-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GP/cis190SIiSL9XuK3avg/vnAmp0yo6PSbCLNSDXoF/cnH2k0N9Z7dQEGm66gaF CImSS5JkiWCnv33p57dbFg== 0001015402-02-002841.txt : 20020816 0001015402-02-002841.hdr.sgml : 20020816 20020815173339 ACCESSION NUMBER: 0001015402-02-002841 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMNIS SYSTEMS INC CENTRAL INDEX KEY: 0001069389 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 330821967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29645 FILM NUMBER: 02740394 BUSINESS ADDRESS: STREET 1: 3450 HILLVIEW AVENUE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 6508550200 MAIL ADDRESS: STREET 1: 3450 HILLVIEW AVENUE CITY: PALO ALTO STATE: CA ZIP: 94304 FORMER COMPANY: FORMER CONFORMED NAME: GRAFFITI-X INC DATE OF NAME CHANGE: 20000114 10QSB/A 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A Amendment No. 2 (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 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. (Exact name of small business issuer as specified in its charter) Delaware 94-3402831 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 3450 Hillview Avenue, Palo Alto, California 94304 (Address of principal executive offices, including zip code) Issuer's telephone number, including area code: (650) 855-0200 Not applicable (Former name, former address and former fiscal year, if changed since last report) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of each of the issuer's classes of common equity as of May 3, 2002: 18,464,237 shares of Common Stock. Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No 1 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This information is contained on pages F-1 through F-9 of this report and is incorporated into this Item 1 by reference. In our management's opinion, all adjustments necessary for a fair presentation of the statements of the results for the interim period have been included. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS Management's discussion and analysis or plan of operation is provided as a supplement to the accompanying consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in financial condition and results of operations. Accordingly, the following discussion and analysis should be read in conjunction with our financial statements and the related notes included elsewhere in this report. INTRODUCTION Amnis Systems Inc., a Delaware consolidated corporation, makes hardware and software products for the creation, management and transmission of high-quality digital video over computer networks. Our products are distributed worldwide through a network of value added resellers, or VARs, system integrators and original equipment manufacturers, or OEMs. Our products are used in diverse applications such as interactive distance learning, corporate training, video content distribution, video surveillance and telemedicine. On April 16, 2001, we merged with Optivision, Inc., an operating company, in an exchange of common stock accounted for as an acquisition under the purchase method of accounting. As a result of the merger, Optivision became our wholly-owned subsidiary. The accompanying historical consolidated financial statements and notes for the first quarter of 2001 reflect only the financial results of Amnis Systems Inc., since the merger between Amnis Systems and Optivision did not take place until April 16, 2001. As a result, Amnis Systems' first quarter 2001 historical operating results and financial condition are not comparable to the first quarter 2002 because of the merger. Accordingly, in order to enhance comparability and make an analysis of the first quarter 2002 meaningful, the following discussion of results of operations and changes in financial condition and liquidity is based upon unaudited pro forma financial information for the first quarter of 2001 as if the merger had occurred on January 1, 2000. In order to maintain comparability and enhance clarity, goodwill amortization has been excluded from the comparison. Unaudited pro forma Consolidated Statements of Operations for each period are inserted at the beginning of each section as a reference for that discussion. 2 The unaudited pro forma comparisons of the Consolidated Statements of Operations have been derived from, and should be read in conjunction with, our historical financial statements, including the notes thereto. The unaudited pro forma comparisons of the Consolidated Statements of Operations are presented for informational purposes only and are not necessarily indicative of our financial position or results of operations that would have occurred had the merger been consummated as of the date indicated. In addition, the unaudited pro forma comparisons of the Consolidated Statements of Operations are not necessarily indicative of our future financial condition or operating results. CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to future events, the outcome of which is subject to certain risks, which could cause actual results to differ from those contained in the forward-looking statements, and which include those risks set forth herein and those risks identified in our other filings with the SEC. Words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify such forward-looking statements. The SEC encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. However, the inclusion of forward-looking statements should not be regarded as a representation by us, or any other person, that such forward-looking statements will be achieved. The forward-looking statements contained in this report are based on management's present expectations about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and we are under no obligation to (and expressly disclaims any such obligation to) update or alter the forward-looking statements, whether as a result of such changes, new information, future events or otherwise. In light of the foregoing, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report. 3
