Edgar Filing: PARADIGM MEDICAL INDUSTRIES INC

As filed with the Securities and Exchange Commission on April 21, 2004
Commission File No. 333-103061
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

PARADIGM MEDICAL INDUSTRIES, INC.
(Name of small business issuer in its charter)

Delaware 3841 87-0459536
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation
or organization) Classification Code Number) Identification Number)

2355 South 1070 West
Salt Lake City, Utah 84119
(801) 977-8970
(Address and telephone number of registrant's principal
executive offices and principal place of business)

John Y. Yoon, President and Chief Executive Officer
2355 South 1070 West
Salt Lake City, Utah 84119
(801) 977-8970
(Name, address and telephone number of agent for service)
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Copies to:

Randall A. Mackey, Esq.
Mackey Price Thompson & Ostler
350 American Plaza II
57 West 200 South
Salt Lake City, Utah 84101-3663
Telephone: (801) 575-5000

Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reimbursement plans check the
following box. |X|

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

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CALCULATION OF REGISTRATION FEE

Title of each Proposed Proposed
class of Amount maximum maximum Amount of
securities to be to be offering price aggregate registration
registered registered per Share offering price fee

Resale of Common Stock issuable upon exercise of Class A Warrants 1,000,000 $ 7.50 $7,500,000 (1)
Resale of Common Stock issuable upon exercise of Kenneth Jerome
Warrants................................................. 100,000 8.125 812,500 (1)
Resale of Common Stock issuable upon exercise of Kenneth Jerome
Warrants.................................................. 100,000 7.50 750,000 (1)
Resale of Common Stock issuable upon exercise of Cyndel Warrants 150,000 4.00 600,000 (1)
Resale of Common Stock issuable upon exercise of Cyndel Warrants 75,000 4.00 300,000 (1)
Resale of Common Stock issuable upon exercise of Limberg Warrants 100,000 4.00 400,000 (1)
Resale of Common Stock issuable upon exercise of Limberg Warrants 50,000 4.75 237,500 (1)
Resale of Common Stock issuable upon exercise of Limberg Warrants 50,000 6.75 337,500 (1)
Resale of Common Stock issuable upon exercise of Limberg Warrants 50,000 4.00 200,000 (1)
Resale of Common Stock issuable upon exercise of Consulting for
Strategic Growth Warrants................................ 40,000 3.50 140,000 (1)
Resale of Common Stock issuable upon exercise of Hemmer Warrants 75,000 7.50 562,500 (1)
Resale of Common Stock issuable upon exercise of Kohn and
Sucoff Warrants.......................................... 100,000 4.00 400,000 (1)
Resale of Common Stock issuable upon conversion of Series
E Preferred Stock....................................... 1,706,432 1.875 3,199,560 (1)
Resale of Common Stock issuable upon exercise of Series
E Preferred Warrants.................................... 241,095 4.00 964,380 (1)
Resale of Common Stock issuable upon conversion of Series
F Preferred Stock....................................... 2,181,042 1.875 4,089,454 (1)
Resale of Common Stock issuable upon exercise of Series
F Preferred Warrants.................................... 230,589 4.00 922,356 (1)
Resale of Common Stock issuable upon exercise of Options........ 650,000 4.00 2,600,000 (1)
Resale of Common Stock issuable upon exercise of Options........ 359,632 5.00 1,798,160 (1)
Resale of Common Stock issuable upon exercise of Options........ 300,000 6.00 1,800,000 (1)
Resale of Common Stock issuable upon exercise of Options........ 2,285,500 2.75 6,285,125 (1)
Resale of Common Stock issuable to certain holders of Common Stock 425,000 4.00 1,700,000 (1)
Resale of Common Stock issuable to certain holders of Common Stock 1,307,484 2.125 2,778,404 (1)
Resale of Common Stock issuable to certain holders of Common Stock 425,580 2.14 910,741 (1)
Resale of Common Stock issuable to certain holders of Common Stock 1,968,509 1.16 2,283,470 (1)
Resale of Common Stock issuable upon exercise of Limberg Warrants 50,000 4.00 200,000 (1)
Resale of Common Stock issuable upon exercise of Kaplan Warrants 100,000 3.00 300,000 (1)
Resale of Common Stock issuable upon exercise of Cyndel Warrants 250,000 3.00 750,000 (1)
Resale of Common Stock issuable upon exercise of Rodman &
Renshaw Warrants......................................... 35,000 2.00 70,000 (1)
Resale of Common Stock issuable upon exercise of Warrants....... 788,750 .25 197,188 18.14
Resale of Common Stock issuable to certain holders of common stock 3,654,945 .25 913,736 84.06
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Total Registration Fee.................................... $ 102.20
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(1) No registration fee is required as securities were previously
registered by Form SB-2 Registration Statement, No. 333- 2496,
effective as of July 10, 1996; Form SB-2 Registration Statement No.
333-57711, effective as of September 14, 1998; Form SB-2 Registration
Statement No. 333-68471, effective as of January 4, 1999; Form SB-2
Registration Statement No. 333-77267, effective as of May 7, 1999; Form
S-3 Registration Statement No. 333-93725, effective as of January 6,
2000; Form S-3 Registration Statement No. 333-44154, effective as of
September 1, 2000; Form S-3 Registration Statement No. 333-50846,
effective as of December 8, 2000; Form S-3 Registration Statement No.
333- 66742, effective as of August 22, 2001; Form S-3 Registration
Statement No. 333-75912, effective as of June 21, 2002; and Form S-3
Registration Statement No. 333-97837, effective as of September 26,
2002. Pursuant to Rule 429, this is a combined registration statement
which relates to the securities previously registered by the earlier
registration statements and the securities being registered by this
registration statement. The number of securities being carried forward,
which were previously registered by the earlier registration
statements, is 14,479,693 shares of common stock, and the total amount
of the previously paid registration fees associated with such
securities that were previously registered is $22,601.54. The number of
shares being registered by this registration statement is 18,849,558
shares.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Commission acting pursuant to said Section 8(a) may determine.

PROSPECTUS
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18,849,558 Shares of Common Stock

PARADIGM MEDICAL INDUSTRIES, INC.

Paradigm Medical Industries, Inc. is registering for resale a total of
18,849,558 shares of common stock. Our securities are quoted on the
Over-the-Counter Bulletin Board under the symbols PMED.OB and PMEDW.OB. On April
19, 2004, the last reported sale price for our common stock was $.16 per share
and the last reported sale price for our Class A warrants was $.03 per warrant.

We are registering the resale of common stock for certain shareholders
and will only receive proceeds to the extent that outstanding warrants or
options are exercised. The exercise price for all of the outstanding warrants
and options exceeds the current trading price for our common stock and, as a
result, the outstanding warrants and options are not likely to be exercised
unless the trading price increases substantially. There are only 200,000 shares
of our common stock underlying these warrants and options that are exercisable
for less than $.20 per share. All other shares of our common stock being
registered are either outstanding or will be issued upon conversion of
outstanding preferred stock, and we will derive no proceeds from the conversions
or subsequent resales of such shares.

Investing in the common stock involves risks that are described in the
"Risk Factors" section beginning on page 6 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is April 21, 2004.

PROSPECTUS SUMMARY

This summary highlights some information from this prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors and the financial statements.

The Company

We develop, manufacture, source, market and sell ophthalmic surgical
and diagnostic instrumentation and related accessories, including disposable
products. Our surgical equipment is designed for minimally invasive cataract
treatment. A cataract is a condition, which largely affects the elderly
population, in which the natural lens of the eye hardens and becomes cloudy,
thereby reducing visual acuity. Treatment consists of removal of the cloudy lens
and replacement with a synthetic lens implant, which restores visual acuity.
Cataract surgery is the single largest volume and revenue producing outpatient
surgical procedure for ophthalmologists worldwide. The Health Care Finance
Administration reports that in the United States approximately two million
cataract removal procedures are performed annually, making this the largest
outpatient procedure reimbursed by Medicare. Most cataract procedures are
performed using a method called phacoemulsification or "phaco", which employs a
high frequency (40 kHz to 60 kHz) ultrasonic probe needle device to fragment the
cataract while still in the eye and remove it in pieces by suction through a
small incision.

We sell our equipment and related products in all countries of the
world in which we are permitted to do so. The nature of the regulatory approval
processes in those countries vary by country but, in general terms, follow the
approach of the regulatory approval processes of the United States Food and Drug
Administration, or FDA, and the approval processes of the countries in the
European Union. The status of specific approvals is detailed in the table in the
Business section of this prospectus.

