<PAGE>

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

                                   FORM 10-QSB

(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, 2003

         [ ]      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.
        (Exact name of small business issuer as specified in its charter)

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


                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 CORPORATE ISSUERS

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity as of November 13, 2003 is 179,925,156 shares of Common Stock.

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



<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

         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.

                                               Amnis Systems Inc. and Subsidiary

                                          Consolidated Balance Sheet (unaudited)
                                                              September 30, 2003
================================================================================

<TABLE>
<CAPTION>
         Assets

         Current Assets:
<S>                                                                                                      <C>
              Cash and cash equivalents                                                                  $    319,627
              Accounts receivable, net of allowance for doubtful accounts of $ 28,580                         273,333
              Inventories, net of reserve of $259,750                                                         568,322
              Prepaid expenses and other current assets                                                        83,081
---------------------------------------------------------------------------------------------------------------------

                   Total current assets                                                                     1,244,363
---------------------------------------------------------------------------------------------------------------------

         Property and Equipment
              Machinery and equipment                                                                       1,644,650
              Demonstration equipment                                                                         458,810
              Furniture and fixtures                                                                          479,736
              Leasehold improvements                                                                          351,111
---------------------------------------------------------------------------------------------------------------------

                                                                                                            2,934,307
              Less:  Accumulated depreciation and amortization                                             (2,844,991)
---------------------------------------------------------------------------------------------------------------------

                   Property and equipment, net                                                                 89,316
---------------------------------------------------------------------------------------------------------------------

         Debt issuance costs                                                                                  143,839
         Deposits                                                                                              10,740
---------------------------------------------------------------------------------------------------------------------

                                                                                                         $  1,488,258
---------------------------------------------------------------------------------------------------------------------

         Liabilities and Stockholders' Deficit

         Current Liabilities:
              Stockholders' notes payable                                                                $    756,188
              Accounts payable                                                                              1,669,901
              Accrued salaries                                                                              1,569,377
              Accrued vacation                                                                                236,007
              Accrued interest payable                                                                        531,628
              Convertible notes payable, current portion (net of discount of $172,030)                      1,619,033
              Deferred revenue                                                                                163,011
              Accrued warrant liability                                                                       212,869
              Other accrued expenses                                                                        1,799,412
---------------------------------------------------------------------------------------------------------------------

                   Total current liabilities                                                                8,557,426

         Long-Term Liabilities:
              Convertible note payable, long-term portion (net of discount of $1,222,108)                     938,012
---------------------------------------------------------------------------------------------------------------------

                   Total liabilities                                                                        9,495,438
---------------------------------------------------------------------------------------------------------------------

         Stockholders' Deficit:
              Preferred stock, $0.0001 par value; 20,000,000 authorized: none issued or outstanding                --
              Common stock, $0.0001 par value:
                Authorized - 800,000,000 shares
                Issued and outstanding - 131,685,220  shares                                                   13,168
              Additional paid-in capital                                                                   25,794,324
              Accumulated deficit                                                                         (33,814,672)
---------------------------------------------------------------------------------------------------------------------

                   Total stockholders' deficit                                                             (8,007,180)
---------------------------------------------------------------------------------------------------------------------

                   Total liabilities and stockholder's deficit                                           $  1,488,258
---------------------------------------------------------------------------------------------------------------------
</TABLE>


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


                                      F-2
<PAGE>

                                               Amnis Systems Inc. and Subsidiary

                               Consolidated Statements of Operations (unaudited)


<TABLE>
<CAPTION>
                                                                             September 30                    September 30
                                                                       -------------------------    ------------------------------
For three months and nine months ended, respectively                     2003            2002             2003           2002
----------------------------------------------------------------------------------------------------------------------------------
                                                                            (as restated)                    (as restated)
<S>                                                                 <C>              <C>            <C>              <C>
         Sales                                                      $     516,185    $   889,658    $   1,217,673    $   1,594,938

         Cost of Goods Sold                                               366,379        583,779          870,256        1,344,802
----------------------------------------------------------------------------------------------------------------------------------

                Gross profit                                              149,806        305,879          347,417          250,136
----------------------------------------------------------------------------------------------------------------------------------

         Operating Expenses
             Research and development                                     291,759        348,017          777,875          827,846
             Sales and marketing                                          154,832        403,335          594,317        1,373,646
             General and administrative                                   919,918        616,680        1,899,187        2,001,635
----------------------------------------------------------------------------------------------------------------------------------

                   Total operating exenses                              1,366,509      1,368,032        3,271,379        4,203,127
----------------------------------------------------------------------------------------------------------------------------------

                   Loss from operations                                (1,216,703)    (1,062,153)      (2,923,962)      (3,952,991)

         Other Income (Expense)
             Interest expense, net                                       (132,911)       (27,486)        (338,113)        (217,047)
             Amortization of discount on convertible notes payable       (297,764)      (526,154)        (713,256)      (3,332,616)
             Financing costs                                             (200,747)      (169,500)      (1,091,737)        (627,855)
             Gain on extinguishment of accounts payable                        --             --               --        1,042,177
             Change in fair value of detachable warrants                  211,361        327,182         (135,459)       1,094,852
             Other, net                                                      (931)         5,040           (1,316)          47,153
----------------------------------------------------------------------------------------------------------------------------------

                    Total other income (expense)                         (420,992)      (390,918)      (2,279,881)      (1,993,336)
----------------------------------------------------------------------------------------------------------------------------------

         Net loss before taxes                                         (1,637,695)    (1,453,071)      (5,203,843)      (5,946,327)
----------------------------------------------------------------------------------------------------------------------------------

             Income Tax                                                        --             --               --               --
----------------------------------------------------------------------------------------------------------------------------------

         Net loss                                                   $  (1,637,695)   $(1,453,071)   $  (5,203,843)   $  (5,946,327)
----------------------------------------------------------------------------------------------------------------------------------

         Basic and Diluted Loss per Common Share                    $       (0.01)   $     (0.03)   $       (0.05)   $       (0.21)
----------------------------------------------------------------------------------------------------------------------------------

         Weighted average shares outstanding - basic & diluted        123,033,241     48,392,197       97,765,671       28,860,365
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       F-3
<PAGE>

                        Amnis Systems Inc. and Subsidiary

           Consolidated Statement of Stockholders' Deficit (unaudited)


<TABLE>
<CAPTION>
                                                                                            Additional                    Total
                                                           Common Stock                      Paid-In     Accumulated   Stockholders'
                                                              Shares            Amount       Capital       Deficit       Deficit
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>         <C>           <C>            <C>
Balance, December 31, 2002                                   66,294,203       $  6,629    $ 22,459,213  $(28,610,829)  $ (6,144,987)

 Issuance of common stock for converstion of notes payable
   and related accrued interest                              47,157,972          4,716         594,057                      598,773

 Issuance of common stock for services                        6,927,288            693         249,555                      250,248

 Issuance of common stock for exercise of options
   and warrants                                              10,773,000          1,077         529,843                      530,920

 Issuance of common stock for compensation                      532,757             53          29,545                       29,598

 Beneficial conversion feature of convertible note payable                                   1,203,668                    1,203,668

 Value of warrants issued for services                                                         451,706                      451,706

