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

                                  FORM 10-KSB/A

(Mark One)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934
          For the fiscal year ended:  December 31, 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.)
                 (name of small business issuer in its charter)

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

 3450 Hillview Avenue, Palo Alto, California              94304
 -------------------------------------------              -----
    (Address of principal executive offices)            (Zip Code)

                   Issuer's telephone number:  (650) 855-0200
                                               --------------

Securities registered under Section 12(b) of the Act:

        Title of each class           Name of each exchange on which registered
               None                                     None
               ----                                     ----

Securities registered under Section 12(g) of the Act:

       Common Stock, $0.0001 par value
       -------------------------------
              (Title of class)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act during the past 12 months (or for such shorter
period  that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  [X] Yes   [ ] No

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

Issuer's revenues for its most recent fiscal year:  $2,363,829.

The  aggregate  market  value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the  average  bid and asked price of such common equity, as of July 19,
2002,  was  $6,962,169.

The  number  of  shares  outstanding  of  each of the issuer's classes of common
equity as of July 19, 2002 was 48,014,957 shares.

Documents incorporated by reference:  None

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


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                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----
                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS.. . . . . . . . . . . . . . . . . .     3
ITEM 2.     DESCRIPTION OF PROPERTY.. . . . . . . . . . . . . . . . . .    14
ITEM 3.     LEGAL PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . .    14
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . .    14

                                    PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS.. . . . . . . . . . . . . . . . . . . .    15
ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
            OPERATION.. . . . . . . . . . . . . . . . . . . . . . . . .    16
ITEM 7.     FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . .    21
ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE.. . . . . . . . . . . .    21

                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
            CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
            EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . . .    22
ITEM 10.    EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . .    24
ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
            AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . .    32
ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . .    34
ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . .    34



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              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This  report  contains  forward-looking  statements  that  involve  risks  and
uncertainties.  These  forward-looking  statements  are  based  on  our  current
expectations, beliefs and assumptions.  When we use words such as "anticipates,"
"expects,"  "intends," "plans," "believes" or similar expressions, we are making
forward-looking  statements.  Our  actual  results  could differ materially from
those  anticipated in forward-looking statements.  Factors that might cause such
differences  include  the  risks  discussed  in  "Item  1.  Description  of
Business-Risk  Factors"  and in "Item 6. Management's Discussion and Analysis or
Plan  of Operation," as well as those discussed elsewhere in this annual report.

We  caution you not to place undue reliance on these forward-looking statements,
which  reflect  our management's view only as of the date of this annual report.
We  will  not  update  any  forward-looking  statement  to  reflect  events  or
circumstances  after  the  date  hereof  or  to  reflect  the  occurrence  of
unanticipated  events.

                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS

                                  OUR BUSINESS


     We  were  formed  on  July  29,  1998.  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.

     Under  the  terms  of  the  merger,  each  issued  and outstanding share of
Optivision  common  stock was converted into the right to receive 0.10 shares of
our  common  stock  rounded  to  the  nearest  whole share; each outstanding but
unexercised  option to purchase common stock of Optivision was converted into an
option  to acquire the number of shares of our common stock equal to the product
of 0.10 multiplied by the number of shares of Optivision common stock that would
have  been  obtained before the merger, rounded to the nearest whole share; each
outstanding  warrant to purchase common stock of Optivision was converted into a
warrant to acquire the number of shares of our common stock equal to the product
of 0.10 multiplied by the number of shares of Optivision common stock that would
have  been  obtained  before  the  merger,  rounded  to the nearest whole share.

PRODUCTS

     Our  products  are  used  to  create,  manage  and  transmit  compressed
high-quality  digital  video over broadband computer networks in a wide range of
applications.  This  is often referred to as "streaming video." Applications for
our  products  include,  for  example,  interactive distance learning, corporate
training,  video  content distribution, video surveillance and telemedicine. The
use  of  compressed  digital  video  for  these applications reduces the network
bandwidth  and  storage requirements when compared to uncompressed digital video
technologies.


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<PAGE>
     Our  products are compatible with the Motion Picture Expert Group, or MPEG,
digital video industry standard which provides the highest quality digital video
for our customers. In addition our products are compatible with computer network
standards based on various computer network communication protocols such as, for
example,  the  Internet  Protocol, or IP, and the Asynchronous Transfer Mode, or
ATM,  protocol.  Our  products  enable  our  customers  to:


     -    Capture, compress and transmit high-quality video from any source,
          including cable TV, wireless, satellite, video tape or live events;
     -    Store high-quality video locally or in remote network video servers;
     -    Transmit live or stored high-quality video across a computer network;
     -    Manage high-quality video distribution as a part of the total
          application; and
     -    Play live or stored high-quality video on a television monitor,
          desktop personal computer or set-top box.

     We  offer  a  family  of  products that includes digital video encoders, or
transmitters,  receivers,  network  management  software  and  a  media  desktop
personal  computer player. All these products are compatible with each other and
can  be  connected  directly  to  a  computer  network or easily integrated into
desktop  personal  computers.

     Our  digital video encoders, or transmitters, and receivers are designed to
transmit,  or  "stream,"  receive, store and process live or previously recorded
digital video over computer networks. Customers can remotely control our digital
video  encoders,  or  transmitters, and receivers through our network management
software.

     Our  media  desktop personal computer player allows users to play streaming
or  stored  MPEG  video  on a desktop personal computer. It also allows users to
simultaneously run other desktop software applications and customize the display
for  improved  user  interface  and  interaction.

SALES  AND  MARKETING

     We  sell  our  products primarily to a network of value added resellers, or
VARs,  system  integrators  and  original  equipment  manufacturers,  or  OEMs.

     We  maintain  a sales organization consisting of regional sales managers in
North America, and Europe. Our North American sales organization covers the U.S.
and  Canadian  markets  and  manages  our  system  integrators  and  value added
resellers.  Selected  overseas  markets  are  covered by systems integrators and
value added resellers in Europe with a dedicated regional sales manager based in
Germany.

     The  system  integrators and value added resellers have been selected by us
for  their ability to provide effective field sales and technical support to our
end  user  customers.  They  perform product demonstrations, advise customers on
system  configuration  and installation, and perform ongoing post-sales customer
support.  We believe that many end users depend on the technical support offered
by these system integrators and value added resellers in making product purchase


                                        4
<PAGE>
decisions.  We  continue  to  invest  resources in developing and supporting our
network  of  system  integrators  and  value  added  resellers.

     We  also  sell  our  products  to  original  equipment  manufacturers  who
incorporate  our  products into end user products that are tailored for specific
applications.  These  original equipment manufacturers purchase our products and
are responsible for conducting their own marketing, sales and support activities
for  their  application-specific  markets  and  customers  such as, for example,
providing  a  satellite  digital  video  service  for  large  corporations.

     Our  marketing  efforts  are  targeted  at  corporations,  healthcare  and
educational  institutions  and the government. In order to increase awareness of
our  products,  we  attend  a  number of trade shows including, for example, the
National  Association of Broadcasters, or NAB, and Networld + Interop, or N + I,
tradeshows  in  the  United  States.  We  also  have  established  strategic
co-marketing,  joint  product  interoperability  testing  and  joint  business
development  relationships  with  corporate  partners  with  whom  we  have  the
opportunity  to  expand  our  sales and marketing presence through the extensive
sales  force  and marketing relationships of our partners to reach new customers
and  markets,  and  with  whom  we participate in joint marketing activities and
tradeshow  booths.

MARKETS

     The  markets  for  our  products  are  characterized  by  rapidly  changing
technology,  evolving industry standards and frequent new product introductions.
We  believe  that  our  future  success  will depend on our continued ability to
maintain expertise in the technologies associated with the Moving Picture Expert
Group, or MPEG, standard, and streaming video network applications. In addition,
we  believe  that  our  future  success  will  depend, in part, on our continued
ability  to  enhance  our  current  products  and  to introduce new products and
features to meet changing customer requirements and evolving industry standards.
Our  present products are based on the MPEG standard.  Although MPEG has evolved
as  the  de-facto  standard  for compression and decompression of digital video,
other  industry standards could replace the current MPEG standard in the future.

     Digital  video  products  generally,  and  video  network  products  and
technologies specifically, are relatively young and evolving markets. Our future
growth  will  depend on our ability to predict the evolution of these markets as
well  as  new  digital  video  applications, and to successfully penetrate those
markets.  Because  of  the  early  stage of the development of the digital video
market,  the demand for, and market acceptance of, our products, is subject to a
high degree of uncertainty. If market growth rates do not meet our expectations,
or  if  we are unsuccessful in identifying and penetrating those segments of the
digital  video  market  which  provide  the greatest opportunity for growth, our
business  would  suffer.

MANUFACTURING  AND  SOURCES  OF  SUPPLY

     Our  manufacturing  strategy focuses on system integration, system assembly
and  final  system  testing  and  quality control of our products.  We outsource
printed  circuit  board, system chassis assembly to third party suppliers.  This
outsourcing  strategy  has  enabled  us  to  benefit  from  the  manufacturing
capabilities  of  our  suppliers  who  can  accommodate significant increases in
production  volume  as necessary.  This strategy also permits us to focus on our
core  competencies  of  rapid  product  development  and  deployment.


                                        5
<PAGE>
     We  handle  all  phases  of  materials  planning,  production  scheduling,
procurement  and  document  control.  In  addition  to  developing manufacturing
strategies, our production staff qualifies our suppliers and their manufacturing
processes  to  ensure  subcontractor  quality  standards.

COMPETITION

     Competition in the streaming video products market is expected to increase.
To  compete effectively, we must continue to respond promptly and effectively to
changing  customer  preferences, and feature and pricing requirements, and rapid
technological  change.  Our principal competitors include Minerva Networks Inc.,
Optibase  Ltd. and Vbrick Systems Inc.  We believe that these competitors do not
offer  the  range  of products that combine network management, desktop personal
computer players and network video functions provided by us.  We further believe
that  we  offer  our customers a unique blend of computer networking and digital
video  competencies that differentiates us from our competition.  Although there
are  no  public market studies or market share estimate, we believe that we have
the  largest  installed  base  of  products  in  the  this  young  market.

     Competition  in the future may force us to lower product prices and add new
products  and  features  at  lower  prices,  or  we  may  otherwise be unable to
introduce  new  products  at higher prices. We cannot assure you that we will be
able  to compete successfully in this kind of price competitive environment, and
lower  prices  and  reduced  demand for our products would reduce our ability to
generate  revenue.

RESEARCH  AND  DEVELOPMENT

     The  goal  of  our  research  and development activities is to continue the
development  and introduction of next-generation products for our customers that
resolve  the limitations of current network streaming video products and address
new  markets.  Our  efforts are also focused on increasing the functionality and
reducing  the  cost of our current products.  We are developing new technologies
and  products  that  will:

     -    Employ  the  next  generation  MPEG-4  digital  video  technologies;

     -    Enhance  current  products  for use in video surveillance and distance
          learning  applications;

     -    Provide  greater  network  management  and  control  capability;

     -    Support  video  storage  and  server  functions;  and

     -    Accommodate  different  computer  network  bandwidth  constraints  and
          fluctuations.

     Optivision's  research and development expenditures were approximately $1.9
million  and  $1.8 million for fiscal years ended December 31, 2001 and December
31,  2000,  respectively.



                                        6
<PAGE>
TRADEMARKS

     We  have  registered  "Optivision,"  "High  Speed  Quad," "MPEG Studio" and
"Optivideo"  as  registered trademarks.  In addition, the names "NAC," "VS-Pro,"
"LiveMap,"  "LivePlayer,"  "mpegNet,"  "mpegStudio  Pro" and "ScaleWare" are our
trademarks.

PROPRIETARY  RIGHTS

     We  have  one U.S. patent issued by the U.S. Patent and Trademark Office in
the  area  of  digital  video  coding,  which  we  believe currently provides no
competitive  advantage  to  us in our current markets.  Many participants in the
digital  video  market  have a significant number of patents and have frequently
demonstrated  a  readiness to commence litigation based on allegations of patent
and  other  intellectual  property  infringement.  We expect that companies will
increasingly  be  subject  to  infringement claims as the number of products and
competitors  in  our industry segment grows and the functionality of products in
different  industry segments overlaps.  Responding to such claims, regardless of
merit,  could  cause product shipment delays or require us to enter into royalty
or  licensing  arrangements  to  settle such claims.  Any such claims could also
lead  to  time-consuming,  protracted and costly litigation, which would require
significant expenditures of time, capital and other resources by our management.
Moreover,  we  cannot  be sure that any necessary royalty or licensing agreement
will  be  available  or  that, if available, such agreement could be obtained on
commercially  reasonable  terms.

CUSTOMERS

     Our  products  are  used  by corporations, government agencies, educational
institutions,  healthcare  institutions  and  other  institutions with broadband
computer  networks,  that  require  high  quality  streaming  video  for  such
applications as interactive distance learning, corporate training, video content
distribution,  video  surveillance,  and  telemedicine.

     Historically,  a  substantial  portion  of our revenues has come from large
purchases  by  a  small  number  of  customers.  During calendar year 2001, five
customers  accounted  for 48% of our net revenues and during 2000 four customers
accounted  for  44%  of  Optivision's  net revenues. During 2001, Hughes Network
Systems  and  Glory  Group  accounted  for  25%  and  10%  of  our net revenues,
respectively,  and  during  2000 GTE (Verizon) accounted for 11% of Optivision's
net revenues. Our customers purchase our hardware and software products on an as
needed  basis  by  issuing  purchase  orders directly to us. Customers of system
integrator  and  value  added  resellers  are extended a purchase price discount
based  on  mutual  negotiation  and  agreement which is typically based on total
volume  of  business over a 12 month period or for a specific order and delivery
schedule.  Generally,  consistent  with  industry  practice  in  our market, our
customers  do  not  sign  long  term  contracts  with committed purchase volume.

EMPLOYEES

     We  employ  a  total  of  24  full  time  employees,  which include four in
engineering,  ten  in  sales  and  marketing,  five in manufacturing and five in
administration  and  finance.


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<PAGE>
                                  RISK FACTORS

The  risks and uncertainties described below are not the only ones that we face.
Additional  risks  and  uncertainties  not  presently  known  to  us  or that we
currently  believe  to be immaterial may also adversely affect our business.  If
any  of  the  following  risks and uncertainties develop into actual events, our
business,  financial condition and results of operations could be materially and
adversely  affected,  and  the  trading price of our common stock could decline.

OUR  RECURRING  OPERATING LOSSES, STOCKHOLDERS' DEFICIT, WORKING CAPITAL DEFICIT
AND NEGATIVE CASH FLOW FROM OPERATIONS CAUSE SUBSTANTIAL DOUBT ABOUT OUR ABILITY
TO  CONTINUE  OUR  BUSINESS.

     We  have  received  a report from our independent auditors on our financial
statements  for  fiscal years ended December 31, 2001 and 2000, respectively, in
which  our  auditors  have  included  explanatory paragraphs indicating that our
recurring  net  losses,  stockholders'  deficit;  working  capital  deficit  and
negative  cash flow from operations cause substantial doubt about our ability to
continue  as  a  going concern. If our recurring operating losses, stockholders'
deficit,  working  capital  deficit  and  negative  cash  flow  from  operations
continue,  our  business  could  be  materially  adversely  affected.

WE HAVE A HISTORY OF LOSSES, AND WE WILL NEED ADDITIONAL CAPITAL TO CONTINUE OUR
OPERATIONS.  IF  WE  ARE  UNABLE  TO  OBTAIN ADDITIONAL CAPITAL, WE WILL HAVE TO
CURTAIL  OUR  OPERATIONS.

     As  of  this  date,  we  have  generated  limited  revenues  and  incurred
significant  losses.  As  of  December  31,  2001  and March 31, 2002, we had an
accumulated deficit of approximately $21,797,659 and  $23,905,302, respectively.
For  the  year ended December 31, 2001 and for the first quarter ended March 31,
2002,  our  consolidated net losses were $21,684,606, which includes $17,877,694
of  goodwill  amortization  and  impairment  adjustments,  and  $2,107,643,
respectively.  We  have  never been profitable and continue to incur losses from
operations.  We expect to incur net losses over the next two years of between $4
million  and  $6  million  in  total.  We may never generate sufficient revenue,
income  and  cash  flows  to  support our operations.  Our future revenues could
decline  by  reason  of factors beyond our control such as technological changes
and  developments,  downturns in the economy and decreases in demand for digital
video  networking  and  broadband  Internet  products.  If  we continue to incur
losses,  if  our  revenues  decline or grow at a slower rate, or if our expenses
increase  without commensurate increases in revenues, our operating results will
suffer  and  the  price  of  our  common  stock  may  decline.

