UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997
Commission File Number: 0-28498
PARADIGM MEDICAL INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 87-0459536
- ----------------------------- ------------------
(State or other jurisdiction (IRS Identification
of incorporation or organization) Number)
1772 West 2300 South, Salt Lake City, Utah 84119
- ------------------------------------------ -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including Area Code: (801) 977-8970
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for 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.
YES X NO
-------- ------------
State the number of shares outstanding of each of the issuer's
classes of common equity as of the close of the period covered by
this report.
Class A Common Stock, $.001 par value 3,773,641
- ------------------------------------- -------------------
Title of Class Number of Shares
Outstanding as of
September 30, 1997
Series A Preferred, $.001 par value 53,302
- ----------------------------------- ---------------------
Title of Class Number of Shares
Outstanding as of
September 30, 1997
Series B Preferred, $.001 par value 60,573
- ----------------------------------- ----------------------
Title of Class Number of Shares
Outstanding as of
September 30, 1997
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
No.
-----
Item 1. Financial Statements (unaudited)
Balance Sheets - September 30, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . 3
Statements of Operations for the
nine months ended September 30, 1997 and
September 30, 1996 and for the three months
ended September 30, 1997 and September 30, 1996. . . . 5
Statements of Cash Flows for the
nine months ended September 30, 1997 and
September 30, 1996 . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . .7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . .9 to 11
PART II - OTHER INFORMATION
Other Information . . . . . . . . . . . . . . . . . . 11
Signature Page. . . . . . . . . . . . . . . . . . . . 12
<PAGE>
<TABLE>
<CAPTION>
PARADIGM MEDICAL INDUSTRIES, INC.
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1997 1996
------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 399,554 $ 2,468,988
Marketable debt securities 273 509,411
Trade accounts receivable 39,872 18,228
Inventories 959,772 241,746
Prepaid expenses 13,763 14,093
---------- -----------
Total current assets 1,413,234 3,252,466
Deferred charges, net 327,960 10,000
Property and equipment, net 119,755 129,494
----------- -----------
Total assets $ 1,860,949 $ 3,391,960
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 211,776 $ 35,767
Accounts payable -
related parties 411,067 200,000
Accrued expenses 269,733 277,473
Note payable to bank -
current 3,445 3,278
Purchase deposit 33,500 0
------------ -----------
Total current liabilities 929,521 516,518
Note payable, less current
portion 12,035 15,605
------------ -----------
Total liabilities 941,556 532,123
Contingencies (Note 2)
Stockholders' equity:
Preferred stock, $.001 par
value, authorized:
5,000,000 shares
Series A, $.001 par value,
authorized: 500,000 shares;
issued and outstanding:
122,764 shares at December
31, 1996 and 53,302 shares
at September 30, 1997
(aggregate liquidation
preference of $233,208 at
September 30, 1997) 53 122
Series B, $.001 par value,
authorized: 500,000 shares;
issued and outstanding:
448,398 shares at December
31, 1996 and 60,573 shares
at September 30, 1997
(aggregate liquidation
preference of $242,292 at
September 30, 1997) 61 448
Additional paid-in capital,
preferred stock 76,186 1,900,637
Common stock, $.001 par value,
authorized: 20,000,000 shares;
issued and outstanding:
3,194,061 shares at
December 31, 1996 and
3,773,641 shares at
September 30, 1997 3,774 3,194
Additional paid-in capital,
common stock 8,195,501 6,261,097
Treasury stock, 2,600 shares,
at cost (3,777) (3,777)
Unearned compensation (6,314) (63,141)
Accumulated deficit (7,346,091) (5,248,412)
Unrealized gain on marketable
debt securities, available-
for-sale 9,669
----------- -----------
Total stockholders'
equity 919,393 2,859,837
----------- -----------
Total liabilities
and stockholders'
equity $ 1,860,949 $ 3,391,960
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the financial statements
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
---------------------- -----------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 378,610 $ 200,508 $ 18,203 $ 41,012
Cost of sales 207,277 134,931 12,213 50,933