 Reclass of value of warrants from liability due to
   underlying shares being registered on Form SB-2                                             276,737                      276,737

 Net loss                                                                                                 (5,203,843)    (5,203,843)
------------------------------------------------------------------------------------------------------------------------------------

Balance, September 30, 2003                                 131,685,220       $ 13,168    $ 25,794,324  $(33,814,672)  $ (8,007,180)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                      F-4
<PAGE>

                                               Amnis Systems Inc. and Subsidiary

                               Consolidated Statements of Cash Flows (unaudited)


<TABLE>
<CAPTION>
                                                                                                    September 30
                                                                                             -----------------------------
         For the nine months ended                                                               2003            2002
--------------------------------------------------------------------------------------------------------------------------

         Cash Flows from Operating Activities:
<S>                                                                                          <C>               <C>
              Net loss                                                                       $(5,203,843)      $(5,946,327)
              Adjustments to reconcile net loss to
                net cash used in operating activities:
                  Common stock and options/warrants issued for services                          701,954           423,233
                  Common stock issued for financing costs                                             --           288,750
                  Warrants issued for financing costs                                                 --           107,005
                  Employee salaries exchanged for stock                                           29,598         1,285,027
                  Depreciation and amortization                                                   42,015            41,581
                  Amortization of discount on convertible notes payable                          713,256         3,332,616
                  Amortization of debt issuance costs                                             28,632                --
                  Loss on disposal of property and equipment                                         945             1,627
                  Change in fair value of warrant liability                                      135,459        (1,094,852)
                  Gain on extinguishment of debt                                                      --        (1,042,177)
              (Increase) decrease in accounts receivable                                          38,770           (38,686)
              (Increase) decrease in inventories                                                  (7,322)          100,492
              (Increase) decrease in prepaid expenses and other assets                           (31,494)           70,798
              Increase (decrease) in accounts payable                                             52,084          (518,866)
              Increase (decrease) in accrued salaries                                            992,484          (451,241)
              Increase (decrease) in accrued vacation                                             23,172           (66,065)
              Increase in accrued interest payable                                               339,868           208,793
              Decrease in deferred rent                                                               --           (99,985)
              Increase in deferred revenue                                                         6,289            39,886
              Increase in other accrued expenses                                               1,146,642           330,069
              Decrease in sublease deposit                                                            --           (72,800)
--------------------------------------------------------------------------------------------------------------------------

                  Net cash used in operating activities                                         (991,491)       (3,101,122)
--------------------------------------------------------------------------------------------------------------------------

         Cash Flows from Investing Activities:
              Purchases of property and equipment                                                (23,503)          (15,677)
--------------------------------------------------------------------------------------------------------------------------

                  Net cash used in investing activities                                          (23,503)          (15,677)
--------------------------------------------------------------------------------------------------------------------------

         Cash Flows from Financing Activities:
              Bank Overdraft                                                                          --            11,393
              Proceeds from financing obligations collateralized by accounts receivable          891,702         1,364,540
              Payments on financing obligations collateralized by accounts receivable         (1,277,971)       (1,388,449)
              Payment of debt issuance costs                                                    (147,500)               --
              Proceeds from issuance of common stock                                                  --         2,170,397
              Proceeds from the exercise of options and warrants                                 530,920                --
              Proceeds from convertible debentures                                             1,250,000           950,000
--------------------------------------------------------------------------------------------------------------------------

                  Net cash provided by financing activities                                    1,247,151         3,107,881
--------------------------------------------------------------------------------------------------------------------------

         Net increase (decrease) in cash and cash equivalents                                    232,157            (8,918)

         Cash and cash equivalents, beginning of period                                           87,470            48,467
--------------------------------------------------------------------------------------------------------------------------

         Cash and cash equivalents, end of period                                            $   319,627       $    39,549
--------------------------------------------------------------------------------------------------------------------------


         Non Cash Investing and Financing Activities:
              Common stock issued for services                                               $   250,248       $   434,922
              Accrued salaries exchanged for common stock                                         29,598         1,266,749
              Debt and accrued interest exchanged for common stock                               327,073           275,890
              Convertible note payable exchanged for common stock                                271,700         2,050,000
              Note payable and interest in exchange for convertible note payable                      --         3,547,920
              Convertible note payable exchanged for convertible note payable                         --         1,612,763
              Stockholder purchase of financing obligation from bank                             531,397                --
              Discount on convertible note payable                                             1,468,247         1,340,636
--------------------------------------------------------------------------------------------------------------------------

         Supplemental Disclosures of Cash Flow Information:
              Cash paid for income taxes                                                     $        --       $        --
              Cash paid for interest                                                         $        --       $   224,175
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                      F-5
<PAGE>


                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


NOTE 1 - BASIS OF PRESENTATION

         The unaudited  consolidated  financial statements have been prepared by
         Amnis  Systems,  Inc.  (the  "Company"),  pursuant  to  the  rules  and
         regulations of the Securities and Exchange Commission.  The information
         furnished  herein  reflects  all  adjustments   (consisting  of  normal
         recurring  accruals  and  adjustments)  which  are,  in the  opinion of
         management,  necessary to fairly present the operating  results for the
         respective  periods.   Certain  information  and  footnote  disclosures
         normally present in annual consolidated  financial  statements prepared
         in accordance  with  accounting  principles  generally  accepted in the
         United  States of America have been omitted  pursuant to such rules and
         regulations.  These consolidated financial statements should be read in
         conjunction  with the audited  consolidated  financial  statements  and
         footnotes  for  the  year  ended  December  31,  2002  included  in the
         Company's Annual Report on Form 10-KSB.  The results of the nine months
         ended September 30, 2003 are not necessarily  indicative of the results
         to be expected for the full year ending December 31, 2003.

         The accompanying  consolidated  financial statements have been prepared
         in conformity  with  accounting  principles  generally  accepted in the
         United States of America, which contemplate continuation of the Company
         as a going concern. The Company incurred net losses for the nine months
         ended  September 30, 2003 of $ 5,203,843 and at September 30, 2003, had
         an accumulated deficit of $ 33,814,672 and a working capital deficit of
         $  7,313,063.  These  conditions  raise  substantial  doubt  as to  the
         Company's  ability to continue as a going concern.  These  consolidated
         financial  statements do not include any adjustments  that might result
         from the  outcome of this  uncertainty.  These  consolidated  financial
         statements   do  not   include   any   adjustments   relating   to  the
         recoverability and classification of recorded asset amounts, or amounts
         and  classification  of liabilities  that might be necessary should the
         Company be unable to continue as a going concern.

         The Company plans to take the following  steps that it believes will be
         sufficient  to provide  the  Company  with the  ability to  continue in
         existence. The Company has recently hired a new Chief Executive Officer
         and has  obtained  additional  funding  from a group  put  together  by
         existing  investors and a commitment for additional funds from this and
         other  new  investors.  The  Company  believes  that with a new CEO and
         sufficient  capital to fund operations that the Company will be able to
         achieve profitable  operations,  but there can be no assurance that the
         Company will generate positive cash flows from operations sufficient to
         sustain operations in the near term.

