UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                  FORM 10-QSB/A

                                 Amendment No. 1
(Mark One)
[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934
               For the quarterly period ended:  September 30, 2001

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
               For the transition period from _________ to _________

Commission File Number:  000-29645

                               AMNIS SYSTEMS INC.
                           (Formerly Graffiti-X, Inc.)
        (Exact name of small business issuer as specified in its charter)

             Delaware                                   94-3402831
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

                3450 Hillview Avenue, Palo Alto, California 94304
          (Address of principal executive offices, including zip code)

         Issuer's telephone number, including area code:  (650) 855-0200

                                 Not applicable
    (Former name, former address and former fiscal year, if changed since last
                                     report)

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  Yes [ ]      No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of each of the issuer's classes of common
equity as of November 14, 2001:  11,369,597 shares of Common Stock.

Transitional Small Business Disclosure Format (check one):   [ ] Yes     [X] No


                                        1
<PAGE>
                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS

     This information is contained on pages F-1 through F-11 of this report and
is incorporated into this Item 1 by reference.

     In our management's opinion, all adjustments necessary for a fair
presentation of the statements of the results for the interim period have been
included.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     Management's discussion and analysis or plan of operation is provided as a
supplement to the accompanying consolidated financial statements and footnotes
to help provide an understanding of our financial condition, changes in
financial condition and results of operations. Accordingly, the following
discussion and analysis should be read in conjunction with our financial
statements and the related notes included elsewhere in this report.

INTRODUCTION

     Amnis Systems Inc., a Delaware consolidated corporation, makes hardware and
software products for the creation, management and transmission of high-quality
digital video over computer networks. Our products are distributed worldwide
through a network of value added resellers, or VARs, system integrators and
original equipment manufacturers, or OEMs. Our products are used in diverse
applications such as interactive distance learning, corporate training, video
content distribution, video surveillance and telemedicine.

     On April 16, 2001, we merged with Optivision, Inc., an operating company,
in an exchange of common stock accounted for as an acquisition under the
purchase method of accounting.  As a result of the merger, Optivision became our
wholly-owned subsidiary.

     The accompanying historical consolidated financial statements and notes for
the third quarter of 2001 reflect only the financial results of Amnis Systems
Inc., until the merger between Amnis Systems and Optivision which took place on
April 16, 2001.

     As a result, Amnis Systems' third quarter and year to date September 30,
2001 historical operating results and financial condition are not comparable to
the same periods in 2000. Accordingly, in order to enhance comparability and
make an analysis of the three-month and nine-month periods ended September 30,
2001 meaningful, the following discussion of results of operations and changes
in financial condition and liquidity is based upon unaudited pro forma financial
information for the three-month and nine-month periods ended September 30, 2001
as if the merger had occurred on January 1, 2000. In order to maintain
comparability and enhance clarity, goodwill amortization has been excluded from
the comparison. The unaudited pro forma Consolidated Statements of Operations
for each period are inserted at the beginning of the "Results of Operations"
section as a reference for that discussion.


                                        2
<PAGE>
     The unaudited pro forma comparisons of the Consolidated Statements of
Operations have been derived from, and should be read in conjunction with, our
historical financial statements, including the notes thereto.  The unaudited pro
forma comparisons of the Consolidated Statements of Operations are presented for
informational purposes only and are not necessarily indicative of our financial
position or results of operations that would have occurred had the merger been
consummated as of the date indicated.  In addition, the unaudited pro forma
comparisons of the Consolidated Statements of Operations are not necessarily
indicative of our future financial condition or operating results.

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, with respect to future events, the
outcome of which is subject to certain risks, which could cause actual results
to differ from those contained in the forward-looking statements, and which
include those risks set forth herein and those risks identified in our other
filings with the SEC.  Words such as "anticipates," "estimates," "expects,"
"projects," "intends," "plans," "believes" and words and terms of similar
substance used in connection with any discussion of future operating or
financial performance identify such forward-looking statements.

     The SEC encourages companies to disclose forward-looking information so
that investors can better understand a company's future prospects and make
informed investment decisions.  However, the inclusion of forward-looking
statements should not be regarded as a representation by us, or any other
person, that such forward-looking statements will be achieved.  The
forward-looking statements contained in this report are based on management's
present expectations about future events. As with any projection or forecast,
they are inherently susceptible to uncertainty and changes in circumstances, and
we are under no obligation to (and expressly disclaims any such obligation to)
update or alter the forward-looking statements, whether as a result of such
changes, new information, future events or otherwise.  In light of the
foregoing, readers are cautioned not to place undue reliance on the
forward-looking statements contained in this report.