Amortization of
deferred charges 42,876 18,564
---------- ---------- ---------- ----------
Net cost of sales 250,153 134,931 30,777 50,933
Gross profit 128,457 65,577 (12,574) (9,921)
---------- ---------- ---------- ----------
Gross margin 34% 33% (69%) (24%)
Operating expenses:
Marketing and
selling 434,029 220,210 182,277 51,918
General and
administrative 1,256,098 580,148 481,042 336,942
Research and
development 569,887 176,793 55,973 188,004
---------- ---------- ---------- ----------
Total operating
expenses $2,260,014 $ 977,151 $ 719,292 $ 576,864
---------- ---------- ---------- -----------
Operating loss (2,131,557) (911,574) (731,866) (586,785)
Cost associated
with relinquish-
ment of anti-
dilution rights (179,000)
Return of Stock
Dividend-Series
B-Pref 848
Interest income 53,807 42,859 11,369 35,226
Interest expense (19,929) (56,829) (19,023) (13,291)
--------- ---------- ---------- ----------
Total other
income
(expense) 33,878 (192,122) (7,654) 21,935
--------- ---------- ---------- ----------
(cost related
to anti-
dilution
rights)
Net Loss (2,097,679) (1,103,696) (739,520) (564,850)
Net loss
attributable
to common
shareholders $(2,097,679) $(1,103,696) $ (739,520) $ (564,850)
Net loss
per common
share $(0.58) $(0.42) $(0.20) $(0.19)
Shares used
in computing
net loss per
common share 3,638,383 2,603,725 3,751,274 3,035,833
</TABLE>
The accompanying notes are an integral
part of the financial statement
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------------------
1997 1996
------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from
operating activities:
Net loss $(2,097,679) $(1,449,019)
Adjustments to reconcile
net loss to net
cash used in operating
activities:
Depreciation and amortization 22,486 17,771
Amortization of deferred
charges 42,876 0
Common stock issued for
compensation 125,272 69,455
Issuance of common stock for
services and relinquishment
of anti-dilution rights 0 179,000
Amortization of debt
offering costs 0 41,325
Issuance of bridge notes
and warrants for services 0 25,000
Changes in operating assets and
liabilities:
Trade accounts receivable (21,644) 49,445
Inventories (718,026) 31,855
Prepaid expenses 330 3,282
Deferred charges (360,836) 0
Purchase deposit 33,500 0
Deferred public offering costs (100,000)
Accounts payable -
related parties 211,067
Trade accounts payable 176,009 (255,791)
Accrued expenses (7,740) 72,278
--------- ---------
Net cash used in
operating activities (2,594,385) (1,315,399)
---------- ----------
Cash flows from investing
activities:
Purchase of property and
equipment (12,747) (91,179)
Proceeds from the sale of
marketable debt securities -
available for sale 499,469 0
Purchase of marketable debt
securities - available for
sale 0 (499,742)
--------- ----------
Net cash provided by (used
in) investing activities 486,722 (590,921)
--------- ----------
Cash flows from financing
activities:
Proceeds from lines of credit 980,000 0
Repayment of lines of credit (980,000) 0
Proceeds from issuance of
promissory notes and warrants 575,000
Proceeds from exercise of warrants 41,632 0
Debt offering costs 0 (41,325)
Principal payments on notes payable (3,403) (631,829)
Proceeds from issuance of stock 0 6,350,000
Payments for recission offer of
Series B preferred stock 0 (131,848)
Issuance costs - stock and warrants 0 (1,511,744)
-------- ---------
Net cash provided by financing
activities 38,229 4,608,254
--------- ----------
Net increase (decrease) in cash
and cash equivalents $(2,069,434) $2,701,934
Cash and cash equivalents at
beginning of period $ 2,468,988 $ 338,218
----------- ----------
Cash and cash equivalents at
end of period $ 399,554 $3,040,152
=========== ==========
Supplemental disclosure of
cash flow information:
Cash paid for interest $ 19,023 $ 56,829
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Significant Accounting Policies:
-------------------------------
In the opinion of management, the accompanying financial
statements contain all adjustments (consisting only of normal
recurring items) necessary to present fairly the financial
position of Paradigm Medical Industries, Inc. (the Company) as of
December 31, 1996 and September 30, 1997, and the results of its
operations for the nine months ended September 30, 1996 and 1997,
and its cash flows for the nine months ended September 30, 1996
and 1997. The results of operations for the periods presented
are not necessarily indicative of the results to be expected for
the full year period.
