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 June 30, 2000 Commission File Number: 0-28498
PARADIGM MEDICAL INDUSTRIES, INC.
---------------------------------
Exact Name of Registrant.
DELAWARE 87-0459536
---------------------------- ------------------
(State or other jurisdiction IRS Identification
of incorporation or organization) Number
2355 South 1070 West, 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.
Common Stock, $.001 par value 11,559,187
----------------------------- ----------
Title of Class Number of Shares
Outstanding as of
June 30, 2000
Series A Preferred, $.001 par value 5,957
----------------------------------- -----
Title of Class Number of Shares
Outstanding as of
June 30, 2000
Series B Preferred, $.001 par value 15,236
------------------------------------ ------
Title of Class Number of Shares
Outstanding as of
June 30, 2000
Series C Preferred, $.001 par value 0
------------------------------------ ---
Title of Class Number of Shares
Outstanding as of
June 30, 2000
Series D Preferred, $.001 par value 52,500
----------------------------------- ------
Number of Shares
Outstanding as of
June 30, 2000
Transitional Small Business Disclosure Format
YES NO X
---- ----
1
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PARADIGM MEDICAL INDUSTRIES, INC.
FORM 10-QSB
QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
No.
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Item 1. Financial Statements
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Balance Sheets (unaudited) - June 30, 2000.......................................... 3
Statements of Operations (unaudited) for the three months and the six months
ended June 30, 2000 and June 30, 1999 ...............................................5
Statements of Cash Flows (unaudited) for the six months
ended June 30, 2000 and June 30, 1999 .............................................. 6
Notes to Financial Statements (unaudited)............................................7
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Item 2.
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Management's Discussion and Analysis of
Financial Condition and Results of
Operations..........................................................................10
PART II - OTHER INFORMATION
Other Information...................................................................13
Signature Page......................................................................16
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PARADIGM MEDICAL INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
June 30,
2000
-------------
(Unaudited)
ASSETS
Current Assets
<S> <C>
Cash & Cash Equivalents 2,850,000
Receivables, Net 907,000
Prepaid Expenses 116,000
Inventory 5,822,000
Notes Receivable 11,000
---------------
Total Current Assets 9,706,000
Inventory - Noncurrent 62,000
Intangibles, Net 1,580,000
Property and Equipment, Net 672,000
Deposits and Other Assets 86,000
---------------
Total Assets 12,106,000
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade Accounts Payable 559,000
Accrued Expenses 890,000
Current Portion of Long-term Debt 96,000
---------------
Total Current Liabilities 1,545,000
Long-term Debt 17,000
---------------
Total Liabilities 1,562,000
Stockholders' Equity:
Preferred Stock, Authorized:
5,000,000 Shares, $.001 par value
Series A
Authorized: 500,000 shares; issued and
outstanding: 5,957 shares at June 30, 2000
Series B
Authorized: 500,000 shares; issued and
outstanding: 15,236 shares at June 30, 2000
Series C
Authorized: 30,000 shares; issued and
outstanding: zero shares at June 30, 2000
Series D
Authorized: 1,140,000 shares; issued and
outstanding: 52,500 shares at June 30, 2000
Common Stock, Authorized:
20,000,000 Shares, $.001 par value; issued and
outstanding: 11,599,187 shares at June 30, 2000 12,000
Additional paid-in-capital 37,430,000
Treasury Stock, 2,600 shares, at cost (4,000)
Stock Subscription Receivable (8,000)
Accumulated Deficit (26,886,000)
---------------
Total Stockholders' Equity 10,544,000
---------------
Total Liabilities and Stockholders' Equity $ 12,106,000
===============
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PARADIGM MEDICAL INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------ ------------
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales 1,695,000 1,455,000 3,716,000 3,752,000