                                        3
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS

                UNAUDITED PRO FORMA COMPARISON OF THE CONSOLIDATED STATEMENT OF OPERATIONS

                                                              September 30                September 30
For three months and nine months ended, respectively       2001          2000          2001          2000
-------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>           <C>
SALES                                                  $   477,354   $   664,675   $ 3,436,263   $ 2,398,508
COST OF GOODS SOLD                                         421,104       504,852     2,066,522     1,603,120
-------------------------------------------------------------------------------------------------------------
    Gross margin                                            56,250       159,823     1,369,741       795,388
OPERATING EXPENSES
  Research and development                                 427,344       508,138     1,665,081     1,182,886
  Sales and marketing                                      697,113       525,843     2,175,425     1,825,878
  General and administrative                               459,001       522,461     1,380,464     1,312,933
-------------------------------------------------------------------------------------------------------------
                                                         1,583,458     1,556,442     5,220,970     4,321,697
-------------------------------------------------------------------------------------------------------------
      Loss from operations                              (1,527,208)   (1,396,619)   (3,851,229)   (3,526,309)
OTHER INCOME (EXPENSE)
  Interest expense, net                                   (124,857)      (71,108)     (395,820)     (226,422)
  Other, net                                                 7,625           645        43,763        64,272
-------------------------------------------------------------------------------------------------------------
       Total other (expense)                              (117,232)      (70,464)     (352,057)     (162,151)
-------------------------------------------------------------------------------------------------------------
      Net loss                                         $(1,644,440)  $(1,467,083)  $(4,203,286)  $(3,688,460)
=============================================================================================================

BASIC AND DILUTIVE LOSS PER COMMON
SHARE                                                  $    (0.145)  $    (0.129)  $    (0.370)  $    (0.326)
</TABLE>



     Historical results and comparisons are not commented on since we had no
operations in 2000 and in 2001 we had operations beginning April 16, 2001.
Please see the attached financial statements for our historical results.

     Revenues for the nine months ended September 30, 2001 were $3,436,263, an
increase of approximately 43% over revenues of $2,398,508 for the nine months
ended September 30, 2000.  Revenues for the three-month period ended September
30, 2001 were $477,354, a decrease of 28% from the same period in the prior year
reflecting the effect of the economic slowdown.

     Research and development expenses were $1,665,081 for the nine months ended
September 30, 2001, as compared to $1,182,886 for the nine months ended
September 30, 2000.  For the three months ended September 30, 2001, research and
development expenses were $427,344, 16% less than the same period in the prior
year. This decrease is in line with cost reductions necessary as a result of the
revenue slowdown.


                                        4
<PAGE>
     Sales and marketing expenses for the nine months ended September 30, 2001
were $2,175,425, as compared to $1,825,878 for the nine months ended September
30, 2000. The period-to-period variation is primarily attributable to expenses
incurred in connection with the opening of offices in Hong Kong and Munich.
Those increased costs continue to be reflected for the three months ended
September 30, 2001 with expenditures of $697,113, compared to $525,843 in the
prior year.

     General and administrative costs were $1,380,464 for the nine months ended
September 30, 2001, as compared to $1,312,933 for the nine months ended
September 30, 2000, reflecting increased legal costs associated with the merger,
lawsuit settlements and maintaining public reporting requirements.   For the
three months ended September 30, 2001, general and administrative costs were
$459,001 down from $522,461 for the same period in the prior year as a result of
decreased expenditures necessitated by the revenue slowdown.

     Interest and other expense, net was $352,057 for the nine months ended
September 30, 2001, as compared to $162,151 for the nine months ended September
30, 2000.  The increase was primarily due to accruing interest on shareholder
loans and other increases in debt.  For the three months ended September 30,
2001, interest and other expenses were $117,232, compared to $70,464 in the
prior year.

     Our historical financials reflect the acquisition of Optivision as of April
16, 2001, which was accounted for by the purchase method of accounting.  As a
part of purchase accounting, based on the five day average market value of our
common stock on April 16, 2001, Optivision recorded goodwill in the amount of
$17,877,694.  A five year amortization was adopted and $1,638,789 amortization
was recorded for the period through September 30, 2001.  At September 30, 2001,
a review of the carrying value of the goodwill was performed. Optivision's
current operations and expected future sales have been affected by significant
negative industry and economic trends.  Specifically, Optivision has not been
able to raise adequate and timely funding for operations, and thus its research
and development of new products have fallen behind in a rapidly changing
technological industry.  As a result, we changed our estimate of the useful life
of the goodwill associated with the acquisition of Optivision to fully amortize
the amount of goodwill during the quarter ended September 30, 2001.