We market two cataract surgery systems with related accessories and
disposable products. Our cataract removal system, the Photon(TM) laser system,
is a laser cataract surgery system marketed as the next generation of cataract
removal. The Photon(TM) product has yet to be approved by the Food and Drug
Administration. Except for the Photon(TM) laser system, which can only be sold
in countries outside of the United States, our products can be sold in the
United States and in foreign countries including but not limited to Argentina,
Australia, Bangladesh, Borneo, Brazil, Canada, China, Czechoslovakia, Egypt,
France, Germany, Greece, Hong Kong, India, Israel, Italy, Japan, Jordan, Korea,
Malaysia, Mexico, New Zealand, Pakistan, Peru, Poland, Puerto Rico, Russia,
Saudi Arabia, Spain, Sri Lanka, Taiwan, Thailand, Turkey, United Kingdom, and
United Arab Emirates . Both the Photon(TM) and the Precisionist ThirtyThousand
(TM) are manufactured as an Ocular Surgery Workstation(TM). At present, because
the Photon(TM) has not received FDA approval, it does not provide significant
revenue to us. We are in the process of completing the clinical trials in order
to file for FDA approval. However, due to the uncertainty surrounding the
timetable for obtaining FDA approval and the lack of significant revenue from
other surgical products, we have recorded an inventory reserve against the
majority of inventory associated with the Photon(TM) and Precisionist Thirty
Thousand(TM).

Our diagnostic products include a P55 pachmetric analyzer, a P37
Ultrasonic A/B Scan, a P40 UBM Ultrasound Biomicroscope, a perimeter, a corneal
topographer and the Blood flow Analyzer (TM). The diagnostic ultrasonic
products, including the P55 pachymetric analyzer, the P37 Ultrasonic A/B Scan
and the P40 UBM Ultrasound Biomicroscope were acquired from Humphrey Systems, a
division of Carl Zeiss, Inc. in 1998. We developed and offered for sale in the
fall of 2000 the P45, which combines the A/B scope and the P40 UBM Biomicroscope
in one machine. The perimeter and the corneal topographer were added when we
acquired the outstanding shares of the stock of Vismed, Inc. d/b/a/ Dicon(TM) in
June 2000. We acquired Ocular Blood Flow, Ltd. in June of 2000, whose principal
product is the Blood Flow Analyzer(TM). This product is designed for the
measurement of intraocular pressure and pulsatile ocular blood flow volume for
detection and treatment of glaucoma. We are currently attempting to develop
additional applications for all of our diagnostic products.

We rely upon several products for revenues. For the fiscal year ended
December 31, 2003, 36% of our revenues were derived from the Dicon (TM)
diagnostic products sales (the perimeter and corneal topographer), 16% of
revenues from Blood Flow Analyzer(TM) sales, 20% of revenues from P40 and P45
UBM Ultrasound Biomicroscope sales, 9% of revenues from Humphrey Systems
diagnostic product sales (the P55 pachymetric analyzer, the P20 A-Scan and the
P37 A/B Scan), 11% of revenues from cataract removal surgery sales, including
the sale of our SIStem(TM) and Odyssey(TM) products lines, and 8% of revenues
from services, disposables and other sales. For the fiscal year ended December
31, 2002, 28% of our revenues were derived from the Dicon(TM) diagnostic
products sales (the perimeter and the corneal topographer), 9% of revenues from
Blood Flow Analyzer(TM) sales, 24% of revenues from the P40 and P45 UBM
Ultrasound Biomicroscope sales, 11% of revenues from Humphrey systems diagnostic
products sales (the P55 pachymetric analyzer, the P20 A-Scan and the P37 A/B
Scan), 5% of revenues from cataract removal surgery sales, and 23% of revenues
from services, disposables and other sales. Our principal executive offices are
located at 2355 South 1070 West, Salt Lake city, Utah 84119 and our telephone
number is (801) 977-8970.

Audited revenues for the fiscal year ended December 31, 2003 were
$3,059,000 as compared to $5,368,000 for the comparable period for fiscal 2002.

On March 18, 2004, our board of directors appointed John Y. Yoon as
President and Chief Executive Officer of the company, replacing Jeffrey F.
Poore, who served in those positions from March 19, 2003 to March 18, 2004. On
March 23, 2004, our board of directors appointed Aziz A. Mohabbat as Vice
President of Operations and Chief Operating Officer of the company, replacing
David I. Cullumber who resigned as Chief Operating Officer and Chief Technical
Officer on March 22, 2004. Mr. Mohabbat had previously served as Chief Operating
Officer of the Company from August 2002 to March 2003, and as Vice President of
Operations from 2001 to March 2003. On June 23, 2003, our board of directors
appointed Gregory Hill as Vice President of Finance, Treasurer and Chief
Financial Officer of the company, replacing Heber C. Maughan, who resigned as
Vice President of Finance, Treasurer and Chief Financial Officer. Mr. Hill
resigned from his positions on December 5, 2003. The board of directors has not
yet appointed a new Vice President of Finance and Chief Financial Officer.

The Offering

Securities Offered .............. The resale of 18,849,558 shares of common
stock, consisting of the following:

o The resale of 1,000,000 shares
issuable upon exercise of Class A
warrants with an exercise price of
$7.50 per share.

o The resale of 200,000 shares
issuable upon exercise of warrants
by Kenneth Jerome & Co. with
exercise prices ranging from $7.50
to $8.l25 per share.

o The resale of 475,000 shares
issuable upon exercise of warrants
by Cyndel & Co., Inc. with exercise
prices ranging from $3.00 to $4.00
per share.

o The resale of 300,000 shares
issuable upon exercise of warrants
by Dr. Michael B. Limberg with
exercise prices ranging from $4.00
to $6.75 per share.

o The resale of 40,000 shares issuable
upon exercise of warrants by
Consulting for Strategic Growth,
Ltd. with exercise prices ranging
from $2.78 to $3.89 per share.

o The resale of 75,000 shares issuable
upon the exercise of warrants by
John W. Hemmer with exercise price
of $7.50 per share.

o The resale of 50,000 shares issuable
upon exercise of warrants by Helen
Cohn with an exercise price of $4.00
per share.

o The resale of 50,000 shares issuable
upon the exercise of warrants by
Ronit Sucoff with an exercise price
of $4.00 per share.

o The resale of 100,000 shares
issuable upon the exercise of
warrants by Barry Kaplan Associates
with an exercise price of $3.00 per
share.

o The resale of 35,000 shares issuable
upon the exercise of warrants by
Rodman & Renshaw, Inc. with an
exercise price of $2.00 per share.

o The resale of 1,706,432 shares
issuable upon conversion of Series E
preferred stock with a conversion
price of $1.875 per share.

o The resale of 241,095 shares
issuable upon the exercise of
warrants by Series E preferred
holders with an exercise price of
$4.00 per share.

o The resale of 2,181,042 shares
issuable upon conversion by Series F
preferred stock with a conversion
price of $1.875 per share.

o The resale of 230,589 shares
issuable upon exercise of warrants
by Series F preferred holders with
an exercise price of $4.00 per
share.

o The resale of 788,750 shares
issuable upon exercise of warrants
by Paul L. Archambeau, M.D., John H.
Banzhaf, Daniel S. Lipson, Douglas
A. MacLeod, M.D., Douglas A.
MacLeod, M.D. Profit Sharing Trust,
St. Mark's Eye Institute, Milan
Holdings, Ltd., Frank G. Mauro and
Delbert D. Reichardt with an
exercise price of $.25 per share.

o The resale of 300,000 shares
issuable upon exercise of options by
executive officers, employees and
directors with an exercise price of
$6.00 per share.

o The resale of 359,632 shares
issuable upon exercise of options by
executive officers, employees and
directors with an exercise price of
$5.00 per share.

o The resale of 650,000 shares
issuable upon exercise of options by
executive officers, employees and
directors with an exercise price of
$4.00 per share.

o The resale of 2,285,500 shares
issuable upon exercise of options by
executive officers, employees and
directors with an exercise price of
$2.75 per share.

o The resale of 7,781,518 shares.

Common stock outstanding
prior to the offering ........... 25,509,868 shares.

Common stock outstanding
after the offering .............. 44,359,426 shares.

Use of proceeds.................. All funds received by us upon the exercise of
the warrants and options will be used for
general corporate purposes. We will not
receive any proceeds from the conversion of
the shares of Series E preferred stock or
Series F preferred stock.

Risk Factors/Dilution............ The offering involves a high degree of risk.

Nasdaq symbols
Common stock................ PMED.OB
Class A warrants............ PMEDW.OB

RISK FACTORS

Before you invest in our common stock, you should be aware of the risks
described below which constitute material risks to potential investors. You
should consider carefully these risk factors together with all of the other
information included in this prospectus before you decide to invest in our
common stock. If any of the following risks actually occurs, our business,
financial condition and results of operations could suffer, in which case the
trading price of our common stock could decline. No investment should be made by
any person who is not in a position to lose the entire amount of his investment.

