10KSB

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended	Commission file number 0-16416
October 31, 2005

MICRO IMAGING TECHNOLOGY, INC.

(Formerly, Electropure, Inc.)

(Exact name of registrant as specified in its charter)

California	33-0056212
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
23456 South Pointe Drive, Laguna Hills, California 92653
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (949) 770-9347

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  o    No  ý.

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-KSB or any amendment to this Form 10-KSB. ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No  ý

The registrant’s revenues for the twelve months ended October 31, 2005 were $1,338,676.

As of February 9, 2006, the aggregate market value of the common stock held by non-affiliates of the registrant was $817,736, based on a closing price for the common stock of $0.14 on the OTC Bulletin Board on such date.

At February 9, 2006, 13,424,572 shares of the Registrant’s stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:  NONE

Forward-Looking Statements

This Annual Report on Form 10-KSB, including the Notes to the Consolidated Financial Statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. The words “believe,” “expect,” “anticipate,” “intends,” “projects,” and similar expressions identify forward-looking statements. Such statements may include, but are not limited to, projections regarding demand for the Company’s products, the impact of the Company’s development and manufacturing process on its research and development costs, future research and development expenditures, and the Company’s ability to obtain new financing as well as assumptions related to the foregoing. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I

Item 1.Description of Business

COMPANY OVERVIEW

We were incorporated in December 1979 in California under the name HOH Water Technology Corporation and changed our name to Electropure, Inc. in 1996. In November 2005, we again changed our name to Micro Imaging Technology, Inc. as a condition of sale of our EDI assets (see “Electropure EDI, Inc.” below). The Company conducts all of its business through its subsidiaries. Our address and telephone number is:  23456 South Pointe Drive, Laguna Hills, California 92653, (949) 770-9347.

Electropure EDI, Inc.

In 1997, the Company began marketing a small, point-of-use water treatment product aimed at the high purity segment of commercial and industrial water treatment markets. In February 2000, the Company formed Electropure EDI, Inc. (EDI), a wholly-owned Nevada subsidiary, through which all manufacturing and sales of its proprietary water treatment products were then conducted. Over the years, though the EDI product slowly gained market acceptance and we made significant strides in product improvement and production cost reductions, our EDI subsidiary operation continued to sustain operating losses.

Beginning in early 2002 and continuing through April 2005, the Company’s management and Board of Directors explored numerous possible means to generate working capital sufficient to meets its needs to expand sales in the EDI subsidiary and to continue the research and development activities of Micro Imaging Technology, its majority-owned Nevada subsidiary. The Company sought new investors or partners seeking ways to fund ongoing administrative expenses and development costs. Numerous companies were contacted by members of the Board of Directors, both verbally and in writing, inquiring of their interest in our EDI operation, whether involving a license, partnership, joint venture or sale. We contacted companies across a broad span of the water industry, including current competitors, as well as other companies whose

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businesses are unrelated to water treatment. However, none of the many companies and parties contacted, except SnowPure, LLC, was willing or able to make what the Board considered to be a reasonable offer for the EDI business or assets or any other financial arrangement involving the EDI business, that comported with the Company’s need to obtain working capital quickly. Because sales revenues were subject to wild fluctuations, our ability to continue the EDI operation for any length of time was in doubt.

In August 2004, Michael Snow, who was at the time the Vice President and Chief Operating Officer of the Company and General Manager of the EDI subsidiary, advised the Board of his interest in purchasing the assets of the EDI subsidiary. Mr. Snow resigned as Vice President and COO at that time, and the Company began informal discussions with Mr. Snow while continuing all efforts to seek outside interested parties for the EDI business. In December 2004, Mr. Snow made a $100,000 working capital loan to the Company through SnowPure, LLC, and was granted a security interest in most of the EDI assets as collateral.

Given the Company’s quickly diminishing financial resources and the lack of other interest in the EDI subsidiary, the Board determined that a sale of the EDI subsidiary to SnowPure, LLC was the Company’s only viable option to generate some value out of the EDI subsidiary. On April 15, 2005, the parties agreed to the terms of a Purchase and Sale Agreement and on April 19, 2005, the Company’s Board of Directors approved the sale, subject to shareholder approval, whereby SnowPure would pay a total purchase price of $800,000 for the assets, through a combination of cash and assumption of certain liabilities. In October 2005, the shareholders approved the EDI sale and on October 31, 2005, the transaction was consummated with SnowPure, LLC. In exchange for $402,647 in cash proceeds and the assumption of $407,578 in liabilities, SnowPure received substantially all of the assets owned by and used in the operations of EDI, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company realized a net gain on the sale of assets in the sum of $695,537, which is reported in Net Income (loss) from discontinued operations.

The sale of the EDI assets also required that the Company dissolve the Electropure EDI subsidiary and amend the charter of the Company to change its corporate identity to a name other than “Electropure”. As a result, the Company changed its name to Micro Imaging Technology, Inc. and dissolved its EDI subsidiary. The results of operations of EDI have been reported in discontinued operations for all period presented.

Electropure Holdings, LLC

In February 1998, the Company entered into a three-year lease, with option to purchase, with an unaffiliated third party for 30,201 square feet of office, manufacturing and warehousing space located at 23456 South Pointe Drive, Laguna Hills, CA (the “building”). In January 2001, the Company exercised its purchase option and formed Electropure Holdings, LLC, a wholly-owned California limited liability company, for the purpose of the building transaction. We financed substantially the entire $2,454,552 purchase price with a loan of $1,375,000 from a real estate mortgage lender and a $1,000,000 private loan from our majority stockholder, Mr. Anthony M. Frank.

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The Company refinanced the building mortgage on two additional occasions in order to utilize the appreciation in equity for working capital. In October 2005, in order to generate additional working capital, the Company sold the building to the George A Boukather Trust (“Boukather”), an unaffiliated third party for the sum of $3,875,000. The Company realized $901,674 in cash proceeds from the sale and recognized a gain of $1,585,637 on the sale.

The majority of the sale proceeds were used to pay off the senior mortgage on the building in the sum of $2,386,563 held by Farmers Insurance Group Federal Credit Union c/o Business Partners LLC (“Senior Mortgage”). In addition, proceeds from the sale were used to repay a $250,000 loan from the building purchaser and $300,000 in junior liens held by Mr. Anthony M. Frank for loans made to the Company on and since February 18, 2005, together with interest in the sum of $14,849.30. The Company also paid $9,782 in property taxes due, together with one-half of all escrow charges, all usual recording fees and required documentary transfer taxes and the premium for a standard coverage owner’s title insurance policy, all of which aggregated $12,992.

Micro Imaging Technology

In October 1997, we acquired an exclusive license to patent and intellectual property rights involving laser light scattering techniques to be utilized in the detection and monitoring of toxicants in drinking water. In February 2000, we formed Micro Imaging Technology (MIT), a wholly-owned Nevada subsidiary to conduct research and development based upon advancements we developed and patented from the licensed technology. MIT remains our only subsidiary as of October 31, 2005.

DEVELOPMENT OF OUR BUSINESS

MICRO IMAGING TECHNOLOGY

The acquisition of the MIT patent and intellectual property rights in 1997 provides the basis for our development of near “real-time” fluid monitoring systems for water monitoring as well as food processing and clinical applications. The technology transferred underthe October 25, 1997 agreement with Wyatt Technology Corporation had, at inception, two main areas for exploitation:

•Detection and early warning of dangerous particulate materials such as parasites and other organisms, i.e., bacteria, spores, etc. If the initial efforts were successful, future efforts were to be directed to include detection and early warning of asbestos fibers and similar materials that pose a health hazard to the consumer.

•Detection and early warning of dangerous soluble substances such as mutagens, carcinogens and metabolic poisons.

The feasibility of the technology had already been confirmed, although never commercialized in this area of application, during a study by Wyatt for the U. S. Army through a Small Business Innovative Research program conducted in the 1980’s. We believe that the technology for this application may well represent a major opportunity on a worldwide basis for future growth of consumer market products and the currently available instrumentation and methods being developed by us appear to provide a more immediate path to developing the technology for this concept.

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Our initial proof-of-principal testing in 1998 demonstrated the ability, in a laboratory setting, to detect and monitor parasites, primarily Cryptosporidium and Giardia(1) in drinking water sources and the pathogenic microbes E. coli, Listeria and Salmonella.

Potential customers for a water monitoring system would include local water utilities, both private and municipal; state water utilities and water quality and health agencies; Federal government agencies such as EPA, DoD, DoE, CDC; wastewater treatment plants; ground water and well users; and potentially, as the cost of the sensors and system decreases, homeowners.

However, we believe development of an MIT System for clinical laboratory and food processing applications will be achieved more rapidly because it will not require the specialized instrumentation necessary for water monitoring. Consequently, we have focused our research efforts to address these areas, each of which we believe may achieve cost and efficiency benefits similar to the proposed water monitoring device. In addition to Cryptosporidium and Giardia protozoas, this technology has already demonstrated identification of the bacteria E.coli, Listeria monocytogenes, Salmonella typhi, Pseudomonas aeruginosa, Staphylococcus aureus and Streptococcus pneumoniae. Additionally, the Company is in the process of adding to the system the ability to identify the following pathogens: Klebsiella, Proteus, Shigella and subspecies of each.

The clinical and food processing applications for our MIT System for rapid identification of microbes will undergo stringent and lengthy regulatory approval processes, including clinical trials. We anticipate that the MIT System for clinical and food processing applications may be ready for commercialization in late 2006. However, no assurances can be given as to when or if we may offer an MIT System for sale since it may be subject to regulatory approvals.

Although the water monitoring application for the MIT System will not require regulatory review and approval, this application will require more extensive development efforts because of the vast array of contaminants commonly found in water and the need to configure a unique method and apparatus for isolating the water being tested. For these reasons, we expect that a practical device for the water monitoring application of our technology will not be commercialized until we have successfully introduced and gained acceptance of an MIT System in the clinical and food processing market segments.

Based on a very preliminary evaluation of market needs and the size and number of possible customers, we estimate that the market potential for the MIT System in all of the above domestic market areas could exceed $1 billion annually. More detailed market validation will be conducted as our research program continues.

(1) Cryptosporidium (Cryptosporidium parvum) and Giardia (Giardia lamblia) are waterborne protozoan parasites which contaminate water sources such as wells, rivers, streams, and lakes, generally through animal and fowl fecal deposits.

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With regard to the Micro Imaging Technology System, there are established methods of testing currently employed by both public and private agencies. However, these methods are labor intensive, expensive and time consuming, and do not provide the near “real time” monitoring capabilities which our product offers. We believe that the MIT system is the only microbe identification system that is not biologically based – that is, does not rely on biological agents or reagents.

The Markets for Microbe Identification

The number of applications for our laser-based rapid microbe detection system is large, including food inspection, clinical applications and water testing. However, we have elected in the near term to focus on food inspection:

The Food and Drug Administration currently requires elaborate laboratory procedures taking up to 64 hours to identify E. coli, Salmonella or Listeria. According to industry analysts at Strategic Consultants, Inc (Scarborough, ME.) there were over 144 million microbiology tests performed in almost 6,000 plants. The analysts further report that food manufacturers and processors anticipate a continued increase in testing as regulatory agencies require more surveillance and monitoring programs. The MIT system identifies bacteria in under 15 minutes, thus minimizing the testing and reporting time which minimizes health risks, product recall dangers and expenses to the producer.

Patents

In July 2002, we were granted U.S. Patent No. 6,639,672 on our MIT rapid microbe detection technology. We also received a U.S. Continuation-in-part patent on this technology on October 28, 2003. Corresponding foreign patents are pending in Europe, Australia, Mexico and Japan.

Because the review and approval process associated with filing for patent protection on new products can be lengthy, we cannot be certain when, or if, foreign patents will be issued for any of our pending applications. The existence of a patent may not provide us any meaningful protection because of technological changes, the decision of courts not to uphold all or part of a patent, or because of the limited financial resources that may be available to enforce patent rights. We do not believe that any of our individual patents is of sufficient importance that its termination or expiration would have a material adverse effect on the Company. Conversely, we believe that our technical know-how and trade secrets may be more significant to our business than trademark or patent protection although we will continue to apply for patents on any inventions or improvements made in the normal course of our business.

We have not secured a registered trademark or trade name for “Micro Imaging Technology.”

Research and Development

During fiscal 2005, we expended $318,521 primarily on our Micro Imaging Technology research program to develop a microbiological detection and monitoring system derived from the technology acquired from Wyatt in October 1997. We concluded Phase 1 research on the Micro

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Imaging System in 1998 with a laboratory system that was used to prove the scientific principal and initiated phase two of our research program which resulted in the development of a more advanced system and the culmination of the library for the identification for various pathogens. . We expect to continue to incur and accelerate additional research and development costs on this MIT System project through product development.

During fiscal 2004, we spent $351,230 on similar research and development activities.

Compliance with Environmental Laws

We do not produce hazardous waste as a result of our research activities. Consequently, our costs for compliance with federal, state and local environmental laws are negligible.

