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

                                  FORM 10-KSB

(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, 2002

[ ]      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              (I.R.S. Employer Identification No.)
of 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:  $2,240,135.

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 May 16,
2003,  was  $3,238,638.

The  number  of  shares  outstanding  of  each of the issuer's classes of common
equity as of May 16, 2003 was 107,451,652 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
ITEM 14.    CONTROLS AND PROCEDURES                                           38


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<PAGE>
              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  a  recapitalizations  of  Optivision.

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

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.


                                        3
<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


                                        5
<PAGE>
production  volume  as necessary.  This strategy also permits us to focus on our
core  competencies  of  rapid  product  development  and  deployment.

     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 digital video and network technologies;

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

     -    Provide greater network management and control capability;

     -    Support  real  time  video  storage,  server,  processing  and content
          management  functions;  and

     -    Accommodate  different  computer  network  bandwidth  constraints  and
          fluctuations.


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<PAGE>
     Optivision's  research and development expenditures were approximately $1.3
million  and  $1.9 million for fiscal years ended December 31, 2002 and December
31,  2001,  respectively.

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 2002, five
customers  accounted  for 43% of our net revenues and during 2001 five customers
accounted  for  53%  of  Optivision's  net revenues.  During 2002 Hughes Network
Systems,  Marshall  Associates,  Inc,  Pan Dacom Networking AG and University of
Calgary accounted for 9%, 9%, 10% and 10% of our net revenues, respectively.  In
2001,  Hughes  Network  Systems,  Glory  Group  and  Marshall  Associates,  Inc.
accounted  for  25%, 10% and 9% of our net revenues, respectively. Our customers
and  VARS  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.


                                        7
<PAGE>
EMPLOYEES

     As  of  December  31,  2002, we employed a total of 23 full time employees,
which  include  four  in  engineering,  nine  in  sales  and  marketing, five in
manufacturing  and five in administration and finance.  After December 31, 2002,
the  Company  lost  most  of  its  employees and as of April 2003 had only three
full-time employees. All employees since September 30, 2003, have only been paid
one  weeks  salary.  As  of May 16, 2003, as a result of new funding, we have 12
employees, which include four in engineering, two in sales, two in manufacturing
and  four  in  administration.



                                  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, 2002 and 2001, 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, 2002, we had an accumulated deficit of
approximately  $28,600,000.  For  the  year  ended  December  31,  2002,  our
consolidated  net  loss  was  approximately  $8,900,000.  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.


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<PAGE>
     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  $6  million and $7 million in total.  However, our capital
requirements  will  depend  on  many  factors,  including,  but  not limited to,
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.

     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  2002, five customers
accounted  for  43% of our net revenues.  As of December 31, 2002, approximately
66%  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.


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<PAGE>
     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.


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


                                       10
<PAGE>
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.


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 Scott Mac Caughern, our chairman, president
and chief executive officer, and Lawrence L. Bartlett, our vice president, chief
financial officer and secretary. We do not carry key person life insurance on
our senior management or key personnel. Any loss of the services of Messrs. Mac
Caughern, 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, our competitors or we 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


                                       11
<PAGE>
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.

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, of
               which $500,000 has been issued, 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
               May 16, 2003, prior to entering into the additional funding in
               May 2003, Bristol agreed to allow the Company to reserve a
               maximum of 53,453,861 shares of common stock for issuance
               pursuant to its financing documents and 74,835,405 shares of
               common stock with respect to Stonestreet pursuant to all of its
               financing documents with the Company until such time as the
               Company obtains stockholder approval to increase its authorized
               shares of common stock.

          -    On January 14 2002, the Company issued a one-year convertible
               note in the principal amount of $3,547,917 to Mr. Michael A.
               Liccardo, president, chief executive officer, and chairman of the
               board of directors, in exchange for the cancellation of certain
               loans aggregating $3,204,375 and related accrued interest of
               $343,542 that Mr. Liccardo had loaned to Optivision Inc. to meet
               operating expenses. At any time, Mr. Liccardo may elect to
               convert the note to common stock of the Company at $0.35 per
               share, subject to adjustment related to the price of subsequent
               securities issuances by the Company to third parties. On June 18,
               2002, Mr. Liccardo converted $2,050,000 in principal of the
               convertible note issued on January 14, 2002 and, in connection
               therewith, received 26,623,377 shares of common stock. The
               remaining principal and accrued interest was transferred to a
               two-year new convertible note as of this date. The note provides
               that Mr. Liccardo may, at any time, elect to convert the
               outstanding principal of $1,000,783 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


                                       12
<PAGE>
               event of stock splits, dividends, recapitalizations and the like.
               Mr. Liccardo is restricted from selling any shares resulting from
               the conversion of his note until the stock reaches fifty cents
               ($0.50) per share or the Alpha and Stonestreet notes from the
               June financing have been paid. On January 14, 2003, Mr. Liccardo
               converted $500,000 in principal of the convertible note issued on
               June 18, 2002 and, in connection therewith, received 12,500,000
               shares of common stock. Mr. Liccardo utilized a conversion price
               without a discount to market and forgave the accrued interest of
               $92,789.11. The remaining principal was transferred to a new
               two-year convertible note, which, as of this date, is in the
               amount of $1,112,763. On April 15, 2003, Mr. Liccardo converted
               $100,000 in principal of the convertible note issued on June 18,
               2002 and, in connection therewith, received 14,000,000 shares of
               common stock. The accrued interest of approximately $26,000 was
               forgiven by Mr. Liccardo and the remaining principal was
               transferred to a new two-year convertible note as of this date in
               the amount of $1,000,763. Mr. Liccardo agreed to not convert or
               require that the Company reserve shares of common stock in
               connection with his convertible until such time as the Company
               has obtained stockholder approval for an increase in its shares
               of 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. In May 2003, Alpha agreed to
               modify its units and waive its right to the reset option in
               exchange for the Company converting the units into Secured
               Convertible Debentures. Alpha and Stonestreet also agreed to
               allow the Company to reserve a maximum of 125,025,785 shares of
               common stock for issuance pursuant to all of its financing
               documents with the Company until such time as the Company obtains
               stockholder approval to increase its authorized shares of 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


                                       13
<PAGE>
               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. The investor also agreed to allow the
               Company to reserve a minimum number of shares of common stock for
               issuance pursuant to its financing documents with the Company
               until such time as the Company obtains stockholder approval to
               increase its authorized shares of common stock.

          -    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. Alpha and Stonestreet agreed to allow the Company
               to reserve a maximum of 125,025,785 shares of common stock for
               issuance pursuant to all of its financing documents with the
               Company with respect to Alpha and 74,835,405 shares of common
               stock with respect to Stonestreet pursuant to all of its
               financing documents with the Company until such time as the
               Company obtains stockholder approval to increase its authorized
               shares of common stock.

          -    In May 2003, we entered into a financing agreement with three
               investors whereby we issued a secured convertible debentures in
               the amount of $1,000,000 and warrants to purchase up to 5,000,000
               shares of common stock. The convertible debentures are due two
               years from the date of issuance and are convertible at a price
               equal to the lower of (i) $.05 or (ii) 65% of the average of the
               three lowest intraday trading prices for the common stock on a
               principal market for the 30 trading days before but not including
               the conversion date. The warrants are exercisbable for a period
               of seven years at the price of $.05 per share. The Company is not
               required to reserve shares for issuance pursuant to this
               agreement until such time as the Company has received stockholder
               approval for an increase in its authorized 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.


                                       14
<PAGE>
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;
     -    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


                                       15
<PAGE>
     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 that commenced on November
1,  1995  and  terminated on December 15, 2002.  Since December 15 2002, we have
been  operating  on  a  month-to-month  basis  with  an  agreement to vacate the
facility  with  in  30  days should the landlord identify another tenant.  As of
this  date,  we  have  reached an agreement with the landlord for month-to-month
rental  of  approximately  10,000  square  feet  for  $10,000  per  month.

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.


                                       16
<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  May  16, 2003, the closing price of our common stock was $0.08 per share. As
of  March  31,  2003,  there were approximately 176 record holders of our common
stock. We believe we have approximately 7,000 beneficial stockholders.

<TABLE>
<CAPTION>
CALENDAR YEAR 2000                          HIGH BID   LOW BID
<S>                                         <C>        <C>

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                          $    0.17  $  0.115
Fourth Quarter 2002                         $    0.06  $   0.03

CALENDAR YEAR 2003

First Quarter 2003                          $    0.06  $   0.01
Second Quarter 2003 (through May 16 ,2003)  $    0.08  $   0.01
</TABLE>

     As  of  May 16, 2003, there were approximately 107,451,652 shares of common
stock  issued  and  outstanding.


                                       17
<PAGE>
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.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     On  December  28,  2001,  the  Company entered into an agreement to issue a
debenture,  bearing  interest  at 12% per annum, in the amount of $500,000, with
the  right  to convert the debt into common stock upon demand at a rate equal to
the  lesser  of  $0.385 per share or 70% of the three lowest trading prices over
the  previous 20 days trading. On January 3, 2002, the Company received $500,000
pursuant  to this debenture. In addition to the debenture, the lender was issued
investment  options  to  purchase,  at  the  applicable  conversion  price,  one
additional  share  of  common  stock  for  each share of common stock owned upon
conversion  of  the debenture and warrants to purchase up to 1,000,000 shares of
common  stock  at an exercise price equal to the lesser of $0.385 or the average
of  the  lowest  trading prices over the previous 20 days trading. The debenture
limits  the  ownership  that  can  be acquired through this transaction to be no
greater  than  4.9% on a fully diluted basis. Additional warrants to purchase up
to  a total of 100,000 shares of common stock, at the same exercise price as the
warrants issued to the lender, were issued as a finders fee.  In accordance with
EITF  00-27,  the  Company  first  determined the value of the note and the fair
value  of  the  detachable  warrants  issued in connection with this convertible
debenture.  The proportionate value of the note and the warrants is $233,209 and
$266,791,  respectively.  The  value  of the note was then allocated between the
note and the preferential conversion feature, which amounted to $0 and $233,209,
respectively.  The  combined  total  discount is $500,000, and will be amortized
over  the  year  life  of  the  debenture. For the year ended December 31, 2002,
$252,055  has  been  amortized  to interest expense, due to the passage of time.
None  of  the  note  balance under this agreement has been converted into common
stock  as  of  as  of  December  31,  2002.