Special Note Regarding Forward-Looking Statements

Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward-looking" information. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this Prospectus. The risk factors noted in this section and other
factors noted throughout this prospectus, including certain risks and
uncertainties, could cause our actual results to differ materially from those
contained in any forward-looking statement.

Our auditors have expressed substantial doubt about our ability to continue as a
going concern.

Due to our significant recurring losses and our inability to generate
sufficient cash flows from operations to satisfy our liabilities and sustain
operations, our auditors have expressed substantial doubt about our ability to
continue as a going concern. Although we have had success in raising working
capital from the sale of our common stock in the past, the going concern
language in our auditors' report could negatively affect our ability to raise
such funds in the future. Some investors are unwilling to invest with companies
that have going concern language in the auditors' report and others demand
substantial discounts from the market price. Unless we are able to raise
additional working capital through the sale of our common stock, we will not be
able to continue the development of our products nor will we be able to pay our
existing current liabilities, which could result in protection under bankruptcy
laws. Under certain conditions, including but not limited to having judgments
rendered against us in a court of law, a group of creditors could force us into
bankruptcy due to our inability to pay the liabilities arising out of such
judgments. At this time, we are unable to assess the likelihood that we would
seek bankruptcy protection in the near future. There can be no assurance that we
will be successful in raising working capital from the sale of our common stock.

We have limited working capital, have accumulated significant losses, and expect
our losses to continue.

As of December 31, 2003, we had a deficit working capital of
$(197,000). Our accumulated deficit was $53,656,000 as of December 31, 2002, and
$56,817,000 as of December 31,2003. Our net loss was $11,155,000 for the fiscal
year ended December 31, 2002, and $3,161,000 for the fiscal year ended December
31, 2003. Such losses have resulted principally from costs incurred in
connection with research and development, including clinical trials, of the
laser surgery system. Medical products were not sold by us until late 1992. Our
ability to become profitable largely depends on successfully developing clinical
applications and obtain regulatory approvals for our laser surgery products,
including the Photon(TM) laser system, and to effectively market such products.
The problems and expenses frequently encountered in developing new products and
the competitive industry in which we operate will impact whether we are
successful. We may never achieve profitability. Furthermore, we may encounter
substantial delays and unexpected expenses related to research, development,
production, marketing, regulatory matters or other unforeseen difficulties.

Because our securities trade on the OTC Bulletin Board, your ability to sell
your shares in the secondary market may be limited.

Since June 26, 2003, our shares have traded on the OTC Bulletin Board.
As a result, it may be more difficult for an investor to dispose of our
securities, or to obtain accurate quotations on their market value. Furthermore,
the prices for our securities may be lower than might otherwise be obtained. On
October 8, 2002, we received a notice from Nasdaq's Listing Qualifications staff
that for the previous 30 consecutive trading days, the price of our common stock
closed below the minimum $1.00 per share requirement for continued inclusion on
Nasdaq. The notice further provided that if at anytime before April 7, 2003, the
bid price of our common stock closed at $1.00 or more for a minimum of 10
consecutive trading days, we would be notified by the staff that we comply with
such rule.

On April 15, 2003, we received notice of a determination by Nasdaq's
Listing Qualifications staff that we failed to comply with the minimum bid price
rules for continued listing set forth in Nasdaq's rules. Specifically, the
notice stated that we have not regained compliance with the minimum $1.00
closing bid price per share requirement (noting that pursuant to the October 8,
2002, notice from the Nasdaq Listing Qualifications staff, we were provided 180
calendar days, or until April 7, 2003, to regain compliance with this
requirement) and we do not qualify with the $5,000,000 shareholders equity,
$50,000,000 market value of listed securities or $750,000 net income from
continuing operations requirement for an additional 180 calendar day compliance
period to comply with Nasdaq's rules. The April 15, 2003, notice further stated
that as of December 31, 2002, we reported stockholders' equity of $2,847,000 and
net losses from continuing operations of approximately $11,155,000, and as of
April 14, 2003, the market value of our listed securities was $4,208,108.
Accordingly, our common stock would be delisted from the Nasdaq SmallCap Market
at the opening of business on April 24, 2003. Separately, Nasdaq informed us
that listing fees of $22,500 and $18,000 under Rule 4310(c)(13) are owed to the
Nasdaq SmallCap Market.

We requested an oral hearing before a Nasdaq Listing Qualifications
Panel to review the staff's determination. The request automatically stayed the
delisting of our common stock. On April 23, 2003, we received formal notice from
Nasdaq that a hearing to consider our appeal would be held on May 29, 2003. On
May 29, 2003, Dr. Jeffrey F. Poore, our President and Chief Executive Officer;
Randall A. Mackey, our Chairman of the Board; and Dr. David M. Silver, a
director of the company, attended an oral hearing before a Nasdaq Listing
Qualifications Panel in Washington, D.C. At the hearing Dr. Poore presented to
the panel a definitive plan both for regaining compliance with the particular
deficiencies cited in the April 15, 2003, letter from the Nasdaq Listing
Qualifications staff and sustaining long term compliance with the Nasdaq
Marketplace Rules, including all applicable maintenance criteria. On June 24,
2003 we received notification from the Nasdaq Listing Qualifications Panel that
we were to be delisted from the Nasdaq Stock Market effective June 26, 2003. Our
securities trade on the OTC Bulletin Board effective June 26, 2003. Because our
securities are delisted from the Nasdaq SmallCap Market and now trade on the OTC
Bulletin Board, additional sales requirements on broker-dealers will adversely
effect the ability of purchasers to sell our securities and the trading price of
our securities could decline.

Moreover, because our securities currently trade on the OTC Bulletin
Board, they are subject to the rules promulgated under the Securities Exchange
Act of 1934, as amended, which impose additional sales practice requirements on
broker-dealers that sell securities governed by these rules to persons other
than established customers and "accredited investors" (generally, individuals
with a net worth in excess of $1,000,000 or annual individual income exceeding
$200,000 or $300,000 jointly with their spouses). For such transactions, the
broker-dealer must determine whether persons that are not established customers
or accredited investors qualify under the rule for purchasing such securities
and must receive that person's written consent to the transaction prior to sale.
Consequently, these rules may adversely effect the ability of purchasers to sell
our securities and otherwise affect the trading market in our securities.

Because our shares may be deemed "penny stocks," you may have difficulty selling
them in the secondary trading market.

The Commission has adopted regulations which generally define a "penny
stock" to be any non-Nasdaq equity security that has a market price (as therein
defined) less than $5.00 per share or with an exercise price of less than $5.00
per share, subject to certain exceptions. For any transactions by broker-dealers
involving a penny stock (unless exempt), rules promulgated under the Securities
Exchange Act of 1934 require delivery, prior to a transaction in a penny stock,
of a risk disclosure document relating to the penny stock market. Disclosure is
also required to be made about compensation payable to both the broker-dealer
and the registered representative and current quotations for the securities.
Furthermore, monthly statements are required to be sent disclosing recent price
information for the penny stocks.

We are offering our shares on a best efforts basis and there is no guarantee
that we will sell the maximum shares offered.

No underwriter has been retained to purchase the shares offered in
connection with this prospectus. There can be no assurance that all of the
shares offered will be sold and that we will receive all of the estimated net
proceeds generated from such a sale of all of the common stock. If all of the
15,000,000 shares we are offering are not sold, we may be unable to fund all of
the intended uses for the net proceeds anticipated from this offering without
obtaining funds from alternative sources. Alternative sources of funds may not
be available to us at a reasonable cost.

If the litigants in the class action lawsuits succeed on any of their claims and
we are denied coverage for the lawsuits under our Directors and Officers
Liability and Company Insurance Policy, it could adversely affect our financial
condition and operations, and we would be forced to seek bankruptcy protection.

On May 14, 2003, a complaint was filed in the United States District
Court, District of Utah, captioned Richard Meyer, individually and on behalf of
all others similarly suited v. Paradigm Medical Industries, Inc., Thomas Motter,
Mark Miehle and John Hemmer, Case No. 2:03 CV00448TC. The complaint also
indicates that it is a "Class Action Complaint for Violations of Federal
Securities Law and Plaintiffs Demand a Trial by Jury." We have retained legal
counsel to review the complaint, which appears to be focused on alleged false
and misleading statements pertaining to the Blood Flow Analyzer(TM) and
concerning a purchase order from Valdespino Associates Enterprises and Westland
Financial Corporation.