------------- ------------- ------------- -------------
Cost of Sales 1,044,000 765,000 2,174,000 1,766,000
Amortization of Capitialized
Engineering, Design, and
Production Right Charges 44,000 18,000 87,000 43,000
------------ ------------ ------------ ------------
Net Cost of Sales 1,088,000 783,000 2,261,000 1,809,000
------------ ------------ ------------ ------------
Gross Profit 607,000 672,000 1,455,000 1,943,000
------------ ------------ ------------ ------------
Operating Expenses:
Marketing and Selling 1,178,000 678,000 1,891,000 1,292,000
General and Administrative 1,157,000 647,000 2,672,000 1,099,000
Research and Development 412,000 233,000 817,000 499,000
------------ ------------ ------------ ------------
Total Operating Expenses 2,747,000 1,558,000 5,380,000 2,890,000
------------ ------------ ------------ ------------
Operating Income (Loss) (2,140,000) (886,000) (3,925,000) (947,000)
Other Income and (Expense):
(Loss) gain from Discontinued
Product (1,000) (95,000) 14,000 (182,000)
Interest Income 45,000 8,000 75,000 18,000
Interest Expense 3,000 (13,000) (7,000) (23,000)
Other Income (Expense) 6,000 - 10,000 (1,000)
------------ ------------ ------------ ------------
Total Other Income and
(Expense) 53,000 (100,000) 92,000 (188,000)
------------ ------------ ------------ ------------
Net loss before provision (2,087,000) (986,000) (3,833,000) (1,135,000)
for income taxes ============ ========= ========= =========
Provision for income taxes - - - -
------------ ------------ ------------ ------------
Net Loss (2,087,000) (986,000) (3,833,000) (1,135,000)
============ ============ ============ ============
Net Loss Per Common Share - Basic
and Diluted (.19) (.13) (.36) (.16)
===== ===== ===== =====
Weighted Average Outstanding
Shares - Basic and Diluted 11,214,000 7,737,000 10,847,000 7,182,000
============ ============ ============ ============
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PARADIGM MEDICAL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
ended 6/30/00 ended 6/30/99
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
<S> <C> <C>
Net Loss (3,833,000) (1,135,000)
Adjustment to Reconcile Net Loss to Net
Cash Used In Operating Activities:
Depreciation and Amortization 224,000 147,000
Issuance of Common Stock for Compensation,
Services and Payables 957,000 154,000
Issuance of Stock Option/Warrant for Services 133,000 -
Provision for Losses on Receivables (22,000) -
(Increase) Decrease from Changes in:
Trade Accounts Receivable 845,000 (679,000)
Inventories (499,000) (548,000)
Prepaid Expenses 112,000 128,000
Increase (Decrease) from Changes in:
Trade Accounts Payable 11,000 254,000
Accrued Expenses and Deposits (93,000) (2,000)
--------------- ---------------
Net Cash Used in Operating Activities (2,165,000) (1,681,000)
--------------- ---------------
Cash Flow from Investing Activities:
Purchase of Property and Equipment (407,000) (139,000)
Proceeds from Sale of Stock - 21,000
Patents and Intangibles (7,000) -
Sale of Long-term Investment - -
Net Cash Paid in Acquisition (95,000) -
Notes Receivable (11,000) -
--------------- ---------------
Net Cash Used in Investing Activities (520,000) (118,000)
--------------- ---------------
Cash Flows from Financing Activities:
Proceeds from Exercise of Warrants and Options 4,525,000 242,000
Proceeds from 12% CV Promissory Note - 100,000
Principle Payments on Notes Payable (108,000) (18,000)
Proceeds from Bank Line of Credit - 330,000
Net Proceeds from Series D Stock Issue - 1,651,000
Sale of Common Stock - 495,000
--------------- ---------------
Net Cash Provided by Financing Activities 4,417,000 2,800,000
--------------- ---------------
Net Increase in Cash and Cash Equivalents 1,732,000 1,001,000
Cash and Cash Equivalents at Beginning of Period 1,118,000 161,000
--------------- ---------------
Cash and Cash Equivalents at End of Period 2,850,000 1,162,000
=============== ===============
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest 6,629 23,000
=============== ===============
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PARADIGM MEDICAL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 June 30, 2000 and the results of its operations for the three
and six months ended June 30, 1999 and 2000, and its cash flows for the six
months ended June 30, 1999 and 2000. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year period.