Employees

As of October 31, 2005, we employed 16 full-time employees, of which three were engaged in administrative, accounting and clerical functions; three in research and development of the Company’s proposed MIT System; and ten were engaged in manufacturing and marketing of EDI products and components. Pursuant to the sale of the EDI assets to SnowPure, LLC, from November 1, 2005 through November 30, 2005, all employees engaged in the EDI operations were leased to SnowPure, LLC at cost and on December 1, 2005 SnowPure arranged to hire those employees. To implement our MIT business strategies, we anticipate that we will hire additional employees in fiscal 2006. However, we cannot predict with any certainty when we will hire any additional personnel. We believe that our relationship with our employees is good and we are not a party to any collective bargaining agreement. Our future success will be dependent upon our ability to attract and retain qualified personnel.

Risks and Uncertainties

Failure to raise additional capital could seriously reduce our ability to compete or harm our ability to continue operations

From time to time we have experienced and continue to experience working capital shortfalls that slowed the development of the EDI product and our research on the MIT technology. We will be required to raise substantial amounts of new financing, through equity investments, loans or strategic alliances, to carry out our business objectives. There can be no assurance that we will be able to obtain such additional financing on terms that are acceptable to us and at the time we require, or at all. Further, any such financing may cause substantial dilution of the interests of current shareholders. If we are unable to obtain such additional financing, the financial condition and results of operations of the Company will be materially adversely affected. Moreover, our estimates of cash requirements to carry out our current business objectives are based upon certain assumptions, including assumptions as to revenues, net income or loss and other factors, and there can be no assurance that such assumptions will prove to be accurate or that unforeseen costs will not be incurred. Future events, including the problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to cost increases that could have a material adverse

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effect on us and our plans. If we are not successful in obtaining loans or equity financing, it is unlikely that we will have sufficient cash to continue to conduct operations. We believe that to raise needed capital, we may be required to issue debt or equity securities that are significantly lower than the current market price of our common stock. However, no assurances can be given that we can obtain additional working capital through the sale of common stock or other securities, the issuance of indebtedness or otherwise or on terms acceptable to us. Further, no assurances can be given that any such equity financing will not result in a further substantial dilution to the existing shareholders or will be on terms satisfactory to us.

We have a history of losses which are likely to continue.

From our inception in 1979 through October 31, 2005, we have accumulated a loss of $27,794,991 and a net stockholders’ deficit of $1,366,244. The accumulated loss is principally due to expenses incurred in the development of the EDI product, initial manufacturing start-up costs, initial marketing efforts, administrative expenses and interest, as well as the expenses associated with the research and development of MIT laser-based monitoring technology acquired in 1997. The report of our independent registered public accounting firm for the fiscal year ended October 31, 2005 contains an explanatory paragraph as to our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern. As discussed in the notes to the financial statements, our negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. Management’s plans in regard to these matters are also described in the notes to the financial statements and in Item 6 - “MANAGEMENTS’ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

MIT is considered to be a research and development operation. As such, it has no operating income and its prospects must be considered speculative considering the risks, expenses and difficulties frequently encountered in the development of a new technology. While laboratory results and other tests have been encouraging, substantial additional development efforts will be required. The development of the Micro Imaging Technology System involves significant risks, which a combination of experience, knowledge and careful evaluation may not be able to overcome. There can be no assurance that unanticipated problems will not occur which would result in material delays in our product development, or that our efforts will result in successful product commercialization. There can be no assurance that we will be able to achieve profitable operations.

We have limited patent protection

We own two U.S. patents on our MIT technology and certain corresponding foreign patents for this technology are currently in process. We may not be able to afford the expenses required to enforce any patent we may now or in the future own and no assurances can be given that any patents would be upheld if challenged, or if upheld, would provide us with meaningful protection. We also rely on trade secrets and know-how as regards the MIT technology that is not patentable. Although we have taken steps to protect our unpatented trade secrets and know-how, in part through the use of confidentiality agreements with our employees, consultants and certain of our contractors, there can be no assurance that:

•these agreements will not be breached,

•we would have adequate remedies for any breach, or

•our proprietary trade secrets and know-how will not otherwise become known or be independently developed or discovered by competitors.

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Our competitors are larger and better financed

The microbe identification industry continues to undergo rapid change with intense competition that is expected to increase. There can be no assurance that our competitors have not or will not succeed in developing technologies and products that are more accurate than the Micro Imaging Technology System microbe identification and monitoring method and would, accordingly, render the Micro Imaging Technology System obsolete and noncompetitive. Many of our competitors have substantially greater experience, financial and technical resources and production, marketing and development capabilities. Accordingly, certain of those competitors may succeed in obtaining regulatory approval for products more rapidly or effectively than us. We will also be competing with respect to sales and marketing capabilities, areas in which we currently have little experience.

Continued technological changes and government regulations could adversely affect our sales

The technology upon which the Micro Imaging Technology System relies may undergo rapid development and change. There can be no assurance that the technology utilized by us will be competitive in light of possible future technological developments. Further, we cannot assure that our technology will not become obsolete or that we will have adequate funds to meet technological changes.

There can be no assurance that the we will be successful in developing the Micro Imaging Technology System to respond to technological changes or evolving industry standards, that we will not experience difficulties that could delay or prevent the successful development, introduction and marketing of the Micro Imaging Technology System, or that any new products will adequately satisfy the requirements of prospective customers and achieve market acceptance. If we are unable to develop and introduce new or improved products in a timely manner in response to changing market conditions or customer requirements, our business, operating results and financial condition will be materially adversely affected.

Dependent upon the field of application, the Micro Imaging Technology System, when commercialized, may be subject to extensive regulation by numerous governmental authorities and regulatory agencies worldwide prior to introduction of the product. The process of obtaining required regulatory approvals may be lengthy and expensive depending on the jurisdiction. There can be no assurance that we will be able to obtain the necessary approvals to conduct clinical trials for the manufacturing and marketing of products, that all necessary clearances will be granted to us for future products on a timely basis, or at all, or that review or other actions by the regulatory agencies will not involve delays adversely affecting the marketing and sale of our products. In addition, the testing and approval process with respect to certain products which we may develop or seek to introduce may take a substantial number of years and involve the expenditure of

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substantial resources. There can be no assurance that the Micro Imaging Technology System will be cleared for marketing by the regulatory agencies of the countries in which we seek to gain distribution rights. Failure to obtain any necessary approvals or failure to comply with applicable regulatory requirements could have a material adverse effect on our business, financial condition or results of operations. Further, future government regulation could prevent or delay regulatory approval of our products.

If we fail to attract and retain key personnel, our ability to compete will be harmed.

Our future success is highly dependent on our ability to attract, retain and motivate qualified personnel, including technical personnel, executive officers and other key management. The loss or unavailability of services of one or more of our key employees, including Floyd Panning, our chief executive officer, or our inability to attract and retain qualified personnel, could have a material adverse effect on our ability to operate effectively.

Item 2.Properties

In October 2005, we sold our 30,200 sq. ft. building to an unaffiliated third party for $3,875,000. We are currently leasing approximately 7,500 sq. ft. in the facility from the new owner for $9,175 per month through April 2006. In January, we executed a one-year lease for a 4,100 sq. ft. facility in San Clemente, California to commence on April 1, 2006 at the rate of $3,650 per month.

Management believes that our present facilities and the facility we plan to lease in San Clemente, California will be adequate for all of our current operations, and those contemplated for the foreseeable future. We also believe that our property is adequately covered by insurance.

Item 3.Legal Proceedings

None.

Item 4.Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5.Market for Registrant’s Common Equity and Related Stockholder Matters.

Our common stock is currently quoted in the OTC Electronic Bulletin Board market as a “penny stock” under the symbol “ELTP.”   The following table sets forth the high and low bid prices for the common stock, as reported on the Bulletin Board or “pink sheets,” for the quarters that the securities were traded. The quotations reflect inter-dealer prices, without retail mark-up or mark-down or commissions and may not represent actual transactions.

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		Common Stock Bid Prices
		High	Low
Fiscal 2004	First Quarter	0.35	0.20
	Second Quarter	0.51	0.30
	Third Quarter	0.28	0.28
	Fourth Quarter	0.15	0.12
Fiscal 2005	First Quarter	0.15	0.07
	Second Quarter	0.12	0.05
	Third Quarter	0.12	0.05
	Fourth Quarter	0.09	0.08
Fiscal 2006	First Quarter	0.14	0.08
	Second Quarter (through February 9, 2006)	0.18	0.09

The market for our common stock is sporadic and quoted prices may not represent the true value of the securities.

As of October 31, 2005 the Company had approximately 400 holders of record of its common stock.

On January 27, 2005, the Company issued 285,714 shares of common stock with a fair market value of $0.07 per share, in payment for $20,000 in accrued interest on a $1 million loan made by Anthony M. Frank in January 2001. The shares issued satisfied interest accrued on the loan through December 31, 2004.

On June 29, 2005, we granted warrants to purchase 50,000 shares of common stock to a consultant for future services. The warrants are exercisable at $0.10 per share and expire on June 29, 2008. The fair market value of the warrants was $4,500 and was recorded as a consulting expense.

On June 29, 2005, for one-year’s services to be performed, we granted a consultant 600,000 shares of common stock and warrants to purchase 100,000 shares of common stock at exercise price of $0.10 per share, as well as 100,000 shares of common stock at $0.25 per share. The warrants are exercisable through June 29, 2008. The shares vest in increments of 50,000 per month and as of October 31, 2005, the Company had issued 200,000 shares to the consultant. The fair market value of the shares and warrants as of October 31, 2005 was $17,000 and $18,000, respectively, and was recorded as consulting expense.

On July 1, 2005, for future legal services to be performed, we granted counsel warrants to purchase 200,000 shares of common stock at exercise price of $0.06 per share and 200,000 shares of common stock at $0.25 per share. The warrants are exercisable through June 29, 2008. The fair market value of the warrants on the date of issuance was $36,000 and was recorded as legal expense.

On or about July 1, 2005, we received a $50,000 net short-term loan from an unaffiliated third party and, as partial consideration for the loan, we granted warrants to purchase 25,000 shares of the Company’s common stock. The warrants are exercisable for $0.06 per share and expire on July 1, 2008. The fair market value of these warrants, $2,250, was recorded as financing charges.

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We received a $250,000 loan from the prospective buyer of our building on July 15, 2005. The loan, which is collateralized by a second trust deed on the building, is due to be repaid upon the closing of the building sale or December 31, 2005, whichever first occurs. Concurrent with the loan transaction, the Company agreed to reduce the purchase price of the building from $3,925,000 to $3,875,000 ($50,000) in partial consideration for the loan and to retain the buyer’s interest in the transaction while the Company obtains the necessary approvals to conclude the sale. We also granted the buyer warrants to purchase 100,000 shares of common stock in partial consideration for the loan. The warrants are exercisable through July 15, 2008 at $0.06 per share. The fair market value of the warrants, $9,000, was recorded as a finance charge.

All of these securities issuances were in private direct transactions, exempt under Section 4(2) of the Securities Act of 1933 or Regulation D promulgated thereunder.

Equity Compensation Plan Information

The following table provides information as of October 31, 2005 with respect to shares of our common stock that may be issued under equity compensation plans. See also Item 10 - “Executive Compensation-Stock Option Plan”.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance
Equity compensation plans approved by security holders	185,000		$	0.63	815,000	(1)
Equity compensation plans not approved by security holders	275,000	(2)	$	0.34	—
Total	460,000		$	0.46	815,000

(1)In January 2006, options to purchase 500,000 shares of the Company’s common stock were granted to various employees, officers and directors of the Company at an exercise price of $0.14 per share.

(2)Consists of 275,000 options issuable subject to approval by our shareholders of an increase in the authorized number of shares issuable under our existing stock option plan or a new plan to be approved by the shareholders. Includes 190,000 options scheduled to expire as of February 28, 2006.

The Company has not paid any dividends on its Common Stock since its incorporation. We anticipate that, in the foreseeable future, earnings, if any, will be retained for use in the business or for other corporate purposes and it is not anticipated that cash dividends will be paid. Payment of dividends is at the discretion of the Board of Directors and may be limited by future loan agreements or California law. Under California law, a corporation may pay dividends if the

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amount of the retained earnings of the corporation immediately prior thereto equals or exceeds the amount of the proposed distribution. California law also provides that if a corporation does not have retained earnings at least equal to the amount of the proposed distribution, it may pay dividends provided that after giving effect thereto, (a) the sum of the assets of the corporation (exclusive of good will, capitalized research and development expenses or deferred charges) would be at least equal to one and one-quarter times its liabilities (not including deferred taxes, deferred income and other deferred credits) and (b) the current assets of the corporation would be at least equal to the current liabilities or, if the average of the earnings of the corporation before taxes on income and for interest expense for the two preceding fiscal years was less than the average of interest expense of the corporation for such fiscal years, the current assets must be at least equal to one and one-quarter times its current liabilities.

