FORM
8-K/A-3
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of Earliest Event Reported): August 12, 2008
PARADIGM
MEDICAL INDUSTRIES, INC.
(Exact
name of registrant as specified in this Charter)
|
Delaware
|
0-28498
|
87-0459536
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
|
|
|
|
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
Does Not
Apply
(Former
name or former address, if changed since last report)
SECTION
4 Matters Related
to Accountants and Financial Statements
ITEM
4.02 Non-reliance of
Previously Issued Financial Statements or Related Audit Report or Completed
Interim Review
On December 17, 2007, Paradigm
Medical Industries, Inc. (the "Company") received a letter from the Securities
and Exchange Commission (the "Commission") stating that the staff had reviewed
the financial statements and related documents in the Company's Form 10-KSB for
the fiscal year ending December 31, 2006. As a result of its review,
the staff had several comments on the disclosures in the financial statements of
the December 31, 2006 Form 10-KSB. The letter additionally stated
that in future filings the Company's Form 10-KSB should be revised in response
to the comments.
On March 14, 2008, the Company filed
a letter with the Commission responding to the December 17, 2007 comment letter
from the Commission. After reviewing the Company's responses to the
December 17, 2007 comment letter, the Commission staff arranged for a telephone
conference with the Company's executive officers on March 26, 2008 to discuss
the Company's March 14, 2008 letter. The staff expressed
its view during the telephone conference that the $5,139,010 in convertible
notes the Company issued to investors during the period from April 27, 2005 to
December 24, 2007 to obtain funding for the Company's ongoing
operations contained embedded derivatives. As a
consequence, in disclosing these convertible notes in the financial statements
of the Company's Form 10-KSB for the fiscal year ending December 31, 2006, the
Company did not correctly follow the disclosure requirements of Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for Derivative
Instruments and Hedging Activities, which was issued by the Financial
Accounting Standards Board. The staff requested that in order to
comply with the disclosure requirements of SFAS No. 133, the Company would need
to value the convertible notes in the financial statements of its Form-KSB using
a binomial lattice model that values all embedded derivatives in the convertible
notes, such as conversion options, interest rate resets and put
options.
On April 17, 2008 the Company's
executive officers had another telephone conference with the Commission staff to
discuss further issues concerning compliance with SFAS No. 133 by valuing the
convertible notes in the financial statements using the binomial lattice
model. The Company was advised during the conference by the
Commission staff that it would not be required to amend its Form 10-KSB for the
fiscal years ended December 31, 2006 and 2005, but the Form 10-KSB for the
fiscal year ended December 31, 2007 must include revised financial information
and disclosures for fiscal 2006 and 2005 as a result of valuing the convertible
notes using the binomial lattice model.
On April 24, 2008, the Company
entered into an agreement with Monarch Bay Management Company to value the
Company's convertible notes pursuant to SFAS No. 133 using the binomial lattice
model. Monarch Bay completed its valuation work on the convertible
notes on May 5, 2008. The Company paid a total of $32,000 for Monarch
Bay's valuation report.
Upon receipt of Monarch Bay's
valuation report on the Company's convertible notes, Louis A. Mostacero, the
Company's Vice President of Finance and Chief Financial Officer, refigured and
recalculated the financial statements in the Company's Form 10-KSB reports for
the years ended December 31, 2006 and 2005 and the Company's Form 10-QSB reports
for the periods ended March 31, 2006, June 30, 2006, September 30, 2006, March
31, 2007, June 30, 2007, and September 30, 2007. Mr. Mostacero
completed the revisions of these financial statements on May 9,
2008. On May 9, 2008, an initial draft of these revised financial
statements was forwarded to the Company's independent accountants, Chisholm,
Bierwolf & Nilson, LLC, and the Company's legal counsel, Mackey Price
Thompson & Ostler.