On  January  14,  2002,  the  Company issued a convertible note in the principal
amount  of  $3,547,917  to  Mr.  Michael  A.  Liccardo,  former president, chief
executive  officer  and  chairman of the board of directors, in exchange for the
cancellation  of  certain  loans  aggregating  $3,204,375  and  related  accrued
interest  of $343,542 that Mr. Liccardo had loaned to Optivision to meet current
operating  expenses.  At any time, Mr. Liccardo may elect to convert the note to
shares  of  the Company's common stock at $0.35 per share, subject to adjustment
related  to the price of subsequent securities issuances by the Company to third
parties.  The  convertible  note  bears  interest  at  10%  per annum. Since the
Company's  stock  price  exceeded  the conversion price on the transaction date,
there  is  an  embedded beneficial conversion feature present in the convertible
note  which  has  been  valued separately. As of January 14, 2002, the intrinsic
value  of  the  beneficial  conversion  feature  is  greater  than  the proceeds
allocated  to  the convertible note. On January 14, 2002, the Company recorded a
discount  of  $3,547,917.  This discount is being amortized over the life of the
convertible  note.  For  the  year  ended December 31, 2002, $3,486,058 has been
amortized  to  interest expense, due to the passage of time and conversions into
shares  of common stock.  During the year ended December 31, 2002, principal and
accrued  interest  in  the amount of $2,435,154 and $114,846, respectively, were
converted  into  39,123,377  shares  of  the  Company's  common  stock.


                                       18
<PAGE>
     On  June 18, 2002, the Company issued and sold two 12% two-year Convertible
Notes  in  the  aggregate principal amount of $450,000 and common stock purchase
warrants  exercisable  for  up  to  135,000  shares  of common stock, subject to
adjustment  for, among other things, capital issuances below $0.13 per share and
for  stock  splits,  combination  or  reclassification of the Company's stock to
Alpha  Capital  Aktiengesellschaft  and Stonestreet  Limited  Partnership,  in a
private  financing  transaction. Each note is convertible at the holder's option
at  any  time into shares of our common stock at the lesser of a 30% discount to
the  average  of  the  lowest  three intraday trading prices of our common stock
during  the  20  trading  day periods ending on trading day prior to the date of
conversion,  or  $0.385  per  share.  In accordance with EITF 00-27, the Company
first  determined  the  value  of  the note and the fair value of the detachable
warrants  issued  in  connection  with  this  convertible  debenture.  The
proportionate  value  of  the  note  and  the  warrants is $428,164 and $21,836,
respectively.  The value of the note was then allocated between the note and the
preferential  conversion  feature,  which  amounted  to  $0  and  $428,164,
respectively.  The  combined  total  discount is $450,000, and will be amortized
over  the  year  life  of  the  debenture. For the year ended December 31, 2002,
$120,657  has  been  amortized  to interest expense, due to the passage of time.
None  of  the  note  balance under this agreement has been converted into common
stock  as  of  as  of  December  31,  2002.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

As of December 31, 2002, we had the following securities authorized for issuance
under the equity compensation plans:

<TABLE>
<CAPTION>
                                                                                                      Number of securities
                                                                                                     remaining available for
                                                                             Weighted-average     future issuance under equity
                                        Number of Securities to be issued    exercise price of         compensation plans
                                          upon exercise of outstanding     outstanding options,       (excluding securities
Plan Category                             options, warrants and rights      warrants and rights      reflected in column (a)
<S>                                     <C>                                <C>                    <C>

Equity compensation plans approved by
security holders                                               14,621,469  $                 .40                      6,301,983

Equity compensation plans not approved
by security holders                                                    --                     --                             --

Total                                                          14,621,469  $                 .40                      6,301,983
</TABLE>

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


                                       19
<PAGE>
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.

     Amnis was formed on July 29, 1998. On April 16, 2001, Amnis merged with
Optivision, Inc., an operating company, in an exchange of common stock accounted
for as a reverse merger.  In accounting for this transaction Optivision is
deemed to be the purchaser and surviving company for accounting purposes.
Accordingly, its net assets are included in the balance sheet at their
historical book values and the results of operations of Optivision have been
presented for the comparative prior period.  Control of the net assets and
business of Amnis was acquired effective April 16, 2001. This transaction has
been accounted for as a purchase of the assets and liabilities of Amnis by
Optivision. The historical cost of the net assets assumed was $0.

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.

     In the fourth quarter of 2002 due to lack of funding and our inability to
pay employees, our operation began to wind down.  This decrease in business
activity continued through April of 2003 at which time there were only 3
employees.

     Numerous potential investors and companies were contacted since November
2002 but the Company was unable to attract new investors due to the Company's
current financing arrangements.  In addition, the Company was unsuccessful in
finding a buyer for its business. In March 2003, the Company had negotiated a
sale of assets to another public company, which would have required the Company
to file for bankruptcy. After numerous discussion with current investors and
creditors, the Company received a written proposal for funding two days before a
bankruptcy filing and was advised by the Company's principal secured creditor,
its bank, that it favored the new financing proposal.  The financing proposal
required a management restructuring, which included a change in management.  As
a result, on April 28, 2003, Mike Liccardo resigned as Chairman and CEO of the
Company and Optivision, and Scott Mac Caughern was named Chairman and Interim
CEO.

     On May 16, 2003, the Company entered into a Securities Purchase Agreement
whereby it issued convertible debentures in exchange for funding of $1,000,000.
As of May 12. in anticipation of the additional funding, the Company had rehired
ten employees and commenced rebuilding the Company's operations.


                                       20
<PAGE>
RESULTS OF OPERATIONS - FISCAL YEAR ENDED DECEMBER 31, 2002 AS COMPARED TO

FISCAL YEAR ENDED DECEMBER 31, 2001

     REVENUES

     Revenues  for  2002  were  $2,240,136, an decrease of $1,855,620, or 45.3%,
from  revenues  of  $4,095,756  in 2001.  Revenues in 2002 continued the decline
brought  about  by the softening economy in the third quarter of 2001, which was
accelerated  by  the  aftermath  effects  of  the  September  11, 2001 terrorist
attacks.  The  revenue  decline bottomed in the first quarter of 2002.  However,
with  the infusion of new financing, revenue began to recover and nearly doubled
in  the  second  quarter  followed  again by a nearly doubling of revenue in the
third  quarter.  The  majority  of the increased revenue was from government and
defense  subcontractors.  Unfortunately,  as  we  entered the fourth quarter the
inability  to  raise  additional  funds  to pay employees and support operations
forced  us  to  effectively  curtail  operations  by  December.  Even  though we
continued to build a large pipeline of business and revenue opportunities, we no
longer  had  the resources to close sales, provide customer support, develop and
support our product and manufacture product. The possibility of these events was
disclosed  in  our  third  quarter  10Q-SB  wherein we stated that if additional
financing  is not available or is not available on acceptable terms we will have
to  curtail  our  operations.  As  a  result  of  the curtailment of operations,
revenue  has  continued to decline in the fourth quarter, which has continued in
the  first  and second quarters of 2003.  Numerous orders have been cancelled by
customers.  In  May  2003  an investment group led by our existing investors has
begun  funds  for  the restart and recovery of our company. During calendar year
2002,  five customers accounted for 43% of our net revenues and during 2001 five
customers  accounted  for  53% of Optivision's net revenues.  During 2002 Hughes
Network  Systems,  Marshall  Associates,  Inc,  Pan  Dacom  Networking  AG  and
University  of  Calgary  accounted  for  9%, 9%, 10% and 10% of our net revenues
respectively.  In  2001,  Hughes  Network  Systems,  Glory  Group  and  Marshall
Associates,  Inc.  accounted  for  25%,  10%  and  9%  of  our  net  revenues,
respectively

     COST OF GOODS SOLD

     Cost  of  goods  sold  for  2002  was  $896,572, a decrease of $379,867, or
29.717.6%,  over  cost  of goods sold of $1,276,439 for 2001. Cost of goods sold
did  not decrease ratably with revenue due to the low volume level and our fixed
cost  structure,  and  accelerated  purchases  of  additional  critical obsolete
components.

     RESEARCH  AND  DEVELOPMENT  EXPENSES

     Research  and  development expenses were $1,255,823, a decrease of $614,807
or  32.9%,  as  compared to $1,870,630 for 2001. Product development and support
during  2001  primarily  consisted  of  the  expenses in connection with outside
consultants,  which  continued  into  the  third  quarter  2002  focusing  the
development  of  new  network  digital  video  products.  These  efforts  were
substantially  curtailed  in  the  fourth  quarter due to lack of funding, which
resulted  in  the  research  and  development  for  2002.

     SALES  AND  MARKETING  EXPENSES


<PAGE>
     Sales  and  marketing  expenses  were  $1,772,971  for  2002  a decrease of
$1,049,539, or 37.2%, as compared to $2,822,510 for 2001. In 2001, our sales and
marketing expenses consisted of marketing efforts  in connection with trade show
activity and increased travel expenditure.  This trend  continued into the third
quarter  of  2002  when  we began to reduce expenditures due to lack of funding,
which  resulted  in  the  research  and  development  for  2002

     GENERAL  AND  ADMINISTRATIVE  COSTS

General and administrative costs were $2,620,008 for the year ended December 31,
2002,  an  increase of $586,320 or 28.8%, as compared to $2,033,688 for the year
ended  December  31, 2001. The majority of this increase is due to absorption of
additional  facility  rental  expense  after our sub tenant moved out in July of
2002.  In 2002, we continued to incur heavy legal and audit costs due efforts to
file a  Form SB-2 Registration Statement to register the new financings received
in  late  2001.

     INTEREST  AND  OTHER  EXPENSE

Interest  and  other expense, net was, $278,401 for 2002, a decrease of $374,660
or  57.4%,  as  compared  to  $653,061 for 2001.  The interest expense component
decreased  in  2002  by  $157,862 as compared to 2001, which was the result of a
lower  debt  level  and the resulting lower interest charges. Other income items
increased  in 2002 due to adjustments and other credits to more properly reflect
balance  sheet  balances

     NET  LOSS

Our  net  loss from operations for 2002 increased 3.5%, $170,793 to ($4,983,678)
from  ($4,812,885)  in  the comparable 2001 period. This is the result of all of
the  above  operational  changes  and  financing  costs.

     LIQUIDITY  AND  CAPITAL  RESOURCES

     At  March 31, 2003, we had cash and cash equivalents of $44,550 compared to
$87,469 at December 31, 2002.  During 2002 our negative working capital position
improved  by  nearly  $3  million  due  primarily  to settlement of our accounts
payable  moratorium  and  the  conversion  to  equity  by Mr. Liccardo, our then
president,  chief executive officer and chairman, of approximately $2 million of
his  convertible  notes from loans he made to the Company to support operations.
This  was  possible  as  a result of the receipt of proceeds from a $1.8 million
unit  financing  in  February  2002  and  with  the receipt of proceeds from the
issuance  of  $450,000  in  principal  amount of convertible notes in June 2002.


                                       22
<PAGE>
     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. We were
not able to effectively file our registration statement and accordingly have not
received  the  second  tranche  from  Bristol  Investment  Fund  Ltd.