Net Income (Loss) Per Share
---------------------------
Net income (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.
Legal Proceedings:
------------------
The company is not a party to any legal proceedings.
Preferred Stock Conversions:
----------------------------
Under the Company's Articles of Incorporation, holders of the Company's Class A
and Class B 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 three month period ended June 30, 2000
2,120 shares of Series A Preferred Stock and 4,000 of Series B Preferred Stock
were converted into common stock.
During the three months ended June 30, 2000, 230,828 shares Series D Preferred
stock were converted to 230,828 shares of the Company's Common stock.
Warrants:
---------
During the three month period ended June 30, 2000, warrants for a total of
136,825 shares of the Company's Common Stock were exercised. These warrants
included KSH Warrants, Win Capital Corp. Warrants, Cyndel & Co., Inc. Warrants,
and Class A Public Warrants. Net proceeds for the exercise of warrants and
options during this period were approximately $490,000.
Related Party Transactions:
---------------------------
On January 21, 2000 the Board of Directors granted Thomas F. Motter, CEO and
President, 100,000 shares of the Company's Common Stock. 61,111 shares of this
total amount were considered repayment for the 61,111 shares Mr. Motter sold to
Douglas A. MacLeod prior to the Company's initial public offering in July 1996,
under a settlement agreement to terminate certain anti-dilution rights granted
Mr. MacLeod by the Company. The balance of 38,889 shares was deemed by the Board
as a bonus for work done by Mr. Motter since the initial public offering. The
market price on the date of grant was $12.50 per share, and compensation expense
in the amount of $486,000 was recognized.
On January 21, 2000 the Board of Directors granted Michael W. Stelzer, an
officer of the Company, 20,000 shares of the Company's Common Stock as part of a
severance agreement, and as part of settlement of Mr. Stelzer's employment
agreement. The market price on the date of grant was $12.50 per share, and
compensation expense in the amount of $250,000 was recognized.
On June 5, 2000 the Company issued Mark Miehle 28,500 shares of the Company's
Common stock for a signing bonus as part of Mr. Miehle's employment agreement.
The market price on the date of the grant was $6.8125 per share, and
compensation expense in the amount of $194,000 was recognized.
Supplemental Cash Flow Information
----------------------------------
During the six months ended June 30, 2000 the Company acquired the assets and
liabilities of Ocular Blood Flow, Ltd. (OBF) in a purchase transaction. The
transaction required the payment of $100,000 and 100,000 shares of common
stock. The Company recorded the following:
Acconts receivable 22,000
Prepaids 18,000
Inventory 28,000
Intangibles 799,000
Property, Plant and Equipments 25,000
Accounts payable (48,000)
Accrued liabilities (8,000)
Debt (66,000)
Common stock issued (675,000)
--------------------
Net cash paid 95,000
====================
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
General
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.
The Company is engaged in the design, development, manufacture and sale of high
technology eye care products. Its surgical equipment is designed to perform
minimally invasive cataract surgery and is comprised of surgical devices and
related instruments and accessories, including disposable products. Its
diagnostic products include a pachymeter, a A-Scan, a A/B Scan, a biomicroscope,
a perimeter, a corneal topographer, and a blood flow analyzer. The ultrasound
diagnostic product technology was acquired from Humphrey Systems in 1998. In
October 1999, the Company purchased the inventory, design and production rights
of a surgical equipment line, also designed to perform minimally invasive
cataract surgery. The line includes the Mentor SIStem(TM), the Odyssey(TM), and
the Surgitrol(TM). In November 1999, the Company entered into a Mutual Release
and Settlement Agreement with the manufacturer of the Precisionist
ThirtyThousand(TM)which allowed the Company to purchase the raw material and
finished goods inventory and to bring manufacture of this product in-house. The
Dicon(TM)Perimeter and the Dicon(TM) Topographer were acquired from Vismed in
June 2000. The blood flow analyzer was acquired with the purchase of Ocular
Blood Flow, Ltd. (OBF) also in June 2000. The Company has received approval for
ISO 9000 and CE Mark certifications. Activities for the three and six months
ended June 30, 2000, included sales of the Mentor SIStem(TM) and associated
accessories, sales of the ultrasound diagnostic products, sales for the
Dicon(TM)products. Other activities include R&D expenditures associated with ISO
9000 certification and transaction costs in connection Vismed and OBF.
