonstrates that Micromem has taken a technology through research, proof of concept and into production. Micromem has now reached the stage where it is generating revenue from a finished product.
About Micromem and MASTInc
MASTInc is a wholly owned
U.S.-based subsidiary of Micromem Technologies Inc., a publicly traded (OTC BB:
MMTIF, CNSX: MRM) company. MASTInc responsibly analyzes the specific industry
sectors to create intelligent game-changing applications that address unmet
market needs. By leveraging its expertise and experience with sophisticated
magnetic sensor applications, MASTInc successfully powers the development and
implementation of innovative solutions for healthcare/biomedical, natural
resource exploration, government, information technology, manufacturing, and
other industries. Visit www.micromeminc.com
www.mastinc.com.
Safe Harbor Statement
This press release contains
forward-looking statements. Such forward-looking statements are subject to a
number of risks, assumptions and uncertainties that could cause the Companys
actual results to differ materially from those projected in such forward-looking
statements. In particular, factors that could cause actual results to differ
materially from those in forward looking statements include: our inability to
obtain additional financing on acceptable terms; risk that our products and
services will not gain widespread market acceptance; continued consumer adoption
of digital technology; inability to compete with others who provide comparable
products; the failure of our technology; the infringement of our technology with
proprietary rights of third parties; inability to respond to consumer and
technological demands; inability to replace significant customers; seasonal
nature of our business; and other risks detailed in our filings with the
Securities and Exchange Commission. Forward-looking statements speak only as of
the date made and are not guarantees of future performance. We undertake no
obligation to publicly update or revise any forward-looking statements. When
used in this document, the words believe, expect, anticipate, estimate,
project, plan, should, intend, may, will, would, potential, and
similar expressions may be used to identify forward-looking statements.
The CNSX or any other securities regulatory authority has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release that has been prepared by management.
Listing: NASD OTC-Bulletin
Board - Symbol: MMTIF
CNSX - Symbol: MRM
Shares issued: 130,701,175
SEC File No: 0-26005
Investor Contact: info@micromeminc.com; Tel. 416-364-2023
Subscribe to receive News Releases by Email on our websites home page.
www.micromeminc.com
FOR IMMEDIATE RELEASE | October 1, 2012 |
Micromem Technologies Inc. Files Interim Statements
Toronto, New York, October 1, 2012: Micromem Technologies Inc. (the Company) (CNSX: MRM, OTCBB: MMTIF) announces it has filed its interim financial statements for the period ended July 31, 2012, together with the Managements Discussion & Analysis on SEDAR and EDGAR. These documents may be viewed at www.sedar.com and by searching EDGAR at http://www.sec.gov/.
About Micromem and MASTInc
MASTInc is a wholly owned
U.S.-based subsidiary of Micromem Technologies Inc., a publicly traded (OTC BB:
MMTIF, CNSX: MRM) company. MASTInc responsibly analyzes the specific industry
sectors to create intelligent game-changing applications that address unmet
market needs. By leveraging its expertise and experience with sophisticated
magnetic sensor applications, MASTInc successfully powers the development and
implementation of innovative solutions for healthcare/biomedical, natural
resource exploration, government, information technology, manufacturing, and
other industries. Visit www.micromeminc.com
www.mastinc.com.
Safe Harbor Statement
This press release contains
forward-looking statements. Such forward-looking statements are subject to a
number of risks, assumptions and uncertainties that could cause the Companys
actual results to differ materially from those projected in such forward-looking
statements. In particular, factors that could cause actual results to differ
materially from those in forward looking statements include: our inability to
obtain additional financing on acceptable terms; risk that our products and
services will not gain widespread market acceptance; continued consumer adoption
of digital technology; inability to compete with others who provide comparable
products; the failure of our technology; the infringement of our technology with
proprietary rights of third parties; inability to respond to consumer and
technological demands; inability to replace significant customers; seasonal
nature of our business; and other risks detailed in our filings with the
Securities and Exchange Commission. Forward-looking statements speak only as of
the date made and are not guarantees of future performance. We undertake no
obligation to publicly update or revise any forward-looking statements. When
used in this document, the words believe, expect, anticipate, estimate,
project, plan, should, intend, may, will, would, potential, and
similar expressions may be used to identify forward-looking statements.
The CNSX or any other securities regulatory authority has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release that has been prepared by management.
Listing: NASD OTC-Bulletin Board
- Symbol: MMTIF
CNSX - Symbol: MRM
Shares issued: 130,701,175
SEC File No: 0-26005
Investor Contact: info@micromeminc.com; Tel. 416-364-2023
Subscribe to receive News Releases by Email on our websites home page.
www.micromeminc.com
Condensed Consolidated Interim Financial Statements of
MICROMEM TECHNOLOGIES INC.
For the three and nine months ended July 31, 2012
(Unaudited See Notice to reader)
MICROMEM TECHNOLOGIES INC.
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
(Unaudited expressed in United States dollars)
July 31, | October 31, | |||||
2012 | 2011 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 15,481 | $ | 44,062 | ||
Deposits and other receivables | 122,014 | 32,334 | ||||
Promissory note receivable (Note 9) | - | - | ||||
137,495 | 76,396 | |||||
Property and equipment, net (Note 10) | 6,892 | 10,201 | ||||
Deferred development costs (Note 11) | 574,457 | 646,606 | ||||
Intangible assets (Note 12) | 120,951 | 135,465 | ||||
Patents, net (Note 12) | 10,269 | 37,678 | ||||
$ | 850,064 | $ | 906,346 | |||
Liabilities and Shareholders' Equity (Deficiency) | ||||||
Current liabilities: | ||||||
Bridge loans (Note 15) | $ | 518,563 | $ | 106,783 | ||
Accounts payable and accrued liabilities | 471,951 | 1,016,841 | ||||
Derivative warrant liability | 2,142,803 | 1,251,688 | ||||
$ | 3,133,317 | $ | 2,375,312 | |||
Shareholders' Equity (Deficiency) | ||||||
Share capital: (Note 13) | ||||||
Authorized: 2,000,000 special preference shares, redeemable, voting Unlimited common shares without par value Issued and outstanding: 127,944,710 common shares (2011: 116,149,718) |
$ | 53,453,452 | $ | 51,306,229 | ||
Equity component of bridge loans (Note 15) | 2,679 | 558 | ||||
Contributed surplus (Note 16) | 27,306,291 | 26,634,223 | ||||
Accumulated other comprehensive income (loss) | - | - | ||||
Deficit | (83,045,675 | ) | (79,409,976 | ) | ||
(2,283,253 | ) | (1,468,966 | ) | |||
$ | 850,064 | $ | 906,346 | |||
Going Concern (Note 2) | ||||||
Related Party Transactions (Note 18) | ||||||
Commitments (Note 19) | ||||||
Contingencies (Note 20) | ||||||
Subsequent Events (Note 23) |
"Joseph Fuda" (Signed) | |
Joseph Fuda, Director | |
"David Sharpless" (Signed) | |
David Sharpless, Director |
See accompanying notes.
2
MICROMEM TECHNOLOGIES INC.
CONDENSED STATEMENT OF
CONSOLIDATED LOSS AND COMPREHENSIVE LOSS
(Unaudited expressed in United
States dollars)
For the three and nine months ended July 31, 2012 and 2011
Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Costs and expenses (income): | ||||||||||||
Administration | $ | 181,497 | $ | 85,107 | $ | 399,970 | $ | 349,113 | ||||
Professional, other fees and salaries (Note 18) | 352,894 | 298,499 | 1,065,743 | 950,423 | ||||||||
Stock Compensation | - | (64,146 | ) | 430,856 | 46,160 | |||||||
Research and development | 724 | - | 12,201 | - | ||||||||
Research and development (recovery) | - | (67,962 | ) | - | (59,522 | ) | ||||||
Travel and entertainment | 39,954 | 33,079 | 107,671 | 71,956 | ||||||||
Amortization of property and equipment (Note 10) | 1,103 | 1,651 | 3,309 | 4,886 | ||||||||
Amortization of intangible assets and patents | 4,838 | - | 14,514 | 10,711 | ||||||||
Foreign exchange loss | 5,302 | 15,326 | (5,040 | ) | (20,160 | ) | ||||||
Allowance (recovery), promissory note receivable (Note 9) | - | (60,000 | ) | - | (90,000 | ) | ||||||
Loss from operations | 586,312 | 241,554 | 2,029,224 | 1,263,567 | ||||||||
Interest and other income | - | (585 | ) | (963 | ) | |||||||
Derivative warrants liability( recovery) | (75,736 | ) | 1,349,945 | (38,728 | ) | |||||||
Income taxes (Note 17) | - | 1,205 | 1,205 | |||||||||
Net loss | (510,576 | ) | (242,174 | ) | (3,379,169 | ) | (1,225,081 | ) | ||||
Exchange gain (loss) | 3,497 | 4,379 | (2,070 | ) | (60,979 | ) | ||||||
Net loss and comprehensive loss | (507,079 | ) | (237,795 | ) | (3,381,239 | ) | (1,286,060 | ) | ||||
Loss per share - basic and diluted | (0.00 | ) | (0.00 | ) | (0.03 | ) | (0.01 | ) | ||||
Weighted average number of shares | 125,684,658 | 104,877,124 | 120,988,786 | 99,706,142 |
See accompanying notes.
3
MICROMEM TECHNOLOGIES INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, expressed in United States
dollars)
For the three and nine months ended July 31, 2012 and 2011
Three Months Ended | Nine Months Ended | |||||||||||
July 31 | July 31 | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (507,079 | ) | $ | (237,795 | ) | $ | (3,381,239 | ) | $ | (1,286,060 | ) |
Adjustments to
reconcile loss for the period to net cash used in operating activities: |
||||||||||||
Amortization of patents | - | - | - | 10,711 | ||||||||
Amortization of property and equipment | 1,103 | 1,651 | 3,309 | 4,886 | ||||||||
Amortization of Intangible asset | 4,838 | - | 14,514 | - | ||||||||
Accretion expense | 687 | 282 | 3,177 | 1,133 | ||||||||
Stock option expense | - | (64,146 | ) | 430,856 | 46,160 | |||||||
Increase (decrease) in deposits and other receivables | (22,222 | ) | 40,432 | (89,680 | ) | 51,563 | ||||||
Increase (decrease) in accounts payable and accrued liabilities | (131,698 | ) | (325,010 | ) | (544,891 | ) | (28,631 | ) | ||||
Change in fair value of derivative warrant liability | (75,736 | ) | - | 1,349,945 | (38,728 | ) | ||||||
Net cash used in operating activities | (730,107 | ) | (584,586 | ) | (2,214,009 | ) | (1,238,966 | ) | ||||
Cash flows from investing activities: | ||||||||||||
Patents | 18,004 | - | 18,004 | (3,108 | ) | |||||||
Deferred development costs | (36,365 | ) | (38,170 | ) | 81,554 | (206,694 | ) | |||||
Net cash used in investing activities | (18,361 | ) | (38,170 | ) | 99,558 | (209,802 | ) | |||||
Cash flows from financing activities: | ||||||||||||
Issue of common shares | 828,762 | 859,191 | 1,674,049 | 1,465,694 | ||||||||
Bridge loans | - | - | 634,366 | (10,717 | ) | |||||||
Bridge loan repayments | (93,001 | ) | (239,096 | ) | (222,545 | ) | - | |||||
Net cash provided by financing activities | 735,761 | 620,095 | 2,085,870 | 1,454,977 | ||||||||
Increase (decrease) in cash and cash equivalents | (12,707 | ) | (2,661 | ) | (28,581 | ) | 6,209 | |||||
Cash and cash equivalents, beginning of period | 28,188 | 34,909 | 44,062 | 26,039 | ||||||||
Cash and cash equivalents, end of period | $ | 15,481 | $ | 32,248 | $ | 15,481 | $ | 32,248 | ||||
Supplemental cash flow information: | ||||||||||||
Interest paid (Classified in operating activities) | 17,071 | 23,898 | 46,008 | 23,898 |
See accompanying notes.
4
MICROMEM TECHNOLOGIES INC.
