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
June, 2012
Commission File Number 0-26005
MICROMEM TECHNOLOGIES INC.
121 Richmond St W, Suite 304 Toronto, ON M5H 2K1
[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shall be deemed a part of such registration statement from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished by Micromem Technologies Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934.
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. |
|
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By: /s/ Joseph Fuda |
Date: June 29, 2012 | Name: Joseph Fuda |
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Title: Chief Executive Officer |
Exhibit Index
Condensed Consolidated Interim Financial Statements of
MICROMEM TECHNOLOGIES INC.
For the three and six months ended April 30, 2012
(Unaudited See Notice to reader)
Notice to Reader
The accompanying unaudited interim consolidated financial statements of Micromem Technologies Inc. (the Company) condensed are the responsibility of management. The unaudited interim consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the unaudited condensed interim consolidated financial statements. Where necessary, management has been informed judgments and estimates in accounting for transactions which were not complete at the balance sheet date. In the opinion of management, the unaudited condensed interim consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with International Accounting Standard 34-interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances. Management has established processes, which are in place to provide it sufficient knowledge to support management representations that it has exercised reasonable diligence that: (i) the unaudited condensed interim consolidated financial statements do not contain any untrue statement of 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 is made, as of the date of, and for the periods presented by, the unaudited condensed interim consolidated financial statements, and (ii) the unaudited condensed interim consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the unaudited condensed interim consolidated financial statements. The Board of Directors is responsible for reviewing and approving the unaudited condensed interim consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. Management recognizes its responsibility for conducting the Companys affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
The Companys independent auditor has not performed a review of these unaudited interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of condensed interim consolidated financial statements by an entitys auditor.
/s/ Joseph Fuda | /s/ Dan Amadori | |
Joseph Fuda | Dan Amadori | |
CEO and Director | Chief Financial Officer |
2
MICROMEM TECHNOLOGIES INC.
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
(Unaudited expressed in United States dollars)
April 30, | October 31, | |||||
2012 | 2011 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 28,188 | $ | 44,062 | ||
Deposits and other receivables | 99,792 | 32,334 | ||||
Promissory note receivable (Note 9) | - | - | ||||
127,980 | 76,396 | |||||
Property and equipment, net (Note 10) | 7,995 | 10,201 | ||||
Deferred development costs (Note 11) | 534,958 | 646,606 | ||||
Intangible assets (Note 12) | 125,789 | 135,465 | ||||
Patents, net (Note 12) | 31,408 | 37,678 | ||||
$ | 828,130 | $ | 906,346 | |||
Liabilities and Shareholders' Equity (Deficiency) | ||||||
Current liabilities: | ||||||
Bridge loans (Note 15) | 610,878 | 106,783 | ||||
Accounts payable and accrued liabilities | 603,649 | 1,016,841 | ||||
Derivative warrant liability | 2,740,313 | 1,251,688 | ||||
3,954,840 | 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: 1 21,603,332 common shares (2011: 98,099,511) |
52,058,674 | 51,306,229 | ||||
Equity component of bridge loans (Note 15) | 3,217 | 558 | ||||
Contributed surplus (Note 16) | 27,349,995 | 26,634,223 | ||||
Deficit | (82,538,596 | ) | (79,409,976 | ) | ||
(3,126,710 | ) | (1,468,966 | ) | |||
$ | 828,130 | $ | 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 six months ended April 30, 2012 and 2011
Three Months Ended April 30, | Six Months Ended April 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Costs and expenses (income): | ||||||||||||
Administration | $ | 128,113 | $ | 120,919 | $ | 218,475 | $ | 224,284 | ||||
Professional, other fees and salaries (Note 18) | 388,240 | 320,884 | 712,849 | 651,924 | ||||||||
Stock Compensation | 430,856 | 12,425 | 430,856 | 110,306 | ||||||||
Research and development | 11,091 | - | 11,477 | 15,061 | ||||||||
Research and development (recovery) | - | (6,621 | ) | - | (6,621 | ) | ||||||
Travel and entertainment | 42,506 | 21,302 | 67,717 | 38,877 | ||||||||
Amortization of property and equipment (Note 10) | 1,103 | 1,651 | 2,206 | 13,946 | ||||||||
Amortization of patents | 4,838 | - | 9,676 | - | ||||||||
Foreign exchange loss | 7,773 | 48,937 | 5,567 | 65,358 | ||||||||
Allowance (recovery), promissory note receivable (Note 9) | - | (20,000 | ) | - | (30,000 | ) | ||||||
Loss from operations | 1,014,520 | 499,497 | 1,458,823 | 1,083,135 | ||||||||
Interest and other income | - | (39 | ) | (378 | ) | |||||||
Derivative warrants liability( recovery) | 1,837,757 | - | 1,425,681 | (38,728 | ) | |||||||
Net loss | (2,852,277 | ) | (499,458 | ) | (2,884,504 | ) | (1,044,029 | ) | ||||
Income taxes (Note 17) | - | - | - | - | ||||||||
(2,852,277 | ) | (499,458 | ) | (2,884,504 | ) | (1,044,029 | ) | |||||
Exchange gain (loss) | 2,442 | (7,767 | ) | 10,342 | (4,236 | ) | ||||||
Net loss comprehensive loss | (2,849,835 | ) | (507,225 | ) | (2,874,162 | ) | (1,048,265 | ) | ||||
Loss per share - basic and diluted | (0.02 | ) | (0.01 | ) | (0.02 | ) | (0.01 | ) | ||||
Weighted average number of shares | 119,982,036 | 97,860,622 | 118,659,914 | 97,142,643 |
See accompanying notes.
3
MICROMEM TECHNOLOGIES INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, expressed in United States
dollars)
For the three and six months ended April 30, 2012 and 2011
Three Months Ended | Six Months Ended | |||||||||||
April 30 | April 30 | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Cash flows from operating activities: | ||||||||||||
Net loss |
$ | (2,849,835 | ) | $ | (507,225 | ) | $ | (2,874,162 | ) | $ | (1,048,265 | ) |
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 | 2,206 | 3,235 | ||||||||
Amortization of Intangible asset |
4,838 | - | 9,676 | - | ||||||||
Accretion expense |
1,810 | 373 | 2,490 | 851 | ||||||||
Stock option expense |
430,856 | 12,425 | 430,856 | 110,306 | ||||||||
Increase (decrease) in deposits and other receivables |
(32,376 | ) | 65,196 | (67,458 | ) | 41,131 | ||||||
Increase (decrease) in accounts payable and accrued liabilities |
(462,026 | ) | 336,135 | (413,191 | ) | 296,379 | ||||||
Change in fair value of derivative warrant liability |
1,837,757 | - | 1,425,681 | (38,728 | ) | |||||||
Allowance (recovery), promissory note receivable (Note 9) |
- | (20,000 | ) | - | (30,000 | ) | ||||||
Net cash used in operating activities | (1,067,873 | ) | (111,445 | ) | (1,483,902 | ) | (654,380 | ) | ||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment |
- | - | - | - | ||||||||
Patents |
- | - | - | (3,108 | ) | |||||||
Deferred development costs |
219,437 | (168,524 | ) | 117,919 | (168,524 | ) | ||||||
Net cash used in investing activities | 219,437 | (168,524 | ) | 117,919 | (171,632 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Issue of common shares |
630,809 | 103,363 | 845,287 | 533,140 | ||||||||
Subscription received |
- | - | - | 73,363 | ||||||||
Bridge loans |
239,362 | 186,260 | 634,366 | 228,379 | ||||||||
Bridge loan repayments |
(17,071 | ) | - | (129,544 | ) | - | ||||||
Net cash provided by financing activities | 853,100 | 289,623 | 1,350,109 | 834,882 | ||||||||
Increase (decrease) in cash and cash equivalents | 4,664 | 9,654 | (15,874 | ) | 8,870 | |||||||
Cash and cash equivalents, beginning of period | 23,524 | 25,255 | 44,062 | 26,039 | ||||||||
Cash and cash equivalents, end of period | $ | 28,188 | $ | 34,909 | $ | 28,188 | $ | 34,909 | ||||
Supplemental cash flow information: | ||||||||||||
Interest paid (Classified in operating activities) |
17,071 | 23,898 | 28,937 | 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 | Contributed | Equity | Deficit | Total | |||||||||||||
Shares | Capital | 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 | 4,183,614 | 678,973 | - | - | - | 678,973 | ||||||||||||
Financing costs | - | (12,956 | ) | - | - | - | (12,956 | ) | ||||||||||
Stock option issued to directors/staff | - | 430,856 | - | - | 430,856 | |||||||||||||
Warrants issued for private placements | - | (171,480 | ) | 171,480 | - | - | - | |||||||||||
Warrants extended | - | 254,460 | - | - | 254,460 | |||||||||||||
Warrants exercised | 1,270,000 | 179,270 | 179,270 | |||||||||||||||
Reclassed for warrants exercised | 74,116 | (74,116 | ) | - | ||||||||||||||
Modification of bridge loans | - | - | - | - | - | |||||||||||||
Equity portion of bridge loan | - | - | 558 | 2,659 | - | 3,217 | ||||||||||||
Reclassified to warrant liability | - | 4,522 | (67,466 | ) | - | - | (62,944 | ) | ||||||||||
Net loss for the period | - | - | - | - | (3,128,620 | ) | (3,128,620 | ) | ||||||||||
Balance at April 30, 2012 | 121,603,332 | 52,058,674 | 27,349,995 | 3,217 | (82,538,596 | ) | (3,126,711 | ) | ||||||||||
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 | 2,775,000 | 533,140 | - | - | - | 533,140 | ||||||||||||
Subscription received | - | 73,363 | - | - | - | 73,363 | ||||||||||||
Financing costs | - | - | - | - | - | - | ||||||||||||
Stock option issued to directors/staff | - | - | 46,160 | - | - | 46,160 | ||||||||||||
Warrants issued for private placement | - | (167,543 | ) | 167,543 | - | - | - | |||||||||||
Warrants extended | - | - | 64,146 | - | - | 64,146 | ||||||||||||
Modification of bridge loans | - | - | - | - | - | - | ||||||||||||
Equity portion of bridge loan | - | - | - | 798 | - | 798 | ||||||||||||
Reclassified to warrant liability | - | - | (159,309 | ) | - | - | (159,309 | ) | ||||||||||
Net loss for the period | - | - | - | - | (1,089,841 | ) | (1,089,841 | ) | ||||||||||
Balance at April 30, 2011 | 98,099,511 | 50,336,831 | 24,822,084 | 6,582 | (76,840,378 | ) | (1,674,881 | ) |
5
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 777 College Street, Suite 1902, 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 April 30, 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 June 29, 2012.