Item 6.Management’s Discussion and Analysis of Financial Conditionand Results of Operations.

Certain reclassifications have been made to prior year’s financial information to conform to the current year’s presentation.

Fiscal Years Ended October 31, 2005 and 2004

Research and development expenses for the fiscal year ended October 31, 2005 decreased by $32,709 compared to fiscal 2004. These expenses primarily arise from the program, which we initiated in December 1997, to develop the micro imaging technology for detecting and identifying contaminants in fluids. The decrease in research and development expense in fiscal 2005 primarily reflects reduced costs relating to patent fees and filings.

Sales, general and administrative expenses increased in fiscal 2005 by $155,605 compared to 2004. The increase primarily reflects substantially higher legal expenses incurred during fiscal 2005 relating to the sale of the EDI assets and filing the appropriate disclosure documents with the securities and exchange commission. The increase also reflects a rise in consulting expenses and financing charges for short term borrowings during the period.

Interest income arose from short-term investments and increased in fiscal 2005 by $212 compared to the prior year period. The increase resulted from the short term investment of borrowings during the year.

Interest expense for fiscal 2005 decreased by $167,407 compared to 2004. The Company incurred substantial interest expenses due to short-term borrowings in fiscal 2004.

Components of other income in fiscal 2005, other than interest, decreased by $114,181 compared to the prior year period. We realized sub-lease income of $149,150 in fiscal 2005, an $18,250 increase over the prior year period. In fiscal 2004, we recognized $3,093 on the sale of obsolete inventory and equipment and a $7,868 gain on debt written off. We also entered into discussions with a competitor interested in obtaining a license for our membrane technology and received a $100,000 non-refundable deposit in September 2004. The negotiations were abandoned when the competitor purchased a company which had in-house membrane capabilities.

We recorded the minimum state income tax provision in fiscal 2005 and 2004 as we had cumulative net operating losses in all tax jurisdictions.

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Liquidity and Capital Resources

At October 31, 2005, we had working capital deficit of $1,386,937. This represents a working capital increase of $86,546 compared to that reported at October 31, 2004. The increase primarily results from the gains realized on the sale of our EDI and building assets in October 2005.

Our primary sources of working capital have been from short-term loans and from the sale in October 2005 of our building and the EDI assets. Between December 2004 and July 2005, we borrowed a total of $720,000 from various lenders, including $100,000 from the prospective purchaser of our EDI assets and $250,000 from the prospective buyer of our building. Of such funds, $320,000 was loaned to the Company by Mr. Anthony Frank, our majority shareholder. Except for $20,000 borrowed from Mr. Frank in January 2005, all of such loans were repaid as of October 31, 2005. We realized net proceeds from the sale of our building and the EDI assets in the sum of $901,674 and $402,647, respectively.

Plan of Operation

In the opinion of management, available funds are expected to satisfy our working capital requirements through August 2006. Our independent registered public accounting firm has included an explanatory paragraph in their report on the financial statements for the year ended October 31, 2005 which raises substantial doubt about our ability to continue as a going concern.

Management believes that the sale of its EDI assets and the building it currently owns is required to sustain the Company’s operations and bring the MIT technology to a commercial stage. This approach is intended to optimize the value of the Company for its shareholders. To this end, we intend to seek commercial, technical and scientific partners that can aid in advancing the MIT expertise, provide external endorsements of the technology and accelerate introduction to the market. The implementation of this strategy is completely dependent on obtaining the proceeds from the EDI and building sale transactions. This strategy will also be dependent upon our ability to identify and attract the right customers and partners over the next six month period and to secure sufficient additional working capital in a timely manner thereafter.

We will be required to raise substantial amounts of new financing in the form of additional equity investments, loan financings, or from strategic partnerships, to carry out our business objectives. There can be no assurance that we will be able to obtain additional financing on terms that are acceptable to us and at the time required by us, or at all. Further, any financing may cause dilution of the interests of our current shareholders. If we are unable to obtain additional equity or loan financing, our financial condition and results of operations will be materially adversely affected. Moreover, estimates of our cash requirements to carry out our current business objectives are based upon various assumptions, including assumptions as to our revenues, net income or loss and other factors, and there can be no assurance that these assumptions will prove to be accurate or that unbudgeted costs will not be incurred. Future events, including the

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problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to cost increases that could have a material adverse effect on us and our plans. If we are not successful in obtaining financing for future developments, whether in the form of loans, licenses or equity transactions, it is unlikely that we will have sufficient cash to continue to conduct operations, particularly research and development programs, as currently planned. We believe that in order to raise needed capital, we may be required to issue debt at significantly higher interest rates or equity securities that are significantly lower than the current market price of our common stock.

No assurances can be given that currently available funds will satisfy our working capital needs for the period estimated, or that we can obtain additional working capital through the sale of common stock or other securities, the issuance of indebtedness or otherwise or on terms acceptable to us. Further, no assurances can be given that any such equity financing will not result in a further substantial dilution to the existing shareholders or will be on terms satisfactory to us.

Impact of Recently Issued Accounting Pronouncements

In November 2004, the FASB issued SFAS 151, “Inventory costs.” SFAS 151 is an amendment of Accounting Research Board Opinion number 43 and sets standards for the treatment of abnormal amounts of idle facility expense, freight, handling costs and spoilage. SFAS 151 is effective for fiscal years beginning after June 15, 2005. Management does not expect adoption of SFAS 151 to have a material impact on the Company’s financial statements.

In December 2004, the FASB issued SFAS 123R, “Share-Based Payment,” a revision of FASB Statement No. 123. Under this standard, all forms of share-based payment to employees, including stock options, would be treated as compensation and recognized in the income statement. This proposed statement would be effective for awards granted, modified or settled in fiscal years beginning after December 15, 2005. We currently account for stock options under APB No. 25. The pro forma impact of expensing options, valued using the Black Scholes valuation model, is disclosed in Note 1 of Notes to Consolidated Financial Statements. The Company is currently researching the appropriate valuation model to use for stock options. In connection with the issuance of SFAS 123R, the Securities and Exchange Commission issued Staff Accounting Bulletin number 107 (“SAB 107”) in March of 2005. SAB 107 provides implementation guidance for companies to use in their adoption of SFAS 123R. Management believes that the impact on the Company’s financial statements will approximate the proforma information presented in Item 7. Financial Statements Note 3.

Item 7.Financial Statements and Supplementary Data

The information required by Item 7 is included on pages F-1 to F-28.

Item 8.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

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Item 9A.Controls and Procedures.

In the course of their audit of the Company’s financial statements as at and for the fiscal year ended October 31, 2005, the Company’s independent registered public accounting firm, Hein & Associates, LLP, identified and reported a material weakness as it relates to numerous adjusting entries which were undetected due to deficiencies in the Company’s financial statement close process, and, as a result of the audit, were recorded by the Company during the course of the audit to correct the underlying books and records.

The Company carried out an evaluation of the effectiveness of the design and operation of its “disclosure controls and procedures,” as defined in, and pursuant to, Rule 13a-15 of the Securities Exchange Act of 1934, as of October 31, 2005 under the supervision and with the participation of the Company’s management, including the Company’s President and Principal Executive Officer and its Principal Financial Officer. Based on that evaluation and the events described above, the Company’s President and Principal Executive Officer and its Principal Financial Officer concluded that, as of their evaluation, the Company’s disclosure controls and procedures were not effective to ensure that material information relating to the Company and its subsidiary was made known to them on a timely basis.

Management of the Company and Hein & Associates, LLP have discussed the material weaknesses referred to above with the Audit Committee of the Board of Directors of the Company. Management of the Company has instituted a review of the Company’s internal controls in order to correct these and any other deficiencies which the review may bring to light and to strengthen the accounting infrastructure if required.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the fourth fiscal quarter of fiscal 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART III

Item 10.Directors and Executive Officers of the Registrant Directors and Executive Officers

Our directors and executive officers are as follows:

Name	Age	Position
William F. Farnam *	84	Director (Chairman)
Randolph S. Heidmann *	54	Director
Floyd H. Panning *	77	Director, President and Chief Executive Officer
Catherine Patterson	53	Chief Financial Officer and Secretary

•There are currently two vacancies on the Board of Directors, due to the resignations of Randall P. Frank and Arthur Lipper III in February and August 2003, respectively.

•All current directors serve as members of the Audit Committee, with Mr. Panning as the Chairman of the Committee.

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William F. Farnam, 84, was named to the Board of Directors on August 5, 1997. Mr. Farnam spent 1967 through 1968 as General Manager on construction of The Los Angeles Forum for sports entrepreneur Jack Kent Cooke. He served the City of Inglewood, California for 20 years, as Public Works Director and City Engineer and went on to become the Assistant City Manager there from 1980 to 1982. Between 1983 and 1984, he served as Project Engineer for the Park Place Associates Poker Casino in Southern California. He provided engineering consulting services for various municipalities from 1985 through 1990 when he retired. Mr. Farnam is a Registered Professional Civil Engineer in the State of California and received a Bachelor of Science Degree in Electrical Engineering from the University of Southern California and is a Management Studies Graduate from the University of California at Los Angeles.

Randolph S. Heidmann, 54, was employed by us between September 1990 and November 1991 as an electronics instrumentation design engineer to continue development work on innovative electronic components which we planned to engineer into our product line. He was named to the Board of Directors in September 1991. Prior to joining us, he spent nine years with Teledyne Electronics where he was responsible for data acquisition subsystems design for telemetry products. He has participated in the development of a variety of consumer electronics products and custom production test equipment. Between 1991 and June 1999, Mr. Heidmann served as an electrical engineer for Photonic Detectors, Inc. in Simi Valley, California. Currently, Mr. Heidmann provides independent electrical engineering consulting services. He holds a BS degree in Physics from the University of California at Davis.

Floyd H. Panning, 77, joined the Board of Directors and was engaged by us as President and Chief Executive Officer in August 1997. Mr. Panning came out of retirement in April 1992 to establish EDI Components and form a license relationship with us to manufacture and market the EDI technology. He has been the president of EDI Components, a former licensee, since 1992. Prior to forming EDI Components, Mr. Panning had founded two million-dollar revenue producing businesses that were sold in 1982. In 1972, he founded Formatron, Inc., a manufacturer of rotational molded plastic products such as plating and chemical storage tanks, and many other polyethylene and polypropylene containers. In 1963, he acquired Mills Engineering Co., a manufacturer of high quality aluminum products. As owner/operator he expanded the firm from a limited local sales organization by establishing major national and international accounts with Fortune 100 companies and major municipalities.

Catherine Patterson, 53, became our Secretary in May 1989, was Assistant Secretary from May 1986 to May 1988, held the position of Treasurer from August 1984 to February 1986, and was a director for a short time in 1984. In June 1990, she became Chief Financial Officer. From 1971 until she joined us in 1981, she was a legal secretary for various Michigan law offices, including General Motors Corporation, where she dealt closely with various corporate sectors and counsels throughout the United States and Puerto Rico and portions of Canada and South America.

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Directors serve until the next Annual Meeting of Shareholders when their successors are elected and qualified. Mr. Panning has a right to nominate one director. See “MANAGEMENT - - Employment Agreement.”  Officers, subject to any employment agreements, serve at the pleasure of the Board of Directors.

Key Employees

David Haavig, 51, a Ph.D. in Physics, joined Electropure in May 1998 as General Manager of Micro Imaging Technology, its wholly owned subsidiary. Dr. Haavig has over 25 years experience in instrument design in computer software with applications in optical measurements and analysis. From August 1991 to May 1998, he served as Electrical Design Engineer for San Diego-based Science Applications International Corporation, where he was responsible for the mechanical and electrical design of microprocessor controlled, autonomously controlled instruments. He also served as project manager and technical director on various system development projects. Dr. Haavig received his Bachelor of Science degree in Physics (Cum Laude) from the University of Seattle and his Master of Science and Ph.D. degrees in Physics from Purdue University.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers and directors, and stockholders owning more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange and are required by SEC regulations to furnish us with copies of all forms they file pursuant to these requirements. Based solely on our review of the copies of such forms that we have received, or written representations from reporting persons, we believe that during the fiscal year ended October 31, 2005, all executive officers, directors and such stockholders complied with all applicable filing requirements on a timely basis.

Item 11.Executive Compensation

In November 1999, the Board of Directors established a Compensation and Benefits Committee to oversee compensation and benefits, i.e., option and warrant grants, to employees and service providers. The following Directors currently serve on this Committee:  William F. Farnam.

Floyd Panning, who joined us as Chief Executive Officer in August 1997, is being compensated at the rate provided in his employment agreement that is described below under “Employment Agreement.”

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The following table sets forth summary information regarding compensation paid for the years ended October 31, 2005, 2004, and 2003 to the officers of the Company.