                                        5
<PAGE>
                          PART II - OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          99.1  Certification pursuant to Section 906 of the Sarbanes-Oxley Act
                of 2002.



                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date:  August 15, 2002            AMNIS SYSTEMS INC.

                                  By:  /s/  Lawrence L. Bartlett
                                      ------------------------------------------
                                      Lawrence L. Bartlett
                                      Vice President and Chief Financial Officer


                                        6
<PAGE>
                          INDEX TO FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheet as of
September 30, 2001 and June 30, 2001 . . . . . . . . . . . . . . . .  F-1
Unaudited Condensed Consolidated Statement of Operations
for the three-month and for the nine-month periods ended
September 30, 2001 and September 30, 2000. . . . . . . . . . . . . .  F-2
Unaudited Condensed Consolidated Statement of Cash Flows
for the nine-month periods ended September 30, 2001 and
September 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . .  F-3
Notes to Unaudited Consolidated Financial Statements . . . . . . . .  F-4 - F-11


                                        7
<PAGE>
<TABLE>
<CAPTION>
                                                                                                    AMNIS SYSTEMS INC.

                                                                                            CONSOLIDATED BALANCE SHEET

                                                                                                           (UNAUDITED)
======================================================================================================================

                                                                                        Sep 30, 2001    June 30, 2001
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>             <C>
ASSETS

CURRENT ASSETS:
  Cash                                                                                 $       8,358   $      140,666
  Accounts receivable, net of allowance for doubtful
  accounts of $300,375                                                                       497,216          499,290
  Inventories                                                                                462,690          511,483
  Prepaid expenses and other                                                                  45,959           25,881
----------------------------------------------------------------------------------------------------------------------

          Total current assets                                                             1,014,223        1,177,320
----------------------------------------------------------------------------------------------------------------------

INVESTMENTS                                                                                        0                0
----------------------------------------------------------------------------------------------------------------------
GOODWILL                                                                                           0       17,132,790
----------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
  Machinery and equipment                                                                  2,104,886        2,106,361
  Demonstration equipment                                                                    490,548          487,026
  Furniture and fixtures                                                                     521,288          525,293
  Leasehold improvements                                                                     351,111          351,111
----------------------------------------------------------------------------------------------------------------------

                                                                                           3,467,833        3,469,791

  Less: Accumulated depreciation and amortization                                         (3,251,086)      (3,193,953)
----------------------------------------------------------------------------------------------------------------------

          Property and equipment, net                                                        216,747          275,838
----------------------------------------------------------------------------------------------------------------------

OTHER ASSETS                                                                                  96,700           93,270
----------------------------------------------------------------------------------------------------------------------

                                                                                       $   1,327,670   $   18,679,218
======================================================================================================================

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES:
  Bank overdraft                                                                       $     122,508   $            0
  Financing obligations collateralized by accounts receivable                                916,345        1,018,525
  Stockholders' notes payable                                                              3,559,375        2,694,375
  Accounts payable - moratorium                                                            1,561,500        1,561,500
  Accounts payable - other                                                                   568,439          510,406
  Deferred rent                                                                              199,195          199,195
  Accrued liabilities                                                                      1,868,387        1,386,992
  Other current liabilities                                                                   60,368           59,442
----------------------------------------------------------------------------------------------------------------------
          Total current liabilities                                                        8,856,117        7,430,435

STOCKHOLDERS' (DEFICIT):
  Preferred stock, 20,000,000 authorized; none outstanding in September or June 2001
  Common stock, $0.0001 par value:
     Authorized - 100,000,000 shares in September and June, 2001
     Issued and outstanding - 11,369,597                                                       1,137            1,137
  Additional Paid-in Capital                                                              13,064,289       13,064,289
  Accumulated deficit                                                                    (20,593,873)      (1,816,643)
----------------------------------------------------------------------------------------------------------------------

          Total stockholders' deficit                                                     (7,528,447)      11,248,783
----------------------------------------------------------------------------------------------------------------------

          Total liabilities and stockholder's deficit                                  $   1,327,670   $   18,679,218
======================================================================================================================
</TABLE>


                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                                                                                     AMNIS SYSTEMS INC.