6
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 six months ending April 30, 2012, the Company reported a net loss of $2,884,504 (2011: $1,044,029) and a net comprehensive loss of $2,874,162 (2011: $1,048,265) a working capital deficiency( current assets less current liabilities excluding derivative warrant liability) (Note 14) of $1,086,547 and negative cash flow from operations of $1,483,902 (2011: $654,380). | |
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. |
7
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 April 30, 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. |
8
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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. | ||
(a) |
Principles of Consolidation: | |
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as outlined in Note 1. All intercompany investments, balances and transactions have been eliminated upon consolidation. | ||
(b) |
Financial Instruments: Recognition, Measurement, Disclosure and Presentation: | |
The Company initially recognizes loans and receivables and deposits on the date that they are originated. All other financial assets including assets designated at fair value through profit or loss (FVTPL) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. | ||
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire. | ||
Financial assets and liabilities are offset and the net amount presented in the statement of financial position only when the Company has the legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. |
9
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
The Company has the following financial assets: cash and cash equivalents, deposits and other receivables and promissory note receivable. | ||
All financial assets and financial liabilities, including derivatives, are initially measured in the balance sheet at fair value, except for loans and receivables, investments held-to maturity and other financial liabilities, which are measured at amortized cost. Measurement in subsequent periods depends on whether the financial instrument had been classified as FVTPL, available-for-sale, held-to-maturity, loans and receivables, or other liabilities. | ||
FVTPL financial assets are measured at fair value and all gains and losses are included in net income in the period in which they arise. Available-for-sale financial assets are measured at fair value with revaluation gains and losses included in other comprehensive income until the assets are removed from the balance sheet. | ||
The Company classifies cash and cash equivalents as FVPTL. Deposits and other accounts receivable and promissory note receivable are classified as loans and receivables, and are initially measured at fair value and subsequently at amortized cost using the effective interest rate method. Accounts payable and accrued liabilities and bridge loans are classified as other liabilities, and initially measured at fair value and subsequently at amortized cost using the effective interest rate method. The derivative warrant liability is measured at fair value with unrealized gains or losses reported in the statement of consolidated loss. | ||
(c) |
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 are 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. |
10
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
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. | ||
(d) |
Derivative Warrant Liability: | |
The Companys derivative instruments consist of derivative liabilities in relation to its share purchase warrants and the conversion feature on its outstanding bridge loans. | ||
In prior years the Company has issued listed share purchase warrants in conjunction with private placements for the purchase of common shares of the Company. Certain of these share purchase warrants were issued with an exercise price in Canadian dollars, rather than US dollars (the reporting and functional currency of the Company). Such share purchase warrants are considered to be derivative instruments and the Company is required to re- measure the fair value of these at the reporting date. The fair value of these listed share purchase warrants are re-measured at each balance sheet date using the Black Scholes model using the exchange rates at the balance sheet date and measured over their remaining life. Adjustments to the fair value of the share purchase warrants as at the balance sheet date are recorded to the income statement. Share purchase warrants that have expired or have been forfeited are adjusted to the net income statement. | ||
The conversion feature on the bridge loans allows the holder of the option to convert the outstanding principal and interest from time to time to common equity. The Company, using the Black Scholes pricing model, accounts for bridge loans as follows: |
i) |
At date of origination the bifurcation of the total balance of the loan as debt and equity is calculated. Accretion expense is recorded over the term of the loan. | |
| ||
ii) |
The fair value of the conversion feature is calculated at the date of origin and reported as a component of the loan liability. |
11
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
iii) |
The conversion feature is revalued at the end of the reporting period and any adjustment is reflected in the statement of consolidated income or loss. |
(e) |
Comprehensive Income: | ||
Comprehensive income consists of net income and other comprehensive income ("OCI"). Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources. OCI refers to items recognized in comprehensive income but that are excluded from net income calculated in accordance with IFRS. | |||
(f) |
Foreign Currency Translation: | ||
The functional and reporting currency of the Companys wholly-owned foreign subsidiaries is the United States dollar. The functional currency of Micromem and of its wholly-owned subsidiary, 7070159 Canada Inc. is the Canadian dollar. | |||
i) |
Functional and presentation currency | ||
Items included in the financial statements of each of the Companys subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (the functional currency). The consolidated financial statements are presented in United States dollars, which is the Companys functional and presentation currency. | |||
ii) |
Transactions and balances | ||
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an entitys functional currency are recognized in the consolidated statements of operations. |
12
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) | |
(g) |
Cash and Cash Equivalents: | |
Cash and cash equivalents consist of all bank accounts and all highly liquid investments with original maturities of three months or less at the date of purchase. | ||
(h) |
Loan Impairment: | |
Impaired loans are accounted for at their face amount net of the allowance for loan impairment. When a loan is deemed to be impaired, its carrying amount is reduced to its estimated realizable amount which is measured by discounting the expected future cash flows at the effective interest rate inherent in the loan. The amount initially recognized as an impairment loan, together with any subsequent change, is charged to the allowance as an adjustment. A write-off of the loan will occur when the loan is believed to have no reasonable expectation of collectability. | ||
(i) |
Intangible Assets | |
Costs for the general development of the Companys sensor technology are expensed unless they meet the criteria for deferral. Expenditures are capitalized if the Corporation can demonstrate each of the following criteria: (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale, (ii) its intention to complete the intangible asset and use or sell it, (iii) its ability to use or sell the intangible asset, (iv) how the intangible asset will generate probable future economic benefits, (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and (vi) its ability to measure reliably the expenditure attributable to the intangible asset during its development; otherwise, they are expensed as incurred. Commencing in 2011, the Company determined that these costs met the criteria and, accordingly, these costs have been capitalized and are tested in each reporting period for impairment. Amortization is provided on a 7 year straight-line basis. | ||
(j) |
Inventory: | |
Inventory is valued at the lower of cost and net realizable value, where cost is determined on a first in, first out basis. Net realizable value for parts and materials is replacement cost. The cost of finished goods and work in progress includes parts, materials, labour and an allocation of direct overhead expenses. |
13
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
The Company has determined that, at April 30, 2012 and 2011, the prototype units that it is developing do not yet constitute saleable inventory and, accordingly, no inventory balances are reported. | ||
(k) |
Property and Equipment: | |
Property and equipment are recorded at cost and are amortized over their estimated useful lives at the following annual rates and methods: |
Computers | 30% declining balance basis |
Office equipment | 30% declining balance basis |
(l) |
Impairment of Long-lived Assets: | |
Long-lived assets consist of property and equipment, patents, intangible assets, royalty rights and deferred development costs. | ||
The carrying amounts of long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. When the carrying amount exceeds the estimated recoverable amount, the assets are written down to their recoverable amount. | ||
The recoverable amount of long-lived assets is the greater of fair value less costs to sell and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognized in the consolidated statements of operations. | ||
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation/amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statements of operations. Following |
14
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
the recognition or reversal of an impairment loss, the depreciation/amortization charge applicable to the asset is adjusted prospectively in order to systematically allocate the revised carrying amount, net of any residual value, over the estimated life of the useful life. | ||