		Annual Compensation				Long-Term Compensation
Name	Position	Year	Salary ($)		Other Compensation ($)(1)	Awards Options
Floyd Panning	President and	2005	$	122,523	—	—
	Chief Executive Officer	2004	$	122,523	—	—
		2003	$	122,523	—		(2)
Catherine Patterson	Secretary and Chief Financial Officer	2005 2004	$ $	75,600 74,100	— —	— —
		2003	$	72,000	—		(3)

(1)We are not required to report the value of personal benefits unless the aggregate dollar value was at least 10 percent of the executive officer’s salary and bonus or $50,000.

(2)Mr. Panning was granted options to purchase 100,000 shares of the common stock of the Company’s subsidiary, Micro Imaging Technology, on July 31, 2003 at an exercise price of $0.10 per share.

(3)On July 31, 2003, Ms. Patterson was granted options to purchase 100,000 shares of the common stock of the Company’s subsidiary, Micro Imaging Technology, at an exercise price of $0.10 per share.

Compensation Committee Interlocks and Insider Participation

Compensation of executive officers is determined by the Board of Directors. In connection with the License Termination Agreement with EDI Components, the Board of Directors negotiated Mr. Floyd Panning’s Employment Agreement as President and Chief Executive Officer of Electropure.

Employment Agreement

Effective August 5, 1997, we entered into a five-year Employment Agreement with Floyd Panning where he became the President and Chief Executive Officer. The Agreement provided that Mr. Panning can extend the term for a period of two years, which provision he exercised in August 2002, after which the agreement continues on a year-to-year basis until either party provides 30 days notice of termination on the anniversary date of the agreement. The agreement provides Mr. Panning with five weeks’ vacation, the use of a car and cellular telephone and participation in any benefit programs offered by us. Pursuant to the terms of the agreement, Mr. Panning also received warrants to purchase 125,000 shares of our common stock at $0.28125 per share. The warrants are exercisable in increments of 25,000 annually beginning with the date of the agreement. The agreement also provides for the following:

•A base monthly salary of $6,500 increasing to $8,000 per month once we had realized a minimum of $1 million in financing. Each year thereafter, the base salary automatically increased by an amount equal to five percent. Mr. Panning’s base salary is currently $10,210 per month and no automatic increase occurred during the fiscal year ended October 31, 2005.

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•Upon realizing the above minimum financing, we agreed to reimburse Mr. Panning for $63,700 in wages deferred while he was employed at EDI Components. A $25,000 promissory note issued by Mr. Panning, in consideration for his exercise of 50,000 warrants to purchase common stock at $0.50 per share, will be satisfied with the deferred wages, net of normal federal, state and local income and payroll taxes. Mr. Panning agreed to waive any remaining balance of deferred wages after payment of the promissory note with interest.

•Mr. Panning has the right to nominate, subject to shareholder approval, one person to the Board of Directors during the term of his employment. Mr. Panning has been named to the Board of Directors as his nominee.

•Any termination by us of Mr. Panning’s employment without cause shall automatically accelerate the issuance of additional shares due EDI’s investors under the License Termination Agreement at the then fair market value if Mr. Panning’s successor has not been approved by simple majority vote of EDI Components’ investors, excluding Mr. Panning.

Compensation of Directors

In August 1997, we authorized an annual issuance of ten-year options to purchase up to 10,000 shares of our common stock to each Director for service to the Company at a 25% discount from the fair market value of the common stock as of the date of grant. In accordance with this resolution, each Board member has received ten-year options to purchase up to 10,000 shares of our common stock in each of fiscal 1998, 1999, 2000 and 2001 at exercise prices of $1.375, $0.9375, $0.78125 and $0.30 per share, respectively. The grant of such options due in fiscal 2002 and beyond did not occur as scheduled. In January 2006, the Company issued each director options to purchase 50,000 shares of common stock at an exercise price of $0.14 per share.

Stock Option Plan

The Company has adopted a 1999 Stock Option Plan (the “Plan”). Under the Plan, incentive and non-qualified stock options for 1,000,000 shares of common stock may be issued. Incentive stock options may be issued to any employee of the Company; are exercisable in installments as determined by the Board of Directors or the Compensation and Benefits Committee; and may be granted for not more than ten years (five years in the case of any employee who owns or is considered to own more than 10% of the common stock). Incentive stock options may not be exercisable for less than 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of a more than 10% shareholder). Non-qualified stock options may be granted to employees, directors, consultants and advisors of the Company. Non-qualified stock options may not be granted for more than ten years, are exercisable in installments as determined by the Board or Compensation and Benefits Committee, and may not be exercisable for less than 100% of the fair market value of the common stock on the date of grant.

All options are non-transferable except by will or the laws of descent and distribution and terminate six months after death or termination of employment due to permanent disability and three months after employment terminates for any other reason.

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The following table provides information about option exercises during the fiscal year ended October 31, 2005 by the named officers and directors and the value of their unexercised options as of the end of that fiscal year, based on the closing price of Electropure common stock on October 31, 2005.

	Shares Acquired	Value	Number of Securities Underlying Unexercised Options Held at October 31, 2005		Value of Unexercised In-the-Money Options October 31, 2005
Name	On Exercise	Realized	Exercisable	Unexercisable	Exercisable	Unexercisable
William F. Farnam	—	—	50,000	—	—	—
Randolph S. Heidmann	—	—	50,000	—	—	—
Floyd H. Panning	—	—	275,000	—	—	—
Catherine A. Patterson	—	—	100,000	—	—	—
	—	—	475,000	—	—	—

No options to purchase common stock were issued under the Plan during the fiscal years ended October 31, 2004 and 2005. On January 26, 2006, the Board of Directors authorized the issuance of up to 450,000 options to purchase common stock at $0.14 per share to the officers, current and former directors and key employees listed below. An additional issuance of 50,000 options to purchase common stock was made on January 26, 2006 under the Plan to another employee of the Company at a $0.14 per share exercise price. As of October 31, 2005 and January 26, 2006, the total number of options issued under the Plan amounted to 460,000 and 910,000, respectively.

Name	Relationship to the Company	No. of Options Issuable
Floyd H. Panning	Director, President and Chief Executive Officer	100,000
William F. Farnam	Director	50,000
Randolph S. Heidmann	Director	50,000
Catherine Patterson	Secretary and Chief Financial Officer	100,000
David Haavig	General Manager of MIT subsidiary	150,000

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Item 12.Security Ownership of Certain Beneficial Owners and Management.

PRINCIPAL SHAREHOLDERS

The following table sets forth information as of February 9, 2006 with respect to the common stock, Class B common stock, Series C Preferred Stock, Series D Preferred Stock and Convertible Preferred Stock owned by the only persons known by us to own beneficially 5% or more of any of these classes of stock, by each director and by all directors and officers as a group.

Name	Common Stock (1)	% of Class		Class B Common Stock	% of Class		Series C Preferred Stock(2)	% of Class		Series D Preferred Stock(3)	% of Class		Convertible Preferred Stock(4)	% of Class		% of Voting Power (5)
William F. Farnam	196,918	1.5	%	—	—		—	—		—	—		—	—		1.2	%
Anthony M. Frank 20 Meadowood Court Pleasant Hill, CA 94523	7,601,679	56.6	%	—	—		250,000	100	%	250,000	100	%	—	—		45.5	%
Randolph S. Heidmann	100,000		*	—	—		—	—		—	—		—	—			*
Harry M. O’Hare, Sr. 1000 El Centro S. Pasadena, CA 91030	2,500		*	83,983	100	%	—	—		—	—		931,629	35.8	%	9.6	%
Floyd H. Panning	696,792	5.2	%	—	—		—	—		—	—		7,500		*	4.2	%
Catherine Patterson	150,112		*	—	—		—	—		—	—		2,906		*		*
All officers and directors as a group (4 persons)	1,143,822	8.5	%	—	—		—	—		—	—		10,406		*	6.9	%

*Less than 1%

**Includes address of five percent or more shareholders of any class.

 (1)Excludes 83,983 shares of common stock issuable upon conversion of Class B common stock, which carry eight votes per share. If these shares of common stock were included, Mr. O’Hare and all officers and directors, as a group would own 86,483 shares (1.0%) and 1,143,822 shares (8.5%) of common stock, respectively.

(2)Includes currently exercisable warrants or options to purchase an aggregate of 575,000 shares of the Company’s common stock held by the officers and directors referred to in the above table. See also Item 10 - “Executive Compensation - Stock Option Plan.”  Also includes currently exercisable warrants to purchase an aggregate of 200,000 shares of common stock held by Anthony M. Frank.

(3)The Series C Convertible Preferred Stock is convertible into common stock, at the rate of four shares of common stock for each preferred share converted at the option of the holder.

(4)The Series D Convertible Preferred Stock is convertible into common stock, at the rate of two shares of common stock for each preferred share converted at the option of the holder.

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(5)The Convertible Preferred Stock was convertible into common stock only if specified earnings or market prices of the common stock were achieved prior to October 31, 1990. The specified earnings and market prices were not achieved and as of January 31, 1991, we were required to redeem these shares at $0.01 per share as of the fiscal year ended October 31, 1999. See Part II - Item 5 - “Market for Registrant’s Common Equity and Related Stockholder Matters.”

(6)Reflects the voting rights of the common stock and Convertible Preferred Stock, each of which carries one vote per share; Class B common stock, which carries eight votes per share; and Series C and Series D Convertible Preferred Stock, which have no voting rights.

In order to comply with conditions imposed by the Commissioner of Corporations of the State of California, in connection with the public offering of Units in June 1987, Harry M. O’Hare, Sr. and his former, late wife, Sandra O’Hare, agreed that until these conditions are lifted by order of the Commissioner, all the shares of Class B common stock and Convertible Preferred Stock held by them (except for 107,848 shares of Convertible Preferred Stock issued in July 1988 to Harry M. O’Hare, Sr.) and any common stock received upon conversion of the Class B common stock and Convertible Preferred Stock, will be subject to the following conditions which shall be referenced in a legend on the certificates for the shares:

•the shares will not participate in dividends, other than stock dividends;

•the shares will not participate in any distribution of assets in the event of liquidation; and

•the shares may not be transferred without prior written consent of the Commissioner except for transfer pursuant to order or process of any court.

The issuance of an order lifting the conditions is in the sole discretion of the Commissioner. However, under the Commissioner’s Rules, such an order will generally be issued when we have demonstrated a satisfactory earnings record, as defined in the Rules, and we understand that in practice such an order will also be issued in the event of a merger, consolidation, or liquidation in which the holders of the common stock have received a satisfactory return on the shares.

In October 1998, we agreed to seek the approval of our shareholders to enter into an agreement with Mr. O’Hare and two of his creditors which would support a petition to the Commissioner for removal of the above restrictions. If approved, the agreement would have provided for the transfer of all our securities held by Mr. O’Hare’s to the creditors, including us, in exchange for monthly payments of $1,000 and extinguishment of debt owed by Mr. O’Hare. Although our shareholders approved the agreement at the Annual Meeting of Shareholders held on June 26, 1999, the Commissioner essentially indicated his intent to deny the petition under the current conditions and efforts to seek authorization for the transfer of these shares was abandoned in fiscal 2004.

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Item 13.Certain Relationships and Related Transactions.

Mr. Anthony M. Frank

In January 2001, Mr. Frank loaned us $1,000,000 through his personal Keogh Plan for three years at 8% annual interest as the down payment to purchase the building we currently occupy. Interest on the loan is payable each calendar quarter beginning on June 30, 2001, with the principal balance due on February 23, 2006. In September 2002, Mr. Frank assigned $400,000 of the principal balance of this loan from his Keogh account to his Pension Plan. The interest rate, maturity date and payment terms remain the same. Mr. Frank has converted interest accrued on this loan into common stock as outlined in the table below. The Company is currently in default of paying $80,000 in interest due on this loan through December 31, 2005.

CONVERSION DATE	DATE INTEREST ACCRUED THROUGH	NO. OF SHARES ISSUED	FAIR MARKET VALUE PER SHARE		TOTAL INTEREST CONVERTED
10/23/01	09/30/01	161,270	$	0.35	$	56,444
01/02/02	12/31/01	47,619	$	0.42	$	20,000
04/03/02	03/31/02	44,445	$	0.45	$	20,000
07/05/02	06/30/02	57,143	$	0.35	$	20,000
10/21/02	09/30/02	60,606	$	0.33	$	20,000
04/15/03	03/31/03	307,692	$	0.13	$	40,000
07/22/03	06/30/03	100,000	$	0.20	$	20,000
10/13/03	09/30/03	66,667	$	0.30	$	20,000
01/22/04	12/31/03	100,000	$	0.20	$	20,000
05/20/04	03/31/04	66,667	$	0.30	$	20,000
09/30/04	09/30/04	235,294	$	0.17	$	40,000
01/27/05	12/31/04	285,714	$	0.07	$	20,000
		1,533,117			$	316,444

On January 27, 2005, Mr. Frank converted $20,000 in interest accrued on the above loan in exchange for 285,714 shares of common stock. The fair market value of the common stock on the conversion date was $0.07 per share.

Mr. Frank loaned the Company an additional $320,000 between January 27, 2005 and May 24, 2005, all of which loans bears interest at 8% per annum. In October 2005, the Company repaid $300,000 of the loans, plus $14,849 in accrued interest, from the proceeds received on the sale of our building.