     We  had  continuing  operating  losses  of  $(4,179,612) for the year ended
December  31, 2002.  We are currently unable to project when the business may no
longer  generate a loss since we do not know what the cost and time requirements
will  be  to recover and build our revenue to the momentum achieved in the third
quarter  of  2002.  Throughout  the  fourth quarter of 2002 and first quarter of
2003,  we  have implemented measures to increase cash flows through cost-cutting
measures  and  actively pursued additional sources of funding.   However, during
the  fourth  quarter  of  2002  we  began  to  loose  key  sales,  marketing and
manufacturing and other employees due to insufficient funds to pay compensation.
This loss of employees has continued to this date and brought the Company to the
point  of  not  being  able  to  continue  operations.

       Numerous  potential investors and companies were contacted since November
2002,  but  the Company was unable to attract new investors due to the Company's
financing  structure and the Company was unsuccessful in finding a buyer for its
business.  In  March,  the  Company  had  negotiated a sale of assets to another
public  company,  which  would have required the Company to file for bankruptcy.
After  numerous  discussion  with  current  investors and creditors, the Company
received  a written proposal for funding two days before a bankruptcy filing and
were  advised  by  the  Company's  principal secured creditor, its bank, that it
favored  the  new  financing proposal.  Our major secured creditor has located a
financing institution that acquired their note and assisted in further financing
of  the  Company.  Our  other  major creditors have located a workout management
team  and  have  provided  initial  funding  for  that  team to evaluate funding
requirements  and  raise  the  required  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  to obtain financing through the
issuance  of  equity or debt securities.  Even if we are able to raise the funds
required, it is possible that we could incur unexpected costs and expenses, fail
to  collect  significant  amounts  owed  to  us,  or  experience unexpected cash
requirements  that  would force us to seek alternative financing. Further, if we
issue  additional  equity  or  debt  securities,  stockholders  may  experience
additional dilution or the new equity securities may have rights, preferences or
privileges  senior  to  those  of  existing  holders  of  our  common stock.  If
additional  financing  is not available or is not available on acceptable terms,
we  will  have  to  curtail  our  operations  again.


                                       23
<PAGE>
ITEM 7.     FINANCIAL STATEMENTS

     Our  consolidated financial statements and the independent auditors' report
appear  on  pages F-1 through F-20 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

     See 8-K filing for change in accountants dated November 6, 2002.

     On November 6, 2002, we dismissed Hood & Strong LLP ("Hood & Strong") as
our principal independent accountant. The decision to change our independent
accountant was made and approved by our Board of Directors.

     The independent auditors' reports of Hood & Strong on our financial
statements during the two most recent fiscal years did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles, except that the audit reports
on the financial statements for the above periods were modified because of a
going concern uncertainty. In addition, the report for the year ended December
31, 2001 included other paragraphs emphasizing the restatement of the financial
statements because of a change in accounting method for a business combination,
a change in estimate of the life of the goodwill associated with a business
combination, and subsequent event disclosures.

     During our two most recent fiscal years and through November 6, 2002, we
had no disagreements with Hood & Strong on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedures,
which, if not resolved to the satisfaction of Hood & Strong, would have caused
it to make a reference to the subject matter of the disagreement in connection
with its reports. During our two most recent fiscal years and through November
6, 2002, there were no events that would have to be identified in response to
Item 304(a)(1)(iv)(B) of Regulation S-B. We provided Hood & Strong with a copy
of this disclosure, and we requested that Hood & Strong furnish us with a letter
addressed to the Securities and Exchange Commission ("SEC"), stating whether it
agrees with the above statements. A copy of Hood & Strong's letter to the SEC,
dated November 6, 2002, is filed as Exhibit 16.1 to Form 8-K Current Report
filed November 11, 2002.

     On November 6, 2002, we engaged Stonefield Josephson, Inc. ("Stonefield
Josephson") as our principal independent public accountant. The decision to
engage Stonefield Josephson was made and approved by our Board of Directors.
During our two most recent fiscal years and through November 6, 2002, we have
not consulted with Stonefield Josephson regarding (i) the application of
accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that may be rendered on our financial statements, and
neither written nor oral advice was provided that was an important factor we
considered in reaching a decision on an accounting, auditing, or financial
reporting issue; or (ii) any matter that was the subject of either a
disagreement as defined in Item 304(a)(1)(iv) of Regulation S-B and the related
instructions to that item or any event that would have to be identified in
response to Item 304(a)(1)(iv)(B) of Regulation S-B.


                                       24
<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.

<TABLE>
<CAPTION>
NAME                  AGE  POSITION
--------------------  ---  --------
<S>                   <C>  <C>                                       <C>
Michael A. Liccardo    56  Director                                  Resigned as CEO
                                                                     April 28, 2003
Scott Mac Caughern     47  Chief Executive Office and Chairman       Effective April
                                                                     28, 2003
Lawrence L. Bartlett   62  Chief Financial Officer, Vice President,
                           Secretary and Director
Richard A. Falcone     46  Vice President of Marketing, Worldwide    Resigned March
                           Sales and Business Development            31, 2003
Catherine Palmen       44  Director                                  Resigned April
                                                                     28, 2003
</TABLE>

     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  between  three  to  five  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.

     Scott Mac Caughern has served as our Chairman and Chief Executive Officer
since April 28, 2003.  Mr. Mac Caughern is an emerging growth investor in both
private and public companies and has funded and contributed to the success of
many companies in the past decade.  He has held various senior executive
positions within the securities industry and is an expert in developing
innovative financial solutions.  Since 1993, Mr. Mac Caughern has been president
of Mac Caughern Trade Development, which is a national full service
communications company to the capital markets.  Mac Caughern Trade Development
has focused on management and financial consulting services, specializing in
strategic marketing, establishing distribution channels for products, mergers
and acquisitions and financial public relations.  Mr. Mac Caughern has held
various senior executive positions within the securities industry including
running his own OSJ Securities firm for Roundhill Securities, in Park City,


                                       25
<PAGE>
Utah.  After resigning from Roundhill Securities in 1997, Mr. Mac Caughern has
focused on identifying unique opportunities in the public markets and has
implemented his innovative financial solutions for client companies.  Mr. Mac
Caughern attended Central Connecticut State College.  Additionally, since
October 2001,  Mr. Mac Caughern has been a Professional Services Reserve for the
Orange County Sheriff's Department in Orange County California.

     Michael  A.  Liccardo  has served as a director since February 2001, and as
our chief executive officer, president and chairman of the board from April 2001
until  April  28,  2003  at  which  time  he resigned. Mr. Liccardo has been the
president  and  chief  executive  officer  of Optivision since 1998 and chairman
since  December 1999 until April 28, 2003 at which time he resigned as Chairman.
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.

     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,  from  April 2001 until his resignation in March 2003. He
will  continue  to support and provide strategic guidance on a consulting basis.
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.


                                       26
<PAGE>
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 until her
resignation  in April of 2003. Ms. Palmen has also been a director of Optivision
since June 2000 and was chairman of Optivision's creditors committee.

CODE OF ETHICS

The  Company  has  adopted its Code of Ethics and Business Conduct for Officers,
Directors  and  Employees  that  applies  to  all of the officers, directors and
employees  of  the  Company.

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,
2002  all  Section  16(a)  filing  requirements  applicable  to  our  directors,
officers,  and  greater  than  10%  beneficial  owners  were  complied  with.

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 2000, 2001 and
2002  to:

     -    Each person who served as our chief executive officer during 2002; and


                                       27
<PAGE>
     -    Our  other  executive  officers whose total annual salary and bonus in
          2002  exceeded  $100,000.

<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        2002        149,777        ---     2,500,000         1,476
President, Chief           2001        164,680        ---     1,100,000         1,278
Executive Officer and      2000        182,148        ---     1,300,000           ---
Chairman of the Board
(4)

Lawrence L. Bartlett       2002        175,120        ---     2,200,000         1,334
Chief Financial Officer,   2001        163,414        ---       825,000         1,245
Vice President and         2000        185,450        ---       425,000           ---
Secretary (6)
Richard A. Falcone         2002        190,733        ---     2,200,000           943
Vice President of          2001        184,228        ---       740,000           878
Marketing, Worldwide       2000        174,538        ---       500,000           ---
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.  At  the  end of 2002 Messrs. Bartlett,
     Falcone and Liccardo had unpaid compensation $65,508, $55,499 and $196,562,
     respectively.  As  of  this  date  none of the unpaid compensation has been
     paid.
(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.  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, 2002.


                                       28
<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>
Michael A. Liccardo     2,500,000 (3) (4)            28.3%  $        .04     10/31/04

Lawrence L. Bartlett    2,200,000 (3) (4)            24.8            .04     10/31/04

Richard A. Falcone      2,200,000 (3) (4)            24.8            .04     10/31/04

<FN>
(1)  Based  on  a  total  of  8,847,000  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, 2002, 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.
(3)  These  options  were  issued  under  our  2002  Stock  Plan.
(4)  The option vests 50% on November 15, 2002 and at a rate of 5.00% 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,  2002.

<TABLE>
<CAPTION>
                                               NUMBER OF SECURITIES
                       SHARES                UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED
                      ACQUIRED                     OPTIONS AT            IN-THE-MONEY OPTIONS AT
                         ON       VALUE       DECEMBER 31, 2002 (1)        DECEMBER 31, 2002 (2)
NAME                  EXERCISE  REALIZED   EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
<S>                   <C>       <C>        <C>          <C>            <C>           <C>
Michael A. Liccardo     356744  $ 152,434    3,014,570        735,430  $        0.0  $          0.0
Lawrence L. Bartlett    319907  $ 141,976    2,286,858      1,924,447  $        0.0  $          0.0
Richard A. Falcone      307481  $  145377    2,280,799      1,930,506  $        0.0  $          0.0

<FN>
(1)  These amounts represent the total number of shares subject to options held
     by the named executive officers at December 31, 2002. These options were
     granted on various dates during 2001 and 2002 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, 2002
     which was $0.03 for all the in-the-money options held by the named
     executive officers.
</TABLE>


                                       29
<PAGE>
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 served as our president, chief executive officer and
chairman  of  the  board until his resignation in April 2003. Our agreement with
Mr.  Liccardo provided 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.

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


                                       30
<PAGE>
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, 2002,
options  to  purchase  3,09,450  shares  were  outstanding at a weighted average
exercise  price  of  $0.86 per share and 121,092 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;

     -    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


                                       31
<PAGE>
     -    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,
2002, options to purchase 2,769,000 shares of common stock were outstanding at a
weighted  average  exercise  price of $0.88 per share and 3,303 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.

Plan Features

     Under the 2000 Stock Plan:


                                       32
<PAGE>
     -    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. As of December 31,
2002, options to purchase 8,541,000 shares of common stock were outstanding at a
weighted  average  exercise  price  of  $0.04 per share and 6,301,983 shares of
common  stock  remained  available  for  future  grant. The 2002 Stock Plan will
terminate  in  June  2012.

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


                                       33
<PAGE>
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.

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  May  16,  2003,  by:


                                       34
<PAGE>
     -    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,  2002;  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  May 16, 2003 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 107,941,654 shares of common
stock  outstanding  as  of  May  16,  2003.