Gains or losses on the disposal of equipment and intangible assets represent the difference between the net proceeds and the carrying value at the date of sale. | ||
(m) |
Research and Development Costs: | |
Research costs are expensed in the period incurred. Development costs are expensed as incurred unless they meet the criteria for deferral. Expenditures during the development phase are capitalized if the Corporation can demonstrate each of the following criteria: (i) the technical feasibility of completing the asset so that it will be available for use or sale, (ii) its intention to complete the asset and use or sell it, (iii) its ability to use or sell the asset, (iv) how the asset will generate probable future economic benefits, (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset, and (vi) its ability to measure reliably the expenditure attributable to the asset during its development; otherwise, these costs are expensed as incurred. Commencing in 2009, the Company determined that its continuing activities related to the development of its sensor technology met the deferral criteria and, accordingly, these costs have been capitalized and are tested in each reporting period for recoverability. Development costs will be amortized on an appropriate basis at the time the Company enters commercial production. | ||
Investment tax credits (ITCs) arising from research and development are recognized when their realization is reasonably assured. The ITCs are applied against the related costs and expenditures in the year that they are incurred. | ||
(n) |
Patents: | |
Patents are recorded at cost and are amortized on a straight line basis over their estimated useful lives of 5 years. Patents are recorded net of accumulated amortization with amortization expense capitalized as deferred development costs since the patents are directly related to development. |
15
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) | |
(o) |
Unit Private Placements: | |
Until October 31, 2011, the Company had adopted the relative fair value approach in accounting 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. | ||
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 functional currency, the Company measures the value of the warrant and reports this value as warrant liability in the consolidated statement of financial position. | |
The impact of these measurement changes under IFRS are detailed in Note 6. |
(p) |
Stock-based Compensation and Other Stock-based Payments: | |
The Company applies the fair value based method of accounting for all stock-based payments to employees and non-employees and all direct awards of stocks. Accordingly, stock-based payments are measured at the fair value of the consideration received or the fair value of the equity instruments issued or liabilities incurred, whichever is more reliably measurable. Stock-based compensation is charged to operations over the vesting period and the offset is credited to contributed surplus. | ||
Consideration received upon the exercise of stock options and warrants is credited to share capital and the related amount is transferred from contributed surplus to share capital. | ||
The fair value of stock options and warrants is determined by the Black Scholes option- pricing model with assumptions for risk free interest rates, dividend yields, volatility factors of the expected market price of the Companys common shares and an expected life of the option or warrant issued. The fair value of direct awards of stock is determined by the quoted market price of the Companys stock. |
16
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
(q) | Income Taxes: | |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. | ||
| ||
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. | ||
| ||
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income or loss and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. | ||
| ||
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the rates that have been enacted or substantively enacted by the reporting date. | ||
| ||
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. | ||
| ||
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. |
17
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) | |
(r) |
Earnings or Loss Per Share: | |
Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares consist of incremental common shares issuable upon the exercise of stock options and warrants using the treasury stock method. |
(s) |
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: |
| 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.
18
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
4. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd) |
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.
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.
19
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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.
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 April 30, 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 April 30, 2011 and for the three months then ended and in the preparation of the opening IFRS statement of financial position at November 1, 2010. | |
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 n line with IFRS 2 and no adjustment is required. |
20
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
5. |
CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Contd) | |
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. | |
(b) |
The accounting and measurement of the conversion feature of the bridge loans (Note 15) which the Company has secured. | |
(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. |
21
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
5. |
CONVERSION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Contd) |
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. | |
6. |
RECONCILIATION OF FINANCIAL STATEMENTS TO IFRS |
22
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
Reconciliation of statement of financial position and comprehensive loss as previously reported under Canadian GAAP to IFRS
April 30 2011 | ||||||||||
Canadian | ||||||||||
GAAP | Adj | IFRS | ||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 34,909 | $ | - | $ | 34,909 | ||||
Deposits and other receivables | 90,932 | - | 90,932 | |||||||
Promissory note receivable | - | - | - | |||||||
125,841 | - | 125,841 | ||||||||
Property and equipment, net | 13,451 | - | 13,451 | |||||||
Deferred development costs | 400,756 | - | 400,756 | |||||||
Intangible Assets | - | - | - | |||||||
Patents, net | 183,714 | 183,714 | ||||||||
$ | 723,762 | $ | - | $ | 723,762 | |||||
Liabilities and Shareholders' Equity (Deficiency) | ||||||||||
Current liabilities: | ||||||||||
Bridge loans | $ | 740,980 | - | $ | 740,980 | |||||
Accounts payable and accrued liabilities | 1,371,395 | - | 1,371,395 | |||||||
Derivative warrant liability | 286,269 | 286,269 | ||||||||
2,112,375 | 286,269 | 2,398,644 | ||||||||
Shareholders' Equity (Deficiency) | ||||||||||
Share capital: | 50,468,295 | (204,828 | ) | 50,263,467 | ||||||
Subscription received | 73,363 | - | 73,363 | |||||||
Equity component of bridge loans | 6,582 | - | 6,582 | |||||||
Contributed surplus | 24,942,253 | (120,169 | ) | 24,822,084 | ||||||
Accumulated other comprehensive income (loss) | - | 38,728 | 38,728 | |||||||
Deficit | (76,879,106 | ) | - | (76,879,106 | ) | |||||
(1,388,613 | ) | (286,269 | ) | (1,674,882 | ) | |||||
$ | 723,762 | $ | - | $ | 723,762 |
23
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
6. |
RESTATEMENT OF FINANCIAL STATEMENTS TO IFRS (Contd) |
MICROMEM TECHNOLOGIES
INC.
STATEMENT OF CONSOLIDATED LOSS AND COMPREHENSIVE
LOSS
(Unaudited expressed in United States dollars)
For the three and six months ended April 30, 2012 and 2011
Three months ended | Six months ended | ||||||||||||||||||
April 30 2011 | April 30 2011 | ||||||||||||||||||
Canadian | Adj | IFRS | Canadian | Adj | IFRS | ||||||||||||||
GAAP | GAAP | ||||||||||||||||||
Costs and expenses (income): | |||||||||||||||||||
Administration | $ | 128,686 | $ | (7,767 | ) | $ | 120,919 | $ | 228,520 | $ | (4,236 | ) | $ | 224,284 | |||||
Professional, other fees and salaries | 333,309 | - | 333,309 | 762,230 | - | 762,230 | |||||||||||||
Research and development | (6,621 | ) | - | (6,621 | ) | 8,440 | - | 8,440 | |||||||||||
Travel and entertainment | 21,302 | - | 21,302 | 38,877 | - | 38,877 | |||||||||||||
Amortization of property and equipment | 1,651 | - | 1,651 | 13,946 | - | 13,946 | |||||||||||||
Amortization of patents | - | - | - | - | - | - | |||||||||||||
Foreign exchange loss | 48,937 | - | 48,937 | 65,358 | - | 65,358 | |||||||||||||
Writedown of deferred development costs | - | - | - | - | - | - | |||||||||||||
Write-down of royalty rights | - | - | - | - | - | - | |||||||||||||
Allowance (recovery), promissory note receivable | (20,000 | ) | - | (20,000 | ) | (30,000 | ) | - | (30,000 | ) | |||||||||
Other expenses | - | - | - | - | - | - | |||||||||||||
Loss from operations | 507,264 | (7,767 | ) | 499,497 | 1,087,371 | (4,236 | ) | 1,083,135 | |||||||||||
Interest and other income | (39 | ) | - | (39 | ) | (378 | ) | - | (378 | ) | |||||||||
Derivative warrants liability( recovery) | - | - | - | (38,728 | ) | - | (38,728 | ) | |||||||||||
Net loss | (507,225 | ) | 7,767 | (499,458 | ) | (1,048,265 | ) | 4,236 | (1,044,029 | ) | |||||||||
Exchange gain (loss) | - | (7,767 | ) | (7,767 | ) | - | (4,236 | ) | (4,236 | ) | |||||||||
Income taxes | - | - | - | - | - | - | |||||||||||||
Net loss and comprehensive loss | (507,225 | ) | - | (507,225 | ) | (1,048,265 | ) | - | (1,048,265 | ) |
24
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 January 31, 2012. |
25
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 April 30, 2012 the balance outstanding was $121,976 and this amount has been fully reserved . The Company has served notice to the private company that it was demanding payments under the terms of the promissory note and the security agreement.