Net Loss Per Share
------------------
Net loss per common share is computed on the weighted
average number of common and common equivalent shares outstanding
during each period. Common stock equivalents consist of
convertible preferred stock, common stock options and warrants.
Common equivalent shares are excluded from the computation when
their effect is anti-dilutive. Other common stock equivalents
have not been included in loss years because they are
anti-dilutive.
2. Legal Proceedings:
-----------------
On March 31, 1995, the Company entered into an agreement
with an investment banking company to obtain capitalization
through a public offering. The agreement was deemed terminated
if the required capitalization was not obtained by December 31,
1995. In a complaint filed in November 1996, the investment
banking company and its principal officer requested 356,780
shares of the Company's common stock, along with monthly payments
of $3,000 for three years, as compensation under the agreement.
Shortly after the filing of the complaint, the principal officer
of the investment banking company passed away. His estate was
substituted as a plaintiff party. On May 9, 1997, the Company
entered into an agreement with the principal officer's estate to
settle the action by the Company paying the estate an initial
payment of $5,000, plus $1,500 per month for 36 months in return
for dismissal of the action with prejudice and release of all
claims. The settlement date was June 6, 1997. Amounts payable
under this settlement are included in accrued expenses in the
accompanying balance sheet.
3. Preferred Stock Conversions:
---------------------------
Under the Company's Articles of Incorporation, holders of
the Company's preferred stock have the right to convert such
stock into shares of the Company's common stock at the rate of
1.2 shares of common stock for each share of preferred stock.
During the nine month period ended September 30, 1997, there
were 69,462 shares of Series A Preferred Stock and 387,825
shares of Series B Preferred Stock converted into 83,354
and 465,391 shares of the Company's common stock, respectively.
4. Common Stock Issuances:
----------------------
As of September 30, 1997, 12,500 shares of the Company's
common stock had been issued for the exercise of warrants. An
additional 6,098 shares of the Company's common stock was issued
to a former employee and 13,503 shares to non-management
directors for services rendered. The issuances for services
rendered were recorded as a compensation expense.
5. Related Party Transactions:
--------------------------
On January 8, 1997, the Company subcontracted the
subassembly of the Laser Module piece of the Photon(trademark)
laser cataract system. During the nine month period ended
September 30, 1997, the Company purchased 10 Laser Module
subassemblies for a total purchase price of $160,000, from a
manufacturer whose President was a member of the Company's Board
of Directors, and as of September 30, 1997 owed that company
$64,537 which is included in accounts payable. In May, 1997, the
President of the laser module manufacturer resigned from the
Company's Board of Directors.
The Company has subcontracted the manufacturing of its
Precisionist and Photon laser cataract systems to a company that
is a shareholder. During the nine month period ended September
30, 1997, the Company purchased design and manufacturing services
from that company in the amount of $983,844, and as of September
30, 1997 owed that company $411,067 which is included in accounts
payable.
In 1993, the Company signed an exclusive patent license
agreement with a company which owns the patent for the
laser-based Photon(trademark) laser probe. This company is owned
by a shareholder of the Company. The agreement provides for the
payment of a 1% royalty on all sales proceeds related directly or
indirectly, to the Photon machine. The agreement terminates on
July 7, 2003. Through September 30, 1997, no significant
royalties have been earned under this agreement. The Company has
also entered into a consulting agreement with this individual
which provides for annual consulting fees of $25,000 through July
7, 2003, or product sales whichever occurs first.
A law firm, of which a director of the Company is a
shareholder, has rendered legal services to the Company. During
the nine month period ended September 30, 1997, the Company paid
this firm $79,206 for legal services, and as of September 30,
1997, owed this firm $8,514, which is included in accounts
payable.
6. Lines of Credit:
---------------
In May 1997, the Company established a $630,000 line of
credit with a financial institution which bears interest at 2.4%
above the 30-day commercial paper rate. Interest is due monthly
with principal due June 30, 1998. The line of credit was
collateralized by cash and investments held by the institution.
At September 30, 1997, the Company had liquidated the collateral
and repaid the line of credit.