Miscellaneous

The Board of Directors has adopted a policy that no transaction between us and any officer, director, employee or members of their family shall be entered into without the full disclosure of the transaction to and the approval of the transaction by the non-interested members of the Board of Directors. Furthermore, except for routine supply and sales agreement, no agreements will be

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entered into regarding royalties, distributorships, supply agreements, sales agreements, the borrowing of money or the sale or granting of securities or options or the leasing or buying of property by us, or any other type of contract over three months or $50,000 without the approval of the Board of Directors.

PART IV

Item 14.Exhibits and Reports on Form 8-K.

(a)The following documents are filed as part of this report:

1.Financial Statements

Report of Independent Registered Public Accounting Firm

Balance Sheet as of October 31, 2005

Statements of Operations for the years ended October 31, 2005 and 2004

Statements of Shareholders’ Deficit for the years ended October 31, 2005 and 2004

Statements of Cash Flows for the years ended October 31, 2005 and 2004

Notes to Financial Statements

(b)Reports on Form 8-K

A report on Form 8-K was filed on April 26, 2005 relating to the Agreement for Purchase and Sale of Assets by and between Electropure, Inc., Electropure EDI, Inc. and SnowPure, LLC dated April 15, 2005.

A report on Form 8-K was filed on June 9, 2005 relating to the Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated June 3, 2005.

(c)Exhibits

3.1	Articles of Incorporation of the Registrant, as amended, (incorporated by reference to Exhibit 3.1 to Form 10-KSB filed on February 28, 1989).
3.2	By-Laws of the Registrant, as amended, (incorporated by reference to Exhibit 3.2 to Form S-1, Filed No. 33-10669, filed on December 15, 1986).
10.10.BS	Debt Conversion Agreement (Keogh) – 01/27/05 – Face Sheet Only (incorporated by reference to Exhibit 10.10.BS to Schedule 13D/A-23 of Anthony M. Frank filed on January 31, 2005).
10.10.BT	Debt Conversion Agreement (Pension – 01/27/05 – Face Sheet Only (incorporated by reference to Exhibit 10.10.BT to Schedule 13D/A-23 of Anthony M. Frank filed on January 31, 2005).
10.10.BU	8% Convertible Term Note by and between Electropure, Inc. and Anthony M. Frank dated February 18, 2005 (incorporated by reference to Exhibit 10.57 to Form 8-K filed on April 26, 2005).
10.10.BW	8% Convertible Term Note by and between Electropure, Inc. and Anthony M. Frank dated April 21, 2005 (face sheet only). (incorporated by reference to Exhibit 10.59 to Form 8-K filed on April 26, 2005).

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10.10.BY	8% Convertible Term Note by and between Electropure, Inc. and Anthony M. Frank dated May 24, 2005 (incorporated by reference to Exhibit 10.64 to Form 8-K filed on June 9, 2005).
10.12	1999 Stock Option Plan (incorporated by reference to Exhibit 10.12 to Definitive Proxy Statement filed on May 24, 1999).
10.19	Form of Indemnity Agreement with each current Officer and Director. (incorporated by reference to Exhibit 10.19 to Definitive Proxy Statement filed on May 4, 1988).
10.47.8	License Termination Agreement with EDI Components dated August 14, 1997 (effective 08/05/97). (incorporated by reference to Exhibit 10.47.8 to Form 10-QSB filed on September 11, 1997).
10.47.9	Employment Agreement with Floyd H. Panning dated August 14, 1997 (effective 08/05/97). (incorporated by reference to Exhibit 10.47.9 to Form 10-QSB filed on September 11, 1997).
10.52	Technology Transfer Agreement with Wyatt Technology Corporation dated October 25, 1997. (incorporated by reference to Exhibit 10.52 to Schedule 13D of Wyatt Technology Corporation filed on November 14, 1997).
10.54.A	Promissory Note Secured by Trust Deed – 06/30/05 (Second Source Solutions)(incorporated by reference to Exhibit 10.54.A to Form 10-KSB filed on September 26, 2005).
10.61	Loan Agreement by and between Electropure, Inc., Electropure EDI, Inc. and SnowPure, LLC dated December 9, 2004 (incorporated by reference to Exhibit 10.61 to Form 8-K filed on April 26, 2005).
10.62	Security Agreement by and between Electropure, Inc., Electropure EDI, Inc. and SnowPure, LLC dated December 9, 2004 (incorporated by reference to Exhibit 10.62 to Form 8-K filed on April 26, 2005).
10.66	Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated June 3, 2005 (incorporated by reference to Exhibit 10.66 to Form 8-K filed on June 9, 2005).
10.66.A	Promissory Note Secured by Deed of Trust – 07/15/05 (Boukather) (incorporated by reference to Exhibit 10.66.A to Form 10-KSB filed on September 26, 2005).
10.66.B	Escrow Amendment to June 3, 2005 Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate)(incorporated by reference to Exhibit 10.66.B to Form 10-KSB filed on September 26, 2005).
10.67	Agreement for Purchase and Sale of Assets by and between Electropure, Inc., Electropure EDI, Inc. and SnowPure, LLC dated April 15, 2005 as approved by the Board of Directors on April 19, 2005 (incorporated by reference to Exhibit 10.67 to Form 8-K filed on April 26, 2005).

25

10.67.A.	Amendment of Purchase and Sale Agreement dated April 15, 2005)(incorporated by reference to Exhibit 10.67.A to Form 10-KSB filed on September 26, 2005).
21.1	Subsidiaries of Micro Imaging Technology, Inc. *
31.1	Certification of Chief Executive Officer *
31.2	Certification of Chief Financial Officer *
32.1	906 Certification of Chief Executive Officer *
32.2	906 Certification of Chief Financial Officer *

* Filed herewith

Item 15.Principal Accountant Fees and Services.

Audit Fees.

The aggregate fees billed to the Company for professional services rendered for the audit of the Company’s annual financial statements, review of the Company’s quarterly financial statements, and other services normally provided in connection with statutory and regulatory filings or engagements was $65,035 for the fiscal year ended October 31, 2005, and $72,157 for the fiscal year ended October 31, 2004.

Tax Fees.

Fees billed for professional services for tax compliance, tax advice and tax planning were $7,372 and $0 for the fiscal year ended October 31, 2005 and 2004, respectively.

Other Fees.

Other fees billed to the Company by accountants for consultation services, research and client assistance totaled $0 for the fiscal year ended October 31, 2005, and $0 for the fiscal year ended October 31, 2004.

26

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto.

Dated:  February 9, 2006
	MICRO IMAGING TECHNOLOGY, INC.
	BY	/S/ CATHERINE PATTERSON
		CATHERINE PATTERSON Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1934, as amended, this Report has been signed below by the following persons in the capacities and on the dates indicated.

Signatures

/S/ WILLIAM F. FARNAM	Director	February 9, 2006
WILLIAM F. FARNAM
/RANDOLPH S. HEIDMANN	Director	February 9, 2006
RANDOLPH S. HEIDMANN
/S/ FLOYD H. PANNING	Chief Executive Officer	February 9, 2006
FLOYD H. PANNING	and Director
/S/ CATHERINE PATTERSON	Chief Financial Officer (Principal Financial and	February 9, 2006
CATHERINE PATTERSON	Accounting Officer)

27

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Micro Imaging Technology, Inc. and Subsidiaries

Laguna Hills, California

We have audited the accompanying consolidated balance sheet of Micro Imaging Technology, Inc. (the “Company”) (formerly, Electropure, Inc.) and Subsidiaries as of October 31, 2005 and the related consolidated statements of operations, shareholders’ deficit and cash flows for the two years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Micro Imaging Technology, Inc. and Subsidiaries as of October 31, 2005, and the results of their operations and their cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, and as of October 31, 2005 has an accumulated deficit of $27,809,201 that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of reported asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

/s/HEIN & ASSOCIATES LLP

HEIN & ASSOCIATES LLP

Certified Public Accountants

Irvine, California

January 18, 2006

F-1

Micro Imaging Technology, Inc.

(Formerly, Electropure, Inc.)

Consolidated Balance Sheet

October 31, 2005

	2005
ASSETS
Current assets:
Cash	$	1,195,298
Prepaid and other expenses	25,590
Total current assets	1,220,888
Property, plant and equipment, net	6,483
Total assets	$	1,227,371
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current portion of notes payable to shareholder	$	1,870,000
Trade accounts payable	167,566
Accrued payroll	240,343
Other accrued liabilities	303,916
Redeemable convertible preferred stock, $0.01 par value; 2,600,000 shares authorized, issued and outstanding at October 31, 2005.	26,000
Total current liabilities	2,607,825
Commitments and contingencies (Notes 2 and 13)	—
Shareholders’ deficit:
Series C convertible preferred stock; $1.00 par value; 250,000 shares authorized, issued and outstanding at October 31, 2005; liquidation preference of $1,000,000.	250,000
Series D convertible preferred stock; $1.00 par value; 250,000 shares authorized, issued and outstanding at October 31, 2005; liquidation preference of $500,000.	250,000
Common stock, $0.01 par value; 20,000,000 shares authorized; 12,965,851 shares issued and outstanding at October 31, 2005.	129,658
Class B common stock, $0.01 par value; 839,825 shares authorized; 83,983 shares issued and outstanding at October 31, 2005.	840
Additional paid-in capital	25,834,496
Note receivable on common stock	(36,247		)
Accumulated deficit	(27,809,201		)
Total shareholders’ deficit	(1,380,454		)
Total liabilities and shareholders’ deficit	$	1,227,371

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Micro Imaging Technology, Inc.

(Formerly, Electropure, Inc.)

Consolidated Statements of Operations

For Each of the Two Years in the Period Ended October 31, 2005

	2005			2004
Operating costs and expenses:
Research and development	$	318,521		$	351,230
Sales, general and administrative	639,406			483,801
Loss from operations	957,927			835,031
Other income (expense):
Gain on sale of building	1,585,637			—
Interest income	1,668			1,456
Interest expense	(349,623		)	(517,030		)
Sublease income	149,100			130,850
Other income (expense), net	(6,420		)	107,761
Other income (expense), net	1,380,362			(276,963		)
Income (loss) from continuing operations before income taxes	422,435			(1,111,994		)
Provision for income taxes	(6,184		)	(1,270		)
Net income (loss) from continuing operations	416,251			(1,113,264		)
Discontinued operations:
Gain (loss) from discontinued operations, including gain on disposal of assets of $695,537 and $0 for fiscal year ended October 31, 2005 and 2004, respectively, net of income taxes	701,737			(289,600		)
Net income (loss)	$	1,117,988		$	(1,402,864	)
Net income (loss) per share, basic
From continuing operations	$	0.03		$	(0.09	)
From discontinued operations	0.06			(0.02		)
Net income (loss) per share, basic	$	0.09		$	(0.11	)
Net income (loss) per share, diluted
From continuing operations	$	0.03		$	(0.09	)
From discontinued operations	0.05			(0.02		)
Net income (loss) per share, diluted	$	0.08		$	(0.11	)
Shares used in computing net income (loss) per share
Basic	12,714,595			12,205,004
Diluted	14,828,209			12,205,004

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Micro Imaging Technology, Inc.

(Formerly, Electropure, Inc.)

Consolidated Statements of Stockholders’ Deficit

For Each of the Two Years in the Period Ended October 31, 2005

	Series C Convertible Preferred Shares	Series D Convertible Preferred Shares	Common Shares	Class B Common Shares	Series C Convertible Preferred Stock		Series D Convertible Preferred Stock		Common Stock		Class B Common Stock		Additional Paid-in Capital		Note Receivable Common Stock			Accumulated Deficit			Total
Balance, November 1, 2003	250,000	250,000	12,078,176	83,983	$	250,000	$	250,000	$	120,782	$	840	$	25,541,997	$	(33,502	)	$	(27,524,325	)	$	(1,394,208	)
Common shares issued for convertible debt	—	—	401,961	—	—		—		4,019		—		75,981		—			—			80,000
Warrants issued to a lender as a debt discount for a loan	—	—	—	—	—		—		—		—		42,563		—			—			42,563
Warrants issued as a beneficial conversion feature on a loan	—	—	—	—	—		—		—		—		42,562		—			—			42,562
Warrants issued as a finders fee for a loan	—	—	—	—	—		—		—		—		24,800		—			—			24,800
Options and warrants granted to employees and consultants for services	—	—	—	—	—		—		—		—		4,600		—			—			4,600
Interest recognized on notes receivable for common shares	—	—	—	—	—		—		—		—		—		(1,373		)	—			(1,373		)
Net loss	—	—	—	—	—		—		—		—		—		—			(1,402,864		)	(1,402,864		)
Balance, October 31, 2004	250,000	250,000	12,480,137	83,983	$	250,000	$	250,000	$	124,801	$	840	$	25,732,504	$	(34,875	)	$	(28,927,189	)	$	(2,603,920	)
Common shares issued for convertible debt	—	—	285,714	—	—		—		2,857		—		17,143		—			—			20,000
Common shares issued for services	—	—	200,000	—	—		—		2,000		—		15,000		—			—			17,000
Warrants issued as a beneficial conversion feature on a loan	—	—	—	—	—		—		—		—		9,000		—			—			9,000
Warrants issued as a finders fee for a loan	—	—	—	—	—		—		—		—		2,250		—			—			2,250
Options and warrants granted to employees and consultants for services	—	—	—	—	—		—		—		—		58,600		—			—			58,600
Interest recognized on notes receivable for common shares	—	—	—	—	—		—		—		—		—		(1,372		)	—			(1,372		)
Net income	—	—	—	—	—		—		—		—		—		—			1,117,988			1,117,988
Balance, October 31, 2005	250,000	250,000	12,965,851	83,983	$	250,000	$	250,000	$	129,658	$	840	$	25,834,496	$	(36,247	)	$	(27,809,201	)	$	(1,380,454	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Micro Imaging Technology, Inc.