     We  currently  expect  to reach break even in 2004. So, in order to sustain
our  operations  until  then, we currently estimate that we will need additional
funding  of  between  $4  million  and $6 million in total. However, our capital
requirements  will depend on many factors, including, for example, acceptance of
and demand for our products, the extent to which we invest in new technology and
research  and  development projects, general economic conditions, and the status
and  timing of competitive developments. To the extent that our existing sources
of  liquidity  and  cash  flow  from  operations  are  insufficient  to fund our
activities,  we  will  continue  to  need  to  raise  additional  capital.


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     If  additional  funds are raised through the issuance of equity securities,
the percentage of equity ownership of our existing stockholders will be reduced.
In  addition, holders of these equity securities may have rights, preferences or
privileges  senior  to  those  of the holders of our common stock. If additional
funds  are  raised  through  the  issuance  of  debt  securities,  we  may incur
significant  interest  charges,  and  these  securities  could  also  impose
restrictions  on  our  operations. If additional financing is not available when
needed  on  terms  favorable  to  us  or  at  all,  we  will have to curtail our
operations.

WE DEPEND ON SEVERAL LARGE RESELLERS FOR A SIGNIFICANT PORTION OF OUR REVENUES,
AND THE LOSS OF ONE OR MORE OF THESE CUSTOMERS, OR A SIGNIFICANT DECREASE IN
REVENUE FROM ANY OF THESE CUSTOMERS, COULD HAVE A DISPROPORTIONATE IMPACT ON OUR
REVENUES AND INCOME. IF THESE RELATIONSHIPS DO NOT CONTINUE, OUR BUSINESS MAY BE
MATERIALLY ADVERSELY AFFECTED.

     We use a network of value added resellers, or VARs, consisting primarily of
system integrators and original equipment manufacturers, or OEMs, to assist with
the  marketing  of  our products and installation and servicing of our streaming
video  network  products.  Some  of  these  value  added  resellers,  system
integrators  and  original  equipment  manufacturers  are  important  customers
representing  a  substantial portion of our revenues.  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  2001, five customers
accounted  for  48%  of our net revenues.  As of December 31, 2001 approximately
44%  of  our  accounts  receivable  were  concentrated  with  five  customers.

     Our future success depends on our ability to maintain old relationships and
develop  new  relationships  with  value added resellers, system integrators and
original  equipment  manufacturers,  and  on  their  marketing  efforts  and
installation  and  support  services.  A  decline  in the financial prospects of
particular  customer  or  any  of  their  customers, inadequate installation and
support  services  by  a  customer  or  our  inability  to  maintain  existing
relationship or contract with additional customers could have a material adverse
effect  on  our  business.

WE DEPEND ON THIRD PARTIES FOR THE SUPPLY AND MANUFACTURE OF ALL OF OUR
COMPONENT AND ELECTRONIC PARTS.  IF THESE MANUFACTURERS AND SUPPLIERS DO NOT
MEET OUR DEMAND, OUR BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED.

     We  purchase components and electronic parts pursuant to purchase orders in
the  ordinary  course  of business and do not maintain supply agreements. We are
substantially  dependent  on  the  ability  of  third-party  manufacturers  and
suppliers  to  meet  our  design, performance and quality specifications. If our
third-party  suppliers  cannot  supply  us  with  systems  or  parts  within our
timeframes or allocate the supply of certain high demand components, we could be
unable  to  meet  our  delivery  schedules  and  requirements  on  a  timely and
competitive  basis,  which could have a material adverse effect on our business.


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<PAGE>
IF OUR PRODUCTS DO NOT KEEP PACE WITH THE TECHNOLOGICAL DEVELOPMENT IN THE
RAPIDLY CHANGING DIGITAL VIDEO AND BROADBAND INTERNET VIDEO INDUSTRY, OUR
BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED.

     The  digital  video  industry  generally  and  the broadband Internet video
industry specifically are in the early state of development, and the demand for,
and  market  acceptance  of,  our technologies and products under development is
subject to a high degree of uncertainty. If we cannot develop and launch our new
products,  or  if  we fail to achieve market acceptance of our new products, our
business  may  be  materially  adversely  affected.

     Our future success also depends upon our ability to continue to enhance our
existing  products  and  to  successfully  develop  and market new products in a
cost-effective  and  timely  basis.  Once  a  new  product is developed, we must
rapidly  commence  volume production. This process requires accurate forecasting
of  customer  requirements and attainment of acceptable manufacturing costs. The
introduction  of  new  or  enhanced  products  also  requires  us  to manage the
transition  from  older,  displaced  products in order to minimize disruption in
customer  ordering patterns, avoid excessive levels of older product inventories
and  ensure  that  adequate  supplies  of  new products can be delivered to meet
customer  demand.  In  addition,  reliability, quality or compatibility problems
with  our  products could significantly delay or reduce market acceptance of our
products,  could  require  the  devotion  of  significant  time and resources to
addressing  errors,  could divert our engineering and other resources from other
tasks  and  development  efforts,  and could damage our reputation and adversely
affect  our  ability  to  retain  our  existing  customers  and  to  attract new
customers.

COMPETITION MAY DECREASE OUR MARKET SHARE, NET REVENUES AND GROSS MARGINS.

     Competition  in  the  streaming  video  products  market is intense, and we
expect  competition  to  increase.  To  compete effectively, we must continue to
respond  promptly  and effectively to changing customer preferences, and feature
and  pricing  requirements,  and  rapid  technological  change.  Our  principal
competitors include Minerva Networks Inc., Optibase Ltd. and Vbrick Systems Inc.
Some  of  our  actual  and  potential competitors have greater name recognition,
access to a larger customer base and significantly greater financial, marketing,
technical  and  other  resources  than we do. Our competitors also sell products
that  provide  some  of  the benefits of the products that we sell, and we could
lose  sales to our competitors. Moreover, the digital video products industry is
undergoing  a  period of consolidation in which companies, including some of our
competitors,  are participating in business combinations. These combinations may
result  in  the emergence of competitors who have larger market shares, customer
base,  sales  forces  and  product  offerings  and  greater technology marketing
expertise  than  we  do.  As a result, our competitors may be able to adapt more
quickly  to new or emerging technologies and changes in customer requirements or
to devote greater resources to the promotion and sale of their products than us.
We  may  not  be  able  to  compete  successfully  against  current  and  future
competitors,  or  to  make  technological  advances necessary to improve or even
maintain  our  competitive  position,  or  achieve  market  acceptance  for  our
products.


                                       10
<PAGE>
WE DEPEND ON A LIMITED NUMBER OF KEY PERSONNEL WHO WOULD BE DIFFICULT TO
REPLACE, AND IF WE LOSE THE SERVICES OF THESE INDIVIDUALS OR CANNOT HIRE
ADDITIONAL QUALIFIED PERSONNEL, OUR BUSINESS COULD BE SERIOUSLY HARMED.

     Our  future success also depends in large part on the continued services of
our  senior management, and key technical and sales personnel. In particular, we
are  highly  dependent  on  the  services  of Michael A. Liccardo, our chairman,
president and chief executive officer, Lawrence L. Bartlett, our vice president,
chief financial officer and secretary, and Richard A. Falcone our vice president
of  marketing,  worldwide  sales  and  business development. We do not carry key
person life insurance on our senior management or key personnel. Any loss of the
services of Messrs. Liccardo, Bartlett, or Falcone, or other key personnel could
seriously  harm  our  business.

IF WE FAIL TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES AND MULTIPLE EVOLVING
STANDARDS THAT CHARACTERIZE THE DIGITAL VIDEO AND NETWORKING MARKET, OUR
BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED AND OUR RESULT OF OPERATIONS MAY
SUFFER.

     The  markets  for  our  products  are  characterized  by  rapidly  changing
technology,  evolving industry standards and frequent new product introductions.
We  believe  that  our  future  success  will depend on our continued ability to
maintain expertise in the technologies associated with the Moving Picture Expert
Group,  or MPEG, and computer network and broadband Internet video applications.
Our  present  products are based on the MPEG standard. Although MPEG has evolved
as  the  de-facto  standard  for compression and decompression of digital video,
other  industry standards could replace the current MPEG standard in the future,
and  this  may  materially  adversely  affect  our  business.

     In  addition, we or our competitors may announce new products that have the
potential  to  shorten the life cycle of, or replace, our current products. Such
announcements  could cause customers not to buy or to defer to buy our products.
Similarly,  such  new  products  could  render  our  products  or  technologies
non-competitive  or  obsolete. If we fail to enhance our current products and to
introduce  new  products and features to meet changing customer requirements and
evolving  industry  standards,  our  results  of  operations  may  suffer.

IF WE ARE UNSUCCESSFUL IN IDENTIFYING AND PENETRATING THOSE SEGMENTS OF THE
DIGITAL VIDEO MARKET WHICH PROVIDE THE GREATEST OPPORTUNITY FOR GROWTH, OUR
BUSINESS WOULD SUFFER.

     Digital  video products generally, and video network and broadband Internet
video  products and technologies specifically, are relatively young and evolving
markets.  Our  future growth will depend on our ability to predict the evolution
of  these  markets  as  well  as  new  streaming  video  applications,  and  to
successfully  penetrate  those  markets.  Because  of  the  early  stage  of the
development  of  the digital video market, the demand for, and market acceptance
of  our  products,  is  subject  to  a  high  degree  of  uncertainty. If we are
unsuccessful  in identifying and penetrating those segments of the digital video
market  which  provide  the  greatest opportunity for growth, our business would
suffer.


                                       11
<PAGE>

WE ARE OBLIGATED TO ISSUE ADDITIONAL SHARES AND MAY ISSUE FURTHER SHARES AND
DILUTE YOUR OWNERSHIP PERCENTAGE.

     We are obligated to issue additional shares of our common stock pursuant to
certain agreements for the following financings which will dilute your ownership
percentage:

     -    In December 2001, we entered into a financing agreement with Bristol
          Investment Fund, Ltd. for the issuance of a total of $1,000,000 in
          principal amount of convertible debentures that are convertible into
          shares of our common stock at a floating conversion price, investment
          options to purchase shares of our common stock at the applicable
          conversion price for each share of common stock issued upon conversion
          of the debentures, and warrants to purchase up to 1,100,000 shares of
          our common stock at a floating exercise price. Due to the floating
          conversion rate, we do not know the exact number of shares that we
          will have to issue upon conversion of the debentures and exercise of
          the investment options. As of July 19, 2002, assuming full conversion
          of all convertible debentures and exercise of all related investment
          options and warrants, we would have to issue to Bristol Investment
          Fund, Ltd. and others up to approximately 25,200,000 shares of our
          common stock.

     -    In February 2002, we entered into financing agreements with Alpha
          Capital Aktiengesellschaft and Stonestreet Limited Partnership. Under
          these financing agreements, as amended in June 2002, we sold a total
          of 187,500 units at a purchase price of $8.00 per unit, each unit
          consisting of 21 shares of common stock, subject to adjustment
          pursuant to exercise of the related reset option, and one warrant to
          purchase three shares of our common stock at an exercise price of
          approximately $0.13 per share, also subject to adjustment for, among
          other things, capital issuances below $0.13 per share and for stock
          splits, combination or reclassification of our capital stock and the
          like. Due to the floating exercise feature of the reset options, we do
          not know the exact number of shares that we will have to issue upon
          exercise of the reset options. As of July 19, 2002, assuming full
          exercise of all reset options and related warrants, we would have to
          issue to Alpha Capital Aktiengesellschaft and Stonestreet Limited
          Partnership up to approximately 15,000,000 shares of our common stock.

     -    In February 2002, we entered into a financing agreement with a
          non-U.S. person for a total of 37,500 units, each unit consisting of
          ten shares of our common stock, subject to adjustment pursuant to
          exercise of the related reset option, and a warrant to purchase three
          shares of our common stock at an exercise price of $0.90, subject to
          such customary adjustment for stock splits, combination or
          reclassification of our capital stock and the like. As the number of
          shares issuable upon exercise of the reset option depends on the
          closing bid price of our common stock during a 30-day period prior to
          exercise, we do not know the exact number of shares that we will have
          to issue upon exercise of the reset option. As of July 19, 2002,
          assuming exercise of the reset option and warrants, we would have to
          issue up to approximately 2,825,000 shares of our common stock.


                                       12
<PAGE>
     -    In June 2002, we sold to Alpha Capital Aktiengesellschaft and
          Stonestreet Limited Partnership two convertible notes in the aggregate
          principal amount of $450,000 and warrants to purchase up to 135,000
          shares of our common stock at an exercise price of approximately
          $0.13, subject to adjustment for, among other things, capital
          issuances below $0.13 per share and for stock splits, combination or
          reclassification of our capital stock and the like. Due to the
          floating conversion rate, we do not know the exact number of shares
          that we will have to issue upon conversion of the notes. As of July
          19, 2002, assuming full conversion of all convertible notes and
          exercise of all related warrants, we would have to issue to Alpha
          Capital Aktiengesellschaft and Stonestreet Limited Partnership up to
          approximately 5,600,000 shares of our common stock.

     In  addition, some events could result in the issuance of additional shares
of  our  common  stock, which would further dilute your ownership percentage. We
may  issue  additional  shares  of  common  stock:

     -    to raise additional capital or finance acquisitions;
     -    upon the exercise or conversion of outstanding options, warrants and
          convertible notes (other than the convertible notes, the reset options
          and warrants issued to the selling security holders, and the
          convertible debentures, investment options, reset options and warrants
          described above); and
     -    in lieu of obligations owed in cash.

     As  of  July  19,  2002,  other  than the convertible notes, reset options,
convertible  debentures,  investment options and warrants described above, there
were  outstanding  warrants  to  acquire  a  total of 3,185,000 shares of common
stock,  outstanding  options  to  acquire  a total of 6,108,450 shares of common
stock,  and  outstanding promissory notes convertible into a total of 21,431,304
shares of common stock. In total, these shares would represent approximately 40%
of  our  total  outstanding  common  stock.

OUR STOCK PRICE MAY BE VOLATILE AND THE TRADING MARKET FOR OUR COMMON STOCK IS
LIMITED.

     The  market price for our common stock, like that of the securities of many
companies  in  the  technology  and  emerging  growth  sectors,  has  fluctuated
substantially  and may continue to be highly volatile in the future.  We believe
that  the  following factors, in addition to other risk factors described above,
will  continue  to  significantly  affect  the market price of our common stock:

     -    announcements  of technological innovations or new commercial products
          by  us  and  our  competitors;
     -    developments  concerning  research and development, manufacturing, and
          marketing  alliances  or  collaborations  by  us  and our competitors;
     -    developments  in  our  industry;


                                       13
<PAGE>
     -    general  market  and  economic conditions and other factors, including
          factors  unrelated  to  our  operating  performance  or  the operating
          performance  of  our  competitors;  and
     -    period-to-period  fluctuations  in  our  operating  results  and  the
          operating  results  of  our  competitors.

     In addition, stock markets have from time to time experienced extreme price
and  volume fluctuations.  These fluctuations have especially affected the stock
market  price of many technology companies, and, in many cases, are unrelated to
the  operating  performance  of the particular companies.  We believe that these
broad  market fluctuations may continue to affect the market price of our common
stock.

     With  the  advent  of  the  Internet, new avenues have been created for the
dissemination  of  information. We do not have control over the information that
is  distributed  and discussed on electronic bulletin boards and investment chat
rooms.  The  motives  of  the  people  or  organizations  that  distribute  such
information  may  not  be  in  our  best  interest  or  in  the  interest of our
stockholders.  This,  in  addition  to  other  forms  of  investment information
including  newsletters  and  research  publications, could result in significant
fluctuations  in  the  market  price  of  our  common  stock.