NOTE 2 - STOCK OPTIONS

         The Company has adopted only the disclosure  provisions of SFAS No. 148
         and  123,   "Accounting  for  Stock-Based   Compensation."  It  applies
         Accounting  Principles Bulletin ("APB") Opinion No. 25, "Accounting for
         Stock Issued to Employees," and related  interpretations  in accounting
         for its Stock Option Plan and does not recognize  compensation  expense
         for its Stock Option Plan other than for  restricted  stock and options
         issued  to  outside  third  parties.  If the  Company  had  elected  to
         recognize  compensation  expense based upon the fair value at the grant
         date for  awards  under  the  Stock  Option  Plan  consistent  with the
         methodology prescribed by SFAS No. 123, the Company's net loss and loss
         per share would be reduced to the pro forma amounts indicated below for
         the nine months ended September 30, 2003 and 2002:



                                      F-6
<PAGE>

                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


                                                        2003           2002
                                                    -----------    -----------

         Net loss as reported                       $(5,203,843)   $(5,946,327)
         Expense recognized                                  --             --
         Pro forma expense                             (824,879)      (722,876)
                                                    -----------    -----------

         Pro forma net loss                         $(6,028,722)   $(6,669,203)
                                                    ===========    ===========
         Basic and diluted loss per common share:
             As reported                            $     (0.05)   $     (0.21)
             Pro forma                              $     (0.06)   $     (0.23)


         The fair value for these  options  was  estimated  at the date of grant
         using  a   Black-Scholes   option  pricing  model  with  the  following
         weighted-average  assumptions  for the nine months ended  September 30,
         2003 and the years  ended  December  31,  2002 and 2001,  respectively:
         risk-free  interest rate of 4.0% 3.0% and 3.5%;  dividend yields of 0%,
         0% and 0%;  volatility  factors  of the  expected  market  price of the
         Company's  common  stock of 242.2%  139.1% and  137.4%;  and a weighted
         average  expected  life of the  option of 2, 3 and 4 years.  There were
         888,000  options  granted  during the nine months ended  September  30,
         2003.

         The  Black-Scholes  option  valuation  model was  developed  for use in
         estimating  the fair  value of traded  options  which  have no  vesting
         restrictions and are fully transferable.  In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility.  Because the Company's  employee stock
         options  have  characteristics  significantly  different  from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the  existing  models  do not  necessarily  provide a  reliable  single
         measure of the fair value of employee stock options.

NOTE 3 - EARNINGS PER SHARE

         In accordance  with SFAS No. 128,  "Earnings Per Share," the basic loss
         per common share is computed by dividing  net loss  available to common
         stockholders   by  the  weighted   average   number  of  common  shares
         outstanding. Diluted loss per common share is computed similar to basic
         loss per common  share  except that the  denominator  is  increased  to
         include  the number of  additional  common  shares that would have been
         outstanding  if the potential  common shares had been issued and if the
         additional  common shares were  dilutive.  At September  30, 2003,  the
         Company had  outstanding  warrants  and  options to purchase  shares of
         common stock of 22,554,935, which were antidilutive.


NOTE 4 - CONVERTIBLE NOTES PAYABLE

          On December 28, 2001, the Company entered into an agreement to issue a
          debenture,  bearing  interest  at 12%  per  annum,  in the  amount  of
          $500,000,  with the right to convert the debt into  common  stock upon
          demand at a rate equal to the lesser of $0.385 per share or 70% of the
          three  lowest  trading  prices over the previous 20 days  trading.  On
          January  3, 2002,  the  Company  received  $500,000  pursuant  to this
          debenture.  In  addition  to the  debenture,  the  lender  was  issued
          investment  options to purchase,  at the applicable  conversion price,
          one  additional  share of common  stock for each share of common stock
          owned upon  conversion of the debenture and warrants to purchase up to
          1,000,000  shares of common  stock at an  exercise  price equal to the
          lesser of $0.385 or the average of the lowest  trading prices over the
          previous 20 days trading.  The debenture limits the ownership that can
          be acquired  through this  transaction to be no greater than 4.9% on a


                                      F-7
<PAGE>

                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


          fully diluted basis.  Additional warrants to purchase up to a total of
          100,000  shares of common  stock,  at the same  exercise  price as the
          warrants  issued to the  lender,  were  issued as a  finders  fee.  In
          accordance with EITF 00-27,  the Company first determined the value of
          the note  and the fair  value of the  detachable  warrants  issued  in
          connection with this convertible debenture. The estimated value of the
          warrants of $509,194 was  determined  using the  Black-Scholes  option
          pricing model and the following  assumptions:  term of 7 years, a risk
          free interest rate of 4.00%,  a dividend yield of 0% and volatility of
          212%.   The  face  amount  of  the  note   payable  of  $500,000   was
          proportionately  allocated to the note payable and the warrants is the
          amount of $247,722 and $252,278, respectively. The amount allocated to
          the  warrants  of  $252,278  was  recorded  as a discount  on the note
          payable and as accrued  warrant  liability as these  warrants  contain
          registration  rights. The value of the note payable was then allocated
          between  the  note  and the  preferential  conversion  feature,  which
          amounted to $0 and $247,722, respectively. The combined total discount
          is  $500,000,  and is  being  amortized  over  the  year  life  of the
          debenture.  Of  the  $500,000  discount,  as of  September  30,  2003,
          $442,662 has been amortized to expense,  including $190,608 during the
          nine months ended  September 30, 2003,  due to the passage of time and
          conversions into common stock.  During the nine months ended September
          30, 2003,  principal and penalty of $29,700 and $7,000 were  converted
          into  5,242,857  shares of common stock.  The Company did not register
          the shares underlying this convertible  debenture per the terms of the
          agreement and has accrued a penalty for this  non-registration  event.
          See Note 5.

          On January 14,  2002,  the Company  issued a  convertible  note in the
          principal  amount of $3,547,917  to Mr.  Michael A.  Liccardo,  former
          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  to meet  current  operating
          expenses.  At any time, Mr.  Liccardo may elect to convert the note to
          shares of the  Company's  common stock 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 $3,547,917. This discount is being amortized over the life
          of the convertible note. Of the $3,547,917  discount,  as of September
          30, 2003, $3,547,917 has been amortized to expense,  including $61,859
          during the nine months ended September 30, 2003, due to the passage of
          time and conversions into common stock. During the year ended December
          31, 2002,  principal and accrued  interest in the amount of $2,435,154
          and $114,846,  respectively,  were converted into 39,123,377 shares of
          the Company's common stock. During the nine months ended September 30,
          2003,   principal  in  the  amount  of  $112,000  was  converted  into
          14,000,000 shares of the Company's common stock.