More specifically, the complaint alleges that we falsely stated in our
Securities and Exchange Commission filings and press releases that we had
received authorization to use an insurance reimbursement CPT code from the CPT
Code Research and Development Division of the American Medical Association in
connection with the Blood Flow Analyzer(TM), adding that the CPT code provides
for a reimbursement to doctors of $57.00 per patient for use of the Blood Flow
Analyzer(TM). The complaint also alleges that on July 11, 2002, we issued a
press release falsely announcing that we had received a purchase order from
Valdespino Associates Enterprises and Westland Financial Corporation for 200
sets of our entire portfolio of products, with $70 million in systems to be
delivered over a two-year period, then another $35 million of orders to be
completed in the third year. As a result of these statements, the complaint
contends that the price of our shares of common stock was artificially inflated
during the period from April 25, 2001 through May 14, 2003, and the persons who
purchased our common shares during that period suffered substantial damages. The
complaint requests judgment for unspecified damages, together with interest and
attorney's fees.

We dispute having issued false and misleading statements concerning the
Blood Flow Analyzer(TM) and a purchase order from Valdespino Associates
Enterprises and Westland Financial Corporation. On April 25, 2001, we issued a
press release that stated we had received authorization to use common procedure
terminology or CPT code number 92120 for our Blood Flow Analyzer(TM). This press
release was based on a letter we received from the CPT Editorial Research and
Development Department of the American Medical Association authorizing use of
common procedure terminology or CPT code number 92120 for our Blood Flow
Analyzer(TM), for reimbursement purposes for doctors using the device.

Currently, there is reimbursement by insurance payors to doctors using
the Blood Flow Analyzer(TM) in 22 states and partial reimbursement in four other
states. The amount of reimbursement to doctors using the Blood Flow Analyzer(TM)
generally ranges from $56.00 to $76.00 per patient, depending upon the insurance
payor. Insurance payors providing reimbursement for the Blood Flow Analyzer(TM)
have the discretion to increase or reduce the amount of reimbursement. We are
endeavoring to obtain reimbursement by insurance payors in other states where
there is currently no reimbursement being made. We believe we have continued to
correctly represent in our Securities and Exchange Commission filings that we
have received authorization from the CPT Editorial Research and Development
Department of the American Medical Association to use CPT code number 92120 for
our Blood Flow Analyzer(TM), for reimbursement purposes for doctors using the
device.

On July 11, 2002, we issued a press release that stated we received a
purchase order from Westland Financial Corporation and Valdespino Associates
Enterprises for 200 complete sets of our entire product portfolio of diagnostic
and surgical equipment for Mexican ophthalmic practitioners, to be followed by a
second order of 100 sets of equipment. The press release was based on a purchase
order dated July 10, 2002 that we entered into with Westland Financial
Corporation for the sale of 200 complete sets of our surgical and diagnostic
equipment to Mexican ophthalmic practitioners. The press release also stated
that the initial order was for $70 million of our equipment to be filled over a
two-year period followed by the second order of $35 million in equipment to be
completed in the third year. The press release further stated that delivery
would be made in traunches of 25 complete sets of our equipment, beginning in 30
days from the date of the purchase order.

On September 13, 2002, the board of directors issued a press release
updating the status of our product sales to the Mexican ophthalmic
practitioners. In that press release the board stated that we had been in
discussions for the prior nine months with Westland Financial Corporation, aimed
at supplying our medical device products to the Mexican market. In the past, we
have had a business relationship with Westland Financial. Upon investigation,
the board of directors had determined that the purchase order referenced in the
July 11, 2002 press release was not of such a nature as to be enforceable for
the purpose of sales or revenue recognition. In addition, we had not sent any
shipment of medical products to Mexican ophthalmic practitioners nor received
payment for those products pursuant to those discussions. The September 13, 2002
press release also stated that discussions were continuing with Westland
Financial Corporation regarding sales and marketing activities for our medical
device products in Mexico, but we could not, at the time, predict or provide any
assurance that any transactions would result.

On June 2, 2003, a complaint was filed in the United States District
Court captioned Michael Marrone v. Paradigm Medical Industries, Inc., Thomas
Motter, Mark Miehle and John Hemmer, Case No. 2:03 CV00513 PGC. On or about June
11, 2003, a complaint was filed in the same United States District Court
captioned Milian v. Paradigm Medical Industries, Inc., Thomas Motter, Mark
Miehle and John Hemmer, Case No. 2:03 CV00617PGC. Both complaints seek class
action status. These cases are substantially similar in nature to the Meyer
case, including the contention that as a result of allegedly false statements
regarding the Blood Flow Analyzer(TM) and the purchase order from Valdespino
Associates Enterprises and Westland Financial Corporation, the price of our
common stock was artificially inflated and the persons who purchased our common
shares during the class period suffered substantial damages. The cases request
judgment for unspecified damages, together with interest and attorneys' fees.
These cases have now been consolidated with the Meyer case into a single action.
We believe the consolidated cases are without merit and intend to vigorously
defend and protect our interests in the said cases.

which is excess of a $250,000 retention. The officers and directors named in the
consolidated cases have requested coverage under the policy. U.S. Fire is
currently investigating whether it may have a right to deny coverage for the
consolidated cases based upon policy terms, conditions and exclusions or to
rescind the policy based upon misrepresentations contained in our application
for insurance.

We have not paid any amounts toward satisfaction of any part of the
$250,000 retention that is applicable to the consolidated cases. We have advised
U.S. Fire that we cannot pay the $250,000 retention due to our current financial
circumstances. As a consequence, on January 8, 2004, we entered into a
non-waiver agreement with U.S. Fire in which U.S. Fire agreed to fund and
advance our retention obligation in consideration for which we have agreed to
reimburse U.S. Fire the sum of $5,000 a month, for a period of six months, with
the first of such payments due on February 15, 2004. Thereafter, commencing on
August 15, 2004, we are currently required to reimburse U.S. Fire the sum of
$10,000 per month until the entire amount of $250,000 has been reimbursed to
U.S. Fire. We have not yet made the payments due to U.S. Fire on February 15,
March 15 and April 15, 2004.

In the event U.S. Fire determines that we or the former officers and
directors named in the consolidated cases are not entitled to coverage under the
policy, or that it is entitled to rescind the policy, or should we be declared
in default under the non-waiver agreement for not making the monthly payments in
a timely manner that are owed to U.S. Fire, then we agree to pay U.S. Fire, on
demand, the full amount of all costs advanced by U.S. Fire, except for those
amounts that we may have reimbursed to U.S. Fire pursuant to the monthly
payments due under the non-waiver agreement.

We will be in default under the non-waiver agreement if we fail to make
any payment due to U.S. Fire thereunder when such payment is due, or institute
proceedings to be adjudicated as bankrupt or insolvent. U.S. Fire's obligation
to advance defense costs under the agreement will terminate in the event that
the $5,000,000 policy limit of liability is exhausted. If U.S. Fire denies
coverage for the consolidated cases under the policy and we are not successful
in defending and protecting our interests in the cases, resulting in a judgment
against us for substantial damages, we would not be able to pay such liability
and, as a result, would be forced to seek bankruptcy protection.

On July 10, 2003, a complaint was filed in the United States District
Court, District of Utah captioned Innovative Optics, Inc., Barton Dietrich
Investments, L.P. v. Paradigm Medical Industries, Inc., Mackey Price & Thompson,
Thomas Motter, Mark Miehle and John Hemmer, Case No. 2:03 CV00582DB. The
complaint claims that Innovative and Barton entered into an asset purchase
agreement with us on January 31, 2002, in which we agreed to purchase all the
assets of Innovative in consideration for the issuance of 1,310,000 shares of
the Company's common stock to Innovative. The complaint claims we breached the
asset purchase agreement. The complaint also claims that we allegedly made false
and misleading statements pertaining to the Blood Flow Analyzer(TM) and
concerning a purchase order from Valdespino Associates Enterprises and Westland
Financial Corporation. The purpose of these statements, according to the
complaint, was to induce Innovative to sell its assets and purchase the shares
of our common stock at artificially inflated prices while simultaneously
deceiving Innovative and Barton into believing that the Company's shares were
worth more than they actually were. The complaint contends that had Innovative
and Barton known the truth, they would not have sold Innovative to us, would not
have purchased our stock for the assets of Innovative, or would not have
purchased the stock at the inflated prices that they allegedly paid. The
complaint further contends that as a result of the allegedly false statements,
Innovative and Barton suffered substantial damages in an amount to be proven at
trial.