     From  time  to  time, there has been limited trading volume with respect to
our  common  stock  which  is  traded  in the over-the-counter market on the OTC
Bulletin  Board,  and  a  trading  market  in our common stock may not continue.

ITEM  2.     DESCRIPTION  OF  PROPERTY

     Our  principal  administrative,  marketing,  manufacturing  and  product
development facility is located in Palo Alto, California. This facility occupies
approximately 22,000 square feet pursuant to a lease which commenced on November
1,  1995  and which will terminate on December 15, 2002.  The lease provides for
two  successive  options  to  extend  the  lease term, each for a period of five
years.  Our  landlord  has  agreed  to  meet  with us at the end of July 2002 to
negotiate  lease  renewal  and  payment  of  approximately  $200,000 of past due
amounts.

ITEM  3.     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  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     None.


                                       14
<PAGE>
                                     PART II

ITEM  5.     MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS

PRICE  RANGE  OF  COMMON  STOCK

     Our  common stock is traded in the over-the-counter market and is quoted on
the  OTC  Bulletin Board under the symbol "AMNM." The following table sets forth
the high and low closing bid prices (which reflect prices between dealers and do
not  include  retail markup, markdown or commission and may not represent actual
transactions)  for  each  quarterly  period  since  our common stock first began
trading  in  the over-the-counter market in July 2000. From time to time, during
the  periods indicated, trading activity in our common stock was infrequent.  As
of July 19, 2002, the closing price of our common stock was $0.145 per share. As
of  March  19,  2002,  there were approximately 168 record holders of our common
stock.  We  believe  we  have  approximately 7,000 beneficial stockholders.  The
source  of  the  quotes  is  The  Nasdaq  Stock  Market,  Inc.

CALENDAR YEAR 2000                       HIGH BID   LOW BID

Third Quarter 2000 (commencing July 19)  $  10.00   $  0.355
Fourth Quarter 2000                      $   6.00   $  3.00

CALENDAR YEAR 2001                       HIGH BID   LOW BID

First Quarter 2001                       $   3.82   $  1.75
Second Quarter 2001                      $   2.95   $  0.89
Third Quarter 2001                       $   1.69   $  0.41
Fourth Quarter 2001                      $   0.92   $  0.33

CALENDAR YEAR 2002                       HIGH BID   LOW BID

First  Quarter  2002                     $   1.72   $  0.52
Second Quarter  2002                     $   0.63   $  0.10
Third  Quarter  2002 (through July 19)   $   0.17   $  0.115

     As  of  July 19, 2002, there were approximately 48,014,957 shares of common
stock  issued  and  outstanding.

OUR  DIVIDEND  POLICY

     We  anticipate  that  for the foreseeable future, earnings will be retained
for  the  development  of our business. Accordingly, we do not anticipate paying
dividends  on  the common stock in the foreseeable future. The payment of future
dividends  will  be  at  the  sole discretion of our board of directors and will
depend  on  our  general  business  condition.


                                       15
<PAGE>
RECENT  SALES  OF  UNREGISTERED  SECURITIES

     In  October 2001, we issued and sold to an unaffiliated qualified corporate
investor  555,555  shares of our common stock for a total of $200,000 in cash in
reliance  upon  an  exemption  from  registration  pursuant  to  Regulation  S
promulgated  under  the  Securities  Act  of  1933.

     In December 2001, we issued and sold to an unaffiliated accredited investor
a 12% two-year secured convertible debenture in the principal amount of $500,000
convertible  at  the holder's option at any time into shares of our common stock
at  the  lesser  of 70% of the average of the lowest three trading prices of our
common  stock  during  the 20 trading day period ending one trading day prior to
the  date of conversion or $0.385 per share, investment options for the purchase
up  to  $500,000  of  our  common  stock  at  the  same  conversion price of the
debenture,  and  warrants  exercisable  for up to 1,000,000 shares of our common
stock at an exercise price equal to the lesser of $0.385 per share or 70% of the
average  of  the  lowest three trading prices for our common stock during the 20
days  immediately  prior to exercise. In connection therewith, as a finders fee,
we issued to Bristol Capital, L.L.C. and to Alexander Dunham Capital Group, Inc.
10%  of  the cash proceeds from the debentures issuance and warrants to purchase
up  to  a total of 100,000 shares of our common stock at an exercise price equal
to  the  lesser  of  $0.385  per share or 70% of the average of the lowest three
trading  prices  for  our  common  stock during the 20 days immediately prior to
exercise.  These  securities  were  issued  in  reliance  upon an exemption from
registration  pursuant  to  Section  4(2)  of  the  Securities  Act  of  1933.


ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION

GENERAL

     The  following  discussion  of  our  financial  condition  and  results  of
operations  should  be  read together with the consolidated financial statements
and  the  notes  to  those  statements  included  elsewhere in this report. This
discussion  contains  forward-looking  statements  that  involve  risks  and
uncertainties.  For  additional  information  regarding  some  of  the risks and
uncertainties  that affect our business and the industry in which we operate and
that  apply  to  an  investment in our common stock, please read "Risk Factors."

     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.


                                       16
<PAGE>
RECENT  DEVELOPMENTS

     On  June  25, 2002, we amended our certificate of incorporation to increase
the  total  number  of  shares  which  we are authorized to issue to 420,000,000
shares,  of  which  400,000,000  shares  will be common stock, each having a par
value  of  $0.0001, and 20,000,000 shares will be preferred stock, each having a
par  value  of  $0.0001.

RESULTS  OF  OPERATIONS

     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  year  ended  December  31, 2000 reflect only the financial results of Amnis
Systems Inc., since the merger between Amnis Systems and Optivision did not take
place  until  April  16,  2001.  As  a  result,  Amnis  Systems' 2000 historical
operating  results and financial condition are not comparable to 2001 because of
the  merger. Accordingly, in order to enhance comparability and make an analysis
of  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 2000 as if the merger had occurred on January 1, 2000.
Unaudited  pro  forma  Consolidated Statements of Operations for each period are
inserted  at  the  beginning  of  the section as a reference for the discussion.

     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.


                                       17
<PAGE>
2001  Compared  to  2000

   UNAUDITED PRO FORMA COMPARISON OF THE CONSOLIDATED STATEMENTS OF OPERATIONS


For the Years Ended December 31,        2001          2000
--------------------------------------------------------------

SALES                               $ 4,095,755   $ 3,574,090
COST OF GOODS SOLD                    2,148,038     2,377,230
--------------------------------------------------------------

    Gross margin                      1,947,717     1,196,860
OPERATING EXPENSES:
  Research and development            1,870,630     1,772,474
  Sales and marketing                 2,822,510     2,630,810
  General and administrative          2,033,688     2,008,415
--------------------------------------------------------------

                                      6,726,828     6,411,699
--------------------------------------------------------------

    Loss from operations             (4,779,111)   (5,214,839)

OTHER INCOME (EXPENSE)
  Interest expense, net                (693,071)     (273,923)
  Other, net                             40,010        69,107
--------------------------------------------------------------
     Total other (expense)             (653,061)     (204,816)
--------------------------------------------------------------

NET LOSS                            $(5,432,172)  $(5,419,655)
==============================================================

BASIC AND DILUTIVE LOSS PER SHARE   $     (0.21)  $     (0.18)
==============================================================


     Revenues  for 2001 were $4,095,755, an increase of $521,665, or 14.6%, over
revenues of $3,574,090 for 2000. Revenues increased primarily as a result of the
continued  growth  in enterprise market applications for digital video products.
As  a  part  of  this growth, we saw an increase in foreign sales, as the market
expands  internationally,  and  an increase in sales to defense contractors as a
result  of the heightened interest in video surveillance following the September
11,  2001  terrorist  attacks. During calendar year 2001 and 2000, foreign sales
accounted  for 15.8% and 14.0% of our total sales, respectively. During calendar
year  2001  and  2000,  four  customers  accounted  for  52%  and 44% of our net
revenues,  respectively.  During  2001,  Hughes  Network Systems and Glory Group
accounted for 25% and 10% of our net revenues, respectively, and during 2000 GTE
(Verizon)  accounted  for  11%  of our net revenue. (Historical revenues for the
years ended December 31, 2001 and 2000 were $2,363,879 and $0.00, respectively).


                                       18
<PAGE>
     Cost  of  goods  sold  for 2001 were $2,148,038, a decrease of $229,192, or
9.64%,  over cost of sales of $2,377,230 for 2000. The decrease in cost of goods
sold  came  from  improved  materials management that resulted in less scrap and
obsolete  materials.  In  addition,  manufacturing  and  product testing process
revisions  brought  new  efficiencies  that allowed a reduction in manufacturing
headcount.  (Historical  cost of sales for the year ended December 31, 2001 were
$1,148,581).

     Research  and development expenses were $1,870,630 for 2001, an increase of
$98,156  or  5.54%,  as compared to $1,772,474 for 2000. Product development and
support  during  2001  was  increased  through  the  use of outside consultants.
Increases  in  engineering  costs  will continue with development of new network
digital  video  products.  (Historical research and development expenses for the
year  ended  December  31,  2001  were  $1,090,844).

     Sales and marketing expenses for the full year ended December 31, 2001 were
$2,822,510, an increase of $191,700, or 7.29%, as compared to $2,630,810 for the
year  ended  December  31, 2000. In 2001, we increased our marketing effort with
more  trade  show  activity  and  increased  travel  expenditure.  This trend is
expected  to  continue.  (Historical  sales  and marketing expenses for the year
ended  December  31,  2001  were  $1,953,667).

     General  and  administrative  costs  were  $2,033,688  for  the  year ended
December  31,  2001,  an increase of $25,273 or 1.26%, as compared to $2,008,415
for  the  year  ended  December  31,  2000. This is primarily due to the cost of
acquiring Optivision's operations in April 2001 and meeting regulatory reporting
requirements.  Increases  were  offset by decreased expenditures necessitated by
our  revenue  slowdown.  (Historical general and administrative expenses for the
year  ended  December  31,  2001  were  $1,478,616).

     As  a  part  of  purchase accounting, Optivision on the date of acquisition
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.  It was concluded that because of significant negative
industry  and  economic trends affecting both our current operation and expected
future  sales  after the terrorism events of September 11, 2001, and the decline
in  market  conditions  within  our  industry was significant, that the carrying
value  was zero. Thus, we recorded an impairment adjustment of $16,328,905. (See
Financial  Statement  note  4).

     Interest  and  other  expense,  net  was  $653,061 for 2001, an increase of
$448,245  or  219%, as compared to $204,816 for 2000. The increase was primarily
due to accruing interest on shareholder loans and other increases in debt. These
interest  expenses  will  continue  until  such  time as the notes are repaid or
converted  to  equity.  (Historical  other  income (expenses) in 2000 was $0.0).

     Our  net loss for 2001 remained steady, increasing by $12,517, or 0.23%, to
a  net  loss  of  ($5,432,172) from a net loss of ($5,419,655) in the comparable
2000  period.  This  is  the  result of all of the above operational changes and
financing  costs.  (Historical net loss for the year ended December 31, 2001 was
$21,684,606,  which  includes  the goodwill amortization and goodwill impairment
adjustment  mention  above  and  in  note  17  to  the  Financial  Statements.)


                                       19
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

     At March 31, 2002, we had cash and cash equivalents of $608,890 compared to
$48,467 at December 31, 2001.  During the three months ended March 31, 2002, our
negative  working  capital position improved by over $3 million primarily due to
the  receipt  of  proceeds from the issuance of the first tranche of $500,000 in
principal  amount  of convertible debentures from Bristol Investment Fund, Ltd.,
the receipt of proceeds from a $1.8 million unit financing in February 2002, the
reduction of past due and accrued salary due employees of approximately $990,000
through  the  issuance  of  stock options, and the conversion of a $250,000 note
payable  together with accrued interest thereon into shares of our common stock.
In  June  2002,  our  balance sheet was further strengthened with the receipt of
proceeds  from the issuance of $450,000 in principal amount of convertible notes
and the elimination of approximately $3.2 million in debt with the final payment
under  a  work  out agreement with the creditors of Optivision which resulted in
the  forgiveness  of  approximately  $1.1  million  of  debt,  the conversion of
$2,050,000  in  principal  amount  of  a  convertible  note by Mr. Liccardo, our
president, chief executive officer and chairman of the board, into shares of our
common  stock.

     In  December 2001, pursuant to a financing agreement between us and Bristol
Investment  Fund Ltd. for a total of $1,000,000 of convertible debentures and up
to $1,385,000 of investment options and warrants, we received a first tranche of
financing  through  the  issuance  of  a $500,000 convertible debenture. Bristol
Investment  Fund  Ltd.  is  committed  to  provide us with the second tranche of
financing  in  the  amount  of  $500,000  through  the issuance of a convertible
debenture  within  ten  business days after the effective date of a registration
statement  covering  the  resale  of  the shares issuable upon conversion of the
debentures  and exercise of the related warrants and investment options. Receipt
of  this  additional  convertible  debenture financing and financing through the
exercise  of the related investment options and warrants will be critical for us
to  continue  operations  through  2002.

     We  had  continuing  operating  losses  of  $3,307,829,  excluding goodwill
amortization  and  impairment  adjustments,  and  $1,378,669  for the year ended
December  31,  2001  and  the  first  quarter of 2002, respectively. Although we
currently expect to break even in 2004, we expect to incur operating losses over
the  next  two years of between $4 million and $6 million in total. So, in order
to  sustain  our  operations,  finance  our  growth  and  achieve  our strategic
objectives  until  then,  we  currently  estimate  that  we will need additional
funding  of  between  $4  million  and  $6  million  in  total.  Management  has
implemented  measures  to  increase  cash flows through increases in revenue and
cost-cutting  measures  and  is actively pursuing additional sources of funding.
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 for us 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.


                                       20
<PAGE>
ITEM  7.     FINANCIAL  STATEMENTS

     Our  consolidated financial statements and the independent auditors' report
appear  on  pages F-1 through F-__ of this Report and are incorporated into this
Item  7  by  reference.

ITEM  8.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL  DISCLOSURE

     None.


                                       21
<PAGE>
                                    PART III

ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
             COMPLIANCE  WITH  SECTION  16(A)  OF  THE  EXCHANGE  ACT

DIRECTORS  AND  EXECUTIVE  OFFICERS

     The  following table sets forth the names, age, and position of each of our
directors  and  executive  officers.

NAME                     AGE  POSITION
----                     ---  --------
Michael A. Liccardo       56  President, Chief Executive Officer
                              and Chairman
Lawrence L. Bartlett      62  Chief Financial Officer, Vice President, Secretary
                              and Director
Richard A. Falcone        46  Vice President of Marketing, Worldwide Sales and
                              Business Development
Catherine Palmen          44  Director


     Our  executive officers are appointed by, and serve at the pleasure of, our
board  of  directors.  There  are no family relationships among our directors or
executive  officers.  Our  directors  are elected to serve until the next annual
meeting  of  stockholders  or  until their successors are elected and qualified.
Pursuant  to  our  bylaws,  the number of directors on our board of directors is
fixed  at  four  members.

BIOGRAPHICAL  INFORMATION

     Set  forth below is biographical information for each officer and director.
No  person  other  than officers and directors will currently perform any of our
management  functions.

     Michael  A.  Liccardo  has served as a director since February 2001, and as
our  chief  executive  officer,  president and chairman of the board since April
2001.  Mr.  Liccardo  has  been  the  president  and  chief executive officer of
Optivision  since  1998  and chairman since December 1999. With over 25 years of
experience  in  the  high  technology  industry  in  various  senior  marketing,
operations  and  financial  management  positions,  Mr.  Liccardo  has  directed
business  strategy  for  a  broad  range  of  markets,  including  computer  and
peripheral systems, software, semiconductors and multimedia communication. Prior
to  joining  Optivision,  Mr.  Liccardo  served  in various executive management
positions  at  Cirrus  Logic,  a  supplier  of  analog  circuits  and  advanced
mixed-signal  chip  products,  including vice president of business development,
vice  president  of  strategic planning, and vice president and general manager.
While  at  Cirrus  Logic,  Mr.  Liccardo  directed  the spin off of Lexar Media.
Previously,  Mr.  Liccardo  was  the chief operating officer of Scientific Micro
Systems  where  he  successfully  completed  its  initial  public  offering. Mr.
Liccardo  also  served  as a member of the board at BusLogic. Mr. Liccardo holds
both  master  and bachelor of science degrees in electrical engineering from the
University  of  California  at  Berkeley,  and  an MBA from Stanford University.