RESULTS OF OPERATIONS First Quarter of 2002 Compared to First Quarter 2001 UNAUDITED PRO FORMA COMPARISON OF THE CONSOLIDATED STATEMENTS OF OPERATIONS For the First Quarter Ended March 31, 2002 2001 ================================================================== SALES $ 246,071 $ 1,333,858 COST OF GOODS SOLD 287,496 803,192 - ------------------------------------------------------------------ Gross margin (41,425) 530,666 OPERATING EXPENSES Research and development 175,359 666,017 Sales and marketing 440,572 742,565 General and administrative 721,313 526,428 - ------------------------------------------------------------------ 1,337,244 1,935,010 - ------------------------------------------------------------------ Loss from operations (1,378,669) (1,404,344) OTHER INCOME (EXPENSE) Interest expense, net (769,457) (183,058) Other, net 40,483 42,489 - ------------------------------------------------------------------ Total other (expense) (728,974) (140,569) - ------------------------------------------------------------------ NET LOSS $(2,107,643) $(1,544,913) ================================================================== BASIC AND DILUTIVE LOSS PER SHARE $ (0.14) $ (0.14) ==================================================================
Revenues for the three months ended March 31, 2002 were $246,071, a decrease of approximately 81.5% over revenues of $1,333,858 for the three months ended March 31, 2001. Revenues for this quarter were impacted by delayed decision-making late in our sales cycle that postponed several large deals beyond our first quarter. Our prior two quarters were $659,492 and $477,354 for the three-month periods ending December 31, 2001 and September 30, 2001, respectively. Our pipeline of new business opportunities is now growing and bringing us strong optimism about our long-term future in spite of the tough short-term macro economic environment. (Historical revenues were $0.0 for the three months ended March 31, 2001). As a result of strong cost controls, the net loss for the three months ended March 31, 2002 of $2,107,643, after excluding the non cash amortization of the discount on a note payable of $659,036, is a decrease of 6.2% over the prior year first quarter loss of $1,544,913 in spite of a 81% drop in revenue. (The historical net loss of $25,100 for the prior year first quarter was from general and administrative expenses). 4 Cost of goods sold decreased $515,696, from $803,192 to $287,496 for the three months ended March 31, 2002, yet we experienced a negative gross margin since revenues, were not sufficient to cover our manufacturing overhead. (Historical prior year first quarter cost of goods sold was $0.0). Research and development expenses were $175,359 for the three months ended March 31, 2002, as compared to $666,017 for the three months ended March 31, 2001, a decrease of 73.7%. This decrease is in line with cost reductions necessary as a result of the economic slowdown and our revenue slowdown. We do expect modest increases in future quarters to support development of the new network digital video products. (Historical research and development expenses for the first quarter 2001 were $0.0). Sales and marketing expenses for the three months ended March 31, 2002 were $440,572, as compared to $742,565 for the three months ended March 31, 2001, a decrease of 40.7%. Again, this decrease is consistent with cost reductions necessary as a result of the economic slowdown and our revenue slowdown. However, we do expect quarterly expenses to increase in light of our stronger emphasis on trade show activity and increases in our sales organization. (Historical sales and marketing expenses for the first quarter 2001 were $0.0). General and administrative costs were $721,313 for the three months ended March 31, 2002, as compared to $526,428 for the three months ended March 31, 2001, an increase of $194,885. During the quarter we recorded $277,751 of non-cash consulting contracts for services covering strategic planning, mergers and acquisition activity and corporate financing. Cash expenses decreased $82,866, or 15%, as a result of decreased expenditures necessitated by the economic and revenue slowdown. (Historical general and administrative expenses for the three months ended March 31, 2001 were $25,100). Interest and other expense, net was $769,457 for the three months ended March 31, 2002 as compared to $183,058 for the three months ended March 31, 2001. This increase includes the non cash amortization of the discount on a note payable of $659,036. