From MMTIF Annual report and MICROMEM TECHNOLOGIES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2019
PREPARED AS OF FEBRUARY 24, 2020
Highlights
Business Developments in 2019:
(a) Chevron: In March 2019, we advanced the Chevron project to onsite field trials of the
ARTRA technology. These in field trials have served to validate the technology. Chevron
continues to test samples from these trials with ongoing successful results. We anticipate
positive developments with respect to commercialization of this technology with Chevron
as they have advised on their intent to commercialize.
(b) Romgaz: We engaged in discussions with Romgaz in mid-2019 with respect to the
ARTRA technology. Romgaz and Chevron have discussed the results of the Chevron field
trials in November – December 2019. Romgaz has communicated that it is proceeding
with purchase orders to acquire initial units of the ARTRA technology and to have the
Company develop a fully integrated software analytics solution for Romgaz use and
application. Pending the completion of these two initial undertakings, Romgaz has
communicated their commitment to commercializing the technology with manufacturing
to be completed in Romania.
(c) Repsol S.A.: We have negotiated a draft final contract with Repsol relating to the RT
Lube Analyzer technology. The Company intends to proceed with this project in 2020.
(d) Other: In 2019 the Company evaluated other potential opportunities and participated in
a number of technical trade shows across North America
Update of Product Development Activity at October 31, 2019
The current status of our active development projects is as reported below:
Chevron: In 2019 we continued to engage with Chevron personnel and with our engineering
subcontractor, Entanglement Technologies Inc. (“Entanglement”). We met with the Chevron team
members in their Houston offices on seven occasions to continue our dialogue and measure our go
forward path. We also met directly with Entanglement on three occasions for these purposes.
The field testing of the onsite pilot program was coordinated between Chevron, Entanglement and
the Company and commenced in March 2019 at a California-based oil well site operated by
Chevron. The initial on site testing was conducted over a period of approximately 6
weeks. Thereafter sample testing from the onsite well continued in both the Entanglement and
Chevron laboratories.
Chevron has advised that the results of the testing that has been completed to date have met with
their expectations and requirements and that the performance of the technology in the onsite pilot
and in the subsequent lab sample testing has been validated.
We are advised by Chevron that they will adopt the technology as required in future and that they
have earmarked funding for commercial units in their 2020 fiscal year budget. To date, Chevron
has not released commercial orders for the technology.
In 2019, under the terms of the preexisting Joint Development Agreement with Chevron, they paid
$77,597 relating to the cost reimbursements that the Company invoiced for the ongoing pilot tests.
Repsol S.A. (“Repsol”): We have previously reported on our initial activity with this Spanish
energy conglomerate in our 2018 report. The developments with Repsol in 2019 are as presented
below:
a) In Q1 2019 we submitted a proposed letter of intent (“Repsol LOI”) to the Repsol
engineering team with whom we have engaged since September 2018. The Repsol LOI
was intended to reset the go forward product development parameters, marketing efforts
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and cost sharing arrangements for this project between the Company and Repsol. The
original Repsol purchase order submitted in 2017 was suspended as part of these current
discussions with Repsol.
b) In mid-2019, we began negotiations with the Repsol team towards a final development
contract. The discussions remain open at the date of this report.
The underlying technology for the Repsol initiative has been referenced in our 2018 report as the
RT Lube Analyzer. The initial development completed on this technology between 2016-2018
was undertaken by the Company and its engineering subcontractor, SBM Microsystems. In 2019
we moved the project to an engineering and manufacturing entity in Toronto Canada.
The Company intends to proceed with this project in 2020 pending finalization of the final
development contract. A visit to the Repsol offices in Spain is intended for this purpose in calendar
2020.
Romgaz: Romgaz is the state-controlled gas company in Romania. We initiated a dialogue with
the senior management team at Romgaz in May 2019. The opportunity developed as a result of
the progress that we had experienced with our Chevron initiative which, by that point, had
advanced to the onsite pilot program referenced above.
We continued our initial discussions with Romgaz thereafter and, in October 2019, we announced
that the Company had executed a letter of intent (“LOI”) with Romgaz which afforded the
Company the opportunity to sell the ARTRA technology units to Romgaz and to develop a robust
analytics solution for the technology. The key conditions to progressing this LOI were twofold:
a) Romgaz would continue with their due diligence on the ARTRA technology, and
b) Manufacturing of the commercial units in future would be completed, with the Company’s
input, in Romania.
Discussions and negotiations with Romgaz continued after the execution of the LOI. These
discussions involved Chevron whom the Company introduced to Romgaz as part of the Romgaz
due diligence process.
In December 2019 Romgaz put forward a series of questions to Chevron relating to the Chevron
experience with the ARTRA technology and the testing that Chevron had conducted in 2019. The
dialogue that the Company coordinated between Romgaz and Chevron was very positive and the
specifics of those discussions were approved by both parties and posted to the Micromem website
on December 20, 2019.
The Company is now anticipating a series of purchase orders from Romgaz with respect to:
a. The purchase of initial units of the existing ARTRA technology for training and education
purposes, and,
b. A proposal by Micromem to deliver a comprehensive analytics solution to Romgaz for the
technology, and,
c. Pending satisfactory completion of b. above, a purchase order for commercial orders for the
technology which is to be manufactured in Romania.
Based on the above sequence of events, the Company anticipates that it will report commercial
revenues related to Romgaz in 2020.
Other Developments:
a) In last year’s report, we discussed the Company’s participation in March 2018 in a conference
in Dubai .Mr. Van Fleet represented the Company at the conference; subsequently he prepared
a significant number of proposals for various companies in North America and abroad with
respect to the ARTRA technology which was showcased at the Dubai conference.
Since Mr. Van Fleet’s resignation in August 2018, we have pursed many of the proposals
submitted by Mr. Van Fleet to these prospective customers. As of this date, there have been
no commercial opportunities identified by the Company in these follow up efforts which the
Company has undertaken.
b) In last year’s report we indicated that the Company was engaged in dialogue with an
established private company that has engineering and manufacturing capabilities and
commercial revenues in North America. In 2019 we actively pursued those discussions and
those discussions continue at the date of this report. In addition, we have been provided
guidance in terms of product development and commercial roll out strategies. We anticipate
that a formal working relationship may materialize in 2020.
MY Comments.....Progress is being made on several fronts with revenue and earnings expected this year.