Also, in May 1997, the Company established a $350,000 line
of credit with a financial institution which bears interest at
.25% above the Broker's Daily Call Money Rate as quoted by Bear
Stearns Securities Corp. Interest is due monthly with principal
due June 30, 1998. The line of credit was collateralized by cash
and investments held by the institution. At September 30, 1997,
the Company had liquidated the collateral and repaid the line of
credit.
However, due to the collateral requirements of these lines
of credit, any borrowings would be limited to cash and investments
restricted for this purpose.
7. Investment Banking Agreement:
----------------------------
On August 20, 1997, the Company entered into an investment
banking agreement with Win Capital Corp. ("Win Capital") for a
two year period which could be extended an additional year. The
Company pays a retainer to Win Capital of $2,000 per month for
the first six months, $4,000 per month for the second six months
and $6,000 per month for the remainder of the contract. The
Company also issued a warrant to Win Capital to purchase up to
191,000 shares of common stock at a purchase price of $3.00 per
share. The warrant expires on August 19, 2000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of
Financial Condition and results of Operations contains forward
looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those
anticipated in these forward looking statements as a result of
certain factors discussed in this section. The Company's fiscal
year runs from January 1 to and including December 31.
General
The Company is engaged in the development, manufacture and
sale of ophthalmic surgical devices designed to perform minimally
invasive cataract removal surgery. Paradigm's activities for the
nine months ended September 30, 1996 include international and
domestic sales of the Precisionist 3000 Plus(trademark) Phaco
system, research and developments of the Precisionist Thirty
Thousand(trademark) and the Photon(trademark) laser cataract
system, and primary research for other new products and
businesses. Paradigm's activities for the nine months ended
September 30, 1997 include international and domestic sales of
the Precisionist 3000 Plus(trademark) and Precisionist Thirty
Thousand(trademark) and Photon(trademark) laser cataract systems,
as well as primary research for other new products and
businesses.
Results of Operations
Sales increased by $178,000, or 89%, to $379,000 for the
nine months ended September 30, 1997 from $201,000 for the
comparable period in 1996. Sales of product in the surgical
equipment market are contingent upon customer evaluation. Based
on the evaluation of the products shipped in the initial new
product launch, five units were returned and certain software and
hardware revisions were identified and corrected. The increase
in sales and net sales was a result of the Company launching the
Photon Ocular Surgery System(trademark) and the Precisionist
Thirty Thousand(trademark), the latest generation of Paradigm
products on March 31, 1997.
Cost of sales and amortization of deferred changes
increased $115,000, or 85%, to $250,000 for the nine months ended
September 30, 1997 from $135,000 for the comparable period in
1996, as a result of the increased sales. The gross margin for
the nine months ended September 30, 1997 of 34% was slightly
higher than the gross margin for the comparable period in 1996 of
33%.
Marketing and selling expenses increased by $214,000, or
97%, to $434,000 for the nine months ended September 30, 1997
from $220,000 for the comparable period in 1996. The increase
was a result of the Company adding two additional sales
representatives and increasing promotional activities in
anticipation of launching the Photon Ocular Surgery System and
the Precisionist Thirty Thousand during the first quarter of
1997, and the resulting service expenses associated with
installing identified software and hardware revisions.
General and administrative expenses increased by $676,000,
or 117%, to $1,256,000 for the nine months ended September 30,
1997 from $580,000 for the comparable period in 1996. This was
the result of an increase in personnel and costs associated with
pre-production and new product launch activities.
Research and development expenses increased by $393,000, or
222%, to $570,000 for the nine months ended September 30, 1997
from $177,000 for the comparable period in 1996. This was the
result of hiring four additional employees and costs associated
with developing new products for the Company.