Condensed Consolidated
Statement of Changes in Shareholders' Equity
(Expressed in United States dollars)
Number of | Share Capital | Contributed | Equity | Deficit | Total | |||||||||||||
Shares | Surplus | component of | ||||||||||||||||
Bridge loan | ||||||||||||||||||
Balance at November 01, 2011 | 116,149,718 | 51,306,229 | 26,634,223 | 558 | (79,409,976 | ) | (1,468,966 | ) | ||||||||||
Private placement of units for cash | 4,891,947 | 827,483 | - | - | - | 827,483 | ||||||||||||
Financing costs | - | (16,456 | ) | - | - | - | (16,456 | ) | ||||||||||
Stock option issued to directors/staff | - | 430,856 | - | - | 430,856 | |||||||||||||
Warrants issued for private placements | 198,514 | |||||||||||||||||
- | (198,514 | ) | - | - | - | |||||||||||||
Warrants extended | 254,460 | |||||||||||||||||
- | - | - | 254,460 | |||||||||||||||
Warrants exercised | 5,783,045 | 753,197 | 753,197 | |||||||||||||||
Reclassed for warrants exercised | (144,854 | ) | ||||||||||||||||
144,854 | - | |||||||||||||||||
Equity portion of bridge loan | 2,121 | |||||||||||||||||
- | 538 | 558 | - | 3,217 | ||||||||||||||
shares issued on conversion of bridge loan | 1,120,000 | 109,825 | 109,825 | |||||||||||||||
Reclassified to warrant liability | - | 526,296 | (67,466 | ) | - | - | 458,830 | |||||||||||
Adjustment for modification of warrents | (254,460 | ) | (254,460 | ) | ||||||||||||||
Net loss and comprehensive loss | - | - | - | - | (3,381,239 | ) | (3,381,239 | ) | ||||||||||
Balance at July 31, 2012 | 127,944,710 | 53,453,452 | 27,306,291 | 2,679 | (83,045,675 | ) | (2,283,253 | ) | ||||||||||
Balance at November 01, 2010 | 95,324,511 | 49,897,871 | 24,703,544 | 5,784 | (75,750,537 | ) | (1,143,338 | ) | ||||||||||
Private placement of units for cash | 11,130,045 | 1,392,331 | - | - | - | 1,392,331 | ||||||||||||
Subscription received | 73,363 | |||||||||||||||||
- | - | - | - | 73,363 | ||||||||||||||
Stock option issued to directors/staff | 46,160 | |||||||||||||||||
- | - | - | - | 46,160 | ||||||||||||||
Warrants issued for private placement | (457,556 | ) | 457,556 | |||||||||||||||
- | - | - | - | |||||||||||||||
Warrants extended | 137,190 | |||||||||||||||||
- | - | - | - | 137,190 | ||||||||||||||
Equity portion of bridge loan | - | - | - | 798 | - | 798 | ||||||||||||
Reclassified to warrant liability | - | - | (159,309 | ) | - | - | (159,309 | ) | ||||||||||
Net loss and comprehensive loss | - | - | - | - | (1,464,835 | ) | (1,464,835 | ) | ||||||||||
Balance at July 31, 2011 | 106,454,556 | 50,906,009 | 25,185,141 | 6,582 | (77,215,372 | ) | (1,117,640 | ) |
5
MICROMEM TECHNOLOGIES INC. |
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL |
STATEMENTS |
TABLE OF CONTENTS |
6
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
1. |
REPORTING ENTITY AND NATURE OF BUSINESS |
Micromem Technologies Inc. (Micromem or the Company) is a corporation incorporated under the laws of the Province of Ontario, Canada. The principal business address of the Company is 121 Richmond street west, Suite 304, Toronto, Ontario, Canada. | |
The Company currently operates as a developer of magnetic sensor technology and applications of this technology. The Company has not generated revenue through July 31, 2012 and is devoting substantially all of its efforts to the development of its technologies. | |
These unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: |
(i) |
Micromem Applied Sensors Technology, Inc. (MAST), incorporated in November 2007 and domiciled in Delaware. MAST has the primary responsibility for the further development of the Companys technologies in conjunction with various strategic development partners. | |
(ii) |
7070179 Canada Inc., incorporated in October 2008 under the Canada Business Corporations Act. The Company has assigned to this entity its rights, title and interests in certain patents which it previously held directly in exchange for common shares of this entity. | |
(iii) |
Memtech International Inc., Memtech International (USA) Inc., Pageant Technologies Inc., and Micromem Holdings (Barbados) Inc. All of these entities are inactive. |
These unaudited consolidated financial statements were authorized for issuance and release by the Companys Board of Directors on September 28, 2012.
7
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
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. | |
There are material uncertainties related to adverse conditions and events that cast significant doubt about the Companys ability to continue as a going concern for a reasonable period of time in future. During the nine months ending July 31, 2012, the Company reported a net loss of $3,379,169 (2011: $1,225,081) and a net comprehensive loss of $3,381,239 (2011: $1,286,060) a working capital deficiency( current assets less current liabilities excluding derivative warrant liability) (Note 14) of $853,019 and negative cash flow from operations of $2,214,009 (2011: $1,238,966). | |
The Company continues to focus its development efforts on existing projects in order to develop commercial applications for these projects. 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. | |
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. Such adjustments may be material. |
8
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
3. |
BASIS OF PRESENTATION |
Statement of Compliance: These unaudited interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB) and the accounting policies that the Company adopted in accordance with International Financial Reporting Standards (IFRS). | |
Our unaudited interim consolidated financial statements for the three months ended July 31, 2012 are prepared in accordance with IFRS and its interpretations adopted by the IASB, including IFRS 1, First-time adoption of International Financial Reporting Standards. November 1, 2010 is the date of transition to IFRS (Transition Date) and, accordingly, an opening statement of financial position as at that date has been presented. Previously, the Company prepared its consolidated financial statements in accordance with Canadian generally accepted accounting principles (GAAP) which differ in certain policies from IFRS. In accordance with the transition rules, IFRS is retrospectively applied to comparative data for the prior fiscal year. | |
These unaudited interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements for the fiscal year ended October 31, 2011 which were prepared in accordance with GAAP and also in conjunction with the IFRS transition disclosures as described in Note 5. | |
Functional and Reporting Currencies: These unaudited interim consolidated financial statements are presented in US dollars. The functional currency for Micromem and its Canadian subsidiary, 7070179 Canada Inc. is Canadian dollars. The functional currency for MAST and for all of the inactive subsidiaries referred to in Note 1 is US dollars. | |
The description of the effect of transitioning from GAAP to IFRS on our consolidated statement of financial position, equity, net loss and comprehensive loss is presented in Note 5. A reconciliation of the unaudited interim consolidated financial statements from GAAP to IFRS is presented in Note 6. | |
Use of Estimates and Judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets and liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities. Actual results could differ materially from these estimates and assumptions. Management reviews the estimates and the underlying assumptions utilized on an ongoing basis. |
9
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
3. |
BASIS OF PRESENTATION (Contd) |
The Company has made significant estimates and assumptions in valuing warrant capital and warrant liabilities, convertible bridge loans, stock-based compensation, deferred development costs, promissory note receivable and intangible assets and patents. Refer to Note 4, Significant Accounting Policies, for additional disclosures with respect to these significant estimates and assumptions. | |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Unless otherwise indicated, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS statement of financial position at November 1, 2010 for the purposes of the transition to IFRS. | |
Reference should be made to the annual audited financial statement at October 31, 2011 and the unaudited quarterly financial statement as of January 31, 2012 and April 30, 2012, which disclose the significant accounting policies which the Company has adopted under IFRS. These accounting policies relate to consolidation, financial instruments, compound financial instruments derivative warrant liability, comprehensive income, foreign currency translation, cash and cash equivalents, loan impairment, intangible assets, inventory, property and equipment, impairment of long lived assets, research and development costs, patents, unit private placements, stock based compensation, income taxes, and earnings per share. | |
These policies have been consistently applied in the quarter ended July 31, 2012. | |
New Standards and Interpretations issued but not yet adopted: |
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or International Financial Reporting Interpretations Committee (IFRIC) that are mandatory for accounting periods beginning after January 1, 2011 or later periods. The standards impacted that are applicable to the Company area as follows:
IFRS 9 was issued in November 2009 and contained requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories:
10
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
| Amortized cost and | |
| Fair value through profit and loss |
IFRS 9 also replaces the models for measuring equity instruments, and such instruments are either recognized at fair value through earnings or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends, to the extent not clearly representing a return of investment, are recognized in earnings; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely.
Requirements for financial liabilities were added in October 2010 and largely carried forward existing requirements in IAS 39, Financial Instruments Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through earnings would generally be recorded in other comprehensive income.
This standard is required to be applied for accounting periods beginning on or after January 1, 2015, with earlier adoption permitted.
IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain live entertainment from its activities. IFRS 10 replaces SIC-12, Consolidation Special Purpose Entities and parts of IAS 27, Consolidated and Separate Financial Statements.
This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted.
IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures.
11
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. | |
In addition, there have been amendments to existing standards, including IAS 27, Separate Financial Statements, and IAS 28, Investments in Associates and Joint Ventures. IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in non- consolidated financial statements. IAS 28 has been amended to include joint ventures in its scope and to address the changes in IFRS 10 to IFRS 13. | |
This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. | |
The Company is currently assessing the impacts of the above standards, and has not yet made a determination if it will early adopt any of the new requirements or what the impact will be on its financial statements. |
5. |
CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS |
In February 2008, the Accounting Standards Board ("AcSB") confirmed that the use of IFRS will be required in 2011 for publicly accountable enterprises in Canada. In April, 2008, the AcSB issued an IFRS Omnibus Exposure Draft proposing that publicly accountable enterprises be required to apply IFRS, in full and without modification, on January 1, 2011. The adoption date of January 1, 2011 requires the restatement, for comparative purposes, of amounts reported by the Company for its year ended October 31, 2011, and of the opening balance sheet as at November 1, 2010. The Company is continuing to assess the level of disclosure required, as well as system changes that may be necessary to gather and process the required information. | |
The accounting policies disclosed in Note 4 have been applied in preparing the financial statements for the quarter ended July 31, 2012, the comparative information presented in these financial statements as at October 31, 2011 and for the year then ended, the comparative information as at July 31, 2011 and for the three months then ended and in the preparation of the opening IFRS statement of financial position at November 1, 2010. |
12
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
Elections under adoption:
IFRS 1 allows first time adopters to IFRS to take advantage of a number of voluntary exemptions from the general principal of retrospective restatement. The Company has taken the following exemptions:
IFRS 2 Share-based payments (IFRS 2):
The Company elected not to apply IFRS 2 to equity instruments which vested before the Transition Date. All stock options currently outstanding are vesting in line with IFRS 2 and no adjustment is required.
IFRS 3 Business Combinations (IFRS 3):
The Company has elected to apply the exemption for retrospective application of IFRS 3 to business combinations that took place before the Transition Date.
In preparing its opening IFRS statement of financial position, statement of comprehensive income (loss), statement of cash flows and statement of changes in shareholders equity, the Company has determined that no adjustments were necessary to amounts reported previously in financial statements prepared in accordance with GAAP. Therefore, no reconciliations of GAAP to IFRS have been presented.
Mandatory exceptions:
The Companys consolidated financial statements were previously prepared in accordance with GAAP. Under IFRS, hindsight is not used to create or revise estimates. The estimates previously made by the Company under GAAP were not revised for application of IFRS except where necessary to reflect any difference in accounting policies.
In preparing the opening IFRS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. These adjustments relate to:
(a) |
The accounting and measurement of warrant liability with respect to common share purchase warrants (Note 14) issued in conjunction with Unit private placement financings which the Company has secured and which are denominated in the relevant entitys functional currency. |
13
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
(b) |
The accounting and measurement of the conversion feature of the bridge loans (Note 15) which the Company has secured. |
5. |
CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Contd) | |
(c) |
The presentation of foreign currency translation adjustments with respect to those entities included in the consolidated financial statements where the functional currency for such entities is different from the Companys presentation currency. In these cases, the foreign currency translation adjustment is reported in Other Comprehensive Income. |
The illustration of how the transition from previous GAAP to IFRS has affected the Companys financial position, financial performance is set out in Note 6.