Results of Operations
Three Months Ended June 30, 2000, Compared to Three Months Ended June 30, 1999
Net sales increased by $240,000, or 16.5%, to $1,695,000 for the three months
ended June 30, 2000, from $1,455,000 for the comparable period in 1999. This was
due to increased sales in diagnostic and surgical equipment.
The gross margin for the three months ended June 30, 2000, of 36%, was lower
than the gross margin of 46% for the three months ended June 30, 1999. This
decrease in the gross margin from second quarter 1999 to second quarter 2000 was
related to the Company previously using outside production facilities, in
addition to pre-production costs previously expensed through Research and
Development.
Marketing and selling expenses increased by $500,000, or 74%, to $1,178,000 for
the three months ended June 30, 2000, from $678,000 for the comparable period in
1999. This was primarily the result of an increase in sales and marketing
personnel and increased sales commissions and advertising expense for second
quarter 2000 as compared to the same period in 1999.
General and administrative expenses increased by $510,000, or 79% to $1,157,000
for the three months ended June 30, 2000, from $647,000 for the comparable
period in 1999. This was primarily due to increased cost related to transactions
to acquire Dicon and OBF, which took place during the second quarter.
Research and development expenses increased by $179,000, or 77%, to $412,000 for
the three months ended June 30, 2000, from $233,000 for the same period in 1999.
This was the result of an increase in personnel and consulting fees in
connection with ISO 9000, CE Mark certification, and FDA submission.
Other income increased by $153,000, or 153%, to $53,000 for the quarter ended
June 30, 2000 from a loss of $100,000 for the same period in 1999. This was
primarily due to interest earned on a greater amount of funds in the Company's
cash account in the second quarter of 2000 as compared to the same period in
1999.
Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999
Net sales decreased by $36,000, or 1%, to $3,716,000 for the six months ended
June 30, 2000, from $3,752,000 for the comparable period in 1999. This figure is
in-line with current projections as the Company ramps up for sales in the second
half of 2000.
The gross margin for the six months ended June 30, 2000, of 39%, was lower than
the gross margin of 52% for the six months ended June 30, 1999. This decrease in
sales margin from June 30, 1999 compared to June 30, 2000 was related to the
Company previously using outside production facilities, in addition to
pre-production costs previously expensed through Research and Development.
Marketing and selling expenses increased by $599,000, or 46%, to $1,891,000 for
the six months ended June 30, 2000, from $1,292,000 for the comparable period in
1999. This was primarily the result of an increase in sales and marketing
personnel, increased sales commissions and increased advertising expense for six
months of 2000 as compared to the same period in 1999.
General and administrative expenses increased by $1,573,000, or 143% to
$2,672,000 for the six months ended June 30, 2000, from $1,099,000 for the
comparable period in 1999. This was the result of having recorded the fair
market value of Common Stock granted to two officers of the Company in the first
quarter 2000, in addition to the costs related to transactional expenses to
acquire Dicon and OBF, and the recording of the Black-Scholes expense for first
six months of 2000 compared to the same period in 1999.
Research and development expenses increased by $318,000, or 64%, to $817,000 for
the six months ended June 30, 2000, from $499,000 for the same period in 1999.
This was the result of an increase in personnel and consulting services in
connection with the ISO 9000, CE Mark certification, and FDA submission.
