DEF 14A 1 electrod14a.htm

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934

Filed by the Registrant [X]

Filed by a Party other than the Registration [ ]

Check appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-12

ELECTROPURE, INC.

(Name of Registrant as Specified in its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (check applicable box)

[ ] No fee required

[X] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies: N/A

2) Aggregate number of securities to which transaction applies: N/A

3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is

calculated and state how it was determined):

Total Amount: $4,675,000

How Determined: Purchase Price under Purchase Agreements

4) Proposed maximum aggregate value of transaction: $4,675,000

5) Total Fee paid: $550.25

[ ] Fee paid previously with preliminary materials

[X] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.

Identify for previous filing by registration statement number, or for the form or schedule and the date of its filing.

1) Amount previously paid: $94.16

2) Form, schedule or registration statement number: Schedule 14C Information Statement

3) Filing party: Electropure, Inc.

4) Date filed: May 16, 2005

ELECTROPURE, INC.

23456 South Pointe Drive

Laguna Hills, California 92653

NOTICE OF SOLICIATION OF THE CONSENT

OF SHAREHOLDERS WITHOUT A MEETING

TO THE SHAREHOLDERS OF ELECTROPURE, INC:

Notice is hereby given that Electropure, Inc. is soliciting the consent of its Shareholders with regard to the following actions:

1. To approve the sale of substantially all of the assets owned by and used in the operations of Electropure EDI, Inc. to SnowPure, LLC and to

immediately dissolve and terminate the corporate existence of Electropure EDI, Inc., pursuant to the Agreement for Purchase and Sale of Assets dated April

15, 2005, as amended on June 29, 2005 (the "EDI Asset Sale Transaction").

2. To amend the bylaws and articles of incorporation of Electropure, Inc. to change its corporate name to Micro Imaging Technology, Inc.

3. To approve the sale of the land and building owned by Electropure Holdings, LLC to the George A Boukather Trust, an unaffiliated third party,

pursuant to the Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated June 3, 2005, as amended on July 15, 2005 (the

"Building Asset Sale Transaction").

The EDI Asset Sale Transaction, the Building Asset Sale Transaction, and the plan to amend the bylaws and articles of incorporation of Electropure, Inc. are more fully described in the Consent Solicitation Statement accompanying this Notice. You are encouraged to carefully read the Consent Solicitation statement and the exhibits referenced therein.

You are being asked to approve the EDI Asset Sale Transaction and the Building Asset Sale Transaction (collectively, the "Asset Sale Transactions") because the sales, jointly and severally, constitute a sale of "substantially all" of Electropure's assets as this phrase is defined under the California General Corporation Law.

Electropure's Board has unanimously approved, and recommends that you vote in favor of, each of the proposals described above. Electropure's Board believes that Micro Imaging Technology's system for rapid microbe identification, if it can be fully developed and commercialized, may have significant market potential and could provide growth and long-term benefits to the shareholders of the Company. Substantially all the proceeds from the Asset Sale Transactions will be invested in furthering MIT's product development.

Only shareholders of record at the close of business on September 27, 2005 (the "Record Date") are entitled to notice of and to vote on the proposals.

Electropure encourages you to read the accompanying Consent Solicitation Statement and submit your Consent Card, to American Stock Transfer and Trust Company on or before November 11, 2005. You may submit your Consent by completing, signing, dating and returning your Consent Card in the pre-addressed envelope provided. Should you receive more than one Consent Card because your shares are held in multiple accounts or registered in different names or addresses, please return each Consent Card to assure that all of your shares are voted.

FOR THE BOARD OF DIRECTORS

/S/ William F. Farnam

William F. Farnam, Chairman

Laguna Hills, California

October 18, 2005

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE ASSET TRANSACTIONS AND PROPOSALS...................................................................	1
CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING STATEMENTS.........................................................................	5
PROPOSAL ONE: TO APPROVE THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS OWNED BY AND USED IN THE OPERATIONS OF ELECTROPURE EDI, INC. TO SNOWPURE, LLC.......................................................................................................	6
SUMMARY TERM SHEET..............................................................................................................................................................................	6
PROPOSAL TWO: TO AMEND THE BYLAWS AND ARTICLES OF INCORPORATION OF ELECTROPURE, INC. TO CHANGE ITS CORPORATE NAME TO MICRO IMAGING TECHNOLOGY, INC......................................................................	7
PROPOSAL THREE: TO APPROVE THE SALE OF THE LAND AND BUILDING OWNED BY ELECTROPURE HOLDINGS, LLC TO THE GEORGE A BOUKATHER TRUST..........................................................................................................................................	8
SUMMARY TERM SHEET..............................................................................................................................................................................	8
PROPOSALS ONE AND TWO: APPROVAL OF THE EDI ASSET TRANSACTION AND AMENDMENT OF ELECTROPURE'S BYLAWS AND ARTICLES OF INCORPORATION..................................................................................................................	9
BACKGROUND OF THE EDI ASSET TRANSACTION:..........................................................................................................	9
PARTIES:................................................................................................................................................................................	10
TERMS:...................................................................................................................................................................................	10
USE OF PROCEEDS:............................................................................................................................................................	12
REGULATORY APPROVALS:................................................................................................................................................	12
INCOME TAX CONSEQUENCES:........................................................................................................................................	12
STOCKHOLDER APPROVAL:...............................................................................................................................................	12
IMPORTANT NOTE TO THE COMPANY'S SHAREHOLDERS:...........................................................................................	12
PROPOSAL THREE: APPROVAL OF THE BUILDING ASSET TRANSACTION................................................................	13
BACKGROUND OF THE EDI ASSET TRANSACTION:............................................................................................................	13
PARTIES:....................................................................................................................................................................................	14
TERMS:.......................................................................................................................................................................................	14
USE OF PROCEEDS:................................................................................................................................................................	15
REGULATORY APPROVALS:....................................................................................................................................................	15
INCOME TAX CONSEQUENCES:...........................................................................................................................................	15
STOCKHOLDER APPROVAL:..................................................................................................................................................	15
ELECTROPURE SELECTED HISTORIAL CONSOLIDATED FINANCIAL DATA..................................................................	16
MARKET PRICE AND DIVIDEND INFORMATION...................................................................................................................	16
INFORMATION CONCERNING THE PURPOSE OF THE TRANSACTIONS, VOTING AND SOLICITATION...................	17
PURPOSE OF THE TRANSACTIONS..............................................................................................................................................	17
RECOMMENDATION OF ELECTROPURE'S BOARD...................................................................................................................	19
THE CONSENT PROCEDURE..........................................................................................................................................................	19
VOTING PROCEDURES AND REVOCATION OF CONSENTS....................................................................................................	20
ABSENCE OF DISSENTERS' RIGHTS..............................................................................................................................................	20
DESCRIPTION OF CAPITAL STOCK..............................................................................................................................................	20
COMMON STOCK..........................................................................................................................................................................	20
CLASS B COMMON STOCK...........................................................................................................................................................	21
CONVERTIBLE PREFERRED STOCK...........................................................................................................................................	21
PREFERRED STOCK.....................................................................................................................................................................	21
WARRANTS AND STOCK OPTIONS..............................................................................................................................................	22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................................................	22
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON...................................................................................	24
DISTRIBUTION AND COSTS................................................................................................................................................................	24
ADDITIONAL INFORMATION.............................................................................................................................................................	24
FINANCIAL INFORMATION................................................................................................................................................................	26

iii

QUESTIONS AND ANSWERS ABOUT THE ASSET TRANSACTIONS AND PROPOSALS

WHAT AM I BEING ASKED TO VOTE ON?

You are being asked to approve the following proposals:

(1) The EDI Asset Sale Transaction (Proposal 1) -- the sale of substantially all of the assets owned by and utilized in the operations of Electropure EDI, Inc.

("EDI") (a wholly-owned subsidiary of the Company) to SnowPure, LLC, and the subsequent dissolution and termination of the corporate existence of the

EDI subsidiary,

(2) The amendment of the articles of incorporation and bylaws of the Company (Proposal 2) -- to change its name from Electropure, Inc. to Micro Imaging

Technology, Inc., and

(3) The Building Asset Sale Transaction (Proposal 3) -- the sale of the building owned by Electropure Holdings, LLC ("LLC") (a wholly-owed subsidiary of the

Company) to the George A. Boukather Trust, an unaffiliated third party, and the subsequent dissolution and termination of the corporate existence of

Electropure Holdings, LLC.

WHY IS ELECTROPURE PROPOSING TO ENTER INTO THE ASSET TRANSACTIONS?

After due consideration of other alternatives available to Electropure, Electropure's Board concluded that the completion of the Asset Sale Transactions, which also require our corporate name change and the subsequent dissolution and winding up of Electropure EDI, Inc., was most reasonably likely to return the greatest potential value, when adjusted for risk, to Electropure shareholders as compared to other alternatives. Electropure's Board believes that further investment in Micro Imaging Technology's system for rapid microbe identification, if it can be fully developed and commercialized, may have significant market potential and could provide growth and long-term benefits to the shareholders of the Company.

WHAT WILL ELECTROPURE RECEIVE IN THE ASSET TRANSACTIONS?

Electropure will receive an aggregate of $800,000 in a combination of cash and assumption of liabilities as a result of the EDI Asset Sale Transaction. Pursuant to the Building Asset Sale Transaction, Electropure will sell the building it currently owns for $3,875,000. The aggregate net cash to be realized from each of these transactions is described elsewhere in this Consent Solicitation Statement.

WHEN WILL THE ASSET TRANSACTIONS BE COMPLETED?

The parties are working toward completing the Asset Sale Transactions as quickly as possible. In addition to the approval of the Asset Sale Transactions by Electropure's shareholders, each of SnowPure, LLC and Electropure and the George A. Boukather Trust and Electropure must satisfy or waive, to the extent possible, all of the other closing conditions contained in the respective Asset Purchase Agreements. The parties anticipate that the Asset Sale Transactions will close as promptly as practicable following receipt by Electropure of the affirmative vote of the holders of a majority of the outstanding shares of Electropure's common stock and convertible preferred stock; provided that each of the closing conditions contained in the respective Asset Purchase Agreements, including the approval of the Asset Sale Transactions by Electropure's shareholders, has been satisfied or waived.

WHEN WILL THE COMPANY'S SUBSIDIARIES BE DISSOLVED AND WHEN WILL ELECTROPURE'S CORPORATE NAME BE CHANGED TO MICRO IMAGING TECHNOLOGY, INC.?

California General Corporation Law provides that, following the approval of Electropure's shareholders to sell the assets and dissolve the corporate existence of Electropure, EDI, Inc. and Electropure Holdings, LLC (the "Subsidiaries") and following the approval of Electropure's shareholders to change the corporate name of Electropure, Inc., Electropure's Board may take such actions as it deems necessary in furtherance thereof. In connection with the foregoing, as soon as practicable:

* Electropure will file a certificate of dissolution in the appropriate jurisdiction to dissolve Electropure EDI, Inc. (a Nevada corporation) and Electropure

Holdings, LLC (a California limited liability company), after the payment, or the provision for the payment, of all of liabilities and obligations of the

respective Subsidiaries.

* Electropure will file a Certificate of Amendment of the Articles of Incorporation of Electropure, Inc. with the Secretary of State of the State of California to

change its corporate name to "Micro Imaging Technology, Inc."

WILL ANY DISTRIBUTIONS BE MADE TO ELECTROPURE'S SHAREHOLDERS?

No. The Asset Sale Transactions will not result in the distribution of anything to the shareholders of Electropure. A portion of the proceeds will be used to further the business and value of the Micro Imaging Technology, and the remaining portion of the proceeds may be used to repay certain indebtedness owed to Mr. Anthony M. Frank or his affiliates in his capacity as a creditor of the Company. Except for $300,000 in principal loans, plus interest accrued on the loans, on which the Company has granted Mr. Frank liens against the building, there is no agreement or understanding between the Company and Mr. Frank regarding what additional portion of the proceeds of the sales, if any, will be used to repay Mr. Frank.

WHAT VOTE OF ELECTROPURE SHAREHOLDERS IS REQUIRED TO APPROVE THESE MATTERS?

Each of the Proposals contained in this Consent Solicitation Statement require the approval of the holders of a majority of the outstanding shares of common stock and convertible preferred stock of Electropure as of the Record Date.

WHAT HAPPENS IF ELECTROPURE'S SHAREHOLDERS APPROVE ONE ASSET TRANSACTION, BUT NOT BOTH?

If one of the transactions is approved but not the other, then the Board will proceed with solely that asset sale transaction. In this case, it would mean that fewer assets would be available for working capital and repayment of liabilities and indebtedness than if both transactions had been completed. No assurances can be given that Electropure will be able to continue its remaining operations in this case.

DOES THE BOARD OF DIRECTORS OF ELECTROPURE RECOMMEND THAT I VOTE IN FAVOR OF THE ASSET TRANSACTIONS AND THE CORPORATE NAME CHANGE?

Yes. After careful consideration, Electropure's Board unanimously recommends that you vote in favor of each of Proposals 1, 2, and 3.

DID ELECTROPURE OBTAIN A FAIRNESS OPINION IN CONNECTION WITH THE ASSET TRANSACTIONS?

No written opinion, report or appraisal relating to the fairness of the sale price of the assets has been obtained by the Company. The terms of the transactions are based on the negotiations and solicitations described elsewhere in this Consent Solicitation Statement. However, based upon studied research regarding the value of properties in the area, the Company believes that the price offered and accepted for the building is at or about fair market value for similar properties currently being sold in the area.

WHAT DO I NEED TO DO NOW?

You should read this Consent Solicitation Statement carefully in its entirety to consider how the matters discussed will affect you. Then mark, sign, date and return the enclosed Consent card in the postage-paid envelope provided in accordance with the instructions on the enclosed Consent card or the voting instruction form received from any broker, dealer, trustee, bank or other nominee that may hold your shares of Electropure stock on your behalf, as soon as possible so that your shares can be voted.

WHAT HAPPENS IF I DO NOT VOTE?

The failure to return your Consent card or vote will have the same effect as voting AGAINST approval of each Proposal.

WHAT HAPPENS IF I RETURN A SIGNED CONSENT CARD BUT DO NOT INDICATE HOW TO VOTE MY SHARES?

If you do not include instructions on how to vote your properly signed and dated Consent, your shares will be voted FOR approval of each Proposal.

IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY SHARES FOR ME?

Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote your shares by following the procedure provided by your broker. The failure to provide voting instructions to your broker will have the same effect as voting AGAINST approval of each Proposal.

MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED CONSENT CARD OR INSTRUCTION FORM?

Upon receipt of an affirmative vote of a majority of the common stock and convertible preferred stock of Electropure, Electropure will be authorized and intends to take all necessary steps to immediately complete each of the Asset Sale Transactions. However, you may revoke or change your Consent at any time prior to the receipt of the required number of votes or November 11, 2005, whichever first occurs. You may revoke or change your Consent by submitting another Consent card with a later date or by sending a written notice or revocation to Electropure's Secretary at Electropure's principal executive offices.

SHOULD I SEND IN MY ELECTROPURE STOCK CERTIFICATES?

No. Please do not mail in your Electropure stock certificates in connection with the corporate name change to Micro Imaging Technology, Inc. Electropure will communicate with you as to when and how to exchange your Electropure stock certificates for new Micro Imaging Technology, Inc. certificates.

CAN I STILL SELL MY SHARES OF ELECTROPURE COMMON STOCK?

Yes, none of the transactions contemplated in this Consent Solicitation Statement will affect your status as a shareholder of Electropure, Inc. or your ability to sell your Electropure common stock which is currently traded on the OTC Electronic Bulletin Board market "pink sheets." However, the trading symbol of our common stock may change from "ELTP" once we have changed the corporate name to Micro Imaging Technology, Inc. We will notify our shareholders in the event of such a symbol change.

AM I ENTITLED TO DISSENTERS' RIGHTS?

No. Under California General Corporation Law, Electropure's shareholders will not be entitled to dissenters' rights in connection with either of the Asset Sale Transactions or the corporate name change.

WHO CAN HELP ANSWER MY ADDITIONAL QUESTIONS?

Shareholders who have additional questions about the Asset Sale Transactions or the corporate name change, including the procedures for voting their shares of Electropure stock, or who would like additional copies, without charge, of this Consent Solicitation Statement, should contact:

Corporate Secretary

Electropure, Inc.

23456 South Pointe Drive

Laguna Hills, California 92653

Phone: 1-949-770-9347

Fax: 1-949-770-9209

CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING STATEMENTS

This Consent Solicitation Statement includes certain "forward-looking" statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are based on Electropure's management's current expectations based upon information currently available to them, are not statements of historical fact and are subject to various risks, uncertainties and assumptions. Words such as "may", "will", "intends", "should", "expects", "proposed", "plan", "projects", "anticipates", "believes", "estimates", "predicts", "potential", "continue", or "opportunity", or the negative of these terms or words of similar import, are intended to identify forward-looking statements.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated including, without limitation, the following risks and uncertainties:

* Not all of the conditions to the completion of the Asset Sale Transactions pursuant to the respective asset purchase agreements, including the approval of

Electropure's shareholders holding a majority of the outstanding Electropure common stock and convertible preferred stock, and the receipt of necessary

regulatory and governmental approvals, may be fulfilled;

* If the EDI Asset Sale Transaction is terminated under certain circumstances outlined in the Purchase and Sale Agreement, Electropure's obligation to pay a

termination fee of $30,000 in cash to SnowPure, LLC could adversely affect Electropure's business, financial condition and results of operations;

* Potential or actual litigation may challenge the proposed transactions;

* General economic, financial and business conditions may make the Asset Sale Transactions less desirable;

* The benefits of the proposed Asset Sale Transactions may not be realized due to less than favorable than anticipated future financial and operating

performance and results in the Company's Micro Imaging Technology subsidiary.