14
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
6. RECONCILIATION OF FINANCIAL STATEMENTS TO IFRS
July 31 2011 | ||||||||||
Canadian | ||||||||||
GAAP | Adj | IFRS | ||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 32,248 | $ | - | $ | 32,248 | ||||
Deposits and other receivables | 50,500 | - | 50,500 | |||||||
Promissory note receivable | - | - | - | |||||||
82,748 | - | 82,748 | ||||||||
Property and equipment, net | 11,800 | - | 11,800 | |||||||
Deferred development costs | 449,637 | - | 449,637 | |||||||
Intangible Assets | - | - | - | |||||||
Patents, net | 173,003 | 173,003 | ||||||||
$ | 717,188 | $ | - | $ | 717,188 | |||||
Liabilities and Shareholders' Equity (Deficiency) | ||||||||||
Current liabilities: | ||||||||||
Bridge loans | $ | 502,166 | - | $ | 502,166 | |||||
Accounts payable and accrued liabilities | 1,046,385 | - | 1,046,385 | |||||||
Derivative warrant liability | 286,269 | 286,269 | ||||||||
1,548,551 | 286,269 | 1,834,820 | ||||||||
Shareholders' Equity (Deficiency) | ||||||||||
Share capital: | 51,110,837 | (204,828 | ) | 50,906,009 | ||||||
Subscription received | - | - | - | |||||||
Equity component of bridge loans | 6,582 | - | 6,582 | |||||||
Contributed surplus | 25,305,310 | (120,169 | ) | 25,185,141 | ||||||
Accumulated other comprehensive income (loss) | - | 38,728 | 38,728 | |||||||
Deficit | (77,254,092 | ) | - | (77,254,092 | ) | |||||
(831,363 | ) | (286,269 | ) | (1,117,632 | ) | |||||
$ | 717,188 | $ | - | $ | 717,188 |
15
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
6. |
RESTATEMENT OF FINANCIAL STATEMENTS TO IFRS (Contd) |
For the three and nine months ended July 31, 2012 and 2011
Three months ended | Nine months ended | |||||||||||||||||
July 31 2011 | July 31 2011 | |||||||||||||||||
Canadian | Adj | IFRS | Canadian | Adj | IFRS | |||||||||||||
GAAP | GAAP | |||||||||||||||||
Costs and expenses (income): | ||||||||||||||||||
Administration | $ | 100,433 | $ | (15,326 | ) | $ | 85,107 | $ | 328,953 | $ | (20,160 | ) | $ | 308,793 | ||||
Professional, other fees and salaries | 298,499 | - | 298,499 | 950,423 | - | 950,423 | ||||||||||||
Stock compensation | (64,146 | ) | (64,146 | ) | 46,160 | 46,160 | ||||||||||||
Research and development | (67,962 | ) | - | (67,962 | ) | (59,522 | ) | - | (59,522 | ) | ||||||||
Travel and entertainment | 33,079 | - | 33,079 | 71,956 | - | 71,956 | ||||||||||||
Amortization of property and equipment | 1,651 | - | 1,651 | 15,597 | - | 15,597 | ||||||||||||
Foreign exchange loss | (4,379 | ) | - | (4,379 | ) | 60,979 | - | 60,979 | ||||||||||
Allowance (recovery), promissory note receivable | (60,000 | ) | - | (60,000 | ) | (90,000 | ) | - | (90,000 | ) | ||||||||
Other expenses | - | - | - | - | - | - | ||||||||||||
Loss from operations | 237,175 | (15,326 | ) | 221,849 | 1,324,546 | (20,160 | ) | 1,304,386 | ||||||||||
Interest and other income | (585 | ) | - | (585 | ) | (963 | ) | - | (963 | ) | ||||||||
Derivative warrants liability( recovery) | - | - | - | (38,728 | ) | (38,728 | ) | |||||||||||
Income taxes | 1,205 | - | 1,205 | 1,205 | - | 1,205 | ||||||||||||
Net loss | (237,795 | ) | 15,326 | (222,469 | ) | (1,324,788 | ) | 58,888 | (1,265,900 | ) | ||||||||
Exchange gain (loss) | - | (15,326 | ) | (15,326 | ) | - | (20,160 | ) | (20,160 | ) | ||||||||
- | - | - | - | - | - | |||||||||||||
Net loss and comprehensive loss | (237,795 | ) | - | (237,795 | ) | (1,324,788 | ) | 38,728 | (1,286,060 | ) |
16
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
7. |
FAIR VALUE DISCLOSURES |
The following summarizes the methods and assumptions used in estimating the fair value of the Company's financial instruments where measurement is required. The fair value of financial instruments approximate their carrying amounts due to the relatively short period to maturity. Fair value amounts represent point-in-time estimates and may not reflect fair value in the future. The measurements are subjective in nature, involve uncertainties and are a matter of significant judgment. The methods and assumptions used to develop fair value measurements, for those financial instruments where fair value is recognized in the balance sheet, have been prioritized into three levels of the fair value hierarchy as follows: | |
Level 1: Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. | |
Level 2: Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. | |
Level 3: Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. | |
The Company's financial instruments measured at fair value on the balance sheet consist of cash and cash equivalents. Cash and cash equivalents are measured at Level 1 of the fair value hierarchy. Derivative warrant liability and the conversion feature on bridge loans are measured at Level 2 of the fair value hierarchy. | |
8. |
CAPITAL RISK MANAGEMENT |
The Companys 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 Companys 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 three months ended July 31, 2012. |
17
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
9. |
PROMISSORY NOTE RECEIVABLE |
In April 2009, the Company advanced $200,000 to a private company incorporated in New Jersey and a strategic development partner of the Company. The Company and the private company executed a promissory note with respect to the $200,000 advance stipulating the following terms and conditions: |
(a) |
Maturity date of September 30, 2010. | |
(b) |
Interest payable on a quarterly basis in arrears calculated from August 1, 2009 at a rate of 10%. In July 2011, the interest rate on the promissory note increased to 18%. | |
(c) |
Secured by a first priority security interest over all of the assets of the private company. |
At October 31, 2010, the Company recorded a provision to reserve the outstanding principal and interest outstanding of $201,333 pending resolution of collection efforts.
Since October 31, 2010 the Company has received payments totally $115,000 against the amounts previously reserved.
At July 31, 2012 the balance outstanding was $127,554 and this amount has been full reserved. The Company served notice to the private company that it was demanding payments under the terms of the promissory note and the security agreement and has received judgment in its favor during the quarter ended July 31, 2012. It continues to pursue collection of this fully reserved note (Note 23).
18
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
Gross | Net | |||||
Balance outstanding at November 01, 2010 | 206,333 | 5,000 | ||||
Interest accrued in 2011 | 20,220 | 20,200 | ||||
Reversed in 2011 | - | (20,200 | ) | |||
Repayment in 2011 | (115,000 | ) | (115,000 | ) | ||
Recovery of reserved amount in 2011 | - | 110,000 | ||||
Balance outstanding at October 31, 2011 | 111,553 | - | ||||
Interest accrued in 2012 | - | 16,001 | ||||
Reversed in 2012 | - | (16,001 | ) | |||
Balance outstanding at July 31, 2012 | 111,553 | - |
The outstanding balance of principal and interest at July 31, 2012 is $127,554 which amount is fully reserved (Note 23).
19
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
10. |
PROPERTY AND EQUIPMENT |
Computer | Furniture and | Total | |||||||
Equipment | Equipment | ||||||||
Cost | |||||||||
Balance at November 1, 2010 | $ | 40,733 | $ | 25,989 | $ | 66,722 | |||
Additions | - | - | - | ||||||
Nine months ended July 31, 2011 | $ | 40,733 | $ | 25,989 | $ | 66,722 | |||
Balance at November 1, 2011 | $ | 40,733 | 25,989 | $ | 66,722 | ||||
Additions | - | - | - | ||||||
Nine months ended July 31, 2012 | $ | 40,733 | $ | 25,989 | $ | 66,722 |
Depreciation and impairments | Computer | Furniture and | Total | ||||||
Equipment | Equipment | ||||||||
Balance at November 1, 2010 | $ | 24,048 | $ | 25,989 | $ | 50,037 | |||
Depreciation for the period | 4,886 | - | 4,886 | ||||||
Nine months ended July 31, 2011 | $ | 28,934 | $ | 25,989 | $ | 54,923 | |||
Balance at November 1, 2011 | $ | 30,532 | 25,989 | $ | 56,521 | ||||
Depreciation for the period | 3,309 | - | 3,309 | ||||||
Nine months ended July 31, 2012 | $ | 33,841 | $ | 25,989 | $ | 59,830 | |||
Balance at November 1, 2010 | $ | 16,685 | $ | - | $ | 16,685 | |||
Balance at July 31, 2011 | $ | 11,799 | $ | - | $ | 11,799 | |||
Balance at November 1, 2011 | $ | 10,201 | $ | - | $ | 10,201 | |||
Balance at July 31, 2012 | $ | 6,892 | $ | - | $ | 6,892 |
20
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
11. |
DEFERRED DEVELOPMENT COSTS |
The breakdown of development costs that have been capitalized is as follows: |
Cost | |||
Balance at November 1, 2010 | $ | 221,521 | |
Additions | 228,116 | ||
Nine months ended July 31, 2011 | $ | 449,637 | |
Balance at November 1, 2011 | $ | 646,606 | |
Additions | (72,149 | ) | |
Nine months ended July 31, 2012 | $ | 574,457 | |
Amortization | |||
Balance at November 1, 2010 | $ | - | |
Depreciation for the period | - | ||
Nine months ended July 31, 2011 | $ | - | |
Balance at November 1, 2011 | $ | - | |
Depreciation for the period | - | ||
Nine months ended July 30, 2012 | $ | - | |
Balance at November 1, 2010 | $ | 221,521 | |
Balance at July 31, 2011 | $ | 449,637 | |
Balance at November 1, 2011 | $ | 646,606 | |
Balance at July 31, 2012 | $ | 574,457 |
For the nine months ended July 31, 2012 the Company incurred $157,276 of deferred development costs and recovered $ 229,425 of costs previously reported for a net adjustment of ($72,149) ( 2011 incurred $ 228,109 of development costs)
21
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
12. |
INTANGIBLE ASSETS AND PATENTS |
Intangible assets comprise the costs which the Company has capitalized relating to the technical expertise and know-how that the Company has developed with respect to the commercialization efforts relating to its sensor technology. In 2011, the Company determined that it had sufficiently advanced its expertise and product knowledge relating to the general commercialization efforts for its sensor technology in multiple industry vertical applications. It anticipates that it will realize commercial economic benefits from the exploitation of these intangible assets in future. |
Intangible Assets
Cost | |||
Balance at November 1, 2010 | $ | - | |
Additions | - | ||
Nine months ended July 31, 2011 | $ | - | |
Balance at November 1, 2011 | $ | 135,465 | |
Additions | - | ||
Nine months ended July 31, 2012 | $ | 135,465 | |
Amortization | |||
Balance at November 1, 2010 | $ | - | |
Depreciation for the period | - | ||
Nine months ended July 31, 2012 | $ | - | |
Balance at November 1, 2011 | $ | - | |
Depreciation for the period | 14,514 | ||
Nine months ended July 31, 2012 | $ | 14,514 | |
Balance at November 1, 2010 | $ | - | |
Balance at April 30, 2011 | $ | - | |
Balance at November 1, 2011 | $ | 135,465 | |
Balance at July 30, 2012 | $ | 120,951 |
22
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
12. |
INTANGIBLE ASSETS AND PATENTS (Contd) |
Patents
Cost | |||
Balance at November 1, 2010 | $ | 230,294 | |
Additions | 3,108 | ||
Nine months ended July 31, 2011 | $ | 233,402 | |
Balance at November 1, 2011 | $ | 109,279 | |
Additions | (18,004 | ) | |
Nine months ended July 31, 2012 | $ | 91,275 | |
Amortization | |||
Balance at November 1, 2010 | $ | 28,267 | |
Amortization for the period | 32,133 | ||
Nine months ended July 31, 2011 | $ | 60,400 | |
Balance at November 1, 2011 | $ | 71,602 | |
Amortization for the period | $ | 9,405 | |
Nine months ended July 31, 2012 | $ | 81,007 | |
Balance at November 1, 2010 | $ | 202,027 | |
Balance at July 31, 2011 | $ | 173,002 | |
Balance at November 1, 2011 | $ | 37,678 | |
Balance at July 31, 2012 | $ | 10,269 |
In the fiscal quarter ended October 31, 2011, the Company wrote-down the value of its patents by $129,033 relating to technology the Company has no immediate plans to develop.