(Formerly, Electropure, Inc.)

Consolidated Statements of Cash Flows

For Each of the Two Years in the Period Ended October 31, 2005

	2005			2004
Cash flows from operating activities:
Net income (loss)	$	1,117,988		$	(1,402,864	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation	79,185			171,907
Gain on disposition of assets	(695,537		)	—
Gain on sale of building	(1,585,637		)	—
Bad debt expense	—			(6,085		)
Interest expense relating to amortization of holdback	—			4,000
Interest expense relating to amortization of debt issuance costs	—			16,878
Common stock issued for services	17,000			—
Warrants issued as partial compensation for loans	11,250			—
Non-cash compensation for stock options and warrants	58,600			4,600
Discount related to issuance of debt	—			85,126
Interest paid with common stock	20,000			80,000
Interest on notes receivable for common stock	(1,372		)	(1,373		)
(Increase) decrease in assets:
Trade accounts receivable	(29,434		)	(39,792		)
Prepaid expenses	(16,312		)	7,280
Inventories	(7,441		)	59,780
Other assets	2,598			—
Increase (decrease) in liabilities:
Trade accounts payable	73,594			(21,526		)
Customer deposits	(40,109		)	32,042
Accrued payroll and other liabilities	274,123			62,721
Net cash used in operating activities	(721,504		)	(947,306		)
Cash flows from investing activities:
Proceeds from disposition of assets	402,647			—
Proceeds from sale of building	3,875,000			—
Purchase of property, plant and equipment	(1,880		)	(4,340		)
Net cash provided by (used in) investing activities	4,275,767			(4,340		)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

	2005			2004
Cash flows from financing activities:
Principal payments on notes payable	(2,406,645		)	(2,308,046		)
Proceeds from issuance of notes payable	—			2,825,000
Principal payments on capital lease obligations	(1,927		)	(9,916		)
Proceeds from issuance of notes payable to a related party	20,000			450,000
Net cash provided by (used in) financing activities	(2,388,572		)	957,038
Net increase in cash	1,165,691			5,392
Cash at beginning of period	29,607			24,215
Cash at end of period	$	1,195,298		$	29,607
Supplemental Disclosure of Cash Flow Information
Interest paid	$	160,229		$	145,829
Income taxes paid	$	2,400		$	1,600
Supplemental Schedule of Non-Cash Investing and Financing Activities
Liabilities assumed in disposition of assets of operating subsidiary	$	407,578		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Micro Imaging Technology, Inc.

(Formerly, Electropure, Inc.)

Notes to the Consolidated Financial Statements

1.Description of Business

Micro Imaging Technology, Inc. (formerly, Electropure, Inc.) (the “Company”), a California corporation, is a holding company whose operations are conducted through its subsidiaries.

In 1997, the Company began marketing a small, point-of-use water treatment product aimed at the high purity segment of commercial and industrial water treatment markets. In February 2000, the Company formed Electropure EDI, Inc. (EDI), a wholly-owned Nevada subsidiary, through which all manufacturing and sales of its proprietary water treatment products were then conducted. In October 2005, the Company sold the assets of the EDI subsidiary and discontinued operations. See Note 4.

In October 1997, the Company acquired an exclusive license to patent and intellectual property rights involving laser light scattering techniques to be utilized in the detection and monitoring of toxicants in drinking water. In February 2000, the Company formed Micro Imaging Technology (MIT), a wholly-owned Nevada subsidiary, to conduct research and development based upon advancements developed and patented from the licensed technology. The technology is in the development phase and MIT remains the Company’s only operation as of October 31, 2005.

2.Basis of Presentation

The Company incurred net income from continuing operations of $416,251 for the fiscal year ended October 31, 2005 and a net loss of $1,113,264 in fiscal year 2004. At October 31, 2005 the Company had an accumulated deficit of $27,809,201 and is in default under the redemption provisions of its redeemable preferred stock (Note 11) that raise substantial doubt about the Company’s ability to continue as a going concern. The Company has been able to secure operating capital through the sale of assets and through private loans from an individual who is a related party and the largest shareholder. No assurances can be given that the Company can or will continue to obtain sufficient working capital through the sale of the Company’s securities, borrowing, or through the sale of assets or products that will generate sufficient revenues in the future to sustain ongoing operations. The Company’s ability to continue as a going concern will be dependent upon its ability to gain access to equity and debt capital or achieve profitable operations.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustment that might be necessary should the Company be unable to continue as a going concern.

F-7

3.Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, Electropure EDI, Inc. (“EDI”), Micro Imaging Technology (“MIT”) and Electropure Holdings, LLC (“LLC”). All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company invests portions of its excess cash in highly liquid investments. Cash and equivalents include time deposits and commercial paper with original maturities of three months or less. As of October 31, 2005, there were no cash equivalents outstanding.

Impairment of Long-Lived Assets

The Company annually evaluates its long-lived assets, including identifiable intangible assets for potential impairment. When circumstances indicate that the carrying amount of an asset is not recoverable, as demonstrated by the projected undiscounted cash flows, an impairment loss is recognized. The Company’s management has determined that there was no such impairment present at October 31, 2005 and 2004.

Stock Based Compensation

Statement of Financial Accounting Standards No 123, “Accounting for Stock-Based Compensation” (SFAS 123) encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has elected to continue to account for stock based compensation using the intrinsic value method prescribed in Accounting Principals Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations. Under APB 25 and the intrinsic value method, as the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant or, in the case of the Company’s employee stock purchase plans since the plans are non-compensatory, no compensation expense is recognized.

The following table illustrates the effect on the Company’s net loss and loss per share as if the Company had applied the fair value recognition provisions of SFAS 123 to its stock based employee compensation awards, and recognized expense over the applicable award vesting period:

F-8

	2005			2004
Net income (loss), as reported:	$	1,117,988		$	(1,402,864	)
Add: Stock-based employee compensation included in reported net loss	—			—
Less: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(61,270		)	(135,910		)
Pro forma net income (loss):	$	1,056,718		$	(1,538,774	)
Net income (loss) per share
Basic, as reported	$	0.09		$	(0.11	)
Basic, pro forma	$	0.08		$	(0.13	)
Net income (loss) per share
Diluted, as reported	$	0.08		$	(0.11	)
Diluted, pro forma	$	0.07		$	(0.13	)
Weighted average shares outstanding
Basic	12,714,595			12,205,004
Diluted	14,828,209			12,205,004

The pro forma effect for the years presented is not likely to be representative of the pro forma effect on reported net income or loss in future years because these amounts reflect less than five years of vesting.

The assumptions made for purposes of estimating the fair value of its stock options, as well as a summary of the activity under the Company’s stock option plan are included in Note 12.

Revenue Recognition

All servicing and training are provided prior to shipment. Revenues on the sale of the Company’s products are recognized when the products are shipped. The Company does not accept returns. Provision for estimated product warranty cost is recorded at the time of sale and periodically adjusted to reflect actual experience.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance is determined through an

F-9

analysis of the aging of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of current and projected economic conditions. The Company evaluates the past-due status of its trade receivables based on contractual terms of sale. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Bad debt expense for the year ended October 31, 2004 was $6,085. The Company did not incur bad debt expense in fiscal 2005.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis, which approximates the first-in, first-out method of valuation. The Company’s management monitors inventories for excess and obsolete items and makes necessary valuation corrections when such adjustments are required.

Property and Equipment

Property and equipment are recorded at cost and are depreciated using the straight-line method over an expected useful life of 5 years. The Company’s building was being depreciated over an expected useful life of 30 years. Expenditures for normal maintenance and repairs are charged to operations. The cost and related accumulated depreciation of assets are removed from the accounts upon retirement or other disposition, and the resulting profit or loss is reflected in the Statement of Operations. Renewals and betterments that materially extend the life of the assets are capitalized.

Intangible Assets

Intangible assets represent the cost of intellectual properties described as acquired technology and unpatented process technology and are amortized on a straight-line method over the shorter of the estimated useful life of the technology or the remaining term of the patent.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts could differ from those estimates.

Advertising Costs

The Company charges advertising costs to expense as incurred. Advertising expense for the years ended October 31, 2005 and 2004 was $10,092 and $7,531, respectively.

F-10

Research and Development

Research and development expenditures are charged to expense as they are incurred. The Company’s research and development activities include ongoing work on various uses of the micro imaging multi-angle laser light scattering technology. Contract research and development expenditures are expensed as incurred.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade accounts receivable. Exposure to losses on accounts receivable is principally dependent on the individual customer’s financial condition, as credit sales are not collateralized. The Company monitors its exposure to credit losses and reserves for those accounts receivable that it deems to be not collectible.

Fair Value of Financial Instruments

The estimated fair value amounts of all financial instruments on the Company’s balance sheet have been determined by using available market information and appropriate valuation methodologies. Fair value is described as the amount at which the instrument could be exchanged in a current transaction between informed willing parties, other than in a forced liquidation. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The Company does not have any off balance sheet financial instruments.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial statements:

Cash and equivalents, trade accounts receivable, notes receivable, trade accounts payable, current portion of notes payable and capital leases, and certain other current liability amounts reported in the balance sheet approximate fair value due to the short term maturities of these instruments.

The fair value of non-current notes payable is estimated by determining the net present value of future payments. The carrying amount on the balance sheet approximates the fair value as the interest rates approximate current market rates.

Income Taxes

The Company accounts for income taxes under the liability method. Under the liability method, deferred income taxes are determined based on differences between the financial reporting and

F-11

tax bases of assets and liabilities. They are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company is required to adjust its deferred tax liabilities in the period when tax rates or the provisions of the income tax laws change. Valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized.

Loss Per Share

Basic earnings per share excludes dilution and is calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then share in the earnings of the entity. Common stock equivalents of 5,786,479 and 7,211,479 as of October 31, 2005 and 2004, respectively, have been omitted from the earnings per share calculation, as their effect would be antidilutive.

Reclassification

Certain amounts presented within the 2004 financial statements have been reclassified in order to conform to the 2005 financial statement presentation. Such reclassifications had no effect on net loss.

New Accounting Pronouncements

In November 2004, the FASB issued SFAS 151, “Inventory costs.” SFAS 151 is an amendment of Accounting Research Board Opinion number 43 and sets standards for the treatment of abnormal amounts of idle facility expense, freight, handling costs and spoilage. SFAS 151 is effective for fiscal years beginning after June 15, 2005. Management does not expect adoption of SFAS 151 to have a material impact on the Company’s financial statements.

In December 2004, the FASB issued SFAS 123R, “Share-Based Payment,” a revision of FASB Statement No. 123. Under this standard, all forms of share-based payment to employees, including stock options, would be treated as compensation and recognized in the income statement. This proposed statement would be effective for awards granted, modified or settled in fiscal years beginning after December 15, 2005. We currently account for stock options under APB No. 25. The pro forma impact of expensing options, valued using the Black Scholes valuation model, is disclosed in Note 1 of Notes to Consolidated Financial Statements. The Company is currently researching the appropriate valuation model to use for stock options. In connection with the issuance of SFAS 123R, the Securities and Exchange Commission issued Staff Accounting Bulletin number 107 (“SAB 107”) in March of 2005. SAB 107 provides implementation guidance for companies to use in their adoption of SFAS 123R. Management does not expect adoption of SFAS 123R to have a material impact on the Company’s financial statements.

F-12

4.Disposition of Assets

On October 25, 2005, the Company sold the building owned by its subsidiary, Electropure Holdings, LLC, to the George A. Boukather Trust, an unrelated party, for a total of $3,875,000 in cash and realized a gain on the sale in the sum of $1,585,637.

On October 31, 2005, the Company sold substantially all of the assets owned by and utilized in the operations of its Electropure EDI, Inc. subsidiary to SnowPure, LLC, for a total purchase price of $800,000, plus $10,224 to cover a portion of the sales tax, which was paid in a combination of cash and the assumption of certain liabilities. SnowPure, LLC is principally owned and operated by Michael Snow, a former officer of the Company and General Manager of EDI. At closing, the Company received $402,647 in cash proceeds and SnowPure assumed $407,578 in various trade and notes payable. The Company recognized a gain of $695,537 on the sale of assets. The related operating results of EDI have been excluded from the results from continuing operations and classified as a discontinued operation for all periods presented in accordance with the requirements of SFAS 144.