On May 12, 2008, on the basis of
discussions with the Company's independent accountants and legal counsel, the
Company's executive officers determined that the financial statements in the
Form 10-KSB reports for the years ended December 31, 2006 and 2005, and the Form
10-QSB reports for the periods ended March 31, 2006, June 30, 2006, September
30, 2006, March 31, 2007, June 30, 2007, and September 30, 2007, should no
longer be relied upon because of errors in such financial
statements. These errors required material changes to the Company's
financial statements for the years ended December 31, 2006 and 2005 and the
interim periods for the years ended December 31, 2007 and 2006.
On May 16, 2008, the Company filed a
Form 10-KSB/A-1 report for the fiscal year ended December 31, 2007, which
included revised financial information and disclosures for the years ended
December 31, 2006 and 2005, as a result of valuing the convertible notes using
the binomial lattice model. Also included in the Form 10-KSB/A-1
report for the fiscal year ended December 31, 2007 were revised and restated
financial statements for the periods ended March 31, 2006, June 30, 2006,
September 30, 2006, March 31, 2007, June 30, 2007, and September 30,
2007.
On May 27, 2008, the Company received
a letter from the Commission stating that the staff had reviewed the financial
statements and related documents in the Company's Form KSB/A-1 for the fiscal
year ended December 31, 2007. As a result of the review, the staff
had several comments on the financial statements and related
disclosures in the Form 10-KSB/A-1 for the fiscal year ended December 31,
2007.
On June 23, 2008, the Company filed a
letter with the Commission responding to the May 27, 2008 comment letter from
the Commission. On July 22, 2008, the Company received a letter from
the Commission stating that the Commission staff had received the Company's
response letter dated June 23, 2008 and had additional comments concerning the
Form 10-KSB for the fiscal year ended December 31, 2007 and the Company's Form
10-QSB for the quarter ended December 31, 2008. On July 22, 2008 and
August 12, 2008, the Company's executive officers had telephone conferences with
the Commission staff to discuss further issues concerning compliance with SFAS
No. 133 in valuing the convertible notes in the financial statements of the Form
10-KSB/A-2 for the fiscal year ended December 31, 2007 and the Form 10-QSB for
the quarter ended March 31, 2008.
On August 12, 2008, on the basis of
discussions with the Commission staff, the Company's executive officers
determined that the financial statements and related disclosures in the Form
10-KSB/A-2 report for the fiscal year ended December 31, 2007, which report
included revised financial information and deleted disclosures for the fiscal
years ended December 31, 2006 and 2005, and the Form 10-QSB report for the
quarter ended March 31, 2008 should no longer be relied upon because of errors
in such financial statements. The errors related to the Company not
correctly following the disclosure requirements of SFAS No. 133 when valuing the
convertible notes in the financial statements of such Form 10-KSB and Form
10-QSB reports. These errors required material changes to the
financial statements and related disclosures in the Form 10-KSB for the fiscal
year ended December 31, 2007, including the revised financial information and
related disclosures for the fiscal years ended December 31, 2006 and 2005, which
were included in said Form 10-KSB for the fiscal year ended December 31, 2007,
and the Form 10-Q report for the quarter ended March 31, 2008.
As the certifying officers, Mr.
Mostacero and I believe that, as of the end of the years ended December 31,
2007, 2006 and 2005, the Company's disclosure controls and procedures were not
effective and adequate because, in disclosing the convertible notes in the
financial statements of the Form 10-KSB reports for the years ended December 31,
2007, 2006 and 2005 and the interim periods for the years ended December 31,
2007 and 2006, the Company did not correctly follow the disclosure requirements
of SFAS No. 133 when valuing the convertible notes in the financial statements
of such reports.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
|
|
PARADIGM
MEDICAL INDUSTRIES, INC.
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
Date:
August 18, 2008
|
By /s/
Raymond P.L. Cannefax
|
|
|
Raymond
P.L. Cannefax
|
|
|
President
and Chief Executive Officer
|