                                                                   CONSOLIDATED STATEMENT OF OPERATIONS
                                                                                            (UNAUDITED)
=======================================================================================================

                                                             September 30              September 30
                                                       -----------------------  -----------------------
For three months and nine months ended, respectively       2001         2000        2001         2000
-------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>       <C>            <C>
SALES                                                  $    477,354   $     0   $  1,704,386   $     0

COST OF GOODS SOLD                                          421,104         0      1,067,064         0
-------------------------------------------------------------------------------------------------------

       Gross margin                                          56,250         0        637,322         0

OPERATING EXPENSES
  Research and development                                  427,344         0        885,294         0
  Sales and marketing                                       697,113         0      1,306,582         0
  General and administrative                                459,001     1,037        825,392     4,333
  Amortization of goodwill                               17,132,790         0     17,877,694         0
-------------------------------------------------------------------------------------------------------

                                                         18,716,248     1,037     20,894,962     4,333
-------------------------------------------------------------------------------------------------------

       Loss from operations                             (18,659,998)   (1,037)   (20,257,640)   (4,333)

OTHER INCOME (EXPENSE)
  Interest expense, net                                    (124,857)        0       (200,637)        0
  Other, net                                                  7,625         0          2,558         0
-------------------------------------------------------------------------------------------------------

       Total other (expense)                               (117,232)        0       (198,079)        0
-------------------------------------------------------------------------------------------------------

       Net loss                                        $(18,777,230)  $(1,037)  $(20,455,719)  $(4,333)
=======================================================================================================

BASIC AND DILUTED LOSS PER COMMON SHARE                      (1.652)   (0.000)        (1.263)   (0.000)
</TABLE>


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                                                                                               AMNIS SYSTEMS INC.

                                                                             CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                                      (UNAUDITED)
=================================================================================================================
                                                                                          September 30
                                                                           --------------------------------------
For the nine months ended                                                          2,001               2000
-----------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                 $        (20,455,719)  $       (4,333)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Depreciation and amortization                                                  17,972,941                0
      Provision for doubtful accounts                                                         -                0
      Provision for excess and obsolete inventories                                      57,128                0
      Issuance of common stock for services                                              21,000                0
  Decrease (increase) in accounts receivable                                            510,385                0
  Decrease (increase) in inventories                                                    494,083              736
  Decrease (increase) in prepaid expenses and other assets                              (25,762)               0
  Decrease (increase) in deposits                                                        (3,430)               0
  Increase (decrease) in accounts payable                                                31,453                0
  Increase (decrease) in accrued liabilities                                           (466,736)               0
  Increase (decrease) in other accrued liabilities                                      (13,391)               0
  Increase (decrease) in deferred rent                                                        -                0

          Net cash used in operating activities                                      (1,878,048)          (3,597)
-----------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash acquired from business combination                                                11,720
  Purchases of property and equipment                                                   (12,702)               0
-----------------------------------------------------------------------------------------------------------------

          Net cash used in investing activities                                            (982)               0
-----------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Bank overdraft                                                                        122,508
  Borrowings from stockholders                                                          987,178                0
  Payments on financing obligations collateralized by accounts receivable              (222,298)               0
  Proceeds from issuance of common stock                                              1,000,000                0
  Payment on notes payable                                                                    -                0
                                                                                                               0
-----------------------------------------------------------------------------------------------------------------

          Net cash provided by (used in) financing activities                         1,887,388                0
-----------------------------------------------------------------------------------------------------------------

          Net increase (decrease) in cash                                                 8,358           (3,597)

CASH AND CASH EQUIVALENTS, beginning of year                                                  -            3,697
-----------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of quarter                                  $              8,358   $          100
=================================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  Cash paid for interest                                                   $            102,810   $            0
=================================================================================================================

NON CASH INVESTING AND FINANCING ACTIVITIES
  Common stock exchanged for acquisition of Optivision, Inc. common stock  $         12,221,884
  Issuance of common stock for services at $1.00 per share                                5,000
  Issuance of common stock for services at $2.00 per share                               16,000
  Cancellation of shares of common stock                                                  1,974
</TABLE>


                                      F-3
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

The accompanying unaudited interim consolidated financial statements reflect all
adjustments  that are, in the opinion of management, necessary to present fairly
the financial position, results of operations, and cash flows of the Company for
the periods indicated. All adjustments for the third quarter ended September 30,
2001  were  of  a  recurring  nature.  The  accompanying  unaudited  interim
consolidated  financial  statements  have  been  prepared in accordance with the
instructions  for Form 10-QSB and, therefore, do not include all information and
footnotes  necessary  for  a  complete  presentation  of the financial position,
results  of  operations,  and  cash  flows  for  the Company, in conformity with
accounting  principles  generally  accepted in the United States of America. The
Company  has filed audited financial statements that include all information and
footnotes  necessary  for such a presentation of the financial position, results
of  operations  and  cash flows for the fiscal years ended December 31, 2000 and
1999,  with  the  Securities  and  Exchange  Commission.