Other income increased by $280,000, or 149%, to $92,000 for the first six months
ended June 30, 2000 from a loss of $188,000 for the same period in 1999. This
was primarily due to interest earned on a greater amount of funds in the
Company's cash account in the first six months of 2000 compared to the same
period in 1999.
Liquidity and Capital Resources
The Company used cash in operating activities of $2,165,000 for the six months
ended June 30, 2000, compared to $1,681,000 for the six months ended June 30,
1999. The increase in cash used by operating activities for the first six months
of 2000 was primarily attributable to the Net Operating Loss. The Company used
cash from investing activities of $520,000 for the six months ended June 30,
2000, compared to $118,000 in the same period in 1999. The increase in cash used
in investing activities in first six months 2000 was partly the result of the
purchase of computer equipment and software to upgrade the Company's information
system and furniture and equipment added with the move to a larger facility. Net
cash provided by financing activities was $4,417,000 for the six months ended
June 30, 2000, compared to $2,305,000 for the same period in 1999. The Company
received approximately $490,000 in second quarter of 2000 from the exercise of
public and private warrants.
In March 1999, the Company completed a private placement of 1,140,000 shares of
Series D Convertible Preferred Stock at $1.75 per share with the net proceeds
approximating $1.6 million. Also, in first quarter of 1999, proceeds of $100,000
were received from a six-month promissory note.
Based on our 2000 budget and the net proceeds from the exercise of warrants, the
Company believes that funds are sufficient to continue operations through
December 31, 2000. However, no assurances can be given that the Company's plan
will be successful in achieving positive cash flow or profitability.
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 these or other sources on favorable terms, if at all.
The ratio of inventory to sales for the three-month period ended June 30, 2000
was 3.43 compared with 2.07 for the same period in 1999. Purchases of product
lines and their associated raw material and finished goods inventories have
resulted in abnormally high inventory levels.
The Company's ability to use Net Operating Loss Carryforwards (NOLs) to offset
future income is dependant upon certain limitations as a result of the pooling
transaction with Vismed and the tax laws in effect at the time the NOLs can be
utilized. The Tax Reform Act of 1996 significantly limits the annual amount that
can be utilized for certain of these carryforwards as a result of change of
ownership.
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 it
experienced unfavorable profit reductions due to currency exchange fluctuations
or inflation with its foreign customers.
Impact of New Accounting Pronouncements
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective date of FASB
Statement No. 133." SFAS 133 establishes accounting and reporting standards for
derivative instruments and recognition of all derivatives as assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. SFAS 133 is now effective for fiscal years beginning
after June 15, 2000. In addition, the FASB has issued SFAS 138 which amends
certain parts of SFAS 133. The Company believes that the adoption of SFAS 133
and 138 will not have any material effect on the financial statements of the
Company.
The Company has reviewed all other recently issued accounting standards in order
to determine their effects, if any, on the results of operations or financial
position. Based on that review, the Company believes that none of these
pronouncements will have a significant effect on current or future earnings or
operations.
Upgrades
To garner sales, the Company offers the ultrasonic Precisionist system with an
unconditional arrangement under which the customer may trade in its Precisionist
system to upgrade to a Precisionist ThirtyThousand(TM) Ocular Surgery
Workstation(TM) . Under this arrangement, the customer receives full credit for
the trade-in purchase price of the Precisionist system against the price of the
new Precisionist ThirtyThousand(TM) Ocular Surgery Workstation(TM). As of June
30, 2000, the Company had distributed approximately 51 Precisionist systems
under this provision. If all of these customers were to exercise their upgrade
privilege, the Company would exchange the Precisionist system for our new
Precisionist ThirtyThousand(TM) Ocular Surgery Workstation(TM) and refurbish the
ultrasonic Precisionist system and sell them in the international market. There
were no trade-in sales for the year 1999, and no trade-ins for the three months
ended June 31, 2000.