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2002, we had cash and cash equivalents of $608,890 compared to $48,467 at December 31, 2001. During the three months ended March 31, 2002, our negative working capital position improved by over $3 million primarily due to the receipt of proceeds from the issuance of the first tranche of $500,000 in principal amount of convertible debentures from Bristol Investment Fund, Ltd., the receipt of proceeds from a $1.8 million unit financing in February 2002, the reduction of past due and accrued salary due employees of approximately $980,000 through the issuance of stock options, and the conversion of a $250,000 note payable together with accrued interest thereon into shares of our common stock. In June 2002, our balance sheet was further strengthened with the receipt of proceeds from the issuance of $450,000 in principal amount of convertible notes and the elimination of approximately $3.2 million in debt with the final payment under a work out agreement with the creditors of Optivision which resulted in the forgiveness of approximately $1.1 million of debt, the conversion of $2,050,000 in principal amount of a convertible note by Mr. Liccardo, our president, chief executive officer and chairman of the board, into shares of our common stock. 5 In December 2001, pursuant to a financing agreement between us and Bristol Investment Fund, Ltd. for a total of $1,000,000 of convertible debentures and up to $1,385,000 of investment options and warrants, we received a first tranche of financing through the issuance of a $500,000 convertible debenture. Bristol Investment Fund, Ltd. is committed to provide us with the second tranche of financing in the amount of $500,000 through the issuance of a convertible debenture within ten business days after the effective date of a registration statement covering the resale of the shares issuable upon conversion of the debentures and exercise of the related warrants and investment options. Receipt of this additional convertible debenture financing and financing through the exercise of the related investment options and warrants will be critical for us to continue operations through 2002. We had continuing operating losses of $3,307,829, excluding goodwill amortization, and $1,378,669 for the year ended December 31, 2001 and the first quarter of 2002, respectively. Although we currently expect to break even in 2004, we expect to incur operating losses over the next two years of between $4 million and $6 million in total. So, in order to sustain our operations, finance our growth and achieve our strategic objectives until then, we currently estimate that we will need additional funding of between $4 million and $6 million in total. Management has implemented measures to increase cash flows through increases in revenue and cost-cutting measures and is actively pursuing additional sources of funding. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and the downturn in the U.S. stock and debt markets could make it more difficult for us to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations. 6 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: August 15, 2002 AMNIS SYSTEMS INC. By: /s/ Lawrence L. Bartlett ------------------------------------------ Lawrence L. Bartlett Vice President, Secretary and Chief Financial Officer 7 INDEX TO FINANCIAL STATEMENTS Unaudited Condensed Consolidated Balance Sheet as of March 31, 2002 and December 31, 2001 . . . . . . . . . . . . . . F-1 Unaudited Condensed Consolidated Statement of Operations for the three-month periods ended March 31, 2002 and March 31, 2001 . . F-2 Unaudited Condensed Consolidated Statement of Cash Flows for the three-month periods ended March 31, 2002 and March 31, 2001 . . F-3 Notes to Unaudited Consolidated Financial Statements . . . . . . . F-4 to F-9 8
AMNIS SYSTEMS INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) ================================================================================================================================== March 31, 2002 Dec 31, 2001 - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash $ 608,890 $ 48,467 Accounts receivable, net of allowance for doubtful accounts of $236,000 for 2002 and 2001, respectively 38,879 371,517 Note Receivable 500,000 Inventories 656,232 624,056 Prepaid expenses and other 308,315 82,919 - ---------------------------------------------------------------------------------------------------------------------------------- Total current assets 1,612,316 1,626,959 - ---------------------------------------------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Machinery and equipment 1,894,221 1,919,634 Demonstration equipment 456,648 452,188 Furniture and fixtures 494,700 498,796 Leasehold improvements 351,111 351,111 - ---------------------------------------------------------------------------------------------------------------------------------- 3,196,680 3,221,729 Less: Accumulated depreciation and amortization (3,052,388) (3,069,937) - ---------------------------------------------------------------------------------------------------------------------------------- Property and equipment, net 144,292 151,792 - ---------------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS 84,890 84,890 - ---------------------------------------------------------------------------------------------------------------------------------- $ 1,841,498 $ 1,863,641 ================================================================================================================================== LIABILITIES AND STOCKHOLDERS' (DEFICIT) CURRENT LIABILITIES: Financing obligations collateralized by accounts receivable $ 576,832 $ 1,029,283 Accounts payable - moratorium 