26
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
9. |
PROMISSORY NOTE RECEIVABLE (Contd) |
A continuity schedule of the outstanding promissory note receivable is as below: |
Original advance of funds, April 2009 | 200,000 | ||
Interest charged to October 31, 2009 | 5,000 | ||
Repayments in 2009 fiscal year | (5,000 | ) | |
Balance outstanding at October 31, 2009 | 200,000 | ||
Interest charged to October 31, 2010 | 26,333 | ||
Repayments in 2010 fiscal year | (20,000 | ) | |
Balance outstanding at October 31, 2010 before reserve | 206,333 | ||
Reserve of balance outstanding at October 30, 2010 | (201,333 | ) | |
Balance outstanding at October 31, 2010 | 5,000 | ||
Interest charged to October 31, 2011 | 20,220 | ||
Reserve of interest accrued | (20,220 | ) | |
Repayments in 2011 fiscal year | (115,000 | ) | |
Recovery of promissory note receivable | 110,000 | ||
Balance outstanding at October 31, 2011 | - | ||
Interest charged to April 30, 2012 | 10,423 | ||
Reserve of interest accrued | (10,423 | ) | |
Balance outstanding at April 30,2012 | - |
The outstanding balance of principal and interest at April 30, 2012 is $121,976 which amount is fully reserved.
27
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
10. |
PROPERTY AND EQUIPMENT |
Computer | Furniture and | Total | ||||||||
Equipment | Equipment | |||||||||
Cost | ||||||||||
Balance at November 1, 2010 | $ | 40,734 | $ | 25,989 | $ | 66,723 | ||||
Additions | - | - | - | |||||||
Six months ended April 30, 2011 | $ | 40,734 | $ | 25,989 | $ | 66,723 | ||||
Balance at November 1, 2011 | $ | 40,733 | - | $ | 40,733 | |||||
Additions | - | - | - | |||||||
Six months ended April 31, 2012 | $ | 40,733 | $ | - | $ | 40,733 |
Depreciation and impairments | Computer | Furniture and | Total | |||||||
Equipment | Equipment | |||||||||
Balance at November 1, 2010 | $ | 24,047 | $ | 25,989 | $ | 50,036 | ||||
Depreciation for the period | 3,235 | - | 3,235 | |||||||
Six months ended April 30, 2011 | $ | 27,282 | $ | 25,989 | $ | 53,271 | ||||
Balance at November 1, 2011 | $ | 30,532 | - | $ | 30,532 | |||||
Depreciation for the period | 2,206 | - | 2,206 | |||||||
Six months ended April 31, 2012 | $ | 32,738 | $ | - | $ | 32,738 | ||||
Balance at November 1, 2010 | $ | 16,687 | $ | - | $ | 16,687 | ||||
Balance at April 30, 2011 | $ | 13,452 | $ | - | $ | 13,452 | ||||
Balance at November 1, 2011 | $ | 10,201 | $ | - | $ | 10,201 | ||||
Balance at April 30, 2012 | $ | 7,995 | $ | - | $ | 7,995 |
28
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
10. |
DEFERRED DEVELOPMENT COSTS |
The breakdown of development costs that have been capitalized is as follows: |
Cost | |||
Balance at November 1, 2010 | $ | 221,521 | |
Additions | 179,235 | ||
Six months ended April 30, 2011 | $ | 400,756 | |
Balance at November 1, 2011 | $ | 646,606 | |
Additions | (111,648 | ) | |
Six months ended April 30, 2012 | $ | 534,958 | |
Amortization | |||
Balance at November 1, 2010 | $ | - | |
Depreciation for the period | - | ||
Six months ended April 30, 2011 | $ | - | |
Balance at November 1, 2011 | $ | - | |
Depreciation for the period | - | ||
Six months ended April 30, 2012 | $ | - | |
Balance at November 1, 2010 | $ | 221,521 | |
Balance at April 30, 2011 | $ | 400,756 | |
Balance at November 1, 2011 | $ | 646,606 | |
Balance at April 30, 2012 | $ | 534,958 |
For the six months ended April 30, 2012 the Company incurred $117,777 of deferred development costs and recovered $ 229,425 of costs previously reported for a net adjustment of ($111,648) ( 2011 incurred $ 179,235 of development costs)
29
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
11. |
INTANGIBLE ASSETS AND PATENTS |
Intangible assets comprise the costs which the Company has capitalized relating to the technical expertise and know-how that the Company has developed with respect to the commercialization efforts relating to its sensor technology. In 2011, the Company determined that it had sufficiently advanced its expertise and product knowledge relating to the general commercialization efforts for its sensor technology in multiple industry vertical applications. It anticipates that it will realize commercial economic benefits from the exploitation of these intangible assets in future. | |
Intangible Assets |
Cost | |||
Balance at November 1, 2010 | $ | - | |
Additions | - | ||
Six months ended April 30, 2011 | $ | - | |
Balance at November 1, 2011 | $ | 135,465 | |
Additions | - | ||
Six months ended April 30, 2012 | $ | 135,465 | |
Amortization | |||
Balance at November 1, 2010 | $ | - | |
Depreciation for the period | - | ||
Six months ended 31, 2012 | $ | - | |
Balance at November 1, 2011 | $ | - | |
Depreciation for the period | 9,676 | ||
Balance at April 30, 2012 | $ | 9,676 | |
Balance at November 1, 2010 | $ | - | |
Balance at April 30, 2011 | $ | - | |
Balance at November 1, 2011 | $ | 135,465 | |
Balance at April 30, 2012 | $ | 125,789 |
30
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
12. |
INTANGIBLE ASSETS AND PATENTS (Contd) |
Patents
Patents | |||
Cost | |||
Balance at November 1, 2010 | $ | 230,294 | |
Additions | 3,108 | ||
Six months ended April 30, 2011 | $ | 233,402 | |
Balance at November 1, 2011 | $ | 109,279 | |
Additions | - | ||
Six months ended April 30, 2012 | $ | 109,279 | |
Amortization | |||
Balance at November 1, 2010 | $ | 28,267 | |
Depreciation for the period | 10,711 | ||
Six months ended April 30, 2011 | $ | 38,978 | |
Balance at November 1, 2011 | $ | 71,602 | |
Depreciation for the period | $ | 6,270 | |
Six months ended April 30, 2012 | $ | 77,872 | |
Balance at November 1, 2010 | $ | 202,027 | |
Balance at April 30, 2011 | $ | 194,424 | |
Balance at November 1, 2011 | $ | 37,678 | |
Balance at April 30, 2012 | $ | 31,408 |
In the fiscal year ended October 31, 2011, the Company wrote-down the value of its patents by $129,033 relating to technology the Company has no immediate plans to develop.
31
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
12. |
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 April 30, 2012 the Company reports 121,603,332 (2011 - 98,099,511) 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 | - | (32,249 | ) | |||
Reclassified to w arrant liability | - | (263,498 | ) | |||
Balance at October 31, 2011 | 116,149,718 | $ | 51,306,229 | |||
Issued in connection w ith private placements | 5,453,614 | 678,973 | ||||
Related w arrents granted on private placements | - | 7,790 | ||||
Financing costs | - | (12,956 | ) | |||
Allocation from contributed surplus | 74,116 | |||||
Reclassified to w arrant liability | - | 4,522 | ||||
Balance at April 30, 2012 | 121,603,332 | $ | 52,058,674 |
32
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
(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 April 30, 2012 and changes during the periods is as follows: |
Options | Weighted average | ||||||
(000) | exercise price | ||||||
Outstanding, November 01, 2011 and January 31,2012 | 11,175 | 0.47 | |||||
Granted | 2,000 | 0.35 | |||||
Expired | (370 | ) | (0.41 | ) | |||
Cancelled | (2,700 | ) | (1.20 | ) | |||
Outstanding, April 30, 2012 | 10,105 | 0.25 |
33
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
13. |
SHARE CAPITAL (Contd) |
Stock options issued during the quarter ended April 30, were as follows: |
2011 | 2012 | ||||||
Issued | 375,000 | 2,000,000 | |||||
Strike price per option | .55 | 0.35 | |||||
Expiry date | 12/20/13 | 04/10/17 | |||||
Stock option expense recorded | $ | 33,735 | $ | 430,856 | |||
Options exercised | -- | -- |
34
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
13. |
SHARE CAPITAL (Contd) |
The following table summarizes information about stock options outstanding as at April 30, 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 | 0.5 | 0.60 | 190,000 | 0.60 |
0.55 | 315,000 | 0.7 | 0.55 | 315,000 | 0.55 |
0.35 | 125,000 | 4.0 | 0.35 | 125,000 | 0.35 |
0.20 | 7,475,000 | 4.5 | 0.20 | 7,475,000 | 0.20 |
0.35 | 2,000,000 | 5.0 | 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. |
35
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
13. |
PRIVATE PLACEMENTS AND COMMON SHARE PURCHASE WARRANTS |
In the quarter ended April 30, 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 | 533,140 | 858,243 | |||||
Common share issued | 2,775,000 | 3,060,022 | |||||
Common share purchase | - | - | |||||
Warrants issued - $US denominated | 250,000 | 639,166 | |||||
Warrants issued - $CDN denominated | - | 1,539,426 | |||||
Average price of common share purchase warrants | 0.15 | 0.20 | |||||
Term of warrants | 12 Months | 12 Months |
Under IFRS reporting guidelines the Company has recorded a warrant liability of $ 1,488,625 for the quarter ended April 30, 2012 (2011: $162,157) with respect to the warrants issued in a foreign currency (Note 5).