<TABLE>
<CAPTION>
                                                                                      PERCENTAGE OF
NAME AND ADDRESS                                                NUMBER OF SHARES         SHARES
OF BENEFICIAL OWNER                                          BENEFICIALLY OWNED (1)  OUTSTANDING (1)
-----------------------------------------------------------  ----------------------  ---------------
<S>                                                          <C>                     <C>
5% Stockholders
---------------


Alpha Capital Aktiengesellschaft
  Pradafant
  79490 Furstentums, Vaduz, Liechtenstein                                10,449,776             9.7%

Stonestreet Limited Partnership
  260 Town Centre Blvd.,
  Suite 201, Markham, ON, L3R 8H8, Canada                                 6,509,357             6.0%


Executive Officers and Directors (2)
------------------------------------
Michael A. Liccardo                                                      41,018,677            38.0%
Lawrence L. Bartlett (3)                                                  3,598,805             3.3%
Scott Mac Caughern                                                                0               *
All directors and executive officers as a group (3 persons)              44,617,482            41.3%

<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. At May 16, 2003 the
     market  price for computation of shares on conversion of notes was $0.08. .

(2)  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.


                                       35
<PAGE>
(3)  Includes  3,598,805  shares  that  may  be acquired through the exercise of
     options  currently  or  within  60  days  of  May  16,  2003.

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

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     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.  In December 2002, Mr. Liccardo converted
$500,000  in  principle  of  his  convertible  note  and in connection therewith
received  12,500,000  shares  of  common  stock.  In  March  2003  Mr.  Liccardo
converted  $112,000  in  principle  of  this  convertible note and in connection
therewith  received 14,000,000 shares of common stock.  Mr. Liccardo may, at any
time,  elect  to  convert  the  outstanding  principal  of  $1,000,783  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:

                                                                            Page
Independent Auditors' Report.................................................F-1
Consolidated Balance Sheets, December 31, 2002 and 2001......................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-20

     (a)(2) Exhibits

Exhibit Number      Identification of Exhibit
--------------      -------------------------

2.1**               Agreement and Plan of Merger dated as of September 11, 2000
                    by and among the Issuer, Optivision, Inc., and ASI
                    Acquisition, Inc.


                                       36
<PAGE>
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

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


                                       37
<PAGE>
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

99.1                Certification of the Chief Executive Officer of Amnis
                    Systems Inc. to 18 U.S.C. Section 1350, As Adopted Pursuant
                    to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2                Certification of the Chief Financial Officer of Amnis
                    Systems Inc. Pursuant to 18 U.S.C. Section 1350, As Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.3                Code of Ethics and Business Conduct of Officers, Directors
                    and Employees of Amnis Systems Inc.



+       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

*****   Filed as an exhibit to the registration statement on Form SB-2 filed
with the Securities and Exchange Commission on March 22, 2002


                                       38
<PAGE>
******  Filed as an exhibit to the report on Form 8-K filed with the Securities
and Exchange Commission on June 27, 2002

     (b)     Reports on Form 8-K

     None.

ITEM 14.     CONTROLS AND PROCEDURES.

As of December 31, 2002, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2002. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to December 31,
2002.


                                   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:  May 19, 2003                 AMNIS SYSTEMS INC.

                                    By:   /s/ Scott Mac Caughern
                                       -----------------------------------------
                                       Scott Mac Caughern
                                       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:  May 19, 2003                 By:   /s/ Scott Mac Caughern
                                       -----------------------------------------
                                       Scott Mac Caughern
                                       ------------------
                                       Director and Chairman of the Board and
                                       Chief Executive Officer

Date:  May 19, 2003                 By:   /s/ Lawrence L. Bartlett
                                       -----------------------------------------
                                       Lawrence L. Bartlett
                                       Director, Vice President, Chief Financial
                                       Officer and Secretary


                                       39
<PAGE>
           SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
     PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS

The Company did not provide any annual report to security holders covering the
registrant's last fiscal year or any proxy statement, form of proxy or other
proxy soliciting material have been sent to more than ten of the registrant's
security holders with respect to any annual or other meeting of security
holders.


                                       40
<PAGE>
                                 CERTIFICATIONS
                                 --------------

I, Scott Mac Caughern, certify that:
   ------------------

     1.     I  have  reviewed this annual report on Form 10-KSB of Amnis Systems
Inc.;

     2.     Based  on  my  knowledge,  this  annual  report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

     4.     The registrant's other certifying officers and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

          a)     designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b)     evaluated the effectiveness of the registrant's disclosure
     controls and procedures as of a date within 90 days prior to the filing
     date of this annual report (the "Evaluation Date"); and

          c)     presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5.     The  registrant's  other  certifying  officers and I have disclosed,
based  on our most recent evaluation, to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  functions):

          a)     all significant deficiencies in the design or operation of
     internal controls which could adversely affect the registrant's ability to
     record, process, summarize and report financial data and have identified
     for the registrant's auditors any material weaknesses in internal controls;
     and

          b)     any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6.     The  registrant's  other certifying officers and I have indicated in
this  annual  report  whether  or not there were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.


Date:  May 19, 2003

/s/  Scott  Mac  Caughern
---------------------------------------
Name:  Scott  Mac  Caughern
       --------------------
Title:  Chief Executive Officer


                                       41
<PAGE>
                                 CERTIFICATIONS
                                 --------------

I, Lawrence L. Bartlett, certify that:

     1.     I  have  reviewed this annual report on Form 10-KSB of Amnis Systems
Inc.;

     2.     Based  on  my  knowledge,  this  annual  report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

     4.     The registrant's other certifying officers and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

          a)     designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b)     evaluated the effectiveness of the registrant's disclosure
     controls and procedures as of a date within 90 days prior to the filing
     date of this annual report (the "Evaluation Date"); and

          c)     presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5.     The  registrant's  other  certifying  officers and I have disclosed,
based  on our most recent evaluation, to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  functions):

          a)     all significant deficiencies in the design or operation of
     internal controls which could adversely affect the registrant's ability to
     record, process, summarize and report financial data and have identified
     for the registrant's auditors any material weaknesses in internal controls;
     and

          b)     any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6.     The  registrant's  other certifying officers and I have indicated in
this  annual  report  whether  or not there were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.


Date:  May 19, 2003
/s/Lawrence L. Bartlett
Name:  Lawrence L. Bartlett
Title:  Chief Financial Officer


                                       42
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


                                      INDEX


                                                                            Page

INDEPENDENT  AUDITORS''  REPORT

     Report  on  audited  consolidated  financial  statements               F-1

FINANCIAL  STATEMENTS

     Consolidated  Balance  Sheet  as  of  December  31,  2002              F-2

     Consolidated Statements of Operations for the Years
       Ended  December  31,  2002  and  2001                                F-3

     Consolidated Statement of Stockholders' Deficit for the Years
       Ended  to  December  31,  2002  and  2001                            F-4

     Consolidated Statements of Cash Flows for the Years
       Ended  December  31,  2002  and  2001                                F-5

     Notes  to  Consolidated  Financial  Statements                F-6  to  F-?


<PAGE>
<TABLE>
<CAPTION>
                          AMNIS SYSTEMS, INC. AND SUBSIDIARY
                              CONSOLIDATED BALANCE SHEET
                    FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


                                                       AMNIS SYSTEMS INC. AND SUBSIDIARY

                                                              CONSOLIDATED BALANCE SHEET

                                                                       DECEMBER 31, 2002
========================================================================================

----------------------------------------------------------------------------------------
<S>                                                                        <C>
ASSETS

CURRENT ASSETS:
  Cash                                                                     $     87,470
  Accounts receivable, net of allowance for doubtful accounts of $103,000       312,103
  Contractual Receivable                                                              0
  Inventories                                                                   561,000
  Prepaid expenses and other                                                     51,587
----------------------------------------------------------------------------------------

    Total current assets                                                      1,012,160
----------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT
  Machinery and equipment                                                     1,899,335
  Demonstration equipment                                                       456,752
  Furniture and fixtures                                                        496,433
  Leasehold improvements                                                        351,111
----------------------------------------------------------------------------------------

                                                                              3,203,631
  Less:  Accumulated depreciation and amortization                           (3,094,858)
----------------------------------------------------------------------------------------

    Property and equipment, net                                                 108,773
----------------------------------------------------------------------------------------

DEPOSITS                                                                         10,740
----------------------------------------------------------------------------------------

                                                                           $  1,131,673
========================================================================================

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Financing obligations collateralized by accounts receivable              $    917,666
  Accounts payable moratorium                                                         0
  Stockholders' notes payable                                                   105,000
  Notes payable                                                                       0
  Accounts payable                                                            1,737,607
  Accrued salaries                                                              576,893
  Accrued vacation                                                              212,835
  Accrued interest payable                                                      239,246
  Convertible notes payable                                                   1,612,763
  Discount on convertible note payable                                         (309,804)
  Deferred rent                                                                       0
  Deferred revenue                                                              156,722
  Accrued warrant liability                                                      47,076
  Other accrued expenses                                                      1,859,999
----------------------------------------------------------------------------------------

    Total current liabilities                                                 7,156,003

LONG-TERM LIABILITIES:
  Sublease deposit                                                                    0
  Convertible note payable                                                      450,000
  Discount on convertible note payable                                         (329,343)
----------------------------------------------------------------------------------------

    Total liabilities                                                         7,276,660
----------------------------------------------------------------------------------------

STOCKHOLDERS' (DEFICIT):
  Preferred stock, 20,000,000 authorized: none outstanding
  Common stock, $0.0001 par value:
    Authorized - 400,000,000 shares
    Issued and outstanding - 66,294,203  shares                                   6,629
  Additional paid-in capital                                                 22,459,213
  Accumulated deficit                                                       (28,610,829)
----------------------------------------------------------------------------------------

    Total stockholders' deficit                                              (6,144,987)
----------------------------------------------------------------------------------------

    Total liabilities and stockholder's deficit                            $  1,131,673
========================================================================================
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


                                                 AMNIS SYSTEMS INC. AND SUBSIDIARY

                                              CONSOLIDATED STATEMENT OF OPERATIONS

==================================================================================
                                                                December 31
                                                        --------------------------
For the years ended                                         2002          2001
----------------------------------------------------------------------------------
<S>                                                     <C>           <C>
SALES                                                   $ 2,240,136   $ 4,095,756

COST OF GOODS SOLD                                          890,572     1,276,439
----------------------------------------------------------------------------------

    Gross profit                                          1,349,564     2,819,317

OPERATING EXPENSES
  Research and development
  Sales and marketing
  General and administrative                              6,333,242     7,632,202
----------------------------------------------------------------------------------

      Total operating exenses                             6,333,242     7,632,202
----------------------------------------------------------------------------------

      Loss from operations                               (4,983,678)   (4,812,885)