1,461,500 1,561,500 Accounts payable - other 347,092 932,866 Accrued Salaries 112,220 766,286 Accrued Vacation 200,427 274,833 Accrued Interest Payable 87,364 381,104 Notes Payable 250,000 Shareholders' notes Payable 105,000 3,309,375 Convertible notes payable 3,547,917 Discount on convertible note payable (1,862,657) Deferred rent 80,486 108,892 Deferred revenue 39,163 59,095 Other Accrued Expenses 256,990 302,237 - ---------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 4,952,334 8,975,471 LONG-TERM LIABILITIES: Sublease deposits 72,800 72,800 Convertible note payable 500,000 500,000 Discount on convertible note payable (267,045) (305,195) - ---------------------------------------------------------------------------------------------------------------------------------- Total Liabilities 5,258,089 9,243,076 - ---------------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' (DEFICIT): Preferred stock, 20,000,000 authorized; none outstanding in March, 2002 and December, 2001 Common stock, $0.0001 par value: Authorized - 100,000,000 shares in Mar. 2002 and Dec. 2001, respectively Issued and outstanding - 17,960,414 and 12,947,082 for Mar 2002 and Dec 2001, respectively 1,796 1,295 Additional Paid-in Capital 20,486,915 14,416,929 Accumulated deficit (23,905,302) (21,797,659) Total stockholders' deficit (3,416,591) (7,379,435) - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's deficit $ 1,841,498 $ 1,863,641 ==================================================================================================================================
F-1
AMNIS SYSTEMS INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) =============================================================== For the First Quarter Ended March 31, 2002 2001 - --------------------------------------------------------------- SALES $ 246,071 $ COST OF GOODS SOLD 287,496 - --------------------------------------------------------------- Gross margin (41,425) OPERATING EXPENSES Research and development 175,359 Sales and marketing 440,572 General and administrative 721,313 25,100 - --------------------------------------------------------------- 1,337,244 25,100 - --------------------------------------------------------------- Loss from operations (1,378,669) (25,100) OTHER INCOME (EXPENSE) Interest expense, net (769,457) Other, net 42,083 - --------------------------------------------------------------- Total other (expense) (727,374) - --------------------------------------------------------------- Income Tax (1,600) NET LOSS $(2,107,643) $(25,100) =============================================================== BASIC AND DILUTIVE LOSS PER SHARE $ (0.14) $ 0.00 ===============================================================
F-2
AMNIS SYSTEMS INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) ==================================================================================================== For the Quarter Ended March 31, 2002 2001 - ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,107,643) $(25,100) Adjustments to reconcile net loss to net cash used in operating activities: Stock options for services 277,751 Interest expense exchanged for stock 25,890 Interest expense exchanged for debt 343,542 Employee salaries exchanged for stock 325,429 Depreciation and amortization 14,599 Amortization of discount on note payable 659,036 Loss on disposal of property and equipment 1,627 Provision for doubtful accounts Provision for excess and obsolete inventories 12,254 Decrease (increase) in accounts receivable 332,638 Increase in inventories (44,430) Decrease (increase) in prepaid expenses and other assets (225,396) Decrease in debt issue costs Decrease in accounts payable moratorium (100,000) Increase (decrease) in accounts payable (585,775) 25,100 Increase (decrease) in accrued salaries Decrease in accrued vacation (74,406) Increase (decrease) in accrued interest (293,740) Increase in reserve for sales adjustment Decrease in deferred rent (28,406) Decrease in deferred revenue (19,932) Decrease in other accrued liabilities (45,247) Net cash used in operating activities (1,532,209) - ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (8,726) - ---------------------------------------------------------------------------------------------------- Net cash used in investing activities (8,726) - ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from stockholders Proceeds from financing obligations collateralized by accounts receivable 763,280 Payments on financing obligations collateralized by accounts receivable (1,215,731) Proceeds from issuance of common stock 2,236,265 Costs incurred to secure capital (182,456) Proceeds from notes receivable 500,000 - ---------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 2,101,358 - ---------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH 560,423 CASH AND CASH EQUIVALENTS, beginning of year 48,467 - ---------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of period $ 608,890 $ - ==================================================================================================== NON CASH INVESTING AND FINANCING ACTIVITIES: Stock options issued for services $ 277,751 Accrued salaries exchanged for common stock $ 979,495 Debt and accrued interest exchanged for common stock $ 275,890 Convertible note payable and interest in exchange for note payable $ 3,547,917 Discount on convertible note payable $ 2,483,542 ==================================================================================================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ 2,400 Cash paid for interest $ 101,147 ====================================================================================================