The continuity schedule of the balance reported as warrant liability in the consolidated statement of financial position under IFRS reporting guidelines is as follows:
36
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 | ) | ||
Warrants issued in quarter ended April 30, 2012 denominated in $CDN | 259,210 | |||
Revaluation of liability as of April 30, 2012 | 1,578,547 | |||
Liability as of April 30, 2012 | 2,740,313 |
37
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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.
38
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
14. | PRIVATE PLACEMENTS AND COMMON SHARE PURCHASE WARRANTS (Contd) |
A summary of the outstanding common share purchase warrants as of April 30 and the charges during the period is as follows: |
Weighted | ||||||||||
average exercise | Proceeds | |||||||||
April 30, 2012 | Warrants | piece | Realized | |||||||
Balance outstanding at October 31, 2011 | 26,672,637 | $0.23 | - | |||||||
Exercised | (1,270,000 | ) | $0.16 | 179,270 | ||||||
Expired | - | - | - | |||||||
Granted | 4,183,614 | $0.20 | - | |||||||
Balance at April 30, 2012 | 29,586,251 | $0.22 |
Weighted | ||||||||||
average exercise | Proceeds | |||||||||
April 30, 2011 | Warrants | piece | Realized | |||||||
Balance outstanding at October 31, 2011 | 6,198,885 | $0.23 | - | |||||||
Exercised | - | - | - | |||||||
Expired | (65,455 | ) | - | - | ||||||
Granted | 2,810,000 | $0.20 | - | |||||||
Balance at April 30, 2011 | 8,943,430 | $0.22 |
15. |
BRIDGE LOANS |
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 |
39
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
15. |
BRIDGE LOANS (Contd) |
(a) |
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. | |
(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. |
40
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
(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. |
(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. | |
(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 common share purchase warrant with a one year expiry and an exercise price of $0.20. |
41
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
15. |
BRIDGE LOANS (Contd) |
The outstanding bridge loans at April 30, 2012 are summarized as follows:
Loan 6 | Loan 7 | Loan 8 | Total | ||||||||||
Principal | $ | 284,513 | $ | 98,058 | $ | 205,049 | $ | 587,620 | |||||
Interest accrued | 5,500 | 7,125 | 11,359 | 23,984 | |||||||||
Accretion expense | 1,542 | 364 | 584 | 2,490 | |||||||||
Equity portion of bridge loan- conversion | (1,557 | ) | (537 | ) | (1,122 | ) | (3,216 | ) | |||||
Equity portion of bridge loan- warrants | - | - | - | ||||||||||
Payment | - | - | - | ||||||||||
$ | 289,998 | $ | 105,010 | $ | 215,870 | $ | 610,878 |
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 | 112-121% | 126%-153% |
Risk-free interest rate | 1.27-1.33% | 0.93% |
Weighted average expected life | 6 months | 6 months |
42
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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 | 191,531 | 196,368 | 387,899 | |||||||
April 30, 2012 | 610,878 | 379,254 | 990,132 |
(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% 153% |
Risk free interest rates | 0.93 |
Weighted average expected life | 5 month 7 months |
43
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
16. |
CONTRIBUTED SURPLUS |
Balance outstanding at November 01, 2010 | 24,703,544 | |||
Stock compensation expense relating to stock options issued | 171,734 | |||
Common share purchase warrants | ||||
(a) Issued | 41,969 | |||
(b) Extended | 64,146 | |||
(c) Reclassified to warrant liability | (159,309 | ) | ||
Balance at April 30, 2011 | 24,822,084 | |||
Stock compensation expenses relating to stock option issued | 756,763 | |||
Common share purchase warrants | ||||
(a) Issued | 732,606 | |||
(b) Extended | 228,874 | |||
(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 | 171,480 | |||
(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 | (74,116 | ) | ||
Modification of conversion feature of bridge loans | - | |||
Balance at April 30, 2012 | 27,349,995 |
44
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 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: |
4/30/2012 | 10/31/2011 | 4/30/2011 | ||||||||
Amount relating to loan forgiveness at inception of the Company | $ | 544,891 | $ | 544,891 | $ | 544,891 | ||||
Stock option compensation related | 23,961,528 | 23,530,672 | 22,648,336 | |||||||
Common share purchase warrants | 2,936,757 | 2,584,933 | 1,749,026 | |||||||
Bridge loan related | 191,912 | 191,354 | - | |||||||
Reclassified to warrant liability | (285,093 | ) | (217,627 | ) | (120,169 | ) | ||||
$ | 27,349,995 | $ | 26,634,223 | $ | 24,822,084 |
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 |
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.
45
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
16. |
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 April 30 is summarized as follows: |
Cash Compensation |
Stock Compensation Expense | |
2012 | $ 74,822 | $ 23,694 |
2011 | 76,181 | - |
(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 during the three and six months ended April 30 is as follows: | ||
Three months ended April 30, |
Cash Compensation |
Stock Compensation | |
2012 | $ 158,483 | 159,396.00 |
2011 | 159,136 | - |
Six months ended April 30,
46
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
Cash Compensation |
Stock Compensation Expense | |
2012 | $ 300,126 | $ 159,396 |
2011 | 247,440 | - |
19. |
COMMITMENTS | |
(a) |
License Agreement: | |
In June 2005, the Company signed a license agreement (the License Agreement) with the University of Toronto (UofT) and the Ontario Centres of Excellence (including MMO and CITO) (collectively OCE) whereby: |
|
OCE released the Company and the University from the commercialization obligations set forth in all prior research collaboration agreements. | |
|
The Company acquired exclusive worldwide rights to the technology and patent rights related to the MRAM technology developed at the UofT. | |
|
The Company has agreed to royalties and payments under the terms of the License Agreement as follows: | |
|
In consideration for the rights and licenses granted, the Company has agreed to pay to the UofT: |
i. |
4% of net sales until such time as the UofT has received from the Company an aggregate amount of five hundred thousand Canadian dollars (CDN$500,000). | |
ii. |
1% of net sales thereafter. |
47
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
19. |
COMMITMENTS (Contd) |
| If the Company sublicenses any rights granted herein to any non-affiliate: |
i. |
in combination or association with the Companys intellectual property, the UofT shall receive 10% of any net fees and/or net royalties that shall be received by the Company in respect of any licenses involving both the rights granted and such Micromem intellectual property; | |
ii. |
For all other sublicenses of the rights granted to any non-affiliate, the UofT shall receive 20% of any net fees and/or net royalties that may be received by the Company in respect of such sublicenses. | |
iii. |
Net fees and/or net royalties shall be received from the Company until such time as the UofT has received from the Company an aggregate amount of five hundred thousand Canadian dollars (CDN$500,000); thereafter the Company shall pay half of the amounts as otherwise noted above. |
|
At any point after which the Company has paid the UofT five hundred thousand Canadian dollars (CDN$500,000), the Company may at its option buy out the obligation to pay royalties under the License Agreement by paying to the UofT a single lump sum payment equaling the greater of five hundred thousand Canadian dollars (CDN$500,000) and an amount equal to the total amount of royalties paid by the Company to the UofT in the preceding twenty-four months. The Company shall be entitled to exercise such option by providing written notice to the UofT along with the required payment, after which time the Companys obligation to pay royalties as otherwise calculated shall be waived by the UofT. | |
|
As a condition to entering the License Agreement the Company agreed to a research agreement with a funding commitment of five hundred thousand Canadian dollars (CDN $500,000), to continue the further research and development of the inventions and the Companys intellectual property. In August 2005, the Company made an initial payment of CDN $250,000 (approximately $200,000 U.S. funds at the then prevailing exchange rates) and, in November 2005, the Company made the second payment of CDN $250,000 (approximately $200,000 U.S. funds at the then prevailing exchange rates) under the terms of this research agreement. |
48
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
19. |
COMMITMENTS (Contd) | |
(b) |
Operating Leases: | |
Subsequent to April 30, 2012 the Company secured new leased premises ( Note 23). | ||
(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. | ||
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 $55K of wages to the president of MAST, above the monthly minimum amount as above.