                                       22
<PAGE>
     Lawrence  L.  Bartlett  has  served  as  interim  president from March 2001
through April 2001 and has served as our vice president, chief financial officer
and  secretary since April 2001. Mr. Bartlett has also served on our board since
February  2001.  Mr.  Bartlett has also served as the chief financial officer of
Optivision  since  June  1998,  overseeing  Optivision's worldwide financial and
administration  operations. He has also been a director of Optivision since June
2000.  He brings over 25 years of leadership in high technology financial, human
resources  and  information  technology management. Prior to joining Optivision,
Mr.  Bartlett  served  for  five  years as the senior finance and administration
executive  at  Peninsula  Laboratories.  Mr.  Bartlett  spent  eight  years as a
contract  chief  financial  officer,  providing  financial expertise to startup,
turnaround  and  fast-track  growth  companies. Mr. Bartlett also served as vice
president  of  finance  and  administration,  and  chief  financial  officer  of
Northstar  Computers  and  corporate  controller  for  Bio-Rad  Laboratories. At
Northstar Computers, Mr. Bartlett led the company to an initial public offering.
Previously,  Mr.  Bartlett  was  an  auditor  with  Arthur Andersen LLP. He is a
certified public accountant and holds a bachelor of science degree in accounting
and  business  statistics  from  the  University  of  Oregon.

     Richard  A.  Falcone  has served as our vice president, worldwide sales and
business  development,  since  April  2001.  He  joined  Optivision in 1997 with
significant  experience  in  sales,  marketing,  strategic planning, finance and
operational  management  in  growth environments. During his career, Mr. Falcone
has  developed  both enterprise direct and indirect models within end user, OEM,
integration  and service provider environments. Prior to Optivision, Mr. Falcone
spent  nine  years  at  General Signal Networks (now InRange), a manufacturer of
data  communications  switching  and  test  equipment,  network control and open
systems  connectivity.  GSN  was  the  result  of the merger of Telenex and Data
Switch  corporations. As Area Vice President, he built and managed a $40 million
field  organization,  including  sales,  business  development, field marketing,
systems  engineering  and  support.  Prior  to General Signal, Mr. Falcone spent
eight  years  at  Nortel Networks, most recently serving as eastern region sales
director  for  the  Spectron  Division  (data communications). He was top ranked
among  management  in  quota  achievement. While at Nortel, Mr. Falcone gained a
wealth  of  experience serving in numerous management and professional positions
including  director  marketing/sales  operations,  senior  manager  financial
planning,  and  strategic  planning  analyst. He benefited from a broad scope of
assignments  within  formal  executive  development  initiatives  for  select
candidates.  Mr. Falcone holds a master's degree in business administration from
Drexel  University  in  Philadelphia,  PA,  and  a bachelor of science degree in
mathematics  from Villanova University in Villanova, PA. He was elected to Pi Mu
Epsilon,  a  national  mathematics  honor  society.  Throughout  his career, Mr.
Falcone  has  dedicated  himself  to  continuing  education, including executive
simulation  programs  at  the  Wharton  School.

     Catherine  Palmen  has served as a director since February 2001. Ms. Palmen
has  also  been  a  director  of  Optivision  since June 2000 and is chairman of
Optivision's  creditors  committee.  Since  March  1998,  Ms. Palmen has been an
account  executive  with  Interprose, a public relations agency for emerging and
established  players  in  the  information  technology  and  telecommunications
industries,  where  she  supports  trade  shows  and  tours, coordinates product
reviews,  and  manages  relations  with  business  and  trade press for multiple
clients.  Before  joining Interprose, Ms. Palmen worked in public relations with
Newbridge  Networks  Inc.  and  in  public  relation and sales with UB Networks.


                                       23
<PAGE>
SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

     Section  16(a)  of the Securities Exchange Act of 1934, as amended, and the
regulations  of  the  Securities and Exchange Commission promulgated thereunder,
require our directors, executive officers and persons who own more than 10% of a
registered  class  of  our  equity  securities  to file reports of ownership and
changes in ownership with the Securities and Exchange Commission, and provide us
with  copies  of  such  reports.  Based  solely on a review of the copies of the
reports  furnished  to  us,  or  written  representations  that  no reports were
required  to be filed, we believe that during the fiscal year ended December 31,
2001  all  Section  16(a)  filing  requirements  applicable  to  our  directors,
officers, and greater than 10% beneficial owners were complied with, except that
Michael  A.  Liccardo  reported  four transactions on a late Form 4, Lawrence L.
Bartlett  reported  four  transactions  on a late Form 4, and Richard A. Falcone
reported  three  transactions  on  a  late  Form  4.

ITEM  10.     EXECUTIVE  COMPENSATION

EXECUTIVE  COMPENSATION

     The following table sets forth all compensation awarded, earned or paid for
services  rendered  in  all  capacities to us during fiscal years 1999, 2000 and
2001  to:

     -    Each person who served as our chief executive officer during 2001; and

     -    Our  other  executive  officers whose total annual salary and bonus in
          2001  exceeded  $100,000.


                                       24
<PAGE>
<TABLE>
<CAPTION>
                               SUMMARY COMPENSATION TABLE

                                  ANNUAL COMPENSATION (1)    LONG TERM COMPENSATION (1)
                                  ------------------------  ---------------------------

                                                             SECURITIES     ALL OTHER
                                                             UNDERLYING   COMPENSATION
NAME AND PRINCIPAL          YEAR  SALARY ($)(2)  BONUS ($)  OPTIONS (#S)     ($) (3)
    POSITION
<S>                         <C>   <C>            <C>        <C>           <C>
Michael A. Liccardo         2001        164,680        ---     1,100,000         1,278
  President, Chief          2000        182,148        ---     1,300,000           ---
Executive Officer and       1999        175,014        ---       110,000           ---
Chairman of the Board
(4)
Jason John                  2001            ---        ---           ---           ---
  President, Secretary      2000            ---        ---           ---           ---
and  Chairman of the        1999            ---        ---           ---           ---
Board (5)
Lawrence L. Bartlett        2001        163,414        ---       825,000         1,245
  Chief Financial           2000        185,450        ---       425,000           ---
Officer, Vice President     1999        131,250        ---        30,000           ---
and Secretary (6)
Richard A. Falcone          2001        184,228        ---       740,000           878
  Vice President of         2000        174,538        ---       500,000           ---
Marketing, Worldwide        1999        155,675        ---        49,250           ---
Sales and Business
Development
<FN>
_________________

(1)  Amounts for fiscal year 1999 and 2000 reflect pre-merger compensation
     awarded, earned or paid for services rendered in all capacities to
     Optivision, Inc.
(2)  Amounts shown include cash and non-cash compensation earned and received by
     the named executive officers. These officers elected to defer all or a
     significant portion of their salaries in order that our financial resources
     be directed toward supporting operations. At the end of 2001, Messrs.
     Bartlett and Falcone had deferred compensation of approximately $40,000 and
     $39,800, respectively, all of which was paid in February 2002. At the end
     of 2001, Mr. Liccardo had deferred compensation of approximately $87,000, a
     portion of which was paid in the form of 13,695 stock options that were
     granted and immediately exercised by Mr. Liccardo on January 15, 2002 at
     the price of $1.20 per share, and the remainder of which will not be paid
     until our board of directors deems it prudent and such payment will not
     adversely affect our operations.
(3)  Represents the premiums paid by us with respect to term life insurance on
     the lives of each named executive officer pursuant to which the proceeds
     are paid to the beneficiaries of each policy.
(4)  Mr. Liccardo became our president, chief executive officer and chairman of
     the board of directors in April 2001.
(5)  Mr. John became our president, chairman of the board and secretary and
     served as the sole director in August 2000, and resigned as director in
     February 2001 and as chairman of the board, president and secretary in
     March 2001.
(6)  Mr. Bartlett served as our interim president upon the resignation of Mr.
     John in March 2001 and until Mr. Liccardo was appointed in April 2001.
</TABLE>


                        OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information regarding option granted to each
of  the  named  executive  officers  during  the  year  ended December 31, 2001.


                                       25
<PAGE>
<TABLE>
<CAPTION>
                                  INDIVIDUAL GRANTS

                                            PERCENTAGE OF
                           NUMBER OF        TOTAL OPTIONS
                          SECURITIES         GRANTED TO      EXERCISE OR
                      UNDERLYING OPTIONS    EMPLOYEES IN     BASE PRICE    EXPIRATION
NAME                        GRANTED        FISCAL YEAR (1)   ($/SH) (2)       DATE
<S>                   <C>                  <C>              <C>            <C>
                          200,000 (3) (4)           5.25%   $       2.00     04/09/11
Michael A. Liccardo.      900,000 (5) (6)           23.65           1.07     06/28/11
                          160,000 (3) (4)            4.20           2.00     04/09/11
                          365,000 (5) (6)            9.59           1.07     06/28/11
                          200,000 (5) (7)            5.25           0.35     10/13/11
Lawrence L. Bartlett      100,000 (5) (8)            2.62           0.62     12/27/11
                          150,000 (3) (4)            3.94           2.00     04/09/11
                          365,000 (5) (6)            9.59           1.07     06/28/11
                          125,000 (5) (7)            3.28           0.35     10/13/11
Richard A. Falcone        100,000 (5) (8)            2.62           0.62     12/27/11
<FN>
_________________

(1)  Based  on  a  total  of  3,805,300  shares  subject  to  options granted to
     employees  (not  counting  options  granted to non-employees) under all our
     stock  option  plans in the year ended December 31, 2001, including options
     granted  to  the  named  executive  officers.
(2)  All  options  were  granted  at  an exercise price equal to the fair market
     value  of  our  common  stock  at  the  date  of  grant, or, in the case of
     Optivision,  Inc.  options,  issued  at  the  fair  market  value  of  the
     Optivision,  Inc.  common  stock as determined by the board of directors of
     Optivision,  Inc.
(3)  These  options  were  issued  under  our  1997  Stock  Plan in exchange for
     Optivision,  Inc.  options  in  connection with our merger with Optivision,
     Inc.  on April 16, 2001. The Optivision, Inc. options were granted on April
     9,  2001.
(4)  The  option  vests  at  a  rate  of  2.08%  each  month.
(5)  These  options  were  issued  under  our  2000  Stock  Plan.
(6)  The option vested 25% on the date of grant, 25% on March 1, 2002, and vests
     at  a  rate  of  2.08%  each  month  thereafter.
(7)  The  option  vested  33% on November 12, 2001, 33% on December 12, 2001 and
     34%  on  January  12,  2002.
(8)  The  option  vested 25% on March 30, 2002 and vests at a rate of 2.08% each
     month  thereafter.
</TABLE>


AGGREGATED  OPTION  EXERCISES  IN  LAST  FISCAL  YEAR AND FISCAL YEAR-END OPTION
VALUES

     The  following  table sets forth information regarding the number and value
of securities underlying unexercised options held by each of the named executive
officers  at  December 31, 2001.  None of the named executive officers exercised
stock  options  during  the  year  ended  December  31,  2001.


<TABLE>
<CAPTION>
                                             NUMBER OF SECURITIES
                                            UNDERLYING UNEXERCISED       VALUE OF UNEXERCISED
                       SHARES                    OPTIONS AT             IN-THE-MONEY OPTIONS AT
                      ACQUIRED              DECEMBER 31, 2001 (1)        DECEMBER 31, 2001 (2)
                         ON       VALUE   --------------------------  ----------------------------
NAME                  EXERCISE  REALIZED  EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
--------------------  --------  --------  -----------  -------------  ------------  --------------
<S>                   <C>       <C>       <C>          <C>            <C>           <C>
Michael A. Liccardo        ---       ---    1,858,000        730,000  $    122,500  $       59,500
Lawrence L. Bartlett       ---       ---      663,801        636,199        81,886          27,927
Richard A. Falcone         ---       ---      709,039        590,001        65,188          22,313
<FN>
_________________


                                       26
<PAGE>
(1)  These amounts represent the total number of shares subject to options held
     by the named executive officers at December 31, 2001. These options were
     granted on various dates during 2001 and include options issued in exchange
     for Optivision, Inc. options in connection with our merger with Optivision,
     Inc. on April 16, 2001.
(2)  These amounts represent the difference between the exercise price of
     options and the closing bid price of our common stock on December 31, 2001
     for all the in-the-money options held by the named executive officers. The
     in-the-money option exercise prices were all at $0.35. These options were
     granted at the fair market value of the stock on the grant date.
</TABLE>

DIRECTOR  COMPENSATION

     We  do  not  currently  compensate  our  directors  for  their  services as
directors.  Directors are reimbursed for their reasonable out-of-pocket expenses
incurred  with  attending  board  or  committee  meetings.

EMPLOYMENT  AGREEMENTS  AND  CHANGE  IN  CONTROL  ARRANGEMENTS

Michael  A.  Liccardo

     In  April  2001,  we  entered  into  an executive employment agreement with
Michael  A.  Liccardo,  who serves as our president, chief executive officer and
chairman of the board. Our agreement with Mr. Liccardo provides for, among other
things,  a  three-year  term  of  employment,  the  payment  of a base salary of
$200,000  per  year,  and  the  minimum  payment  of  one  year's base salary in
severance  upon  termination  of  employment without cause. The agreement may be
terminated  for  any reason by Mr. Liccardo upon 30 days written notice or by us
for  cause  upon  30  days  written notice or without cause upon 90 days written
notice.  Upon  termination  of employment or change in our ownership or control,
all options granted to Mr. Liccardo will be accelerated and will be exercisable,
in the case of termination, for one year after such termination and, in the case
of  a  change  of control, for the 60-day period prior to such change in control
and  for  a  one-year  period after such change in control. Mr. Liccardo is also
subject  to  confidentiality  restrictions  under  his  employment  agreement.

Lawrence  L.  Bartlett

     In  April  2001,  we  entered  into  an executive employment agreement with
Lawrence L. Bartlett, who serves as our vice president, chief financial officer,
secretary  and  director.  Our  agreement  with Mr. Bartlett provides for, among
other  things,  employment  for  three  years,  the  payment of a base salary of
$190,000  per  year,  and  the  minimum  payment  of  one  year's base salary in
severance  upon  termination  of  employment without cause. The agreement may be
terminated  for  any reason by Mr. Bartlett upon 30 days written notice or by us
for  cause  upon  30  days  written notice or without cause upon 90 days written
notice.  Upon  termination  of employment or change in our ownership or control,
all options granted to Mr. Bartlett will be accelerated and will be exercisable,
in the case of termination, for one year after such termination and, in the case
of  a  change  of control, for the 60-day period prior to such change in control
and  for  a  one-year  period after such change in control. Mr. Bartlett is also
subject  to  confidentiality  restrictions  under  his  employment  agreement.


                                       27
<PAGE>
Richard  A.  Falcone

     In  April  2001,  we  entered  into  an executive employment agreement with
Richard  A.  Falcone,  who  serves as our vice-president of marketing, worldwide
sales  and  business  development.  Our agreement with Mr. Falcone provides for,
among  other things, employment for three years, the payment of a base salary of
$130,000  per  year,  and  the  minimum  payment  of  one  year's base salary in
severance  upon  termination  of  employment  without cause. Mr. Falcone is also
entitled  to sales commissions as may be approved by the board of directors from
time to time. The agreement may be terminated for any reason by Mr. Falcone upon
30 days written notice or by us for cause upon 30 days written notice or without
cause  upon  90 days written notice. Upon termination of employment or change in
our ownership or control, all options granted to Mr. Falcone will be accelerated
and  will  be  exercisable,  in the case of termination, for one year after such
termination  and,  in the case of a change of control, for a 60-day period prior
to  such  change  in  control  and  for the one-year period after such change in
control.  Mr.  Falcone is also subject to confidentiality restrictions under his
employment  agreement.