F-3 AMNIS SYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ The accompanying unaudited interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. All adjustments for the first quarter ended March 31, 2002 were of a recurring nature. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows for the Company, in conformity with accounting principles generally accepted in the United States of America. The Company has filed audited financial statements that include all information and footnotes necessary for such a presentation of the financial position, results of operations and cash flows for the fiscal years ended December 31, 2001 and 2000, with the Securities and Exchange Commission. It is suggested that the accompanying unaudited interim consolidated financial statements be read in conjunction with the aforementioned audited consolidated financial statements. The unaudited interim consolidated financial statements contain all normal and recurring entries. The results of operations for the interim period ended March 31, 2002 are not necessarily indicative of the results to be expected for the full year. NOTE 1 - DESCRIPTION OF COMPANY: Amnis Systems Inc., a Delaware corporation, and its whole owned subsidiary, Optivision, Inc. ("Company" combined) 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. NOTE 2 - GOING CONCERN: We are subject to a number of business risks affecting companies at a similar stage of development, including competition from companies with greater resources and alternative technologies, the ability to obtain financing to fund future operations, dependence on new product introductions in a rapidly changing technological environment, dependence on a limited number of customers, dependence on key employees and the ability to attract and retain additional qualified personnel. F-4 AMNIS SYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The stockholders' equity of the Company, after the April 16th, 2001 business combination with Optivision, has resulted in a substantial deficit that is compounded by its current liabilities exceeding its current assets by $3,340,018 at March 31, 2002 and negative cash flow from operating activities of $1,532,209 for the quarter ended March 31, 2002. These factors raise substantial doubt about the Company's ability to continue as a going concern. There is no assurance that the Company will be able to achieve successful operations, obtain sufficient financing or obtain a line of credit. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. Principles of Consolidation --------------------------- The financial statements include the accounts of Amnis Systems Inc. and its wholly-owned subsidiary Optivision, Inc. from the date of acquisition, April 16, 2001. All significant intercompany accounts and transactions have been eliminated in consolidation. b. Risks due to Concentration of Significant Customers --------------------------------------------------- Historically, a substantial portion of our revenues has come from large purchases by a small number of customers. If we lose one or more of our key customers or experience a delay or cancellation of a significant order or a decrease in the level of purchases from any of our key customers, our net revenues could decline and our operating results and business could be harmed. In addition, our net revenues could decline and our operating results and business could be harmed if we experience any difficulty in collecting amounts due from one or more of our key customers. During 2001, our top four customers accounted for 52% of our net revenues. Additionally, as of December 31, 2001, approximately 44% of our accounts receivable were concentrated with five customers. During the three months ended March 31, 2002, our top five customers accounted for 58% of our net revenues. As of March 31, 2002, approximately 71% of our accounts receivable were concentrated with seven of our customers. c. Inventories ----------- Inventories are stated at the lower of cost (first-in, first-out) or market. Provision has been made to reduce obsolete inventories to their net realizable value. Inventories contain components and assemblies in excess of the Company's current estimated requirements and these are reserved for at March 31, 2002. Due to competitive and market pressures, it is reasonably possible that additional provisions could be required in the future. F-5 AMNIS SYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ Inventories consist of the following at March 31, 2002: Raw Materials $ 262,067 Work-in-process 499,339 Demonstration Inventory 118,905 ---------------------------------------------------------------- 880,311 Reserve for inventory obsolescence and demonstration inventory refurbishing costs (224,079) ---------------------------------------------------------------- $656,232 ================================================================ 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 - ACCOUNTS PAYABLE - MORATORIUM: On January 30, 2002, we successfully negotiated a work-out agreement plan with the creditors of Optivision Inc., under which the Company will pay the creditors of