49
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
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: |
Foreign Currancy Balance | ||||||
2012 | 2011 | |||||
Cash and cash equivalents | $ | 4,078 | $ | 25,043 | ||
Deposits and other receivables | 98,585 | 46,088 | ||||
Accounts payable and accrued liabilities | (430,402 | ) | (573,288 | ) | ||
Bridge loan | (352,436 | ) | (841,350 | ) | ||
Derivative warrants liability (recovery) | (2,708,525 | ) | (286,269 | ) | ||
$ | (3,388,700 | ) | $ | (1,629,776 | ) |
(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. |
50
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
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. |
21. |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Contd) |
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: | |
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. |
51
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
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 April 30, 2012.
21. |
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Contd) |
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 April 30, 2012, the Company reports a working capital deficiency of $1,086,547 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. |
52
MICROMEM TECHNOLOGIES INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(Expressed in United States dollars) |
(unaudited) |
For the three and six months ended April 30, 2012 and 2011 |
23. |
SUBSEQUENT EVENTS |
(a) |
The Company raised $360,000 from the exercise of 3,000,000 CDN warrants @.12 and US $80,000 from the exercise of 500,000 US warrants @ .16 subsequent to April 30, 2012 | |
(b) | The Company signed a 5 year lease for office premises at a monthly cost of $7,189. |
24. |
COMPARATIVE FIGURES |
Certain comparative figures have been reclassified to conform with the current financial statement presentation. |
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53
MICROMEM TECHNOLOGIES INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE 3 MONTHS ENDED APRIL 30, 2012 |
PREPARED AS OF JUNE 29, 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 April 30, 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.
1
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.
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.
************************************************
2
MICROMEM TECHNOLOGIES INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE 3 MONTHS ENDED APRIL 30, 2012 |
PREPARED AS OF JUNE 30, 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.
*************************
3
MICROMEM TECHNOLOGIES INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE 3 MONTHS ENDED APRIL 30, 2012 |
PREPARED AS OF JUNE 30, 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 April 30, 2012
During the quarter ended April 30, 2012:
(a) |
The Company raised total financing of approximately $853,100 including a number of Unit private placement financings and convertible bridge loan financings. | |
(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 recovered $229,425 of amounts previously reported as deferred development costs from several suppliers whose invoices were renegotiated by the Company. | |
(d) |
The Company continues to have a substantial pipeline of development opportunities that it anticipates will translate into additional development contracts in future licensing and sales opportunities. | |
(e) |
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. |
4
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 April 30, 2012, the Company reported a (cash) loss from operations of $583,664 (consisting of the loss from operations as reported of $1,014,520 less the non cash expense of $430,856 relating to the Black Scholes computed costs of stock compensation expense in the quarter ) (2011- cash loss from operations of $972,829). As of that date, the Company has an accumulated deficit of $82,538,598 (2011: $76,879,106), a working capital deficiency (for this purpose defined as current assets less current liabilities excluding the reported derivative warrant liability of $1,086,547 (2011: $1,047,228)
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 April 30, 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.
4. SELECT FINANCIAL INFORMATION AND DISCLOSURES
(a) Financial Position at April 30, 2012:
The following table sets out select unaudited financial information as at April 30, 2012 and for the 3 months then ended prepared under IFRS reporting standards.
5
Quarter ended April 30, 2012 |
Quarter ended April 30, 2011 | |
Interest and other income | - | 39 |
Total cash expenses | 583,664 | 487,072 |
Stock compensation expense | 430,856 | 12,425 |
Loss from operations | (1,014,520) | (499,458) |
Warranty liability | (1,837,757) | - |
Exchange gain (loss) | 2,442 | (7,767) |
Net loss and comprehensive loss | (2,849,835) | (507,225) |
Loss per share and diluted loss per share | (0.02) | (0.01) |
Weighted average number of shares outstanding | 119,982,036 | 97,860,622 |
Total assets | 828,130 | 723,762 |
Cash and cash equivalents | 28,188 | 34,909 |
Working capital (excludes warrant liability) | (1,086,547) | (1,986,534) |
Shareholders equity (deficiency) | (3,126,710) | (1,388,613) |
At April 30, 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) |
29,586,251 common share purchase warrants which expire throughout 2013 if unexercised. The average exercise price of these warrants is $0.22. |
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 January 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 April 30, 2012.
6
Discussion of Operating Results
The following table summarizes the Companys operating results for the 3 months ended April 30, 2012 and 2011.
Discussion of operating Results
Quarters ended April 30,
|
|||
2012 ($000) |
2011 ($000) |
2010 ($000) |
|
Interest and other income | - | 5 | |
General and administration' | 128 | 120 | 41 |
Professional fees and salaries | 388 | 323 | 394 |
Stock-based compensation | 431 | 12 | 30 |
Research | 11 | (7) | - |
Travel and entertainment | 43 | 21 | 51 |
Foregn exchange (gain) loss | 8 | 49 | 14 |
Amortization of property and equipment | 6 | 2 | 2 |
Allowance for promissory note | - | (20) | - |
Total expenses | 1015 | 500 | 532 |
Warrant recovery liability | 1837 | - | |
Exchange gain (loss) | 2 | (7) | - |
Net loss and comprehensive loss | (2,850) | (507) | 527 |
Loss per share | (0.02) | (0.01) | (0.01) |
Interest and other income: The Company remains as a pre-revenue company at April 30, 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 April 30, 2012, the Company booked and reserved approximately $10,000 of interest charged on the outstanding balance due (in 2011 it recovered $10,000 on the promissory note which it had fully reserved at the prior year end). At April 30, 2012, the outstanding balance which is fully reserved and which remains due from Unotron is approximately $122,000. The Company has issued a demand notice to collect the outstanding balance.
Warrant liability: The Company, under IFRS, has calculated and reports a warrant liability charge of $1,837,757 relating to the common share purchase warrants issued in Canadian dollars during the quarter. This is further discussed in Section 7 below.
Operating expenses: The Company has maintained its overhead expenses at consistent levels on a quarter over quarter basis. The current monthly cash burn rate on operating expenses is approximately $120,000 per month.
7
Deferred development costs: The Company capitalized $13,123 of deferred development costs in the quarter ended April 30, 2012 relating to various projects under development. It recovered $229,425 costs previously incurred from suppliers which costs were renegotiated during the quarter. Accordingly it reports a net recovery of deferred development costs for the six months period ended April 30,2012 of $111,648 (2011 expenditures of $179,235).
Current projects under development: An update on projects previously reported in our MD&A documentation and in our periodic press releases is as follows:
a) |
Oil Sensor: We have completed our development work on our oil sensor and continue to work with the major international oil company previously referenced. The scope of this work is expanding and we anticipate receiving the next amount of funding from the company prior to end of current fiscal year. By the end of the 2012 calendar year, we anticipate that we will have commercial revenue opportunities under these working arrangements. | |
b) |
Mining sensor: This work continues with NEMT and we are evaluating potential commercial revenue opportunities that we expect can be realized over the next 12 months. | |
c) |
Breast aware technology: We are in current discussion with a 3rd party group with respect to potential manufacturing of a proprietary detection device and with respect to potential licencing opportunities. | |
d) |
GSI: We have completed prototype testing and have begun the manufacture of initial production first articles for this company. The Company anticipates commercial revenue opportunities will be realized over the course of the balance of 2012. |
Sensor development and new opportunities:
a) |
The Company has continued to develop its sensor technology during the quarter and had specific testing completed by a third party group, GMW Associates, who validated the high performance capabilities of our sensors. These results have provided the Company with the ability to respond to a significant number of new proposals, a number of which were introduced to the Company by an open innovation third party service provider, Nine Sigma. | |
b) |
The Company has submitted multiple technical business proposals in response to Nine Sigmas requests for a number of distinct applications. At quarter end, it continues to pursue these proposals and several of these have been advanced through continued interaction with Nine Sigma and the end user customer. Management believes that these initiatives will lead to development contracts and commercial revenue opportunities in future. | |
c) |
At quarter end, as a result of these initiatives, the Company has a significant pipeline of new potential opportunities. |
8
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 April 30, 2011 and 2012 are as presented below.
