Item 2. Management's Discussion and Analysis of Financial Condition and Plan of Operation

Forward-Looking Statements

This Quarterly Report, 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. Readers are cautioned not to place undue reliance on forward-looking statements. They reflect opinions, assumptions, and estimates only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements in this Quarterly Report, whether as a result of new information, future events or circumstances, or otherwise.

Results of Operations

References to fiscal 2012 and fiscal 2011 are for the six month period ended April 30, 2012 and 2011, respectively.

The Company had no sales revenue during the six months ended April 30, 2012 or 2011.

Research and development expenses for the six month period ended April 30, 2012 increased by $20,606 compared to the prior year. These expenses arose from the program which the Company initiated in December 1997 to develop the micro imaging technology for detecting and identifying contaminants in fluids. The overall increase mainly reflects additional expenditures for materials and supplies and increases legal and accounting expenses. Research and development expenses for the three months ended April 30, 2012, decreased by $14,374, primarily as a result of a decrease in consulting fees, offset by moderate increases in various other expenses, such as legal, stockholder relations, utilities and travel.

Sales, general and administrative expenses decreased by $37,044 for the six months ended April 30, 2012 compared to the prior year period due, primarily, to a decrease in consulting fees incurred during the current period. These expenses increased over the prior year period by $14,502 for the three months ended April 30, 2012. The increase resulted from rehiring an administrative employee and from fees relating to the sale of shares of common stock under the Dutchess equity line of credit.

The Company realized negligible interest income during the six months ended April 30, 2012 as all available capital was utilized to sustain operations. Interest expense for the three and six month periods ended April 30, 2012 increased by $112,785 and $132,192, respectively, compared to the prior period and primarily reflects the costs of borrowing during the current and prior fiscal periods.

The Company recognized $15,866 and $44,440 in non-cash gain for the three and six months ended April 30, 2012, related to certain convertible notes with beneficial conversion features (the Series 1 Notes).

Components of other income and expense reflect a gain of $15,557 and $16,319 for the three and six months ended April 30, 2012, respectively, on writing off old debt.

The Company recorded the minimum state income tax provision in fiscal 2012 and 2011 as the Company had cumulative net operating losses in all tax jurisdictions.

Equity Financing Arrangements

On May 4, 2010, the Company entered into an Investment Agreement ("Investment Agreement") with Dutchess Opportunity Fund, II, LP (the "Investor"). Pursuant to the Investment Agreement, the Investor committed to purchase up to $5,000,000 of the Company's common stock over thirty-nine months (the "Equity Line"). The aggregate number of shares issuable by the Company and purchasable by Dutchess under the Investment Agreement (as amended on April 12, 2012) is 500,000,000. The Company also entered into a Registration Rights Agreement with Dutchess on May 4, 2010 whereby the Company was obligated to file one or more registration statements with the SEC to register the resale by Dutchess of shares of common stock issued or issuable under the Investment Agreement. The Company filed three
(3) registration statements on Form S-1 between May 7, 2010 and April 19, 2012 to register the resale by Dutchess of 191 million shares of common stock.

On May 31, 2012, the Company terminated the Investment Agreement with Dutchess and withdrew the third Form S-1 registration statement covering 140 million of the shares.

Through September 2010 and October 2011, the Company issued seventeen (17) puts under the investment agreement with Dutchess and sold 20,136,570 shares of common stock to Dutchess at prices ranging from $0.004 to $0.0225 per share for net proceeds of $114,497. During the six months ended April 30, 2012, the Company issued seven (7) puts with Dutchess and sold an additional 30,830,204 shares of common stock at prices ranging from $0.003 to $0.0056 per share for net proceeds of $99,739.

Liquidity and Capital Resources

At April 30, 2012, the Company had working capital deficit of $1,702,278. This represents a working capital increase of $673,283 compared to that reported at October 31, 2011. The increase primarily reflects the conversions to common stock conducted in the current fiscal year for notes payable and accounts payable to trade vendors as well as officers and directors of the Company.