Part II: Other Information
On June 26, 1998, the Company entered into a Co-Distribution Agreement (the
"Co-Distribution Agreement") with Pharmacia & Upjohn Company ("Pharmacia &
Upjohn") and National Healthcare Manufacturing Corporation ("National
Healthcare") which provides for the marketing and sale of a range of ophthalmic
products. Under the terms of the Co-Distribution Agreement, the Company,
Pharmacia & Upjohn, and National Healthcare, will offer a comprehensive package
of products to cataract surgeons, including cataract surgical equipment,
intraocular lens implants, intraocular pharmaceuticals, surgical instruments and
sterile procedural packs. The Company will provide the Precisionist Thirty
Thousand(TM) for distribution and sale under the Co-Distribution Agreement. The
Pharmacia & Upjohn products to be distributed as part of the Co-Distribution
Agreement include the Healon and Healongv viscoelastic solution and the CeeOn
line of foldable, small intraocular lens implants, designed to replace the
natural lens removed during cataract surgery. This agreement was renewed in
April of 2000.
On July 23, 1998, the Company entered into an Agreement for Purchase and Sale of
Assets (the "Agreement") with the Humphrey Systems Division of Carl Zeiss, Inc.
("Humphrey Systems") to acquire the ownership and manufacturing rights to
certain assets of Humphrey Systems that are diagnostic instruments. These
include the Ultrasonic Biometer Model 820, the A Scan System, A/B Scan System
Model 837, the Ultrasound Pachymeter Model 855, and the Ultrasound Biomicroscope
Model 840, and all accessories, packaging, and end-user collateral materials for
each of the product lines. The sum of the agreement was $500,000, payable in the
form of 78,947 shares of Common Stock which were issued to Humphrey Systems, and
26,316 shares of Common Stock which were issued to Douglas Adams. If the net
proceeds received by Humphrey Systems from the sale of the shares issued
pursuant to the Agreement is less than $375,000, after payment of commissions,
transfer taxes and other expenses relating to the sale of such shares, the
Company is required to issue additional shares of Common Stock, or pay
additional funds to Humphrey Systems as is necessary to increase Humphrey
System's net proceeds from the sale of the assets to $375,000. Since Humphrey
Systems realized only $162,818 from the sale of 78,947 shares of Paradigm's
common stock, Paradigm issued 80,000 additional shares in January 1999, to
enable Humphrey Systems to receive its guaranteed amount. The amount of $21,431
was paid to the Company as excess proceeds from the sale of this additional
stock.
The rights to the ophthalmic diagnostic instruments that have been purchased
from Humphrey Systems under the Agreement complement both the Company's cataract
surgical equipment and its ocular Blood Flow Analyzer. The Ultrasonic Biometer
calculates the prescription for the intraocular lens to be implanted during
cataract surgery. The Ultrasound Pachymeter measures corneal thickness for the
new refractive surgical applications that eliminate the need for eyeglasses and
for the optometric applications including contact lense fitting. The A/B Scan
System combines the Ultrasonic Biometer and ultrasound imaging for advanced
diagnostic testing throughout the eye, and is a viable tool for retinal
specialists. The Ultrasound Biomicroscope utilizes microscopic digital
ultrasound resolution for detection of tumors and improved glaucoma management.
In October 1999, the Company entered into an agreement with Mentor Corp. to
purchase the rights to develop, manufacture, market and distribute their Phaco
product line. The phaco line includes the Mentor SIStem(TM) , the Odyssey(TM),
and the Surg-E-Trol(TM). The sum of the agreement was $1,500,000, payable in the
form of 485,751 shares of Common Stock which were issued to Mentor Corp.
Shipments of the Mentor SIStem(TM)commenced immediately upon purchase and have
continued in the second quarter of 2000.
In November 1999, the Company entered into a Mutual Release and Settlement
Agreement with the manufacturer of its Precisionist ThirtyThousand(TM) Ocular
Surgery Workstation(TM) and Photon(TM) laser cataract systems, in which the
Company terminated its Manufacturing Agreement and completed the purchase from
them of outstanding finished goods and raw material inventory. The sum of the
agreement was $1,386,750, payable in the form of 300,000 shares of Common Stock.