Impairment | ||||||||||||
Projects | 10/31/2010 | Additions | reserve | 31/04/2011 | ||||||||
Project A | $ | 1 | - | $ | - | $ | 1 | |||||
Project B | 1 | - | - | 1 | ||||||||
Project C | 1 | 16,360 | - | 16,361 | ||||||||
Project D | 1 | - | - | 1 | ||||||||
Project E | 146,604 | 18,782 | - | 165,386 | ||||||||
Project F | 1 | - | - | 1 | ||||||||
Project G | 1 | 141,200 | - | 141,201 | ||||||||
Project H | 1 | - | - | 1 | ||||||||
Project I | 74,908 | 2,893 | - | 77,801 | ||||||||
Project J | 1 | - | - | 1 | ||||||||
Project K | 1 | - | - | 1 | ||||||||
Project L | ||||||||||||
$ | 221,521 | $ | 179,235 | $ | - | $ | 400,756 |
Net | ||||||||||||
Additions/ | ||||||||||||
Projects | 10/31/2011 | Recoveries | 4/30/2012 | |||||||||
Project A | $ | 1 | $ | - | $ | 1 | ||||||
Project B | 1 | - | 1 | |||||||||
Project C | 15,001 | (7,067 | ) | 7,934 | ||||||||
Project D | 1 | - | 1 | |||||||||
Project E | 176,604 | 2,180 | 178,784 | |||||||||
Project F | 1 | - | 1 | |||||||||
Project G | 141,201 | (141,200 | ) | 1 | ||||||||
Project H | 1 | - | 1 | |||||||||
Project I | 296,633 | 18,272 | 314,905 | |||||||||
Project J | 1 | - | 1 | |||||||||
Project K | 17,161 | 8,438 | 25,599 | |||||||||
Project L | - | 7,729 | 7,729 | |||||||||
$ | 646,606 | $ | (111,648 | ) | $ | 534,958 |
9
Quarterly general and administrative related expenses compare as follows ($000)
2012 | 2011 | 2010 | |
Investor relations Reserve, doubtful accounts Telephone Insurance Rent Interest Exchange gain/loss MAST All other |
- - 4 16 34 37 - 5 32 |
5 (16) 4 20 14 43 - 9 43 |
- - 6 22 7 - (5) 26 (15) |
128 | 121 | 41 |
Quarterly professional, other fees and salaries related expenses compare as follows($000)
2012 | 2011 | 2010 | |
Audit and related services Legal -patent Legal -other President, MAST Salaries and benefits Management fees Other |
39 - 13 100 94 116 26 |
47 - 48 - 104 119 3 |
53 - 80 - 132 112 17 |
388 | 321 | 394 |
In the quarter ended April 30, 2012 the Company paid the President of MAST an additional $55,000 of compensation beyond the minimum amounts stipulated in the compensation plan in effect (refer to section 14). In 2011 and 2010, his compensation was reported in deferred development costs.
Quarterly Travel related expenses compare as follows ($000)
2012 | 2011 | 2010 | |
43 | 21 | 51 |
10
C) 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 | (1,845,459) | (0.02) |
January 31, 2011 | 339 | 567,219 | (582,616) | (0.01) |
April 30, 2011 | 39 | 499,497 | (507,225) | (0.01) |
July 31, 2011 | 585 | 238,380 | (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) |
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 April 30, 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 April 30, 2012, our working capital deficiency (excluding derivative warrants liability) was $1,086,547 (2011: $1,986,534).
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 April 30, 2012.
11
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.
12
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 3 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 April 30, 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 function 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). |
13
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 April 30, 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 are the difference between the fair value of the compound financial instrument as a while 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.
14
Research and Development Expenses:
Research costs are expensed in the period incurred. Development expenses are expensed as incurred unless they meet the criteria for deferral and amortization under Canadian GAAP 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 $130,627 of such costs as intangible assets at April 30, 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.
15
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 receivable 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 receivable. 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.
16
9. COMMITMENTS AND CONTINGENCIES
Technology Development Agreement with Estancia:
To the extent that the Company generates revenue in future relating directly and specifically to the Vemram patents, we are obligated to pay Estancia 32% of the gross profit realized less expenses agreed to by the parities and 32% of any unit royalties realized less direct expenses. To date no revenues have been generated. We have discontinued the development of this technology after 2002.
Operating Leases:
The Company had operating lease commitments which expired in 2012 in respect of its head office. The monthly obligations is $4,690 plus the proportionate cost of operating costs and taxes.
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 has been 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 compensation based on a percentage of the increase of the market capitalization on a year-over-year basis commencing as at December 31, 2005 and subject to a minimum annual compensation amount of $150,000 Canadian funds ($143,877 U.S. funds at average exchange rates). Under this contract, the 2010 expense as reported was $143,877 as compared to $129,149 in 2009. 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 |
17
10. DISCLOSURE CONTROLS / INTERNAL CONTROLS
The Company was not classified as accelerated filer in 2011 and did not complete an external audit on its internal controls in 2011.
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 and our Chief Information Officer. 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 and our external investor relations consultants, to provide guidance, commentary on all of our press releases.
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 total compensation paid to such parties during the quarters ending January 31st is as follows:
(b) Accounts receivable, payable and accruals:
At April 30, 2012 the Company reports the following accounts receivable and payable balances with related parties:
Payable to Company's Chairman under terms of employment contract: | $37,005 |
Payable to officer under the terms of employment contracts (1): | $105,000 |
18
(1) |
The Company assigned the Unotron promissory note to an officer of the Company during 2011. Of the total of $110,000 of funds recovered from Unotron in 2011, $80,000 was paid directly to that officer under this assignment. |
13. SHARE CAPITAL
At April 30, 2012 the Company reports 121,603,332 common shares outstanding (2011: 98,099,511). Additionally, the Company has 10,105,000 stock options outstanding with a weighted average exercise price of $..25 per share (2011: 10,172,199 options outstanding with a weighted average exercise price of $.89 per share) and a total of 29,586,251 outstanding warrants to acquire common shares with a weighted average exercise price of $.22 per share (2011: 8,943,430 outstanding warrants with a weighted average exercise price of $.41 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 |
Q2 2012 remuneration | ||
Cash | Option | Total | ||
Salvatore Fuda (1) | Chairman, Director | 37,816 | 23,694 | 61,510 |
Joseph Fuda (2) | President, Director | 40,337 | 10,770 | 51,107 |
Steven Van Fleet (3) | President, MAST Inc., Director | 100,494 | 107,700 | 208,194 |
David Sharpless | Director | - | 40,926 | 40,926 |
Andrew Brandt | Director | - | 26,925 | 26,925 |
Oliver Nepomuceno | Director | - | 40,926 | 40,926 |
Larry Blue | Director | - | 40,926 | 40,926 |
Alex Dey | Director | - | - | - |
Dan Amadori (2) | CFO | 37,816 | 40,926 | 78,742 |
(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. |
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15. SUBSEQUENT EVENTS
(a) |
The Company raised $360,000 from the exercise of 3,000,000 CDN warrants @0.12 per warrant and US $80,000 from the exercise of 500,000 US warrants @ .16 per warrant. | |
(b) |
The Company signed a 5year lease for premises at a monthly costs $7,189. |
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Table 1
Micromem Technologies Inc Management Discussion and Analysis April 30, 2012 |
Fiscal year ending | Interest and other | Loss per share (basic | |||||||
October 31 | income | Net Loss | and fully diluted) | ||||||
2011 | 963 | (3,180,855 | ) | (0.03 | ) | ||||
2010 | 22,886 | (4,674,861 | ) | (0.05 | ) | ||||
2009 | 88,047 | (4,310,939 | ) | (0.05 | ) | ||||
Quarter ending | |||||||||
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 | (579,768 | ) | (0.01 | ) | ||||
October 31, 2010 | 12,877 | (2,210,282 | ) | (0.02 | ) | ||||
July 31, 2010 | 5,000 | (1,937,819 | ) | (0.02 | ) | ||||
April 30, 2010 | 5,009 | (526,760 | ) | (0.01 | ) |
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Table 2
Micromem Technologies Inc Management Discussion and Analysis April 30, 2012 Selected Balance Sheet Information (all amounts in United States dollars) |
Capital | |||||||||||||||