The forward-looking statements included in this Consent Solicitation Statement are made only as of the date of this Consent Solicitation Statement. Electropure undertakes no obligation to publicly update any of the forward-looking statements made in this Consent Solicitation Statement, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

ELECTROPURE, INC.

23456 South Pointe Drive

Laguna Hills, California 92653

949-770-9347

CONSENT SOLICITATION STATEMENT

This Consent Solicitation Statement is furnished to the holders of record at the close of business on September 27, 2005 of the outstanding common stock and convertible preferred stock of Electropure, Inc. (the "Company"), pursuant to Rule 14a-2 promulgated under the Securities Exchange Act of 1934, as amended. The shareholders are being asked to provide their written consent to the following actions:

(1) the sale of substantially all of the assets owned by and utilized in the operations of Electropure EDI, Inc. ("EDI") (a wholly-owned subsidiary of the Company) to SnowPure, LLC, and the subsequent dissolution and termination of the corporate existence of the EDI subsidiary,

(2) the amendment of the articles of incorporation and bylaws of the Company to change its name from Electropure, Inc. to Micro Imaging Technology, Inc., and

(3) the sale of the building owned by Electropure Holdings, LLC ("LLC") (a wholly-owed subsidiary of the Company) to the George A. Boukather Trust, and the

subsequent dissolution and termination of the corporate existence of the LLC subsidiary.

This Consent Solicitation Statement is first being mailed to shareholders of Electropure, Inc. on or about October 20, 2005.

PROPOSAL ONE: TO APPROVE THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS OWNED BY AND USED IN THE OPERATIONS OF ELECTROPURE EDI, INC. TO SNOWPURE, LLC.

SUMMARY TERM SHEET

For a more detailed description of the terms of this transaction, please see "BACKGROUND OF THE EDI ASSET TRANSACTION" below.

* Sellers:	Electropure, Inc. and its wholly owned subsidiary, Electropure EDI, Inc.

* Buyers:	SnowPure, LLC, whose principal owner and operator is Michael Snow (the General Manager of Electropure EDI, Inc.).

* Transaction:	Sale of substantially all assets owned by and utilized in the operations of Electropure EDI, Inc. Electropure EDI, Inc. constitutes the Company's only operating business.

* Purchase Price:	$800,000.

* Form of Payment:	The Buyer will assume certain liabilities of Electropure EDI, Inc., estimated to be $362,000 as of July 31, 2005, and payment of the balance of the purchase price in cash at the closing.

* Use of Proceeds:	From the cash proceeds realized at Closing, estimated to be $438,000 as of July 31, 2005, the Company will be required to (1) repay a $100,000 loan from SnowPure, LLC (plus any unpaid interest accrued through the closing date); (2) satisfy certain remaining debts and trade payables on the books of EDI; and (3) pay certain taxes due as a result of the transaction. The remaining net cash proceeds from the transaction will be utilized as working capital and may be used to pay administrative expenses and other liabilities, including but not limited to current and accrued salaries and legal expenses.

	ESTIMATED NET CASH PROCEEDS	$438,000
	Repayment of SnowPure LLC loan, plus interest	-100,000
	Remaining debts and payables	-76,000
	Estimated California Sales Tax (on sale of EDI assets)	-10,000
	Estimated Working Capital Remaining:	$252,000

* Closing Date:	On or before October 31, 2005, as amended.

* Payments to Shareholders:	The transaction will not result in the distribution of anything to the shareholders of the Company. However, a portion of the proceeds may be used to repay certain indebtedness owed to Mr. Anthony M. Frank or his affiliates in his capacity as a creditor of the Company. There is no agreement or understanding between the Company and Mr. Frank regarding what portion of the proceeds of the sale, if any, will be used to repay Mr. Frank.

* Major Effect:	The Company will no longer own an operating business.

* Significant Termination Events:	The Board of Directors of the Company can terminate the Purchase and Sale Agreement at any time prior to the closing, if, upon the concurring advice of counsel, the Board believes it is necessary in the discharge of its fiduciary duties to the Company's shareholders. The Buyer can terminate the Purchase and Sale Agreement at any time prior to the closing if it is not satisfied with the results of its due diligence investigation of the Company and EDI.

* Pre-Closing Obligations:	Subject to available cash flow, the Company agreed to attempt to carry on the business of EDI in substantially the same manner as previously conducted until the closing occurs.

* Post-Closing Obligations:	The Company must change its name to a name unrelated to Electropure or EDI, and the Company must terminate the corporate existence of EDI.

PROPOSAL TWO: TO AMEND THE BYLAWS AND ARTICLES OF INCORPORATION OF ELECTROPURE, INC. TO CHANGE ITS CORPORATE NAME TO MICRO IMAGING TECHNOLOGY, INC.

The obligations of the Company to complete the EDI Asset Sale Transaction include an obligation to obtain approval from its shareholders to change its corporate name to a name unrelated to Electropure or EDI. The Board of Directors proposes that the corporate name be changed to Micro Imaging Technology, Inc. so that the Company's corporate identity may be more closely aligned with its remaining business, its Nevada subsidiary, Micro Imaging Technology. In order to fulfill this obligation and change the corporate name, the Company must amend its Bylaws and Articles of Incorporation.

PROPOSAL THREE: TO APPROVE THE SALE OF THE LAND AND BUILDING OWNED BY ELECTROPURE HOLDINGS, LLC TO THE GEORGE A BOUKATHER TRUST.

SUMMARY TERM SHEET

For a more detailed description of the terms of this transaction, please see "BACKGROUND OF THE BUILDING ASSET TRANSACTION" below.

* Sellers:	Electropure Holdings, LLC, a wholly owned subsidiary of Electropure, Inc.

* Buyers:	George A. Boukather Trust Dated October 10, 1989, as amended.

* Transaction:	Sale of the land and building located at 23456 South Pointe Drive, Laguna Hills, California 92653. The land and building constitutes the Company's single largest asset.

* Purchase Price:	$3,875,000, as amended.

* Form of Payment:	The purchase price will be paid in the form of cash at closing, less amounts owed to the first, second and third lien holders, along with the fees and expenses of the sale to be paid by the Company.

* Use of Proceeds:	From the cash proceeds realized at Closing, estimated to be $1,496,500 as of July 31, 2005, the Company will be required to (1) repay a $250,000 loan received from the Buyer in July 2005; (2) satisfy liens on the property held by our majority shareholder, Anthony M. Frank; and (3) refund the security deposit of our current sublessee. The remaining net cash proceeds from the transaction will be utilized as working capital and may be used to pay administrative expenses and other liabilities, including but not limited to current and accrued salaries and legal expenses.

	ESTIMATED NET CASH PROCEEDS	$1,496,500
	Repayment of Boukather Loan	-250,000
	Repayment of Anthony M. Frank loans, including interest	-308,333
	Refund of Sublessee Security Deposit	-12,600
	Estimated Working Capital Remaining:	$925,567

* Closing Date:	On or before October 31, 2005, as amended.

* Payments to Shareholders:	The transaction will not result in the distribution of anything to the shareholders of the Company. However, a portion of the proceeds may be used to repay certain indebtedness owed to Mr. Anthony M. Frank or his affiliates in his capacity as a creditor of the Company. Except for $300,000 in principal loans, plus interest accrued on the loans, on which the Company has granted Mr. Frank liens against the building, there is no agreement or understanding between the Company and Mr. Frank regarding what additional portion of the proceeds of the sale, if any, will be used to repay Mr. Frank.

* Major Effect:	The Company will no longer own its single largest asset.

* Significant Termination Events:	The Parties can mutually agree to terminate the Sale Agreement at any time prior to the closing. Such termination does not relieve or release either Party from its obligation to pay agreed upon escrow fees and costs. The Buyer can terminate the Sale Agreement at any time prior to the closing if it is not satisfied with or waive contingencies to closing outlined in the Sale Agreement.

* Pre-Closing Obligations:	The Company must obtain all necessary regulatory and shareholder approvals to permit the sale of its corporate assets.

* Tax Consequences:	Due to extensive operating losses, it is unlikely that the sale will result in the imposition of any income tax on the Company. See "INCOME TAX CONSEQUENCES" below.

PROPOSALS ONE and TWO: APPROVAL OF THE EDI ASSET TRANSACTION and AMENDMENT OF ELECTROPURE'S BYLAWS

AND ARTICLES OF INCORPORATION

BACKGROUND OF THE EDI ASSET TRANSACTION:

For the past several years, the only sources of working capital for the Company (other than from EDI operations) has come from refinancing of the Company's building and loans from our majority stockholder, Mr. Anthony Frank, and such funds have proven to be insufficient to carry out the goals and objectives of the organization. Beginning in early 2002 and continuing through April 2005, the Company's management and Board of Directors have explored numerous possible means to generate working capital sufficient to meets its needs and to continue the research and development activities of Micro Imaging Technology, its majority-owned Nevada subsidiary, as well as to expand sales in the EDI subsidiary. The Company has sought new investors or partners seeking ways to fund ongoing administrative expenses and development costs, and numerous companies have been 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 very broad span of the water industry, including current competitors, as well as other companies whose 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 of any form involving the EDI business, that comported with the Company's need to obtain working capital quickly. The Company did not and does not have sufficient cash flow to continue the EDI operation for any length of time.

In August 2004, Michael Snow, who was at the time the Vice President and Chief Operating Officer of the Company and the 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 his Nevada limited liability company, SnowPure, LLC, and was granted a security interest in most of the EDI assets as collateral. The terms of the loan required the Company to pay $10,000 in non-refundable advanced legal expenses. As of July 31, 2005, the Company had paid the legal expenses as well as interest accrued, at 10% per annum, as of that date. The principal balance of the loan, which was due to be repaid on March 9, 2005, as well as additional accrued interest remains due at this time.

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 from 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 whereby SnowPure would pay a total purchase price of $800,000 for the assets, through a combination of cash and assumption of certain liabilities. The purchase price will be paid in the form of cash and assumption of certain debt on the books of EDI as of the closing, including notes and trade payables, accrued salaries and expenses due Michael Snow, the principal owner and operator of SnowPure, LLC. The portion of the purchase price to be paid in cash, therefore, will be the difference between $800,000 and the exact amount of the debt to be assumed pursuant to this transaction as determined at the closing, which is estimated to be approximately $362,000 as of July 31, 2005. From the cash proceeds of the sale, the Company will be required to utilize approximately $86,000 to pay certain taxes and trade and employee payables and to repay SnowPure LLC for the $100,000 December 2004 loan, plus accrued and unpaid interest.

A copy of the Agreement was filed on April 26, 2005 as an Exhibit to Form 8-K. You should read the Agreement in its entirety, including the exhibits and schedules to the Agreement, to understand the terms of the transaction. The exhibits and schedules to the Agreement will be updated at a later date to ensure their accuracy as of the closing date. The information regarding the sale of the EDI subsidiary contained herein is only a summary and does not state all of the terms and conditions of the transaction. Certain terms of the Agreement are set forth below:

PARTIES: Electropure, Inc. - Seller

23456 South Pointe Drive

Laguna Hills, California 92653

Telephone: 949-770-9347

Electropure EDI, Inc. - Seller

23456 South Pointe Drive

Laguna Hills, California 92653

Telephone: 949-770-9347

SnowPure, LLC - Buyer

P. O. Box 8157

Rancho Santa Fe, California 92067

Telephone: 858-336-4300

TERMS:

* The effective date of the Agreement is April 19, 2005, and the closing date, as amended, is estimated to be October 31, 2005. The parties intend to close the

transaction as soon as is possible, however, the Company is required to comply with securities law requirements to obtain shareholder approval of the

transaction.

* The Company agreed to sell substantially all of the assets of its EDI operation to SnowPure, LLC for a total purchase price of $800,000, due in a

combination of cash and assumption of liabilities. A complete listing of the assets being sold is attached to the Agreement as Exhibits A-1, A-2, and A-3, as

of April 19, 2005. The liabilities being assumed by SnowPure, LLC are listed in Exhibits C and D to the Agreement, as of April 19, 2005. The Company will

update the Exhibits to the Agreement to reflect the assets and liabilities of EDI as of the closing date.

* Closing of the transaction is subject to SnowPure, LLC being satisfied with the results of its due diligence review of the Company and EDI. It can terminate

the Agreement at any time prior to the closing if it is not satisfied with the results of its due diligence investigation of the Company and EDI. This "due diligence

out" essentially gives SnowPure, LLC the right to terminate the Agreement for any reason at all. For example, if the Company were unable to maintain

sufficient funding to continue the operation of EDI until the closing date, SnowPure, LLC could terminate the Agreement.

* Upon closing, the Company must pay:

* all trade payables accrued in the EDI operation which are not assumed by Buyer;

* the full amount of interest and principal due SnowPure, LLC under the $100,000 loan agreement of December 9, 2004.

* The Board of Directors of the Company can terminate the Agreement at any time prior to the closing, if, upon the concurring advice of counsel, the Board

believes it is necessary in the discharge of its fiduciary duties to the Company's shareholders.

* Subject to available cash flow, the Company agreed to attempt to carry on the business of EDI in substantially the same manner as previously conducted until

the closing occurs.

* The Company will change its name from Electropure Inc. to a name unrelated to the Electropure or EDI business or market and, as soon as practicable after

Closing, take all action required to liquidate completely and terminate the corporate existence of Electropure EDI, Inc.

* Because the Company's finances continue to be severely limited, no opinion, report or appraisal relating to the fairness of the sale of the EDI assets to

SnowPure, LLC has been obtained by the Company. The terms of the transactions are based on the negotiations and solicitations described herein.

* The transaction will not result in the distribution of anything to the shareholders of the Company. However, a portion of the proceeds may be used to repay

certain indebtedness owed to Mr. Anthony M. Frank or his affiliates in his capacity as a creditor of the Company. There is no agreement or understanding

between the Company and Mr. Frank regarding what portion of the proceeds of the sale, if any, will be used to repay Mr. Frank.

* The Company and EDI are not permitted to enter into a business competitive with the business being sold to SnowPure, LLC for a period of five years

following the Closing.

* The Company will be obligated to pay one-half of the sales tax generated by the sale of the physical assets involved in the transaction, currently estimated to

be up to $10,000 in sales tax.

USE OF PROCEEDS:

From the cash proceeds realized at Closing, estimated to be $438,000 as of July 31, 2005, the Company will be required to (1) repay the principal and interest accrued on the December 2004 loan from SnowPure, LLC.; (2) satisfy certain remaining trade and employee payables on the books of EDI; and (3) pay certain taxes due as a result of the transaction. The remaining net cash proceeds from the transaction will be utilized as working capital and may be used to pay administrative expenses and other liabilities, including but not limited to current and accrued salaries and legal expenses.

ESTIMATED NET CASH PROCEEDS	$438,000
Repayment of SnowPure LLC loan, plus interest	-100,000
Remaining debts and payables	-76,000
Estimated California Sales Tax (on sale of EDI assets)	-10,000
Estimated Working Capital Remaining:	$252,000

REGULATORY APPROVALS:

Approval by the Electropure shareholders of the sale of the EDI assets is subject to compliance with applicable federal and state securities laws, and applicable provisions of California law. No other federal or state regulatory approval is required to complete the sale of the EDI assets to SnowPure, LLC.

INCOME TAX CONSEQUENCES:

For U.S. federal and California state income tax purposes, the sale is expected to result in the recognition of a gain of up to $552,000 by the Company, depending upon the amount of the purchase price allocated to the fixed assets sold in the transaction. However, the Company's cumulative net operating losses can be used to offset the amount of the taxable gain on the sale, and as a result we expect to pay no state or federal income taxes on the sale. Further, the sale transaction will result in no capital gain or loss for the Company's shareholders and no distribution to shareholders in connection with the transaction is anticipated.

STOCKHOLDER APPROVAL:

The affirmative vote of the holders of a majority of the outstanding shares of Electropure's common stock and convertible preferred stock is required to approve the EDI Asset Sale Transaction. See "INFORMATION CONCERNING THE PURPOSE OF THE TRANSACTIONS, VOTING AND SOLICITATION."

An affirmative vote on Proposal 1 and Proposal 2 will result in the disposition of substantially all of the assets owned by and utilized in the operations of Electropure EDI, Inc. and the dissolution of the corporate existence of Electropure EDI, Inc. In addition, the Agreement will result in an amendment of the bylaws and articles of incorporation of the Company to change its name to Micro Imaging Technology, Inc.

IMPORTANT NOTE TO THE COMPANY'S SHAREHOLDERS:

Under the Agreement, the Company makes certain representations and warranties to the Buyer, which is a standard practice in a transaction such as this. The representations and warranties serve as an allocation of risk between the seller and the buyer, and must be read together with the disclosure schedules to the Agreement that qualify the representations and warranties. In the event that a representation made by the Company in the Agreement is not true at the closing, which is referred to as a breach of the representation, the Company may be obligated to reimburse the buyer for its damages associated with the breach by virtue of the indemnification provision included in the Agreement, up to a maximum amount of $160,000 in the aggregate. The representations and warranties in the Agreement are not necessarily intended to represent the true state of affairs of the Company or EDI, but instead serve as a way for the buyer to be reimbursed based on the agreed upon allocation of risk. The shareholders of the Company should not rely on the accuracy of the representations and warranties made in the Agreement. The representations and warranties do not state all of the facts necessary to completely and accurately represent the true state of affairs of the Company and EDI.