It  is suggested that the accompanying unaudited interim financial statements be
read  in  conjunction  with the aforementioned audited financial statements. The
unaudited  interim  consolidated  financial  statements  contain  all normal and
recurring  entries.  The  results  of  operations  for  the interim period ended
September  30, 2001 are not necessarily indicative of the results to be expected
for  the  full  year.

NOTE 1 -  DESCRIPTION  OF  COMPANY:

          Amnis  Systems  Inc.,  a  Delaware  corporation,  and its wholly-owned
          subsidiary,  Optivision,  Inc. ("Company" combined) make  hardware and
          software  products  for  the  creation, management and transmission of
          compressed  high-quality  digital  video  over  broadband  computer
          networks.  Our network video products are distributed primarily in the
          United  States of America, Europe, and Pacific Rim countries through a
          network  of  value  added  resellers,  or VARs, system integrators and
          original  equipment  manufacturers,  or OEMs. Our products are used in
          diverse  applications  such  as distance learning, corporate training,
          video  courier  services,  surveillance,  telemedicine  and  visual
          collaboration.  We  consider  our  operations  to  be  one segment for
          reporting  purposes.

NOTE 2 -  GOING CONCERN:

          We  are subject to a number of business risks affecting companies at a
          similar  stage  of  development,  including competition from companies
          with  greater  resources  and alternative technologies, the ability to
          obtain  financing to fund future operations, dependence on new product
          introductions  in  a  rapidly  changing  technological  environment,
          dependence  on  a  limited  number  of  customers,  dependence  on key
          employees  and  the ability to attract and retain additional qualified
          personnel.


                                      F-4
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

          The accompanying financial statements have been prepared assuming that
          the Company will continue as a going concern. The stockholders' equity
          of  the  Company,  after  the  April  16th  business  combination with
          Optivision,  has  resulted in a substantial deficit that is compounded
          by  its current liabilities exceeding its current assets by $7,841,894
          at  September  30,  2001  and  negative  cash  flow from operations of
          $1,878,048 for the nine months ended September 30, 2001. These factors
          raise  substantial  doubt about the Company's ability to continue as a
          going  concern. There is no assurance that the Company will be able to
          achieve successful operations, obtain sufficient financing or obtain a
          line  of  credit. The accompanying financial statements do not include
          any  adjustments  that  might  result  from  the  outcome  of  these
          uncertainties.



NOTE 3 -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

          a.   Principles  of  Consolidation
               -----------------------------

               The  financial  statements  include the accounts of Amnis Systems
               Inc.  and  its  wholly-owned subsidiary Optivision, Inc. from the
               date of acquisition, April 16, 2001. All significant intercompany
               accounts  and transactions have been eliminated in consolidation.

          b.   Risks  due  to  Concentration  of  Significant  Customers
               ---------------------------------------------------------

               Historically, a substantial portion of our revenues has come from
               large purchases by a small number of customers. If we lose one or
               more  of  our key customers or experience a delay or cancellation
               of  a  significant  order or a decrease in the level of purchases
               from any of our key customers, our net revenues could decline and
               our  operating results and business could be harmed. In addition,
               our  net  revenues  could  decline  and our operating results and
               business  could  be  harmed  if  we  experience any difficulty in
               collecting  amounts  due  from  one or more of our key customers.
               During  the  nine  months  ended September 30, 2001, our top four
               customers  accounted  for  50%  of  our  net  revenues.

               As  of  September  30,  2001,  approximately  45% of our accounts
               receivable  were  concentrated  with  five  of  our  customers.

          c.   Inventories
               -----------

               Inventories are stated at the lower of cost (first-in, first-out)
               or market. Provision has been made to reduce obsolete inventories
               to their net realizable value. Inventories contain components and
               assemblies  in  excess  of  the  Company's  current  estimated
               requirements  and  these  are reserved for at September 30, 2001.
               Due  to  competitive  and  market  pressures,  it  is  reasonably
               possible  that  additional  provisions  could  be required in the
               future.


                                      F-5
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

               Inventories consist of the following at September 30, 2001:

               Raw Materials                                     $     255,173
               Work-in-process                                         696,571

               ----------------------------------------------------------------

                                                                       951,744

               Reserve for inventory obsolescence and
                 demonstration inventory refurbishing costs           (489,054)
               ----------------------------------------------------------------

                                                                 $     462,690
               ================================================================


               Certain  of  the  Company's  products contain components that are
               supplied  by a limited number of third parties. While the Company
               has  an  inventory of these components, any significant prolonged
               shortage  of  these components, or the failure of these suppliers
               to  maintain  or  enhance  these  components  could  materially
               adversely  affect  the  Company's  results  of  operations.