23
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
13. |
SHARE CAPITAL |
(a) | Authorized and outstanding: |
The Company has two classes of shares as follows:
(i) |
Special redeemable voting preference shares, 2,000,000 authorized, none are issued and outstanding. | |
(ii) |
Common shares without par value an unlimited number authorized. At July 31, 2012 the Company reports 127,944,710 (2011 - 106,454,556) outstanding common shares. |
Share Capital
Number of | Amount | |||||
Shares | $ | |||||
Balance at November 1, 2010 | 95,324,511 | $ | 49,897,871 | |||
Issued in connection w ith private placements | 20,825,207 | 2,478,681 | ||||
Related w arrents granted on private placements | - | (774,577 | ) | |||
Financing costs | - | (32,248 | ) | |||
Reclassified from w arrant liability | - | (263,498 | ) | |||
Balance at October 31, 2011 | 116,149,718 | $ | 51,306,229 | |||
Issued in connection w ith private placements | 11,794,992 | 1,690,506 | ||||
Warrents issued | - | (199,456 | ) | |||
Financing costs | - | (16,456 | ) | |||
Allocation from contributed surplus | 70,738 | |||||
Allocation from equity portion for the conversation | 538 | |||||
Reclassified from w arrant liability | - | 601,354 | ||||
Balance at July 31, 2012 | 127,944,710 | $ | 53,453,453 |
24
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
SHARE CAPITAL (Contd)
(b) | Stock option plan: | |
The Company has a fixed stock option plan. Under the Companys stock option plan (the Plan), the Company may grant options for up to 15,600,000 shares of common stock to directors, officers, employees or consultants of the Company and its subsidiaries. The exercise price of each option is equal to or greater than the market price of the Companys shares on the date of grant unless otherwise permitted by applicable securities regulations. An options maximum term under the Plan is 10 years. Stock options are fully vested upon issuance by the Company unless the Board of Directors stipulates otherwise by directors resolution. | ||
| ||
A summary of the status of the Companys fixed stock option plan through July 31, 2012 and changes during the periods is as follows: |
Options | Weighted | |||||
(000) | average | |||||
exercise price | ||||||
Outstanding, November 01, 2011 | 11,175 | 0.47 | ||||
Granted | 2,000 | 0.35 | ||||
Expired | (370 | ) | (0.41 | ) | ||
Cancelled | (2,700 | ) | (1.20 | ) | ||
Outstanding, July 31, 2012 | 10,105 | 0.25 |
25
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
13. |
SHARE CAPITAL (Contd) |
The following table summarizes information about stock options outstanding as at July 31, 2012. |
Options Outstanding | Options exercisable | ||||
Actual exercise price |
Number outstanding |
Weighted average remaining contractual life (in years) |
Weighted average exercise price |
Number Exercisable |
Weighted average exercise price |
0.60 | 190,000 | 0.3 | 0.60 | 190,000 | 0.60 |
0.55 | 315,000 | 0.4 | 0.55 | 315,000 | 0.55 |
0.35 | 125,000 | 3.8 | 0.35 | 125,000 | 0.35 |
0.20 | 7,475,000 | 4.3 | 0.20 | 7,475,000 | 0.20 |
0.35 | 2,000,000 | 4.8 | 0.35 | 2,000,000 | 0.35 |
Total | 10,105,000 | 0.25 | 10,105,000 | 0.25 |
(c) | Loss per share | |
The diluted loss per share gives effect to the exercise of any option or warrant for which the exercise price is lower than the average market price during the year using the treasury stock method. The inclusion of the Companys stock options, convertible debt and share purchase warrants in the computation of diluted loss per share would have an anti-dilutive effect on loss per share and they are therefore excluded from the computation. Consequently, there is no difference between basic loss per share and diluted loss per share. |
26
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
14. |
PRIVATE PLACEMENTS AND COMMON SHARE PURCHASE WARRANTS |
In the quarter ended July 31, the Company completed the following private placement financings with investors pursuant to prospectus and registration exemptions set forth in applicable securities law: |
2011 | 2012 | ||||||
Gross proceeds realized | 932,554 | 722,437 | |||||
Common share issued | 8,355,045 | 6,341,378 | |||||
Warrants issued - $US denominated | 2,344,545 | 208,333 | |||||
Warrants issued - $CDN denominated | 6,030,500 | 1,620,000 | |||||
Average price of common share purchase warrants | 0.14 | 0.23 | |||||
Term of warrants | 12 Months | 12 Months |
The continuity schedule of the balance reported as warrant liability in the consolidated statement of financial position under IFRS reporting guidelines is as follows:
27
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
Liability as of November 1, 2010 | 249,760 | |||
Revaluation of liability as of November 01, 2010 | (125,648 | ) | ||
Liability as of November 01, 2010 | 124,112 | |||
Warrants issued in quarter ended January 31, 2011 denominated in $CDN | 295,395 | |||
Revaluation of liability as of January 31, 2011 | (133,238 | ) | ||
Liability as of January 31, and April 30 2011 | 286,269 | |||
Warrants issued between February 1, 2011 and October 31, 2011 denominated in $CDN | 650,316 | |||
Revaluation of liability as of October 31, 2011 | 315,103 | |||
Liability as of October 31, 2011 | 1,251,688 | |||
Warrants issued in quarter ended January 31, 2012 denominated in $CDN | 163,438 | |||
Revaluation of liability as of January 31, 2012 | (507,106 | ) | ||
Liability as of January 31, 2012 | 908,020 | |||
Allocation to share capital | (5,464 | ) | ||
Set up incremental liability for 1,539,426 wts issued | 259,210 | |||
Revaluation of liability as of April 30, 2012 | 1,578,547 | |||
Liability as of April 30, 2012 | 2,740,313 | |||
Allocation to share capital | (521,774 | ) | ||
Allocation to OCI for 312,500 wts expired | (47,420 | ) | ||
Set up incremental liability for 1,620,000 CDN wts issued on private placement & conversion | 272,901 | |||
Revaluvation of liability on 7/31/12 | (301,217 | ) | ||
Liability as of July 31, 2012 | 2,142,803 |
28
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
14. |
PRIVATE PLACEMENTS AND COMMON SHARE PURCHASE WARRANTS (Contd) |
In 2012 the Company extended the expiry date on certain common share purchase warrants issued proceeds, as below: |
Date of Issue | # of Warrants | Strike price | Extended Expiry | |||||||
$ | Date | |||||||||
November 11, 2009 | 123,276 | 0.75 | November 11, 2012 | |||||||
May 14, 2009 | 429,686 | 1.20 | November 14, 2012 | |||||||
May 25, 2010 | 765,188 | 0.41 | November 25, 2012 | |||||||
December 14, 2009 | 600,000 | 0.76 | December 14, 2012 | |||||||
June 15, 2010 | 339,838 | 0.45 | December 15, 2012 | |||||||
December 16, 2009 | 815,000 | 0.56 | December 16, 2012 | |||||||
July 12, 2010 | 312,500 | 0.39 | December 1, 2013 | |||||||
January 13, 2011 | 750,000 | 0.20 | January 11, 2013 | |||||||
January 16, 2010 | 25,000 | 0.55 | January 15, 2013 | |||||||
July 23, 2010 | 312,500 | 0.40 | January 22, 2013 | |||||||
January 26, 2010 | 300,000 | 0.55 | January 26, 2013 | |||||||
February 1, 2010 | 111,111 | 0.56 | February 1, 2013 | |||||||
February 12, 2010 | 133,333 | 0.56 | February 12, 2013 | |||||||
March 4, 2010 | 10,000 | 0.20 | March 4, 2013 | |||||||
March 4, 2010 | 5,000 | 0.20 | March 4, 2013 | |||||||
April 27, 2010 | 250,000 | 0.20 | April 27, 2013 | |||||||
5,282,432 |
In each case the Company calculated the charge associated with the extensions of these warrants in accordance with the Black Scholes option-pricing model and reported a total charge to retained earnings and an offsetting charge to contributed surplus of $354,460 with respect to these extensions.
29
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
14. |
PRIVATE PLACEMENTS AND COMMON SHARE PURCHASE WARRANTS (Contd) |
A summary of the outstanding common share purchase warrants as of July 31 and the charges during the period is as follows:
Weighted | |||||||||
average | Proceeds | ||||||||
July 31, 2012 | Warrants | exercise piece | Realized | ||||||
Balance outstanding at October 31, 2011 | 26,672,637 | $0.23 | - | ||||||
Exercised | (5,783,045 | ) | $0.13 | 573,927 | |||||
Expired | (312,500 | ) | $0.20 | - | |||||
Granted | 6,011,949 | $0.19 | - | ||||||
Balance at July 31, 2012 | 26,589,041 | $0.23 |
Weighted | |||||||||
average | Proceeds | ||||||||
July 31, 2011 | Warrants | exercise piece | Realized | ||||||
Balance outstanding at October 31, 2010 | 6,198,887 | $0.51 | - | ||||||
Exercised | - | - | - | ||||||
Expired | (406,455 | ) | $0.54 | - | |||||
Granted | 11,185,045 | $0.15 | - | ||||||
Balance at July 31, 2011 | 16,977,477 | $0.28 | - |
30
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
15. |
BRIDGE LOANS | |
(a) |
On March 31, 2010 the Company secured a 180 day convertible bridge loan (Loan 1) from an arms length investor in the amount of CDN $250,000. The interest rate on the loan was established at 4% per month (effective interest rate 48%). The principal and interest of the loan was convertible at $0.55 per share at the holders option. The Company provided 12,500 common share purchase warrants to acquire common shares at a strike price of $0.50 per share. As a result, net proceeds of $220 were allocated to warrants. The loan was originally due in October 2010. At October 31, 2010, the note remained outstanding and interest was accrued at the stated rate of 4% per month compounded monthly. On December 17, 2010, the Company renegotiated the loan, extending the terms to June 17, 2011 and bearing interest at 2% per month compounded monthly. An additional 20,000 common share purchase warrants were issued in conjunction with the renegotiation. No value was assigned to these warrants as their value was nominal. The conversion feature for this loan was reduced from $0.55 to $0.20. As a result of the change in conversion value of $158,567 was recorded to deficit with an offsetting charge to contributed surplus to reflect the value of the more favourable conversion feature. | |
On July 17, 2011 the Company renegotiated the loan, extending the terms to October 17, 2011 and bearing interest at 2% per month compounded monthly. An additional 20,000 common share purchase warrants were issued in conjunction with the renegotiation. No value was assigned to these warrants as their value was nominal. The conversion feature of this loan remained unchanged at $0.20. This loan was repaid in October 2011. | ||
(b) |
On August 30, 2010 the Company secured a 180 day convertible bridge loan (Loan 2) from an arms length investor in the amount of CDN $200,000. The interest rate on the loan was established at 2% per month (effective interest rate 26%). The principal and interest of the loan was convertible at $0.40 per share at the holders option. The Company provided 7,500 common share purchase warrants to acquire common shares at a strike price of $0.40 per share. As a result, net proceeds of $14 were allocated to warrants. This loan was repaid in February 2011. | |
(c) |
On March 4, 2011 the Company secured a 180 day convertible bridge loan (Loan 3) from an arms length investor in the amount of CDN $100,000. The interest rate on the loan was established at 2% per month (effective interest rate 26%). The principal and interest of the loan was convertible at $0.21 per share at the holders option. The Company provided 5,000 common share purchase warrants to acquire common shares at a strike price of $0.21 per share. As a result, net proceeds of $6 were allocated to warrants. The loan was originally due September 4, 2011. The loan was renegotiated and extended for an additional 90 days. The conversion price was revised to $0.15 per share at the holders option. As a result of the change in conversion, a value of $26,997 was recorded to deficit with an offsetting charge to contributed surplus to reflect the value of the more favorable conversion feature. All other terms remained the same. This loan was repaid in the quarter ended January 31, 2012. |
31
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
15. |
BRIDGE LOANS (Contd) |
(d) |
On February 25, 2011 the Company secured a 30 day convertible bridge loan (Loan 4) from an arms length investor in the amount of CDN $250,000. The interest rate on the loan was established at 2% per month (effective interest rate 26%). The principal and interest of the loan was convertible at $0.21 per share at the holders option. The Company provided 10,000 common share purchase warrants to acquire common shares at a strike price of $0.21 per share. No value was assigned to the warrants as the amount was nominal. In the quarter ended July 31, 2011, the principal and interest were repaid. | |
(e) |
On March 22, 2011 the Company secured a short term loan (Loan 5) from a director of the Company in the amount of CDN $100,000. The interest rate on the loan was established at 2% per month (effective interest rate 26%). In the quarter ended July 31, 2011, the principal and interest were repaid. | |
(f) |
The Company secured $284,513 of bridge loans (Loan 6) from a group of arms length investor in December 2011 with maturities of six months. The loans are unsecured, bear interest at a rate of 2% per month (effective interest rate 26%) and are convertible at the holders option at $.12 per unit. Each Unit upon conversion includes one common share and one common share purchase warrant with a one year expiry and an exercise price of $0.12. The term of the loan was extended on a month to month basis in July 2012. | |
(g) |
The Company secured $98,058 of bridge loans (Loan 7) from a group of arms length investors in January 2012 with maturities of six months. The loans are unsecured, bear interest at a rate of 2% per month (effective interest rate 26%) and are convertible at the holders option at $.10 per unit. Each unit includes one common share and one common share purchase warrant with a one year expiry and an exercise price of $0.12. This loan was converted in the quarter ended July 31, 2012. | |
(h) |
The Company secured $205,049 of bridge loans (Loan 8 ) from a group of arms length investors in February 2012 maturing in six months. The loans are unsecured, bear interest at a rate of 2% per months (effective interest rate 26%) and are convertible at the holders option at $.17 per share. Each unit upon conversion includes one common share and one |
32
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
15. |
BRIDGE LOANS (Contd) |
common share purchase warrant with a one year expiry and an exercise price of $0.20. The term of this loan was extended on a month to month basis subsequent to July 31st (Note 23). | |
The outstanding bridge loans at July 31, 2012 are summarized as follows: |
Loan 6 | Loan 8 | Total | ||||||||
Principal | $ | 284,513 | $ | 205,049 | $ | 489,562 | ||||
Interest accrued | 45,332 | 23,540 | 68,872 | |||||||
Interest paid | (39,832 | ) | (39,832 | ) | ||||||
Accretion expense | 1,557 | 1,083 | 2,640 | |||||||
Equity portion of bridge loan- conversion | (1,557 | ) | (1,122 | ) | (2,679 | ) | ||||
Equity portion of bridge loan- warrants | - | - | ||||||||
Payment | - | - | ||||||||
$ | 290,013 | $ | 228,550 | $ | 518,563 |
The fair value of the warrants issued with respect to the bridge loans was estimated using the Black Scholes option-pricing model with the following assumptions:
2011 | 2012 | |||||
Loans | Loans | |||||
Expected dividends | - | - | ||||
Volatility factor | 111-121% | 109%-112% | ||||
Risk-free interest rate | 1.27-1.38% | 0.93-.95% | ||||
Weighted average expected life | 6 months -1 year | 6 months |
33
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
15. |
BRIDGE LOANS (Contd) |
The bridge loans outstanding for the reporting periods presented have a conversion option available to the lender of each case. The Company has calculated the fair value of the conversion option in each case in accordance with the Black Scholes options pricing model. | |
The components of the total bridge loans outstanding at each reporting period are as presented below: |
Conversion | ||||||||||
Loans(1) | Feature(2) | Total | ||||||||
November 1, 2010 | $ | 464,120 | $ | 48,428 | $ | 512.548 | ||||
January 31, 2011 | 431,381 | 123,764 | 555,145 | |||||||
October 31, 2011 | 85,669 | 21,114 | 106,783 | |||||||
January 31, 2012 | 385,804 | 2,095 | 387,899 | |||||||
April 30, 2012 | 607,661 | 3,217 | 610,878 | |||||||
July 31, 2012 | 515,884 | 2,679 | 518,563 |
(1) |
Calculated at amortized cost | |
(2) |
Calculated at fair value |
The assumptions used in the Black Scholes calculations of the conversion feature of the loans are summarized as:
Expected dividends | |
Volatility factors | 126% 127% |
Risk free interest rates | 0.93% 0.95% |
Weighted average expected life | 6 months 6 months |
34
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
16. |
CONTRIBUTED SURPLUS |
Balance outstanding at November 01, 2010 | 24,703,544 | ||
Stock compensation expense relating to stock options issued | 46,160 | ||
Common share purchase warrants | |||
(a) Issued | 457,556 | ||
(b) Extended | 137,191 | ||
(c) Reclassified to warrant liability | (159,309 | ) | |
Balance at July 31, 2011 | 25,185,141 | ||
Stock compensation expenses relating to stock option issued | 882,337 | ||
Common share purchase warrants | |||
(a) Issued | 317,021 | ||
(b) Extended | 155,829 | ||