Fiscal year ending | Working capital | asssets at | Other | Shareholders | |||||||||||
October 31 | (deficiency) | NBV | Assets | Total Assets | equity (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 | ) | ||||||||
2009 | (650,044 | ) | 24,422 | 2,148,461 | 2,562,479 | 1,522,839 | |||||||||
Quarter ending | |||||||||||||||
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 | |||||||||
April 30, 2010 | (918,937 | ) | 20,981 | 2,699,602 | 3,060,200 | 1,801,646 | |||||||||
January 31, 2010 | (341,756 | ) | 23,156 | 2,461,488 | 3,010,357 | 2,142,888 |
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Table 3
Micromem Technologies Inc Management Discussion and Analysis April 30, 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 | |||||||||||||||
Exercise of warrants | ||||||||||||||||||
January 31, 2012 | - | - | ||||||||||||||||
April 30, 2012 | 1,270,000 | 0.141 | 179,270 | |||||||||||||||
20,825,207 | 2,478,681 | 5,453,614 | 845,287 |
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Micromem Technologies Inc Management Discussion and Analysis |
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 | 11/05/2012 | ||||
600,000 | 0.7600 | 14/06/2012 | ||||
772,000 | 0.5600 | 16/06/2012 | ||||
43,000 | 0.5500 | 16/06/2012 | ||||
25,000 | 0.5500 | 15/07/2012 | ||||
300,000 | 0.5500 | 26/07/2012 | ||||
111,111 | 0.5600 | 01/08/2012 | ||||
133,333 | 0.5600 | 12/08/2012 | ||||
429,686 | 1.2000 | 14/05/2012 | ||||
765,188 | 0.4100 | 25/05/2012 | ||||
339,838 | 0.4500 | 15/06/2012 | ||||
312,500 | 0.3900 | 12/07/2012 | ||||
312,500 | 0.4000 | 23/07/2012 | ||||
200,000 | 0.2800 | 26/08/2012 | ||||
1,325,000 | 0.2400 | 15/10/2011 | ||||
500,000 | 0.2000 | 05/11/2011 | ||||
400,000 | 0.1900 | 30/11/2011 | ||||
300,000 | 0.2000 | 20/12/2011 | ||||
250,000 | 0.2000 | 04/01/2013 | ||||
750,000 | 0.2000 | 11/01/2012 | ||||
325,000 | 0.2000 | 31/01/2012 | ||||
20,000 | 0.2000 | 17/12/2011 | ||||
95,000 | 0.1500 | 27/04/2012 | ||||
5,000,000 | 0.1250 | 04/05/2012 | ||||
300,000 | 0.1230 | 20/05/2012 | ||||
790,000 | 0.1600 | 30/05/2012 | ||||
554,545 | 0.1400 | 15/06/2012 | ||||
298,000 | 0.2096 | 18/07/2012 | ||||
312,500 | 0.2105 | 22/07/2012 | ||||
20,000 | 0.2080 | 18/07/2012 | ||||
792,938 | 0.2076 | 03/08/2012 | ||||
75,000 | 0.1600 | 05/08/2012 | ||||
1,666,667 | 0.1528 | 16/08/2012 | ||||
1,275,000 | 0.1212 | 12/09/2012 | ||||
150,000 | 0.1174 | 29/09/2012 | ||||
250,000 | 0.1200 | 29/09/2012 | ||||
200,000 | 0.1174 | 29/09/2012 | ||||
5,118,890 | 0.1100 | 21/10/2012 | ||||
166,667 | 0.1485 | 26/10/2011 | ||||
1,135,022 | 0.1473 | 04/11/2012 | ||||
100,000 | 0.1200 | 23/12/2012 | ||||
770,000 | 0.1188 | 23/01/2013 | ||||
58,824 | 0.2000 | Feb.8.13 | ||||
29,412 | 0.2000 | Feb.8.13 | ||||
142,858 | 0.4400 | Feb.10.13 | ||||
600,000 | 0.1800 | Feb.15.13 | ||||
66,667 | 0.1800 | Feb.15.13 | ||||
208,333 | 0.3000 | Feb.27.13 | ||||
83,333 | 0.3000 | Mar.13.13 | ||||
208,333 | 0.3000 | Mar.13.13 | ||||
58,333 | 0.3000 | Mar.23.13 | ||||
83,333 | 0.3000 | Apr.18.13 | ||||
41,667 | 0.1500 | Feb.3.13 | ||||
35,000 | 0.1500 | Feb.3.13 | ||||
145,833 | 0.3000 | Feb.27.13 | ||||
208,333 | 0.3000 | Feb.27.13 | ||||
208,333 | 0.3000 | Feb.27.13 | ||||
29,586,253 | 0.22 | |||||
Total proceeds if all warrants exercised: | $ | 6,407,142 |
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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 April 30, 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 February 1, 2012 and ended on April 30, 2012 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: June 29, 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 April 30, 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 February 1, 2012 and ended on April 30, 2012 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: June 29, 2012
/s/ Dan Amadori | |
Dan Amadori | |
Chief Financial Officer |
FOR IMMEDIATE RELEASE | June 29, 2012 |
Micromem Begins Work On Product Development Contract With Major Automotive Company
Toronto, New York, June 29, 2012: Micromem Technologies Inc. (Micromem) (CNSX: MRM, OTCBB: MMTIF) through its wholly owned subsidiary, Micromem Applied Sensor Technologies Inc. (MAST), announces that on Monday June 25, 2012 work began on its executed product development agreement with a major automotive company, for a suite of nanotechnology based sensors aimed at improving the automobile owners real time visibility of engine oil analytical measurements.
MAST will deliver as part of this contract a proof of concept sensor package that will fit into a hollowed out oil pan plug, scavenge power inductively from the engine environment and communicate wirelessly to the auto makers control unit. Unlike traditional approaches to understanding how engine oil degrades with usage over time, involving prediction of when an auto owner should change the oil, or, use of viscosity and other single vector sensors that can be used to infer the quality of the oil, the MAST sensor provides analytical measurement in the oil stream in a similar manner as would be measured in a certified laboratory.
Steven Van Fleet, President of MAST, states For the last three years we have been understanding how to deploy nanotechnology in a sensor platform to fully characterize how engine oil properties degrade with different driving habits, and how various contaminants, that make their way into the engine oil stream, impacts oil performance. We plan to integrate our validated technology that we are deploying in the crude oil production process, specifically our sensor platform that is capable of detecting the presence of a 4 nanometer magnetic particle at concentrations below 1 part per billion. By embedding a lab on a chip inside an oil pan plug and at the same time eliminating both power and communication wiring, we are providing a very easily integrated solution platform to our client. We plan to team with the automotive manufacturer in providing more pertinent information to the auto driver and help educate them on how to make informed decisions as to oil changes and/or driving habits. An additional business differentiator, particularly for manufacturers of high performance engines, will be the ability to extend the time between oil changes, therefore lowering operating costs. Our product offering will take two form factors, the above mentioned nanotechnology platform in a oil pan plug, and, a slightly larger form factor for in line installation on larger power plants.
Joseph Fuda, CEO of Micromem, states We have requested and anticipate approval to release the clients name. It is gratifying to be contracted by a company listed in the top 10 of the Fortune 100 American companies and ranked a top 20 of the Fortune 100 global companies. This calibre of client is just one of several in this league that has selected Micromem to deliver on sophisticated high performance technology. Joseph Fuda further states that On the results of our recent successes, I am confident that this will be another project that Micromem will accomplish.
Micromem is confident the required specifications will be met, which at this time are subject to confidentiality to maintain competitive advantage. Micromem is scheduled to demonstrate the proof of concept over the next three months to be followed by ASIC chip manufacturing cycle to shrink the overall form factor.
The commercial arrangement between Micromem and our client is also subject to confidentiality and will not be disclosed at this time. However, once in routine production, the opportunities for Micromem are OEM sales wherein our product will be sold with a new vehicle sale. Secondly, plans are in the works to offer the product as a retrofit for late model vehicles. In addition, emerging market opportunity for this product will be vehicles exported to China, India and the like. Our product will provide much needed oil quality data in countries with questionable oil quality specifications, and this real time information will allow the automaker to make changes to their vehicle warranties.
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: 125,531,665
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 | June 29, 2012 |
Micromem Technologies Inc. Provides Update
Toronto, New York, June 29, 2012: Micromem Technologies Inc. (the Company) (CNSX: MRM, OTCBB: MMTIF) announces it has filed its interim financial statements for the period ended April 30, 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/.
The Company also announces that Jason Baun, Chief Information Officer of the Company, has resigned effective as of June 28, 2012.
The Companys website has been updated with a letter to the Shareholders from Joseph Fuda, CEO of the Company.
Subscribe to receive News Releases by Email on our websites home page. www.micromeminc.com
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: 125,511,665
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