          On June 18,  2002,  the  Company  issued  and  sold  two 12%  two-year
          Convertible  Notes in the aggregate  principal  amount of $450,000 and
          common stock purchase warrants exercisable for up to 135,000 shares of
          common  stock  to Alpha  Capital  Aktiengesellschaft  and  Stonestreet
          Limited Partnership,  in a private financing  transaction.  Pricing is
          subject to adjustment for, among other things, capital issuances below
          $0.13 per share and for stock splits,  combination or reclassification
          of the  Company's  stock.  Each note is  convertible  at the  holder's
          option at any time into shares of the  Company's  common  stock at the
          lesser of a 30% discount to the average of the lowest  three  intraday
          trading prices of the Company's common stock during the 20 trading day
          periods  ending on  trading  day prior to the date of  conversion,  or
          $0.385 per share.  In  accordance  with EITF 00-27,  the Company first
          determined  the value of the note and the fair value of the detachable
          warrants issued in connection  with this  convertible  debenture.  The
          estimated  value of the warrants of $21,282 was  determined  using the
          Black-Scholes option pricing model and the following assumptions: term


                                      F-8
<PAGE>

                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


          of 5 years, a risk free interest rate of 4.00%, a dividend yield of 0%
          and  volatility  of 242%.  The face  amount  of the  note  payable  of
          $450,000  was  proportionately  allocated  to the note payable and the
          warrants  is the amount of $429,679  and  $20,321,  respectively.  The
          amount allocated to the warrants of $20,321 was recorded as a discount
          on the note payable and as accrued warrant liability as these warrants
          contain  registration rights. The value of the note was then allocated
          between  the  note  and the  preferential  conversion  feature,  which
          amounted to $0 and $429,679, respectively. The combined total discount
          is $450,000, and will be amortized over the life of the debenture.  Of
          the $450,000  discount,  as of September  30, 2003,  $335,308 has been
          amortized to expense,  including $214,651 during the nine months ended
          September 30, 2003,  due to the passage of time and  conversions  into
          common  stock.  During  the nine  months  ended  September  30,  2003,
          principal and accrued  interest in the amount of $130,000 and $40,486,
          respectively,  were converted  into 7,253,153  shares of the Company's
          common stock. The Company did not register the shares  underlying this
          convertible debenture per the terms of the agreement and has accrued a
          penalty for this non-registration event. See Note 5.

          On May 9, 2003, the Company issued a 12% two-year  Convertible Note in
          the principal  amount of $910,120 in exchange for the reduction of the
          penalties  accrued for the reset provision  contained in the September
          18, 2002  agreement  (See Note 5) in the same amount to Alpha  Capital
          Aktiengesellschaft.  The note is convertible at the holder's option at
          any time into shares of the Company's  common stock at the lesser of a
          30%  discount  to the  average of the lowest  three  intraday  trading
          prices of the Company's common stock during the 20 trading day periods
          ending on trading day prior to the date of  conversion,  or $0.385 per
          share.  In  accordance  with  EITF  00-27,  the  value of the note was
          allocated  between the note and the preferential  conversion  feature,
          which amounted to $520,069 and $390,051, respectively. The discount of
          $390,051  will be  amortized  over the life of the  debenture.  Of the
          $390,051  discount,  as  of  September  30,  2003,  $76,836  has  been
          amortized to expense due to the passage of time.

          On May 9,  2003,  the  Company  issued  and sold  three  12%  two-year
          Convertible Notes in the aggregate  principal amount of $1,000,000 and
          common stock purchase warrants  exercisable for up to 5,000,000 shares
          of common stock to Alpha Capital Aktiengesellschaft, SDS Merchant Fund
          and Bristol Capital, in a private financing transaction.  Each note is
          convertible  at the  holder's  option at any time  into  shares of the
          Company's  common stock at the lesser of a 30% discount to the average
          of the lowest three intraday  trading  prices of the Company's  common
          stock during the 20 trading day periods ending on trading day prior to
          the date of conversion,  or $0.385 per share.  In accordance with EITF
          00-27, the Company first determined the value of the note and the fair
          value of the  detachable  warrants  issued  in  connection  with  this
          convertible debenture. The estimated value of the warrants of $249,705
          was determined  using the  Black-Scholes  option pricing model and the
          following  assumptions:  term of 7 years, a risk free interest rate of
          4.00%,  a dividend yield of 0% and volatility of 242%. The face amount
          of the notes payable of $1,000,000  was  proportionately  allocated to
          the note  payable  and the  warrants  in the  amount of  $800,188  and
          $199,812,  respectively.  The  amount  allocated  to the  warrants  of
          $199,812 was recorded as a discount on the note payable and as accrued
          warrant liability as these warrants contain  registration  rights. The
          value  of the  note  was  then  allocated  between  the  note  and the
          preferential  conversion  feature,  which  amounted  to  $171,804  and
          $628,384,  respectively.  The combined total discount is $828,196, and
          will be  amortized  over the life of the  debenture.  Of the  $828,196
          discount,  as of September  30, 2003,  $163,146 has been  amortized to
          expense due to the passage of time.

          On  September  12,  2003,  the Company  issued and sold a 12% two-year
          Convertible  Note in the principal amount of $250,000 and common stock
          purchase  warrants  exercisable  for up to 1,250,000  shares of common
          stock  to  Stonestreet  Limited  Partnership  in a  private  financing
          transaction.  The note is  convertible  at the holder's  option at any
          time into shares of the Company's  common stock at the lesser of a 35%


                                      F-9
<PAGE>


                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


          discount to the average of the lowest three intraday trading prices of
          the Company's common stock during the 30 trading day periods ending on
          trading day prior to the date of  conversion,  or $0.05 per share.  In
          accordance with EITF 00-27,  the Company first determined the value of
          the note  and the fair  value of the  detachable  warrants  issued  in
          connection with this convertible debenture. The estimated value of the
          warrants  of $87,413 was  determined  using the  Black-Scholes  option
          pricing model and the following  assumptions:  term of 7 years, a risk
          free interest rate of 4.00%,  a dividend yield of 0% and volatility of
          242%.   The  face  amount  of  the  note   payable  of  $250,000   was
          proportionately  allocated to the note payable and the warrants in the
          amount of $185,233 and $64,767,  respectively. The amount allocated to
          the warrants of $64,767 was recorded as a discount on the note payable
          and  as  accrued   warrant   liability  as  these   warrants   contain
          registration  rights. The value of the note was then allocated between
          the note and the preferential conversion feature, which amounted to $0
          and $185,233,  respectively.  The combined total discount is $250,000,
          and will be amortized over the life of the debenture.  Of the $250,000
          discount,  as of  September  30,  2003,  $6,156 has been  amortized to
          expense due to the passage of time.

NOTE 5 - OTHER ACCRUED EXPENSES

         Other  accrued   expenses  at  September  30,  2003  consisted  of  the
         following:

<TABLE>
<S>                                                                        <C>
         Penalty for not registering shares issued in February 2002, net
            of $299,121 penalties converted to common stock                $  236,079
         Penalty for not registering shares underlying
            convertible debentures                                            316,567
         Value of reset option provision in June 18, 2002 agreement         1,016,857
         Other                                                                229,909
                                                                           ----------
                                                                           $1,799,412
                                                                           ==========
</TABLE>


          On September 3, 2003,  the Company  filed the  registration  statement
          required by the convertible  debenture  agreements mentioned above and
          the  Securities  and Exchange  Commission  declared this  registration
          statement  effective  on  September  5, 2003.  Therefore,  the Company
          stopped accruing penalties on that date.