(c) Reclassified to warrant liability | (97,458 | ) | |
Expenses relating to equity portion of bridge loans | 5,790 | ||
Modification of conversion feature of bridge loans | 185,564 | ||
Balance at October 31, 2011 | 26,634,223 | ||
Stock compensation expenses relating to stock option issued | 430,856 | ||
Common share purchase warrants | |||
(a) Issued | 198,514 | ||
(b) Extended | 254,460 | ||
(c) Reclassified to warrant liability | (67,466 | ) | |
Equity portion of bridge loans paid off | 558 | ||
Residual value of US warrants | - | ||
Reclassed for warrants exercised | (144,854 | ) | |
Modification of conversion feature of bridge loans | - | ||
Balance at July 31, 2012 | 27,306,291 |
35
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
16. |
CONTRIBUTED SURPLUS (Contd) |
The Company has calculated the charges to contributed surplus as presented above using the Black Scholes option pricing model. | |
The components of contributed surplus reported include: |
7/31/2012 | 10/31/2011 | |||||
Amount relating to loan forgiveness at | ||||||
inception of the Company | $ | 544,891 | $ | 544,891 | ||
Stock option compensation related | 23,961,528 | 23,530,672 | ||||
Common share purchase warrants | 2,970,441 | 2,584,933 | ||||
Bridge loan related | 191,912 | 191,354 | ||||
Reclassified to warrant liability | (362,481 | ) | (217,627 | ) | ||
$ | 27,306,291 | $ | 26,634,223 |
17. |
INCOME TAXES |
In accordance with IAS 34 (Note 3) the presentation of income taxes disclosures in these interim unaudited quarterly statements is condensed. | |
The Company has non-capital losses of approximately $17.6 million available to reduce future taxable income, the benefit of which has not been recognized in these consolidated financial statements. The tax losses expire as follows: |
Canada | Other Foreign | Total | |||||||
2014 | 1,026,401 | - | 1,026,401 | ||||||
2015 | 3,232,477 | - | 3,232,477 | ||||||
2022 | - | 7,301 | 7,301 | ||||||
2023 | - | 9,667 | 9,667 | ||||||
2025 | - | 14,471 | 14,471 | ||||||
2026 | 2,418,255 | 5,245 | 2,423,509 | ||||||
2027 | 2,033,562 | 3,459 | 2,037,021 | ||||||
2028 | 10,548 | 55,519 | 66,067 | ||||||
2029 | 2,084,132 | 463,610 | 2,547,742 | ||||||
2030 | 2,812,037 | 1,471,700 | 4,283,737 | ||||||
2031 | 1,552,679 | 421,724 | 1,974,402 | ||||||
$ | 15,170,091 | $ | 2,452,705 | $ | 17,622,796 |
36
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
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. | |
18. |
MANAGEMENT COMPENSATION AND RELATED PARTY TRANSACTIONS |
(a) |
Chairman: | |
On May 29, 2005, the Company entered into a new employment agreement with the Chairman for a period from January 1, 2005 through September 30, 2009. In 2009, the Company extended the agreement to December 31, 2010. In January 2011, the Board of Directors extended the Chairmans contract on a month to month basis reflecting annual compensation amount of $150,000 Canadian funds. | ||
In 2011 the Chairman was awarded a total of 1 million options at a strike price of $.20 per common share (2010: no options were awarded). | ||
The total compensation paid to the Chairman during the period ended July 31 is summarized as follows: |
Cash Compensation |
Stock Compensation Expense | |
2012 | $ 111,659 | $ 23,694 |
2011 | 112,500 | - |
(b) |
Management and consulting fees: | |
Included in professional fees as reported are management and consulting fees paid or payable to individuals (or companies controlled by such individuals) who served as officers and directors of the Company. The total compensation paid to such parties is summarized as. | ||
Three months ended July 31, |
Cash Compensation |
Stock Compensation | |
2012 | $ 133,952 | - |
2011 | 125,489 | - |
37
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
Nine months ended July 31,
Cash Compensation | Stock Compensation Expense | |
2012 | $ 434,076 | $ 159,417 |
2011 | 277,176 | - |
19. |
COMMITMENTS |
(a) |
License Agreement: |
Reference should be made to the License Agreement disclosures in the audited financial statements as of October 31, 2011. The License Agreement was executed in 2005 between the Company and the University of Toronto and the Ontario Centres of Excellence. The Company is committed to royalties of up to $1 million based on future revenues that it may receive relating to certain technology that was developed by the Company in conjunction with the University of Toronto. To date, the Company reports nil revenues and there is no liability to the Company under the License Agreement.
(b) |
Operating Leases: | |
The Company secured new leased premises in June 2012. The lease term is for 5 years and stipulates base monthly rental expenses of $3,800. | ||
(c) |
Employment and Consulting Contracts: | |
The Company entered into an employment agreement with the Chairman through December 31, 2010 as outlined in Note 18 (a) which stipulated an annual minimum obligation of $150,000 Canadian funds ($152,326 U.S. at average exchange rates). In 2011, this contract was extended on a month to month basis. | ||
In May 2008 the Company entered into two year agreements with the President and the Chief Financial Officer and a three year agreement with the President of the Companys subsidiary, MAST. In May 2010 the agreements with the President and the Chief Financial Officer were continued on a month to month basis on the same terms. In May 2011 the agreement with the President of MAST was continued on a month-to-month basis on the same terms. |
38
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
These agreements stipulate minimum cash compensation obligations as below:
President | $13,333 Canadian funds per month |
Chief Financial Officer | $12,500 Canadian funds per month |
President MAST | $15,000 U.S. funds per month |
In the quarter ended April 30, 2012 the Company paid an additional $55,000 of wages to the president of MAST, above the monthly minimum amount as above.
20. |
CONTINGENCIES |
The Company has agreed to indemnify its directors and officers and certain of its employees in accordance with the Companys by-laws. The Company maintains insurance policies that may provide coverage against certain claims. | |
21. |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT |
(a) |
Fair values | |
| ||
The fair values for all financial assets and financial liabilities approximate their carrying values due to their short-term nature. | ||
| ||
(b) |
Foreign currency balances | |
| ||
The consolidated financial statements include balances that are denominated in Canadian dollars as follows: |
39
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
Foreign Currency Balance | ||||||
2012 | 2011 | |||||
Cash and cash equivalents | $ | 9,458 | $ | 15,782 | ||
Deposits and other receivables | 122,367 | 23,272 | ||||
Accounts payable and accrued liabilities | (409,936 | ) | (543,997 | ) | ||
Bridge loan | (257,960 | ) | (449,832 | ) | ||
$ | (536,071 | ) | $ | (954,775 | ) |
(c) | Financial Risk Management | |
The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including foreign exchange risk and interest rate risk) and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out under policies approved by the Board of Directors. Management is charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the approved policies. | ||
Market Risk: |
i. |
Foreign Exchange Risk: | |
The Company currently incurs expenses in Canadian dollars. The total monetary financial instruments are in a net liabilities position. The management monitors the Canadian net liability position on a periodic basis throughout the course of the year and adjusts the total net monetary liability balance accordingly. | ||
A 10% strengthening of the US dollars against Canadian dollars would have increased the net equity by $24,000 (2011 $144,000) due to a reduction in the value of net liability balance. A 10% weakening of the US dollar against Canadian dollar at January 31, 2012 would have had the equal but opposite effect. | ||
ii. |
Interest Rate Risk: |
40
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
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 Companys 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 Companys results of operations.
Liquidity Risk:
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due.
The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. Senior management is actively involved in the review and approval of planned expenditures.
All financial liabilities are due within 1 year from the balance sheet at July 31, 2012.
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 Companys cash and cash equivalents, deposit and other receivables. The carrying amount of financial assets represents maximum credit exposure.
As at July 31, 2012, the Company reports a working capital deficiency of $853,019 and has certain financial commitments (Note 19), the majority of which are due within one year. It must continue to raise financing in order to meet its current obligations.
22. |
SEGMENTED INFORMATION |
There is one operating segment of the business being the development and commercialization efforts with respect to the Company's proprietary memory and sensor applications. Currently, the predominant market segment that the Company is pursuing is the North American market for such technology. |
41
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and nine months ended July 31, 2012 and 2011 |
23. | SUBSEQUENT EVENTS |
The Company reports the following as subsequent events: |
(a) |
It secured unit private placement financing of $102,000. A total of 728,572 units including one common share at $0.14 per share and one common share purchase warrant at $0.17 per share were issued as consideration. The warrants have a 12 month term from issue date. | |
(b) |
A total of 937,813 previously issued warrants at a strike price of $0.14 per share were exercised and the Company received proceeds of $136,378. | |
(c) |
A total of 7,284,655 outstanding warrants were extended for a 12 month period. The strike price of the warrants exceeded the market price of the shares at the extension date, ranging in price from $0.19 to $0.80 per share. | |
(d) |
Since July 31, 2012 the Company has received an additional $30,000 relating to the Unotron note (Note 9). |
24. |
COMPARATIVE FIGURES |
Certain comparative figures have been reclassified to conform with the current financial statement presentation. |
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42
MICROMEM TECHNOLOGIES INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE 3 MONTHS ENDED JULY 31, 2012 |
PREPARED AS OF SEPTEMBER 28, 2012 |
INTRODUCTION
The following sets out the Management's Discussion and Analysis ("MD&A") of the financial position and result of operations for the 3 months ended July 31, 2012 of Micromem Technologies Inc. (the "Company", "Micromem" or "we"). The MD&A should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes for the year ended October 31, 2011 which are prepared in accordance with International Financial Reporting Standards (IFRS). All financial analysis, data and information set out in this MD&A are unaudited. Additional information regarding the Company is available on the SEDAR website at www.sedar.com.
Certain information provided by the Company in this MD&A and in other documents publicly filed throughout the year that are not recitation of historical facts may constitute forward-looking statements. The words "may", "would", "could", "will", "likely", "estimate", "believe", "expect", "forecast" and similar expressions are intended to identify forward-looking statements.
Readers are cautioned that such statements are only predictions and the actual events or results may differ materially. In evaluating such forward-looking statements, readers should specifically consider the various factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements.
FORWARD LOOKING STATEMENTS
This MD&A contains forward-looking statements and forward looking information within the meaning of applicable Canadian securities legislation (forward looking statements). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, potentials, future events or performance (often, but not always, using words or phrases such as believes, expects or does not expect, is expected, anticipates or does not anticipate, or intends or stating that certain actions, events or results may, could, would, might or will be taken or achieved) are not statements of historical fact, but are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or developments in the Companys business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include disclosure regarding possible events, conditions or results of operations that are based on assumptions about future conditions, courses of action and consequences. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. The Company cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things, the successful commercialization of our technology, comments about potential future revenues, joint development agreements and expectations of signed contracts with customers etc. A variety of inherent risks, uncertainties and factors, many of which are beyond the Companys control, affect the operations, performance and results of the Company and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. Some of these risks and uncertainties include the risk of not securing required capital in future, the risks of not successfully concluding agreements with potential partners on a timely basis, the risks associated with commercializing and bringing to market our technology. These risks are affected by numerous factors beyond the Company's control: the existence of present and possible future government regulation, the significant and increasing competition that exists in the Company's business sector, uncertainty of revenues, markets and profitability, as well as those other factors discussed in this MD&A report. This list is not exhaustive of the factors that may affect any of the Companys forward-looking statements and reference should also be made to the Companys Annual Information Form (prepared and filed in the form of a Form 20-F Annual Report pursuant to The Securities Exchange Act of 1934) for a description of additional risk factors.
1
Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forwardlooking statements. The Company does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities law.
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2
MICROMEM TECHNOLOGIES INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE 3 MONTHS ENDED JULY 31, 2012 |
PREPARED AS OF SEPTEMBER 28, 2012 |
(Unless other indicated dollar amounts reported are stated in U.S. dollars) |
TABLE OF CONTENTS:
Refer also to attached Tables 1-4 as supplementary information.
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3
MICROMEM TECHNOLOGIES INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE 3 MONTHS ENDED JULY 31, 2012 |
PREPARED AS OF SEPTEMBER 28, 2012 |
1. OVERVIEW
Micromem Technologies Inc. (Micromem or the Company) is a company that has developed proprietary MRAM technology for both memory and sensor applications. The Companys shares are traded on the NASDAQ over the counter Bulletin Board (OTCBB) under the symbol MMTIF and on the CNSX under the symbol MRM. In 2007, the Company incorporated Micromem Applied Sensor Technologies Inc. (MAST) for the purpose of moving forward with the planned commercialization of its technology.
Reference should be made to the MD&A documentation filed as of October 31, 2011 for a chronology of the Companys activities and developments between 2005-2010 and for a review of the highlights for the fiscal year ended October 31, 2011.
2. HIGHLIGHTS 3 MONTHS ENDED July 31, 2012
During the quarter ended July 31, 2012:
(a) |
The Company raised total financing of $828,762 through a number of Unit private placement financings, from the exercise of common share warrants and from the conversion of debt to common shares. | |
(b) |
The Company issued several technical updates/releases on the status of its various projects that are under development and on certain product prototype testing that was completed successfully. | |
(c) |
The Company continues to develop and build a substantial pipeline of development opportunities that it anticipates will translate into additional development contracts in future licensing and sales opportunities. | |
(d) |
The Company has successfully completed its transition to International Financials Reporting Standards (IFRS) reporting and is filing the current quarter financial statements under these new reporting standards. It has restated its previously reported financial information for the relevant reporting periods in this report to conform with the IFRS presentation. | |
(e) |
The Company began the process of securing the sponsorship of an investment banking firm to apply for listing on the TSX Venture Exchange. | |
(f) |
The Company relocated its head office in June 2012 to 121 Richmond Street West, Suite 304 located in downtown Toronto. It signed a favorable 5 year lease for these premises. |
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3. 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.