1997  STOCK  PLAN

General

     Our  board  of  directors  adopted  the  1997  Stock  Plan  (formerly  the
Optivision,  Inc.  1997  Stock  Plan)  in  February  2001  effective  upon  the
completion  of  the merger with Optivision, Inc. in April 2001. Our stockholders
approved  the  1997  Stock Plan in February 2001. 3,993,482 shares of our common
stock  are authorized for issuance under the 1997 Stock Plan. As of December 31,
2001,  options  to  purchase  3,384,630  shares  were  outstanding at a weighted
average  exercise  price  of  $0.86 per share and 608,852 shares of common stock
remained  available  for  future  grant.  The  1997 Stock Plan will terminate in
February  2011.

Administration

     The  1997  Stock  Plan  is  administered  by  our  board  of directors or a
committee  of the board. The 1997 Stock Plan provides for the grant of incentive
stock  options  as  defined  in  Section 422 of the Internal Revenue Code to our
employees  (including  officers  and  directors  who are also employees) and the
employees  (including  officers  and  directors  who  are also employees) of our
subsidiary  corporations.  The  1997  Stock  Plan also provides for the grant of
nonstatutory  stock  options  and the grant of stock purchase rights both to our
employees,  non-employee  directors,  consultants  and  advisors,  and  to  the
employees,  non-employee  directors,  consultants and advisors of our subsidiary
corporations.  Our  board of directors has the authority to amend the 1997 Stock
Plan  at  any  time,  with  stockholder  approval,  if  required.

Plan  Features

Under  the  1997  Stock  Plan:

     -    Qualified  employees  are  eligible  for  the grant of incentive stock
          options  to  purchase  shares  of  our  common  stock;


                                       28
<PAGE>
     -    Our  board  of  directors  or  the committee appointed by the board to
          administer  the  1997  Stock Plan will determine the exercise price of
          options or the purchase price of stock purchase rights, but the option
          price  for  incentive  stock options will not be less than 100% of the
          fair  market  value of the stock on the date of grant and the exercise
          price  of  nonstatutory stock options will not be less than 85% of the
          fair  market  value  of  the  stock  on  the  date  of  grant;  and

     -    The  exercise  price  or  purchase price may, at the discretion of our
          board  of  directors  or  the  committee  appointed  by  the  board to
          administer  the  1997  Stock  Plan, be paid in cash, cash equivalents,
          promissory note, surrender of stock, a cashless exercise, surrender of
          stock, past services, cancellation of indebtedness owed to the grantee
          or  any  form  of  payment  that  is  consistent with applicable laws,
          regulations  and  rules.

Change of Control and Accelerated Vesting

     In  the  event  that  we  merge  with  or  into another corporation or sell
substantially  all of our assets, to the extent permitted by applicable law, the
surviving  corporation will assume all outstanding stock awards, including stock
options,  or  substitute  equivalent  stock awards. If the successor corporation
does not agree to assume the stock awards or substitute equivalent stock awards,
all  stock  awards shall become fully vested and exercisable prior to the change
of  control, and our board of directors (or the committee appointed by the board
to  administer  the plan) will notify plan participants that the stock award are
fully  exercisable  for  a  15-day period from the date of the notice. The stock
awards  will  terminate  upon  expiration  of  such  period. In the event of our
proposed  dissolution  or  liquidation, our board of directors (or the committee
appointed  by the board to administer the plan) will notify plan participants at
least  15  days  prior to such proposed action. Unless previously exercised, all
stock  awards  will  terminate  immediately  prior  to  the consummation of such
proposed  action.

2000  STOCK  PLAN

General

     Our board of directors adopted the 2000 Stock Plan in October 2000, and our
stockholders  approved  the plan in October 2000. 5,500,000 shares of our common
stock  are authorized for issuance under the 2000 Stock Plan. As of December 31,
2001, options to purchase 2,804,016 shares of common stock were outstanding at a
weighted  average  exercise  price  of  $0.88  per share and 2,695,984 shares of
common  stock  remained  available  for  future  grant. The 2000 Stock Plan will
terminate  in  October  2010.

Administration

     The  2000  Stock  Plan  is  administered  by  our  board  of directors or a
committee  of the board. The 2000 Stock Plan provides for the grant of incentive
stock  options  as  defined  in  Section 422 of the Internal Revenue Code to our
employees  (including  officers  and  directors  who are also employees) and the
employees  (including  officers  and  directors  who  are also employees) of our
subsidiary  corporations.  The  2000  Stock  Plan also provides for the grant of
nonstatutory  stock  options  and the grant of stock purchase rights both to our
employees,  non-employee  directors,  consultants  and  advisors,  and  to  the
employees,  non-employee  directors,  consultants and advisors of our subsidiary
corporations.  Our  board of directors has the authority to amend the 2000 Stock
Plan  at  any  time,  with  stockholder  approval,  if  required.


                                       29
<PAGE>
Plan  Features

     Under  the  2000  Stock  Plan:

     -    Qualified  employees  are  eligible  for  the grant of incentive stock
          options  to  purchase  shares  of  our  common  stock;

     -    Our  board  of  directors  or  the committee appointed by the board to
          administer  the  plan  will determine the exercise price of options or
          the  purchase price of stock purchase rights, but the option price for
          incentive  stock options will not be less than 100% of the fair market
          value  of  the  stock  on  the date of grant and the exercise price of
          nonstatutory  stock  options  will  not  be  less than 85% of the fair
          market  value  of  the  stock  on  the  date  of  grant;  and

     -    The  exercise  price  or  purchase price may, at the discretion of our
          board  of  directors  or  the  committee  appointed  by  the  board to
          administer  the  plan,  be  paid in cash, cash equivalents, promissory
          note,  surrender  of  stock,  a cashless exercise, surrender of stock,
          past services, cancellation of indebtedness owed to the grantee or any
          form  of  payment that is consistent with applicable laws, regulations
          and  rules.

Change  of  Control  and  Accelerated  Vesting

     In  the  event  that  we  merge  with  or  into another corporation or sell
substantially  all of our assets, to the extent permitted by applicable law, the
surviving  corporation will assume all outstanding stock awards, including stock
options,  or  substitute  equivalent  stock awards. If the successor corporation
does not agree to assume the stock awards or substitute equivalent stock awards,
all  stock  awards shall become fully vested and exercisable prior to the change
of  control, and our board of directors (or the committee appointed by the board
to  administer  the plan) will notify plan participants that the stock award are
fully  exercisable  for  a  15-day period from the date of the notice. The stock
awards  will  terminate  upon  expiration  of  such  period. In the event of our
proposed  dissolution  or  liquidation, our board of directors (or the committee
appointed  by the board to administer the plan) will notify plan participants at
least  15  days  prior to such proposed action. Unless previously exercised, all
stock  awards  will  terminate  immediately  prior  to  the consummation of such
proposed  action.

2002  STOCK  PLAN

General

     On  June 17, 2002, our board of directors adopted the 2002 Stock Plan which
our  stockholders  approved  on  June  20, 2002. 20,000,000 shares of our common
stock  are authorized for issuance under the 2002 Stock Plan, none of which have
been  issued.  The  2002  Stock  Plan  will  terminate  in  June  2012.


                                       30
<PAGE>
Administration

     The  2002  Stock  Plan  is  administered  by  our  board  of directors or a
committee  of the board. The 2002 Stock Plan provides for the grant of incentive
stock  options  as  defined  in  Section 422 of the Internal Revenue Code to our
employees  (including  officers  and  directors  who are also employees) and the
employees  (including  officers  and  directors  who  are also employees) of our
subsidiary  corporations.  The  2002  Stock  Plan also provides for the grant of
nonstatutory  stock  options  and the grant of stock purchase rights both to our
employees,  non-employee  directors,  consultants  and  advisors,  and  to  the
employees,  non-employee  directors,  consultants and advisors of our subsidiary
corporations.  Our  board of directors has the authority to amend the 2002 Stock
Plan  at  any  time,  with  stockholder  approval,  if  required.

Plan  Features

     Under  the  2002  Stock  Plan:

     -    Qualified  employees  are  eligible  for  the grant of incentive stock
          options  to  purchase  shares  of  our  common  stock;

     -    Our  board  of  directors  or  the committee appointed by the board to
          administer  the  plan will determine the exercise price of options and
          the purchase price of stock purchase rights, which cannot be less than
          100%  of  the fair market value of the stock on the date of grant; and

     -    The  exercise  price  or  purchase price may, at the discretion of our
          board  of  directors  or  the  committee  appointed  by  the  board to
          administer  the  plan,  be  paid in cash, cash equivalents, promissory
          note,  surrender  of  stock,  a cashless exercise, surrender of stock,
          past services, cancellation of indebtedness owed to the grantee or any
          form  of  payment that is consistent with applicable laws, regulations
          and  rules.


                                       31
<PAGE>
Change  of  Control  and  Accelerated  Vesting

          In  the  event  that we merge with or into another corporation or sell
substantially  all of our assets, to the extent permitted by applicable law, the
surviving  corporation will assume all outstanding stock awards, including stock
options,  or  substitute  equivalent  stock awards. If the successor corporation
does not agree to assume the stock awards or substitute equivalent stock awards,
all  stock  awards shall become fully vested and exercisable prior to the change
of  control, and our board of directors (or the committee appointed by the board
to  administer  the plan) will notify plan participants that the stock award are
fully  exercisable  for  a  15-day period from the date of the notice. The stock
awards  will  terminate  upon  expiration  of  such  period. In the event of our
proposed  dissolution  or  liquidation, our board of directors (or the committee
appointed  by the board to administer the plan) will notify plan participants at
least  15  days  prior to such proposed action. Unless previously exercised, all
stock  awards  will  terminate  immediately  prior  to  the consummation of such
proposed  action.


ITEM  11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

     The  following table presents information about the beneficial ownership of
our  common  stock,  as  of  July  19,  2002,  by:

     -    each person or entity who is known by us to own beneficially more than
          5%  of  the  outstanding  shares  of  our  common  stock;
     -    each  of  our  directors;
     -    each  of  our  named  executive  officers;
     -    each  of  the persons who served as our chief executive officer during
          our  fiscal  year  ended  December  31,  2001;  and
     -    all  directors  and  executive  officers  as  a  group.

     Beneficial  ownership  is  determined  in  accordance with the rules of the
Securities  and  Exchange Commission and generally includes voting or investment
power  with  respect  to  securities,  subject to community property laws, where
applicable.  Shares  of our common stock subject to options or other convertible
securities  that  are  presently  exercisable  or  convertible or exercisable or
convertible  within  60  days  of July 19, 2002 are deemed to be outstanding and
beneficially  owned  by  the  holder  for  the  purpose  of computing shares and
percentage  ownership of that holder, but are not treated as outstanding for the
purpose  of  computing  the  percentage  ownership  of  any  other  person.  The
percentage of beneficial ownership is based on 48,014,957 shares of common stock
outstanding  as  of  July  19,  2002.


                                       32
<PAGE>
<TABLE>
<CAPTION>
             NAME AND ADDRESS                                    NUMBER OF SHARES     PERCENTAGE OF
            OF BENEFICIAL OWNER                               BENEFICIALLY OWNED (1)      SHARES
                                                                                     OUTSTANDING (1)
<S>                                                          <C>                     <C>
5% Stockholders
---------------
Bristol Investment Fund, Ltd. (2)                                        13,048,194      21.4% (11)
  Caledonian House, Jennett Street
  George Town, Grand Cayman, Cayman Islands

Alpha Capital Aktiengesellschaft (3)
  Pradafant                                                              15,587,049      25.6% (12)
  79490 Furstentums, Vaduz, Liechtenstein

Stonestreet Limited Partnership (4)
  260 Town Centre Blvd.,                                                  8,179,639      15.8% (12)
  Suite 201, Markham, ON, L3R 8H8, Canada


Executive Officers and Directors (5)
------------------------------------
Michael A. Liccardo (6)                                                  49,767,105           71.2%
Lawrence L. Bartlett (7)                                                    854,400            1.7%
Catherine Palmen (8)                                                          2,000              *
Jason John (9)                                                                    0              0
  885 West Georgia Street
  Vancouver, BC V6C 1T2, Canada
Richard A. Falcone (10)                                                     839,287            1.7%
All directors and executive officers as a group (4 persons)              51,462,792           71.9%
<FN>
________________
*  Less  than  1%.

(1)  Unless  otherwise  indicated,  this  report  assumes  that  none  of  the
     convertible  debentures,  investment  options,  convertible  notes,  reset
     options  and  warrants  have  been  converted  or  exercised.
(2)  Includes  (a) 1,000,000 shares that may be acquired through the exercise of
     warrants,  (b) 6,024,097 shares that may be acquired through the conversion
     of  a  convertible  note  in  the  principal  amount  of  $500,000, and (c)
     6,024,097  shares  that  may be acquired through the exercise of investment
     options  currently  or  within  60  days  of  July  19,  2002.
(3)  Includes  (a)  450,000  shares that may be acquired through the exercise of
     warrants,  (b) 3,012,049 shares that may be acquired through the conversion
     of  a  convertible  note  in  the  principal  amount  of  $250,000, and (c)
     9,500,000 shares that may be acquired through the exercise of reset options
     currently  or  within  60  days  of  July  19,  2002.
(4)  Includes  (a)  247,500  shares that may be acquired through the exercise of
     warrants,  (b) 2,409,639 shares that may be acquired through the conversion
     of  a  convertible  note  in  the  principal  amount  of  $200,000, and (c)
     4,750,000 shares that may be acquired through the exercise of reset options
     currently  or  within  60  days  of  July  19,  2002.
(5)  Unless  otherwise indicated, the address of each of the persons or entities
     listed  in  the table is c/o Amnis Systems Inc., 3450 Hillview Avenue, Palo
     Alto,  California  94304.
(6)  Includes  (a) 2,467,548 shares that may be acquired through the exercise of
     options,  and  (b)  19,430,880  shares  that  may  be  acquired through the
     conversion  of  a  convertible  note in the principal amount of $1,612,763.
(7)  Includes  854,400  shares  that  may  be  acquired  through the exercise of
     options  currently  or  within  60  days  of  July  19,  2002.
(8)  Includes  2,000 shares that may be acquired through the exercise of options
     currently  or  within  60  days  of  July  19,  2002.
(9)  Mr.  John  resigned as director in February 2001 and as chairman, president
     and  secretary  in  March  2001.
(10) Includes  835,326  shares  that  may  be  acquired  through the exercise of
     options  currently  or  within  60  days  of  July  19,  2002.


                                       33
<PAGE>
(11) The  notes  are convertible and the investment options and the warrants are
     exercisable  by  the holder only to the extent that the number of shares of
     common stock issuable pursuant to such securities, together with the number
     of  shares  of common stock owned by the holder and its affiliates (but not
     including  shares  of  common  stock  underlying  unconverted  shares  of
     debentures  or unexercised portions of the warrants and investment options)
     would not exceed 4.9% of the then outstanding common stock as determined in
     accordance  with  Section  13(d)  of  the  Securities  Exchange  Act.
(12) The  notes  are  convertible  and  the  reset  options and the warrants are
     exercisable  by  any holder only to the extent that the number of shares of
     common stock issuable pursuant to such securities, together with the number
     of  shares  of  common  stock  beneficially  owned  by  such holder and its
     affiliates would not  exceed  9.99% of the then outstanding common stock as
     determined in accordance with Section 13(d) of the Securities Exchange Act.
</TABLE>

     We  are not aware of any arrangements that at a latter date may result in a
change  in  our  control.

ITEM  12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Under  a  November  2001  arrangement  with  us  and  subject  to  certain
conditions,  we  will  issue  to  Richard  A.  Falcone,  our  vice  president of
marketing,  worldwide  sales  and  business  development,  300,000 shares of our
common  stock as a bonus if we are acquired by a public company that Mr. Falcone
has  identified  to  us.

     In  January 2002, we issued to Michael A. Liccardo, our president and chief
executive officer and chairman of the board, a convertible note in the principal
amount  of  $3,547,916  in  exchange  for  the  cancellation  of  certain  loans
(including  accrued  interest  thereon) that Mr. Liccardo had made to us to meet
current operating expenses. The note bears interest at 10% per annum and matures
on  January  14,  2003.  In  June  2002,  Mr.  Liccardo  converted $2,050,000 in
principal  of  this  convertible  note  and,  in  connection therewith, received
26,623,377  shares  of  common  stock.  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.