NOTE 6  - ACCRUED WARRANT LIABILITY

         Under the terms the convertible debentures issued on December 28, 2001,
         September  18, 2002,  May 9, 2003 and  September 12, 2003 (see Note 4),
         and the terms of the private  placement in February  2002,  the Company
         issued detachable  warrants to purchase shares of common stock that had
         registration  rights. As a result, in accordance with the guidelines of
         EITF 00-19,  the fair value of the warrants was  initially  recorded as
         accrued  warrant  liability.  Furthermore,  the  classification  of the
         warrants as a liability require variable accounting, with remeasurement
         of the fair  value of the  warrants  at each  balance  sheet,  with any
         adjustments reflected in earnings.

         On September 3, 2003,  the Company  filed a  registration  statement on
         Form  SB-2  that  registered  shares  of  the  Company's  common  stock
         underlying certain of the detachable warrants issued in connection with
         the convertible  notes payable  described in Note 4. The Securities and
         Exchange Commission  declared this registration  statement effective on
         September 5, 2003.  As a result,  the fair value of the  warrants  that
         were  registered  on Form  SB-2  that  amounted  to  $276,737  has been
         reclassified  from  accrued  warrant  liability to  additional  paid-in
         capital.



                                      F-10
<PAGE>

                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


         The remaining  outstanding warrants still in liabilities which were not
         registered on Form SB-2 were remeasured at September 30, 2003 using the
         Black-Scholes option pricing model and the following assumptions:  term
         of 2 years, a risk-free  interest rate of 4.00%, a dividend yield of 0%
         and  volatility of ranging from 212% to 242%.  The allocated  liability
         related to the  warrants  was  $212,869 at  September  30, 2003 and the
         Company  has  recorded  $135,459  as other  expense for the nine months
         ended September 30, 2003 related to the change in the fair value of the
         warrants.


NOTE 7 - STOCKHOLDERS' DEFICIT

         On  September  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.

         On  September  29,  2003  the  Company   amended  its   Certificate  of
         Incorporation  to increase the total number of shares of  authorized to
         820,000,000  shares;   800,000,000  designated  as  Common  Stocks  and
         20,000,000 designated as preferred stock.




         In February 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 a 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,  combination or reclassification of the Company's capital stock
         and the like.  The total selling price of these units was $1,800,000 of
         which  $970,019 was  allocated  to the common  stock and the  remaining
         $829,981  was  allocated to the  detachable  warrants.  The  allocation
         between the common  stock and the  warrants was based on the fair value
         of the  Company's  stock at the closing date ($0.71) and the  estimated
         fair  value  of the  warrants  ($0.6075).  The  estimated  value of the
         warrants was determined  using the  Black-Scholes  option pricing model
         and the following  assumptions:  term of 2 years,  a risk free interest
         rate of 4.00%,  a  dividend  yield of 0% and  volatility  of 212%.  The
         amount  allocated  to the  warrants of $829,981 was recorded as accrued
         warrant  liability as these warrants contain  registration  rights.  On
         June 18, 2002, the financing  agreements  entered into in February 2002
         were  amended  in  connection  with  the  June  18,  2002   convertible
         debenture,  whereby the Company  issued an additional  2,062,500 to the
         investor in connection with a reset option feature in the February 2002
         agreement.  The Company has  recorded as financing  costs,  $288,750 in
         connection with the issuance of these additional  shares.  The June 18,
         2002 agreement also contained a reset option  provision and the Company
         has recorded a liability of $1,016,857 at September 30, 2003 related to
         the  additional  shares  that could be issued in  accordance  with this
         provision  (See Note 5). The Company did not  register  the shares that
         were issued in the  February  2002 private  placement  offering per the
         terms of the private placement  agreement and has accrued a penalty for
         this non-registration event. See Note 5.

         On July 1, 2003,  the  Company by Written  Consent to Action  without a
         Meeting  of  the  Board  of  Directors   approved  certain   consulting
         agreements  for  10,000,000  shares and authorized the filing of an S-8
         for the underlying  shares.  On July 11, 2003, the Company filed a Form
         S-8 that  registered the 10,000,000  shares  underlying the exercise of
         certain warrants issued in connection with four consulting  agreements.
         The  Company  issued a total of  10,000,000  warrants  with an exercise
         price of $0.05 to certain  consultants.  In the quarter ended September


                                      F-11
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002


         30, 2003, the Company incurred a charge to earnings of $451,706 for the
         fair value of these  options.  The  estimated  value of the options was
         determined  using  the  Black-Scholes  option  pricing  model  and  the
         following  assumptions:  term of 0.083 years, a risk free interest rate
         of 4.00%,  a dividend  yield of 0% and  volatility of 242%.  During the
         quarter ended  September 30, 2003,  all 10,000,000 of the warrants were
         exercised and the Company received  proceeds from the exercise of these
         warrants of $500,000.

         During the nine months ended  September 30, 2003,  the Company  settled
         with its employees for unpaid compensation by issuing 532,757 shares of
         common  stock in lieu of cash in the amount of  $29,598.  The number of
         shares issued equaled the amount of unpaid compensation  divided by the
         market value of the Company's stock on the settlement date. In addition
         the Company issued  6,927,288  shares of common stock to consultants in
         lieu of cash in the  amount  of  $250,248  which  represented  the fair
         market value of the common stock. Stock options for 773,000 shares were
         exercised  for  $30,920.  During nine months ended  September  30, 2003
         convertible promissory notes and related accrued interest and penalties
         were converted to 47,157,972  shares of common stock totaling  $598,773
         which represented the fair market value of the common stock.



NOTE 8 - RESTATEMENT OF 2002 FINANCIAL STATEMENTS

         The Company has restated its financial  statements  for the nine months
         ended September 30, 2002 to account for the transaction with Optivision
         as  a  recapitalization  of  Optivision,  rather  than  a  purchase  in
         accordance  with APB No. 16 as had  previously  been  reported,  and to
         properly  account  for the  warrants  issued  in  connection  with  the
         convertible debentures and private placement offering in February 2002.

         The effects of the restatement are as follows:
<TABLE>
<CAPTION>
                                                                     as previously
                                                                          filed          as restated
                                                                     ---------------  ----------------
<S>                                                                  <C>              <C>
         Accumulated deficit at January 1, 2002(1)                   $  (21,797,659)  $   (19,666,955)
         Net loss nine months ended September 30, 2002 (2)           $   (6,861,491)  $    (5,946,327)
</TABLE>


         (1) The beginning  accumulated  deficit reported at January 1, 2002 has
         been restated to reflect the accumulated  deficit balance of Optivision
         at that date, and;


         (2)  The  difference  in net  loss  is  principally  attributed  to the
         amortization   of  the  discounts   associated   with  the  convertible
         debentures  and using  variable  accounting to account for the warrants
         issued in connection  with the  convertible  debentures and the private
         placement offering in February 2002.


NOTE 9 - SUBSEQUENT EVENTS

         The  Company  had a loan  agreement  with a bank  to  provide  accounts
         receivable  financing  to the  Company.  During the nine  months  ended
         September  30,  2003,  a  stockholder  of  the  Company  purchased  the
         Company's  note from the bank.  The  balance of the note at the date it
         was purchased by the stockholder was $531,397.  Subsequent to September
         30, 2003,  the Company  converted  this note amount into a  convertible
         note payable  with terms  identical to the  convertible  notes  payable
         described in Note 4.



