September 18, 2009

To our shareholders:

2009 has been an exciting time for Micromem Technologies Inc., with the company making significant progress in the last quarter towards revenue generation and with the fulfillment of in-house contracts continuing as scheduled. In addition to in-house contracts, our sales proposal pipeline has grown to over $317 million. Micromem recently announced through its wholly owned subsidiary, Micromem Applied Sensor Technologies, Inc. (MASTInc), that it has to date executed two Manufacturing Supply Agreements that have initial terms of three-to-five years and a combined potential for approximately $190 million in revenue.

The company has seen a general increase in interest in our hall sensor due to the fact that we have materially changed the signal-to-noise performance curve of what can be accomplished with magnetic hall sensor technology. I would like to take this opportunity to recap some of our achievements and product development, discuss field-testing of client product deliverables, and articulate our governing philosophy and plan for the road ahead.

Product Development

Our memory product is now complete through the Global Communication Semiconductor (GCS) and BAE System foundries. The memory is now fully packaged in arrays and is being tested and evaluated against standard and routine memory tests in California. Our memory has passed all radiation hardened testing.

Micromem has seen substantial interest in our memory from companies operating in the medical, aerospace, and military segments. For example, Micromem and BAE Systems are scheduled to meet in the fall to discuss how to move the Micromem’s product forward into BAE’s client base.

Our hall sensor is fully productized. Silicon Turnkey Solutions, Inc. (STS), has completed all life cycle testing of our sensor and we will be publishing a completed product data sheet in the fall. Many of our application requests for the hall sensor involve extreme temperature and harsh conditions, such as those experienced in an engine oil circuit. Another application involves survivability in deep sub ocean trenches on the ocean floor as listening devices.

The National Institute of Standards and Technology (NIST), a non-regulatory federal agency within the U.S. Department of Commerce working to promote U.S. innovation, and SENIS GmbH, a spin-off of SENTRON AG, have both completed third party evaluations of our sensor. Both reports indicated the sensor is capable of detecting very weak magnetic fields, less than 1 nT/root HZ. These results were measured with the basic device, without the addition of either noise reduction circuits or amplification. When our sensor is coupled with a spinning current circuitry and other proprietary signal-to-noise reduction techniques, we expect to be well below 0.1 nT/root Hz. Micromem has made routine manufacturing runs with this sensor.

Two very important enhancements are underway. We have partnered with Nano Opto, a precision optics nanofabrication company based in Somerset, New Jersey, to create a concentrator for our hall sensor. We expect that this addition to our product will provide us up to 200 times improvement in sensitivity.

Micromem continues to work closely with Nth Degree of Arizona in completing a printable hall sensor via its process. This technology holds great promise for massive arrays of hall sensors tightly packed together into form factors for which the medical and military communities have long been searching.

Field Testing of Client Product Deliverables

We have shipped our oil sensor at the end of August for field trials in two important areas, military automotive in line analysis of oil particulates and cooking oil degradation in commercial institutions.

Our low frequency radio designed for electromagnetic surveys of the earth as part of oil and mineral exploration is being readied for field trial in first quarter 2010. The sensor platform is being integrated into an aircraft that will be used to survey large undersea areas. Micromem has submitted three patents associated with the novel approach including unique signal processing algorithms.

Our mining core analysis sensor is also being prepared for field trials in late 2009. The sensor platform is fully capable of identifying repeatable and consistent magnetic signature of pure metals and compounds. Mining cores with third party assays are now undergoing tests to determine if we can discern/predict the absence/presence of a particular mineral in the core as it is extracted from the earth.

We are on schedule to deliver the first batch of evaluation circuits to Unotron, a leader in the design and manufacturing of washable keyboards, in late September. Our magnetic sensor has been integrated into a fully printed circuit that will form the basis under the Unotron keyboard.

Work has begun on the integration of Micromem’s sensor into the Life Medical product line. LMTI is dedicated to educating and providing life-enhancing, innovative medical products to the public through partnerships with non-profit organizations, corporations, academia, the government, and individuals in an ongoing effort to strive towards a successful outcome in the fight against breast cancer and other life-threatening illnesses.

Product integration has begun with the following three deliverables:

1. Basic temperature measurement.
2. Specific location both spatially and depth of growths.
3. Frequency specific/molecular specific identification of choline and other markers.

Magnetic sensors differ from most other detectors in that they do not directly measure the physical property of interest. Devices that monitor properties such as temperature, pressure, strain, or flow, provide an output that directly reports the desired parameter. Magnetic sensors, on the other hand, detect changes, or disturbances in magnetic fields that have been created or modified and, from them, derive information on properties such as direction, presence, rotation, angle, or electrical currents. The output signal of these sensors require some signal processing for translation into the desired parameter. Although magnetic detectors are somewhat more difficult to use, they do provide accurate and reliable data — without physical contact.

Magnetic sensors can be classified according to low-, medium-, and high-field sensing range. Devices that detect magnetic fields <1 µG (microgauss) are considered low-field sensors; those with a range of 1 µG to 10 G are Earth’s field sensors; and detectors that sense fields >10 G are referred to as bias magnet field sensors. We believe that Micromem’s magnetic sensors are considered the most sensitive on earth and can measure molecules in the body.

Magnetic Sensors In Medical Diagnosis

The use of magnetic sensors in medical diagnosis is on the increase. Most everyone is familiar with magnetic resonance imaging (MRI) machines, those large and expensive analytical machines that can take a picture “inside” one’s body. A worthy technology, MRIs are also very expensive to make, insurance companies are beginning to balk at paying for use, and they are not very specific to certain medical problems. Non-invasive medicine is on the rise. These kinds of procedures involve less risk, lowered expense, and devices can now be developed and manufactured that are small and can be made specifically for certain medical conditions.

Micromem plans to produce a series of products that are focused initially on early detection of breast cancer. By printing magnetic sensors in our current products, we will be able to more accurately determine temperature differences between breasts, as an early indication of tumor growth formation. In addition, by placing a printed array of the magnetic sensors on the breast we will be able to locate through triangulation the exact location and, in time, the depth of the growth. This, however, is just the beginning. The real excitement comes from us using the full signal available from the magnetic sensor.

Every chemical in our body has a magnetic signature; for women going through radiation treatment for breast cancer one of the chemicals that is produced to indicate that the treatment is effective is choline. Traditional diagnosis includes using an expensive nuclear magnetic resonance (NMR) machine to detect choline, but, once again, insurance companies are beginning to balk at paying for these measurements.

Micromem plans to develop cost effective products that can measure chemicals like choline, read the blood flow characteristics as they relate to growth formation, and determine and capture the full rich signals from the magnetic sensors as they relate to a healthy breast and a breast that has cancerous cells. We will be in a position to capture this information over time and develop a patient history. We will be able to transmit directly from the home over the Internet to doctors at remote locations who will be able to provide faster diagnosis to remote and underprivileged areas.

Finally, Micromem has recently announced the appointment of Carol Fitzgerald, CEO of Life Medical, to the Advisory Committee of MASTInc. Ms. Fitzgerald has over twenty-five years of specialized marketing, operations and executive management experience with companies ranging from start-up organizations to Fortune 500 companies.

Viewed from a scientific and financial perspective, the past few months have been an auspicious period in our corporate history. Micromem Technologies Inc. remains committed to its vision of partnering with companies for the commercialization of “killer apps” in the realms of biometrics, medical devices, defense and security, and natural resource exploration. We sincerely thank our partners, staff, and valued shareholders for their steadfastness and continued support.

Sincerely,

Joseph Fuda
President and Chief Executive Officer
Micromem Technologies Inc.