ITEM  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

     (a)(1)  Financial  Statements

     The  following financial statements are incorporated by reference in Item 7
of  this  Report:


                                       34
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                              <C>
                                                                                        Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-1
Consolidated Balance Sheets, December 31, 2001 and 2000. . . . . . . . . . . . . . . .   F-2
Consolidated Statements of Operations for years ended December 31, 2001 and 2000 . . .   F-3
Consolidated Statements of Cash Flow for years ended December, 2001 and 2000 . . . . .   F-4
Statements of Stockholders' Deficit for years ended December 31, 2001 and 2000 . . . .   F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . F-6 to F-23
</TABLE>




<PAGE>
                               Amnis Systems Inc.

                           December 31, 2001 and 2000




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




                        Consolidated Financial Statements

                                       and

                          Independent Auditors' Report






<PAGE>
INDEPENDENT  AUDITORS'  REPORT


BOARD  OF  DIRECTORS
AMNIS  SYSTEMS  INC.
Palo  Alto,  California

We  have  audited  the  accompanying consolidated balance sheet of AMNIS SYSTEMS
INC.  (THE  COMPANY)  as  of  December  31,  2001  and  2000,  and  the  related
consolidated statements of operations, stockholders' deficit, and cash flows for
the  years then ended.  These financial statements are the responsibility of the
Company's  management.  Our  responsibility  is  to  express an opinion on these
financial  statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all material respects, the financial position of Amnis Systems Inc.
as  of  December 31, 2001 and 2000, and the results of their operations and cash
flows  for  the  years  then  ended  in  conformity  with  accounting principles
generally  accepted  in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  As  discussed  in Note 3 to the
financial  statements,  the  Company  has incurred a net loss of $21,684,606 and
$110,923  in the years ended December 31, 2001 and 2000, respectively, and has a
stockholders'  deficit  of  $7,379,435  and  current  liabilities exceed current
assets  by  $7,348,512  at  December  31,  2001.  Additionally,  the Company has
negative cash flow from operations of $2,091,505 for the year ended December 31,
2001.  These  factors  raise  substantial  doubt  about the Company's ability to
continue  as  a going concern. Management's plans in regard to these matters are
also  described  in  Note  3.  The  financial  statements  do  not  include  any
adjustments  that  might  result  from  the  outcome  of  this  uncertainty.

As  discussed  in Note 2 to the financial statements, the accompanying financial
statements  have  been  restated  to  change  the  method  of accounting for the
business  combination  with  Optivision,  Inc. on April 16, 2001 to the purchase
method  of  accounting  from  the  pooling  of  interests  method of accounting.


<PAGE>
As  discussed  in  Note  17 to the financial statements, the Company changed its
estimate  of  the  life  of  goodwill  associated  with its business combination
discussed  in  Note  5.




/s/  HOOD  &  STRONG  LLP





San  Francisco,  California
February  22,  2002  (except for Notes 2 and 17 as to which the date is July 19,
2002,  and  Note  19  as  to  which  the  date  is  June  25,  2002)


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

                                                                                                        CONSOLIDATED BALANCE SHEET


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


December 31,                                                                                                 2001          2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                      <C>            <C>
ASSETS

CURRENT ASSETS:
  Cash                                                                                                   $     48,467   $
  Accounts receivable, net of allowance for doubtful accounts of $236,000 for 2001                            371,517
  Contractual receivable                                                                                      500,000
  Inventories                                                                                                 624,056
  Prepaid expenses and other                                                                                   82,919
----------------------------------------------------------------------------------------------------------------------------------

    Total current assets                                                                                    1,626,959
----------------------------------------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT:
  Machinery and equipment                                                                                   1,919,634
  Demonstration equipment                                                                                     452,188
  Furniture and fixtures                                                                                      498,796
  Leasehold improvements                                                                                      351,111
----------------------------------------------------------------------------------------------------------------------------------

                                                                                                            3,221,729
  Less:  Accumulated depreciation and amortization                                                         (3,069,937)
----------------------------------------------------------------------------------------------------------------------------------

    Property and equipment, net                                                                               151,792
----------------------------------------------------------------------------------------------------------------------------------

DEPOSITS                                                                                                       84,890
----------------------------------------------------------------------------------------------------------------------------------

    Total assets                                                                                         $  1,863,641   $       -
==================================================================================================================================


LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES:
  Financing obligations collateralized by accounts receivable                                            $  1,029,283   $
  Accounts payable - moratorium                                                                             1,561,500
  Accounts payable - other                                                                                    932,866
  Accrued salaries                                                                                            766,286
  Accrued vacation                                                                                            274,833
  Accrued interest payable                                                                                    381,104
  Note payable                                                                                                250,000
  Stockholders' notes payable                                                                               3,309,375
  Deferred rent                                                                                               108,892
  Deferred revenue                                                                                             59,095
  Other accrued expenses                                                                                      302,237
----------------------------------------------------------------------------------------------------------------------------------

    Total current liabilities                                                                               8,975,471

LONG-TERM LIABILITIES:
  Sublease deposits                                                                                            72,800
  Convertible note payable                                                                                    500,000
  Discount on convertible note payable                                                                       (305,195)
----------------------------------------------------------------------------------------------------------------------------------

    Total liabilities                                                                                       9,243,076
----------------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' (DEFICIT):
  Preferred stock, at .0001 par value; 20,000,000 shares authorized; none outstanding in 2001 and 2000          1,295       2,630
  Additional paid-in capital                                                                               14,416,929     110,423
  Accumulated deficit                                                                                     (21,797,659)   (113,053)
----------------------------------------------------------------------------------------------------------------------------------

    Total stockholders' deficit                                                                            (7,379,435)
----------------------------------------------------------------------------------------------------------------------------------

    Total liabilities and stockholders' deficit                                                          $  1,863,641   $       -
==================================================================================================================================
</TABLE>

See accompanying summary of accounting policies and notes to the financial
statements.


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

                                          CONSOLIDATED STATEMENT OF OPERATIONS


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


For the Years Ended Ended December 31,         2001                2000
------------------------------------------------------------------------------
<S>                                      <C>                <C>
NET SALES                                $      2,363,879   $               -

COST OF GOODS SOLD                              1,148,581
------------------------------------------------------------------------------

    Gross margin                                1,215,298

OPERATING EXPENSES:
  Research and development                      1,090,844
  Sales and marketing                           1,953,667
  General and administrative                    1,478,616             110,923
  Amortization of goodwill                     17,877,694
------------------------------------------------------------------------------

                                               22,400,821             110,923
------------------------------------------------------------------------------
                                              (21,185,523)           (110,923)

  Interest expense, net                          (497,889)
  Other, net                                       (1,194)
------------------------------------------------------------------------------

     Total other (expense)                       (499,083)
------------------------------------------------------------------------------

NET LOSS                                 $    (21,684,606)  $        (110,923)
==============================================================================


BASIC AND DILUTIVE LOSS PER SHARE        $          (1.43)  $           (0.00)
==============================================================================
</TABLE>

See accompanying summary of accounting policies and notes to the financial
statements.



                                                                             F-3
<PAGE>
<TABLE>
<CAPTION>
                                                  AMNIS SYSTEMS INC.

                                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT


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

For the Years Ended December 31, 2001 and 2000
---------------------------------------------------------------------------------------------------------------------
                                                                                          Additional
                                                                   Common Stock             Paid-In      Accumulated
                                                                Shares        Amount        Capital        Deficit
<S>                                                          <C>           <C>            <C>           <C>
BALANCE - December 31, 1999                                    9,310,000   $        931   $     5,872   $     (2,130)

  Stock split prior to merger 2.82:1                          16,944,200          1,694        (1,694)

  Issuance of common stock for services                           50,000              5       106,245

  Net loss                                                                                                  (110,923)
---------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 2000                                    26,304,200          2,630       110,423       (113,053)

  Cancellation of common stock                               (19,740,000)        (1,974)        1,974

  Issuance of common stock for purchase of Optivision, Inc.    4,459,063            446    12,221,438

  Sale of common stock                                         1,248,889            125     1,415,875

  Issuance of common stock for services                          663,000             67       309,933

  Exercise of stock options                                       11,930              1        15,486

  Beneficial conversion feature and warrants on
     issuance of convertible note payable                        305,195

  Issuance of common stock options to non-employees               36,605

  Net loss                                                                                               (21,684,606)
---------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 2001                                    12,947,082   $      1,295   $14,416,929   $(21,797,659)
=====================================================================================================================


                                                                Total
                                                             Stockholders'
                                                               Deficit
<S>                                                          <C>
BALANCE - December 31, 1999                                  $     4,673

  Stock split prior to merger 2.82:1

  Issuance of common stock for services                          106,250

  Net loss                                                      (110,923)
-------------------------------------------------------------------------

BALANCE, December 31, 2000

  Cancellation of common stock

  Issuance of common stock for purchase of Optivision, Inc.   12,221,884

  Sale of common stock                                         1,416,000

  Issuance of common stock for services                          310,000

  Exercise of stock options                                       15,487

  Beneficial conversion feature and warrants on
     issuance of convertible note payable                        305,195

  Issuance of common stock options to non-employees               36,605

  Net loss                                                   (21,684,606)
-------------------------------------------------------------------------

BALANCE, December 31, 2001                                   $(7,379,435)
=========================================================================
</TABLE>

See accompanying summary of accounting policies and notes to the financial
statements.


                                                                             F-4
<PAGE>
<TABLE>
<CAPTION>
                                                                                             AMNIS SYSTEMS INC.

                                                                           CONSOLIDATED STATEMENT OF CASH FLOWS


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


For the Years Ended December 31,                                                   2001             2000
---------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                     $(21,684,606)  $       (110,923)
  Adjustments to reconcile net loss to net cash used by operating activities:
    Stock options for services                                                      346,605            106,250
    Depreciation and amortization                                                18,062,740
    Loss on disposal of property and equipment                                        5,480
    Provision for doubtful accounts                                                 (64,375)
    Provision for excess and obsolete inventories                                  (220,101)
  Decrease in accounts receivable                                                   700,459
  Decrease in inventories                                                           609,946                976
  Increase in prepaid expenses and other assets                                     (62,722)
  Decrease in deposits                                                                8,380
  Decrease in accounts payable moratorium                                           (14,173)
  Increase in accounts payable                                                      679,253
  Increase in accrued salaries                                                      440,442
  Increase in accrued vacation                                                       43,357
  Increase in accrued interest                                                       45,110
  Decrease in reserve for sales adjustment                                         (513,802)
  Decrease in deferred rent                                                         (90,303)
  Decrease in deferred revenue                                                      (11,547)
  Decrease in other accrued liabilities                                            (370,641)
  Decrease in sublease deposits                                                      (1,007)
---------------------------------------------------------------------------------------------------------------

    Net cash used by operating activities                                        (2,091,505)            (3,697)
---------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash acquired from business combination                                            11,720
  Purchases of property and equipment                                               (43,026)
---------------------------------------------------------------------------------------------------------------

    Net cash used by investing activities                                           (31,306)
---------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings from stockholders                                                      849,151
  Payments on financing obligations collateralized by accounts receivable        (1,334,591)
  Proceeds from financing obligations collateralized by accounts receivable       1,225,231
  Proceeds from issuance of common stock                                          1,431,487
---------------------------------------------------------------------------------------------------------------

    Net cash provided by financing activities                                     2,171,278
---------------------------------------------------------------------------------------------------------------

NET INCREASE DECREASE IN CASH                                                        48,467             (3,697)

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

CASH AND CASH EQUIVALENTS, end of period                                       $     48,467   $              -
===============================================================================================================


NON CASH INVESTING AND FINANCING ACTIVITIES:
  Convertible note payable in exchange for note receivable                     $    500,000
  Discount on convertible note payable                                             (305,195)
  Stock options issued for services                                                 362,605   $        106,250
===============================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for income taxes                                                   $      1,600
  Cash paid for interest                                                       $    452,779
===============================================================================================================
</TABLE>

See accompanying summary of accounting policies and notes to the financial
statements.


                                                                             F-5
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  1 - DESCRIPTION OF COMPANY:

          Amnis  Systems  Inc.,  a  Delaware  corporation  and  its wholly owned
          subsidiary,  Optivision, Inc. ("Company" combined), makes hardware and
          software  products  for  the  creation, management and transmission of
          compressed  high-quality  video  over broadband computer networks. The
          Company's  network  video  products  are  distributed primarily in the
          United  States  of  America,  Europe,  and  Pacific Rim countries both
          directly  and through leading industry partners. The Company considers
          its  operations  to  be  one  segment  for  reporting  purposes.

          The  Company's  products  are  used  in  diverse  applications such as
          distance  learning,  corporate  training,  video  courier  services,
          telemedicine,  surveillance  and  visual  collaboration.


NOTE  2 - RESTATEMENT OF FINANCIAL STATEMENTS:

          These  financial statements have been restated to change the method of
          accounting  for  the  business  combination discussed in Note 5 to the
          purchase  method of accounting from the pooling of interests method of
          accounting.  The  restatement  is  the  results  of  the  Company's
          determination  that  it did not meet all 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 year ended December 31, 2001:

  Net Sales                               $  2,363,879   $ 4,095,755
  Net Loss                                $(21,684,606)  $(5,432,172)

  Basic and Dilutive Loss per Share       $      (1.43)  $     (0.21)
  ===================================================================

For the year ended December 31, 2000:

  Net Sales                               $          -   $ 3,574,090
  Net Loss                                $   (110,923)  $(5,419,655)

  Basic and Dilutive Loss per Share       $       0.00   $     (0.18)
  ===================================================================
</TABLE>


                                                                             F-6
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  3 - GOING CONCERN:

          The  Company  is  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.

          The accompanying financial statements have been prepared assuming that
          the  Company  will continue as a going concern. The Company incurred a
          net  loss of $21,684,606 and $110,923 for the years ended December 31,
          2001  and  2000,  respectively,  and  has  a  stockholders' deficit of
          $7,379,435 and current liabilities exceed current assets by $7,348,512
          at  December  31,  2001.  In addition, the Company has a negative cash
          flow  from  operations  of  $2,091,505 for the year ended December 31,
          2001.  These  factors  raise  substantial  doubt  about  the Company's
          ability  to  continue  as  a  going  concern.

          Management's  plans,  with  respect  to alleviating the aforementioned
          adverse  financial  conditions  include  the  following:

          -    The  Company  has  entered into a settlement agreement to pay the
               remaining  balance  of  the  "Accounts payable - moratorium" at a
               rate  of $0.35 per dollar outstanding as of December 31, 2001, as
               more  fully  described  in  Note  19.

          -    The Company continues to enter into financing agreements that are
               expected  to  provide  funding  of  operations and payment of its
               obligation,  as  more  fully  described  in  Note  19.

          -    The  Company  has  converted  certain  loans  including  accrued
               interest,  into  convertible debt and have settled obligations to
               its employees by issuing additional common stock options, as more
               fully  described  in  Note  19.

          There  is  no  assurance  that  the  Company  will  be able to achieve
          successful operations or obtain sufficient financing. The accompanying
          financial  statements do not include any adjustments that might result
          from  the  outcome  of  these  uncertainties.


                                                                             F-7
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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

               The  financial  statements  include  the  consolidation  of  the
               Company's  wholly-owned subsidiary, Optivision, Inc. (Optivision)
               from  the  date  of  acquisition, April 16, 2001. All significant
               intercompany  accounts  and  transactions have been eliminated in
               consolidation.

          b.   Use  of  Estimates  in  the  Preparation  of Financial Statements
               -----------------------------------------------------------------

               The  preparation  of  financial  statements  in  conformity  with
               accounting  principles generally accepted in the United States of
               America  requires  management  to  make estimates and assumptions
               that  affect  the  reported amounts of assets and liabilities and
               disclosure  of  contingent  assets and liabilities at the date of
               the financial statements and the reported amounts of revenues and
               expenses  during  the  period.  Estimates  are  used for, but not
               limited  to,  the  accounting  for  the  allowance  for  doubtful
               accounts,  inventory  write-downs, depreciation and amortization,
               sales  returns,  deferred taxes and contingencies. Actual results
               could  differ  from those estimates and such differences could be
               material  to  the  financial  statements.