There are material uncertainties related to adverse conditions and events that cast significant doubt about the Companys ability to continue as a going concern for a reasonable period of time in future. During the quarter ended July 31, 2012, the Company reported a loss from operations of $586,312 (2011- loss from operations of $241,554). As of that date, the Company has an accumulated deficit of $83,045,675 (2011: $77,215,372), a working capital deficiency (for this purpose defined as current assets less current liabilities excluding the reported derivative warrant liability) of $853,019 (2011: $1,465,803)
The Company will focus its development effort on existing projects in order to develop commercial applications for these projects and will continue to raise financing for operations as outlined in the notes to the financial statements at July 31, 2012.
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.
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. Such adjustments may be material.
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4. SELECT FINANCIAL INFORMATION AND DISCLOSURES
(a) Financial Position at July 31, 2012:
The following table sets out select unaudited financial information as at July 31, 2012 and for the 3 months then ended prepared under IFRS reporting standards.
Quarter ended July 31, 2012 (unaudited) |
Quarter ended July 31, 2011 (unaudited) | |
Interest and other income | - | 585 |
Total expenses | 586,312 | 305,700 |
Stock compensation expense | - | (64,146) |
Loss from operations | (586,312) | (240,969) |
Warranty liability | 75,736 | - |
Exchange gain (loss) | 3,497 | 4,379 |
Income taxes | (1,205) | |
Net comprehensive loss | (507,079) | (237,795) |
Loss per share and diluted loss per share | (0.00) | (0.00) |
Weighted average number of shares outstanding | 125,684,658 | 104,877,124 |
Total assets | 850,064 | 717,188 |
Cash and cash equivalents | 15,481 | 32,248 |
Working capital (excludes warrant liability) | (853,019) | (1,465,803) |
Shareholders equity (deficiency) | (2,283,253) | (831,363) |
At July 31, 2012 the Company has:
a) |
10,105,000 stock options outstanding which expire, if unexercised, between 2012- 2017. The average exercise price of these options is $0.25 per option. | |
b) |
26,589,041 common share purchase warrants which expire throughout 2013 if unexercised. The average exercise price of these warrants is $0.23. |
Refer also to Tables 1 and 2 which are appended to this MD&A. Table 1 sets forth selected information from the consolidated statements of operations and deficit for the fiscal years ending October 31, 2010-2011 and for the related quarterly information through July 31, 2012. Table 2 sets forth selected information from the consolidated balance sheets for the fiscal years ending October 31, 2010-2011 and the related quarterly information through July 31, 2012.
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(b) Discussion of Operating Results:
The following table summarizes the Companys operating results for the 3 months ended July 31, 2012,2011 and 2010.
Discussion of operating Results
Quarters ended July 31, |
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2012 ($000) |
2011 ($000) |
2010 ($000) |
|
Interest and other income | - | 1 | 5 |
General and administration | 181 | 85 | 95 |
Professional fees and salaries | 353 | 298 | 374 |
Stock-based compensation | - | (64) | - |
Research | 1 | (68) | - |
Travel and entertainment | 40 | 33 | 36 |
Foregn exchange (gain) loss | 5 | (4) | (1) |
Amortization of property and equipment | 1 | 2 | 2 |
Amortization of Intangible assets | 5 | - | - |
Impairment of deferred development costs | - | - | 1437 |
Interest and other income | |||
Recovery of promissory note | - | (60) | - |
Total expenses | 586 | 223 | 1943 |
Warrant liability (recovery) | (76) | - | - |
Exchange gain (loss) | (3) | 15 | - |
Income taxes | - | 1 | - |
Net comprehensive loss | 507 | 238 | 1,938 |
Loss per share | - | - | (0.02) |
Interest and other income: The Company remains as a pre-revenue company at July 31, 2012. It reported nil interest revenue in 2012 and a modest amount in 2011 relating to interest earned on outstanding cash balances.
Promissory note: The promissory note from Unotron has been fully reserved. In the quarter ended July 31, 2012, the Company booked and reserved approximately $16,000 of interest charged on the outstanding balance due (in 2011 it recovered $60,000 on the promissory note which it had fully reserved at the prior year end). At July 31, 2012, the outstanding balance which is fully reserved and which remains due from Unotron is $127,554. The Company issued a demand notice to collect the outstanding balance and has received judgment in its favor as of July 31, 2012. It continues to pursue collection of the fully reserved balance. Subsequent to July 31, 2012, it received $30,000 of payments on account from Unotron.
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Warrant liability: The Company, under IFRS, has calculated and reports a warrant liability charge of $(75,736) relating to the common share purchase warrants issued in Canadian dollars during the quarter. This is further discussed in Section 7 below.
Operating expenses: General and administration expenses and professional fees and salaries have increased in the quarter ended July 31, 2012 versus the comparable period in 2011 as further detailed later in this report. In 2011, the Company recorded a recovery of $64,146 relating to the modification of warrants which was reflected in Q1 2011 as an expense instead of as a charge to retained earnings.
Deferred development costs: The Company capitalized $36,365 of deferred development costs in the quarter ended July 31, 2012 relating to various different projects. In the quarter ended April 30, 2012, it reported a net recovery of $216,302 of costs previously capitalized. These represented third party invoices originally recorded to deferred development costs which were reversed in Q2. Accordingly, the Company reports a net recovery of $81,554 of capitalized costs for the nine month period through July 31, 2012 (2011: expenditures of $206,694).
Current projects under development: An update on projects previously reported in our MD&A documentation and in our periodic press releases is as follows:
Progress on Current Contracts in House
1. |
Nanoparticle Concentration Application: We received a formal change of scope from our client, a major international oil company, expanding our work scope from initially requiring us to only detect magnetic nanoparticles at extremely low concentrations in oil, to now requiring us to detect and measure the actual concentration in the stream. The revised beta version of our product development is in final test and will be shipped to the client in Q412. There is a revenue milestone payment attached to this delivery. | |
2. |
NEMT Aerial Exploration Platform: All field-testing on the proof of concept was completed this summer. We are now in the process of formal commercialization of this application and have begun discussion with a third party, outside of NEMT, who will license and market the product development for MAST. | |
3. |
Breast Aware Technology: We are in the process of consummating a product commercialization and production agreement with a European country that will roll this product out to various regional constituents. | |
4. |
Oil Condition Sensor: We received a formal purchase order from a major automotive company to demonstrate our MEMS based sensor platform capable of measuring automotive oil condition along with oil pan level. Our engine oil loop lab bench setup has been assembled and our client will be receiving process data during October. Once the client approves our prototype sensor, our plans are to design, fabricate a MEMS chip that will fit within an oil pan plug on. |
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5. |
GSI Westwind: Our prototype product development contract is complete. We have released our product to routine production and will begin delivering volume based within 8 weeks. |
Business development Updates
1. |
Proposal Pipeline: Our new business proposal pipeline remains robust and is growing in value. It is currently at $75.8 M USD. | |
2. |
Oil Exploration Company: We are negotiating with a global oil exploration company for the development and productization of a cement integrity sensor. This nano-sized sensor will be pumped with cement into the bore annulus of undersea oil wells and will be used to report for many years on the integrity of the cement lining of the oil well. This project is scheduled to kick off in late Q412. | |
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3. |
Global Power Distribution Company: We are in the final stage of negotiation with a multi-national high power transmission and distribution company. We are providing a customized sensor platform that will be used to detect imminent failure of a section of transmission line as a result of line sagging. MAST has demonstrated to the client our patented orthogonal Time Domain Reflectometry sensor platform that can detect line sagging as small as 10 cm on 1-4 km line segments. We expect to begin work in late Q412. | |
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4. |
Japanese High Performance Urban Infrastructure and Environmental Products Company: We have been selected for the final round of technology evaluation for being able to power residences wirelessly. Our solution leverages our patented sensor base and will help to significantly reduce the cost of home construction. | |
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5. |
Miniature Hall Sensors: We are in the final stages of technology evaluation for a global manufacturer that has a requirement for extremely small Hall sensors. MASTs Hal sensor is already smaller than their requirement. We have led the competitive testing so far through the evaluation. A decision to move forward is expected in 2012. Annual production volume is estimated to begin at 8-10 million units. | |
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6. |
World Leader in Industrial Automation Equipment and Electronic Component Business: MAST has been chosen to produce a prototype of what will be the worlds smallest current sensor device. This MAST product will ultimately be designed and manufactured in a MEMS format and will have the capability to communicate remotely. Work is anticipated to begin in Q412. | |
| ||
7. |
Remote Medical Monitoring of Aged Patients: MAST submitted a proposal to a global medical company for innovative ideas on how to monitor our aging population, particularly those that are suffering from some form of medical condition. Our proposal has made it through the first 2 of 3 rounds of technology evaluation. This work is scheduled to begin in Q113. | |
| ||
8. |
Global Pharmaceutical Company: Our technology has been selected for final evaluation with this company. We proposed an extremely accurate weighing system that is capable of accurately measuring 500 nanograms and making over 1 million routine measurements per year. The contract is scheduled to close in Q412. |
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9. |
DARPA: MAST submitted a design and build proposal to the US government for a Non-invasive electromagnetic encephalogram. This would be a wearable that veterans who have prosthetics would wear. The intent is to capture the brain wave and use them to effectively manipulate the prosthetics. | |
10. |
Department of Defense: MASTs technology was selected by the DOD for standoff sensor that can detect disturbed ground. The contract has been put on hold pending the US election and a determination of available funds as a result of budget sequestration. | |
11. |
Major Global Automotive Manufacturer: MAST submitted a technology proposal for improvements in driver visibility during periods of rain, fog and other bad weather. Our proposal for using UV LIDAR with a combination sonar and radar was selected for final round technology evaluation. This project is scheduled to begin in March 2013. |
Management has satisfied itself that the projects to which deferred development costs are reported meet the criteria for deferral and management expects that it will realize future revenues against each of these projects sufficient to justify the recurring values reported.
A summary of the continuity of the projects under development and the costs incurred by project for the quarters ended July 31, 2011 and 2012 are as presented below.
Impairment | ||||||||||||
Projects | 10/31/2010 | Additions | reserve | 7/31/2011 | ||||||||
Project A | $ | 1 | - | $ | - | $ | 1 | |||||
Project B | 1 | - | - | 1 | ||||||||
Project C | 1 | 17,721 | - | 17,722 | ||||||||
Project D | 1 | - | - | 1 | ||||||||
Project E | 146,604 | 22,564 | - | 169,168 | ||||||||
Project F | 1 | - | - | 1 | ||||||||
Project G | 1 | 141,200 | - | 141,201 | ||||||||
Project H | 1 | - | - | 1 | ||||||||
Project I | 74,908 | 46,429 | - | 121,337 | ||||||||
Project J | 1 | - | - | 1 | ||||||||
Project K | 1 | 202 | - | 203 | ||||||||
Project L | ||||||||||||
$ | 221,521 | $ | 228,116 | $ | - | $ | 449,637 |
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Net | |||||||||
Additions/ | |||||||||
Projects | 10/31/2011 | Recoveries | 7/31/2012 | ||||||
Project A | $ | 1 | $ | - | $ | 1 | |||
Project B | 1 | - | 1 | ||||||
Project C | 15,001 | 867 | 15,868 | ||||||
Project D | 1 | - | 1 | ||||||
Project E | 176,604 | 3,270 | 179,874 | ||||||
Project F | 1 | - | 1 | ||||||
Project G | 141,201 | (141,200 | ) | 1 | |||||
Project H | 1 | - | 1 | ||||||
Project I | 296,633 | 27,988 | 324,621 | ||||||
Project J | 1 | - | 1 | ||||||
Project K | 17,161 | 23,882 | 41,043 | ||||||
Project L | - | 13,044 | 13,044 | ||||||
$ | 646,606 | $ | (72,149 | ) | $ | 574,457 |
Quarterly general and administrative related expenses compare as follows ($000)
2012 | 2011 | 2010 | |
Investor relations | - | - | - |
Reserve, doubtful accounts | 6 | (4) | - |
Telephone | 2 | 3 | 5 |
Insurance | 16 | 20 | 22 |
Rent | 16 | - | - |
Interest | 33 | 28 | 29 |
Exchange gain/loss | - | - | 5 |
MAST | 9 | 8 | 9 |
Sponsorship | 73 | - | - |
Moving expenses | 8 | - | - |
All other | 18 | 30 | 25 |
181 | 85 | 95 |
In the quarter ended July 31, 2012, the Company initiated the process of applying for a TSX Venture Exchange listing. It incurred approximately $73,000 in sponsorship related costs in the quarter.
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Quarterly professional, other fees and salaries related expenses compare as follows($000)
2012 | 2011 | 2010 | |
Audit and related services | 42 | 32 | 32 |
Legal -patent | - | - | - |
Legal -other | 7 | 1 | 2 |
President, MAST | 58 | 45 | - |
Salaries and benefits | 108 | 91 | 132 |
Management fees | 113 | 119 | 110 |
Other | 25 | 10 | 33 |
353 | 298 | 309 |
In the quarter ended July 31, 2012 the Company paid the President of MAST an additional $13,241 of compensation beyond the minimum amounts stipulated in the compensation plan in effect (refer to section 14). In 2010, his compensation was reported in deferred development costs.