The complaint also claims that 491,250 of the shares to be issued to
Innovative in the asset purchase transaction were not issued on a timely basis
and we also did not file a registration statement with the Securities and
Exchange Commission within five months of the closing date of the asset purchase
transaction. As a result, the complaint alleges that the value of the shares of
our common stock issued to Innovative in the transaction declined, and
Innovative and Barton suffered damages in an amount to be proven at trial. We
filed an answer to the complaint and also filed counterclaims against Innovative
and Barton for breach of contract. We believe the complaint is without merit and
intend to vigorously defend and protect our interests in the action. If we are
not successful in defending and protecting our interests in this action,
resulting in a judgment against us for substantial damages, and U.S. Fire denies
coverage in the litigation under the Directors and Officers Liability and
Company Reimbursement Policy, we would not be able to pay such liability and, as
a result, would be forced to seek bankruptcy protection.

On October 14, 2003, an action was filed in the Third Judicial District
Court, Salt Lake County, State of Utah, captioned Albert Kinzinger, Jr.,
individually and on behalf of all others similarly situated vs. Paradigm Medical
Industries, Inc., Thomas Motter, Mark Miehle, Randall A. Mackey, and John
Hemmer, Case No. 030922608. The complaint also indicates that it is a "Class
Action Complaint for Violations of Utah Securities Laws and Plaintiffs Demand a
Trial by Jury." We have retained legal counsel to review the complaint, which
appears to be focused on alleged false or misleading statements pertaining to
the Blood Flow Analyzer(TM). More specifically, the complaint alleges that we
falsely stated in Securities and Exchange Commission filings and press releases
that we had received authorization to use an insurance reimbursement CPT code
from the CPT Code Research and Development Division of the American Medical
Association in connection with the Blood Flow Analyzer(TM), adding that the CPT
code provides for a reimbursement to doctors of $57.00 per patient for the Blood
Flow Analyzer(TM).

from registration. The complaint requests rescission, compensatory damages and
treble damages, including interest and attorneys' fees. We filed an answer to
the complaint. We believe the complaint is without merit and intend to
vigorously defend our interests in the action. If we are not successful in
defending and protecting our interests in the action, resulting in a judgment
against us for substantial damages, and U.S. Fire denies coverage in the
litigation under the Directors and Officers Liability and Company Reimbursement
Policy, we would not be able to pay such liability and, as a result, would be
forced to seek bankruptcy protection.

If the litigants in other lawsuits and threatened lawsuits succeed on any of
their claims, it could adversely affect our financial condition and operations,
and we would be forced to seek bankruptcy protection.

We have been involved in other lawsuits besides the class action
lawsuits, and have received demand letters threatening litigation. If the
litigants in these other lawsuits and threatened lawsuits succeed on any of
their claims, it would adversely affect our financial condition and operations,
and we could be forced to seek bankruptcy protection.

We received a demand letter dated December 30, 2002 from counsel for
Thomas F. Motter, our former Chairman and Chief Executive Officer. Mr. Motter
claims in the letter that he was entitled to certain stock options that had not
been issued to him in a timely manner. By the time the options were actually
issued to him, however, they had expired. Mr. Motter contends that if the
options had been issued in a timely manner, he would have exercised them in a
manner that would have given him a substantial benefit. Mr. Motter requests
restitution for the loss of the financial opportunity. Mr. Motter also claims
that he was defrauded by us by not being given an extended employment agreement
when he terminated the change of control agreement that he had entered into with
us.

Mr. Motter is further claiming payment for accrued vacation time during
the 13 years he had been employed by the Company, asserting that he only had a
total of four weeks of vacation during that period. Finally, Mr. Motter is
threatening a shareholder derivative action against us because of the board of
directors' alleged failure to conduct an investigation into conversations that
took place in a chat room on Yahoo. Mr. Motter asserts that certain individuals
participating in the conversations were our officers or directors whose
interests were in conflict with the interest of the shareholders. We believe
that Mr. Motter's claims and assertions are without merit. However, if Mr.
Motter succeeds on his claims, we would not be able to pay such liability and,
as a result, would be forced to seek bankruptcy protection.

An action was filed on June 20, 2003, in the Third Judicial District
Court, Salt Lake County, State of Utah (Civil No. 030914195) by CitiCorp Vendor
Finance, Inc., formerly known as Copelco Capital, Inc. The complaint claims that
$49,626 plus interest is due for the leasing of two copy machines that were
delivered to our Salt Lake City facilities on or about April of 2000. The action
also seeks an award of attorney's fees and costs incurred in the collection. We
dispute the amounts allegedly owed, asserting that the equipment it returned to
the leasing company did not work properly. A responsive pleading has not yet
been filed. We are currently engaged in settlement discussions with CitiCorp.
However, if we are unable to settle the dispute, and CitiCorp succeeds on its
claims, we may not be able to pay such liability and, as a result, would be
forced to seek bankruptcy protection.

We received demand letters dated July 18, 2003, September 26, 2003 and
November 10, 2003 from counsel for Douglas A. MacLeod, M.D., a shareholder of
the company. In the July 18, 2003 letter, Dr. MacLeod demands that he and
certain entities with which he is involved or controls, namely the Douglas A.
MacLeod, M.D. Profit Sharing Trust, St. Marks' Eye Institute and Milan Holdings,
Ltd., be issued a total of 2,296,667 shares of our common stock and warrants to
purchase 1,192,500 shares of our common stock at an exercise price of $.25 per
share. Dr. MacLeod claims that these common shares and warrants are owing to him
and the related entities under the terms of a mutual release dated January 16,
2003, which he and the related entities entered into with us. Dr. MacLeod
renewed his request for these additional common shares and warrants in the
September 26, 2003 and November 10, 2003 demand letters. We believe that Dr.
MacLeod's claims and assertions are without merit and that neither he nor the
related entities are entitled to any additional shares of our common stock or
any additional warrants under the terms of the mutual release. However, if Dr.
MacLeod succeeds on his claims, we would be required to issue additional common
shares and warrants to him.

On August 3, 2003, a complaint was filed against us by Corinne Powell,
a former employee, in the Third Judicial District Court, Salt Lake County, State
of Utah (Civil No. 030918364). Defendants consist of the Company and Randall A.
Mackey, Dr. David M. Silver and Keith D. Ignotz, directors of the company. The
complaint alleges that at the time we laid off Ms. Powell on March 25, 2003, she
was owed $2,030 for business expenses, $11,063 for accrued vacation days,
$12,818 for unpaid commissions, the fair market value of 50,000 stock options
exercisable at $5.00 per share that she claims she was prevented from
exercising, attorney's fees and a continuing wage penalty under Utah law. We
dispute the amounts allegedly owed to Ms. Powell. However, if Ms. Powell
succeeds on her claims, we may not be able to pay such liability and, as a
result, would be forced to seek bankruptcy protection.

On September 10, 2003, an action was filed against us by Larry Hicks in
the Third Judicial District Court, Salt Lake County, State of Utah, (Civil No.
030922220), for payments due under a consulting agreement with us. The complaint
claims that monthly payments of $3,083 are due for the months of October 2002 to
October 2003 under a consulting agreement and, if the agreement is terminated,
for the sum of $110,000 minus whatever we have paid Mr. Hicks prior to such
termination, plus costs, attorney's fees and a wage penalty pursuant to Utah
law. We dispute the amounts allegedly owed to Mr. Hicks. However, if Mr. Hicks
succeeds on his claims, we would not be able to pay such liability and, as a
result, would be forced to seek bankruptcy protection.

If we are unable to obtain additional capital, we would be required to eliminate
certain activities that would adversely effect our operations.

We may require substantial funds for various purposes, including
continuing research and development, expanding clinical trials, completing the
FDA approval process for our products (including the Photon(TM) laser system),
and manufacturing and marketing our existing products. We will need to seek
additional capital, possibly through public or private sales of our securities,
in order to fund our activities on a long-term basis. Adequate funds may not be
available when needed or on terms acceptable to us. Insufficient funds may
require us to delay, scale back or eliminate certain or all of our research and
development programs or to license third parties to commercialize products or
technologies that we would otherwise seek to develop ourself, which may
materially adversely affect our continued operations.

The recent loss of members of senior management could adversely affect our
operations.

Our success largely depends on a number of key employees. The loss of
one or more of these employees could have a material adverse effect on us,
including the development and sale of eye surgery systems. On August 30, 2002,
Thomas F. Motter resigned as our Chairman of the Board and Chief Executive
Officer, and Mark R. Miehle was terminated as our President and Chief Operating
Officer. The reason for these management changes was that the board of directors
determined that a change in the leadership and direction of our company was
necessary due to management's inability to meet certain goals including those
relating to sales and cost control. On June 3, 2003, Heber C. Maughan resigned
as our Vice President of Finance, Treasurer and Chief Financial Officer to
pursue other business opportunities. The recent loss of these members of senior
management could have a significant adverse effect on us and our operations and
prospects. We had no key man insurance on either Mr. Motter, Mr. Miehle or Mr.
Maughan.