NOTE 4 -  STOCKHOLDERS' NOTES PAYABLE:

          Certain stockholders' loaned Optivision funds beginning in April 1999.
          These  unsecured loans were all due in one year and bear interest at a
          rate  of  10%  per  annum.  The Company assumed the liability of these
          stockholder notes payable in connection with the merger. The loans are
          currently  past  due  and  any  unpaid  interest has been accrued. The
          carrying  value  of these notes payable approximates their fair value.


                                      F-6
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


NOTE 5 -  LOSS PER SHARE:

          The  basic  and  diluted  loss  per  share  was  calculated based on a
          weighted  average  number  of  shares  outstanding  of  11,369,597 and
          16,190,853  for the 3 months and 9 months ended September 30, 2001 and
          26,297,135  and  26,268,616  for  the  3  months and 9 months ended at
          September 30, 2000, respectively. Since we have a loss for all periods
          presented,  net  loss  per  share  on a diluted basis is equivalent to
          basic  net  loss  per  share  because  the  effect of converting stock
          options, warrants, convertible debt and other common stock equivalents
          would  be  anti-dilutive.

NOTE 6 -  SUBSEQUENT EVENTS:


          In  October  2001, the Company issued to an investor 555,555 shares of
          our  common  stock  for  a  total  of  $200,000  in  cash.

          On  December  28,  2001,  the  Company  issued and sold a 12% two-year
          secured  convertible  debenture  in  the principal amount of $500,000,
          investment options for the purchase of up to $500,000 of common stock,
          and  warrants  exercisable  for up to 1,100,000 shares of common stock
          The  terms of this financing also provide for the issuance and sale of
          an  additional  12%  two-year  secured  convertible  debenture  in the
          principal  amount  of  $500,000 and related investment options for the
          purchase  of  up  to $500,000 of common stock. The conversion price of
          the  debentures  is  equal  to  the  lesser  of  $0.385 per share or a
          floating  average  related to stock price fluctuations. Similarly, the
          exercise  price  of  the warrants is equal to the lesser of $0.385 per
          share  or  a floating average related to stock price fluctuations, and
          is  also  subject to adjustment for, among other things, stock splits,
          combination or reclassification of the Company's capital stock and the
          like.

          Since  there are multiple components of the debenture, value was added
          to  each  component (warrants and debenture) based on their respective
          value. A discount on the debenture was calculated in two parts; first,
          the  beneficial  conversion feature on the debenture was valued as the
          difference  between  the  purchase  price  of  the  conversion and the
          current trading price of the stock. Secondly, the warrants were valued
          using  the  Black  Scholes  Model.  The  combined  total  discount  is
          $305,195,  and  will  be  amortized  over  the  two  year  life of the
          debenture.


                                      F-7
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

          On  January  30,  2002, the Company successfully negotiated a work-out
          agreement plan with the creditors of Optivision, Inc., under which the
          Company  will  pay  the  creditors of Optivision, Inc. $0.35 for every
          $1.00  owed  on debt listed on the balance sheet as Accounts Payable -
          moratorium  of  $1,561,500. In accordance with the work-out agreement,
          the  debt  was  settled  in  June  2002.

          On  January  14,  2002,  the  Company issued a convertible note in the
          principal  amount of $3,547,917 to Mr. Michael A. Liccardo, president,
          chief  executive  officer  and  chairman of the board of directors, in
          exchange  for the cancellation of certain loans aggregating $3,204,375
          and  related accrued interest of $343,542 that Mr. Liccardo had loaned
          to  Optivision,  Inc. to meet current operating expenses. At any time,
          Mr.  Liccardo  may  elect  to  convert the note to Common stock of the
          Company  at  $  0.35  per  share, subject to adjustment related to the
          price  of  subsequent  securities  issuances  by  the Company to third
          parties.  The  convertible note bears interest at 10% per annum. Since
          the  Company's  stock  price  exceeded  the  conversion  price  on the
          transaction  date,  there is an embedded beneficial conversion feature
          present  in  the convertible note which has been valued separately. As
          of  January 14, 2002, the intrinsic value of the beneficial conversion
          feature  is  greater  than  the  proceeds allocated to the convertible
          note.  On  January  14,  2002,  the  Company  recorded  a  discount of
          $2,483,542. This discount is being amortized from the date of issuance
          of  the  convertible  note  through  the  stated  redemption  date.