PROPOSAL THREE: APPROVAL OF THE BUILDING ASSET TRANSACTION

BACKGROUND OF THE BUILDING ASSET TRANSACTION:

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.

The Company has since refinanced the building mortgage on two additional occasions in order to utilize as working capital the appreciation in the building equity. In June 2002, we refinanced the first mortgage for $2 million and realized net proceeds of approximately $550,000. In May 2004, we again refinanced the building for $2,425,000, whereby we realized approximately $500,000 in net proceeds. In addition to a first trust deed granted to the mortgage lender in the May 2004 financing, the Company has granted a second security interest in the building to our majority stockholder, Mr. Anthony M. Frank, as collateral for $300,000 in short-term loans he made between February and May 2005. Mr. Frank has been a co-guarantor on each of the building financings conducted by the Company.

The Company and its subsidiaries currently occupy approximately 18,201 sq. ft. of the building and sub-lease 12,000 sq. ft. to an unaffiliated tenant. Once the sale of the EDI business has been concluded and the operation is subsequently moved by the new owner, the Company's need for operating space will be greatly diminished. Moreover, the current market for commercial buildings in the area is such that a sale of the building at this time would provide the Company with additional working capital and the ability to relocate to more suitable offices and laboratory space for the Company's Micro Imaging Technology subsidiary.

On June 3, 2005, the Company accepted an offer to purchase the building from the George A Boukather Trust ("Boukather"), an unaffiliated third party for the sum of $3,925,000. The parties executed a Purchase and Sale Agreement (the "Building Agreement") which was filed with the Securities and Exchange Commission on June 9, 2005 as an Exhibit on Form 8-K. To understand the terms of the transaction, the Agreement, including the exhibits and schedules to the Agreement, should be read in its entirety.

On July 15, 2005, the George A Boukather Trust loaned the Company $250,000 which is collateralized by a second trust deed on the building in preference to the $300,000 security interest granted to Anthony Frank. The loan is to be repaid by December 31, 2005 or from the proceeds of the building sale, whichever occurs first. As partial consideration for the loan, the Company granted warrants to purchase 100,000 shares of its common stock and agreed to reduce the purchase price of the building by $50,000 to $3,875,000.

The information regarding the sale of the building contained herein is only a summary and does not state all of the terms and conditions of the transaction. Certain terms of the Building Agreement are set forth below:

PARTIES: Electropure Holdings, LLC - Seller

23456 South Pointe Drive

Laguna Hills, California 92653

Telephone: 949-770-9347

George A. Boukather Trust Dated October 10, 1989, As Amended

1399 Logan Avenue

Costa Mesa, California 92626

Telephone: 714-636-7950

TERMS:

* Effective June 3, 2005, the Company agreed to sell the building located at 23456 South Pointe Drive, Laguna Hills, CA for a total purchase price of

$3,925,000 cash due at the close of escrow. On July 15, 2005, in connection with the $250,000 loan from the Buyer to the Company, the parties agreed to

reduce the purchase price of the building to $3,875,000.

* The effective date of the Agreement is June 3, 2005 and is subject to shareholder approval.

* Escrow on the sale will close within 90 days of removal of all contingencies or as soon as possible after all Sellers's SEC requirements for the sale of

corporate assets have been met and Buyer's loan financing has been funded.

* Buyers are allowed forty five (45) days to conduct a review of various contingency items (the "contingency period"), i.e., inspect the building and obtain a title

report, geological and environmental reports.

* From the proceeds of the sale, the Company has agreed to pay one-half of the escrow charges, all usual recording fees and any required documentary

transfer fees. The Company has also agreed to pay the premium for a standard coverage owner's or joint protection policy of title insurance.

* The Company is currently negotiating with the Buyer to lease back a portion of the building for approximately six months until it can relocate to more suitable

offices and laboratory space for the Company's Micro Imaging Technology subsidiary. We anticipate that the leaseback will be on a month-to-month basis

on up to 7,500 square feet of the facilities we currently occupy at approximately $1.10 per sq. ft. per month.

* No written opinion, report or appraisal relating to the fairness of the sale price of the building has been obtained by the Company. The terms of the

transactions are based on the negotiations described above. Based upon research conducted by the Company, the sale price of the building, however, is in

line with similarly situated properties in the area and, based upon management's opinion, represents the fair market value of the property.

* No consideration will be paid to the Company's shareholders as a result of the sale, other than the repayment of indebtedness owed to the Company's

majority stockholder, Mr. Anthony M. Frank, in his capacity as a creditor of the Company.

USE OF PROCEEDS:

The majority of the proceeds of the sale will be used to pay off the senior mortgage (approximately $2,372,500 at July 31, 2005) on the building held by Farmers Insurance Group Federal Credit Union c/o Business Partners LLC ("Senior Mortgage"). In addition, proceeds from the sale will be used to repay the $250,000 Boukather loan and junior liens held by Mr. Anthony M. Frank for loans made to the Company on and since February 18, 2005, which as of July 31, 2005 aggregated $308,333, including interest. In addition, from the sale proceeds, the Company will pay one-half of all escrow charges and all usual recording fees and required documentary transfer taxes. The Company must also pay from escrow the premium for a standard coverage owner's title insurance policy. The Company estimates such fees will amount to approximately $6,000.

ESTIMATED NET CASH PROCEEDS	$1,496,500
Repayment of Boukather Loan	-250,000
Repayment of Anthony M. Frank loans, including interest	-308,333
Refund of Sublessee Security Deposit	-12,600
Estimated Working Capital Remaining:	$925,567

The remaining net cash proceeds from the transaction will be utilized as working capital and may be used to pay administrative expenses and other liabilities, including but not limited to current and accrued salaries, legal and accounting expenses, and costs associated with relocating the Company's remaining operations to a smaller facility.

REGULATORY APPROVALS:

Approval by the Electropure shareholders of the sale of the building is subject to compliance with applicable federal and state securities laws, and applicable provisions of California law. No other federal or state regulatory approval is required to complete the sale of the building to the George A Boukather Trust.

INCOME TAX CONSEQUENCES:

For U.S. federal and California state income tax purposes, the sale is expected to result in the recognition of a gain of an estimated $1,583,000 by the Company. However, the Company's cumulative net operating losses can be used to offset the amount of the taxable gain on the sale, and as a result we expect to pay no state or federal income taxes on the sale. Further, the sale transaction will result in no capital gain or loss for the Company's shareholders and no distribution to shareholders in connection with the transaction is anticipated.

STOCKHOLDER APPROVAL:

The affirmative vote of the holders of a majority of the outstanding shares of Electropure's common stock and convertible preferred stock is required to approve the Building Asset Sale Transaction. See "INFORMATION CONCERNING THE PURPOSE OF THE TRANSACTIONS, VOTING AND SOLICITATION."

An affirmative vote on Proposal 3 will result in the disposition of the Company's largest asset.

ELECTROPURE SELECTED HISTORIAL CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial data has been derived from Electropure's audited consolidated financial statements as of and for the fiscal years ended October 31, 2004, October 31, 2003 and October 31, 2002. The selected consolidated financial data for the nine months ended July 31, 2005 is derived from Electropure's unaudited condensed financial statements, which include all adjustments consisting of normal recurring adjustments, which are in Electropure's opinion, necessary for a fair presentation of Electropure's results of operations for such period. The results of operations for the nine months ended July 31, 2005 are not necessarily indicative of the results for the full year. The information set forth below is not necessarily indicative of the expectations of results for future operations and should be read in conjunction with the consolidated financial statements and notes thereto appearing in Electropure's Annual Report on Form 10-KSB for the fiscal year ended October 31, 2004. See the section "Additional Information" later in this Consent Solicitation Statement.

	Fiscal Year Ended October 31,			Nine Months Ended July 31, 2005
	2004	2003	2002	Nine Months Ended July 31, 2005
Consolidated Statements of Operating Data:
Net Sales	$ 1,129,009	$ 1,444,805	$ 1,412,786	$ 967,607
Operating loss	(1,124,301)	(1,340,048)	(1,542,938)	(635,834)
Net loss	(1,402,864)	(1,504,243)	(1,687,046)	(763,820)

Net loss per share, basic and diluted	$ (0.11)	$ (0.13)	$ (0.15)	$ (0.06)

Weighted average common shares, basic and diluted	12,205,004	11,699,817	10,971,522	12,680,347

Consolidated Balance Sheet Data:
Cash	$ 29,607	$ 24,215	$ 21,053	$ 184,281
Working capital deficit	(1,473,483)	(1,907,433)	(350,253)	(3,110,469)
Total assets	2,586,946	2,762,383	3,086,161	2,780,330
Long-term debt, net of current portion	3,527,038	2,017,022	2,888,198	2,490,846
Total shareholders' deficit	(2,603,919)	(1,394,208)	(518,727)	(3,273,919)

MARKET PRICE AND DIVIDEND INFORMATION

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.

		Common Stock Bid Prices
		High	Low
Fiscal 2003	First Quarter	0.32	0.10
	Second Quarter	0.18	0.13
	Third Quarter	0.25	0.14
	Fourth Quarter	0.45	0.14
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 (through September 27, 2005)	0.09	0.08

The Company has not paid any dividends on its common stock since its incorporation and it does not expect to pay dividends following the completion of the Asset Sale Transactions described in this Consent Solicitation Statement. 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, 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.

INFORMATION CONCERNING THE PURPOSE OF THE TRANSACTIONS, VOTING AND SOLICITATION

PURPOSE OF THE TRANSACTIONS

The Company, through its predecessor, HOH, Inc., was formed in December 1979 to develop a water treatment device intended to be a more efficient and economical replacement for whole-house water softening. In 1987, the Company conducted a public offering of its securities in an effort to raise working capital to complete its research and development activities. Due to technical difficulties and high production costs, it was not until 1997 and with losses aggregating nearly $11 million that the Company was able to develop and begin marketing its current, smaller, point-of-use model EDI product aimed at the high purity water treatment segment of commercial and industrial water treatment markets. Over the years, though our EDI product has slowly gained market acceptance and we have made significant strides in product improvement and production cost reductions, our Electropure EDI subsidiary operation has consistently sustained losses and in fiscal 2004 EDI operations resulted in a nearly 28% net loss. In the three months ended July 31, 2005, however, the EDI operation realized a significant sales growth and, as a result posted, the first, albeit modest, net gain (6%) it has enjoyed since its inception. No assurances can be given and the Company does not anticipate that it can expect sustained growth in the EDI sales since previous experiences have recorded sharp declines from month to month. Growing competition, increased fixed overhead costs and global economic uncertainties in general, among other factors, may have materially adverse effects on the Company's ability to continue not only the EDI operation, but administrative operations and the research and development activities of its Micro Imaging Technology subsidiary as well.

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 microorganisms in fluid. This acquisition, called "Laserpure," provided the basis for our proposed development of near "real-time" fluid monitoring systems for water monitoring as well as food processing and clinical applications. We subsequently formed the Micro Imaging Technology ("MIT") subsidiary to conduct the research and development activities and have had considerable success to date in the laboratory setting in applying the technology to detect a number of parasites and bacteria, e.g., E.coli, Listeria monocytogenes, Salmonella typhi, Pseudomonas aeruginosa, Staphylococcus aureus, and Streptococcus pneumoniae. We believe the MIT technology, if it can be fully developed and commercialized, may have significant market potential and could provide growth and long-term benefits to the shareholders of the Company.

Currently, the Company does not have the financial wherewithal to either continue the research and development activities of Micro Imaging Technology or to expand marketing and sales efforts in order to make the EDI operation more profitable, or even continue to operate EDI as a going concern for any length of time. The Company believes the MIT technology may ultimately provide greater value to the shareholders than will the continued operation of EDI, although no assurance can be given in this regard. The Company further believes that the best, and possibly only, value of the EDI subsidiary will be realized from a sale of the operation. Consequently, on April 19, 2005, the Company entered into a Purchase and Sale Agreement (the "Agreement") to sell substantially all of the assets of the EDI subsidiary to SnowPure, LLC, a Nevada limited liability company, formed by EDI's General Manager, Michael Snow, for the purpose of this transaction.

The EDI transaction will generate some working capital and eliminate some debt and eliminate the expense of EDI's continued operation. It represents the first of two steps that the Company hopes will be sufficient to permit the further development of the MIT technology. As a second measure, in June 2005, the Company entered into an agreement to sell the building currently owned by Electropure Holdings, LLC, our wholly-owned California limited liability company, to the George A Boukather Trust, an unaffiliated third party. Upon concluding the building sale, the Company intends to temporarily lease back approximately 7,500 sq. ft. of office and laboratory space for up to six months. Thereafter, it is the current intention of the Company to relocate and lease a more appropriate and less costly facility to develop and commercialize the MIT technology.

In May 2004, the appraised value of the building was estimated to be $3.6 million and the Company believes that the value of the building has appreciated since May 2004. As of July 31, 2005, the first mortgage on the building is approximately $2,372,500 and the Company has granted the Buyer a second deed of trust on the building in the sum of $250,000 in conjunction with a July 2005 loan in that amount. An additional $300,000 in subordinated security interests on the building were granted to our majority stockholder, Mr. Anthony M. Frank, in connection with short-terms loans he made the Company between February and May 2005.

Consequently, upon a sale of the building, the Company anticipates that it will realize approximately $925,000 in net proceeds that, together with the proceeds from the EDI sale, could be utilized as working capital in furtherance of the MIT research and development. Since the building constitutes the Company's single largest asset and EDI represents the Company's only operating business, the terms of the Asset Sale Transactions must be approved by a majority vote of the Company's shareholders.

RECOMMENDATION OF ELECTROPURE'S BOARD

Electropure's Board unanimously recommends that the Electropure shareholders vote "FOR" each of the three Proposals described above.

Based on the factors listed above, Electropure's Board determined that the Asset Sale Transactions will likely return the greatest value to Electropure shareholders as compared to other alternatives. In making its determination, the Board considered the following factors:

* The sale of the EDI and Building assets will enable Electropure to immediately realize value which can be utilized to further the development and

commercialization of the Micro Imaging Technology product.

* After extensive marketing efforts, the offers from SnowPure LLC and the George A. Boukather Trust to acquire the assets of the EDI operation and the

building, respectively, represented the most favorable terms to Electropure and its shareholders, including with respect to price, closing certainty, closing

speed and regulatory considerations.

THE CONSENT PROCEDURE

Section 603 of the General Corporation Law of the State of California states that, unless otherwise provided in the articles (of incorporation), any action that may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote thereon were present and voted.

Only shareholders of record as of September 27, 2005 are entitled to consent, to withhold their consent, or to revoke their consent, to the Proposals. Each share of our common stock is entitled to one vote per share, and each share of our Class B common stock is entitled to eight votes per share on all matters brought before the shareholders. The holders of our outstanding convertible preferred stock are entitled to one vote per share. Shares of the Series C and Series D preferred stock carry no voting rights. As of the record date, 12,815,851 shares of our common stock were issued and outstanding; 83,983 shares of our Class B common stock were issued and outstanding; 2,600,000 shares of our redeemable preferred stock were issued and outstanding; 250,000 shares of our Series C preferred stock were issued and outstanding; and 250,000 shares of our Series D preferred stock were issued and outstanding.

The following shareholders, who jointly hold a majority of the outstanding common stock and convertible preferred stock entitled to vote as of the Record Date (the "Consenting Shareholders'), have indicated their intent to deliver to the Company their written consent approving each of the Proposals:

* Mr. Anthony M. Frank, who owns 44.1% of the voting power, holding 7,024,749 shares of our common stock; 250,000 shares of our Series C preferred

stock; and 250,000 shares of our Series D preferred stock;

* Mr. Randall P Frank, who owns 4.3% of the voting power, holding 698,898 shares of our common stock;

* Ms. Tracy F. Frank, who owns 2.8% of the voting power, holding 457,196 shares of our common stock; and

* Floyd H. Panning, who owns 2.7% of the voting power, holding 421,792 shares of our common stock and 7,500 shares of our convertible preferred stock.

The affirmative vote of a majority of the outstanding shares of Electropure's common stock and convertible preferred stock entitled to vote is required to approve each of the Proposals. Upon receipt of an affirmative vote of a majority of such stock, Electropure will be authorized and intends to take all necessary steps to immediately close each of the Asset Sale Transactions. The Company will also take all necessary steps to terminate the corporate existence of Electropure EDI, Inc. and Electropure Holdings, LLC, and to change the name of Electropure, Inc. to Micro Imaging Technology, Inc.

VOTING PROCEDURES AND REVOCATION OF CONSENTS

To ensure that your vote is recorded promptly, please submit your Consent card as soon as possible. You may revoke or change your Consent at any time before November 11, 2005 or prior to the receipt of an affirmative vote of a majority of Electropure's common stock and convertible preferred stock, whichever occurs first. You may revoke or change your Consent by submitting another Consent card with a later date or by sending a written notice or revocation to Electropure's Secretary at Electropure's principal executive offices.

ABSENCE OF DISSENTERS' RIGHTS

No dissenters' or appraisal rights are available to the Company's shareholders under the General Corporation Law of California, the Company's articles of incorporation or its bylaws in connection with the matters acted upon.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Corporation consists of the following:

COMMON STOCK

The Company is authorized to issue up to 20,000,000 shares of $0.01 par value common stock. As of the Record Date, 12,815,851 shares of the Company's common stock were issued and outstanding.