Optivision Inc. $0.35 for every $1.00 owed on debt listed on the balance sheet as Accounts Payable-moratorium. In accordance with the work-out agreement, the debt was settled in June 2002. NOTE 5 - CONVERTIBLE NOTES PAYABLE: On January 14 2002, the Company issued a convertible note in the principal amount of $3,547,917 to Mr. Michael A. Liccardo, president, chief executive officer, and chairman of the board of directors, in exchange for the cancellation of certain loans aggregating $3,204,375 and related accrued interest of $343,542 that Mr. Liccardo had loaned to Optivision Inc. to meet 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. F-6 AMNIS SYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ The convertible note bears interest at 10% per annum. Since the Company's stock price exceeded the conversion price on the transaction date, there is an embedded beneficial conversion feature present in the convertible note which has been valued separately. As of January 14, 2002, the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible note. On January 14, 2002, the Company recorded a discount of $2,483,542. This discount is being amortized from the date of issuance of the convertible note through the stated redemption date. The carrying value of this debenture approximates its fair value. NOTE 6 - LOSS PER SHARE: The basic loss per share was calculated based on a weighted average number of shares outstanding of 15,397,123 and 13,566,602 at March 31, 2002 and 2001, respectively. Since we have a loss for all periods presented, net loss per share on a diluted basis is equivalent to basic net loss per share because the effect of converting stock options, warrants, convertible debt and other common stock equivalents would be anti-dilutive. NOTE 7 - FINANCING: Between February 14, 2002 and February 21, 2002 the Company entered into financing agreements for the sale of 2,250,000 shares of its common stock. The stock was sold in units, which include ten shares of common stock, subject to adjustment related to stock price fluctuations, and one warrant, for $8.00 each. Each warrant allows the holder to purchase three shares of common stock at $0.90 per share subject to such customary adjustment for stock splits, combination or reclassification of the Company's capital stock and the like. The total selling price of these units was $1,800,000. In March 2002, the Company issued and sold to a corporate investor 275,890 shares of its common stock at $1.00 per share in exchange for the cancellation of certain loans that the investor had made to the Company (including all accrued interest thereon). NOTE 8 - OTHER CAPITAL TRANSACTIONS: In March 2002, the Company settled with its employees for unpaid compensation by issuing additional stock options in lieu of cash in the amount of $979,495. F-7 AMNIS SYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ In February 2002, the Company issued 10,000 shares of its common stock to a corporate service provider in exchange for certain services to be rendered to the Company over a three month period. NOTE 9 - SUBSEQUENT EVENTS: In May 2002, the Company issued 250,000 shares of its common stock to a corporate service provider in exchange for certain consulting services to be rendered to the Company over a four month period. On June 17, 2002, our Board of Directors adopted the 2002 Stock Plan. 20,000,000 shares are authorized for issuance of which none have been granted through June 17, 2002. On June 18, 2002, two of the financing agreements entered into in February 2002 were amended. The number of shares per unit has increased to 21 and may be further increased by an amount as defined in the agreement. The warrant was amended to reduce the exercise price to $0.13, subject to adjustment for, among other things, capital issuances below $0.13 per share and for stock splits, combination or reclassification of the Company's capital stock and the like. No additional proceeds were received. On June 18, 2002, Mr. Liccardo converted $2,050,000 in principal of the convertible note issued on January 14, 2002 and, in connection therewith, received 26,623,377 shares of common stock. The remaining principal and accrued interest was transferred to a new convertible note as of this date. The note provides that Mr. Liccardo may, at any time, elect to convert the outstanding principal of $1,612,763 of the convertible note and accrued interest thereon into a number of shares of our common stock determined by dividing the outstanding principal and interest on the note by $0.35. The $0.35 conversion price is subject to adjustment to a lower conversion price through January 14, 2003, and is also subject to customary adjustment in the event of stock splits, dividends, recapitalizations and the like. The convertible note bears interest at 10% per annum. Since the Company's stock price exceeded the conversion price on the transaction date, there is an embedded beneficial conversion feature present in the convertible note which has been valued separately. As of June 18,2002, the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible note. On June 18,2002 the Company recorded a discount of $882,276. This discount is being amortized from the date of issuance of the convertible note through the stated redemption date. As a result of the partial conversion $825,645 of the unamortized portion of the discount on convertible note payable was written-off