Our research activities may not result in any commercially profitable products.

The science and technology of medical products, including lasers, is
rapidly evolving. Our medical systems may require significant further research,
development, testing and regulatory clearances. They are also subject to the
risks of failure inherent in the development of products based on innovative
technologies. These risks include the possibility that any or all of the
proposed products will prove to be ineffective or unsafe; that they fail to
receive necessary regulatory clearances; that the proposed products are
uneconomical; that others hold proprietary rights which preclude us from
marketing such products; or that others market better products. Accordingly, we
are unable to predict whether our research and development activities will
result in any commercially profitable products. Further, due to the extended
testing and regulatory review process required, we may be unable to sell our
current and proposed products. There is also no guarantee that we will be able
to develop and sell a glaucoma surgery system.

We are uncertain of obtaining FDA approval for our Photon(TM) laser system and
further development of the Photon(TM) is on hold until our financial situation
improves, and we may lose our rights to manufacture or sell the Photon(TM) laser
system if we are unable to agree on the correct method of calculating royalty
payments under a license agreement.

We are subject to substantial regulation by the Food and Drug
Administration or FDA and other federal and state regulatory agencies. FDA
regulations require us to obtain either 510(k) clearance or pre-marketing
approval prior to marketing a product in the United States. We are also subject
to foreign regulation and must receive various types of approvals from foreign
government agencies prior to selling our products in some countries. The
clearance and approval processes for both the FDA and foreign regulatory
authorities are costly, time consuming and uncertain. In addition, we are
required to obtain FDA approval before exporting a device which has not received
FDA marketing clearance or approval. We may never be able to obtain these
required government approvals. Delays or failure to obtain such approvals would
materially and adversely effect us, as would changes in existing requirements.
We have received 510(k) clearance from the FDA for our ultrasonic surgery
systems allowing us to sell both devices in the United States. We have also
received 510(k) clearance to market our Blood Flow Analyzer(TM).

In May 1995, we were granted an investigational device exemption for
our Photon(TM) laser system allowing us to conduct clinical studies in support
of our application with the FDA to obtain approval to market the system. During
the clinical trials, we discovered that the Photon(TM) laser system may not
effectively remove hard (dense or impacted) cataracts. In May, 1998, we received
FDA clearance to conduct clinical tests on soft cataracts. We believe the FDA
will approve our 510(k) predicate device application for the Photon(TM) laser
system because in the United States most cataracts are removed before tissue
hardens. We received an FDA warning letter in August 2000 concerning
deficiencies in the Phase I clinical trials and, after making several
submissions to the FDA, we received a letter from the FDA in February 2001
stating that the deficiencies had been corrected and the clinical trials could
continue.

We have completed the authorized clinical studies and, in October 2001,
made a supplemental submission to the FDA regarding the 510(k) application. We
received a preliminary review from the FDA of our supplemental submission in
December 2001 and submitted additional clinical information to the FDA on
February 6, 2002. On May 7, 2002, we received a letter from the FDA requesting
further clinical information. We have generated additional clinical information
in response to the letter and are uncertain if we will make a submission to the
FDA with the additional clinical information. Because of the "going concern"
status of the company, management has focused efforts on those products and
activities that will, in its opinion, achieve the most resource efficient
short-term cash flow to the company. As reflected in the results for the fiscal
year ended December 31, 2003, diagnostic products are currently our major focus

and the Photon(TM) and other extensive research and development projects have
been put on hold pending future evaluation when our financial position improves.
Our focus is not on any specific diagnostic product or products, but rather on
our entire group of diagnostic products.

We have also received FDA approval to manufacture and export the
Photon(TM) laser system internationally. However, we have not yet obtained
approval from some foreign countries to market the laser product where approval
is necessary. We anticipate that many contemplated applications of our currently
existing and planned products will be subject to the lengthy regulatory approval
process, including preclinical studies, clinical trials and extensive regulatory
review. This process could take many years and require the expenditure of
substantial resources.

The Photon(TM) laser system is protected under a United States patent
issued to Daniel M. Eichenbaum, M.D. in 1987 and subsequently assigned to
PhotoMed International, Inc. and a Japanese patent issued to us in 1997. The
United States patent is due to expire in September 2004. We secured the
exclusive worldwide rights to this patent from PhotoMed by means of a license
agreement dated July 7, 1993. The license agreement expires when the United
States patent rights expire in September 2004. PhotoMed and Dr. Eichenbaum
brought legal action against us on September 11, 2000 involving an amount of
royalties that are allegedly due and owing to them from the sale of equipment by
us under the license agreement.

We have paid $14,736 to bring all royalty payments up to date through
June 30, 2001. We have been working with PhotoMed and Dr. Eichenbaum to insure
that the royalty calculations have been correctly made. It is anticipated that
once the parties agree on the correct royalty calculations, the legal action
will be dismissed. However, if the parties are unable to agree on a method of
calculating royalties, there is risk that PhotoMed and Dr. Eichenbaum may amend
the complaint to request termination of the license agreement and, if
successful, we would lose our rights to manufacture or sell the Photo(TM) laser
system.

Our executives lack operating experience.

Our executives rely on their experience and skill from their
professional occupations. None of our executives has direct experience in
managing a company that utilizes research and product development activities and
technology to such a high degree.

Purchasers of our common shares could experience dilution from our tendering
puts under a private equity line of credit agreement with Triton West.

On June 30, 2000, we entered into a private equity line of credit
agreement with Triton West Group, Inc., in which Triton agreed to provide an
amount up to $20,000,000 to us in order to purchase put common shares pursuant
to the terms and conditions of the agreement. Under the agreement, we may elect
for a period of three years from the effective date of December 8, 2000 (the
date on which the Securities and Exchange Commission declared effective a
registration statement registering shares to be purchased by Triton on put
transactions with us) to exercise our right to tender a put notice to Triton.
The put notice requires Triton to purchase shares of our common stock at 88% of
the market price on the trading day immediately following the valuation period,
which is a period of five trading days beginning two days before the trading day
on which the put notice is deemed to be delivered and two trading days after
such date. Under certain conditions, the purchase price will be reduced to 85%
of the market price of our common stock. The agreement provides certain
restrictions on the tendering of puts. The maximum amount of each put (which may
vary from $750,000 to $2,000,000) is to be determined according to a schedule
based on the trading price of our common stock at the time and the average 30
day volume of such shares. There must be a minimum of 15 business days between
puts. Moreover, a registration statement must be effective registering the
shares of common stock covered by the put. There may be significant dilution
associated with tendering put notices under the agreement. Because a
registration statement is not effective registering the shares issuable under
the equity line of credit, our equity line of credit is currently not available
as a source of equity. The equity line of credit agreement expired by its terms
on December 8, 2003, but the Company is currently in the process of renewing the
agreement.

Our products may become obsolete due to rapid technological change.

Our market is subject to rapid technological change. Development by
others of new or improved products, processes or technologies may make our
products obsolete or less competitive. Accordingly, we must continue investing
in research and development on our existing products and to develop new
products. Despite such investment, our current or proposed products may be
unsuccessful.

Our Photon(TM) laser system could receive competition from other laser systems
that are well financed with well recognized trade names.

Our Photon(TM) laser system will potentially receive competition from
other laser systems, such as excimer, holmium (Ho:YAG), Erbium (Er:YAG), Nd:YLF
(Neodymium:Yttium-Lithium-Fluoride) or lasers of other wave lengths. Competition
may also come from other medical devices and other surgical techniques. Further,
the cataract surgical device industry is dominated by a small number of large
competitors that are well established in the marketplace, have experienced
management, are well financed and have a well recognized trade name related to
their product lines. We may be unable to penetrate the existing market and
acquire a sufficient market share to be profitable. Significant competitive
factors which will affect future sales include regulatory approvals,
performance, pricing, timely product shipment, safety, customer support,
convenience of use and patient and general market acceptance.

Our new products may incur unexpected production problems, which would impact
our sales and profits.

New ventures, particularly those involved in a highly technical
industry such as the medical industry, have substantial inherent risks. These
risks are in three general areas: technical, mechanical and human.
Notwithstanding any pre-production planning, new products can incur unexpected
problems in full scale production, which cannot always be foreseen or accurately
predicted. Designs can become unworkable, for unpredicted reasons. Quality
control and component sourcing failures can also be expected from time to time.
Any business, including ours, is substantially dependent upon the capabilities
and performance of both management, engineering and sales personnel. Mistakes in
judgment or performance can be costly and, in certain instances, disabling.
Therefore, management skill, experience, character and reliability are of
significant importance.

Mistakes may occur in the design and manufacture of our products, which could
prevent or limit the sales of such products.