Quarterly Travel related expenses compare as follows ($000)
2012 | 2011 | 2010 | |
Travel: | |||
Airfare | 19 | 23 | 15 |
Hotel | 7 | 4 | 6 |
Meals | 9 | 2 | 3 |
Transportation | 5 | 4 | 12 |
40 | 33 | 36 |
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C) Unaudited Quarterly Financial Information - Summary
Unaudited Quarterly Financial Information - Summary
Three months ended (unaudited) |
Interest and other income $ |
Expenses |
Loss in period $ |
Loss per share $ |
April 30, 2010 | 5,009 | 531,769 | (526,760) | (0.01) |
July 31, 2010 | 5,000 | 1,942,819 | (1,937,819) | (0.02) |
October 31, 2010 | 7,778 | 1,811,661 | (1,803,883) | (0.02) |
January 31, 2011 | 339 | 580,107 | (579,768) | (0.01) |
April 30, 2011 | 39 | 507,264 | (507,225) | (0.01) |
July 31, 2011 | 585 | 241,554 | (237,795) | - |
October 31, 2011 | - | 1,248,756 | (683,021) | (0.01) |
January 31, 2012 | - | 444,303 | (24,327) | - |
April 30, 2012 | - | 1,014,520 | (2,849,835) | (0.02) |
July 31, 2012 | - | 586,312 | (507,079) | - |
Refer also to Tables 1 and 2 for summarized quarterly information.
5. LIQUIDITY AND CAPITAL RESOURCES
Liquidity:
Table 3 provides a summary of the financing that was raised during the 2009-2011 fiscal years and for the current year to date through July 31, 2012.
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 technologies. As at July 31, 2012, our working capital deficiency (excluding derivative warrant liability) was $853,019 (2011: $1,465,803).
We currently have no lines of credit in place. We must obtain financing from new investors or from investors who currently hold outstanding options and warrants in order to meet our cash flow needs until we generate revenues.
We have granted to our directors, officers and other employees options to purchase shares at prices that are at or above market price on the date of grant. A summary of the outstanding options and warrants is provided in Table 4.
Capital Resources:
We have no commitments for capital expenditures as of July 31, 2012.
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6. RISKS AND UNCERTAINTIES OVERVIEW
There are a number of material risks which may individually or in the aggregate effect the long-term commercial success of the Company, both known and unknown. An investment in the Company should be considered highly speculative due to the nature of the Companys activities and its current stage of development:
Stage of Development of Technology:
The Company has made significant strides in developing its prototype products over the past several years in its attempt to commercialize its products with its various strategic development partners. Nonetheless, the Company at this stage has not completed such efforts to the point that it has product available for sale and their remains uncertainties as to the Companys ultimate ability to complete the development of a product that is saleable.
Customers Willingness to Purchase:
We have entered into multiple joint development agreements whereby our prototype products are being subjected to rigorous testing by our partners. We have not as yet received unequivocal and firm purchase orders for our product. Some of the joint development partners that we are dealing with are private companies and there is a potential risk of those companies having to secure all of their requisite financing to support their orders and their working capital requirement.
Patent Portfolio:
The Company has spent a considerable amount of time, effort and incurred significant costs with respect to the maintenance and development of our intellectual property portfolio. However, given the nature of IP development, the Company is subject to continuing risks that our patents could be successfully challenged, that our patent pending files may not ultimately be granted full patent status. While we continue to make specific efforts to broaden our IP claims, this is an ongoing process and requires continued effort and vigilance. The Company does not have extensive in-house resources so as to manage its IP portfolio in this environment and has traditionally relied heavily on its patent attorneys for these services. In October 2010, the Companys working relationship with its patent attorneys, Morgan Lewis, was discontinued. The Company has secured an alternative service provider. In the fourth quarter of 2011, the Company wrote-down the value of patent asset by $129,033 which relates to older technology which the Company has no immediate plans to further develop.
Financing:
The Company has successfully raised funding over the past several years to continue to support its development initiatives and fund the Companys corporate structure and overheads. The financing environment for early stage technology companies remains challenging and there is no certainty that the Company will be able to continue to raise financing as it has in the past to continue to support its business initiatives.
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Competitors:
The Company is subject to competition from other larger entities who have greater financial resources and more in-house technical expertise.
Management Structure:
The Company is highly dependent on the services of a small number of senior management team members. If one of these individuals were unavailable, the Company could encounter difficult transition processes.
Foreign Currency Exposure:
The Company expects to sell its products and license technologies in the United States, in Canada and abroad. The Company has not hedged its foreign currency exposure, which has not been significant to date. In future, foreign currency fluctuations could present a risk to the business.
7. CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are set forth in Note 4 to our consolidated financial statements and should be read in conjunction with managements discussion of the Companys critical accounting policies and estimates as set forth below.
IFRS:
IFRS reporting has been adopted effective November 1, 2010.
The accounting policies disclosed in Note 4 have been applied in preparing the financial statements for the quarter ended July 31, 2012, the comparative information presented in these financial statements as at October 31, 2011 and for the year then ended, as at April 30, 2012 and for the three months ended and in the preparation of the opening IFRS statement of financial position at November 1, 2010 (the Companys date of transition).
In preparing the opening IFRS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous Canadian GAAP. These adjustments relate to:
(a) |
The accounting and measurement of warrant liability with respect to common share purchase warrants issued in conjunction with Unit private placement financings which the Company has secured, which are denominated in Canadian dollars. | |
(b) |
The accounting and measurement of the conversion feature of the bridge loans which the Company has secured. | |
(c) |
The presentation of foreign currency transaction adjustments with respect to those entities included in the consolidated financial statements where the functional currency for such entities is different from the Companys reporting currency. In these cases, the foreign currency translation adjustment is reported in Other Comprehensive Income (OCI). |
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The illustration of how the transition from previous Canadian GAAP to IFRS has affected the Companys financial position, financial performance and cash flows is set out in Note 6 to the financial statements as of July 31, 2012.
Compound Financial Instruments:
Compound financial instruments issued by the Company comprise convertible notes that can be converted to share capital at the option of the holder and the number of shares to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest rate method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
Interest, dividends, losses and gains relating to the financial liability are recognized in profit or loss except for borrowing costs on qualifying assets which are added to asset cost. Distributions to the equity holders are recognized in equity, net of any tax effect.
Comprehensive Income:
Comprehensive income consists of net income and 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.
Foreign Currency Translation:
The functional and reporting currency of the Companys wholly-owned foreign subsidiaries is the United States dollar. These entities are integrated foreign operations. 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.
The functional currency of Micromem and of its wholly-owned subsidiary, 7070159 Canada Inc. is the Canadian dollar. The Company translates monetary assets and liabilities at the rate of exchange in effect at the end of date of the reporting period and non-monetary assets and liabilities at historical rates. Exchange gains and losses which arise on the settlement of foreign currency denominated transactions and foreign currency differences arising on translation are recognized in OCI.
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Research and Development Expenses:
Research costs are expensed in the period incurred. Development expenses are expensed as incurred unless they meet the criteria for deferral and amortization under IFRS which is the translation of research findings or other knowledge into a plan for the technology prior to commercial production or use.
Patents:
Patents are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When circumstances dictate, an impairment loss is calculated as equal to the excess of the carrying value of the assets over their undiscounted estimated future net cash flow. The Company amortizes based on our estimated useful life for patents of 5 years. In the quarter ended October 31, 2011, the Company wrote-down the value of its patents by $129,033 which relates to older technology which the Company has no immediate plans to further develop.
Intangible Assets:
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When circumstances dictate, an impairment loss is calculated as equal to the excess of the carrying value of the assets over their undiscounted estimated future net cash flow. During the fiscal year ended October 31, 2011, the Company determined that it met the criteria for capitalizing development costs related to the general sensor technology the Company is pursuing and reports $120,951 of such costs as intangible assets at July 31, 2012. Amortization is provided on a 7 year straight-line basis.
Stock-Based Compensation:
Stock-based compensation is recognized using the fair value method. Under this method, the Black Scholes option-pricing model is used to determine periodic stock option expense. Any compensatory benefit recorded is recognized initially as deferred share compensation in the consolidated statements of shareholders equity and then charged against income over the contractual or vesting period.
As stock options are exercised, the Company records a charge to contributed surplus and a credit to share capital. The amount reported in each case is based on the original expense recorded when the related options were granted.
Unit Private Placements:
Until October 31, 2011, the Company had adopted the relative fair value approach in accounts for the value assigned to the common shares and the warrants which it had made available in the Unit private placement financings that it secured, calculated in accordance with the Black Scholes option pricing model.
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Under IFRS:
(i) |
The Company has adopted the residual value approach in accounting for the value assigned to the common shares and the warrants included in the Unit private placements. | |
(ii) |
For Unit private placements which are denominated in a currency other than the US dollar reporting currency, the Company measures the value of the warrant and reports this value as warrant liability in the consolidated statement of financial position. |
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.
8. FINANCIAL INSTRUMENTS
It is management's opinion that the Company is not exposed to significant interest rate and credit risks arising from financial instruments and that the fair value of financial instruments approximates the carrying value.
Fair values: The Company's financial instruments include: cash and cash equivalents, other receivables and accounts payable and accrued liabilities, the fair values of which approximate their carrying values due to their short-term maturity.
Credit risk: Financial instruments, which subject the Company to potential credit risk, consist of other receivables. The Company does not require collateral or other security for accounts receivable. The Company estimates its provision for uncollectible amounts based on an analysis of the specific amount and the debtor's payment history and prospects.
Foreign exchange: The Company completes transactions denominated in Canadian and in United States dollars and, as such, is exposed to fluctuations in foreign exchange rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.
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9. COMMITMENTS AND CONTINGENCIES
Operating Leases:
The Company entered into a new five year lease in June, 2012 at a base monthly cost of approximately $3,800.
Legal Matters:
There are currently no outstanding legal matters to which the Company is a party. 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.
Royalties:
The Company has obligations under the terms of the License Agreement signed with University of Toronto in June 2005. The total obligation could be $1 million tied to future product revenues.
Senior Management:
In 2005, we entered into an employment agreement with the Chairman of the Board of Directors, Salvatore Fuda, for a period from January 1, 2005 through December 31, 2009, which contract was extended to December 31, 2010. Under the terms of the agreement, the Chairman was retained to provide certain management services to the Company. The contract stipulated a minimum annual compensation amount of $150,000 Canadian funds ($143,877 U.S. funds at average exchange rates). In January 2011, the Board of Directors extended the Chairmans contract on a month-month-basis at an annual rate of $150,000 Canadian funds.
In May 2008, the Company entered into two year employment agreements with the President and the CFO and a three year agreement with the President of the Companys subsidiary, MAST Inc. These agreements have now expired and the Company has continued these on a month-to-month basis since expiry date. These agreements stipulated monthly obligations as below:
President | $13,333 | Canadian Funds |
Chief Financial Officer | $12,500 | Canadian Funds |
President MAST | $15,000 | U.S. Funds |
10. DISCLOSURE CONTROLS / INTERNAL CONTROLS
The Company is not classified as accelerated filer in 2011 or in 2012 and did not complete an external audit on its internal controls in 2011. It filed its last audit report on internal controls in 2010.
Management and the Board of Directors, primarily through the Audit Committee, have instituted review procedures on all of our periodic filings. We have established a disclosure committee consisting of independent directors. A charter for the disclosure committee and a policy has been developed and has been ratified by our Board of Directors. We engage legal counsel, as required, to provide guidance and commentary on our press releases.
19
Management has concluded that our disclosure controls and procedures meet required standards. These disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in its various reports are recorded, processed, summarized and reported accurately. In spite of its evaluation, management does recognize 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.
11. OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet financial commitments and does not anticipate entering into any contracts of such nature other than the addition of new operating leases for equipment and premises as may be required in the normal course of business.
12. TRANSACTIONS WITH RELATED PARTIES
The Company reports the following related party transactions:
(a) Compensation paid:
Included in professional fees as reported are management and consulting fees paid or payable to individuals (or companies controlled by such individuals) who served as officers and directors of the Company. The compensation paid to such parties during the quarter ending July 31st is as outlined above.
(b) Accounts receivable, payable and accruals:
At July 31, 2012 the Company reports the following accounts receivable and payable balances with related parties:
Payable to Company's Chairman under terms of employment contract: | $37,392 |
Payable to officer under the terms of employment contracts (1): | $113,189 |
(1) |
The Company assigned the Unotron promissory note to this officer of the Company during 2011. |
20
13. SHARE CAPITAL
At July 31, 2012 the Company reports 127,944,710 common shares outstanding (2011: 106,454,556). Additionally, the Company has 10,105,000 stock options outstanding with a weighted average exercise price of $..25 per share (2011: 4,075,000 options outstanding with a weighted average exercise price of $1.11 per share) and a total of 26,589,039 outstanding warrants to acquire common shares with a weighted average exercise price of $.23 per share (2011: 16,977,475 outstanding warrants with a weighted average exercise price of $.28 per share).