                                      F-12
<PAGE>

                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

         On October 8, 2003, the Company filled with the SEC an S8  registration
         statement   covering  the  2003  stock  plan  for  50  million  shares.
         Subsequently  shares  of common  stock  totaling  31,547,432  have been
         issued  to  cover  consulting   arrangements  and  employee  back  pay.
         24,275,734   shares  were  optioned  for  employee  back  pay  totaling
         $1,213,786  and is included in accrued  salaries on the balance  sheet.
         The remaining  7,271,698  shares for consulting  services valued at the
         fair market value on the date of issue total $365,000.

         Since September 30, 2003, the Company has issued  16,961,235 shares for
         $682,187  associated  with  conversion  of  the  Company's  convertible
         promissory notes.

                                      F-13


<PAGE>



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

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.

General

         We are a Delaware corporation formed in July 1998. We make 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, Amnis Systems Inc. ("Amnis" or the "Company") merged
with  Optivision,  Inc.,  an operating  company,  in an exchange of common stock
accounted for as a  recapitalization  of Optivision Inc.. In accounting for this
transaction  Optivision is deemed to be the purchaser and surviving  company for
accounting  purposes.  Accordingly,  its net assets are  included in the balance
sheet  at  their  historical  book  values  and the  results  of  operations  of
Optivision have been presented for the comparative prior period.  Control of the
net assets and business of Amnis was acquired effective April 16, 2001.



                                       2
<PAGE>

         The Company previously  applied  incorrectly the guidance in EITF 00-27
in calculating the discount  corresponding to convertible notes payable. Per the
guidance  in EITF  00-27,  the  Company  has now first  determined  the value of
warrants  issued in  connection  with the  convertible  notes  payable,  then it
determined  the  amount of the  beneficial  conversion  feature.  The  resulting
discount is being  amortized over the term varying  between one and two years of
the respective  convertible  notes. The effect of the prior period adjustment is
shown in the attached financial statement in foot note 8.

Recent Developments

         In the fourth  quarter of 2002 due to lack of funding and our inability
to pay employees,  our operations  began to wind down. This decrease in business
activity  continued  through  April of 2003, at which time there were only three
employees.

         On May  9,  2003,  the  Company  entered  into  a  Securities  Purchase
Agreement  whereby it issued  secured  convertible  debentures  in exchange  for
funding of  $1,000,000.  On May 12,  2003,  in  anticipation  of the  additional
funding,  the  Company  rehired  ten  employees  and  commenced  rebuilding  the
Company's operations.

Results of Operations -

<TABLE>
<CAPTION>
Summary of Operations:               (Expense number are from the Financial Statements attached hereto)

                                                       Three months ending September 30, 2003
                                             2003                 2002             Inc/ (dec)               %
                                             ----                 ----             ----------            -------
<S>                                  <C>                    <C>                   <C>                      <C>
 Revenue                             $     516,185           $ 889,658            (373,473)               -42.0%
 Cost of Goods Sold                        366,379             583,779            (217,400)               -37.2%
 Research and development                  291,759             348,017             (56,258)               -16.2%
 Sales and marketing                       154,832             403,335            (248,503)               -61.6%
 General and administrative                919,918             616,680             303,238                 49.2%
 Interest expense                          132,911              27,486             105,425                383.6%


                                                        Nine months ending September 30, 2003

 Revenue                                 1,217,673          1,594,938             (377,265)               -23.7%
 Cost of Goods Sold                        870,256          1,344,802             (474,546)               -35.3%
 Research and development                  777,875            827,846              (49,971)                -6.0%
 Sales and marketing                       594,317          1,373,646             (779,329)               -56.7%
 General and administrative              1,899,187          2,001,635             (102,448)                -5.1%
 Interest expense                          338,113            217,047              121,066                 55.8%
</TABLE>


                                       3
<PAGE>


            We have  included  the  above  tables to more  effectively  show the
period-to-period changes and percentages associated with the change.

Revenue:

         Revenues  generated during the three months ended September 30, 2003 of
$516,185  were nearly  double the revenues for the three months  ending June 30,
2003 but were 42% down compared to $889,658 for the three months ended September
30, 2002.  This decrease of $373,473 in revenues is a result of the cessation of
operations  that  began in the  fourth  quarter  of 2002 due to lack of funds to
support  operations.  Furthermore,  in the  second  and third  quarters  of 2002
revenue was beginning to grow as a result of  substantial  funding that occurred
in the first  quarter of 2002.  This  increase in revenue  during the second and
third quarters of 2002 was the result of domestic and  international  government
and defense  subcontractors  increased interest in video  surveillance.  For the
nine month period ending  September  30, 2003 revenue  decreased 24% or $377,265
from  $1,594,938 in 2002 to  $1,217,673 in 2003.  This decrease in revenue was a
result of the factors explained above.

             For the three-month periods ended June 30, 2003, March 31, 2003 and
December 31, 2002 revenues were $269,103,  $432,385 and $645,197,  respectively.
Revenues increased in the third quarter 2003 to $516,185 a result of the restart
of the Company's  operations  with the investment of $1,000,000 in May 2003. The
decline from the fourth  quarter  2002  through the second  quarter of 2003 is a
result of the lack of funds to support operations from December 2002 through May
of 2003. In May 2003, the Company entered into a Securities  Purchase  Agreement
whereby it issued secured convertible debentures in exchange for $1,000,000.

Cost of goods sold:

            Cost of goods sold  decreased  37% or $217,400  to $366,379  for the
three months ended  September  30, 2003 from $583,779 for the three months ended
September 30, 2002.  Revenue decreased 43% for the same period.  The increase in
costs as a percentage of revenue is the result of an increase in the sale of low
margin product compared to the prior period.

            Cost of goods sold for the nine  months  ended  September  30,  2003
decreased 35% or $474,546 from  $1,344,802  for the nine months ended  September
30, 2002 to $870,256 for the nine months ended  September 30, 2003 compared to a
23% decrease in revenue.  This decrease is due to employee  reductions and other
cost  efficiencies  in 2003  and  write  off of  obsolete  materials  in 2002 of
$119,000.

Research and development:

            Research and  development  dropped by 16% or $56,258 to $291,759 for
the three months  ended  September  30, 2003 from  $348,017 for the three months
ended  September 30, 2002 as a result of reduced  employee and other expenses in
2003.  For the nine months ended  September 30, 2003,  research and  development
expenses were down 6% or $49,971 to $777,875 from $827,846.





                                       4
<PAGE>

Sales and marketing:

            Sales and  marketing  expenses were down 62% or $248,503 to $154,832
the three months  ended  September  30, 2003 from  $403,335 for the three months
ended  September 30, 2002 as a result of the Company not  attending  trade shows
and a virtual  curtailment of sales efforts in the first and second  quarters of
2003 due to the lack of funds.  Efforts  to  resurrect  the sales and  marketing
effort have  resulted in an increase in expenses in the third  quarter  over the
second quarter of 13%. For the nine months ended  September 30, 2003,  sales and
marketing expenses were down 57% or $779,329 to $594,317 from $1,373,646 for the
reasons mentioned above.