Holders of common stock are entitled to one vote per share on all matters to be voted upon by the shareholders and except as may otherwise be required by law or as set forth under "DESCRIPTION OF CAPITAL STOCK - Class B common stock," will vote with the holders of the Class B common stock, and convertible preferred stock as one class.

The shares of common stock have no preemptive, subscription, conversion or redemption rights. Upon liquidation, dissolution or winding up, the holders of common stock are entitled to receive pro rata all assets which are legally available for distribution to shareholders, subject to the liquidation rights held by the Class B common stock, Series C and Series D convertible preferred stock and the convertible preferred stock, and the prior rights that may be established in the future for future issuances of Preferred Stock, if any. See "DESCRIPTION OF CAPITAL STOCK - Preferred Stock." Holders of common stock are entitled to dividends when, as and if declared by the Board of Directors out of legally available funds along with the holders of the Class B common stock, subject to any prior rights when may be granted in the future to holders of Preferred Stock.

CLASS B COMMON STOCK

There are 83,983 authorized and outstanding shares of Class B common stock all of which are issued and owned by Harry M. O'Hare, Sr., the Company's founder. The Class B common stock, the common stock, and the convertible preferred stock vote as a single class on all matters except as required by law and except if a reverse stock split or stock split is effected on the common stock and a similar reverse stock split or stock split is not effected on the Class B common stock or if a stock dividend in Class B common stock is not declared equal to a stock dividend declared on the common stock. In the latter situations, a separate class vote of the Class B common stock is required.

Each share of Class B common stock carries eight votes per share and is entitled to non-stock dividends and liquidation payments equal to 80% of those paid on the common stock. The Class B common stock may not be transferred or assigned by the owner thereof. If a transfer is made of a share of Class B common stock in contravention of such restrictions, such share will automatically be converted into a share of common stock. Class B common stock will automatically convert, on a share-for-share basis, into shares of common stock upon the death of Harry M. O'Hare, Sr.

CONVERTIBLE PREFERRED STOCK

The Company has issued a total of 2,600,000 shares of convertible preferred stock, $0.01 par value. In March 1987, an aggregate of 2,492,152 shares of convertible preferred stock had been issued pro rata to all of the shareholders of the then currently outstanding common stock and Class B common stock. On July 28, 1988, the balance of 107,848 Convertible Preferred Shares were issued to Harry M. O'Hare, Sr. as a bonus. Each share of convertible preferred stock has one vote per share and except as otherwise may be required by law or set forth in "DESCRIPTION OF CAPITAL STOCK - Class B common stock," will vote as a class on all matters with the common stock and the Class B common stock. The convertible preferred stock is not entitled to receive any dividends, and in the event of liquidation, dissolution or winding up, each share is entitled to share ratably in all assets available for distribution at the rate equal to one share of common stock up to a maximum of $0.01 per share. The shares of convertible preferred stock have no preemptive rights or other rights to subscribe for additional securities and there are no sinking fund provisions with respect to such shares.

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, which were not achieved. As of January 31, 1991, the convertible preferred stock became redeemable by the Company for $0.01 per share out of "legally available funds."

PREFERRED STOCK

On January 15, 1999, we issued 1,000,000 shares of Series B convertible preferred stock out of the 1,000,000 shares of authorized Preferred Stock, $1.00 par value, to Anthony M. Frank. Series B convertible preferred stock provides for a $1.00 per share liquidation preference over the common stock, Class B common stock and convertible preferred stock and each share of Series B convertible preferred stock entitles the holder thereof to four (4) votes per share and is to vote as a class along with holders of the common stock, Class B common stock and convertible preferred stock.

In January 2001, Mr. Frank converted 1,000,000 shares of Series B convertible preferred stock each with four (4) votes per share into 250,000 shares of Series C convertible preferred stock which carry no voting rights. The Series C preferred stock has an aggregate liquidation value equal to the $1,000,000 price Mr. Frank paid for the preferred stock in January 1999. Each one share of Series C preferred stock is convertible into four (4) shares of common stock at the option of the holder.

Also in January 2001, we sold Mr. Frank 250,000 shares of Series D convertible preferred stock for $2.00 per share in 50,000 share monthly increments beginning on January 26, 2001. Each share of Series D preferred stock has a liquidation value of $2.00 per share and is convertible, at the option of Mr. Frank, into two (2) shares of common stock. The Series D preferred stock has no voting rights.

WARRANTS AND STOCK OPTIONS

On various dates through the Record Date, the Company's Board of Directors has granted options and warrants to purchase Common Stock at prices ranging from $0.13 to $1.375 per share. Currently, 4,345,000 of such options and warrants to purchase common stock are outstanding. None of the outstanding options or warrants is entitled to vote on any issue.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of the Record Date 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 consenting stockholder, by each director and by all directors and officers as a group.

Name

Common

Stock (1)(2)

% of Class

Class B

Common

Stock

% of Class

Series C

Preferred

Stock (3)

% of Class

Series D

Preferred

Stock (4)

% of

Class

Convertible

Preferred

Stock (5)

% of

Class

% of

Voting

Power (6)

William F. Farnam

23456 South Pointe Drive

Laguna Hills, CA 92654 96,918 * -- -- -- -- -- -- -- -- *

     (Director)

Anthony M. Frank

320 Meadowood Ct.

Pleasant Hill, CA 94523 7,542,958 55.3% -- -- 250,000 100% 250,000 100% -- -- 44.1%

     (Consenting Stockholder)

Randall P. Frank

320 Meadowood Ct.

Pleasant Hill, CA 94523 698,898 5.5% -- -- -- -- -- -- -- -- 4.3%

     (Consenting Stockholder)

Tracy F. Frank

320 Meadowood Ct.

Pleasant Hill, CA 94523 457,196 3.6% -- -- -- -- -- -- -- -- 2.8%

     (Consenting Stockholder)

Randolph S. Heidmann

23456 South Pointe Drive

Laguna Hills, CA 92563 -- -- -- -- -- -- -- -- -- -- --

     (Director)

Harry M. O'Hare, Sr.

1000 El Centro

S. Pasadena, CA 91030 2,500 * 83,983 100% -- -- -- -- 931,629 35.8% 10.0%

     (Founder)

Floyd H. Panning

23456 South Pointe Drive

Laguna Hills, CA 92653 421,792 3.3% -- -- -- -- -- -- 7,500 * 2.7%

     (Officer and Director)

Catherine Patterson

23456 South Pointe Drive

Laguna Hills, CA 92653 50,112 * -- -- -- -- -- -- 2,906 * *

     (Officer)

All officer and directors

     as a group (5 persons) 568,822 4.4% -- -- -- -- -- -- 10,406 * 3.6%

* Less than 1%

(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 568,822 shares (4.4%) of common stock, respectively.

(2) Excludes currently exercisable warrants or options to purchase an aggregate of 275,000 shares of common stock held by the officers and directors referred to in the above table. Also excludes currently exercisable warrants to purchase an aggregate of 450,000 and 50,000 shares of common stock held by Anthony M. Frank and Randall P. Frank, respectively.

(3) The Series C convertible preferred stock has no voting rights and 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. Anthony M. Frank owns all of the issued and outstanding Series C convertible preferred stock of the Company.

(4) The Series D convertible preferred stock has no voting rights and 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. Anthony M. Frank owns all of the issued and outstanding Series D convertible preferred stock of the Company.

(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 when funds became legally available.

(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.

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

No director, executive officer, associate of any director or executive officer or any other person has any substantial interest, direct or indirect, by security holdings or otherwise, in any action covered by the related resolutions adopted by the Board of Directors, which is not shared by all other shareholders. Michael Snow, the principal owner and operator of SnowPure, LLC which is buying the assets of EDI, was formerly an officer of the Company serving as its Vice President and Chief Operating Officer, however, he has never held any position with the Company granting him the power to make or direct policy decisions within the Company.

DISTRIBUTION AND COSTS

We will pay all costs associated with the distribution of this Consent Solicitation Statement, including the costs of printing and mailing. In addition, we will only deliver one Consent Solicitation Statement to multiple security holders sharing an address, unless we have received contrary instructions from one or more of the security holders. Also, we will promptly deliver a separate copy of this Consent Solicitation Statement and future stockholder communication documents to any security holder at a shared address to which a single copy of this Consent Solicitation Statement was delivered, or deliver a single copy of this Consent Solicitation Statement and future stockholder communication documents to any security holder or holders sharing an address to which multiple copies are now delivered, upon written request to us at our address noted above.

Security holders may also address future requests regarding delivery of Consent Solicitation Statements and/or other information by contacting us at the address noted above.

ADDITIONAL INFORMATION

The Company has filed annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission under the Securities Act of 1934, as amended. You may read and copy these reports and other information filed by Electropure, Inc. at the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.

The Securities and Exchange Commission also maintains an internet world wide web site that contains reports, proxy statements and other information about issuers, like Electropure, who file electronically with the Securities and Exchange Commission through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The address of this site is http://www.sec.gov.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

EDI ASSET TRANSACTION:

On April 15, 2005, Electropure, Inc. entered into a Purchase and Sale Agreement pursuant to which SnowPure would pay a total purchase price of $800,000 for substantially all of the assets owned by and utilized in the operations of Electropure EDI, Inc. The purchase price will be paid in the form of cash and assumption of certain debt on the books of EDI as of the closing, including notes and trade payables, accrued salaries and expenses due Michael Snow, the principal owner and operator of SnowPure, LLC. The portion of the purchase price to be paid in cash, therefore, will be the difference between $800,000 and the exact amount of the debt to be assumed pursuant to this transaction as determined at the closing, which is estimated to be approximately $362,000 as of July 31, 2005. Following the transaction, the Company will be required to utilize approximately $86,000 of the net cash proceeds from the sale to pay certain taxes and trade and employee payables and to repay SnowPure LLC for the $100,000 December 2004 loan, plus accrued and unpaid interest.

BUILDING ASSET TRANSACTION:

In June 2005, the Company entered into an agreement to sell the land and building currently owned by Electropure Holdings, LLC, our wholly-owned California limited liability company, to the George A Boukather Trust, an unaffiliated third party. The majority of the proceeds of the sale will be used to pay off the senior mortgage (approximately $2,372,500 at July 31, 2005) on the building held by Farmers Insurance Group Federal Credit Union c/o Business Partners LLC ("Senior Mortgage"). In addition, proceeds from the sale will be used to repay the $250,000 Boukather loan and junior liens held by Mr. Anthony M. Frank for loans made to the Company on and since February 18, 2005, which as of July 31, 2005 aggregated $308,333, including interest. In addition, from the sale proceeds, the Company will pay one-half of all escrow charges and all usual recording fees and required documentary transfer taxes. The Company must also pay the premium for a standard coverage owner's title insurance policy. The Company estimates such fees will amount to approximately $6,000.

The following financial information includes the audited financial information for the fiscal year ended October 31, 2004 and unaudited financial information for the quarter ended July 31, 2005.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Electropure, Inc. and Subsidiaries

Laguna Hills, California

We have audited the accompanying consolidated balance sheet of Electropure, Inc. and Subsidiaries as of October 31, 2004 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. 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 Electropure, Inc. and Subsidiaries as of October 31, 2004, 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, 2004 has an accumulated deficit of $28,927,189, 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 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

August 2, 2005

Electropure, Inc.

Consolidated Balance Sheet

October 31, 2004

ASSETS

2004

Current assets:

Cash

29,607

Trade accounts receivable

49,085

Inventories

101,145

Prepaid expenses

10,507

Total current assets

190,344

Property, plant and equipment, net

2,341,376

Other assets

55,226

Total assets

2,586,946

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

Electropure, Inc.

Consolidated Balance Sheet

October 31, 2004

LIABILITIES AND SHAREHOLDERS' DEFICIT

2004

Current liabilities:

Obligations under capital leases

1,927

Current portion of notes payable to bank

46,104

Current portion of notes payable to shareholder

850,000

Trade accounts payable

243,573

Accrued payroll

191,863

Other accrued liabilities

261,418

Customer deposits

42,942

Redeemable convertible preferred stock, $0.01 par value; 2,600,000

shares authorized, issued and outstanding at October 31, 2004.

26,000

Total current liabilities

1,663,827

Notes p ayable to shareholder

1,000,000

Notes payable

166,498

Notes payable to bank, net of current portion

2,360,540

Total liabilities

5,190,865

Commitments and contingencies (Notes 7 and 12)

Shareholders' deficit:

Series C convertible preferred stock; $1.00 par value; 250,000

shares authorized, issued and outstanding at October 31, 2004;

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, 2004;

liquidation preference of $500,000.

250,000

Common stock, $0.01 par value; 20,000,000 shares authorized;

12,480,137 shares issued and outstanding at October 31, 2004.

124,801

Class B common stock, $0.01 par value, 839,825 shares authorized;

83,983 shares issued and outstanding at October 31, 2004.

840

Additional paid-in capital

25,732,504

Notes receivable on common stock

(34,875)

Accumulated deficit

(28,927,189)

Total shareholders' deficit

(2,603,919)

Total liabilities and shareholders' deficit

2,586,946

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

Electropure, Inc.

Consolidated Statements of Operations

For Each of the Two Years in the Period Ended October 31, 2004

2004

2003

Net sales

1,129,009

1,444,805

Cost of Sales

949,592

1,257,724

Gross profit

179,417

187,081

Operating costs and expenses:

Research and development

398,203

417,782

Sales, general and administrative

905,515

1,109,347

Total operating expenses

1,303,718

1,527,419

Loss from operations

(1,124,301)

(1,340,048)

Other income (expense):

Interest income

1,456

1,533

Interest expense

(517,030)

(270,596)

Sublease income

130,850

120,015

Other income (expense), net

107,761

(13,547)

Other income (expense), net

(88,350)

(162,595)

Loss before provision for income tax

(1,401,264)

(1,502,643)

Provision for income tax

(1,600)

Net loss

(1,402,864)

(1,504,243)

Net loss per share, basic and diluted

(0.11)

(0.13)

Shares used in computing basic and

diluted net loss per share

12,205,004

11,699,817

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

Electropure, Inc.

Consolidated Statements of Shareholders' Deficit

For Each of the Two Years in the Period Ended October 31, 2004

Series C

Convertible

Preferred

Series D

Convertible

Preferred

Common

Class B

Common

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, October 31, 2002

250,000

11,354,044

83,983

250,000

113,540

840

24,919,104

(32,129)

(26,020,082)

(518,727)

Common shares issued in a

Private placement

227,273

2,273

47,727

50,000

Warrants and common stock and

warrants of subsidiary issued

in a private placement

400,000

Common shares issued for

convertible debt

474,359

4,744

75,256

80,000

Common shares and warrants issued

in exchange for surrender of

common stock in subsidiary

22,500

225

50,275

50,500

Options and warrants granted

to employees and consultants

for services

49,635

Interest recognized on notes

receivable for common shares

(1,373)

Net loss

(1,504,243)

Balance, October 31, 2003

250,000

12,078,176

83,983

250,000

120,782

840

25,541,997

(33,502)

(27,524,325)

(1,394,208)

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

Electropure, Inc.

Consolidated Statements of Shareholders' Deficit

For Each of the Two Years in the Period Ended October 31, 2004

Series C

Convertible

Preferred

Series D

Convertible

Preferred

Common

Class B

Common

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, October 31, 2003

250,000

12,078,176

83,983

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

Warrants issued as a beneficial

conversion feature on a loan

42,563

Warrants issued as a finders

fee for a loan

24,800

Options and warrants granted

to employees and consultants

for services

4,600

Interest recognized on notes

receivable for common shares

(1,373)

Net loss

(1,402,864)

Balance, October 31, 2004

250,000

12,480,137

83,983

250,000

124,801

840

25,732,504

(34,875)

(28,927,189)

(2,603,919)

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

Electropure, Inc.

Consolidated Statements of Cash Flows

For Each of the Two Years in the Period Ended October 31, 2004

2004

2003

Cash flows from operating activities:

Net loss

(1,402,864)

(1,504,243)

Adjustments to reconcile net loss to net cash used in

operating activities:

Depreciation

171,907

183,780

Amortization

11,945

Bad debt expense

(6,085)

1,261

Impairment of goodwill

50,500

Interest expense relating to amortization of holdback

4,000

8,000

Interest expense relating to amortization of debt issuance costs

16,878

5,458

Non-cash compensation for stock options and warrants

4,600

49,635

Discount related to issuance of debt

85,126

Interest paid with common stock

80,000

Interest on notes receivable for common stock

(1,373)

(Increase) decrease in assets:

Trade accounts receivable

(39,792)

96,217

Prepaid expenses

7,280

45,921

Inventories

59,780

(5,936)

Increase (decrease) in liabilities:

Trade accounts payable

(21,526)

117,416

Customer deposits

32,042

(23,445)

Accrued payroll and other liabilities

62,721

77,653

Net cash used in operating activities

(947,306)

(807,211)

Cash flows from investing activities:

Purchase of property, plant and equipment

(4,340)

(11,706)

Net cash used in investing activities

(4,340)

(11,706)

Cash flows from financing activities:

Principal payments on notes payable

(2,308,046)

(67,462)

Proceeds from issuances of notes payable

2,825,000

200,000

Principal payments on capital lease obligations

(9,916)

(10,459)

Proceeds from issuance of notes payable to a related party

450,000

Proceeds from sale of subsidiary stock and warrants

146,000

Proceeds from issuance of common stock

50,000

Proceeds from sale of warrants

54,000

Net cash provided by financing activities

957,038

822,079

Net increase (decrease) in cash

5,392

3,162

Cash at beginning of period

24,215

21,053

Cash at end of period

29,607

24,215

Supplemental Disclosure of Cash Flow Information

Interest paid

145,829

138,434

Income taxes paid

1,600

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

Electropure, Inc.