          Between  February  14, 2002 and February 21, 2002, the Company entered
          into  financing  agreements  for  the  sale of 2,250,000 shares of its
          common stock. The stock was sold in units, which include ten shares of
          common  stock,  subject  to  adjustment  related  to  stock  price
          fluctuations, and one warrant, for $8.00 each. Each warrant allows the
          holder  to  purchase  three  shares of common stock at $0.90 per share
          subject to such customary adjustment for stock splits, combinations or
          reclassifications  of  the  Company's  capital stock and the like. The
          total  selling  price  of  these  units  was  $1,800,000.

          In  March  2002,  the  Company issued and sold to a corporate investor
          275,890  shares of its common stock at $1.00 per share in exchange for
          the  cancellation  of  certain loans that the investor had made to the
          Company  (including  all  accrued  interest  thereon).

          During  2002,  the  Company  settled  with  its  employees  for unpaid
          compensation  by  issuing  additional stock options in lieu of cash in
          the  amount  of  $1,254,051.

          In  May 2002, the Company issued 250,000 shares of its common stock to
          a  corporate  service  provider  in  exchange  for  certain consulting
          services  to  be  rendered  to  the  Company over a four month period.

          On  June  18,  2002,  two  of the financing agreements entered into in
          February  2002  were  amended.  The  number  of  shares  per  unit has
          increased  to  21 and may be further increased by an amount as defined
          in the agreement. The warrant was amended to reduce the exercise price
          to  $0.13,  subject  to  adjustment  for,  among other things, capital
          issuances  below $0.13 per share and for stock splits, combinations or
          reclassifications  of  the  Company's  capital stock and the like.

          No  additional  proceeds  were  received.


                                      F-8
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

          On  June  17,  2002, the Company's Board of Directors adopted the 2002
          Stock  Plan.  20,000,000  shares  are authorized for issuance of which
          none  have  been  granted  through  June  17,  2002.

          On  June  18,  2002, Mr. Liccardo converted $2,050,000 in principal of
          the  convertible  note  issued  on January 14, 2002 and, in connection
          therewith,  received  26,623,377 shares of common stock. The remaining
          principal  and  accrued  interest was transferred to a new convertible
          note  as of this date. The note provides that Mr. Liccardo may, at any
          time,  elect to convert the outstanding principal of $1,612,763 of the
          convertible  note and accrued interest thereon into a number of shares
          of  our  common stock determined by dividing the outstanding principal
          and  interest  on  the  note  by  $0.35. The $0.35 conversion price is
          subject  to adjustment to a lower conversion price through January 14,
          2003,  and  is  also  subject  to customary adjustment in the event of
          stock  splits,  dividends,  recapitalizations  and  the  like.  The
          Convertible  note bears interest at 10% per annum. Since the Company's
          stock  price  exceeded  the  conversion price on the transaction date,
          there  is  an  embedded  beneficial  conversion feature present in the
          convertible  note  which  has  been  valued separately. As of June 18,
          2002,  the  intrinsic  value  of  the beneficial conversion feature is
          greater  that  the proceeds allocated to the convertible note. On June
          18, 2002 the Company recorded a discount of $882,276. This discount is
          being  amortized  from  the  date  of issuance of the convertible note
          through  the  stated  redemption  date.

          As  a  result  of  the  partial conversion $825,645 of the unamortized
          portion of the discount on convertible note payable was written-off to
          additional  paid  in  capital.  The exchange of the note resulted in a
          loss  of  extinguishment  of  debt  of  $73,610,  and  the  remaining
          unamorized  portion  of  the  discount  on convertible note payable of
          $603,292  related  to  the original note was written-off to additional
          paid  in  capital.

          On  June  18,  2002,  the  Company  issued  and  sold two 12% two-year
          convertible  notes  in  the aggregate principal of $450,000 and common
          stock purchase warrants exercisable for up to 135,000 shares of common
          stock,  subject  to  adjustment  for,  among  other  things,  capital
          issuances  below $0.13 per share and for stock splits, combinations or
          reclassifications  of  the Company's capital stock and the like. Since
          there  are  multiple  components of the debentures, value was added to
          each  component  (warrants  and  debenture)  based on their respective
          value. A discount on the debenture was calculated in two parts; first,
          the  beneficial  conversion feature on the debenture was valued as the
          difference  between  the  purchase  price  of  the  conversion and the
          current trading price of the stock. Secondly, the warrants were valued
          using the Black Scholes Model. The combined total discount of $249,528
          will  be  amortized  over  the  two-year  life  of  the  debentures.