OTHER INCOME (EXPENSE)
  Interest expense, net                                  (4,344,769)     (693,514)
  Financing costs                                        (2,115,073)            -
  Net extraordinary item-gain on debt extinguishment      1,042,177             -
  Other, net                                              1,459,069        42,053
----------------------------------------------------------------------------------

       Total other income (expense)                      (3,958,596)     (651,461)
----------------------------------------------------------------------------------

Net loss before taxes                                   $(8,942,274)  $(5,464,346)
----------------------------------------------------------------------------------

  Income Tax                                                 (1,600)       (1,600)
----------------------------------------------------------------------------------

NET LOSS                                                $(8,943,874)  $(5,465,946)
==================================================================================

BASIC AND DILUTED LOSS PER COMMON SHARE                 $     (0.26)  $     (0.57)
==================================================================================

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC & DILUTED    34,698,065     9,635,791
==================================================================================
</TABLE>


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


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                           AMNIS SYSTEMS, INC. AND SUBSIDIARY
                                    CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT


                                                                                                AMNIS SYSTEMS INC. AND SUBSIDIARY

                                                                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

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

                                                                                         Additional                     Total
                                                                   Common Stock           Paid-In       Accumulated  Stockholders'
                                                               Shares        Amount       Capital        Deficit       Deficit
<S>                                                          <C>          <C>           <C>           <C>            <C>

BALANCE, December 31, 2000                                    2,545,062   $       255   $ 7,016,122   $(14,201,009)  $(7,184,632)

  Issuance of common stock in connections with
    merger with Amnis Systems, Inc.                           6,564,200           656          (656)                           -

  Issuance of common stock for converstion of notes payable   1,687,640           168     2,799,832                    2,800,000

  Sale of common stock                                        1,488,889           149     1,380,972                    1,381,121

  Issuance of common stock for services                         423,000            42       279,158                      279,200

  Issuance of common stock for debt and interest                137,685            14       202,102                      202,116

  Exercise of stock options                                     100,606            10        45,668                       45,678

  Beneficial conversion feature of convertible note payable                                 247,722                      247,722

  Issuance of common stock options to non-employees                                         197,605                      197,605

  Net loss                                                                                              (5,465,946)   (5,465,946)
---------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 2001                                   12,947,082   $     1,294   $12,168,525   $(19,666,955)  $(7,497,136)

  Sale of common stock                                        3,000,000           300     1,189,706                    1,190,006

  Issuance of common stock for services                       5,291,858           529       534,115                      534,644

  Exercise of stock options                                     386,388            39       150,371                      150,410

  Issuance of common stock for compensation                   3,207,108           321     1,328,406                    1,328,727

  Issuance of common stock for conversion of notes payable   39,399,267         3,940     2,821,950                    2,825,890

  Issuance of common stock for financing cost                 2,062,500           206       288,544                      288,750

  Beneficial conversion feature of convertible note payable                               3,977,596                    3,977,596

  Net loss                                                                                              (8,943,874)   (8,943,874)
---------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 2002                                   66,294,203   $     6,629   $22,459,213   $(28,610,829)  $(6,144,987)
==================================================================================================================================
</TABLE>


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


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                  AMNIS SYSTEMS INC. AND SUBSIDIARY
                                CONSOLIDATED STATEMENT OF CASH FLOWS
                                            December 31


                                                                      Amnis Systems Inc. and Subsidiary

                                                                   Consolidated Statement of Cash Flows

=======================================================================================================
                                                                                    December 31
                                                                             --------------------------
For the year ended                                                               2002          2001
-------------------------------------------------------------------------------------------------------
<S>                                                                          <C>           <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                   $(8,943,874)  $(5,465,946)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Common stock and options issued for services                               534,644       476,805
      Common stock issued for financing costs                                    288,750             0
      Employee salaries exchanged for stock                                    1,328,727             0
      Depreciation and amortization                                               60,909       272,131
      Amortization of discount on note payable                                 3,858,770             0
      Loss on disposal of property and equipment                                   1,627         5,306
      Gain on extinguishment of debt                                          (1,115,787)            0
      Forgiveness of debt                                                              0       (42,967)
      Change in fair value of warrant liability                               (1,055,504)            0
  Decrease in accounts receivable                                                 44,414       207,427
  Decrease in inventories                                                         63,056       482,593
  (Increase) decrease in prepaid expenses and other assets                        31,333       (32,684)
  Decrease in deposits                                                            74,150         8,380
  (Decrease) in accounts payable moratorium                                     (445,713)          435
  Increase in accounts payable                                                   804,741       191,689
  Decrease in reserve for sales adjustment                                             0      (263,331)
  Increase (decrease) in accrued salaries                                       (189,393)      495,084
  Increase (decrease) in accrued vacation                                        (61,998)       15,363
  Increase (decrease) in accrued interest payable                                342,421       393,098
  Increase (decrease) in deferred rent                                          (123,657)      (75,538)
  Increase (decrease) in deferred revenue                                         97,627        11,276
  Increase (decrease) in other accrued expenses                                1,527,298       (50,141)
  (Decrease) in sublease deposits                                                (72,800)       (1,007)
-------------------------------------------------------------------------------------------------------

        Net cash used in operating activities                                 (2,950,259)   (3,372,027)
-------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                            (19,518)      (43,025)
-------------------------------------------------------------------------------------------------------

        Net cash used in investing activities                                    (19,518)      (43,025)
-------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings from stockholders                                                         0     1,737,178
  Proceeds from financing obligations collateralized by accounts receivable    1,578,031     1,225,231
  Payments on financing obligations collateralized by accounts receivable     (1,689,648)   (1,334,546)
  Proceeds from issuance of common stock                                       2,170,397     1,426,799
  Payment on notes payable                                                             0       (55,908)
  Proceeds from notes receivable                                                 500,000       250,000
  Proceeds from issuance of convertible notes payable                            450,000             0
-------------------------------------------------------------------------------------------------------

        Net cash provided by financing activities                              3,008,780     3,248,754
-------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              39,003      (166,298)

CASH AND CASH EQUIVALENTS, beginning of year                                      48,467       214,765
-------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of year                                       $    87,470   $    48,467
=======================================================================================================


NON CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock and options issued for services                               $   534,644   $   476,805
  Accrued salaries exchanged for common stock                                  1,328,727             0
  Accrued interest exchanged for common stock                                    140,736       202,116
  Note payable exchanged for common stock                                        250,000             0
  Convertible note payable exchanged for common stock                          2,435,154             0
  Note payable and interest in exchange for convertible note payable           3,547,920             0
  Discount on convertible note payable                                         3,997,917       500,000
=======================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for income taxes                                                 $     2,400   $     1,600
  Cash paid for interest                                                     $   268,005   $   452,779
=======================================================================================================
</TABLE>


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


                                      F-5
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

     Organization  and  Line  of  Business
     -------------------------------------

     Amnis  Systems  Inc.  (""Amnis""),  a  Delaware corporation, and its wholly
     owned  subsidiary,  Optivision,  Inc.  (""Optivision"")  (collectively  the
     "Company"),  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.

     Amnis  was  formed  on  July 29, 1998. On April 16, 2001, Amnis merged with
     Optivision,  Inc.,  an  operating  company,  in an exchange of common stock
     accounted  for  as  a  reverse  merger. 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 Amnis common; each outstanding but
     unexercised  option  to  purchase  common stock of Optivision was converted
     into  an option to acquire the number of shares of Amnis 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; each
     outstanding  warrant  to  purchase common stock of Optivision was converted
     into a warrant to acquire the number of shares of Amnins 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. In accounting
     for  this  transaction:

          -    Optivision  is  deemed  to be the purchaser and surviving company
               for accounting purposes. Accordingly, its net assets are included
               in  the  balance  sheet  at  their historical book values and the
               results  of  operations of Optivision have been presented for the
               comparative  prior  period;

          -    Control  of  the  net  assets  and business of Amnis was acquired
               effective April 16, 2001. This transaction has been accounted for
               as  a  purchase  of  the  assets  and  liabilities  of  Amnis  by
               Optivision. The historical cost of the net assets assumed was $0.


     Basis  of  Presentation
     -----------------------

     The  accompanying  consolidated  financial statements have been prepared in
     conformity  with  accounting  principles  generally  accepted in the United
     States of America, which contemplate continuation of the Company as a going
     concern.  The  Company incurred net losses for the years ended December 31,
     2002  and  2001 of $8,943,874 and $5,465,946, respectively, and at December
     31,  2002  had  a  working  capital deficit of $6,143,843. These conditions
     raise  substantial doubt as to the Company's ability to continue as a going
     concern.  These  consolidated  financial  statements  do  not  include  any
     adjustments  that  might result from the outcome of this uncertainty. These
     consolidated  financial  statements do not include any adjustments relating
     to  the  recoverability  and  classification  of recorded asset amounts, or
     amounts  and  classification  of liabilities that might be necessary should
     the  Company  be  unable  to  continue  as  a  going  concern.

     The  Company  plans  to  take  the following steps that it believes will be
     sufficient  to  provide  the  Company  with  the  ability  to  continue  in
     existence. The Company has recently hired a new Chief Executive Officer and
     has  obtained additional funding from an existing investor and a commitment
     for  additional  funds


                                      F-6
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     from this investor. The Company believes that with a new CEO and sufficient
     capital  to  fund  operations  that  the  Company  will  be able to achieve
     profitable  operations, but these can be no assurance that the Company will
     generate  positive  cash  flows  from  operations  sufficient  to  sustain
     operations  in  the  near  term.

     Principles  of  Consolidation
     -----------------------------

     The  accompanying consolidated financial statements include the accounts of
     the  Company  and  its  wholly  owned  subsidiary,  Optivision,  Inc.  All
     inter-company  accounts  and  transactions  have  been  eliminated.

     Use  of  Estimates
     ------------------

     The  preparation  of  financial  statements  in  conformity  with generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosures  of  contingent  assets  and  liabilities  at  the  date of the
     financial  statements  and  the  reported  amounts  of revenue and expenses
     during the reporting periods. As of December 31, 2002 and 2001, the Company
     used  estimates  in  determining the realization of its accounts receivable
     inventory  write-downs,  depreciation  and  amortization,  sales  returns,
     deferred  taxes  and  contingencies. Actual results could differ from these
     estimates.

     Fair  Value  of  Financial  Instruments
     ---------------------------------------

     For  certain  of  the  Company''s  financial  instruments,  including cash,
     accounts  receivable, inventory, other current assets, accounts payable and
     accrued  expenses, the carrying amounts approximate fair value due to their
     short  maturities.  The  amounts  shown  for  convertible  debentures,  and
     financing  obligations also approximate fair value because current interest
     rates  and  terms offered to the Company for similar debt are substantially
     the  same.


     Cash  and  Cash  Equivalents
     ----------------------------
     For  purposes  of  the  statements  of cash flows, the Company defines cash
     equivalents as all highly liquid debt instruments purchased with a maturity
     of  three  months  or  less.