The payment included the outstanding payables to this firm.
In June 2000, the Company entered into a pooling of interests reorganization
with Vismed. Vismed, a privately held company located in California, was founded
in 1989 and manufactures and distributes Dicon branded diagnostic products.
These products include a perimeter used in the detection and monitoring of
glaucoma and a corneal topographer used to measure the curvature of the cornea
which is useful the fitting of contact lenses and refractive surgery. The
transaction was completed in exchange for 921,500 shares of Common Stock. Under
the terms of the transaction and in accordance with the requirements of a
pooling all Vismed employee stock options were converted into the Company's
stock option plan.
In June 2000 the Company completed the purchase of Ocular Blood Flow Ltd. (OBF).
OBF manufactures a blood flow analyzer representing proprietary technology for
measuring blood flow to the eye. Many clinicals have been performed
demonstrating the clinical efficacy of the product in glaucoma.
Strategically the company feels the Vismed and OBF acquisitions add to the
diagnostic product line-up and provide experienced management to assist the
Company in its transition into the growth phase.
Overall, the Company has invested heavily into all departments in anticipation
of FDA Approval for it's Photon Laser Surgical System and the new product lines
obtained through the acquisitions.
Item 1. Legal Proceedings
.........
The Company is not a party to any legal proceedings outside the ordinary course
of its business or to any other legal proceedings which, if adversely
determined, would have a material adverse effect on the Company or its business.
Item 6. Exhibits and Reports on Form 8-K
None.
(a) Exhibits
--------
The following Exhibits are filed herewith pursuant
to Rule 601 of Regulation S-B or are incorporated by
reference to previous filings.
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
<S> <C>
2.1 Amended Agreement and Plan of Merger between Paradigm Medical Industries, Inc., a California
corporation and Paradigm Medical Industries, Inc., a Delaware corporation(1)
3.1 Certificate of Incorporation(1)
3.2 Bylaws(1)
4.1 Warrant Agency Agreement with Continental Stock Transfer & Trust Company(3)
4.2 Specimen Common Stock Certificate (2)
4.3 Specimen Class A Warrant Certificate(2)
4.4 Form of Class A Warrant Agreement(2)
4.5 Underwriter's Warrant with Kenneth Jerome & Co., Inc.(3)
4.6 Warrant to Purchase Common Stock with Note Holders re bridge financing(1)
4.7 Warrant to Purchase Common Stock with Mackey Price & Williams(1)
4.8 Warrant to Purchase Common Stock with Win Capital Corp.(4)
4.9 Specimen Series C Convertible Preferred Stock Certificate(4)
4.10 Certificate of the Designations, Powers, Preferences and Rights of the Series C
Convertible Preferred Stock(4)
4.11 Specimen Series D Convertible Preferred Stock Certificate (7)
4.12 Certificate of the Designations, Powers, Preferences and Rights of the Series D Convertible
Preferred Stock (10)
4.13 Warrant to Purchase Common Stock with Win Capital Corp. (7)
4.14 Warrant to Purchase Common Stock with Cyndel & Co. (7)
4.15 Warrant Agreement with KSH Investment Group, Inc. (7
4.16 Warrant to Purchase Common Stock with John R. Hemmer (7)
4.17 Warrant to Purchase Common Stock with R.F. Lafferty & Co., Inc.(7)
4.18 Warrant to Purchase Common Stock with Dr. David B. Limberg
4.19 Warrant to Purchase Common Stock with John R. Hemmer
10.1 Exclusive Patent License Agreement with Photomed(1)
10.2 Consulting Agreement with Dr. Daniel M. Eichenbaum(1)