The operations from EDI through the date of the sale are included in Gain (loss) from Discontinued Operations on the Consolidated Statements of Operations for fiscal 2005 and 2004. The following is a summary of the results of discontinued operations relating to EDI for the years ended October 31, 2005 and 2004:

	October 31,
	2005			2004
Net sales	$	1,338,676		$	1,129,009
Cost of Sales	902,267			949,592
Gross profit:	436,409			179,417
Operating costs and expenses:
Research and development	39,610			46,973
Sales, general and administrative	367,175			421,714
Total operating expenses	406,785			468,687
Income (loss) from operations	29,624			(289,270		)
Other income (expense):
Interest expense	(12,998		)	—
Income (loss) before provision for income tax	16,626			(289,270		)
Provision for income tax	(10,426		)	(330		)
Net income (loss)	$	6,200		$	(289,600	)

F-13

5.Inventories

As of October 31, 2005, all inventories had been transferred as part of the sale of EDI assets to SnowPure, LLC.

6.Property, Plant and Equipment

At October 31, 2005, property, plant and equipment consisted of the following:

Machinery and equipment	$	27,949
Furniture and fixtures	120,152
	148,101
Less: accumulated depreciation	(141,618		)
Total property and equipment, net	$	6,483

Depreciation expense for the years ended October 31, 2005 and 2004 was $79,185 and $171,907, respectively.

In October 2005, the Company sold its 30,201 square foot building located at 23456 South Pointe Drive, Laguna Hills, California to an unaffiliated third party for $3,875,000 and currently leasing a portion of the facility through April 30, 2006.

7.Acquired Technology

At October 31, 2005, acquired technology consisted of the following:

Ion exchange membrane technology	$	200,000
Less: accumulated amortization	(200,000		)
Acquired technology, net	$	—

There was no amortization expense for the fiscal year ended October 31, 2005 as acquired technology was fully amortized during the fiscal year ended October 31, 2003.

8.Capital Lease Obligations

The Company leases certain equipment under agreements that are classified as capital leases. The cost of the equipment under capital leases is included in machinery and equipment and furniture and fixtures and was $59,148 at October 31, 2004. Leased equipment valued at $22,891 was transferred to SnowPure, LLC pursuant to the October 2005 sale of EDI assets and at October 31, 2005, the Company retained $36,257 in capital equipment obtained under leases. Accumulated amortization of the leased equipment at October 31, 2005 and 2004 was $56,907 and $49,894, respectively. Amortization of the leased property is included in depreciation expense.

F-14

As of October 31, 2005, all leases on capital equipment, including equipment transferred to SnowPure, LLC, had been paid in full.

9.Notes Payable

At October 31, 2005, notes payable consisted of the following:
Convertible note payable to major shareholder, collateralized by intellectual property of Micro Imaging Technology subsidiary (MIT), with interest only payments at 8% payable quarterly beginning on June 30, 2001, with balance due in full on January 17, 2006.	(A)	$	1,000,000
Note payable to major shareholder, collateralized by intellectual property of MIT, with principal and interest at 8% per annum due in full on February 23, 2006.		150,000
Convertible notes payable to major shareholder (for six separate loans), collateralized by intellectual property of MIT, with principal and interest at 8% per annum due in full on February 23, 2006.		550,000
Unsecured convertible notes payable to major shareholder (for three separate loans) with principal and interest at 8% per annum due in full on February 23, 2006.		170,000
		1,870,000
Less current maturities		(1,870,000		)
Long Term portion of notes payable		$	—

(A)The Company is currently in default of the interest payment provisions on the loan which required payment on or about March 31, June 30, September 30, and December 31, 2005.

F-15

10.Income Taxes

At October 31, 2005 and 2004, the components of the income tax expense are as follows:

	2005		2004
Current tax expense:
Federal	$	4,600	$	—
State	1,584		1,270
	6,184		1,270
Deferred tax expenses:
Federal	—		—
State	—		—
	—		—
Total provision:	$	6,184	$	1,270

Significant components of the Company’s net deferred income tax assets/ (liabilities) at October 31, 2005 were as follows:

Current deferred tax assets:
Accrued vacation	$	13,714
Deferred payroll	39,228
Book compensation for options and warrants	430,276
Other	95,504
Total current deferred tax assets	578,722
Valuation allowance	(578,722		)
Net deferred current tax assets	$	—
Noncurrent deferred tax assets:
Net operating loss carryforward	$	5,662,470
Other credit carryforward	301,214
Depreciation and amortization	8,940
Total noncurrent deferred tax assets	5,972,624
Valuation allowance	(5,972,624		)
Net deferred noncurrent tax assets	$	—
Total deferred tax assets	$	—

The Company, based upon its history of losses and management’s assessment of when operations are anticipated to generate taxable income, has concluded that it is more likely than not that none of the net deferred income tax assets will be realized through future taxable earnings and has established a valuation allowance for them. The change in the total valuation allowance for the year ended October 31, 2005 was a decrease of $1,408,487.

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Reconciliation of the effective income tax rate to the U.S. statutory income tax rate is as follows:

Tax expense (benefit) at U.S. statutory income tax rate	(34.0	)%	(34.0	)%
State tax	(0.7	)%	(0.1	)%
Utilization of net operating loss	37.3	%	0	%
Change in beginning balance of valuation allowance	(4.1	)%	32.5	%
Effective income tax rate	(1.5	)%	(1.6	)%

The Company has federal and state net operating loss carryforwards of $15,984.161 and $2,597,545, respectively. The federal and state net operating loss carryforwards began expiring in 2005. The Company also has federal and state research and development tax credit carryforwards of $175,518 and $109,086, respectively. The federal tax credits will begin to expire in 2013.

11.Shareholders’ Deficit

Common Stock

In January 2001, the Company borrowed $1,000,000 from a related party who is the largest shareholder. The terms of the note provided for interest only payments each calendar quarter at the rate of 8% per annum. On January 27, 2005, the Company exchanged a total of 285,714 shares of common stock, at a conversion rate of $0.07 per share, for interest accrued on the loan through December 31, 2004 in the total amount of $20,000.

On June 29, 2005, for one-year’s services to be performed, we granted a consultant 600,000 shares of common stock and warrants to purchase 100,000 shares of common stock at exercise price of $0.10 per share, as well as 100,000 shares of common stock at $0.25 per share. The shares vest in 50,000 increments each month during the term of the agreement. The warrants vested fully on the date of grant and are exercisable through June 29, 2008. The fair market value of the shares and warrants as of October 31, 2005 was $17,000 and $18,000, respectively, and was recorded as consulting expense in the current period.

F-17

In August 1997, the Company allowed a current officer and director to exercise warrants held by him in exchange for a note receivable at a fixed interest rate of 5.49%. As of October 31, 2005 and 2004, the note receivable related to the issuance of common stock is reflected as a reduction in equity and is summarized as follows:

	2005		2004
Note receivable from an officer and director of the Company for the issuance of 50,000 shares of common stock in August 1997, with an interest rate of 5.49% per annum, due in July 2002. The note receivable is collateralized by shares issued resulting from the exercise of warrants. The amount outstanding includes accrued interest of $11,247.	$	36,247	$	34,875

Class B Common Stock

The Class B common stock is entitled to non-stock dividends and liquidation payments equal to 80% of those paid to the common stock. All of the Class B common stock is held by one individual (a significant shareholder and the founder of the Company) and may not be transferred or assigned. These shares automatically convert on a share for share basis into common stock upon the death of the current owner. However, in connection with an order imposed by the California Corporations Commissioner, all shares held by this individual will not participate in dividends, other than for stock in distribution of assets in the event of liquidation and may not be transferred without prior consent of the Commissioner or pursuant to a court order.

Redeemable Preferred Stock

The redeemable preferred stock, issued in 1987 to the then holders of the common and Class B common stock, had a redemption date in 1991. The redeemable preferred stock has not been redeemed due to a lack of “legally available funds.”  These shares must be redeemed by the Company as soon as possible for $0.01 per share at any time the Company has the “legally available funds” for the redemption. There was a conversion feature to this redeemable preferred stock, which, with the passing of time, has lapsed. The Company believes the definition of “legally available funds” to be the amount under California law from which dividends could be paid by a corporation that does not have retained earnings. In general, California law provides that to the extent a corporation’s assets, excluding intangible and deferred assets, are at least equal to (a) the amount of the proposed distribution, and (b) 1.25 times its liabilities, excluding deferred taxes, deferred income, and deferred credits, a corporation may pay dividends. Under this definition, the Company had “legally available funds” as of October 31, 2000 and 1999. As a result, the Company is in default under the redemption provisions of the redeemable preferred stock. The impact of this default on the Company’s financial position is uncertain.

The redeemable preferred stock is not assignable or transferable, except upon death or upon approval of a majority of the members of the Board of Directors not holding such shares and is not entitled to receive any dividends.

F-18

Voting Rights

Each share of the Company’s common stock is entitled to one vote per share, and each share of the Class B common stock of the Company is entitled to eight votes per share. The holders of the outstanding redeemable preferred stock of the Company are entitled to one vote per share. Shares of the Series C and Series D convertible preferred stock carry no voting rights.

Liquidation Preferences

In the event of liquidation or dissolution of the Company, the holders of the common stock, Class B common stock and redeemable preferred stock, subject to the rights of the holders of the Series C and Series D convertible preferred stock, shall be entitled to receive an equal amount per share, provided, however, in no instance shall a share of redeemable preferred stock receive more than $0.01 per share and in no instance shall each share of Class B common stock receive an amount greater than 80% of the amount each share of common stock receives, subject to the restrictions imposed by the Commissioner as described above.

Each share of Series C convertible preferred stock is convertible at the option of the holder into four shares of common stock. The Series C convertible preferred stock carries no voting rights.

In any liquidation or dissolution of the Company, the holder of the Series C convertible preferred stock will be entitled to a liquidation preference of $4 per share.

Each share of Series D convertible preferred stock is convertible at the option of the holder into two shares of common stock. The Series D convertible preferred stock carries no voting rights.

In any liquidation or dissolution of the Company, the holder of the Series D convertible preferred stock will be entitled to a liquidation preference of $2 per share.

12.Stock Options and Warrants

Common Stock Options

In May 1999, the Company adopted the Micro Imaging Technology, Inc. (formerly, Electropure, Inc.) 1999 stock option plan (the “plan”), for officers, directors, employees, consultants, and advisors of the Company. The plan provides two types of options: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. The plan authorizes the granting of options up to 1,000,000 shares of common stock. The exercise price per share on options granted may not be less than the fair market value per share of the Company’s common stock at the date of grant. The exercise price per share of Incentive stock options granted to anyone who owns more than 10% of the voting power of all classes of the Company’s common stock must be a minimum of 110% of the fair market value per share at the date of grant. The options exercise price may be paid in cash or its equivalent including cashless exercises as determined and approved by the plan administrator. No options were granted under this plan during the fiscal year ended October 31, 2005 or 2004. As of the year ended October 31, 2005, the number of options granted by the

F-19

Company exceeds the total authorized by the plan by 10,000 options. In fiscal 2001, the Company also authorized the issuance of 450,000 options at an exercise price of $0.50 per share to the members of the Board of Directors contingent upon concluding a manufacturing or strategic alliance for the sale of EDI products or equity interests in the EDI subsidiary. All of the options granted by the Company during the year ended October 31, 2001, including those contingently issuable to the Board, are subject to approval by the Company’s shareholders of an increase in the authorized number of options available under the plan at its next Annual Meeting of Shareholders. The term of each Incentive stock option granted is fixed by the plan administrator and shall not exceed 10 years, except that for those who own 10% of the voting power of the Company the term of the option may be no more than 5 years. Non-qualified stock options may not be granted for more than ten years. The vesting period for both Incentive stock options and Non-qualified stock options is determined by the administrator at or after the date of grant.

The following table summarizes information about Electropure options granted to employees and directors of the Company. Unless otherwise noted, options vest on an annual pro rata basis over various periods of time and are exercisable, upon proper notice, in whole or in part at any time upon vesting. Generally, unvested options terminate when an employee leaves the Company. The options granted have contractual lives ranging from 3 to 10 years.

No Electropure options were granted during the fiscal year ended October 31, 2004 and 2005.

	Number of Options		Weighted Average Exercise Price
Outstanding at October 31, 2003	2,095,000		$	0.74
Granted	—		—
Exercised	—		—
Expired	(300,000	)	0.81
Canceled	(50,000	)	0.73
Outstanding at October 31, 2004	1,745,000		0.56
Granted	—		—
Exercised	—		—
Expired	(650,000	)	0.90
Canceled	—		—
Outstanding at October 31, 2005	1,095,000		$	0.36

The Company’s MIT subsidiary granted 585,000 options to various employees of the Company during the year ended October 31, 2003. The weighted average fair value of the MIT options granted was $0.10. No MIT options have been granted prior to or since fiscal 2003.