Notes to the Consolidated Financial Statements

Description of Business

Electropure, Inc. (the "Company") manufactures and markets electrodeionization water treatment devices for commercial and industrial high purity water applications. The Company holds an exclusive patent on its electrodeionization product and markets it to original equipment manufacturers as a specialized component for water treatment systems, whose major customers include semiconductor, pharmaceutical and cosmetic companies, as well as laboratories and petrochemical companies. The Company's membrane products are based on ion exchange membrane technology for electrodialysis, electrodeposition, and electrochemical separations. The Company's micro imaging technology ("MIT") is in the development phase, which, when completed, will provide a product that will enable real time identification of contamination in fluids.

Basis of Presentation

The Company incurred net losses of $1,402,864 and $1,504,243 in fiscal years October 31, 2004 and 2003, respectively. At October 31, 2004 the Company had an accumulated deficit of $28,927,189 and is in default under the redemption provisions of its redeemable preferred stock (Note 10) that raise substantial doubt about the Company's ability to continue as a going concern. Despite negative cash flows from operations of $947,306 and $807,211 in the years ended October 31, 2004 and 2003, respectively, the Company has been able to secure additional operating capital 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 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 Company believes, however, that the potential market interest in its MIT technology is strong and will enhance its ability to generate the funds necessary through equity and debt capital and the sale of its products to meet its needs.

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.

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, Inc.

Notes to the Consolidated Financial Statements

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, 2004, 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, 2004 and 2003.

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:

Electropure, Inc.

Notes to the Consolidated Financial Statements

2004 2003

Net loss, as reported:

(1,402,864)

(1,504,243)

Add: Stock-based employee compensation

included in reported net loss

5,850

Less: Stock-based employee compensation expense

determined under fair value based method for

all awards, net of related tax effect

(135,910)

(269,040)

Pro forma net loss:

(1,538,774)

(1,767,433)

Earnings per share:

Basic and diluted, as reported

(0.11)

(0.13)

Basic and diluted, pro forma

(0.13)

(0.15)

Weighted average shares outstanding

12,205,004

11,699,817

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 11.

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 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 was $6,085 and $1,261 for the years ended October 31, 2004 and 2003, respectively.

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.

Electropure, Inc.

Notes to the Consolidated Financial Statements

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 is 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, 2004 and 2003 was $7,531 and $9,829, respectively.

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. Additionally, efforts are continuing on development of improved production processes and cost reduction techniques for the ion permeable membranes for their application in electrodeionization products and for the electrodeionization products themselves. 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.

Electropure, Inc.

Notes to the Consolidated Financial Statements

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 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 6,211,479 and 6,596,479 as of October 31, 2004 and 2003, respectively, have been omitted from the earnings per share calculation, as their effect would be antidilutive.

Electropure, Inc.

Notes to the Consolidated Financial Statements

Reclassification

Certain amounts presented within the 2003 financial statements have been reclassified in order to conform to the 2004 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, 2004. We are currently evaluating the impact of SFAS 151 on our 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 June 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. We are currently evaluating the effect of SFAS 123R and SAB 107 on our financial statements with the intent of implementing this standard on November 1, 2005.

Inventories

At October 31, 2004, inventories consisted of the following:

Raw materials	$ 50,253
Work in process	1,993
Finished goods	48,900

Inventories	$ 101,145

Electropure, Inc.

Notes to the Consolidated Financial Statements

Property, Plant and Equipment

At October 31, 2004, property, plant and equipment consisted of the following:

Machinery and equipment	$ 606,050
Automobiles	6,500
Furniture and fixtures	120,152
Building	1,396,555

Land	1,057,997
	3,187,254
Less: accumulated depreciation	(845,878)
Total property and equipment, net	$ 2,341,376

Depreciation expense for the years ended October 31, 2004 and 2003 was $171,907 and $183,780, respectively.

In January 2001, the Company purchased the land and a 30,201 square foot building located at 23456 South Pointe Drive, Laguna Hills, California for $2,454,552. The Company currently conducts its operations in approximately 20,000 square feet of the building and subleases the remaining portion to an unaffiliated third party.

Acquired Technology

At October 31, 2004, acquired technology consisted of the following:

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

Amortization expense for the year ended October 31, 2003 was $11,945. There was no amortization expense for the fiscal year ended October 31, 2004 as acquired technology was fully amortized during the fiscal year ended October 31, 2003.

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 and 2003. Accumulated amortization of the leased equipment at October 31, 2004 and 2003 was $49,894 and $40,062, respectively. Amortization of the leased property is included in depreciation expense.

The future minimum lease payments under capital leases and the net present value of the future minimum lease payments at October 31, 2004 are as follows:

2005
Total minimum lease payments	$ 1,980
Less: amount representing interest	(53)
Present value of net minimum lease payments	1,927
Less: current maturities	(1,927)
Long-term capital lease obligation	$ -

Electropure, Inc.

Notes to the Consolidated Financial Statements

Notes Payable

At October 31, 2004, notes payable consisted of the following:

Note payable to a bank, guaranteed by majority shareholder and collateralized by a deed of trust on the building, with fixed interest at 5.75% per annum, payable in monthly installments of $15,256 through April 2009, with balance due on May 1, 2009.		$ 2,406,644

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 July 3, 2005.	(B)	150,000

Unsecured note payable to a customer, with principal and interest at prime plus 2% due in full on April 23, 2008. Principal is reduced by 15% discount provided on sales of EDI products, if any.		166,498

Convertible note payable to major shareholder, collateralized by intellectual property of MIT, with principal and interest at 8% per annum due in full on December 2, 2005.		50,000

Convertible note payable to major shareholder, collateralized by intellectual property of MIT, with principal and interest at 8% per annum due in full on January 23, 2006.		100,000

Convertible 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.		100,000

Notes Payable (Continued) Convertible 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, 2005.	(B)	100,000

Convertible note payable to major shareholder, collateralized by intellectual property of MIT, with principal and interest at 8% per annum due in full on November 21, 2005.		100,000

Electropure, Inc.

Notes to the Consolidated Financial Statements

Convertible note payable to major shareholder, collateralized by intellectual property of MIT, with principal and interest at 8% per annum due in full on December 19, 2005.		100,000

Unsecured convertible note payable to major shareholder, with principal and interest at 8% per annum due in full on July 1, 2005.	(B) (C)	100,000

Unsecured convertible note payable to major shareholder, with principal and interest at 8% per annum due in full on March 16, 2005.	(B) (C)	50,000

		4,423,142
Less current maturities		(896,104)

Long Term portion of notes payable		$ 3,527,038

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

(B) As of August 30, 2005, the Company is in default on the repayment provisions on the loan and plans to negotiate with the lender to extend the repayment date.

(C) The Company has agreed to repay the loan and interest by the maturity date or from the proceeds of the sale of the Company's EDI subsidiary, whichever first occurs.

Aggregate maturities required on notes payable and long-term debt at October 31, 2004 are due in future years as follows:

2005		$ 896,104
2006		1,183,070
2007		183,070
2008		349,568
After 2008		1,811,330
		$ 4,423,14 2

Income Taxes

At October 31, 2004 and 2003, the components of the income tax expense are as follows:

Electropure, Inc.

Notes to the Consolidated Financial Statements

2004

2003

Current tax expense:

Federal

State

1,600

Deferred tax expense:

Federal

State

Total provision:

1,600

Significant components of the Company's net deferred income tax assets/ (liabilities) at October 31, 2004 were as follows:

Current deferred tax assets:
Accrued vacation		$ 16,998
Deferred payroll		18,989
Book compensation for options and warrants		406,933
Accrued warranty		35,851
Other		45,802
Total current deferred tax assets		524,573
Valuation allowance		(524,573)
Net deferred current tax assets		$ -

Noncurrent deferred tax assets:
Net operating loss carryforward		$ 7,362,583
Other credit carryforward		293,742
Depreciation and amortization		(220,523)
Total noncurrent deferred tax assets		7,435,802
Valuation allowance		(7,435,802)
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, 2004 was an increase of $455,058 .

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

Electropure, Inc.

Notes to the Consolidated Financial Statements

2004

2003

Tax expense/ (benefit) at U.S. statutory income tax rate

(34.0)%

State tax

(0.1)

0.1

Permanent differences

(0.1)

Change in beginning balance of valuation allowance

32.5

33.9

Effective income tax rate

(1.6)

0.1%

The Company has federal and state net operating loss carryforwards of $20,216,410 and $5,531,723, respectively. The federal and state net operating loss carryforwards began expiring in 2004. The Company also has federal and state research and development tax credit carryforwards of $174,471 and $119,271, respectively. The federal tax credits will begin to expire in 2013.

On September 11, 2002, the Governor of California signed into law new tax legislation that suspends the use of NOL carryforwards into tax years beginning on or after January 1, 2002 and 2003. This suspension will not apply to tax years beginning in 2005 and beyond.

10.

Shareholders' Equity (Deficit)

Common Stock

On November 8, 2002, the Company issued 227,273 shares of common stock to its largest shareholder in a private placement transaction for total proceeds of $50,000.

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. During the fiscal year ended October 31, 2003, the Company exchanged a total of 474,359 shares of common stock, at conversion rates ranging from $0.13 to $0.30 per share, for interest accrued on the loan through September 30, 2003 in the total amount of $80,000.

During the year ended October 31, 2004, the Company exchanged an additional 401,961 shares of common stock, at conversion rates ranging from $0.17 to $0.30 per share, for interest accrued on the above loan through September 30, 2004 in the amount of $80,000.

On August 4, 2003, the Company reacquired 450,000 shares of the Common Stock of its MIT subsidiary from a former consultant in exchange for 22,500 shares of its Common Stock, with a fair market value of $4,500 or $0.20 per share, and five-year warrants to purchase 100,000 shares of Electropure, Inc. common stock exercisable at $0.20 per share. The Company also extended the expiration date on previously issued warrants to purchase 200,000 shares of Electropure, Inc. common stock at $0.78125 per share for a period of two years to September 11, 2007. The fair market value of this transaction, $50,500, was recorded as goodwill. Subsequent to the transaction, the Company deemed the goodwill to be impaired, resulting in an expense of $50,500.

Electropure, Inc.

Notes to the Consolidated Financial Statements

On August 19, 2003, the Board of Directors authorized an offering of up to 1,500,000 shares of the Common Stock of Micro Imaging Technology in conjunction with a private placement offering of 60 Units of the combined securities of Electropure, Inc. and its Nevada subsidiary, MIT. Each Unit consisted of 25,000 shares of MIT Common Stock, a four-year warrant to purchase 12,500 shares of MIT Common Stock at $2.00 per share, and a four-year warrant to purchase 12,500 shares of Electropure, Inc. Common Stock at $1.00 per share. The purchase price for each Unit was $25,000 and the offering expired on September 30, 2003.

The largest shareholder, Anthony M. Frank, purchased 16 Units of the above private placement offering on September 9, 2003 for $200,000 in cash proceeds and the conversion of $200,000 in principal loans he made to the Company between December 18, 2002 and January 9, 2003. Of the total proceeds, $54,000 was allocated to Electropure based on the fair value of the warrants to purchase Electropure common stock.

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, 2004 and 2003, the note receivable related to the issuance of common stock is reflected as a reduction in equity and is summarized as follows:

	2004	2003
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 resulting from the exercise of warrants. The amount outstanding includes accrued interest of $9.875.	$ 34,875	$ 33,502

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

Electropure, Inc.

Notes to the Consolidated Financial Statements

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.

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.

11.

Stock Options and Warrants

Common Stock Options

In May 1999, the Company adopted the 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

Electropure, Inc.

Notes to the Consolidated Financial Statements

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. The Company granted options to purchase 25,000 shares of its common stock under this plan during the year ended October 31, 2003. No options were granted under this plan during the year ended October 31, 2004. As of the year ended October 31, 2004, the number of options granted by the 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 Company issued options to purchase 500,000 shares of its common stock to two employees during the year ended October 31, 2003 outside of its stock option plan. In addition, on July 31, 2003, the Company's subsidiary, Micro Imaging Technology (MIT), granted a total of 585,000 warrants to purchase its common stock to various employees of the Company and MIT.

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.

The weighted average fair value of the Electropure options granted during the year ended October 31, 2003 was $0.29. No Electropure options were granted during the fiscal year ended October 31, 2004.

Electropure, Inc.

Notes to the Consolidated Financial Statements

		Weighted
		Average
	Number of	Exercise
	Options	Price
Outstanding at October 31, 2002	3,024,000	$ 0.75
Granted	525,000	0.29
Exercised	-	-
Expired	(39,000)	0.66
Canceled	(1,415,000)	0.80
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

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.

For purposes of pro forma calculations, the fair value of options granted by the Company during the years ended October 31, 2004 and 2003 is estimated using the Black-Scholes Option Pricing Model with the weighted average assumptions listed below:

ELECTROPURE:

2004

2003

Risk-free interest rate

2.77%

Expected dividend yield

Expected stock price volatility

1.462

Expected life in years

8 years

MICRO IMAGING TECHNOLOGY:

Rick-free interest rate - 3.380%

Expected dividend yield - -

Expected stock price volatility - 2.325

Expected life in years -

5 years

Summary information about the Company's options outstanding at October 31, 2004:

Electropure, Inc.

Notes to the Consolidated Financial Statements

		Weighted
	Options	Average	Weighted	Options	Weighted
Range of	Outstanding	Remaining	Average	Exercisable	Average
Exercise	October 31,	Contractual	Exercise	October 31,	Exercise
Prices	2004	Life	Price	2004	Price

ELECTROPURE:
$0.28 - $0.50	985,000	5.4	$0.30	663,000	$0.31
$0.59 - $0.90	275,000	1.2	$0.70	275,000	$0.70
$0.94 - $1.13	485,000	0.7	$1.00	475,000	$1.01
	1,745,000			1,413,000
MIT:
	560,000	3.8	$0.10	560,000	$0.10
TOTAL:	2,305,000			1,973,000

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, 2004 and 2003 the Company granted warrants as follows:

The Company granted a total of 60,000 warrants during the years ended October 31, 2003, to purchase common stock to an individual for consulting services. The warrants are exercisable at $0.13 per share and have a contractual life of 5 years. Additionally, the Company's MIT subsidiary granted warrants to purchase 75,000 shares of its common stock to the same consultant during fiscal 2003 at an exercise price of $0.10 per share. The MIT warrants have a contractual life of 5 years. Warrants granted to the consultant during the years ended October 31, 2003 vested in full on the date of grant. The aggregate fair value of the consulting services received was estimated to be $15,450 and was charged to expense for the year ended October 31, 2003.

In August 2003, the Company granted 100,000 five-year warrants at $0.20 per share to a former consultant as partial payment for the repurchase of 450,000 shares of the common stock of its MIT subsidiary. The fair value of the warrants was estimated and an expense of $16,000 was recognized relating to this issuance for the year ended October 31, 2003.

In September 2003, the Company issued 200,000 detachable warrants of its common stock and 200,000 detachable warrants of its majority owned MIT subsidiary as part of a private placement

Electropure, Inc.

Notes to the Consolidated Financial Statements

offering. The warrants have a four-year term to purchase common stock at $2.00 and $1.00 per share, respectively. The warrants are exercisable at any time and expire July 30, 2007.

In March 2004, in partial consideration for a loan from an unaffiliated third party, we 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.

The following table summarizes the information relating to Electropure warrants granted to non-employees as of October 31, 2004 and 2003 and changes during the years then ended:

		Weighted
		Average
	Number of	Exercise
	Warrants	Price
Outstanding at October 31, 2002	2,780,103	$ 0.99
Granted	360,000	0.63
Exercised	-	-
Expired	(655,103)	1.84
Canceled	(110,000)	0.30
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

The following table summarizes the information relating to MIT warrants granted to non-employees as of October 31, 2004 and 2003 and changes during the years then ended. Warrants to purchase 250,000 shares of the common stock of the Company's majority owned subsidiary 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, 2003.

Electropure, Inc.

Notes to the Consolidated Financial Statements

		Weighted
		Average
	Number of	Exercise
	Warrants	Price
Outstanding at October 31, 2002	250,000	$ 1.25
Granted	275,000	1.48
Exercised	-	-
Expired	-	-
Canceled	-	-
Outstanding at October 31, 2003	525,000	1.37
Granted	-	-
Exercised	-	-
Expired	-	-
Outstanding at October 31, 2004	525,000	$ 1.37

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 2004 and 2003:

ELECTROPURE:

2004

2003

Risk-free interest rate

2.730%

3.147%

Expected dividend yield

Expected stock price volatility

1.973

1.709

Expected life in years

2 years

5 years

MICRO IMAGING TECHNOLOGY:

Rick-free interest rate - 3.343%

Expected dividend yield - -

Expected stock price volatility - 2.635

Expected life in years - 3 years

Summary information about the Company's warrants outstanding at October 31, 2004 is as follows:

Electropure, Inc.