     Concentration  of  Credit  Risk
     -------------------------------

     Financial  instruments,  which  potentially  subject  the  Company  to
     concentrations  of  credit  risk, consist of cash and accounts receivables.
     The Company places its cash with high quality financial institutions and at
     times  may  exceed  the  FDIC $100,000 insurance limit. The Company extends
     credit  based  on  an  evaluation  of  the customer''s financial condition,
     generally  without  collateral.  Exposure  to  losses  on  receivables  is
     principally  dependent on each customer''s financial condition. The Company
     monitors  its  exposure  for  credit  losses  and  maintains allowances for
     anticipated  losses,  if  required.

     During  2002,  five  customers  accounted  for  43%  of net revenues. As of
     December  31,  2002  approximately  66%  of  accounts  receivable  were
     concentrated with five customers. During 2001, five customers accounted for
     48%  of  net revenues. 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


                                      F-7
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     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.

     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,  2002.  Due  to  competitive  and market pressures, it is
     reasonably  possible  that  additional  provisions could be required in the
     future.

     Property,  Plant  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.

     Expenditures  for  maintenance  and  repairs  are  charged to operations as
     incurred  while  renewals and betterments are capitalized. Gains and losses
     on  disposals  are  included  in  the  results  of  operations.


     Impairment  of  Long-Lived  Assets
     ----------------------------------

     Long-lived  assets to be held and used are analyzed for impairment whenever
     events  or  changes  in  circumstances  indicate  that the related carrying
     amounts may not be recoverable. The Company evaluates at each balance sheet
     date  whether events and circumstances have occurred that indicate possible
     impairment. If there are indications of impairment, the Company uses future
     undiscounted  cash  flows  of  the related asset or asset grouping over the
     remaining  life  in  measuring  whether  the assets are recoverable. In the
     event  such  cash  flows  are  not expected to be sufficient to recover the
     recorded  asset values, the assets are written down to their estimated fair
     value.  Long-lived  assets  to  be disposed of are reported at the lower of
     carrying  amount  or  fair  value  of  asset  less  cost  to  sell.


     Stock  Based  Compensation
     --------------------------

     The  Company  grants stock options with an exercise price equal to at least
     the  fair  value of the stock at the date of grant. The Company has elected
     to  continue  to  account  for its employee stock- based compensation plans
     using  an  intrinsic  value  based  method  of  accounting  prescribed  by
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees"  (APB 25) and related Interpretations. Under APB 25, because the
     exercise price of the Company's employee stock options equal or exceeds the
     market  price of the underlying stock on the date of grant, no compensation
     expense  is  recognized.

     Revenue  Recognition
     --------------------


                                      F-8
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     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.

     Advertising  and  Marketing  Costs
     ----------------------------------

     The  Company  expenses  costs  of  advertising  and  marketing as incurred.
     Advertising and marketing expense for the years ended December 31, 2002 and
     2001  was  insignificant.

     Income  Taxes
     -------------

     The  Company  accounts  for  income  taxes in accordance with SFAS No. 109,
     "Accounting  for  Income  Taxes.""  Deferred  taxes  are  provided  on  the
     liability  method whereby deferred tax assets are recognized for deductible
     temporary  differences,  and  deferred  tax  liabilities are recognized for
     taxable  temporary  differences.  Temporary differences are the differences
     between the reported amounts of assets and liabilities and their tax bases.
     Deferred  tax  assets  are  reduced  by  a valuation allowance when, in the
     opinion  of management, it is more likely than not that some portion or all
     of  the  deferred  tax  assets  will  be  realized. Deferred tax assets and
     liabilities  are  adjusted for the effects of changes in tax laws and rates
     on  the  date  of  enactment.

     Earnings  Per  Share
     --------------------

     In  accordance with SFAS No. 128, "Earnings Per Share,"" the basic loss per
     common  share  is  computed  by  dividing  net  loss  available  to  common
     stockholders  by  the weighted average number of common shares outstanding.
     Diluted  loss per common share is computed similar to basic loss per common
     share  except  that  the  denominator is increased to include the number of
     additional  common shares that would have been outstanding if the potential
     common  shares  had  been  issued  and if the additional common shares were
     dilutive.  At  December  31, 2002 and 2001, the Company had the outstanding
     common  stock  and  equivalents of 18,536,935 and 15,207,850, respectively.

     Comprehensive  Income
     ---------------------

     SFAS  No.  130, "Reporting Comprehensive Income," establishes standards for
     the reporting and display of comprehensive income and its components in the
     financial  statements.  For  the year ended December 31, 2002 and 2001, the
     Company  has  no  items  that  represent  other  comprehensive  income and,
     accordingly,  has  not  included  a schedule of comprehensive income in the
     financial  statements.


     Discount  on  Convertible  Debentures
     -------------------------------------


                                      F-9
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     Discounts  on  convertible debentures are principally the values attributed
     to  the  detachable  warrants  issued  in  connection  with the convertible
     debentures  and the value of the preferential conversion feature associated
     with  the  convertible  debentures.  These  discounts  are  account  for in
     accordance  with  emerging issues task force (""EITF"") 00-27 issued by the
     American  Institute  of  Certified  Public  Accountants.

     Reclassification
     ----------------

     Certain reclassifications have been made to the 2001 balances to conform to
     the  2002  presentation.


     Recently  Issued  Accounting  Pronouncements
     --------------------------------------------

     In  July  2001,  the Financial Accounting Standards Board (""FASB"") issued
     SFAS  No.  141  "Business Combinations." SFAS No. 141 supersedes Accounting
     Principles Board ("APB") No. 16 and requires that any business combinations
     initiated  after  June  30, 2001 be accounted for as a purchase; therefore,
     eliminating the pooling-of-interest method defined in APB 16. The statement
     is effective for any business combination initiated after June 30, 2001 and
     shall  apply  to  all  business  combinations accounted for by the purchase
     method  for  which  the  date  of acquisition is July 1, 2001 or later. The
     Company  has  implemented  this  pronouncement.


     In  July  2001,  the  FASB  issued  SFAS  No.  142,  "Goodwill  and  Other
     Intangibles."  SFAS  No. 142 addresses the initial recognition, measurement
     and amortization of intangible assets acquired individually or with a group
     of  other  assets  (but  not  those acquired in a business combination) and
     addresses  the  amortization  provisions for excess cost over fair value of
     net  assets acquired or intangibles acquired in a business combination. The
     statement  is effective for fiscal years beginning after December 15, 2001,
     and  is  effective July 1, 2001, for any intangibles acquired in a business
     combination initiated after June 30, 2001. The Company has implemented this
     pronouncement.

     In  October  2001,  the  FASB  issued  SFAS  No. 143, "Accounting for Asset
     Retirement  Obligations," which requires companies to record the fair value
     of a liability for asset retirement obligations in the period in which they
     are  incurred.  The  statement  applies  to  a  company's legal obligations
     associated  with the retirement of a tangible long-lived asset that results
     from  the  acquisition, construction, and development or through the normal
     operation  of  a  long-lived asset. When a liability is initially recorded,
     the  company  would  capitalize  the  cost, thereby increasing the carrying
     amount  of  the  related  asset.  The  capitalized asset retirement cost is
     depreciated  over  the  life of the respective asset while the liability is
     accreted  to  its  present  value.  Upon  settlement  of the liability, the
     obligation  is  settled at its recorded amount or the company incurs a gain
     or  loss.  The statement is effective for fiscal years beginning after June
     30,  2002.  The  Company  does  not  expect the adoption to have a material
     impact  to  the  Company's  financial  position  or  results of operations.

     In  October  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting for the
     Impairment  or  Disposal of Long-Lived Assets." Statement 144 addresses the
     accounting  and  reporting  for  the  impairment  or disposal of long-lived
     assets.  The  statement  provides  a single accounting model for long-lived
     assets to be disposed of. New criteria must be met to classify the asset as
     an  asset  held-for-sale.  This  statement  also  focuses  on reporting the
     effects  of  a  disposal  of  a  segment  of  a business. This statement is
     effective  for  fiscal years beginning after December 15, 2001. The Company
     has  implemented this pronouncement and has concluded that the adoption has
     no  material  impact  to  the  financial  statements.


                                      F-10
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     In  April  2002,  the  FASB  issued  Statement No. 145, "Rescission of FASB
     Statements  No.  4,  44,  and  64,  Amendment of FASB Statement No. 13, and
     Technical  Corrections."  This  Statement  rescinds  FASB  Statement No. 4,
     "Reporting  Gains and Losses from Extinguishment of Debt," and an amendment
     of  that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to
     Satisfy  Sinking-Fund  Requirements" and FASB Statement No. 44, "Accounting
     for  Intangible  Assets  of  Motor  Carriers.""  This Statement amends FASB
     Statement  No.  13,  "Accounting for Leases," to eliminate an inconsistency
     between  the  required  accounting  for sale-leaseback transactions and the
     required  accounting  for  certain  lease  modifications that have economic
     effects  that  are similar to sale-leaseback transactions. The Company does
     not  expect  the  adoption  to  have  a  material  impact  to the Company's
     financial  position  or  results  of  operations.

     In  June  2002,  the  FASB  issued Statement No. 146, "Accounting for Costs
     Associated  with  Exit  or  Disposal  Activities." This Statement addresses
     financial  accounting  and  reporting  for  costs  associated  with exit or
     disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue
     No.  94-3, "Liability Recognition for Certain Employee Termination Benefits
     and  Other Costs to Exit an Activity (including Certain Costs Incurred in a
     Restructuring)." The provisions of this Statement are effective for exit or
     disposal  activities that are initiated after December 31, 2002, with early
     application  encouraged. The Company does not expect the adoption to have a
     material  impact  to  the  Company's  financial  position  or  results  of
     operations.

     In  October  2002,  the  FASB  issued  Statement No. 147, ""Acquisitions of
     Certain  Financial  Institutions-an amendment of FASB Statements No. 72 and
     144  and  FASB  Interpretation  No.  9,""  which  removes  acquisitions  of
     financial  institutions  from  the  scope  of  both  Statement  72  and
     Interpretation  9  and requires that those transactions be accounted for in
     accordance  with  Statements  No.  141, Business Combinations, and No. 142,
     Goodwill  and  Other  Intangible Assets. In addition, this Statement amends
     SFAS  No.  144,  Accounting  for  the  Impairment or Disposal of Long-Lived
     Assets,  to include in its scope long-term customer-relationship intangible
     assets  of  financial  institutions  such  as  depositor-  and
     borrower-relationship  intangible  assets  and credit cardholder intangible
     assets. The requirements relating to acquisitions of financial institutions
     are  effective  for acquisitions for which the date of acquisition is on or
     after  October  1,  2002.  The  provisions  related  to  accounting for the
     impairment  or  disposal  of  certain  long-term  customer-relationship
     intangible  assets  are  effective on October 1, 2002. The adoption of this
     Statement  did  not  have  a  material  impact  to  the Company's financial
     position  or results of operations as the Company has not engaged in either
     of  these  activities.