to additional paid in capital. The exchange of the note resulted in a loss on extinguishment of debt of $73,610, and the remaining unamortized portion of the discount on convertible note payable of $603,292 related to the original note was written-off to additional paid in capital. On June 18, 2002, the Company issued and sold two 12% two-year convertible notes in the aggregate principal 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 capital stock and the like. Since there are multiple components of the debentures, value was added to each component (warrants and debenture) based on their respective value. A discount on the debenture was calculated in two parts; first, the beneficial conversion feature on the debenture was valued as the difference between the purchase price of the conversion and the current trading price of the stock. Secondly, the warrants were valued using the Black Scholes Model. The combined total discount of $249,528 will be amortized over the two-year life of the debentures. On June 25, 2002, the Company amended its certificate of incorporation to increase the total number of shares authorized to 420,000,000; 400,000,000 designated as common stock with par value of $0.0001 and 20,000,000 designated as preferred stock with par value of $0.0001. As of the end of July, the Company has been unable to pay its lease obligations, due to the departure of its sublessee, which now totals approximately $200,000. The landlord has agreed to meet with the Company to negotiate lease renewal and payment of past due amounts. Subsequent to March 2002, the Company settled with its employees for unpaid compensation by issuing additional stock options in lieu of cash in the amount of $274,556. From April 1, 2002 through August 5, 2002 the Company issued 179,879 shares of common stock to various service providers in exchange for services valued at $32,756 to be rendered over varying contract lengths. In July 2002, the Company issued 100,000 of its common stock to a corporate service provider in exchange for certain consulting services to be rendered to the Company. On August 8, 2002, pursuant to the Warrant Agreement with Bristol Investment Fund, Ltd. dated December 28, 2001, the Company reduced the exercise price of the warrant shares to $0.03436 per share and increased the number of warrant shares purchasable at such exercise price by 604,969. F-8 AMNIS SYSTEMS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ NOTE 10 - BUSINESS COMBINATION: On April 16, 2001, we effected a business combination with Optivision, Inc. (Optivision) by exchanging 4,459,063 shares of our common stock for all of the common stock of Optivision. The principal business of Optivision is making hardware and software products for the creation, management and transmission of compressed high-quality video over broadband computer networks. The purchase price of $12,221,884 was determined by using a 5 day range of the average of the Company stock price of $2.74 per share. The combination has been accounted for under the purchase method of accounting and accordingly, the accompanying financial statements include the results of operations of Optivision subsequent to April 16, 2001. NOTE 11 - RESTATEMENT OF FINANCIAL STATEMENTS: The unaudited interim consolidated financial statements have been restated as a result of the Company's determination that it did not meet all of the criteria under Accounting Principles Board Opinion No. 16 "Business Combinations" for a pooling of interests. The information below shows the results included in these financial statements and those previously reported under the pooling of interests method:
Purchase Pooling of Method Interest For the quarter ended March 31, 2002: Net Sales $ 246,071 $ 246,071 Net Loss $(2,107,643) $(2,107,643) Basic and Dilutive Loss per Share $ (0.14) $ (0.14) ======================================================================== For the quarter ended March 31, 2001: Net Sales $ - $ 1,333,858 Net Loss $ (25,100) $(1,544,913) Basic and Dilutive Loss per Share $ 0.00 $ (0.23) ========================================================================
F-9 EX-99.1 3 doc2.txt Exhibit 99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael A. Liccardo, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that this Quarterly Report of Amnis Systems Inc. on Form 10-QSB/A for the quarterly period ended March 31, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-QSB/A fairly presents in all material respects the financial condition and results of operations of Amnis Systems Inc. Date: August 15, 2002 /s/ Michael A. Liccardo - ------------------------ Michael A. Liccardo President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) I, Lawrence L. Bartlett, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that this Quarterly Report of Amnis Systems Inc. on Form 10-QSB/A for the quarterly period ended March 31, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-QSB/A fairly presents in all material respects the financial condition and results of operations of Amnis Systems Inc. Date: August 15, 2002 /s/ Lawrence L. Bartlett - ------------------------- Lawrence L. Bartlett Chief Financial Officer, Vice President and Secretary (Principal Financial Officer) This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Amnis Systems Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 1 -----END PRIVACY-ENHANCED MESSAGE-----