The high-technology product line requires us to deal with suppliers and
subcontractors supplying highly specialized parts, operating highly
sophisticated and narrow tolerance equipment and performing highly technical
calculations. Components must be custom designed and manufactured, which is not
only complicated and expensive, but can also require a number of months to
accomplish. Slight mistakes in either the design or manufacture can result in
unsatisfactory parts that may not be correctable. Because our business requires
the talents of various professions, mistakes from very slight oversights or
miscommunications can occur, resulting not only in costly delays and lost
orders, but also in disagreements regarding liability and, in any event,
extended delays in production. Moreover, we rely on suppliers that are related
to each other for parts and equipment. When dealing with related suppliers the
terms on which parts and equipment are purchased may not be as favorable as
could be obtained from unrelated third-party suppliers.

We are dependent upon a limited number of key suppliers for components and parts
used in our products and the interruption in the supply of these components and
parts could impede our ability to deliver our products to market.

We currently purchase components and parts used in our products from a
limited number of key suppliers. Although we maintain alternative suppliers, our
reliance on our principal suppliers could result in delays associated with
redesigning a product due to an inability to obtain an adequate supply of
required components and parts, and reduced control over pricing, quality and
timely delivery. The loss of any of these principal suppliers or the inability
of a supplier to meet performance and quality specifications, requested
quantities or delivery schedules could cause our revenues to decline. In
addition, any interruption or discontinuance in the supply of components or
parts could have an adverse effect on our business, results of operation and
financial condition. Further, a significant price increase from any of our
principal suppliers could cause our profitability to decline if we cannot
increase the prices of our products to our customers. Our principal suppliers
include Capistrano Labs, U.S. Ultrasound and Anello.

No independent marketing studies have been made to confirm the commercial demand
for the Photon(TM) laser system and the Blood Flow Analyzer(TM).

We believe that there is substantial commercial demand for our
Photon(TM) laser system and our Blood Flow Analyzer(TM) for the eyes at a
profitable price. However, this belief is solely based on our management's
experience and judgment. At this time, there have been no independent marketing
studies by independent professional marketing firms to reliably confirm the
extent of this demand, the price ranges within which it exists and the amount of
promotion necessary to exploit whatever demand does exist.

Our Photon(TM) laser system may not be accepted in the marketplace because it
does not remove hard cataracts.

Our products may not be accepted in the marketplace. Such acceptance
will depend on a number of factors including receiving regulatory approvals,
demonstrating the safety, and advantages of our products over existing systems
and techniques. Our Photon(TM) laser system may never gain market acceptance
since the system does not effectively remove hard (dense or impacted) cataracts.
Further, we may be unable to successfully market our products even if they
perform successfully in clinical applications. Our Precisionist
ThirtyThousand(TM) Workstation(TM) may not gain acceptance unless we can reduce
or eliminate the vacuum surge and develop additional, complementary surgical
devices for installation in that host system. Vacuum surge is a phenomenon that
occurs when the tip of the ultrasonic needle is obstructed by target tissue,
allowing pressure to build up and, if the pressure is not released, a rush of
fluid goes from the chamber of the eye into the needle to equalize the pressure.

The result can be complications to the eye such as posterior capsule rupture,
iris capture and chamber collapse. We believe this phenomenon affects all other
ultrasonic cataract removal systems currently on the market.

Our pending patents may not be perfected and our present or future patents may
infringe upon the patents of others, which could restrict or prevent the
manufacture and sale of our products.

We depend on our ability to license and obtain patents and on the
adherence to confidentiality agreements executed by employees, consultants and
third-parties to maintain the proprietary nature of our technology and to
operate without infringing on the proprietary rights of others. Our laser probe
is protected by a United States patent issued in 1987 to Daniel M. Eichenbaum,
M.D. These patent rights expire in September 2004. Patents have also been
granted to the Blood Flow Analyzer(TM) in the United States and the United
Kingdom, to the Dicon(TM) Topographer in the United States, and to the Dicon(TM)
Perimeter in the United States, the United Kingdom, Germany and Switzerland. The
pending patents may not be perfected. Also, our present or future products may
be found to infringe upon the patents of others. If our products are found to
infringe on the patents, or otherwise impermissibly utilize the intellectual
property of others, our development, manufacture and sale of such products could
be severely restricted or prohibited. We may be required to obtain licenses to
utilize such patents or proprietary rights of others and acceptable terms may be
unavailable. If we do not obtain such licenses, the development, manufacture or
sale of products requiring such licenses would be materially adversely affected.
In addition, we could incur substantial costs in defending ourself against
challenges to our patents or infringement claims made by third parties or in
enforcing any patents we may obtain.

Because patents only provide limited protection, others could produce and
distribute products similar to the Photon(TM) laser system, the Mentor systems
and the Blood Flow Analyzer(TM).

We rely on the protections for our products that we hope to realize
under the United States and foreign patent laws. However, patents provide
limited protections. We have a United States and Japanese patent on the
hand-held probe design and applications for various foreign patents are either
pending or planned, and the patents for the Blood Flow Analyzer(TM) for the eyes
are reported by Occular Blood Flow, Ltd. to have been approved in the United
States and the United Kingdom. Similar devices, however, could be designed that
do not infringe on our patent rights, but that are similar enough to compete
against our patented products. Moreover, it is possible that an unpatented but
prior existing device or design may exist that has never been made public and
therefore is not known to us or the industry in general. Such a device could be
introduced into the market without infringing on our current patent. If any such
competing non-infringing devices are produced and distributed, our profit
potential would be seriously limited, which would seriously impair our
viability.

Some of our products may be denied reimbursement by third-party payors, such as
government programs and private insurance plans.

We anticipate that our medical devices will generally be purchased by
ophthalmologists and hospitals that will then bill various third-party payors,
such as government programs and private insurance plans, for the health care
services provided to their patients. Government agencies generally reimburse at
a fixed rate based on the procedure performed. Some of the potential procedures
for which our medical devices may be used, however, may be denied reimbursement
as elective. In addition, third-party payors may deny reimbursement if they
determine that the use of our products was unnecessary, inappropriate, not
cost-effective, experimental or used for a non-approved indication. Certain
purchasers of our Blood Flow Analyzer,(TM), for example, have had difficulty in
obtaining reimbursement from insurance carriers. Even if we receive FDA
clearances for our products, third-party payors may nevertheless deny
reimbursement. Furthermore, third-party payors increasingly challenge the prices
charged for medical products and services. Reimbursement from third-party payors
may be unavailable or if available, that reimbursement may be limited when
compared with reimbursement for competitive procedures, thereby materially
adversely affecting our ability to profitably sell products. The market for our
products could also be adversely affected by recent federal legislation that
reduces reimbursements under the capital cost pass- through system utilized in
connection with the Medicare program. Failure by hospitals and other users of
our products to obtain reimbursement from third-party payors or changes in
government and private third-party payors' policies toward reimbursement for
procedures employing our products would have a material adverse effect on us.

Congress may introduce legislation that could result in price limits and
utilization controls on our products.

Members of Congress have introduced legislation to change aspects of
the delivery and financing of health care services. Such legislation to control
or reduce public (Medicare and Medicaid) and private spending on health care, to
reform the methods of payment for health care goods and services by both the
public and private sectors, and to provide universal access to health care may
be passed. We cannot predict what form this legislation may take or the effect
of such legislation on our business. It is possible that the legislation
ultimately enacted by Congress will contain provisions resulting in price limits
and utilization controls which may reduce the rate of increase in the growth of
the ophthalmic laser market or otherwise adversely affect our business. It is
also possible that future legislation could result in modifications to the
nation's public and private health care insurance systems which will affect

reimbursement policies in a manner adverse to us. We also cannot predict what
other legislation relating to our business or the health care industry may be
enacted, including legislation relating to third-party reimbursement, or what
effect legislation may have on the results of our operations.

Because we have minimal direct sales experience, our sales program may be
unsuccessful.

We commenced a direct sales program in July 1993 with three sales
representatives to market our products. In July 2000, four additional sales
representative were hired. In August 2001, 15 additional sales representatives
were hired, bringing the total number of sales representatives to 22. The number
of sales representatives has been reduced to five as a result of our efforts to
reduce costs and absence of the anticipated FDA approval of the Photon(TM) laser
system. However, we have minimal direct sales experience and may need to recruit
additional qualified personnel for this purpose. Our sales program may be
unsuccessful or we may be unable to attract and retain qualified distributors on
favorable terms.

Our product liability insurance could be inadequate to cover liabilities if we
face significant product liability claims against us.