     In  December  2002,  the  FASB  issued  Statement No. 148, ""Accounting for
     Stock-Based  Compensation-Transition  and  Disclosure,""  which amends FASB
     Statement  No.  123,  Accounting  for  Stock-Based Compensation, to provide
     alternative  methods of transition for a voluntary change to the fair value
     based  method  of  accounting  for  stock-based  employee  compensation. In
     addition,  this  Statement  amends the disclosure requirements of Statement
     123  to  require prominent disclosures in both annual and interim financial
     statements  about  the  method  of  accounting  for  stock-based  employee
     compensation  and  the  effect  of the method used on reported results. The
     transition  guidance  and annual disclosure provisions of Statement 148 are
     effective  for  fiscal  years  ending after December 15, 2002, with earlier
     application  permitted  in  certain  circumstances.  The interim disclosure
     provisions  are  effective  for  financial  reports  containing  financial
     statements  for  interim  periods  beginning  after  December 15, 2002. The
     adoption of this statement did not have a material impact on the Company''s
     financial  position or results of operations as the Company has not elected
     to  change  to  the  fair  value based method of accounting for stock-based
     employee  compensation.

     In  May  2000,  the Emerging Issues Task Force (EITF) issued EITF Issue No.
     00-14,  Accounting  for  Certain  Sales  Incentives.  EITF  Issue No. 00-14
     addresses the recognition, measurement, and income


                                      F-11
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     statement  classification  for  sales  incentives that a vendor voluntarily
     offers  to  customers  (without  charge), which the customer can use in, or
     exercise  as  a  result of, a single exchange transaction. Sales incentives
     that  fall  within  the scope of EITF Issue No. 00-14 include offers that a
     customer  can  use  to  receive  a  reduction  in the price of a product or
     service  at  the  point  of  sale. The EITF changed the transition date for
     Issue 00-14, concluding that a company should apply this consensus no later
     than  the  company s annual or interim financial statements for the periods
     beginning after December 15, 2001. In June 2001, the EITF issued EITF Issue
     No.  00-25,  Vendor Income Statement Characterization of Consideration Paid
     to  a  Reseller  of  the Vendor s Products, effective for periods beginning
     after  December  15,  2001.  EITF  Issue  No.  00-25  addresses  whether
     consideration  from  a  vendor  to  a  reseller is (a) an adjustment of the
     selling prices of the vendor''s products and, therefore, should be deducted
     from  revenue  when  recognized in the vendor''s statement of operations or
     (b)  a cost incurred by the vendor for assets or services received from the
     reseller  and,  therefore,  should  be  included  as a cost or expense when
     recognized  in  the  vendor  s statement of operations. Upon application of
     these  EITFs,  financial  statements  for  prior  periods  presented  for
     comparative  purposes  should  be  reclassified  to  comply with the income
     statement  display  requirements  under these Issues. In September of 2001,
     the EITF issued EITF Issue No. 01-09, Accounting for Consideration Given by
     Vendor  to  a  Customer or a Reseller of the Vendor''s Products, which is a
     codification  of  EITF Issues No. 00-14, No. 00-25 and No. 00-22 Accounting
     for  Points  and  Certain Other Time-or Volume-Based Sales Incentive Offers
     and Offers for Free Products or Services to be Delivered in the Future. The
     Company  has  adopted  these  issues  in 2002 which did not have a material
     impact  on  the  Company''s  financial  statements.

     In  January 2003, the FASB issued Interpretation No. 46, ""Consolidation of
     Variable  Interest  Entities.""  Interpretation  46 changes the criteria by
     which  one  company  includes  another entity in its consolidated financial
     statements.  Previously,  the criteria were based on control through voting
     interest.  Interpretation  46  requires  a  variable  interest entity to be
     consolidated  by  a company if that company is subject to a majority of the
     risk of loss from the variable interest entity''s activities or entitled to
     receive a majority of the entity's residual returns or both. A company that
     consolidates  a  variable interest entity is called the primary beneficiary
     of  that  entity. The consolidation requirements of Interpretation 46 apply
     immediately  to  variable interest entities created after January 31, 2003.
     The  consolidation requirements apply to older entities in the first fiscal
     year  or  interim  period  beginning  after  June  15, 2003. Certain of the
     disclosure  requirements  apply  in  all  financial statements issued after
     January  31,  2003,  regardless  of  when  the variable interest entity was
     established.  The  Company  does not expect the adoption to have a material
     impact  to  the  Company's  financial  position  or  results of operations.

NOTE  2  -  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, 2002
     borrowings  under  this agreement were $917,666. 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".


                                      F-12
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE  3  -  INVENTORIES

     Inventories at December 31, 2002 consisted of the following:


       Raw materials                                 $ 241,456
       Work-in-process                                 483,778
       Demonstration inventory                         119,629
                                                     ----------
                                                       844,863
       Less reserve for inventory obsolescence and
         demonstration inventory refurbishing costs   (283,863)
                                                     ----------
                                                     $ 561,000
                                                     ==========


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

NOTE  4  -  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
     were  due  one  year  from the date of issuance. In March 2002, the Company
     entered into an agreement converting this note payable and related interest
     of  $25,890  into  275,890  shares  of  the  Company's  common stock of the
     Company.

NOTE  5  -  NOTES  PAYABLE  -  STOCKHOLDERS

     Certain  stockholders  loaned Optivision unsecured funds, which amounted to
     $3,309,375 at December 31, 2001. These loans bear interest at a rate of 10%
     per  annum.  In January 2002, certain of these notes aggregating $3,204,375
     were  exchanged  for  a  convertible  note.

NOTE  6  -  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,
     with  the right to convert the debt into common stock upon demand at a rate
     equal  to the lesser of $0.385 per share or 70% of the three lowest trading
     prices  over  the previous 20 days trading. On January 3, 2002, the Company
     received $500,000 pursuant to this debenture. In addition to the debenture,
     the  lender  was  issued  investment options to purchase, at the applicable
     conversion  price,  one  additional share of common stock for each share of
     common  stock  owned  upon  conversion  of  the  debenture  and warrants to
     purchase  up to 1,000,000 shares of common stock at an exercise price equal
     to  the  lesser  of $0.385 or the average of the lowest trading prices over
     the  previous  20 days trading. The debenture limits the ownership that can
     be  acquired through this transaction to be no greater than 4.9% on a fully
     diluted  basis.  Additional  warrants  to purchase up to a total of 100,000
     shares  of  common stock, at the same exercise price as the warrants issued
     to the lender, were issued as a finders fee. In accordance with EITF 00-27,
     the  Company  first  determined the value of the note and the fair value of
     the  detachable  warrants  issued  in  connection  with  this  convertible
     debenture. The proportionate value of the note and the warrants is $247,722
     and  $252,278,  respectively.  The  value  of  the  note was then allocated
     between the note and the preferential conversion feature, which amounted to
     $0 and $247,722, respectively. The combined total discount is $500,000, and
     will  be  amortized over the year life of the debenture. For the year ended
     December  31, 2002, $252,055 has been amortized to interest expense, due to
     the passage of time. None of the note balance under this agreement has been
     converted  into  common  stock  as  of  as  of  December  31,  2002.


                                      F-13
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     On January 14, 2002, the Company issued a convertible note in the principal
     amount  of  $3,547,917  to Mr. Michael A. Liccardo, former president, chief
     executive  officer  and chairman of the board of directors, in exchange for
     the  cancellation  of  certain  loans  aggregating  $3,204,375  and related
     accrued  interest of $343,542 that Mr. Liccardo had loaned to Optivision to
     meet  current  operating  expenses.  At any time, Mr. Liccardo may elect to
     convert  the  note  to  shares  of the Company''s common stock at $0.35 per
     share,  subject to adjustment related to the price of subsequent securities
     issuances  by  the  Company  to  third  parties. The convertible note bears
     interest  at  10%  per  annum. Since the Company's stock price exceeded the
     conversion  price  on the transaction date, there is an embedded beneficial
     conversion  feature  present  in the convertible note which has been valued
     separately.  As  of January 14, 2002, the intrinsic value of the beneficial
     conversion  feature  is  greater  than  the  proceeds  allocated  to  the
     convertible  note.  On January 14, 2002, the Company recorded a discount of
     $3,547,917.  This  discount  is  being  amortized  over  the  life  of  the
     convertible note. For the year ended December 31, 2002, $3,486,058 has been
     amortized  to  interest expense, due to the passage of time and conversions
     into  shares  of  common  stock.  During  the year ended December 31, 2002,
     principal  and  accrued  interest in the amount of $2,435,154 and $114,846,
     respectively,  were  converted  into  39,123,377  shares  of the Company''s
     common  stock.

     On  June 18, 2002, the Company issued and sold two 12% two-year Convertible
     Notes  in  the  aggregate  principal  amount  of  $450,000 and common stock
     purchase  warrants  exercisable  for  up to 135,000 shares of common stock,
     subject  to  adjustment  for,  among  other things, capital issuances below
     $0.13  per  share  and for stock splits, combination or reclassification of
     the  Company's  stock  to  Alpha  Capital Aktiengesellschaft and Stonstreet
     Limited  Partnership,  in  a  private  financing  transaction. Each note is
     convertible  at  the  holder's option at any time into shares of our common
     stock  at  the  lesser of a 30% discount to the average of the lowest three
     intraday  trading  prices  of  our  common  stock during the 20 trading day
     periods  ending  on  trading day prior to the date of conversion, or $0.385
     per  share. In accordance with EITF 00-27, the Company first determined the
     value  of  the note and the fair value of the detachable warrants issued in
     connection  with this convertible debenture. The proportionate value of the
     note  and  the warrants is $429,679 and $20,321, respectively. The value of
     the  note  was  then  allocated  between  the  note  and  the  preferential
     conversion  feature,  which  amounted to $0 and $429,679, respectively. The
     combined  total  discount  is $450,000, and will be amortized over the year
     life  of  the debenture. For the year ended December 31, 2002, $120,657 has
     been amortized to interest expense, due to the passage of time. None of the
     note  balance  under this agreement has been converted into common stock as
     of  as  of  December  31,  2002.


NOTE  7  -  OTHER  ACCRUED  EXPENSES

     Other accrued expenses at December 31, 2002 consisted of the following:


       Penalty for not registering shares issued in February 2002  $  237,600
       Penalty for not registering shares underlying
          convertible debentures                                      160,500
       Value of reset option provision in June 18, 2002 agreement   1,307,487
       Other                                                          154,412
                                                                   ----------

                                                                   $1,859,999
                                                                   ==========


                                      F-14
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE  8  -  ACCRUED  WARRANT  LIABILITY

     Under the terms of two of the convertible debentures issued on December 28,
     2001 and June 18, 2002 (see Note 6), and the terms of the private placement
     in February 2002, the Company issued detachable warrants to purchase shares
     of  common  stock  that had registration rights. As a result, in accordance
     with  the  guidelines  of  EITF  00-19,  the fair value of the warrants was
     initially  recorded  as  accrued  warranty  liability.  Furthermore,  the
     classification  of the warrants as a liability require variable accounting,
     with remeasurement of the fair value of the warrants at each balance sheet,
     with  any  adjustments  reflected  in  earnings.