10.3 Lease Agreement with Eden Roc (4)
10.4 1995 Stock Option Plan and forms of Stock Option Grant Agreements(1)
10.5 Form of Promissory Note with Note Holders re bridge financing(1)
10.6 Co-Distribution Agreement with Pharmacia & Upjohn Company and National
Healthcare Manufacturing Corporation (5)
10.7 Agreement for Purchase and Sale of Assets with Humphrey Systems Division of Carl Zeiss, Inc.(5)
10.8 Employment Agreement with Thomas F. Motter(6)
10.9 Asset Purchase Agreement with Mentor Corp., Mentor Opthalmics, Inc., and Mentor Medical, Inc. (8)
10.10 Transition Services Agreement with Mentor Corp., Mentor Opthalmics, Inc., and Mentor Medical, Inc. (8)
10.11 Severance Agreement and General Release with Michael W. Stelzer (8)
10.12 Consulting Agreement with Dr.Michael B. Limberg (8)
10.13 Renewed Consulting Agreement with Dr. Michael B. Limberg
10.14 Mutual Release and Settlement Agreement with Zevex International, Inc. (8)
10.15 Consulting Agreement with Douglas Adams (8)
10.16 Agreement and Plan of Reorganization with Paradigm Subsidiary, Inc. and Vismed, Inc. d/b/a
Dicon (9)
10.17 Agreement and Plan of Merger with Paradigm Subsidiary, Inc. and Vismed, Inc. d/b/a Dicon (9)
10.18 Registration rights Agreement with Paradigm Subsidiary, Inc. and certain shareholders of Vismed, Inc.,
d/b/a Dicon (9)
10.19 Indemnification Agreement with Paradigm Subsidiary, Inc. and certain shareholders of Vismed,
Inc., d/b/a Dicon (9)
10.20 Consulting Agreement with Cyndel & Co., Inc.
<PAGE>
10.21 Stock Purchase Agreement with Ocular Blood Flow, Ltd. and Malcolm Redman
10.22 Consulting Agreement with Malcolm Redman
10.23 Royalty Agreement with Malcolm Redman
10.24 Registration Rights Agreement with Malcolm Redman
27. Financial Data Schedule
----------------------------
(1) Incorporated by reference from Registration Statement on Form SB-2, as filed on March 19, 1996.
(2) Incorporated by reference from Amendment No. 1 to Registration Statement on Form SB-2, as
filed on May 14, 1996.
(3) Incorporated by reference from Amendment No. 2 to Registration Statement on Form SB-2, as
filed on June 13, 1996.
(4) Incorporated by reference from Annual Report on Form 10-KSB, as filed on April 16, 1998
(5) Incorporated by reference from Quarterly Report on Form 10-QSB, as filed on August 19, 1998.
(6) Incorporated by reference from Quarterly Report on Form 10-QSB, as filed on November 12, 1998.
(7) Incorporated by reference from Registration Statement on Form SB-2, as filed on April 29, 1999.
(8) Incorporated by reference from Annual Report on Form 10-KSB, as filed on March 30, 2000.
(9) Incorporated by reference from Report on Form 8-K, as filed on June 5, 2000.
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(b) Reports on form 8-K
-------------------
On February 17, 2000, the Company filed a report on Form 8-K regarding entering
into a letter of intent to acquire Vismed, Inc., a California Corporation, d/b/a
Dicon.
On June 5, 2000, the Company filed a Report on Form 8-K regarding completion of
the transaction to acquire Vismed, Inc. d/b/a Dicon.
On August 7, 2000, the Company filed an Amended Report on Form 8-K regarding
completion of the transaction to acquire Vismed, Inc. d/b/a/ Dicon.
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.
REGISTRANT
PARADIGM MEDICAL INDUSTRIES, INC.
---------------------------------
Registrant
DATED: August 14, 2000 By: Mark R. Miehle
-----------------
Mark R. Miehle
President and Chief Operating Officer
DATED: August 14, 2000 By: Thomas F. Motter
----------------
Thomas F. Motter
Chairman of the Board, Chief
Executive Officer and Chief Financial Officer