General and administrative:

            General and administrative  (G&A) expenses increased 49% or $303,238
for the three months ended  September 30, 2003 to $919,918 from $616,680 for the
three  months ended  September  30, 2002  primarily  due to $566,487 of non-cash
consulting  contracts  for services  covering  strategic  planning,  mergers and
acquisition  activity and  corporate  financing and legal  expenses  compared to
$85,000 non-cash expenses in 2002. Cash G&A expenses for the 3rd quarter are 63%
lower than the 3rd quarter 2002.  For the nine months ended  September 30, 2003,
cash  expenses  are down 35% over 2002 while total G&A  expenses  are down 5% or
$102,448  to  $1,899,187  for the nine  months  ended  September  30,  2003 from
$2,001,635  for the nine  months  ended  September  30,  2002.  The  significant
increase in non-cash  expenses in 2003,  $701,954 verse $423,233 in 2002 and the
accrual of  severance  liability  in the second  quarter of $400,000 has brought
2003 G&A expenses almost even with 2002.

Other income (Expense):

            Interest  expense  increased  by $121,066  to $338,113  for the nine
months  ended  September  30,  2003  from  $217,047  for the nine  months  ended
September  30, 2002 due to the  increase in  outstanding  interest  bearing debt
incurred  in the second  quarter  of this  year.  Amortization  on  discount  of
convertible  note  payable   decreased  due  to  the  discount  on  the  largest
convertible  debenture being fully amortized at the end of 2002. Financing costs
are  penalties  for not filing and  obtaining  effectiveness  of a  registration
statement  registering  the shares of common stock  underlying the February 2002
private  placement and the two June 2002 convertible  debentures.  Incurrence of
penalties  ceased on September 5, 2003 when the  registration  statement  became
effective.

Liquidity and Capital Resources

         At September  30, 2003,  we had cash and cash  equivalents  of $319,627
compared to $192,468 at June 30, 2003.  In the nine months ended  September  30,
2003,  working  capital has  decreased  $1,169,100  from  December  31, 2002 due
primarily to increases in accrued wages,  termination costs and accrued interest
offset by an increase in cash. The portion of the increase  attributable  to the
third quarter 2003 was $85,600,  which was due primarily to increases in current
convertible notes payable.  During 2002, our working capital position  decreased
by nearly $1,204,700. This decrease was due to the lack of funds to pay expenses
and compensation  and the resulting  increase in payables and drop in inventory.
In addition decreases in accounts  receivable occurred due to lower revenue than
prior quarters.



                                       5
<PAGE>

         We had continuing "Losses from operations" in the third quarter of 2003
of $(1,216,703),  which was $(650,516)  before non-cash  charges  resulting from
stock issued for consulting services. This is in addition to second quarter 2003
"Losses from  operations"  of $(777,449) and a first quarter loss of ($929,810).
For year ended December 31, 2002 "Losses from operations" was  $(4,985,278).  We
are currently  unable to project when the business may no longer generate a loss
since we do not know what the cost and time  requirements will be to recover and
build  our  revenue  to the  momentum  achieved  in the third  quarter  of 2002.
Throughout  the fourth  quarter of 2002 and nine  months of 2003,  we have taken
actions to increase cash flows through cost-cutting measures, increasing revenue
and actively pursuing additional sources of funding.

         On May 9, 2003, we entered into a securities  purchase  agreement  with
three  investors for the sale of (i)  $1,000,000 in  convertible  debentures and
(ii) a warrants to buy  5,000,000  shares of our common stock.  In addition,  in
exchange for cancellation of a reset option by one investor,  the Company issued
an investor a  convertible  debenture in the amount of  $910,120.  Each of these
debentures bear interest at 12%, mature two-years from the date of issuance, and
are convertible  into our common stock, at the investors'  option,  at the lower
of:

         o        $0.05; or

         o        65% of the average of the three lowest intraday trading prices
                  for the common stock on a principal  market for the 30 trading
                  days before but not including the conversion date.

         In  September  2003,  we entered  into a  financing  agreement  with an
accredited  investor,  pursuant to which we issued and sold 12% two-year secured
convertible  debentures  in the  principal  amount  of  $250,000  and  1,250,000
warrants  to  purchase  shares of our  common  stock,  subject  to  antidilution
adjustment. The debenture is convertible at the holder's option at any time into
shares of our common stock at the lesser of (i) $0.05 or (ii) 65% of the average
of the three lowest intraday  trading prices for the common stock on a principal
market for the 30 trading days before but not  including  the  conversion  date.
This  prospectus  relates  to the  resale of the common  stock  underlying  this
convertible debenture and warrants.

         The full principal  amounts of the convertible  debentures are due upon
maturity or upon default under the terms of convertible debentures. In addition,
we have granted the investors a security  interest in  substantially  all of our
assets and  intellectual  property  and  registration  rights.  The warrants are
exercisable  until seven years from the date of issuance at a purchase  price of
$0.05 per  share.  In  addition,  the  exercise  price of the  warrants  will be
adjusted in the event we issue  common stock at a price below  market,  with the
exception  of any  securities  issued  as of  the  date  of  this  warrant.  The
conversion price of the debentures and the exercise price of the warrants may be
adjusted in certain circumstances such as if we pay a stock dividend,  subdivide
or combine outstanding shares of common stock into a greater or lesser number of
shares,  or take such other actions as would otherwise result in dilution of the
selling  stockholder's  position.  The selling  stockholders have  contractually
agreed to restrict  their  ability to convert  their  convertible  debentures or
exercise  their  warrants  and receive  shares of our common stock such that the
number  of  shares  of  common  stock  held by them in the  aggregate  and their
affiliates  after such  conversion  or exercise does not exceed 9.9% of the then
issued and outstanding shares of common stock.



                                       6
<PAGE>

         In  October  2003,  we entered  into an  agreement  with two  creditors
whereby we agreed to pay the  creditors,  in connection  with a senior  security
interest in the amount of $531,397.29,  in shares of common stock at a price per
share equal to the lessor of $.05 or sixty-five  percent (65%) of the average of
the  lowest  three  intraday  trading  prices  during the  thirty  trading  days
preceding payment.


           We will  still  need  additional  investments  in order  to  continue
operations to cash flow break even. Additional investments are being sought, but
we cannot guarantee that we will be able to obtain such investments.

         Financing  transactions  may  include  the  issuance  of equity or debt
securities, obtaining credit facilities, or other financing mechanisms. However,
the trading  price of our common  stock and the  downturn in the U.S.  stock and
debt  markets  could make it more  difficult  to obtain  financing  through  the
issuance  of equity or debt  securities.  Even if we are able to raise the funds
required, it is possible that we could incur unexpected costs and expenses, fail
to  collect  significant  amounts  owed to us,  or  experience  unexpected  cash
requirements that would force us to seek alternative  financing.  Further, if we
issue  additional  equity  or  debt  securities,   stockholders  may  experience
additional dilution or the new equity securities may have rights, preferences or
privileges  senior  to  those  of  existing  holders  of our  common  stock.  If
additional  financing is not available or is not available on acceptable  terms,
we will have to curtail our operations again.