Notes to the Consolidated Financial Statements

		Weighted
	Warrants	Average	Weighted	Warrants	Weighted
Range of	Outstanding	Remaining	Average	Exercisable	Average
Exercise	October 31,	Contractual	Exercise	October 31,	Exercise
Prices	2004	Life	Price	2004	Price

ELECTROPURE:
$0.10 - $0.75	1,115,000	1.5	$0.35	1,105,000	$0.35
$0.78 - $1.00	785,000	1.4	$0.93	785,000	$0.93
$1.06 - $1.38	465,000	1.3	$1.19	465,000	$1.19
	2,365,000			2,355,000
MIT:
	525,000	2.0	$1.37	525,000	$1.37
TOTAL:	2,890,000			2,880,000

12.

Commitments and Contingencies

Facilities Agreement

The Company has leased a portion of its facilities to a third party. The lease agreement was extended through March 2005 and the lessee is currently leasing 12,000 sq. ft. of the facility on a month-to-month basis for $1.05 a square foot. Rental income was $130,850 and $120,000 for the fiscal year ended October 31, 2004 and 2003, respectively.

Future minimum facilities sublease rental income as of October 31, 2004, was as follows:

Minimum

lease

Rental Income

2005 $ 63,000

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 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.

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.

Electropure, Inc.

Notes to the Consolidated Financial Statements

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.

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).

Agreement with Harry O'Hare

In October 1998, the Company entered into an agreement with Mr. Harry O'Hare, a significant shareholder and founder of the Company. In June 1999, the shareholders approved the agreement at the annual shareholders' meeting. The agreement provided for the Company to pay into a special bank account, controlled by Mr. O'Hare's wife, $1,000 per month for ten years and to issue to her a warrant to purchase 10,000 shares of the Company's common stock at $.50 per share with a ten-year term. Also, the Company was to cancel $9,105 owed by Mr. O'Hare to the Company, for which 2,500 of his shares of the Company's common stock was pledged as collateral.

In exchange, the Company was to receive from Mr. O'Hare all of his 931,629 shares of redeemable preferred stock, all of his 31,205 shares Class B common stock, and all of his 2,500 shares of common stock pledged for payment of the $9,105 he owes the Company. Mr. O'Hare was to transfer 52,678 of his remaining Class B common stock (52,778 shares) to others in satisfaction of claims against him. Mr. O'Hare was to also waive any claims he may have had to any royalties for technology the Company now owns, and he would not seek any modification of this agreement. The agreement also provided for the full mutual release of any and all claims between the Company and Mr. O'Hare.

In connection with a public offering made by the Company in 1987, the California Commissioner of Corporations (the "Commissioner") imposed transfer and other restrictions on Mr. O'Hare's Class B common stock and redeemable preferred stock. Even though the agreement was executed by the parties and approved by the shareholders, the closing, and therefore the effectiveness of this agreement, was subject to approval from the Commissioner for the transfer of the shares as described above. The Company and Mr. O'Hare agreed to jointly prepare an application to obtain authorization from the Commissioner to transfer the shares, and in October 1999 the application was filed. During the year ended October 31, 2002, the Commissioner denied the application for the transfer of the shares in part because the Company had not had net income for the most recent three consecutive years. The Company then sought to affect a transfer of the shares without removing legend restrictions, but was unable to obtain the cooperation of all parties involved and subsequently abandoned all efforts to conclude the arrangement in 2003.

The Company continued to make the $1,000 per month payments to an account controlled by Mr. O'Hare's wife through September 2003 when such monthly payments ceased. During the year

Electropure, Inc.

Notes to the Consolidated Financial Statements

ended October 31, 2003, the Company made monthly payments totaling $11,000 to the special bank account controlled by Mr. O'Hare's current wife, which are recorded in other expenses.

Purchase Commitments

In an effort to establish a fixed price for raw materials and services, the Company enters into purchase commitments with vendors on terms ranging from 1 to 12 months. The following tables summarizes the commitments entered into by the Company for the fiscal years ended October 31, 2004 and 2003 and the changes during the years then ended:

Outstanding Purchase Obligations at October 31, 2002		$ 66,028
Purchase Commitments Issued		185,009
Total Purchases		(154,406)
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

Licensed Technology Agreements

Nonexclusive licenses for the worldwide use of the electrodeionization technology were issued to Glegg Water Consulting, Inc. ("Glegg") and to Polymetrics, Inc. ("Polymetrics") in the fiscal years ended October 31, 1997 and 1995, respectively. The license granted to Glegg is a paid up license with no continuing royalty requirements. The license provides Glegg the right to sublicense the technology to its subsidiaries and affiliates and to a Japanese entity. The license granted to Polymetrics has continuing royalty requirements with royalty fee percentages of five (5) percent of net sales of "greater than 100 gallon per minute ("gpm")" systems and ten (10) percent of the "less than 100 gpm" systems. Polymetrics has not sold any units subject to the license since inception of the agreement.

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.

13.

Concentrations of Risk

During the fiscal year ended October 31, 2003, one customer accounted for 23% of product sales. During fiscal 2004, two customers accounted for 13% and 10% of product sales, respectively.

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, as follows:

Electropure, Inc.

Notes to the Consolidated Financial Statements

EMPLOYEE	POSITION		GROSS WAGES DEFERRED	TOTAL UNPAID EXPENSES
Floyd Panning	President and Director		$20,421	$18,530
Michael Snow	Vice President and Chief Operating Officer	(A)	$17,292	$13,684
Catherine Patterson	Chief Financial Officer		$ 9,300	$ 7,594
			$47,013	$39,808

(A)

Dr. Snow resigned as an officer of the Company in August 2004 and remains employed as the General Manager of the Electropure EDI, Inc. subsidiary. See Note 16 - "Subsequent Events."

See Notes 8, 10, 11, 12 and 16 for other related party transactions.

15.

Business Segments

We have two reportable segments: water purification ("EDI/Membrane"), (formerly reported separately under "EDI" and "Membrane") and fluid monitoring ("MI", a start up segment). The EDI segment produces water treatment modules for sale to manufacturers of high purity water treatment systems. The Membrane segment formerly produced ion exchange membranes for outside customers for use in electrodialysis, electrodeionization, electrodeposition and general electrochemical separations. The MI segment is developing technology that is anticipated to enable real time identification of contamination in fluids.

Electropure, Inc.

Notes to the Consolidated Financial Statements

The Company's reportable segments are strategic business units that offer different products, are managed separately, and require different technology and marketing strategies. The accounting policies of the segments are those described in the summary of significant accounting policies. The Company evaluates performance based on results from operations before income taxes not including nonrecurring gains and losses.

Business Segment Information:

2004 2003__

Revenue:

EDI

1,129,009

1,444,805

- -____

Total revenues

1,129,009

1,444,805

Operating Loss:

EDI

(301,549)

(292,712)

(351,230)

(351,540)

Corporate

(660,134)

(695,796)

Total operating loss

(1,312,913)

(1,340,048)

Depreciation and Amortization:

EDI

116,294

127,370

4,580

5,018

Corporate

51,033

63,337

Total depreciation and amortization

171,907

195,725

Identifiable Assets:

EDI

206,284

328,743

6,617

11,198

Corporate

2,374,046

2,422,442

Total identifiable assets

2,586,946

2,762,383

Expenditures for Long Lived Assets:

EDI

1,938

10,416

1,290

Corporate

2,402

Total expenditures for long lived assets

4,340

11,706

GEOGRAPHIC INFORMATION:

Revenues:

United States

133,458

489,749

Asia

625,929

485,845

Europe

333,721

448,281

Other foreign countries

35,901

20,930

Total revenues

1,129,009

1,444,805

Electropure, Inc.

Notes to the Consolidated Financial Statements

16.

Subsequent Events (Unaudited)

On January 27, 2005, the Company issued 285,714 shares of common stock to our majority shareholder upon the conversion of $20,000 in interest accrued on a $1 million loan. The fair market value of the common stock on the date of conversion was $0.07 per share.

On January 12, 2005, our largest shareholder loaned the Company $20,000 at 8% annual interest. The loan was due to be repaid from the proceeds of any sale of our EDI subsidiary or by July 12, 2005, whichever occurred first. The loan, plus interest accrued thereon, are currently in default.

Between February 18 and May 24, 2005, the Company borrowed a total of $300,000 in additional short term loans from Anthony M. Frank, its largest shareholder. All of such loans, which bear interest at 8% per annum were due to be repaid, with interest, by August 18, 2005 and are currently delinquent. The loans were collateralized by a second trust deed on the Company's building, which security interest Mr. Frank agreed to subordinate to the $250,000 loan made to the Company in July 2005 by the prospective buyer of our building.

The Company is currently in default on these loans as well as on an additional $400,000 in loans previously made to the Company in prior years from the same shareholder and have failed to pay interest as it became due on a $1 million loan on December 31, 2004 and in March and June, 2005.

In December 2004, the Company received a $100,000 working capital loan from SnowPure, LLC, a Nevada limited liability company from by Michael Snow, General Manager of the Company's EDI subsidiary. As collateral for the loan, SnowPure, LLC was granted a security interest in substantially all of the EDI assets. The loan, together with 10% annual interest accrued thereon, was due to be repaid on March 9, 2005 and remains due at this time.

On April 15, 2005, subject to shareholder approval, the Company agreed to the terms of a Purchase and Sale Agreement to sell substantially all of the EDI assets to SnowPure, LLC for a total purchase price of $800,000, through a combination of cash and assumption of certain liabilities. The purchase price will be paid in the form of cash and assumption of certain debt on the books of EDI as of the closing, including notes and trade payables, accrued salaries and expenses due Michael Snow, the principal of SnowPure, LLC. The portion of the purchase price to be paid in cash, therefore, will be the difference between $800,000 and the exact amount of the debt to be assumed pursuant to this transaction as determined at the closing. The closing date for this transaction is estimated to be October 15, 2005.

On June 3, 2005, the Company entered into an agreement, which is subject to shareholder approval, to sell its building to the George A. Boukather Trust for the sum of $3,925,000. The parties have agreed to close the sale within 90 days of completion of the buyer's due diligence and receipt of financing or as soon as possible after the Company has met all legal requirements (including requirements imposed by the Securities and Exchange Commission) for the sale of its corporate assets. Subsequently, on July 15, 2005, the Company executed a Promissory Note Secured by Deed of Trust to borrow $250,000 from the prospective buyer of the Company's

Electropure, Inc.

Notes to the Consolidated Financial Statements

building. As additional consideration, the Company issued warrants to purchase 100,000 shares of common stock at $0.06 per share, expiring on July 19, 2008. The Company also agreed to reduce the building purchase price by $50,000.

On June 29, 2005, the Company entered into a one-year arrangement with a consultant for administrative, public relations and financial services. In addition to a $5,000 per month consulting fee, the Company has agreed to issue 50,000 shares of common stock to the consultant each month and has granted three-year warrants to purchase: (a) 100,000 shares of common stock at an exercise price of $0.10 per share and (b) 100,000 shares at $0.25 per share.

Also on June 29, 2005, the Company granted warrants to purchase an additional 50,000 shares of the Company's common stock to a second consultant for business services to be rendered. Such warrants are exercisable at $0.10 per share through June 29, 2008.

On July 1, 2005, the Company granted a legal consultant three-year warrants to purchase a total of 400,000 shares of common stock, one-half at $0.06 per share and one-half at $0.25 per share, for legal services to be rendered.

On or about July 1, 2005, we received a $50,000 net short-term loan from an unaffiliated third party. The loan was repaid, with interest and fees in the sum of $5,231, on July 28, 2005. We granted warrants to purchase 25,000 shares of the Company's common stock as partial consideration for the loan. 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.

Electropure, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(Unaudited)

ASSETS
	July 31, 2005

Current assets:
Cash	$ 184,281
Trade accounts receivable	100,404
Inventories	119,391
Prepaid expenses	48,858
Total current assets	452,934
Property, plant and equipment	2,281,225
Other assets	46,171
Total assets	$ 2,780,330

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

Electropure, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(Unaudited)

*LIABILITIES AND SHAREHOLDERS' DEFICIT*

	July 31, 2005

Current liabilities:
Current portion of notes payable to bank	$ 48,131
Notes payable to shareholder	2,520,000
Trade accounts payable	252,550
Accrued payroll	284,653
Other accrued liabilities	370,952
Customer deposits	61,117
Redeemable convertible preferred stock, $0.01 par value; 2,600,000
shares authorized, issued and outstanding at July 31, 2005	26,000

Total current liabilities	3,563,403

Notes Payable	116,498
Notes payable to bank, net of current portion	2,324,348

Total liabilities	6,054,249

Commitments and contingencies	-

Shareholders' deficit:
Series C convertible preferred stock, $1.00 par value; 250,000 shares
authorized, issued and outstanding at July 31, 2005; liquidation preference $1,000,000	250,000
Series D convertible preferred stock; $1.00 par value; 250,000 shares
authorized, issued and outstanding at July 31, 2005; liquidation preference $500,000	250,000
Common stock, $0.01 par value; 20,000,000 share authorized;
12,815,851 shares issued and outstanding at July 31, 2005	128,158
Class B common stock, $0.01 par value, 839,825 shares authorized;
83,983 shares issued and outstanding at July 31, 2005	840
Additional paid-in capital	25,823,996
Notes receivable on common stock	(35,904)
Accumulated deficit	(29,691,009)

Total shareholders' deficit	(3,273,919)

Total liabilities and shareholders' deficit	$ 2,780,330

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

Electropure, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

*(Unaudited)*

	Three months ended		Nine months ended
	July 31,		July 31,
	2005	2004	2005	2004

Net sales	$ 396,408	$ 289,323	$ 967,607	$ 837,887
Cost of Sales	212,877	247,609	639,786	674,660
Gross profit	183,531	41,714	327,821	163,227

Operating costs and expenses:
Research and development	79,694	88,871	240,579	290,314
Sales, general and administrative	290,046	399,790	723,076	837,105

Total operating expenses	369,740	488,661	963,655	1,127,419

Loss from operations	(186,209)	(446,947)	(635,834)	(964,192)

Other income (expense):
Interest income	345	345	1,034	1,110
Interest expense	(85,179)	(97,493)	(240,818)	(253,296)
Sublease income	37,800	33,050	113,400	93,050
Other income (expense), net	-	33	(2)	6,332
Other income (expense), net	(47,034)	(64,065)	(126,386)	(152,804)

Loss before provision for income tax	(233,243)	(511,012)	(762,220)	(1,116,996)
Provision for income tax	-	-	(1,600)	(1,600)

Net loss	$ (233,243)	$ (511,012)	$ (763,820)	$ (1,118,596)

Net loss per share, basic and diluted	$ (0.02)	$ (0.04)	$ (0.06)	$ (0.09)

Shares used in computing basic and
diluted net loss per share	12,783,242	12,230,350	12,680,347	12,165,722

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

Electropure, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended
	July 31,
	2005	2004

Cash flows from operating activities:
Net loss	$ (763,820)	$ (1,118,596)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation	60,835	129,787
Bad debt expense	-	6,085
Interest expense relating to amortization of holdback	-	4,000
Interest expense relating to amortization of debt issuance costs	-	146,399
Common stock issued for services	5,000	-
Warrants issued as partial consideration 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	40,000
Interest on notes receivable for common stock	(1,029)	(1,029)

(Increase) decrease in assets:
Trade accounts receivable	(51,319)	(69,212)
Prepaid expenses	(38,351)	(5,093)
Inventories	(18,245)	16,275
Other assets	9,055	-
Increase (decrease) in liabilities:
Trade accounts payable	8,977	(41,263)
Customer deposits	18,175	12,015
Accrued payroll and other liabilities	202,323	(2,430)

*Net cash used in operating activities*	(478,549)	(788,476)

Cash flows from investing activities
Purchase of property, plant and equipment	(684)	(4,340)

*Net cash used in investment activities*	(684)	(4,340)

Cash flows from financing activities:
Principal payments on notes payable	(84,166)	(2,296,981)
Proceeds from issuances of notes payable	50,000	2,691,300
Principal payments on capital lease obligations	(1,927)	(8,004)
Proceeds from issuance of notes payable to related party	670,000	400,000

*Net cash provided by financing activities*	633,907	786,315

Net increase (decrease) in cash	154,674	(6,501)

Cash at beginning of period	29,607	24,215

Cash at end of period	$ 184,281	$ 17,714

Supplemental Disclosure of Cash Flow Information

Interest paid	$ 113,758	$ 99,306
Income taxes paid	$ 1,600	$ 1,600

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

Forward-Looking Statements

This Quarterly Report on Form 10-QSB, including the Notes to the Condensed Consolidated Financial Statements and the 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.

Nature of our Business and Continuance of Operations

These unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles applicable to a going concern which contemplated the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Since inception, the Company has incurred substantial losses and there is substantial doubt that the Company will generate sufficient revenues in the foreseeable future to meet its operating cash requirements. Accordingly, the Company's ability to continue operations depends on its success in obtaining additional capital in an amount sufficient to meet its cash needs. This raises substantial doubt about its ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty. At this time, the Company's future is dependent upon concluding certain transactions involving the sale of its assets. See Item 5 - "Other Information - Prospective Sale of Assets."

The Company has been engaged in manufacturing and marketing the "EDI" series of electrodeionization water treatment devices for commercial and industrial high purity water applications through its Electropure EDI, Inc. subsidiary since 1997. The Company also conducts research and development, through its Micro Imaging Technology subsidiary (MIT), on a non-biological identification method and process with the ability to quickly and accurately detect and identify pathogenic microbes such as Cryptosporidium, Giardia, E. coli, Listeria, and Salmonella.