          On June 25, 2002, the Company amended its certificate of incorporation
          to  increase  the  total  number  of shares authorized to 420,000,000;
          400,000,000  designated  as common stock with par value of $0.0001 and
          20,000,000  designated  as  preferred stock with par value of $0.0001.

          As  of  the  end  of  July 2002 the Company has been unable to pay its
          lease  obligations,  due  to the departure of its Sublessee, which now
          total approximately $200,000. The landlord has agreed to meet with the
          Company  to  negotiate  lease renewal and payment of past due amounts.

          From  January  1  through August 5, 2002, the Company issued 1,254,880
          shares  of  common  stock  to  various  corporate service providers in
          exchange  for  services valued at $609,534 to be rendered over varying
          contract  lengths.

          On  August  8,2002  pursuant  to  the  Warrant  Agreement with Bristol
          Investment  Fund  dated  December 28, 2001,  the  Company  reduced the
          exercise  price  of  the  warrant  shares  to  $0.0436  per  share and
          increased  the  number  of warrant shares purchasable at such exercise
          price  by  604,969.

NOTE 7 -  BUSINESS COMBINATION:

          On April 16, 2001, we effected a business combination with Optivision,
          Inc.  (Optivision)  by exchanging 4,459,063 shares of our common stock
          for  all  of the common stock of Optivision. The principal business of
          Optivision  is making hardware and software products for the creation,
          management  and  transmission  of  compressed  high-quality video over
          broadband  computer  networks.  The  purchase price of $12,221,884 was
          determined  by using a 5 day range of the average of the Company stock
          price of $2.74 per share. The combination has been accounted for under
          the  purchase  method  of accounting and accordingly, the accompanying
          financial  statements  include the results of operations of Optivision
          subsequent  to  April  16,  2001.

          The  following  unaudited pro forma information summarizes the year to
          date  results  of  operations  as  if  the  business  combination were
          affected  as  of  January  1,  2000:


                                      F-9
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                                                     2001                 2000

          Net Sales                           $     3,436,263   $     2,398,508
          Amortization of goodwill                 16,500,926         2,475,140
          Net Loss                            $   (20,704,212)  $    (6,163,600)
          ----------------------------------------------------------------------

          Basic and Dilutive Loss per Share   $         (1.82)  $         (0.54)
          ----------------------------------------------------------------------


                                      F-10
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

NOTE 8 -  RESTATEMENT OF FINANCIAL STATEMENTS:

          The  unaudited  interim  consolidated  financial  statements have been
          restated  as  a  result of the Company's determination that it did not
          meet all of the criteria under Accounting Principles Board Opinion No.
          16  "Business  Combinations"  for  a  pooling  of  interests.

          The  information  below  shows the results included in these financial
          statements  and  those  previously  reported  under  the  pooling  of
          interests  method:

<TABLE>
<CAPTION>
                                                             Purchase      Pooling of
                                                              Method        Interest
<S>                                                        <C>            <C>
          For the nine months ended September 30, 2001:

            Net Sales                                      $  1,704,386   $ 3,436,263
            Net Loss                                       $(20,455,719)  $(4,203,286)

            Basic and Dilutive Loss per Share              $      (1.26)  $     (0.34)
            --------------------------------------------------------------------------

          For the nine months ended September 30, 2000:

            Net Sales                                      $          -   $ 2,398,508
            Net Loss                                       $     (4,333)  $(3,688,460)

            Basic and Dilutive Loss per Share              $       0.00   $     (0.32)
            --------------------------------------------------------------------------
</TABLE>

NOTE 9 -  CHANGE IN ESTIMATE OF LIFE OF GOODWILL:

          Optivision's  current  operations  and expected future sales have been
          affected  by  significant  negative  industry  and  economic  trends.
          Specifically,  it  has  not  been  able  to  raise adequate and timely
          funding  for  operations, and thus its research and development of new
          products  has  fallen  behind  in  a  rapidly  changing  technological
          industry.  As a result, the Company changed its estimate of the useful
          life  of the goodwill associated with its acquisition of Optivision to
          fully  amortize  the  amount  of  goodwill  during  the  quarter ended
          September  30,  2001.  The  activity  during  the  year is as follows:

            Goodwill  from  acquisition                         $    17,877,694
            Amortization                                             (1,638,789)
            Amortization  due  to  change  in  estimate             (16,238,905)
            --------------------------------------------------------------------

            Goodwill at September 30, 2001                       $            -


                                      F-11
<PAGE>