Critical Accounting Policies and Estimates

         This  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations  discusses our consolidated  financial  statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America.  The preparation of these financial  statements
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period. On an
on-going  basis,  management  evaluates its estimates and  judgments,  including
those related to revenue recognition,  intangible assets,  financing operations,
and contingencies  and litigation.  Management bases its estimates and judgments
on  historical  experience  and on various other factors that are believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates  under  different  assumptions  or  conditions.  The most  significant
accounting  estimates  inherent in the  preparation of our financial  statements
include  estimates as to the  appropriate  carrying  value of certain assets and
liabilities  which  are not  readily  apparent  from  other  sources,  primarily
allowance for doubtful  accounts and the recognition and  classification  of net
operating  loss carry  forwards  between  current and  long-term  assets.  These
accounting  policies are  described in the notes to the  consolidated  financial
statements  included  in our Annual  Report on Form  10-KSB for the fiscal  year
ended  December  31,  2002  and  in the  notes  to  the  consolidated  financial
statements included with this Form 10-QSB.



                                       7
<PAGE>

ITEM 3.    CONTROLS AND PROCEDURES


         As of  September  30,  2003,  an  evaluation  was  performed  under the
supervision and with the  participation of the Company's  management,  including
the  Chief  Executive   Officer  and  the  Chief  Financial   Officer,   of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures.  Based on that evaluation,  the Company's management,  including
the Chief Executive Officer and the Chief Financial Officer,  concluded that the
Company's  disclosure controls and procedures were effective as of September 30,
2003. There have been no significant  changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to September 30, 2003.


                                       8
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         From  time to  time,  we are a  party  to  litigation  or  other  legal
proceedings  that  we  consider  to be a part  of  the  ordinary  course  of our
business.  We are  not  involved  currently  in  legal  proceedings  that  could
reasonably  be  expected  to have a  material  adverse  effect on our  business,
prospects,  financial condition or results of operations. We may become involved
in material legal proceedings in the future.

Item 2.  Changes in Securities

         On August 26, 2003, we entered into a consulting  agreement  where,  in
consideration for services provided,  we issued 2,000,000 shares of common stock
of the Company.

         On September 12, 2003, we entered into a securities  purchase agreement
with one investors for the sale of (i) $250,000 in  convertible  debentures  and
(ii) a warrants to buy 1,250,000 shares of our common stock. The debenture bears
interest at 12%, matures two-years from the date of issuance, and is convertible
into our common stock, at the investors' option, at the lower of:

         o        $0.05; or

         o        65% of the average of the three lowest intraday trading prices
                  for the common stock on a principal  market for the 30 trading
                  days before but not including the conversion date.

         The full  principal  amount of the  convertible  debenture  is due upon
maturity or upon default under the terms of convertible debenture.  In addition,
we have granted the  investor a security  interest in  substantially  all of our
assets and  intellectual  property  and  registration  rights.  The warrants are
exercisable  until seven years from the date of issuance at a purchase  price of
$0.05 per  share.  In  addition,  the  exercise  price of the  warrants  will be
adjusted in the event we issue  common stock at a price below  market,  with the
exception  of any  securities  issued  as of  the  date  of  this  warrant.  The
conversion price of the debentures and the exercise price of the warrants may be
adjusted in certain circumstances such as if we pay a stock dividend,  subdivide
or combine outstanding shares of common stock into a greater or lesser number of
shares,  or take such other actions as would otherwise result in dilution of the
selling  stockholder's  position.  The selling  stockholders have  contractually
agreed to restrict  their  ability to convert  their  convertible  debentures or
exercise  their  warrants  and receive  shares of our common stock such that the
number  of  shares  of  common  stock  held by them in the  aggregate  and their
affiliates  after such  conversion  or exercise does not exceed 9.9% of the then
issued and outstanding shares of common stock.



                                       9
<PAGE>

         In  October  2003,  we entered  into an  agreement  with two  creditors
whereby we agreed to pay the  creditors,  in connection  with a senior  security
interest in the amount of $531,397.29,  in shares of common stock at a price per
share equal to the lessor of $.05 or sixty-five  percent (65%) of the average of
the  lowest  three  intraday  trading  prices  during the  thirty  trading  days
preceding payment.

         On October 10, 2003, we issued  4,537,500 shares of common stock to one
investor in accordance  with a reset  provision in connection with the investors
subscription agreement dated February 2002.

 * All of the above  offerings and sales were deemed to be exempt under Rule 506
of Regulation D and/or  Section 4(2) of the  Securities Act of 1933, as amended.
No advertising or general  solicitation was employed in offering the securities.
The  offerings and sales were made to a limited  number of persons,  all of whom
were  accredited  investors,  business  associates  of the Company or  executive
officers  of  the  Company,  and  transfer  was  restricted  by the  Company  in
accordance  with the  requirements of the Securities Act of 1933. In addition to
representations by the  above-referenced  persons,  the Company made independent
determinations  that all of the  above-referenced  persons  were  accredited  or
sophisticated  investors, and that they were capable of analyzing the merits and
risks of their  investment,  and that they understood the speculative  nature of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.

Item 3.  Defaults Upon Senior Securities

Amnis is in default on its three  convertible  notes  issued in June 2002 and in
default  of the  terms of the  purchase  agreement  associated  with the  equity
investments  in February  2002.  The nature of the default  arises from  Amnis's
failure to have a registration  statement  declared effective within a specified
time period as set forth in the agreements.

Convertible Notes payable           $1,860,120       penalty    $316,567
Investment in Common shares         $1,800,000       penalty    $535,200

Effective  September 5, 2003, the required  registration  statement was declared
effective and stopped the incurrence of additional penalties.


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

On July 1, 2003, a majority of stockholders  voted by written consent in lieu of
a  special  meeting  of  stockholders  to amend  the  Company's  Certificate  of
Incorporation, as amended, to increase the number of authorized shares of common
stock of the Company from 400,000,000 shares to 800,000,000 shares and authorize
the creation of 20,000,000  shares of blank check preferred stock. The Company's
amended Certificate of Incorporation  increasing the authorized shares of common
stock was filed with the Delaware Secretary of State in September 2003.

Item 5.  Other Information

None.



                                       10
<PAGE>

ITEM 6.         EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

         31.1     Certification of the Chief Executive  Officer of Amnis Systems
                  Inc.  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                  2002.

         31.2     Certification of the Chief Financial  Officer of Amnis Systems
                  Inc.  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                  2002.

         32.1     Certification of the Chief Executive  Officer of Amnis Systems
                  Inc.  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
                  2002.

         32.2     Certification of the Chief Financial  Officer of Amnis Systems
                  Inc.  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
                  2002.

         (b)      Reports on Form 8-K

                  None.




                                       11
<PAGE>

                                   SIGNATURES

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

Date: November 13, 2003                 AMNIS SYSTEMS INC.

                                        By: /S/ Scott Mac Caughern
                                            -----------------------------------
                                            Scott Mac Caughern
                                            President, Chief Executive Officer
                                            and Chairman of the Board

                                        By: /S/ LAWRENCE L. BARTLETT
                                            -----------------------------------
                                            Lawrence L. Bartlett
                                            Vice President, Secretary and Chief
                                            Financial Officer