Though sales of our EDI products recently showed a first, small profit during the three months ended July 31, 2005, the Company believes that the EDI operation does not have the potential to support either the corporate overhead needed to continue operations, or to justify and support a reasonable stock value for the Company's shareholders. Consequently, the current general business strategy of the Company is to sell the assets of its EDI operation and the land and building owned by its Electropure Holdings, LLC subsidiary. This strategy is designed to generate working capital for use in furthering the development and commercialization of the patented, proprietary technology held by its remaining MIT subsidiary.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include all adjustments which management believes are necessary for a fair presentation of the Company's financial position at July 31, 2005 and results of operations for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.

Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with our audited financial statements and footnotes as of and for the year ended October 31, 2004, included in our Annual Report on Form 10-KSB.

Certain amounts presented within the 2004 financial statements have been reclassified in order to conform to the 2005 financial statement presentation.

3. 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 between February 2004 and July 15, 2005. The table below reflects the amount of accumulated salaries and expenses due as of July 31, 2005:

EMPLOYEE	POSITION	GROSS WAGES DEFERRED	TOTAL UNPAID EXPENSES

Floyd Panning	President and Director	$71,472	$25,924
Michael Snow	Vice President and Chief Operating Officer *	$52,292	$22,067
Catherine Patterson	Chief Financial Officer	$18,750	$ 7,594
		$142,514	$55,585

Dr. Snow resigned as an officer of the Company in August 2004 and remains employed as the General Manager of the Electropure EDI, Inc. subsidiary.

As a condition of his August 1997 employment agreement, the Company agreed to reimburse Mr. Panning for $63,700 in wages deferred while he was employed at EDI Components, a former licensor of Electropure, Inc. A $25,000 promissory note issued in 1997 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. As of July 31, 2005, the Company has accrued a total of $53,576 in deferred wages pursuant to this agreement which will be utilized to satisfy the promissory note, plus interest accrued on the note through July 31, 2005 in the sum of $10,904.

Also see Notes 5 and 6 and Item 5 - "Other Information - Prospective Sale of Assets - Sale of EDI Assets."

Summary of Significant Accounting Policies

The accounting policies followed are as set forth in Note 1 of the Notes to Financial Statements in the Company's 2004 Annual Report on Form 10-KSB. The Company has not experienced any material change in its critical accounting policies since October 31, 2004. The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments regarding uncertainties that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the Company evaluates its estimates which are based upon historical experience and on other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company considers the following accounting policies to be most critical in their potential effect on its financial position or results of operations.

Stock Based Compensation

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 123R to its stock based employee compensation awards, and recognized expense over the applicable award vesting period:

	Three months ended July 31,		Nine months ended July 31,
	2005	2004	2005	2004
Net loss, as reported:	$ (233,243)	$ (511,012)	$ (763,820)	$(1,118,596)
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
effect	(11,610)	(45,360)	(51,310)	(120,160)
Pro forma net loss:	$ (244,853)	$ (556,372)	$ (815,130)	$(1,238,756)

Earnings per share:
Basic and diluted, as reported	$ (0.02)	$ (0.04)	$ (0.06)	$ (0.09)
Basic and diluted, pro forma	$ (0.02)	$ (0.05)	$ (0.06)	$ (0.10)

Weighted average shares outstanding	12,783,242	12,230,350	12,680,347	12,165,722

The following securities and contingently issuable shares are excluded in the calculation of diluted shares outstanding as their effects would be antidilutive for the periods ended July 31, 2005 and July 31, 2004 as follows:

	2005	2004
Stock options and warrants	4,345,000	5,520,000
Convertible preferred stock	500,000	500,000
Contingently issuable common shares	516,479	516,479
	5,361,479	6,536,479

5. Notes Payable

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 January 17, 2004. 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 a total of $316,444 in interest accrued on this loan through December 31, 2004 into common stock and on May 20, 2004, Mr. Frank extended the due date of this loan to January 17, 2006. In May 2004, the Company granted Mr. Frank a security interest in all of its current and future patents with respect to the technology owned by our Micro Imaging Technology subsidiary as collateral for this $1 million loan, as well as an additional $700,000 in principal loans made by Mr. Frank between December 2002 and December 2003.

Mr. Frank loaned the Company an additional $320,000 between January 27, 2005 and May 24, 2005, all of which loans bear interest at 8% per annum and all of which loans are currently due. The Company granted Mr. Frank a security interest in the Company's building as collateral for $300,000 of these loans.

Except for a $150,000 loan made in May 2002, Mr. Frank also has the option to convert any or all of the above loans, including interest, into common stock at fair market value as of the conversion date. See also Item 5 - "Defaults Upon Senior Securities."

In December 2004, the Company received a $100,000 working capital loan from SnowPure, LLC, a Nevada limited liability company formed by Michael Snow, General Manager of the Company's EDI subsidiary. As collateral for the loan, SnowPure, LLC was granted a security interest in substantially all of the assets of the EDI operation. The loan, together with 10% annual interest accrued thereon, was due to be repaid on March 9, 2005. We have paid accrued interest on the loan through July 31, 2005, however, the principal balance of $100,000, plus subsequent interest accrued, remains due at this time. See Item 5 - "Other Information - Prospective Sale of Assets - Sale of EDI Assets."

On or about July 1, 2005, we received a $50,000 net short-term loan from an unaffiliated third party. The loan was repaid, with interest and fees in the sum of $5,231, on July 28, 2005.

We received a $250,000 loan from the prospective buyer of our building on July 25, 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 by $50,000, from $3,925,000 to $3,875,000, 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. See Item 5 - "Other Information - Prospective Sale of Assets - Building Sale."

6. Securities Transactions

Common Stock Issued for Debt

On January 27, 2005, we issued 285,714 shares of common stock to our majority shareholder, Anthony M. Frank, in payment of $20,000 in accrued interest on a January 2001 loan for $1 million, which is due to be repaid in January 2006. The fair market value of the common stock was $0.07 per share on the conversion date.

Common Stock and Warrants Issued to Consultants

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 fair market value of the shares and warrants on the date of issuance was $60,000 and $18,000, respectively, and $5,000 was recorded as consulting expense in the current period.

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 July 1, 2005, for future legal services to be performed, we granted local 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.

Warrants Issued as Consideration for Loans

We granted warrants to purchase 25,000 shares of the Company's common stock as partial consideration for a $50,000 loan on or about July 1, 2005. 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.

We received a $250,000 loan from the prospective buyer of our building on July 25, 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 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. The Company also issued the prospective buyer three-year warrants to purchase 100,000 shares of common stock at $0.06 per share as additional consideration for the loan.

7. Employee Retirement Plan

Commencing on January 1, 2005, the Company sponsored a Simple IRA retirement plan which covers substantially all qualified full-time employees. Participation in the plan is voluntary and employer contributions are determined on an annual basis. Currently employer contributions are being made at the rate of 3% of the employees' base annual wages. The Company's contribution to the IRA plan for the nine months ended July 31, 2005 was $8,566.

8. Business Segments

We have two reportable segments: water purification ("EDI") and fluid monitoring ("MI", a start up segment). The EDI segment produces water treatment modules for sale to manufacturers of high purity water treatment systems and ion exchange membranes for outside customers for use in electrodialysis, electrodeionization, electrodeposition and general electrochemical separations. The MI segment is developing technology that is anticipated to enable real time identification of contamination in fluids.

Business Segment Information:

	Three months ended		Nine Months Ended
	July 31,		July 31,
	2005	2004	2005	2004

Revenue:
EDI	$ 967,607	$ 289,323	$ 967,607	$ 837,887
MI	-	-	-	-
Total revenues	$ 967,607	$ 289,323	$ 967,607	$ 837,887

Operating Loss:
EDI	$ 98,687	$ (87,038)	$ 59,347	$ (175,964)
MI	(72,154)	(78,114)	(214,022)	(256,503)
Corporate	(267,742)	(281,795)	(536,159)	(531,725)
Total operating loss	$ (241,209)	$ (446,947)	$ (690,834)	$ (964,192)

Depreciation and Amortization:
EDI	$ 6,080	$ 29,227	$ 21,251	$ 87,611
MI	821	1,131	2,459	3,604
Corporate	12,119	12,636	36,835	38,572
Total depreciation and amortization	$ 19,021	$ 42,994	$ 60,545	$ 129,787

Expenditures for Long Lived Assets:
EDI	$ -	$ 1,938	$ 684	$ 1,938
MI	-	-	-	-
Corporate	-	-	-	2,402
Total expenditures for long lived assets	$ -	$ 1,938	$ 684	$ 4,340

GEOGRAPHIC INFORMATION:
Revenues:
United States	$ 82,963	$ 74,992	$ 224,823	$ 105,156
Asia	247,963	114,250	458,934	450,808
Europe	60,324	90,393	231,694	253,957
Other foreign countries	5,158	9,688	52,157	27,966
Total revenues	$ 396,408	$ 289,323	$ 967,607	$ 837,887

	July 31, 2005	July 31, 2004
Identifiable Assets:
EDI	$ 248,855	$ 289,694
MI	4,158	7,594
Corporate	2,527,317	2,396,965
Total identifiable assets	$ 2,780,330	$ 2,694,481

The following Unaudited Pro Forma Condensed Combined Financial Statements are based on three scenarios as follows:

1. Concluding the EDI Asset Sale Transaction only and dissolving the EDI subsidiary;

2. Concluding the Building Asset Sale Transaction only and dissolving the LLC subsidiary; and

3. Concluding both the EDI and Building Asset Transactions and dissolutions.

The Unaudited Pro Forma Condensed Combined Financial Statements have been prepared by management of Electropure, Inc. based on the financial statement incorporated herein. The pro forma adjustments include certain assumptions and preliminary estimates as discussed in the accompanying notes and are subject to change. These pro forma statements may not be indicative of the results that actually would have occurred if the transactions had been concluded on the dates indicated or which may be obtained in the future. These pro forma financial statements should be read in conjunction with the accompanying notes and the historical financial information of Electropure, Inc. (including the notes thereto) incorporated by reference in this filing.

SCENARIO 1: EDI ASSET TRANSACTION ONLY

Unaudited Pro Forma Condensed Combined Balance Sheet

For the Nine Months Ended July 31, 2005

*ASSETS*
	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance
Current assets:
Cash	$ 184,281	$ 253,201	$ 437,482
Trade accounts receivable	100,404	(100,068)	336
Inventories	119,391	(119,391)	-
Prepaid expenses	48,858	-	48,858
Total current assets	451,934	33,742	486,676
Property, plant and equipment, net	2,281,225	(29,396)	2,251,829
Other assets	46,171	-	46,171
Total assets	2,780,330	4,346	2,784,676

*LIABILITIES AND SHAREHOLDERS' DEFICIT*
Current liabilities:
Current portion of notes payable to bank	48,131	-	48,131
Notes payable to shareholder	2,520,000	(100,000)	2,420,000
Trade accounts payable	252,550	(126,423)	126,127
Accrued payroll	284,653	(89,071)	195,582
Other accrued liabilities	370,952	(121,539)	249,413
Customer deposits	61,117	(48,517)	12,600
Redeemable convertible preferred stock, $0.01 par value
2,600,000 shares authorized, issued and outstanding at July 31, 2005	26,000	-	26,000
Total current liabilities	3,563,403	(485,550)	3,077,853

Notes payable	166,498	(166,498)	-
Notes payable to bank, net of current portion	2,324,348	-	2,324,348
Total liabilities	6,054,249	(652,048)	5,402,201

Commitments and contingencies	-	-	-

Shareholders' deficit:
Series C convertible preferred stock; $1.00 par value;
250,000 shares authorized, issued and outstanding at July 31, 2005
liquidation preference of $1,000,000	250,000	-	250,000
Series D convertible preferred stock; $1.00 par value;
250,000 shares authorized, issued and outstanding at July 31, 2005
liquidation preference of $500,000	250,000	-	250,000
Common stock, $0.01 par value; 20,000,000 shares authorized;
12,815,851 shares issued and outstanding at July 31, 2005	128,658	-	123,658
Class B common stock, $0.01 par value, 839,825 shares authorized;
93,983 shares issued and outstanding at July 31, 2005	840	-	840
Additional paid-in capital	25,823,996	-	25,823,996
Notes receivable on common stock	(35,904)	-	(35,904)
Accumulated deficit	(29,691,009)	656,394	(29,034,615)

Total shareholders' deficit	(3,272,919)	656,394	(2,617,525)

Total liabilities and shareholders' deficit (equity)	$ 2,780,330	$ (4,346)	$ 2,784,676

SCENARIO 1: EDI ASSET TRANSACTION ONLY

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Nine Months Ended July 31, 2005

	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance

Net sales	$ 967,607	$ -	$ 967,607
Cost of Sales	639,786	-	639,786

Gross profit	327,821	-	327,821

Operating costs and expenses:
Research and development	240,579	-	240,573
Sales, general and administrative	723,076	-	723,076

Total operating expenses	963,655	-	963,655

Loss from operations	(635,834)	-	(635,834)

Other income (expense):
Interest income	1,034	-	1,034
Interest expense	(240,818)	-	(240,818)
Sublease income	113,400	-	113,400
Other income (expense), net	(2)	541,398	541,396
Other income (expense), net	(126,386)	541,398	415,012

Income (loss) from continuing operations before
extraordinary gain and provision for income tax	(762,220)	541,398	(220,822)

Extraordinary gain - gain on debt written off	-	114,996	114,996
Provision for income tax	(1,600)	-	(1,600)
Net income (loss) from continuing operations	$ (763,820)	$ 656,394	$ (107,426)

Loss from operations of discontinued EDI
component (including gain of $541,398)	-	(2,097,938)	(2,097,938)

Net income (loss) on discontinued operations	$ (763,820)	$ (1,441,544)	$ (2,205,364)

Net income (loss) per share, basic and diluted, from continuing operations:
Before extraordinary item and provision for income tax	$ (0.06)	$ 0.04	$ (0.02)
Extraordinary item and provision for income tax	-	0.01	0.01
Net income (loss) per share from continuing operations	$ (0.06)	$ 0.05	$ (0.01)

Loss on discontinued operations	-	(0.16)	(0.16)

Net income (loss) per share, basic and diluted	$ (0.06)	$ (0.11)	$ (0.17)

Shares used in computing basic and diluted net loss per share	12,680,347	12,714,595	12,714,595

SCENARIO 1: EDI ASSET TRANSACTION ONLY

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Year October 31, 2004

	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance

Net sales	$ 1,129,009	$ -	$ 1,129,009
Cost of Sales	949,592	-	949,592

Gross profit	179,417	-	179,417

Operating costs and expenses:
Research and development	398,203	-	398,203
Sales, general and administrative	905,515	-	905,515

Total operating expenses	1,303,718	-	1,303,718

Loss from operations	(1,124,301)	-	(1,124,301)

Other income (expense):
Interest income	1,456	-	1,456
Interest expense	(517,030)	-	(517,030)
Sublease income	130,850	-	130,850
Other income (expense), net	107,761	589,970	697,731
Other income (expense), net	(276,963)	589,970	313,007

Income (loss) from continuing operations before
extraordinary gain and provision for income tax	(1,401,264)	589,970	(811,294)

Extraordinary gain - gain on debt written off	-	106,139	106,139
Provision for income tax	(1,600)	-	(1,600)
Net income (loss) from continuing operations	$ (1,402,864)	$ 696,109	$ (706,755)

Loss from operations of discontinued EDI
component (including gain of $589,970)	-	(1,785,035)	(1,785,035)

Net income (loss) on discontinued operations	$ (1,402,864)	$ (1,088,926)	$ (2,491,790)

Net income (loss) per share, basic and diluted, from continuing operations:
Before extraordinary item and provision for income tax	$ (0.11)	$ 0.05	$ (0.06)
Extraordinary item and provision for income tax	-	0.01	0.01
Net income (loss) per share from continuing operations	$ (0.11)	$ 0.06	$ (0.05)

Loss on discontinued operations	-	(0.15)	(0.15)

Net income (loss) per share, basic and diluted	$ (0.11)	$ (0.09)	$ (0.20)

Shares used in computing basic and diluted net loss per share	12,205,004	12,205,004	12,205,004

SCENARIO 2: BUILDING ASSET TRANSACTION ONLY

Unaudited Pro Forma Condensed Combined Balance Sheet

For the Nine Months Ended July 31, 2005

*ASSETS*
	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance
Current assets:
Cash	$ 184,281	$ 925,587	$ 1,109,868
Trade accounts receivable	100,404	-	100,404
Inventories	119,391	-	119,391
Prepaid expenses	48,858	-	48,858
Total current assets	451,934	925,587	1,378,527
Property, plant and equipment, net	2,281,225	(2,245,292)	35,933
Other assets	46,171	(46,171)	-
Total assets	2,780,330	1,365,876	1,414,454

*LIABILITIES AND SHAREHOLDERS' DEFICIT*
Current liabilities:
Current portion of notes payable to bank	48,131	(48,131)	-
Notes payable to shareholder	2,520,000	(550,000)	2,420,000
Trade accounts payable	252,550	-	252,550
Accrued payroll	284,653	-	284,653
Other accrued liabilities	370,952	(8,334)	362,618
Customer deposits	61,117	(12,600)	48,517
Redeemable convertible preferred stock, $0.01 par value
2,600,000 shares authorized, issued and outstanding at July 31, 2005	26,000	-	26,000
Total current liabilities	3,563,403	(619,065)	3,077,853

