UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [xx] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 Commission file Number: 000-29645 AMNIS SYSTEMS INC. (FORMERLY GRAFFITI-X, INC.) (Exact name of small business issuer as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 33-0821967 (I.R.S. Employer Identification Number) 619 Serrano Lane Chula Vista, California 91910 (Address of principal executive offices) (604)681-9588 (Issuer's telephone number) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 9,310,000 common shares as at September 30, 2000 Transitional Small Business Disclosure Format (check one): Yes [_] No [X] AMNIS SYSTEMS INC. (formerly Graffiti-X, Inc.) INDEX PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 Consolidated Statements of Operations for the three and nine month periods ended September 30, 1999 and September 30, 2000 Consolidated Statements of Cash Flows for the nine month period Ended September 30, 1999 and September 30, 2000 Consolidated Statements of Changes in Stockholders' Equity Notes to Consolidated Financial Statements Item 2 Plan of Operation PART II. OTHER INFORMATION Item 1 Legal Proceedings Item 2 Changes in Securities Item 3 Defaults Upon Senior Securities Item 4 Submission of Matters to a Vote of Security Holders Item 5 Other Information Item 6 Exhibits and Reports on Form 8K SIGNATURES 2 AMNIS SYSTEMS INC. (FORMERLY GRAFFITI-X, INC.) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED - PREPARED BY MANAGEMENT) SEPTEMBER 30, 2000 Robert J. Bliss, C.P.A. 289 Church Avenue Chula Vista, CA 91910 FAX (619)585-7597 Phone (619)585-7595 Independent Auditor's Report The Board Of Directors AMNIS Systems, Inc. I have compiled the accompanying balance sheet of AMNIS Systems, Inc. (formerly Graffiti-X, Inc.) as of September 30, 1999 and 2000 and the related statements of operations, changes in stockholders' equity and cash flows for three and nine months ended September 30, 1999 and September 30, 2000, in accordance with standards established by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. I have not audited or reviewed the accompanying statements and accordingly do not express an opinion or any other form of assurance on them. December 1, 2000 AMNIS Systems, Inc (formerly Graffiti-X, Inc.) BALANCE SHEET September 30 December 31 2000 1999 ------------ ----------- ASSETS Cash $ 100 $ 3,697 Inventory 240 976 ------- ------- TOTAL ASSETS $ 340 $ 4,673 LIABILITIES Accounts payable 0 0 TOTAL LIABILITIES 0 0 ------- ------- STOCKHOLDERS' EQUITY Common Stock, &.0001 par value, 40,000,000 shares authorized; 9,310,000 issued and outstanding 931 931 Additional paid-in capital 5,872 5,872 Accumulated deficit (6,463) (2,130) ------- ------- TOTAL STOCKHOLDERS' EQUITY 340 4,673 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 340 $ 4,673 ------- ------- See Accountant's Compilation Report and Notes. AMNIS SYSTEMS, INC. (formerly Graffiti-S, Inc.) STATEMENT OF INCOME Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Sales 0 0 0 0 Cost of sales 0 0 0 0 Gross Profit 0 0 0 0 Operating Expenses General and Administrative 1,037 30 4,333 768 Total Operating Expenses 1,037 30 4,333 768 ---------- ---------- ---------- ---------- Net Income (loss) (1,037) (30) (4,333) (768) Income Taxes (Note C) 0 0 0 0 Net Income (1,037) (30) (4,333) (768) Earnings per share (.00011) $ (.00000) (.00047) (.00013) Weighted Average 9,310,000 9,310,000 9,310,000 5,565,555 See Accountant's Compilation Report and Notes. AMNIS SYSTEMS, INC. (formerly Graffiti-X, Inc.) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY September 30, 2000 Common Stock Additional ------------ Paid-In Accumulated Shares Amount Capital Deficit ----------- ------ ----------- ----------- Beginning Balance July 29, 1998 $ 0 $ 0 $ 0 Issuance of Common Stock for expenses And inventory paid On August 4, 1998 at $0.0015 per share 1,000,000 $ 100 $ 1,392 Issuance of Common Stock for cash on Sept. 20, 1998 at $0.01 per share 385,000 39 3,811 Net income (loss) December 31, 1998 $ (761) ----------- ------ ------- ------- Balance 12/31/98 1,385,000 $ 139 $ 5,203 $ (761) Stock split: Six for One May 10, 1999 6,925,000 692 (692) Issuance of Common Stock for merchandise On July 1, 1999 at $0.0015 per share 1,000,000 100 1,361 Net income (loss) December 31, 1999 (1,369) ----------- ------ ------- ------- Balance on December 31, 1999 9,310,000 $ 931 $ 5,872 $(2,130) Net income (loss) for Sept 30, 2000 (4,333) Balance 9/30/2000 9,310,000 $ 931 $ 5,872 $(6,463) See Accountant's Compilation Report and Notes. AMNIS SYSTEMS, INC. (formerly Graffiti-X, Inc.) STATEMENT OF CASH FLOWS For the nine months ended September 30, 2000 1999 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(4,333) $ (768) Adjustments to reconcile net income To net cash used in operating activities: Use of Inventory 736 678 ------- ------- NET CASH USED IN OPERATING ACTIVITIES (3,597) (90) CASH FLOWS FROM INVESTINF ACTIVITIES 0 0 CASH FLOWS