Upgrades
To garner sales, the Company offers the ultrasonic
Precisionist(trademark) system with an unconditional arrangement
under which the customer may trade in their
Precisionist(trademark) system to upgrade to a Precisionist
Thirty Thousand(trademark) Ocular Surgery System(trademark) or,
upon FDA clearance, a Photon(trademark) laser cataract system
when that system becomes available. Under this arrangement, the
customer receives full credit for the trade in purchase price of
the Precisionist(trademark) system against the price of the new
Precisionist Thirty Thousand(trademark) Ocular Surgery
System(trademark) or Photon(trademark) laser cataract system As
of September 30, 1997, the Company has distributed approximately
51 Precisionist(trademark) systems under this provision. The
gross margin on these original sales was approximately $295,000
or 32%. If all of these customers were to exercise their upgrade
privilege, the Company would exchange the Precisionist(trademark)
system for the Company's new Precisionist Thirty
Thousand(trademark) Ocular Surgery System(trademark) or
Photon(trademark) system and refurbish the ultrasonic
Precisionist(trademark) systems and sell them in the
international market. Any losses on the sale of the refurbished
Precisionist(trademark) systems, which is not expected to be
significant, would reduce the gross margin on the Precisionist
Thirty Thousand(trademark) Ocular Surgery System(trademark) or
Photon(trademark) system sales. The total gross margin on the
upgrade sales is estimated to be $1,677,000 or 41%. As of
September 30, 1997, there have been two trade in sales in which
the customer has upgraded a Precisionist(trademark) system to the
Precisionist Thirty Thousand(trademark) Ocular Surgery
System(trademark).
Liquidity and Capital Resources
The Company used cash in operating activities of $2,594,000
for the nine months ended September 30, 1997 compared to
$1,316,000 for the comparable period in 1996. The Company received
cash from investing activities of $487,000 for the nine months
ended September 30, 1997 compared to $591,000 for the
comparable period in 1996. The investing activities for the nine
months ended September 30, 1997 included $13,000 used for the
purchase of property and equipment and $361,000 in connection
with the purchase of engineering services. The Company received
cash from financing activities of $38,000 for the nine months
ended September 30, 1997 compared to $4,608,000 in the comparable
period in 1996. The financing activities for the nine months
ended September 30, 1997 included $980,000 from the Company's
line of credit and $42,000 in proceeds from the exercise of
warrants. These amounts were offset by $715,000 in cash which
was restricted to secure the lines of credit.
In May 1997, the Company established a $636,000 line of
credit with Merrill Lynch Business Financial Services, Inc.
("Merrill Lynch") and a $350,000 line of credit with Bear Stearns
Securities Corp. ("Bear Stearns") on a secured basis. As of
September 30, 1997, the Company had liquidated the underlying
collateral and repaid the lines of credit with Merrill Lynch and
Bear Stearns. The Company will seek funding to meet its working
capital requirements through collaborative arrangements and
strategic alliances, additional public offerings and/or private
placements of its securities, or bank borrowings. There can be
no assurance, however, that additional funds, if required, will
be available from any of the foregoing or other sources on
favorable terms, if at all.
The Company's future capital requirements will depend on
many factors, including cash flow from operations, technology
developments, and the Company's ability to develop and market
existing and new products successfully. The Company is currently
attempting to raise up to $2.0 million through a private offering
on a "best efforts" basis. If the private offering is
successfully completed, the Company anticipates its existing
capital resources, together with the proceeds from the offering
and anticipated revenues will be adequate to satisfy its
anticipated operating expenses and capital requirements for at
least 12 months after the offering.
At September 30, 1997, the Company had net operating loss
carryforwards (NOLs) of approximately $7,346,000 and research and
development tax credit carryforwards of approximately $48,000.
These carryforwards are available to offset future taxable
income, if any, and expire in the years 2005 through 2011.
Because the Company has yet to recognize significant revenue from
the sale of its Photon(trademark) laser cataract system, a 100%
valuation allowance has been provided for these deferred tax
assets. The Company's ability to use its NOLs to offset future
income taxes may be subject to restrictions enacted in the United
States Internal Revenue Code of 1986, as amended. These
restrictions could limit the Company's future use of its NOLs if
there is a cumulative ownership change of more than 50%, which
would include the changes of ownership related to any public
offering.
Effect of Inflation and Foreign Currency Exchange
The Company has not realized a reduction in the selling
price of the Precisionist phaco system as a result of domestic
inflation. Nor has the Company experienced unfavorable profit
reductions due to currency exchange fluctuations or inflation
with its foreign customers.