Notes payable	166,498	-	166,498
Notes payable to bank, net of current portion	2,324,348	(2,324,348)	-
Total liabilities	6,054,249	(2,943,413)	3,110,836

Commitments and contingencies	-	-	-

Shareholders' deficit:
Series C convertible preferred stock; $1.00 par value;
250,000 shares authorized, issued and outstanding at July 31, 2005
liquidation preference of $1,000,000	250,000	-	250,000
Series D convertible preferred stock; $1.00 par value;
250,000 shares authorized, issued and outstanding at July 31, 2005
liquidation preference of $500,000	250,000	-	250,000
Common stock, $0.01 par value; 20,000,000 shares authorized;
12,815,851 shares issued and outstanding at July 31, 2005	128,658	-	128,658
Class B common stock, $0.01 par value, 839,825 shares authorized;
93,983 shares issued and outstanding at July 31, 2005	840	-	840
Additional paid-in capital	25,823,996	-	25,823,996
Notes receivable on common stock	(35,904)	-	(35,904)
Accumulated deficit	(29,691,009)	1,577,537	(28,113,472)

Total shareholders' deficit	(3,272,919)	1,577,537	(1,696,382)

Total liabilities and shareholders' deficit (equity)	$ 2,780,330	$ (1,365,876)	$ 1,414,454

SCENARIO 2: BUILDING ASSET TRANSACTION ONLY

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Nine Months Ended July 31, 2005

	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance

Net sales	$ 967,607	$ -	$ 967,607
Cost of Sales	639,786	-	639,786

Gross profit	327,821	-	327,821

Operating costs and expenses:
Research and development	240,579	-	240,573
Sales, general and administrative	723,076	-	723,076

Total operating expenses	963,655	-	963,655

Loss from operations	(635,834)	-	(635,834)

Other income (expense):
Interest income	1,034	-	1,034
Interest expense	(240,818)	-	(240,818)
Sublease income	113,400	-	113,400
Other income (expense), net	(2)	1,577,537	1,577,535
Other income (expense), net	(126,386)	1,577,537	1,451,151

Income (loss) from continuing operations before
extraordinary gain and provision for income tax	(762,220)	1,577,537	815,317

Extraordinary gain - gain on debt written off	-	-	-
Provision for income tax	(1,600)	-	(1,600)
Net income (loss) from continuing operations	$ (763,820)	$ 1,577,537	$ 813,717

Loss from operations of discontinued EDI
component (including gain of $1,577,537)	-	(1,006,336)	(1,006,336)

Net income (loss) on discontinued operations	$ (763,820)	$ 571,201	$ (192,619)

Net income (loss) per share, basic and diluted, from continuing operations:
Before extraordinary item and provision for income tax	$ (0.06)	$ 0.12	$ 0.06
Extraordinary item and provision for income tax	-	-	-
Net income (loss) per share from continuing operations	$ (0.06)	$ 0.12	$ 0.06

Loss on discontinued operations	-	(0.08)	(0.08)

Net income (loss) per share, basic and diluted	$ (0.06)	$ 0.04	$ (0.02)

Shares used in computing basic and diluted net loss per share	12,680,347	12,714,595	12,714,595

SCENARIO 2: BUILDING ASSET TRANSACTION ONLY

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Year Ended October 31, 2004

	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance

Net sales	$ 1,129,009	$ -	$ 1,129,009
Cost of Sales	949,592	-	949,592

Gross profit	179,417	-	179,417

Operating costs and expenses:
Research and development	398,203	-	398,203
Sales, general and administrative	905,515	-	905,515

Total operating expenses	1,303,718	-	1,303,718

Loss from operations	(1,124,301)	-	(1,124,301)

Other income (expense):
Interest income	1,456	-	1,456
Interest expense	(517,030)	-	(517,030)
Sublease income	130,850	-	130,850
Other income (expense), net	107,761	1,533,568	1,641,329
Other income (expense), net	(276,963)	1,533,568	1,256,605

Income (loss) from continuing operations before
extraordinary gain and provision for income tax	(1,401,264)	1,533,568	132,304

Extraordinary gain - gain on debt written off	-	-	-
Provision for income tax	(1,600)	-	(1,600)
Net income (loss) from continuing operations	$ (1,402,864)	$ 1,533,568	$ 130,704

Loss from operations of discontinued EDI
component (including gain of $1,553,568)	-	(566,119)	(566,119)

Net income (loss) on discontinued operations	$ (1,402,864)	$ 967,449	$ (435,415)

Net income (loss) per share, basic and diluted, from continuing operations:
Before extraordinary item and provision for income tax	$ (0.11)	$ 0.13	$ 0.02
Extraordinary item and provision for income tax	-	-	-
Net income (loss) per share from continuing operations	$ (0.11)	$ 0.13	$ 0.02

Loss on discontinued operations	-	(0.05)	(0.05)

Net income (loss) per share, basic and diluted	$ (0.11)	$ (0.08)	$ (0.03)

Shares used in computing basic and diluted net loss per share	12,205,004	12,205,004	12,205,004

SCENARIO 3: EDI AND BUILDING ASSET TRANSACTIONS

Unaudited Pro Forma Condensed Combined Balance Sheet

For the Nine Months Ended July 31, 2005

*ASSETS*
	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance
Current assets:
Cash	$ 184,281	$ 1,178,788	$ 1,363,069
Trade accounts receivable	100,404	(100,068)	336
Inventories	119,391	(119,391)	-
Prepaid expenses	48,858	-	48,858
Total current assets	451,934	959,329	1,412,263
Property, plant and equipment, net	2,281,225	(2,274,688)	6,537
Other assets	46,171	(46,171)	-
Total assets	2,780,330	(1,361,530)	1,418,800

*LIABILITIES AND SHAREHOLDERS' DEFICIT*
Current liabilities:
Current portion of notes payable to bank	48,131	(48,131)	-
Notes payable to shareholder	2,520,000	(650,000)	1,870,000
Trade accounts payable	252,550	(126,423)	126,127
Accrued payroll	284,653	(89,071)	195,582
Other accrued liabilities	370,952	(129,873)	241,079
Customer deposits	61,117	(61,117)	-
Redeemable convertible preferred stock, $0.01 par value
2,600,000 shares authorized, issued and outstanding at July 31, 2005	26,000	-	26,000
Total current liabilities	3,563,403	(1,104,615)	2,458,788

Notes payable	166,498	(166,498)	-
Notes payable to bank, net of current portion	2,324,348	(2,324,348)	-
Total liabilities	6,054,249	(3,595,461)	2,458,788

Commitments and contingencies	-	-	-

Shareholders' deficit:
Series C convertible preferred stock; $1.00 par value;
250,000 shares authorized, issued and outstanding at July 31, 2005
liquidation preference of $1,000,000	250,000	-	250,000
Series D convertible preferred stock; $1.00 par value;
250,000 shares authorized, issued and outstanding at July 31, 2005
liquidation preference of $500,000	250,000	-	250,000
Common stock, $0.01 par value; 20,000,000 shares authorized;
12,815,851 shares issued and outstanding at July 31, 2005	128,658	-	128,658
Class B common stock, $0.01 par value, 839,825 shares authorized;
93,983 shares issued and outstanding at July 31, 2005	840	-	840
Additional paid-in capital	25,823,996	-	25,823,996
Notes receivable on common stock	(35,904)	-	(35,904)
Accumulated deficit	(29,691,009)	2,233,931	(27,457,078)

Total shareholders' deficit	(3,272,919)	2,233,931	(1,039,988)

Total liabilities and shareholders' deficit (equity)	$ 2,780,330	$ (1,361,530)	$ 1,418,800

SCENARIO 3: EDI AND BUILDING ASSET TRANSACTIONS

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Nine Months Ended July 31, 2005

	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance

Net sales	$ 967,607	$ -	$ 967,607
Cost of Sales	639,786	-	639,786

Gross profit	327,821	-	327,821

Operating costs and expenses:
Research and development	240,579	-	240,573
Sales, general and administrative	723,076	-	723,076

Total operating expenses	963,655	-	963,655

Loss from operations	(635,834)	-	(635,834)

Other income (expense):
Interest income	1,034	-	1,034
Interest expense	(240,818)	-	(240,818)
Sublease income	113,400	-	113,400
Other income (expense), net	(2)	2,118,935	2,118,933
Other income (expense), net	(126,386)	2,118,935	1,992,549

Income (loss) from continuing operations before
extraordinary gain and provision for income tax	(762,220)	2,118,935	1,256,715

Extraordinary gain - gain on debt written off	-	114,996	114,996
Provision for income tax	(1,600)	-	(1,600)
Net income (loss) from continuing operations	$ (763,820)	$ 2,233,931	$ 1,470,111

Loss from operations of discontinued EDI
component (including gain of $2,118,935)	-	(3,104,274)	(3,104,274)

Net income (loss) on discontinued operations	$ (763,820)	$ (870,343)	$ (1,634,163)

Net income (loss) per share, basic and diluted, from continuing operations:
Before extraordinary item and provision for income tax	$ (0.06)	$ 0.16	$ 0.10
Extraordinary item and provision for income tax	-	0.01	0.01
Net income (loss) per share from continuing operations	$ (0.06)	$ 0.17	$ 0.11

Loss on discontinued operations	-	(0.24)	(0.24)

Net income (loss) per share, basic and diluted	$ (0.06)	$ (0.07)	$ (0.13)

Shares used in computing basic and diluted net loss per share	12,680,347	12,714,595	12,714,595

SCENARIO 3: EDI AND BUILDING ASSET TRANSACTIONS

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Year Ended October 31, 2004

	Beginning Balance	Pro Forma Adjustments	Pro Forma Combined Balance

Net sales	$ 1,129,009	$ -	$ 1,129,009
Cost of Sales	949,592	-	949,592

Gross profit	179,417	-	179,417

Operating costs and expenses:
Research and development	398,203	-	398,203
Sales, general and administrative	905,515	-	905,515

Total operating expenses	1,303,718	-	1,303,718

Loss from operations	(1,124,301)	-	(1,124,301)

Other income (expense):
Interest income	1,456	-	1,456
Interest expense	(517,030)	-	(517,030)
Sublease income	130,850	-	130,850
Other income (expense), net	107,761	2,123,538	2,231,299
Other income (expense), net	(276,963)	2,123,538	1,746,575

Income (loss) from continuing operations before
extraordinary gain and provision for income tax	(1,401,264)	2,123,538	722,274

Extraordinary gain - gain on debt written off	-	106,139	106,139
Provision for income tax	(1,600)	-	(1,600)
Net income (loss) from continuing operations	$ (1,402,864)	$ 2,229,678	$ 826,814

Loss from operations of discontinued EDI
component (including gain of $2,123,538)	-	(2,351,154)	(2,351,154)

Net income (loss) on discontinued operations	$ (1,402,864)	$ (121,476)	$ (1,524,340)

Net income (loss) per share, basic and diluted, from continuing operations:
Before extraordinary item and provision for income tax	$ (0.11)	$ 0.17	$ 0.06
Extraordinary item and provision for income tax	-	0.01	0.01
Net income (loss) per share from continuing operations	$ (0.11)	$ 0.18	$ 0.07

Loss on discontinued operations	-	(0.19)	(0.19)

Net income (loss) per share, basic and diluted	$ (0.11)	$ (0.01)	$ (0.12)

Shares used in computing basic and diluted net loss per share	12,205,004	12,205,004	12,205,004

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1. Basis of Presentation

The Unaudited Pro Forma Condensed Combined Financial Statements reflect the EDI Asset Sale Transaction accounted for as a purchase business combination as defined by Statement of Financial Accounting Standards No. 141, Business Combinations. The Building Asset Sale Transaction is accounted for under the full accrual method for retail land sales as defined by Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate.

The Unaudited Pro Forma Condensed Combined Financial Statements are based on the consolidated October 31, 2004 audited and July 31, 2005 unaudited historical financial statements of Electropure, Inc incorporated by reference herein. The Unaudited Pro Forma Condensed Combined Balance Sheet assumes the Asset Sale Transactions occurred as of July 31, 2005. The Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended July 31, 2005 presents the results of operations assuming the Asset Sale Transactions were completed on November 1, 2004. The Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended October 31, 2004 assumes the Asset Sale Transactions were effective on November 1, 2003.

Note 2. Purchase Accounting

Under the purchase method of accounting, the purchase price would be allocated to acquired tangible and intangible assets acquired and liabilities assumed on their estimated fair values as of the closing date of the Asset Sale Transactions, with any excess being ascribed to gain on the sale of assets. Management is primarily responsible for determining the fair values of these assets. Management has estimated the fair values of the acquired assets reflected in the Unaudited Pro Forma Condensed Combined Financial Statements based on a number of factors, including preliminary estimates of valuations. A final determination of these fair values, which cannot be made prior to the completion of the Asset Sale Transactions, would be based on the actual acquired net tangible and intangible assets that exist on the closing date, and could differ materially from the amounts estimated below (which estimates are as of July 31, 2005):

	ASSET TRANSACTION
	EDI	BUILDING
Current assets	$ 219,205	$ -
Property, plant and equipment	29,396	2,245,292
Other non-current assets	-	46,171
Current liabilities	294,590	-
Other non-current liabilities	166,498	-
Gain on sale of assets	90,311	1,583,537
Total purchase price	$ 800,000	$ 3,875,000

Pursuant to the terms of the Purchase and Sale Agreement with SnowPure, LLC, the $800,000 purchase for the EDI Asset Sale Transaction is to be allocated in the following manner:

Accounts Receivable	Fair Value at Closing
Inventory	Fair Value at Closing
Property, plant and equipment	As determined at Closing by mutual agreement (estimated as of July 31, 2005 to be $250,000)
Intellectual Property (goodwill)	Balance

Although a final determination of the amounts to be allocated cannot be made prior to the completion of the transaction, based upon estimates as of July 31, 2005, the purchase price for the EDI Asset Sale Transaction would be allocated as follows based upon the terms of the Purchase and Sale Agreement:

	EDI
Current assets	$ 219,459
Property, plant and equipment	250,000
Other non-current assets	330,541
Total purchase price	$ 800,000

Note 3. Unaudited Pro Forma Combined Adjustments

The adjustments to the accompanying Unaudited Pro Forma Condensed Combined Balance Sheet as of July 31, 2005 are described below:

EDI ASSET TRANSACTION

(A) Adjustment to eliminate the net book value of Accounts Receivable, Inventory and Property, plant and equipment transferred to SnowPure in the sum of $248,602.

(B) Adjustment to eliminate the fair value of certain debts and liabilities assumed by SnowPure as part of the purchase price in the sum of $361,088.

(C) Record use of $185,580 in cash from the sale proceeds to pay certain EDI vendors and employees upon termination of the EDI operation as well as an estimated $10,000 sales tax liability resulting from the sale of the tangible assets.

(D) Record a gain of $115,127 on debts written off upon termination of the EDI operations.

BUILDING TRANSACTION

(E) Adjustment to eliminate the net book value of Property and other assets related to the property sold in the sum of $2,245,292 and $46,171, respectively.

(F) Adjustment to eliminate the fair value of notes payable to the bank on the property sold and record estimated expenses associated with the sale in the amount of $2,372,479 and $6,000, respectively.

(G) Record use of $570,933 in cash from the sale proceeds to satisfy liens on the building in the total sum of $558,333 and to refund a security deposit in the sum of $12,600 to the current sublessee.

Pursuant to the requirements of the Exchange Act of 1934, as amended, the Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto authorized.

Electropure, Inc.

By Order of the Board of Directors

By: /s/ Floyd H. Panning

Floyd H. Panning, Chief Executive Officer

Laguna Hills, California

October 19, 2005

Name	Common Stock (1)(2)	% of Class	Class B Common Stock	% of Class	Series C Preferred Stock (3)	% of Class	Series D Preferred Stock (4)	% of Class	Convertible Preferred Stock (5)	% of Class	% of Voting Power (6)

William F. Farnam
23456 South Pointe Drive
Laguna Hills, CA 92654	96,918	*	--	--	--	--	--	--	--	--	*
(Director)

Anthony M. Frank
320 Meadowood Ct.
Pleasant Hill, CA 94523	7,542,958	55.3%	--	--	250,000	100%	250,000	100%	--	--	44.1%
(Consenting Stockholder)

Randall P. Frank
320 Meadowood Ct.
Pleasant Hill, CA 94523	698,898	5.5%	--	--	--	--	--	--	--	--	4.3%
(Consenting Stockholder)

Tracy F. Frank
320 Meadowood Ct.
Pleasant Hill, CA 94523	457,196	3.6%	--	--	--	--	--	--	--	--	2.8%
(Consenting Stockholder)

Randolph S. Heidmann
23456 South Pointe Drive
Laguna Hills, CA 92563	--	--	--	--	--	--	--	--	--	--	--
(Director)

Harry M. O'Hare, Sr.
1000 El Centro
S. Pasadena, CA 91030	2,500	*	83,983	100%	--	--	--	--	931,629	35.8%	10.0%
(Founder)

Floyd H. Panning
23456 South Pointe Drive
Laguna Hills, CA 92653	421,792	3.3%	--	--	--	--	--	--	7,500	*	2.7%
(Officer and Director)

Catherine Patterson
23456 South Pointe Drive
Laguna Hills, CA 92653	50,112	*	--	--	--	--	--	--	2,906	*	*
(Officer)

All officer and directors
as a group (5 persons)	568,822	4.4%	--	--	--	--	--	--	10,406	*	3.6%