               The  Company  estimated the useful life of the excess acquisition
               cost  over  the  fair  value  of  the  net assets of the business
               acquired  at  the  time  of  the  acquisition  of  Optivision. An
               adjustment  to  this  estimated  useful life has been made during
               third  quarter  of  the  year  2001  as  described  in  Note  17.


          c.   Stock-Based  Compensation
               -------------------------

               The  Financial  Accounting  Standards  Board  issued Statement of
               Financial  Accounting Standards ("SFAS") No. 123, "Accounting for
               Stock-Based  Compensation," in October 1995. SFAS No. 123 permits
               the use of either a fair value based method or the method defined
               in  Accounting  Principles  Board ("APB") Opinion 25, "Accounting
               for  Stock  Issued  to  Employees,"  to  account  for stock-based
               compensation  arrangements.  Companies  that  elect to employ the
               valuation  method provided in APB No. 25 are required to disclose
               the  pro  forma  net income or loss that would have resulted from
               the  use  of the fair value based method. The Company has elected
               to  determine  the value of stock-based compensation arrangements
               with  its  employees  under  the  provisions  of  APB No. 25 and,
               accordingly,  it  has included the pro forma disclosures required
               under  SFAS  No.  123  in  Note  12. For stock-based compensation
               arrangements  with  non-employee  services providers, the Company
               uses  the fair value based method as required under SFAS No. 123.


                                                                             F-8
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


          d.   Cash  and  Cash  Equivalents
               ----------------------------

               For  the  purpose  of the balance sheet and the statement of cash
               flows,  the  Company  considers  all  highly  liquid  investments
               purchased with an original maturity of three months or less to be
               cash  equivalents.

          e.   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 December 31, 2001. Due
               to  competitive  and  market pressures, it is reasonably possible
               that  additional provisions could be required in the future.

          f.   Property  and  Equipment
               ------------------------

               Property  and  equipment  are  stated  at  cost. Depreciation and
               amortization are computed using the straight-line method over the
               estimated  lives  of  the  assets,  which range from two to seven
               years.  Amortization of leasehold improvements is provided on the
               straight-line  basis  over  the  lesser  of the lease term or the
               estimated  useful  lives  of  the  assets.

          g.   Goodwill
               --------

               Goodwill  represents  the  excess  acquisition cost over the fair
               value  of  identifiable  net  assets  of  the  business acquired.
               Goodwill  was originally amortized using the straight-line method
               over  an  estimated  useful  life  of  5  years. During the third
               quarter  of  2001,  the estimated useful life of the goodwill was
               changed  to  fully  amortize  the  amount  of  the  goodwill,  as
               described  in  Note  17.

          h.   Revenue  Recognition
               --------------------

               The  Company  recognizes  revenue in compliance with Security and
               Exchange  Commission  Staff  Accounting Bulletin No. 101, Revenue
               Recognition  in  Financial  Statements  and Statement of Position
               (SOP) 97-2, as amended by SOP 98-9, Software Revenue Recognition,
               as  applicable,  as  follows:

               -    Revenues  from product sales, both hardware and software, to
                    Value  Added  Resellers  (VAR),  Original  Equipment
                    Manufacturers  (OEM),  and  end  users  are  recognized upon
                    shipment  to  the  customer,  whereby  risk of loss has been
                    transferred  to  the  customer  and the price and terms have
                    been  fixed.

               -    The  company  further  recognizes  revenues  from  warranty
                    contracts on a straight-line basis over the contractual life
                    of the warranty. The unrecognized balance of the warranty is
                    recorded  as  deferred  revenue  on  the  balance  sheet.


                                                                             F-9
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


               i.   Advertising  Costs
                    ------------------

                    The  Company  expenses  all  advertising  costs  as they are
                    incurred.  There were no significant advertising expenses in
                    2001  or  2000.

               j.   Loss  per  Share
                    ----------------

                    Basic and diluted loss per share is computed by dividing net
                    loss  by  the  weighted  average  number  of  common  shares
                    outstanding  during  the period. Since the Company has a net
                    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 outstanding stock options,
                    warrants,  convertible  debt  and  other  common  stock
                    equivalents  would  be  anti-dilutive.

                    Basic  and  diluted loss per share was calculated based upon
                    outstanding  common  stock and equivalents of 15,207,850 and
                    26,269,200  for  2001  and  2000,  respectively.

               k.   Concentration  of  Credit  Risks
                    --------------------------------
                    Financial  instruments  that potentially subject the Company
                    to  concentrations  of credit risk consist primarily of cash
                    and  receivables.  The  Company  places  its  cash with high
                    credit-quality  financial  institutions.

                    During  2001,  five  customers  accounted  for  48%  of  net
                    revenues.  As  of  December  31,  2001  approximately 44% of
                    accounts  receivable  were concentrated with five customers.
                    To reduce credit risk relating to all customers, the Company
                    performs  ongoing credit evaluations of customers' financial
                    conditions  and  limits  the  amount of credit extended when
                    considered  necessary,  but generally requires no collateral
                    on  product  sales.  The  Company  maintains  allowances for
                    estimated  bad  debt  losses to address potential undetected
                    credit  risks. The Company is not able to predict changes in
                    the  financial  stability  of  its  customers.  Any material
                    change  in  the  financial  status  of any one or a group of
                    customers  could  have  a  material  adverse  effect  on the
                    Company's  results  of operations. Although such losses have
                    been  within management's expectations to date, there can be
                    no  assurance  that  such  reserves  will  continue  to  be
                    adequate.  The  Company's  contract receivable is unsecured,
                    however,  credit  risk  is  substantially  mitigated  by the
                    Company's  timely  collection  procedures.

               l.   Income  Taxes
                    -------------

                    The  Company  accounts  for  income taxes in accordance with
                    SFAS  No. 109, "Accounting for Income Taxes." This Statement
                    provides  for  an  asset  and liability approach under which
                    deferred  income  taxes  are provided based upon enacted tax
                    laws  and rates applicable to the periods in which the taxes
                    become  payable.


                                                                            F-10
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


               m.   Current  Pronouncements
                    -----------------------

                    In  September 2000, the FASB issued SFAS No. 140, Accounting
                    for  Transfers  and  Servicing  of  Financial  Assets  and
                    Extinguishments  of  Liabilities.  The  statement  provides
                    accounting  and  reporting  standards  for  transfers  and
                    servicing  of  financial  assets  and  extinguishments  of
                    liabilities,  and  revises  the  accounting  standards  for
                    securitization  and  transfers  of  financial  assets  and
                    collateral.  The  adoption  of  SFAS  No. 140 did not have a
                    material impact on the Company's financial position, results
                    of  operations,  or  cash  flows.

                    In  June  2001,  the  FASB  issued  SFAS  No.  141, Business
                    Combinations, which requires business combinations initiated
                    after  June  30, 2001 to be accounted for using the purchase
                    method  of  accounting.  It  also  specifies  the  types  of
                    acquired  intangible  assets  that  are  required  to  be
                    recognized  and  reported  separately  from  goodwill.  The
                    Company  does  not  anticipate  any material impact from the
                    adoption  of  this  standard.

                    In  June  2001,  the  FASB issued SFAS No. 142, Goodwill and
                    Other  Intangible  Assets,  which will require that goodwill
                    and  certain intangibles no longer be amortized, but instead
                    be  tested for impairment at least annually. SFAS No. 142 is
                    effective  for all fiscal years beginning after December 15,
                    2001,  with  early  application  permitted  in  certain
                    circumstances.  The Company does not expect SFAS 142 to have
                    a  material  impact  on  the  Company's  financial position,
                    results  of  operations  or  cash  flows.

                    In  June  2001, the FASB issued SFAS No. 143, Accounting for
                    Asset  Retirement  Obligations.  The  statement  addresses
                    financial  accounting  and  reporting  for  obligations
                    associated  with the retirement of long-lived assets and the
                    associated  asset  retirement  costs.  The  statement  is
                    effective  for  all  fiscal  years  beginning after June 15,
                    2002, with early application permitted. The Company does not
                    expect  the  adoption  of  SFAS  No.  143 to have a material
                    impact  on  the  Company's  financial  position,  results of
                    operations,  or  cash  flows.

                    In August 2001, the FASB issued SFAS No. 144, Accounting for
                    the  Impairment  or  Disposal  of  Long-Lived  Assets.  This
                    statement  supercedes  SFAS  No.  121,  Accounting  for  the
                    Impairment of Long-Lived Assets and for Long-Lived Assets to
                    be  Disposed of, and the accounting and reporting provisions
                    of APB Opinion No. 30, Reporting the Results of Operations -
                    Reporting  the  Effects  of  Disposal  of  a  Segment  of  a
                    Business,  and  Extraordinary,  Unusual  and  Infrequently
                    Occurring  Events  and  Transactions,  for the disposal of a
                    segment  of  a  business. The statement is effective for all
                    fiscal  years beginning after December 15, 2001. The Company
                    does  not  expect  the  adoption  of  SFAS No. 144 to have a
                    material impact on the Company's financial position, results
                    of  operations,  or  cash  flows.


                                                                            F-11
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  5 - BUSINESS COMBINATION:

          On  April  16,  2001, the Company effected a business combination with
          Optivision,  Inc.  by  exchanging 4,459,063 shares of its common stock
          for all of the common stock of Optivision, Inc. 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  total  purchase  price  was  allocated  as  follows:

          Tangible net assets                                $ 1,055,777
          Liabilities                                         (6,711,587)
          Goodwill                                            17,877,694
          ---------------------------------------------------------------
                                                             $12,221,884
          ===============================================================


          Tangible  net assets included cash, accounts receivable, inventory and
          fixed  assets.  Liabilities  included  trade accounts payable, accrued
          compensation  and  accrued  expenses.

          The following unaudited proforma information summarizes the results of
          operations  as  if  the  business  combination were effected as of the
          beginning  of  the  earliest  year  presented:

                                                  2001          2000

          Net Sales                          $  4,095,755   $ 3,574,090
          Net Loss                           $(18,632,913)  $(8,719,840)

          Basic and Dilutive Loss per Share  $      (0.71)  $     (0.30)
          ==============================================================


                                                                            F-12
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  6 - INVENTORY:

          Inventories  consist  of  the  following  at  December 31, 2001:


          Raw  materials                                   $     274,593
          Work-in-process                                        445,490
          Demonstration  inventory                               115,798
          ---------------------------------------------------------------
                                                                 835,881
          Reserve  for  inventory  obsolescence  and
            demonstration inventory refurbishing costs          (211,825)
          ---------------------------------------------------------------
                                                           $     624,056
          ===============================================================

          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  7 - ACCOUNTS  RECEIVABLE  FINANCING:

          In  October 1998, Optivision entered into a financing arrangement with
          Pacific  Business  Funding  whereby  funds  were  borrowed  against
          receivables.  Funding was based on 80% of qualified receivables. As of
          December 31, 2001 borrowings under this agreement were $1,029,283. The
          balance  bears interest at 18% per annum. Pacific Business Funding has
          allowed  the  Company  to  exceed  its  credit limit available on this
          agreement  without  any  penalties.  This  amount  is  included on the
          balance  sheet  as  "Financing  obligations collateralized by accounts
          receivable".


NOTE  8 - NOTE PAYABLE:

          An  unsecured  note  payable  in  the amount of $250,000 was issued in
          February  of  2001. The note bears interest at 10% per annum. Interest
          and  principal  are  due  one  year  from  the  date  of issuance, and
          therefore  has  been  classified  as  current  on the balance sheet at
          December 31, 2001. Subsequent to year end, the Company entered into an
          agreement  converting  this  note  payable  and  related interest into
          common  stock  of  the  Company,  as  more fully described at Note 19.


                                                                            F-13
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  9 - STOCKHOLDERS' NOTES PAYABLE:

          Certain stockholders loaned Optivision unsecured funds, which amounted
          to  $3,309,375 at December 31, 2001. These loans are all classified as
          current  and  bear  interest  at a rate of 10% per annum. The carrying
          value of these notes payable approximates their fair value. Subsequent
          to  year  end,  certain  of  these  notes  aggregating $3,204,375 were
          exchanged  for  a  convertible  note  as  described  in  Note  19.

NOTE 10 - CONVERTIBLE DEBT:

          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,  which is currently recorded as a debenture receivable, 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. This is the first
          installment  received  on a $2,385,000 commitment from the lender. The
          carrying  value  of  this  debenture  approximates  its fair value. 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
          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.

          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-14
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE 11 - COMMITMENTS AND CONTINGENCIES:

          Lease  Commitments
          ------------------

               The  Company  leases  office  and  manufacturing  space,  under a
               non-cancelable  operating  lease, which expires in December 2002.
               The  lease agreement for the Company's office facilities provides
               for  scheduled  rent  increases throughout the life of the lease.
               Rent  expense  under  this  agreement  is  being  recognized on a
               straight-line  basis  over  the term of the lease. The difference
               between  the amounts paid and the amounts expensed for accounting
               purposes  on  the  straight-line  basis is classified as deferred
               rent  in  the  accompanying  balance  sheet.  Rental  expense was
               approximately  $1,310,000  for 2001. No rent expense was incurred
               for  2000.

               Minimum  rental  payments  under  these leases for 2002 amount to
               $1,047,278.

               The  Company  subleased  a  substantial  portion  of  its  leased
               facilities  under  an operating lease that expires February 2002.
               Sublease  income  for  2001 and 2000 was approximately $1,065,000
               and  $0  respectively. These amounts are reflected as a reduction
               of  rent  expense  on  the  Statement  of  Operations.

          Litigation
          ----------

               The  Company  is  party  to litigation or other legal proceedings
               that  management considers to be a part of the ordinary course of
               the  Company's  business. Management believes that the outcome of
               such  litigation  or  legal  proceedings will not have a material
               adverse  effect on the Company's financial position or results of
               operations.

          Employment  Agreements
          ----------------------

               The  Company  has entered into employment agreements with certain
               key employees with original terms of three years. Future payments
               under  these  agreements for the years subsequent to December 31,
               2001  are  as  follows:


                    2002                                   $    520,000
                    2003                                        520,000
                    2004                                        173,000
               --------------------------------------------------------
                                                           $  1,213,000
               ========================================================


                                                                            F-15
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


               Generally,  the  employment  agreements are automatically renewed
               for  successive  one  year  terms,  unless either party submits a
               notice  not to renew within certain days prior to the term of the
               initial  or  renewal  term.  If  the  Company  terminates  these
               agreements  without  cause  or  the  employee  resigns  with good
               reason,  as defined, the Company shall pay severance compensation
               to  the  employee  in  a  lump sum equal to the greater of twelve
               months  of base salary, or the base salary for the remaining term
               of  the  agreements.

          Provision  for  Contract  Costs
          -------------------------------

               Optivision's  Small Business Innovation Research (SBIR) contracts
               are  subject  to  audit by the Defense Contract Audit Association
               ("DCAA") with respect to claims made by Optivision under the SBIR
               contracts.  The  Company  has  made  an  estimate of the costs of
               disallowable  items  under  the  SBIR  contracts that is based on
               management's  best  estimate  of  the  ultimate  settlement  and
               management's  review  of the Company's claims and the regulations
               covering  allowable  items under SBIR contracts. Should the final
               settlement  with  the  DCAA  result  in a significantly different
               liability  from that accrued, the Company's operating results and
               financial  condition  could be materially and adversely affected.
               As  of December 31, 2001, the Company has accrued a provision for
               contract  costs  of  $134,519.

          Guarantee  to  Federal  Government  for  Contracts  Assigned  to  ONI
          ---------------------------------------------------------------------

               Certain  government  contracts  were  assigned  to  ONI (a former
               division  of Optivision, Inc.) as part of a spin-off during 1998.
               After  the government has approved the assignment of contracts to
               ONI,  Optivision  as  transferor,  remains  a  guarantor  of  the
               successful  completion  of  the contracts by ONI. As of April 30,
               1998,  the total contract value of contracts assigned to ONI, and
               subject  to  guarantee  by  the  Company  was  $7,047,000.  As of
               December  31,  2001 the Company has not determined which, if any,
               of  these  contracts  have  been closed and as a result, what the
               amount  of  the  liability  exposure  is.