F-20

The Company has not granted options since the fiscal year ended October 31, 2003. Summary information about the Company’s options outstanding at October 31, 2005:

Range of Exercise Prices	Options Outstanding October 31, 2005	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Options Exercisable October 31, 2005	Weighted Average Exercise Price
ELECTROPURE:
$ 0.28 - $0.50	985,000	4.4	$	0.30	846,000	$	0.31
$ 0.59 - $0.90	50,000	4.8	$	0.78	50,000	$	0.78
$ 0.94 - $1.13	60,000	1.0	$	0.94	60,000	$	0.94
	1,095,000				956,000
MIT:
$ 0.10	560,000	2.8	$	0.10	560,000	$	0.10
TOTAL:	1,655,000				1,516,000

Common Stock Warrants

The Company accounts for stock-based compensation awards to non-employees based upon fair values at the grant dates in accordance with SFAS No. 123. The consideration received for the issuance of stock purchase warrants (“warrants”) is based on the fair value of the warrants or of the goods or services received for the warrants issued, whichever is more reliably measurable.

When the value of the services is based on the fair value of the warrants, the value is calculated using the Black-Scholes Option Pricing Model. The fair value of the options or warrants is amortized over the period the Company received the goods or services.

In this connection, during the years ended October 31, 2005 and 2004 the Company granted warrants as follows:

In March 2004, in partial consideration for a loan from an unaffiliated third party, the Company issued warrants to purchase a total of 160,000 shares of common stock at $0.20 per share, expiring in March 2006. The fair value of the warrants on the date of issuance, $42,563, was recorded as debt discount and was fully expensed in May 2004 when the loan was repaid. Warrants to purchase an additional 80,000 shares of common stock at $0.20 per share were also issued as a finder’s fee in connection with this loan. The fair value of the warrants, $24,800, which also expire in May 2006, was fully expensed in fiscal 2004 as financing costs.

On June 29, 2005, for one-year’s services to be performed, the Company granted a consultant 600,000 shares of common stock and warrants to purchase 100,000 shares of common stock at

F-21

exercise price of $0.10 per share, as well as 100,000 shares of common stock at $0.25 per share. The shares vest in 50,000 increments per month and 200,000 shares had vested as of October 31, 2005. The warrants vested in full as of the date of grant and are exercisable through June 29, 2008. The fair market value of the shares and warrants was $17,000 and $18,000, respectively, and was recorded as consulting expense as of October 31, 2005.

On June 29, 2005, the Company granted warrants to purchase 50,000 shares of common stock to a consultant for future services. The warrants are exercisable at $0.10 per share and expire on June 29, 2008. The fair market value of the warrants was $4,500 and was recorded as a consulting expense.

On July 1, 2005, for future legal services to be performed, the Company granted legal counsel 200,000 warrants to purchase 200,000 shares of common stock at exercise price of $0.06 per share and 200,000 shares of common stock at $0.25 per share. The warrants are exercisable through July 1, 2008. The fair market value of the warrants on the date of issuance was $36,000 and was recorded as legal expense.

In July 2005, the Company borrowed $50,000 and $250,000 from two separate lenders and granted warrants to purchase a total of 125,000 shares of common stock as partial consideration for the loans. The warrants have a contractual life of three years and are exercisable at $0.06 per share. The fair market value of the warrants, $11,250, was recorded as financing charges.

The following table summarizes the information relating to Electropure warrants granted to non-employees as of October 31, 2005 and 2004 and changes during the years then ended:

	Number of Warrants		Weighted Average Exercise Price
Outstanding at October 31, 2003	2,375,000		$	0.74
Granted	240,000		0.20
Exercised	—		—
Expired	(250,000	)	0.50
Outstanding at October 31, 2004	2,365,000		0.71
Granted	775,000		0.14
Exercised	—		—
Expired	(975,000	)	0.93
Outstanding at October 31, 2005	2,165,000		$	0.71

The following table summarizes the information relating to MIT warrants granted to non-employees as of October 31, 2005 and 2004 and changes during the years then ended. Warrants to purchase 250,000 shares of the common stock of the Company’s majority owned subsidiary

F-22

which were issued in connection with a private placement offering, as previously disclosed and accounted for during the fiscal year ended October 31, 2000, have been included in the table below as a new issuance in the year ended October 31, 2004.

	Number of Warrants		Weighted Average Exercise Price
Outstanding at October 31, 2003	525,000		$	1.37
Granted	—		—
Exercised	—		—
Expired	—		—
Outstanding at October 31, 2004	525,000		1.37
Granted	—		—
Exercised	—		—
Expired	(250,000	)	1.25
Outstanding at October 31, 2005	275,000		$	1.48

The values of the consideration received were based on the values of the warrants granted. The values of the warrants were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions for grants made in 2005 and 2004:

	2005		2004
ELECTROPURE:
Risk-free interest rate	3.840	%	2.730	%
Expected dividend yield	—		—
Expected stock price volatility	1.905		1.973
Expected life in years	3 years		2 years
MICRO IMAGING TECHNOLOGY:
Rick-free interest rate	—		—
Expected dividend yield	—		—
Expected stock price volatility	—		—
Expected life in years	—		—

F-23

Summary information about the Company’s warrants outstanding at October 31, 2005 is as follows:

Range of Exercise Prices	Warrants Outstanding October 31, 2005	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Warrants Exercisable October 31, 2005	Weighted Average Exercise Price
ELECTROPURE:
$ 0.10 - $0.75	1,690,000	1.8	$	0.24	1,690,000	$	0.24
$ 0.78 - $1.00	260,000	2.2	$	0.99	260,000	$	0.99
$ 1.06 - $1.38	215,000	1.0	$	1.12	215,000	$	1.12
	2,165,000				2,165,000
MIT:
	275,000	2.1	$	1.48	525,000	$	1.48
TOTAL:	2,440,000				2,440,000

13.Commitments and Contingencies

Facilities Agreement

The Company leased 12,000 sq. ft of its 30,000 sq. ft. facilities to a third party until October 26, 2005 when it sold the building to the George Boukather Trust. Rental income was $149,100 and $130,850 for the fiscal year ended October 31, 2005 and 2004, respectively.

Commencing November 1, 2005, the Company entered into a short-term agreement to lease back approximately 7,800 sq. ft. of the building from the new owner through February 28, 2006 at the rate of $9,175 per month. The Company issued a security deposit of $9,175 and prepaid all rents due through the original lease term, which has since been extended to April 30, 2006. For the fiscal year ended October 31, 2005, the Company paid pro-rated rent to the new lessor from the sale date in the sum of $3,646.03. In January 2006, the Company entered into a one-year agreement to lease a 4,100 sq. ft. facility in San Clemente, California at a rate of $3,650 per month.

Future minimum facilities lease payments as of October 31, 2005, less prepayments (as adjusted to reflect the effect of subsequent events), are as follows:

2006	$	43,900
2007	$	18,250

F-24

Employment Contract

Effective in August 1997, the Company entered into a five-year employment agreement with Floyd Panning, the Company’s President and Chief Executive Officer. In July 2002, Mr. Panning exercised his option to extend the agreement for two years. The employment agreement provided for the granting to Mr. Panning of 125,000 warrants to purchase common stock at $0.28125 per share and also provides for the following:

a.A base monthly salary of $6,500 that increased to $8,000 per month once the Company realized a minimum of $1 million in additional financing. Mr. Panning’s base monthly salary increased pursuant to this provision effective in April 1998. Annually, the base salary automatically increases by five (5%) percent.

b.The Company agreed it would, upon realizing the above minimum financing, pay Mr. Panning an additional compensation of approximately $28,000, which has been accrued.

c.The right to nominate one person for a seat on the Company’s Board of Directors during the term of his employment. Under the terms of this provision, Mr. Panning was nominated and was voted onto the Company’s Board of Directors.

d.Termination of the employment contract by the Company without cause would require the immediate issuance of 516,479 shares contingently issuable in connection with the termination agreement discussed in Note 12 - “Contingent Share Issuance,” unless Mr. Panning’s successor is approved by a majority vote of certain EDI Components’ shareholders (excluding Mr. Panning).

Purchase Commitments

In an effort to establish a fixed price for raw materials and services, the Company entered into purchase commitments with vendors on terms ranging from 1 to 12 months. Pursuant to the sale of EDI assets in October 2005, SnowPure, LLC assumed all liability for all but $5,620 in purchase commitments issued by the Company, which remaining amount has been accrued as accounts payable as of October 31, 2005. The following tables summarizes the commitments entered into by the Company for the fiscal years ended October 31, 2005 and 2004 and the changes during the years then ended:

Outstanding Purchase Obligations at October 31, 2003	$	96,631
Purchase Commitments Issued	75,290
Total Purchases	(143,581		)
Outstanding Purchase Obligations at October 31, 2004	28,340
Purchase Commitments Issued	434,250
Total Purchases	(296,987		)
Assumed by SnowPure, LLC	(186,983		)
Reclassified to Accounts Payable	(5,620		)
Outstanding Purchase Obligations at October 31, 2005	$	—

F-25

Contingent Share Issuance

Under an agreement with EDI Components to terminate a 1992 license agreement, the Company is contingently obligated to issue up to 516,479 additional common shares if the market price of the Company’s common stock reaches certain levels ranging from $3.00 to $5.50 per share.

14.Related Party Transactions

Due to lack of working capital, certain officers and employees of the Company deferred payment of salaries and reimbursement of expenses due during fiscal 2004 and 2005, as reflected in the table below. Deferred wages and accrued expenses due to Michael Snow in the sum of $52,292 and $27,622, respectively, were paid pursuant to the EDI asset sale transaction with SnowPure, LLC in October 2005.

EMPLOYEE	POSITION		GROSS WAGES DEFERRED		TOTAL UNPAID EXPENSES
Floyd Panning	President and Director	2004	$	20,421	$	18,530
		2005	$	61,261	$	9,494
			$	81,682	$	28,024
Catherine Patterson	Chief Financial Officer	2004	$	9,300	$	7,594
		2005	$	12,600	$	1,253
			$	21,900	$	8,847
	TOTAL DEFERRED:	2005	$	103,582	$	36,871

See Notes 4, 9, 11, 12, 13 and 15 for other related party transactions.

15.Subsequent Events (Unaudited)

On December 30, 2005, the Company entered into a one-year Finder’s Fee Agreement with an unrelated party seeking up to $5 million in financing on behalf of the Company. The agreement provides for a commission to the finder of 10% on the first $1 million realized and 6% on any additional financing received by the Company. The finder will also receive three-year warrants to purchase up to 200,000 shares of common stock at $0.09 per share, pro-rata to the amount of financing received.

In January 2005, the Company entered into an Intermediary Consulting Agreement with a Newport Beach, California company to provide consulting services for financing arrangements   in exchange for the issuance of 200,000 shares of the Company’s common stock.

F-26

On January 26, 2006, the Company’s largest shareholder converted a total of $43,221 in interest accrued on various loans made to the Company into 308,721 shares of common stock at the rate of $0.14 per share.

On January 26, 2006, the Company granted options to purchase a total of 500,000 shares of its common stock under the Company’s 1999 Stock Option Plan to the officers, directors and employees of the Company.  The options are exercisable at $0.14 per share and vest in various increments over 5 to 10 years.

F-27

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF MICRO IMAGING TECHNOLOGY, INC.

The Company owns the indicated percentage of the issued and outstanding stock of the following corporations:

Name of Subsidiary	State of Incorporation	Ownership Percentage
Micro Imaging Technology	Nevada	96.4	%

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Floyd H. Panning, Chief Executive Officer of Micro Imaging Technology, Inc., certify that:

1.I have reviewed this annual report on Form 10-KSB for the fiscal year ended October 31, 2005, of Micro Imaging Technology, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

  /s/ Floyd H. Panning

Floyd H. Panning
Chief Executive Officer
February 9, 2006

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Catherine Patterson, Chief Financial Officer of Micro Imaging Technology, Inc., certify that:

1.I have reviewed this annual report on Form 10-KSB for the fiscal year ended October 31, 2005, of Micro Imaging Technology, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

  /s/ Catherine Patterson

Catherine Patterson
Chief Financial Officer
February 9, 2006

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICERS
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Annual Report of Micro Imaging Technology, Inc. (formerly, Electropure, Inc.) (the “Company”) on Form 10-KSB for the fiscal year ended October 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Floyd H. Panning, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.

  /S/  FLOYD H. PANNING

Floyd H. Panning
President and Chief Executive Officer

February 9, 2006

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICERS
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Annual Report of Micro Imaging Technology, Inc. (formerly, Electropure, Inc.) (the “Company”) on Form 10-KSB for the fiscal year ended October 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Catherine Patterson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(3)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(4)The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.

  /S/  CATHERINE PATTERSON

Catherine Patterson
Secretary and Chief Financial Officer

February 9, 2006