14. MANAGEMENT AND BOARD OF DIRECTORS
Our management team and directors, along with their 2012 remuneration in the quarter is presented as below:
Individual |
Position |
Q3 2012 remuneration | ||
Cash | Option | Total | ||
Salvatore Fuda (1) | Chairman, Director | 36,838 | - | 36,838 |
Joseph Fuda (2) | President, Director | 39,294 | - | 39,294 |
Steven Van Fleet (3) | President, MAST Inc., Director | 57,820 | - | 57,820 |
Andrew Brandt | Director | - | - | - |
David Sharpless | Director | - | - | - |
Larry Blue | Director | - | - | - |
Oliver Nepomuceno | Director | - | - | - |
Alex Dey | Director | - | - | - |
Dan Amadori (2) | CFO | 36,838 | - | 36,838 |
(1) |
contract was extended after December, 2010 on a month to month basis. | |
(2) |
contract was extended on a month to month basis in May 2010. | |
(3) |
contract was extended on a month-to-month basis in May 2011. |
21
15. SUBSEQUENT EVENTS
The Company reports the following as subsequent events:
a) |
Its secured unit private placement financing of $102,000. A total of 728,572 units including one common share at $0.14 per share and one common share purchase warrant at $0.17 per share were issued as consideration. The warrants have a twelve month term from issue date. |
b) |
A total of 937,813 previously issued warrants at a strike price of $0.14 per share were exercised and the Company realized proceeds of $136,378. |
c) |
A total of 7,284,655 outstanding warrants were extended for a twelve month period. The strike price of the warrants exceeded the market price of the shares at the extension date, and ranged in price from $0.19 to $0.80 per share. |
d) |
The Company recovered $30,000 from Unotron as partial payment against its outstanding note receivable from Unotron. |
22
Table 1
Micromem Technologies Inc Management Discussion and Analysis July 31, 2012 |
Fiscal year | |||||||||
ending October | Interest and | Loss per share (basic | |||||||
31 | other income | Net Loss | and fully diluted) | ||||||
2011 | 963 | (3,139,279 | ) | (0.03 | ) | ||||
2010 | 22,886 | (4,674,861 | ) | (0.05 | ) | ||||
Quarter ending | |||||||||
July 31, 2012 | - | (507,079 | ) | (0.00 | ) | ||||
April 30, 2012 | - | (2,849,835 | ) | (0.02 | ) | ||||
January 31, 2012 | - | 24,327 | 0.00 | ||||||
October 31, 2011 | - | (1,248,756 | ) | (0.01 | ) | ||||
July 31, 2011 | 585 | (237,795 | ) | - | |||||
April 30, 2011 | 39 | (507,225 | ) | (0.01 | ) | ||||
January 31, 2011 | 339 | (541,040 | ) | (0.01 | ) | ||||
October 31, 2010 | 17,886 | (2,737,042 | ) | (0.02 | ) | ||||
July 31, 2010 | 5,000 | (1,937,819 | ) | (0.02 | ) |
23
Table 2
Micromem Technologies Inc Management Discussion and Analysis July 31, 2012 Selected Balance Sheet Information (all amounts in United States dollars) |
Fiscal year | Working | Capital | Shareholders | ||||||||||||
ending October | capital | asssets | Other | Total | equity | ||||||||||
31 | (deficiency) | at NBV | Assets | Assets | (deficit) | ||||||||||
2011 | (2,298,916 | ) | 10,201 | 819,749 | 906,346 | (1,468,966 | ) | ||||||||
2010 | (1,459,460 | ) | 16,686 | 423,548 | 568,336 | (1,019,226 | ) | ||||||||
Quarter ending | |||||||||||||||
July 31, 2012 | (853,019 | ) | 6,892 | 705,677 | 850,064 | (2,283,253 | ) | ||||||||
April 30, 2012 | (1,086,547 | ) | 7,995 | 692,155 | 828,130 | (3,126,710 | ) | ||||||||
January 31, 2012 | (2,270,655 | ) | 9,098 | 916,429 | 1,016,467 | (1,345,129 | ) | ||||||||
October 31, 2011 | (1,047,228 | ) | 10,201 | 819,749 | 906,346 | (217,278 | ) | ||||||||
July 31, 2011 | (1,465,803 | ) | 11,800 | 622,640 | 717,188 | (831,363 | ) | ||||||||
April 30, 2011 | (1,986,534 | ) | 13,451 | 584,470 | 723,762 | (1,388,613 | ) | ||||||||
January 31, 2011 | (1,429,020 | ) | 15,102 | 415,945 | 592,430 | (997,973 | ) | ||||||||
October 31, 2010 | (1,459,460 | ) | 16,686 | 423,548 | 568,336 | (1,019,226 | ) | ||||||||
July 31, 2010 | (1,131,126 | ) | 18,808 | 1,596,876 | 1,984,874 | 484,558 |
24
Table 3
Micromem Technologies Inc Management Discussion and Analysis July 31, 2012 |
Summary of financing raised by Company
Date of financing | 2009 | 2010 | ||||||||||||||||
Shares | Price / share | $ | Shares | Price / share | $ | |||||||||||||
Exercise of options | ||||||||||||||||||
January 2009 | 32,801 | 0.74 | 24,417 | |||||||||||||||
April 2009 | 631,000 | 0.64 | 403,500 | |||||||||||||||
July 2009 | 889,000 | 0.57 | 504,500 | |||||||||||||||
August 2009 | 100,000 | 0.60 | 60,000 | |||||||||||||||
Exercise of warrants | ||||||||||||||||||
July 2009 | 200,000 | 1.17 | 234,000 | |||||||||||||||
Private placements | ||||||||||||||||||
January 2009 | 336,053 | 0.58 | 194,465 | |||||||||||||||
April 2009 | 2,777,878 | 0.58 | 1,620,397 | |||||||||||||||
July 2009 | 779,604 | 0.98 | 763,980 | |||||||||||||||
October 2009 | 500,000 | 0.76 | 380,000 | |||||||||||||||
January 2010 | 2,204,276 | 0.476 | 1,049,062 | |||||||||||||||
April 2010 | 289,899 | 0.448 | 130,000 | |||||||||||||||
July 2010 | 1,730,026 | 0.321 | 556,078 | |||||||||||||||
October 2010 | 1,717,307 | 0.196 | 335,910 | |||||||||||||||
6,246,336 | 4,185,259 | 5,941,508 | 2,071,050 |
2011 | 2012 | |||||||||||||||||
Shares | Price / share | $ | Shares | Price / share | $ | |||||||||||||
Private placements | ||||||||||||||||||
January 31, 2011 | 2,525,000 | 0.199 | 503,140 | |||||||||||||||
April 30, 2011 | 250,000 | 0.120 | 30,000 | |||||||||||||||
July 31, 2011 | 8,355,045 | 0.112 | 932,554 | |||||||||||||||
October 31, 2011 | 9,695,162 | 0.104 | 1,012,987 | |||||||||||||||
Private placements | ||||||||||||||||||
January 31, 2012 | 2,005,022 | 0.107 | 214,478 | |||||||||||||||
April 30, 2012 | 2,178,592 | 0.207 | 451,539 | |||||||||||||||
July 31, 2012 | 708,333 | 0.210 | 148,510 | |||||||||||||||
Exercise of warrants | ||||||||||||||||||
January 31, 2012 | - | - | ||||||||||||||||
April 30, 2012 | 1,270,000 | 0.141 | 179,270 | |||||||||||||||
July 31, 2012 | 4,513,045 | 0.127 | 573,927 | |||||||||||||||
Conversion of bridge loan | ||||||||||||||||||
July 31, 2012 | 1,120,000 | 0.098 | 109,825 | |||||||||||||||
20,825,207 | 2,478,681 | 11,794,992 | 1,677,549 |
25
Table 4
Micromem Technologies Inc Management Discussion and Analysis July 31, 2012 |
Outstanding options | Strike price | Expiry date | ||||
190,000 | 0.60 | 10/25/12 | ||||
315,000 | 0.55 | 12/20/12 | ||||
125,000 | 0.35 | 04/05/16 | ||||
2,000,000 | 0.35 | 04/10/17 | ||||
7,475,000 | 0.20 | 10/31/16 | ||||
10,105,000 | 0.25 | |||||
Total proceeds if all options exercised: | $ | 2,526,000 |
Outstanding Warrants | ||||||
123,276 | 0.7500 | 11/11/2012 | ||||
600,000 | 0.7600 | 12/14/2012 | ||||
772,000 | 0.5600 | 12/14/2012 | ||||
43,000 | 0.5500 | 12/14/2012 | ||||
25,000 | 0.5500 | 1/15/2013 | ||||
300,000 | 0.5500 | 1/26/2013 | ||||
111,111 | 0.5600 | 2/1/2013 | ||||
133,333 | 0.5600 | 2/12/2013 | ||||
429,686 | 1.2000 | 5/14/2012 | ||||
765,188 | 0.4100 | 11/25/2012 | ||||
339,838 | 0.4500 | 12/15/2012 | ||||
312,500 | 0.3900 | 1/12/2013 | ||||
312,500 | 0.4000 | 1/12/2013 | ||||
200,000 | 0.2800 | 8/30/2012 | ||||
1,325,000 | 0.2400 | 10/15/2012 | ||||
500,000 | 0.2000 | 11/5/2012 | ||||
400,000 | 0.1900 | 11/30/2012 | ||||
300,000 | 0.2000 | 12/20/2012 | ||||
250,000 | 0.2000 | 1/4/2013 | ||||
750,000 | 0.2000 | 1/11/2013 | ||||
325,000 | 0.2000 | 1/31/2013 | ||||
95,000 | 0.1500 | 4/27/2013 | ||||
1,861,500 | 0.1250 | 5/4/2012 | ||||
290,000 | 0.1600 | 5/30/2012 | ||||
298,000 | 0.2096 | 7/18/2012 | ||||
792,938 | 0.2076 | 8/3/2012 | ||||
75,000 | 0.1600 | 8/5/2012 | ||||
1,666,667 | 0.1528 | 8/16/2012 | ||||
1,275,000 | 0.1212 | 9/12/2012 | ||||
150,000 | 0.1174 | 9/29/2012 | ||||
250,000 | 0.1200 | 9/29/2012 | ||||
200,000 | 0.1174 | 9/29/2012 | ||||
5,118,890 | 0.1100 | 10/21/2012 | ||||
166,667 | 0.1485 | 10/26/2012 | ||||
1,135,022 | 0.1473 | 11/4/2012 | ||||
20,000 | 0.2000 | 12/17/2012 | ||||
100,000 | 0.1200 | 12/23/2012 | ||||
770,000 | 0.1188 | 1/23/2013 | ||||
58,824 | 0.2000 | 2/8/2013 | ||||
29,412 | 0.2000 | 2/8/2013 | ||||
142,858 | 0.4400 | 2/10/2013 | ||||
600,000 | 0.1800 | 2/15/2013 | ||||
66,667 | 0.1800 | 2/15/2013 | ||||
208,333 | 0.3000 | 2/27/2013 | ||||
83,333 | 0.3000 | 3/13/2013 | ||||
208,333 | 0.3000 | 3/13/2013 | ||||
58,333 | 0.3000 | 3/13/2013 | ||||
83,333 | 0.3000 | 4/8/2013 | ||||
41,667 | 0.1500 | 2/3/2013 | ||||
35,000 | 0.1500 | 2/3/2013 | ||||
145,833 | 0.3000 | 2/27/2013 | ||||
208,333 | 0.3000 | 2/27/2013 | ||||
208,333 | 0.3000 | 2/27/2013 | ||||
208,333 | 0.3000 | 5/11/2013 | ||||
1,120,000 | 0.1200 | 7/12/2013 | ||||
500,000 | 0.2500 | 7/13/2013 | ||||
26,589,041 | 0.23 | |||||
Total proceeds if all warrants exercised: | $ | 6,092,285 |
26
FORM 52-109F2
CERTIFICATION OF INTERIM
FILINGS
FULL CERTIFICATE
I, Joseph Fuda, President and Chief Executive Officer of Micromem Technologies Inc., certify the following:
1. |
Review: I have reviewed the interim financial report and interim MD&A (together the interim filings) of Micromem Technologies Inc., (the issuer) for the interim period ended July 31, 2012. |
2. |
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. |
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. |
Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. |
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) |
Designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that | ||
(i) |
Material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and | ||
(ii) |
Information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and | ||
(b) |
Designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 |
Control of framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Committee of Sponsoring Organizations of the Treadway Commission or COSO. The Company is utilizing the guidance for smaller public companies published by COSO. |
5.2 |
not applicable |
5.3 |
not applicable |
6. |
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on May 1, 2012 and ended on July 31, 2012 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: September 28, 2012
/s/ Joseph Fuda | |
Joseph Fuda | |
President and Chief Executive Officer |
FORM 52-109F2
CERTIFICATION OF INTERIM
FILINGS
FULL CERTIFICATE
I, Dan Amadori, Chief Financial Officer of Micromem Technologies Inc., certify the following:
1. |
Review: I have reviewed the interim financial report and interim MD&A (together the interim filings) of Micromem Technologies Inc., (the issuer) for the interim period ended July 31, 2012. |
2. |
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. |
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. |
Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. |
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) |
Designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that | ||
(i) |
Material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and | ||
(ii) |
Information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and | ||
(b) |
Designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 |
Control of framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Committee of Sponsoring Organizations of the Treadway Commission or COSO. The Company is utilizing the guidance for smaller public companies published by COSO. |
5.2 |
not applicable |
5.3 |
not applicable |
6. |
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on May 1, 2012 and ended on July 31, 2012 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: September 28, 2012
/s/ Dan Amadori | |
Dan Amadori | |
Chief Financial Officer |