                                                                            F-16
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE  12 - STOCK  OPTION  PLANS:

          The Company has two stock option plans: the 1997 Stock Plan (the "1997
          Plan")  and  the  2000 Stock Plan (the "2000 Plan"). The 1997 Plan has
          3,993,482  shares authorized for issuance. The 2000 Plan has 5,500,000
          shares  authorized  for  issuance. The 1997 Plan and 2000 Plan specify
          that  the exercise price of Incentive stock options (ISOs) will not be
          less  than 100% (110% for 10% stockholder) of fair market value on the
          date  of  grant  and  that  the  exercise  price of Nonstatutory stock
          options  (NSOs) will not be less than 85% (110% for a 10% stockholder)
          of  fair  market  value  on  the  date of grant. The fair value of the
          Company's  common  stock  is  determined  by  the  Board of Directors.
          Options granted under the 1997 Plan and 2000 Plan generally expire ten
          years  from  the date of grant (five years for a 10% stockholder), and
          vest  over  four  years.

          Stock  option  activity  under  the  Plans  is  as  follows:

<TABLE>
<CAPTION>
                                                                      Weighted
                                                       Number of       Average
                                                        Shares     Exercise Price
<S>                                                   <C>          <C>
Balance, December 31, 2000                                 -
  Assumed Upon Adoption of Optivision 1997 Plan        3,971,509   $          0.61
  Granted                                              3,785,300              1.12
  Exercised                                              (11,930)             0.44
  Cancelled                                           (1,556,233)             0.76
----------------------------------------------------------------------------------

Balance, December 31, 2001                             6,188,646   $          0.88
==================================================================================


Stock options authorized and available to be granted                     3,304,836
==================================================================================
</TABLE>


                                                                            F-17
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


The  following  table  summarizes information about stock options outstanding at
December  31,  2001:

<TABLE>
<CAPTION>
                          Options Outstanding               Options Exercisable
               -----------------------------------------  ----------------------
                                Weighted
                                Average        Weighted                  Weighted
Range of                       Remaining       Average                   Average
Exercise         Number       Contractual      Exercise      Number     Exercise
Prices         Outstanding  Life (in years)     Price     Exercisable     Price
<S>            <C>          <C>               <C>         <C>           <C>
0.00 - $1.00    3,380,596              8.77  $     0.40     2,196,555  $    0.40
1.01 - $2.00    2,719,738              9.11        1.39     1,600,040       1.37
3.00               87,500              9.04        3.00        30,110       3.00
4.00                  812              4.77        4.00           812       4.00
--------------------------------------------------------------------------------
                6,188,646              8.93  $     0.88     3,827,517  $    0.84
================================================================================
</TABLE>

          In accordance with SFAS No. 123, the Company recognized $36,605 and $0
          of  expense  in  2001 and 2000, respectively, related to stock options
          granted  to  outside  consultants.

          As  discussed  in  the  Summary  of  Accounting  Policies, the Company
          follows  APB  No.  25  for  measurement  and  recognition  of employee
          stock-based  transactions.  Had  the  Company  elected  to  adopt  the
          measurement and recognition provisions of SFAS No. 123, the difference
          between  the  exercise price and the fair market options issued on the
          dates  of  the  grant  would  have  been  accounted  for  as  unearned
          compensation and amortized to expense over the related vesting period.
          The  Company  would  have  incurred  an  additional $111,783 and $0 in
          related compensation expenses during the years ended December 31, 2001
          and  2000,  respectively.  Under  the  provisions of SFAS No. 123, the
          proforma  net  loss and basic and diluted loss per share for the years
          ended  December  31,  2001  and  2000  are  as  follows:

                                                           2001          2000

          NET LOSS:
            As reported                                $(21,684,606)  $(110,923)
            Pro forma                                   (21,796,389)   (110,923)
          ======================================================================

          BASIC AND DILUTED LOSS PER SHARE:
            As reported                                $      (1.43)  $ (0.0042)
            Pro forma                                         (1.43)    (0.0042)
          ======================================================================


                                                                            F-18
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


          The  pro forma information provided above was estimated at the date of
          grant,  using  the  Black-Scholes  option-pricing  model,  with  the
          following  weighted  average  assumptions  for  2001:

          Expected  life                               4.0  years
          Risk-free  interest  rate                         3.50%
          Volatility                                      137.44%
          Dividend  yield                                   0.00%


NOTE 13 - WARRANTS:

          As  part  of a convertible debt agreement, Optivision issued 1,250,000
          warrants. The Company assumed the obligation under these warrants upon
          consummation  of  the  business  combination.  The  exercise  price to
          purchase common stock has been adjusted to $2.25 - $4.25 per share. An
          additional  100,000  warrants  were issued to a vendor with a purchase
          price of $3.00 per share. 1,100,000 warrants were also issued with the
          debt  discussed  in  Note  8.

<TABLE>
<CAPTION>
                                 Weighted
                                  Average      Weighted                 Weighted
  Range of                       Remaining      Average                 Average
  Exercise         Number       Contractual    Exercise     Number     Exercise
   Prices        Outstanding  Life (in years)    Price    Exercisable    Price
<S>              <C>          <C>              <C>        <C>          <C>
0.000 - $0.001       52,301             4.83  $   0.001       52,301  $   0.001
0.002 - $0.350    1,100,000             7.00  $   0.350    1,100,000  $   0.350
2.250 - $4.250    1,350,000             1.65  $   2.680    1,350,000  $   2.680
--------------------------------------------------------------------------------
                  2,502,301             4.07  $    1.60    2,502,301  $    1.60
================================================================================
</TABLE>


NOTE 14 - EMPLOYEE BENEFITS:

          The  Company  adopted Optivision's profit sharing and 401(k) plan (the
          "Plan") upon consummation of the business combination with Optivision.
          Under  the  profit  sharing  portion  of the Plan, the Company, at the
          discretion  of  the  Board  of  Directors,  may contribute 5% to those
          employees  meeting minimum age and length of service requirements. The
          Company  recognizes  expenses  as  paid.  The Company made no matching
          contributions  during  2001.

          Employees  may make pre-tax contributions in amounts from 2% to 15% of
          compensation  up  to  a  pre-determined  limit  each  year.


                                                                            F-19
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE 15 - SEGMENT REPORTING:

          In  the  normal  course  of business, the Company sells its product in
          various  foreign  countries.  Total sales in foreign countries were as
          follows  for  the  year  ended  December  31,  2001:

          Hong Kong                                              $ 68,966
          Other foreign countries                                 297,928
          ---------------------------------------------------------------
          Total                                                  $366,894
          ===============================================================

          The Company has no assets in foreign jurisdictions.


NOTE 16 - CANCELLATION OF SHARES:

          The  19,740,000  shares  cancelled  on  April  1,  2001 were part of a
          business  plan  to facilitate the business combination dated April 16,
          2001.  These shares were originally issued in August, 2000 by means of
          a  2.82:1  split of the common stock of the Company. These shares were
          granted  to  a  promoter  to  prepare  the  Company for a merger. Upon
          successful  completion  of  the  duties  of  the  promoter, all of the
          promoter's  shares  were  relinquished  and  cancelled.  The  Board of
          Directors  has  decided  to  return  these  shares  to  the  status of
          authorized  and  unissued.


NOTE 17 - 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 year ended December
          31,  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 December 31, 2001                     $          -
          ===============================================================


                                                                            F-20
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


NOTE 18 - INCOME TAXES:

          The  net  deferred  income  tax  asset  consists  of  the following at
          December  31:

                                                        2001        2000

          Deferred income tax assets from:
            Federal net operating loss carryforwards  $ 5,989,000   $ 38,000
            State net operating loss carryforwards        783,000
            Accrued expenses                              693,000
            Tax credits                                   185,000
            Other, net                                     14,000
          -------------------------------------------------------------------
                                                        7,664,000     38,000
          Valuation allowance                          (7,664,000)   (38,000)
          -------------------------------------------------------------------
          Net deferred income tax assets              $         -   $      -
          ===================================================================


          The  valuation  allowance  of  $7,664,000  includes  an  allowance  of
          $6,214,000  acquired from Optivision and a net increase of $1,412,000.
          This  is  as  a  result  of  the  increase in net deferred tax assets,
          primarily  net  operating  loss  carryforwards  (NOL's).  Because  the
          Company's  management  has  determined that it is highly unlikely that
          the net deferred tax assets will be realized, the Company has recorded
          a 100 percent valuation allowance against the net deferred tax assets.

          Net  operating  loss  carryforwards  at  December  31,  2001  were
          approximately  $17,460,000  for  federal  income  tax  purposes  and
          $8,770,000  for  state  income  tax  purposes.  The net operating loss
          carryforwards  expire  on  various  dates  through  the year 2021. The
          Internal  Revenue  Code  contains  provisions  which may limit the net
          operating  loss  carryforwards  to  be used in any given year upon the
          occurrence  of  certain  events,  including  a  significant  change in
          ownership interest. The Company believes sufficient uncertainty exists
          regarding  the reliability of the net operating loss carryforwards and
          other timing difference at December 31, 2001. Accordingly, a valuation
          allowance  has  been  provided  for the entire amount related thereto.


                                                                            F-21
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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


          Following  is  a  reconciliation  of  the  tax  benefit based upon the
          federal  statutory  rate  to  the tax benefit recognized for the years
          ended  December  31,  2001  and  2000:

<TABLE>
<CAPTION>
                                                       2001        2000
<S>                                                <C>           <C>
Tax benefit at federal statutory rate              $ 7,373,000   $ 38,000
State benefit, net of federal                          111,000
Nondeductible goodwill                              (6,078,000)
Changes in valuation allowance (net of valuation
  allowance on books of acquired business)          (1,412,000)   (38,000)
Other                                                    6,000
--------------------------------------------------------------------------
Tax benefit recognized                             $         -   $      -
==========================================================================
</TABLE>


NOTE 19 - SUBSEQUENT EVENTS:

          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 (see Note 3). As of the date of this report,
          the  Company  was  current  with  all payments under the agreement. In
          accordance  with  the work-out agreement, the debt was settled in June
          2002.

          Subsequent  to  December  31,  2001,  the  Company  settled  with  its
          employees  for unpaid compensation by issuing additional stock options
          in  lieu  of  cash  in  the  amount  of  $670,595  (see  Note  3).

          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 (see Notes 3 and 9) 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  stock  price  fluctuations.  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.


                                                                            F-22
<PAGE>
                                                              AMNIS SYSTEMS INC.

                                                   NOTES TO FINANCIAL STATEMENTS

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

          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 (see Note 3). 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 adjustment related to stock price fluctuations.
          The  total  selling  price  of  these  units  was  $1,800,000.

          On  June  17,  2002, 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  related  to  stock  price  fluctuations.

          The  Company has negotiated an agreement whereby $250,000 of debt (see
          Note  8) plus interest of $25,890 was converted into 275,890 shares of
          common  stock  of  the  Company  at  $1.00  per  share  (see  Note 3).

          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,  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 in stock price fluctuations (see Note 3).

          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.


                                                                            F-23
<PAGE>

<TABLE>
<CAPTION>
     (a)(2)  Exhibits

Exhibit Number   Identification of Exhibit
---------------  -------------------------
<C>              <S>
2.1**            Agreement and Plan of Merger dated as of September 11, 2000 by and
                 among the Issuer, Optivision, Inc., and ASI Acquisition, Inc.
2.2**            Amendment to Agreement and Plan of Merger dated as of January 11, 2001
                 by and among the Issuer, Optivision, Inc., and ASI Acquisition, Inc.
3.1*             Certificate of Incorporation of Issuer dated as of July 29, 1998
3.2**            Certificate of Amendment of Certificate of Incorporation of the Issuer dated
                 as of August 24, 2000
3.3**            Certificate of Amendment of Certificate of Incorporation of the Issuer dated
                 as of September 13, 2000
3.4******        Certificate of Amendment of Certificate of Incorporation of the Registrant
                 dated as of June 21, 2002
3.5*             Bylaws of the Issuer dated as of August 4, 1998
3.6**            Amended and Restated Bylaws of the Issuer dated as of October 2, 2000
4.1***           Form of Secured Convertible Debenture issued pursuant to the Securities
                 Purchase Agreement dated as of December 28, 2001 between the Issuer and
                 Bristol Investment Fund, Ltd.
4.2***           Form of Warrant issued pursuant to the Securities Purchase Agreement dated
                 as of December 28, 2001 between the Issuer and Bristol Investment Fund, Ltd.
4.3****          Form of Warrant issued pursuant to each Unit Subscription Agreement
                 between the Issuer and each qualified investor
4.4******        Form of Convertible Note issued dated as of June 18, 2002 between the
                 Registrant and each of Alpha Capital Aktiengesellschaft and Stonestreet
                 Limited Partnership
4.5******        Form of Warrant issued pursuant to each Amended Unit Subscription
                 Agreement dated as of June 18, 2002 between the Registrant and each of
                 Alpha Capital Aktiengesellschaft and Stonestreet Limited Partnership
4.6******        Form of Warrant issued pursuant to each Convertible Note dated as of June
                 18, 2002 between the Registrant and each of Alpha Capital
                 Aktiengesellschaft and Stonestreet Limited Partnership


                                       35
<PAGE>
10.1*****        + Amended 1997 Stock Plan
10.2*****        + Amended 2000 Stock Plan
10.3******       + 2002 Stock Plan
10.4*****        Lease Agreement dated as of August 8, 1995 between Optivision, Inc. and
                 Alta California Associates
10.5*****        + Employment Agreement dated as of April 18, 2001 between the Issuer and
                 Michael A. Liccardo
10.6*****        + Employment Agreement dated as of April 18, 2001 between the Issuer and
                 Lawrence L. Bartlett
10.7*****        + Employment Agreement dated as of April 18, 2001 between the Issuer and
                 Richard A. Falcone
10.8***          Securities Purchase Agreement dated as of December 28, 2001 between the
                 Issuer and Bristol Investment Fund, Ltd.
10.9***          Registration Rights Agreement dated as of December 28, 2001 between the
                 Issuer and Bristol Investment Fund, Ltd.
10.10***         Security Agreement dated as of December 28, 2001 between the Issuer and
                 Bristol Investment Fund, Ltd.
10.11****        Form of Unit Subscription Agreement between the Issuer and each qualified
                 investor
10.12******      Form of Amended Unit Subscription Agreement dated as of June 18, 2002
                 between the Issuer and each of Alpha Capital Aktiengesellschaft and
                 Stonestreet Limited Partnership
21.1             List of Subsidiaries of the Issuer
<FN>


+       Management  contract  or  compensatory  plan  or  arrangement

*       Filed  as  an  exhibit  to  the  registration  statement  on  Form  10-SB filed with the
Securities  and  Exchange  Commission  on  February  22,  2000,  File  No.  0-29645

**      Filed  as  an exhibit to the annual report on Form 10-KSB filed with the Securities and
Exchange  Commission  on  April  2,  2001

***     Filed  as  an exhibit to the report on Form 8-K filed with the Securities and Exchange
Commission  on  January  14,  2002

****    Filed  as an exhibit to the report on Form 8-K filed with the Securities and Exchange
Commission  on  March  4,  2002



                                       36
<PAGE>
*****  Filed  as  an  exhibit  to  the  registration  statement on Form SB-2 filed with the
Securities  and  Exchange  Commission  on  March  22,  2002
****** Filed  as  an  exhibit  to the report on Form 8-K filed with the Securities and Exchange
Commission  on  June  27,  2002
</TABLE>


     (b)     Reports  on  Form  8-K

     None.


                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date:  July 26, 2002                 AMNIS SYSTEMS INC.
       -------------

                                     By:  /s/  Michael A. Liccardo
                                        -------------------------------------
                                        Michael A. Liccardo
                                        Chairman of the Board, President and
                                        Chief Executive Officer



     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.


Date:  July 26, 2002                 By:  /s/  Michael A. Liccardo
       -------------                    --------------------------------------
                                        Michael A. Liccardo
                                        Director and Chairman of the Board,
                                        President and Chief Executive Officer


Date:  July 26, 2002                 By:  /s/  Lawrence L. Bartlett
       -------------                    --------------------------------------
                                        Lawrence L. Bartlett
                                        Director, Vice President,
                                        Chief Financial Officer and Secretary



                                       37
<PAGE>