Impact of New Accounting Pronouncements
The Company intends to adopt the disclosure approach
provided for in Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock Based Compensation, with
respect to options and warrants granted to employees. Because
the Company has only a minimal investment in long-lived assets,
the adoption of SFAS 121, Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of, and which will occur October
1, 1996, is not expected to have an impact on the Company.
In March 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share. This statement establishes standards for
computing and presenting earnings per share ("EPS") and applies
to entitles with publicly held common stock or potential common
stock. This statement simplifies the standards for computing EPS
and makes them comparable to international EPS standards. This
statement is effective for financial statements for both interim
and annual periods ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. This statement establishes standards for
reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. This
statement is effective for financial statements for both interim
and annual periods ending after December 15, 1997.
The Company has reviewed all other recently issued, but not
yet adopted, accounting standards in order to determine their
effects, if any, on the results of operations or financial
position of the Company. Based on that review, the Company
believes that none of these pronouncements will have a
significant effect on current or future earnings or operations.
Part II: Other Information
Item 1. Legal Proceedings
On March 31, 1995, the Company entered into an agreement
with an investment banking company to obtain capitalization
through a public offering. The agreement was deemed terminated
if the required capitalization was not obtained by December 31,
1995. In a complaint filed in November 1996, the investment
banking company and its principal officer requested 356,780
shares of the Company's common stock, along with monthly payments
of $3,000 for three years, as compensation under the agreement.
Shortly after the filing of the complaint, the principal officer
of the investment banking company passed away. His estate was
substituted as a plaintiff party. On May 9, 1997, the Company
entered into an agreement with the principal officer's estate to
settle the action by the Company paying the estate an initial
payment of $5,000, plus $1,500 per month for 36 months in return
for dismissal of the action with prejudice and release of all
claims. The settlement date was June 6, 1997. A provision for
this claim was provided in a prior period.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Table No. Document
- --------- --------
10.1 Letter Agreement with Win Capital Corp.
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company did not file any reports on Form 8-K during the
three months ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
PARADIGM MEDICAL INDUSTRIES, INC.
---------------------------------
Registrant
DATED: November 19, 1997 By: Michael W. Stelzer
President and Chief
Executive Officer
(Principal Executive
Officer)
DATED: November 19, 1997 By: John W. Hemmer
Treasurer and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
August 20, 1997
Albert L. Barbara, Vice Chairman
Win Capital Corp.
80 Broad Street
New York, New York 10004
Dear Mr. Barbara:
Tom Motter just returned from Las Vegas where he met with Steven
Bayern and Pat Koelnick to discuss the details regarding an
investment banking relationship. Based upon their discussions an
agreement was reached whereby both parties agreed as follows:
1) Paradigm Medical Industries, Inc. ("PMED") hereby retains Win
Capital Corp. ("WIN") to act as its investment bankers for a two
(2) year period which would be extended an additional year unless
either party notified the other party in writing thirty days
before the expiration of the two year contract of their desire to
terminate the contractual relationship.
2) PMED will pay a monthly retainer to WIN of $2,000 for the
first six months, $4,000 for the second six months and $6,000 per
month for the remainder of the contract.
3) PMED will issue a warrant to WIN to purchase up to 200,000
shares of common stock at $4.00 per share but not in excess of
4.9% of the current number of common shares outstanding plus
common shares to be issued upon the conversion of both the Class
A and Class B Preferred Stock issues. In all other respects, the
terms of the warrant will be identical to the Class A warrant
issued in connection with PMED's public offering in July, 1996.
The aforementioned terms were submitted to the Paradigm Board of
Directors and was unanimously approved and resolved to authorize
the officers of the company to finalize the agreement.
Please indicate your concurrence by signing below and returning
the signed copy of this agreement by facsimile. Upon receipt of
your acceptance we will immediately forward our initial month's
payment.
Thank you for your assistance. We look forward to a long and
fruitful relationship with WIN.
Very truly yours,
Michael W. Stelzer
CEO & President
Thomas F. Motter
Chairman of the Board
Agreed to and accepted by:
Albert L. Barbara
Vice Chairman
Win Capital Corp.
Date: August 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET OF PARADIGM MEDICAL INDUSTRIES, INC. AS OF
SEPTEMBER 30, 1997, AND THE RELATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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0
114
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