Our only source of cash during the six months ended April 30, 2012 has been from the sale of common stock and convertible loans totaling $251,400 and $135,000, respectively. Management estimates that it utilized $64,400 per month in working capital on operations for the six months ended April 30, 2012, compared to the approximate $36,000 per month expended during the six month period ended April 30, 2011.

Plan of Operation

Our independent registered public accounting firm has included an explanatory paragraph in its report on the financial statements for the year ended October 31, 2011 which raises substantial doubt about our ability to continue as a going concern.

The Company is in the process of identifying commercial, technical and scientific partners that can aid in advancing the MIT expertise, provide external endorsements of the technology and accelerate introduction to the market. This strategy is dependent upon our ability to identify and attract the right customers and partners over the next six month period and to secure sufficient additional working capital in a timely manner. There can be no assurances that our efforts will be successful or that the Company will be able to raise sufficient capital to implement our plans or to continue operations.

During the six months ended April 30, 2012, the Company sold $251,400 in common stock, net of fees and expenses, and received $70,000 from Asher Enterprises, net of fees, and $60,000 in loans which are convertible into common stock. The Company repaid $30,000 of such loans in May 2012.

In May 2012, the Company entered into subscription agreements with two separate investors to purchase a total of $1 million in common stock over a six-month period.

In April 2012, the Company commenced the production phase of its MIT 1000 Rapid Microbial Identification System with its Hawthorne, California-based manufacturing partner in April 2012. The first of twenty Systems are expected in June.

During the latter part of 2008, the Company appointed an exclusive distributor to sell our MIT products in Taiwan and China. The Company has entered into similar arrangements with five other companies granting distribution rights in Turkey, Bulgaria, the United Kingdom, Ireland, Puerto Rico and the Caribbean. In October 2009, the Company entered into a distribution agreement with a Biotek Sdn Bhd, a Malaysian distributor of research and scientific products for the Association of Southeast Asian Nations (ASEAN) (namely Malaysia, Singapore, Thailand, Brunei, Indonesia, Philippines, Vietnam, Cambodia, Laos and Myanmar). All of our distribution agreements remain in effect at this time.

The Company is in the process of developing promotional materials and marketing and sales strategies with these and other future distributors which the Company believes will assist in generating sales revenues in the near future.

In April 2012, the Company submitted applications to the Association of Advanced Communities Research Institute (AOAC RI) for Performance Test Method Certification for the MIT 1000 System's for accurate bacterial identifications of the pathogens E. coli and Salmonella. In June 2009, the Company received AOAC RI Certification for the identification of the Listeria bacteria species, a rare but lethal food-borne infection. When certified for certification for the two additional pathogenic bacteria identification processes, the Company's System will have the proven capability of identifying over 90 percent of all bacteria-causing, food-related illnesses.

In the opinion of management, available funds and funds anticipated from forthcoming loans and equity sales are expected to satisfy our working capital requirements through February 2013. However, no assurances can be given that the Company will secure additional financing or revenues in a timely manner, if at all, or that such funds would be sufficient to achieve our intended business objectives.

The Company will be required to raise substantial amounts of new financing in the form of additional equity investments, loan financings, or from strategic partnerships, to carry out our business objectives. There can be no assurance that the Company will be able to obtain additional financing on terms that are acceptable to us and at the time required by us, or at all. Further, any financing may cause dilution of the interests of our current stockholders. If the Company is unable to obtain additional equity or loan financing, our financial condition and results of operations will be materially adversely affected. Moreover, estimates of our cash requirements to carry out our current business objectives are based upon various assumptions, including assumptions as to our revenues, net income or loss and other factors, and there can be no assurance that these assumptions will prove to be accurate or that unbudgeted costs will not be incurred. Future events, including the problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to cost increases that could have a material adverse effect on us and our plans. If the Company is not successful in obtaining financing for future developments, whether in the form of loans, licenses or equity transactions, it is unlikely that the Company will have sufficient cash to continue to conduct operations, particularly research and development programs, as currently planned. The Company believes that in order to raise needed capital, the Company may be required to issue debt at significantly higher interest rates or equity securities that are significantly lower than the current market price of our common stock.

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