     All  outstanding  warrants  were  remeasured at December 31, 2002 using the
     Black-Scholes option pricing model and the following assumptions: term of 2
     years,  a  risk-free  interest  rate  of  4.00%, a dividend yield of 0% and
     volatility  of  242%.  The  allocated liability related to the warrants was
     $47,076  at  December  31,  2002 and the Company has recorded an additional
     $1,055,504  as  a  other  income  for  the  year  ended  December 31, 2002.


NOTE  9  -  STOCKHOLDERS''  DEFICIT

     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.

     During  the  year  ended  December  31,  2002, the Company settled with its
     employees  for  unpaid  compensation  by issuing 3,207,180 shares of common
     stock  options  in  lieu  of  cash  in  the  amount  of  $1,328,933.

     In February 2002 the Company entered into financing agreements for the sale
     of 2,250,000 shares of its common stock. The stock was sold in units, which
     include  ten shares of common stock, subject to adjustment related to stock
     price  fluctuations,  and  one warrant, for $8.00 each. Each warrant allows
     the  holder  to  purchase  three  shares of common stock at $0.90 per share
     subject  to  such  customary  adjustment  for  stock splits, combination or
     reclassification  of  the  Company's  capital stock and the like. The total
     selling price of these units was $1,800,000 of which $970,019 was allocated
     to  the  common  stock  and  the  remaining  $829,981  was allocated to the
     detachable warrants. On June 18, 2002, financing agreements entered into in
     February 2002 were amended in connection with the June 18, 2002 convertible
     debenture,  whereby  the  Company issued an additional 2,062,500 to certain
     investors.  The  Company  has  recorded  as  financing  costs,  $288,750 in
     connection  with  the  issuance of these additional shares. The warrant was
     amended  to  reduce the exercise price to $0.13, subject to adjustment for,
     among  other  things, capital issuances below $0.13 per share and for stock
     splits,  combination  or  reclassification  of  the Company's stock and the
     like.  The  Company  has  recorded  a  charge  to  earnings  of  $13,731 in
     connection  with  the repricing of the warrant. No additional proceeds were
     received.

     In June 2002, the Company's Board of Directors adopted the 2002 Stock Plan.
     20,000,000  shares are authorized for issuance of which 8,847,000 have been
     granted  through  December  31,  2002.

     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.


                                      F-15
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE  10  -  COMMITMENTS  AND  CONTINGENCIES

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

     The  Company  leases office and manufacturing space, under a non-cancelable
     operating  lease,  which expired in December 2002. The Company is currently
     on  a  month  to  month  lease  for  this  office  space Rental expense was
     approximately  $1,249,000  and  $1,310,000 for the years ended December 31,
     2002  and  2001

     The  Company subleased a substantial portion of its leased facilities under
     an operating lease that expired February 2002. Sublease income for the year
     ended December 31, 2002 and 2001 was approximately $321,000 and $1,065,000,
     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 ended December 31, 2003 and 2004 are $520,000 and
     $130,000,  respectively.  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, 2002, the Company
     has accrued a provision for contract costs of $159,249 based on an audit by
     the  DCAA.

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

     Certain  government  contracts  were  assigned to ONI (a former division of
     Optivision)  as  part  of  a spin-off during 1998. After the government has
     approved  the  assignment  of  contracts  to ONI, Optivision as


                                      F-16
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     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, 2002 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.

NOTE 11 - STOCK OPTION PLANS AND WARRANTS

     Stock  Options
     --------------

     The  Company  has  three stock option plans: the 1997 Stock Plan (the "1997
     Plan"),  the 2000 Stock Plan (the "2000 Plan") and the 2002 Stock Plan (the
     "2002  Plan")(collectively,  the  ""Plans"").  The  1997 Plan has 3,993,482
     shares  authorized  for  issuance.  The  2000  Plan  has  5,500,000  shares
     authorized for issuance. The 2002 Plan has 20,000,000 shares authorized for
     issuance.  The  Plans  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. Options granted
     under  the  Plans  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:


                                                                     Weighted-
                                                           Stock      Average
                                                          Option     Exercise
                                                           Plan        Price
                                                        -----------  ---------

     Balance, December 31, 2000                                  -   $       -
         Assumed upon adoption of Optivision 1997 Plan   4,060,185   $    0.61
         Granted                                         3,785,300   $    1.12
         Exercised                                        (100,606)  $    0.44
         Canceled                                       (1,556,233)  $    0.76
                                                        -----------

     Balance, December 31, 2001                          6,188,646   $    0.88
         Granted                                         8,847,000   $    0.07
         Exercised                                        (386,388)  $    0.39
         Canceled                                          (27,789)  $    1.52
                                                        -----------

     Balance, December 31, 2002                         14,621,469   $    0.40
                                                        ===========

     Exercisable at December 31, 2002                   10,495,295   $    0.27
                                                        ===========


                                      F-17
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     The  following table summarizes information about stock options outstanding
     at  December  31,  2002:


                           Options Outstanding             Options Exercisable
                  -------------------------------------  -----------------------
                                Weighted
                                Average
                                Remaining    Weighted                  Weighted
     Range of                  Contractual    Average                   Average
     Exercise       Number        Life       Exercise       Number     Exercise
     Price        Outstanding  (in years)      Price     Exercisable     Price
     -----------  -----------  -----------  -----------  ------------  ---------

     0.00-$1.00   11,641,208          2.9   $     0.14     7,709,985   $   0.18
     1.01-$2.00    2,891,949          9.1         1.37     2,724,642       1.45
     3.00             87,500          8.0         3.00        59,856       3.00
     4.00                812          3.8         4.00           812       4.00

                  -----------  -----------  -----------  ------------  --------
                  14,621,469          4.2   $     0.40    10,495,295   $   0.27
                  ===========  ===========  ===========  ============  ========


     In  accordance with SFAS No. 123, the Company recognized $0 and $197,605 of
     expense  for  the  year  ended  December  31,  2002 and 2001, respectively,
     related  to  stock  options  granted  to  outside  consultants.

     The  Company  has  adopted  only the disclosure provisions of SFAS No. 123,
     "Accounting for Stock-Based Compensation." It applies Accounting Principles
     Bulletin  ("APB")  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
     Employees,"  and related interpretations in accounting for its Stock Option
     Plan  and does not recognize compensation expense for its Stock Option Plan
     other  than  for  restricted  stock  and  options  issued  to outside third
     parties. If the Company had elected to recognize compensation expense based
     upon  the  fair  value  at the grant date for awards under the Stock Option
     Plan  consistent  with  the  methodology  prescribed  by  SFAS No. 123, the
     Company's  net  loss  and  loss per share would be reduced to the pro forma
     amounts  indicated  below  for  the years ended December 31, 2002 and 2001:


                                                    2001          2001
                                                ------------  ------------

       Net loss
         As reported                            $(8,943,874)  $(5,465,946)
           Pro forma                            $(9,123,246)  $(5,577,729)

       Basic and diluted loss per common share
         As reported                            $     (0.26)  $     (0.57)
           Pro forma                            $     (0.26)  $     (0.57)


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

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

     Warrants
     --------


                                      F-18
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     The  following  table  summarizes information about warrants outstanding at
     December  31,  2002:


                         Warrants Outstanding           Warrants Exercisable
                 ------------------------------------  ----------------------
                               Weighted
                               Average
                               Remaining    Weighted                 Weighted
     Range of                 Contractual    Average                 Average
     Exercise      Number        Life       Exercise      Number     Exercise
     Price       Outstanding  (in years)     Price     Exercisable     Price
     ----------  -----------  -----------  ----------  ------------  ---------
     0.021        1,100,000          4.0   $    0.021     1,100,000  $   0.021
     0.0436         655,466          4.5   $   0.0436       655,466  $  0.0436
     0.13           810,000          4.1   $     0.13       810,000  $    0.13
     2.75         1,350,000          3.3   $     2.75     1,350,000  $    2.75

                 -----------  -----------  ----------  ------------  ---------
                  3,915,466          3.9   $     0.99     3,915,466  $    0.99
                 ===========  ===========  ==========  ============  =========

NOTE 12 - INCOME TAXES


     Deferred  income taxes reflect the net tax effects of temporary differences
     between  the  carrying  amounts  of  assets  and  liabilities for financial
     statement  purposes  and  the  amounts  used  for  income  tax  purposes.
     Significant components of the Company's deferred tax liabilities and assets
     as  of  December  31,  2002  are  as  follows:


     Deferred tax assets:
       Federal net operating loss                              $11,000,000
       Other                                                       400,000

                                                               ------------
     Total deferred tax assets                                  11,400,000

       Less valuation allowance                                (11,400,000)
                                                               ------------

                                                               $         -
                                                               ============


     The  valuation allowance of $11,400,000 includes an allowance of $6,214,000
     acquired  from  Optivision. The increase in the valuation allowance for the
     years  ended  December  31,  2002  and  2001 was $3,577,000 and $2,185,000,
     respectively.  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.


                                      F-19
<PAGE>
                       AMNIS SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     Net  operating  loss  carryforwards at December 31, 2002 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 2017. 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, 2002. Accordingly, a valuation allowance
     has  been  provided  for  the  entire  amount  related  thereto.

     The provision for income taxes are as follows:

     The  reconciliation  of  the  effective  income  tax  rate  to  the federal
     statutory  rate  for  the  years  ended  December  31,  2002 and 2001 is as
     follows:

                                                          2002     2001
                                                         -------  -------

       Federal income tax rate                           (34.0%)  (34.0%)
       State tax, net of federal benefit                  (6.0%)   (6.0%)
       Increase in valuation allowance                     40.0%    40.0%
                                                         -------  -------

       Effective income tax rate                            0.0%     0.0%
                                                         =======  =======

     The  income  tax  expense  for  the years ended December 31, 2002 and 2001,
     reflect  the  minimum  California  state  franchise  tax.


NOTE  13  -  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  the  years  ended  December  31,  2002  and  2001.

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


NOTE  14  -  SUBSEQUENT  EVENTS


     On  May  16, 2003 the Company closed on a $1 million Convertible Promissory
     note  funding.  As  of  May  12  in anticipation of the funding closing the
     company  had  rehired  10  employees  and  begun  rebuilding the company''s
     operations.

     On May __, 2003, the Company settled a reset option provision in connection
     with  the  private placement offering in February 2002, amended on June 18,
     2002  for  a  $910,120  convertible  debenture. This amount was recorded in
     accrued liabilities at December 31, 2002 in the accompanying balance sheet.


                                      F-20
<PAGE>