FROM FINANCING ACITIVITIES 0 0 PROCEEDS FROM ISSUANCE OF COMMON STOCK 0 0 NET INCREASE (DECREASE) IN CASH (3,597) (90) CASH-BEGINNING 3,697 3,817 ------- ------- CASH-ENDING $ 100 $ 3,727 See Accountant's Compilation Report and Notes AMNIS SYSTEMS, INC. (formerly Graffiti-X, Inc.) NOTES TO FINANCIAL STATEMENTS A. Organization and Summary of Significant Accounting Policies: Organization AMNIS Systems, Inc, (The Company) was incorporated under the laws of the State of Delaware on July 29, 1998. The company was formed to manufacture and sell two chemical products designed to remove graffiti from a variety of surfaces. The Company has not engaged in any significant operations since inception other than product demonstration, the search for a manufacturing facility, corporate maintenance activities, acquisition of capital, and preparation for filing of its Registration Statement Form 10-SB. No operating revenues have been realized by the Company since inception. The Company anticipates incurring increased expenses in the current year as a result of costs associated with registration under the Securities Exchange Act of 1934. However the Company also expects to generate its first revenues from sales before August 31, 2000. The Company's marketing efforts indicate that it should be able to sell its products at a price that is approximately 400% of manufacturing cost. Management therefore expects that it will be able to offset the higher operating cost associated with registration under the Securities Exchange Act with profits from product sales. Management expects sales to begin in the third quarter and increase in the fourth quarter of the year 2000. 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, disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all investments with a maturity of three months or less to be cash equivalents. AMNIS Systems, Inc. (formerly Graffiti-X, Inc.) NOTES TO FINANCIAL STATEMENTS December 31, 1999 Earning Per Share Earnings per share is provided in accordance with Accounting Principles board opinion No. 15 (APB No. 15) "Earnings Per Share". Due to the Company's simple capital structure, only one earnings per share calculation is presented. Earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Income Taxes Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. 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 not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. No deferred taxes have been recorded as an asset or liability. B. Income Tax Expense: The Company's provision for income taxes for the nine months ended September 30, 1999 and 2000 is $0. Due to the Company's operating loss, there is no tax expense recognized for 1999 or 2000. C. Stockholders' Equity: The Company is authorized to issue 40,000,000 shares of common stock, par value $0.0001 per share, of which 9,310,000 shares are issued and outstanding. On August 4, 1998 the company issued 950,000 shares of common stock to its President, Amin Hassan, in exchange for the rights to formulations of the Graffiti XL products and an inventory of chemicals for the manufacture of these products costing $1,367. Also on that date the Company issued 50,000 AMNIS Systems, Inc. (formerly Graffiti-X, Inc.) NOTES TO FINANCIAL STATEMENTS December 31, 1999 shares of common stock to Daniel Masters in exchange for his services in incorporating the Company. On August 4, 1998 the Company filed a Form-D with the U.S. Securities and Exchange Commission. Between August 4, 1998 and September 30, 1998 the Company sold 385,000 shares of common stock at $0.00 per share to 37 individuals for a total proceeds of $3,850. The offers and sales were made pursuant to Rule 504 of Regulation D under the Securities Act of 1933 as amended. On May 10, 1999 the shareholders of the Company agreed to a stock split on the basis of six new shares for one old share. Therefore, as of that date the Company had 8,310,000 shares for one old share. Therefore, as of that date the Company had 8,310,000 shares of common stock issued and outstanding. On July 1, 1999 the Company issued 1,000,000 shares of common stock to its President, Amin Hassan, in exchange for an inventory of chemicals used in the manufacture of Graffiti XL products costing $1,461. Consequently, at December 31, 1999 the Company had 9,310,000 shares of common stock issued and outstanding. D. Need for Additional Financing The company believes that its existing capital will be sufficient to meet the Company's cash needs through the inception of manufacturing and sales. The Company believes that profits from sales will generate sufficient cash for its operating needs by the end of the third quarter, and the Company believes it has sufficient resources to see it through to that time and beyond if necessary. The Company therefore does not foresee the need for additional financing in the year ahead. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Liquidity and Capital Resources - ------------------------------- The Company is in the development stage. The Company's capital consists of chemicals supplied by the Company's founder and President, Amin Hassan and funds provided by investors. The opening chemical inventory had a cost basis to Mr. Hassan (and therefore to the Company) of $1,367. Mr Hassan subsequently contributed an additional chemical inventory which had a cost basis to him of $1,461 for a total inventory contribution of $2,828. Approximately ninety-two percent (92%) of the chemicals have been expended in the course of demonstrating the Company's products, however approximately twenty-nine percent (8%) remain available. Of the $3,850 raised in the Company's private placement $3,667 remains available. The Company's capital is sufficient to allow it to continue to finance operating activities in this manner for one to two years to come. When the Company commences manufacturing it will accept orders only with a down payment of twenty-five percent (25%) of the total sales price. This down payment will be sufficient to provide the necessary working capital to produce and deliver the product. Results of Operations - --------------------- The Company's balance sheet for the period ending December 31, 1999, the Company's first full year of operation, reflects a cash asset of $3,697 and inventory of $976 for a total asset value of $4,673. On July 1, 1999 the Company's President sold an inventory of chemicals with a cost basis of $1,461 to the Company in exchange for 1,000,000 shares of common stock. Thus the total inventory for the year was $2,225 and the ending inventory of $976 reflected a decrease of $1,249 (56%). Cash decreased by $120 (3%), and total assets decreased by $1,369 (23%) during the year. The Company's balance sheet for September 30, 2000, the end of the Company's third quarter of the current year, reflects a cash asset of $100 and inventory of $240 for a total asset value of $340. Cash decreased by $3,557, and total assets decreased by $4,293 during the nine month period. The Company cannot predict to what extent its liquidity and capital resources will be diminished prior to commencement of manufacturing and sales, however management believes that the Company's present capital is sufficient to commence those activities, given the Company's plan to accept orders only with a partial payment approximately equal to the cost of goods sold. The Company has not engaged in any significant operations since inception other than product demonstration, the search for a manufacturing facility, corporate maintenance activities, acquisition of capital, preparation for filing of its Registration Statement on Form 10-SB, and, most recently, preliminary discussions aimed at combining with a better funded company in the event that sales do not materialize. No operating revenues have been realized by the Company since inception. The Company anticipates incurring increased expenses in the current year as a result of costs associated with registration under the Securities Exchange Act of 1934. However the Company 5 also expects to generate its first revenues from sales before June 30, 2001. The Company's marketing efforts indicate that it should be able to sell its products at a price that is approximately 400% of manufacturing cost. Management therefore expects that it will be able to offset the higher operating costs associated with registration under the Securities Exchange Act with profits from product sales. Sales, which are expected to begin in the second quarter of 2001, should increase in the latter half of 2001. Need for Additional Financing - ----------------------------- The Company believes that its existing capital will be sufficient to meet the Company's cash needs through the inception of manufacturing and sales. The Company believes that profits from sales will generate sufficient cash for its operating needs by the end of 2001. The Company therefore does not foresee the need for additional financing in the year ahead. "CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical matters, the matters discussed in this Form 10-SB are forward-looking statements based on current expectations, and involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements under the following heading: "Managements Discussion And Analysis Or Plan Of Operations" the timing and expected profitable results of manufacturing and sales and the need for no additional financing. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS None Item 3 DEFAULTS UPON SENIOR SECURITIES None Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5 OTHER INFORMATION None Item 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 6 Exhibit 27.1 Financial Data Schedule (b) Reports on Form 8-K None 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. AMNIS SYSTEMS INC. (formerly Graffiti-X, Inc. Dated: December 5, 2000 Per: /s/Jason John ---------------------------------- Jason John, President and Director 7