The nature of our business exposes it to risk from product liability
claims and there can be no assurance that we can avoid significant product
liability exposure. We maintain product liability insurance providing coverage
up to $2,000,000 per claim with an aggregate policy limit of $2,000,000. There
is substantial doubt that this amount of insurance would be adequate to cover
liabilities should we face significant claims. A successful products liability
claim brought against us could have a material adverse effect on our business,
operating results and financial condition. Further, product liability insurance
is becoming increasingly expensive, and there can be no assurance that we will
successfully maintain adequate product liability insurance at acceptable rates,
or at all. Should we be unable to maintain adequate product liability insurance,
our ability to market our products would be significantly impaired. Any losses
that we may suffer from future liability claims or a voluntary or involuntary
recall of our products and the damage that any product liability litigation or
voluntary or involuntary recall may do to the reputation and marketability of
our products would have a material adverse effect on our business, operating
results and financial condition.

Our future products sales in foreign countries could be adversely effected by a
significant increase in value of the U.S. dollar against local currencies,
economic and political instability, and changes in the regulatory processes and
other regulations.

We anticipate that a significant portion of our future product sales
will be in foreign countries. Because we quote prices for our products and
accept payment on sales principally in U.S. dollars, any significant increase in
the value of the U.S. dollar against local currencies may make our products less
competitive with foreign products. The economic and political instability of
some foreign countries also may affect the ability of ophthalmologists and
others to purchase our products, or the ability of potential customers to pay
for the procedures for which our products are used. In addition, other specific
risks in doing business in foreign countries include changes in the regulatory
processes affecting our products, in controls governing foreign payments by our
customers, and in regulations, taxes and customs duties or requirements that may
be imposed on the purchase of our products. The foreign countries where our
products are sold include but are not limited to Argentina, Australia,
Bangladesh, Borneo, Brazil, Canada, China, Czechoslovakia, Egypt, France,
Germany, Greece, Hong Kong, India, Israel, Italy, Japan, Jordan, Korea,
Malaysia, Mexico, New Zealand, Pakistan, Peru, Poland, Puerto Rico, Russia,
Saudi Arabia, Spain, Sri Lanka, Taiwan, Thailand, Turkey, United Kingdom, and
United Arab Emirates. Certain of countries may experience political, economic or
social instability, which could adversely affect our sales.

The market price of our securities could fluctuate significantly.

Our common stock and Class A warrants were delisted on The Nasdaq
SmallCap Market effective June 26, 2003 and currently trade on the OTC Bulletin
Board. Factors such as announcements by us of the regulatory status of products,
quarterly variations in our financial results, the gain or loss of material
contracts, changes in management, regulatory changes, trends in the industry or
stock market and announcements by competitors, among other things, could cause
the market price of such securities to fluctuate significantly.

We may issue preferred shares with preferences in an equal or prior rank to
existing preferred shares.

Our certificate of incorporation authorizes the issuance of shares of
"blank check" preferred stock, which will have such designations, rights and
preferences as may be determined from time to time by our board of directors.
Accordingly, our Board of Directors is empowered, without stockholder approval
(but subject to applicable government regulatory restrictions), to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
our common stock. Those terms and conditions may include preferences on an equal
or prior rank to existing preferred stock. Those shares may be issued on such
terms and for such consideration as the board then deems reasonable and such
stock shall then rank equally in all aspects of the series and on the
preferences and conditions so provided, regardless of when issued. In the event
of such issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of our company. As of March 31, 2004, the following preferred shares
were issued and outstanding: 5,627 shares of Series A preferred stock

convertible into 6,753 common shares; 8,986 shares of Series B preferred stock
convertible into 10,783 common shares; no shares of Series C preferred stock;
5,000 shares of Series D preferred stock convertible into 8,750 common shares;
1,000 shares of Series E preferred stock convertible into 53,333 common shares;
4,598.75 shares of Series F preferred stock convertible into 245,267 common
shares; and 1,981,560 shares of Series G preferred stock convertible into
1,981,560 common shares.

Our preferred shares have rights that amount to a preference over the shares of
this offering.

Our preferred shares have dividend and liquidation rights that amount
to preferences over the shares of this offering. We must pay any cash dividends
to our holders of preferred shares before paying cash dividends to the holders
of the shares of this offering. The dividend rights of our preferred shares are
as follows: for Series A and Series B preferred shares, $.24 per share per annum
payable, at our option, in cash from surplus earnings; for Series C preferred
shares, 12% non-cumulative preferred shares payable, at our option, in common
stock or cash from surplus earnings; and for Series D, E, F and G preferred
shares, 8% non-cumulative preferred dividends payable, at our option, in common
stock or cash from surplus earnings. Upon our liquidation, we must pay
preferential distributions to our preferred shareholders before paying any
distributions to holders of the shares of this offering. The liquidation rights
of our preferred shares are as follows: for Series A preferred shares, $1.00 per
share, plus accrued and unpaid dividends; for Series B preferred shares, $4.00
per share, plus accrued and unpaid dividends; for Series C preferred shares, the
stated value of $100.00 per share, plus declared but unpaid dividends; for
Series D preferred shares, the stated value of $1.75 per share, plus declared
but unpaid dividends; for Series E, F, and G preferred shares, the greater of
(i) the amount of distributions such shares would have received had the holders
converted such preferred shares into common stock immediately prior to
liquidation, or (ii) the stated value of $100.00 per share, plus declared but
unpaid dividends.

Exercise of outstanding options and warrants will dilute existing stockholders
and could decrease the market price of our common stock

As of March 31, 2004, we had issued and outstanding 25,509,868 shares
of our common stock, shares of Series A, B, D, E, F and G preferred stock
convertible into 2,080,743 shares of common stock, and outstanding options and
warrants to purchase 8,096,708 additional shares of common stock. The existence
of the outstanding preferred shares, options and warrants may adversely effect
the market price of our common stock and the terms under which we could obtain
additional equity capital.

We do not expect to pay any cash dividends in the foreseeable future.

We issued a stock dividend on our Series A preferred stock and Series B
preferred stock on January 8, 1996, to stockholders of record as of December 31,
1994. We have not paid any cash dividends on our common shares and do not expect
to declare or pay any cash or other dividends in the foreseeable future so that
we may reinvest earnings, if any, into the development of the business. The
holders of our Series A preferred stock, Series B preferred stock, Series C
preferred stock, Series D preferred stock, Series E preferred stock, Series F
preferred stock and Series G preferred stock are entitled to non-cumulative cash
dividends paid out of surplus earnings.

None of the proceeds from the sale of shares in this offering will be placed in
escrow and therefore there are no investor protections for the return of
subscription funds once accepted.

We have not established a minimum amount of proceeds that we must
receive in the offering before any proceeds may be accepted. Once accepted, the
funds will be deposited into an account maintained by us and considered general
assets of Paradigm. None of the proceeds will be placed in any escrow, trust or
other arrangement. Therefore, there are no investor protections for the return
of subscription funds once accepted.

We have sole discretion in allocating the proceeds from the offering.

All of the net proceeds of the offering, if any, have been allocated to
working capital (and not otherwise allocated for a specific purpose) and will be
used for such purposes as management may determine in its sole discretion
without the need for stockholder approval with respect to any such allocations.

We may have continuing liability following our rescission offer in 1996 to
Series B preferred shareholders.

We issued 493,000 shares of Series B preferred stock in 1994 and 1995.
The Series B shares may not have been sold in compliance with certain aspects of
California corporate law and federal and state securities laws. Concurrently
with our July 1996 public offering, we provided the Series B shareholders with a
rescission offer to repurchase all Series B preferred shares or rescission
shares owned by the Series B shareholders. The Series B shareholders were
offered the right to rescind their purchases and receive a refund of the price
paid by them of $4.00 per share plus an amount equal to the interest thereon at
rates ranging from 6% to 12% per annum from the date the rescission shares were
purchased to July 25, 1996, the date our public offering closed and each
rescinding shareholder was paid by us. The original purchasers of approximately

93% of the Series B shares (460,250 shares) rejected the rescission offer by
responding as requested in the rescission offer or by failing to return a
response within 30 days of receiving the rescission offer. Two shareholders
owning a combined total of 32,750 shares accepted the rescission offer. We
purchased the 32,750 shares from the two shareholders accepting the rescission
offer from the proceeds from our public offering. The rescission offer was
designed to reduce any type of contingent liability we may be subject to in
connection with its private placement of Series B preferred stock. However, the
rescission offer may not have fully relieved us from exposure to contingent
liability under federal or state securities laws. Not every state statutorily
provides for voluntary rescission offers. In addition, other states, although
authorizing rescission offers, do not completely limit the liability of the
offeror. Thus, we may have continuing liability in certain states following the
rescission offer. Other than the payments in 1996 to the two shareholders
accepting the rescission offer, we have made no additional payments thereunto as
no other shareholder has accepted the rescission offer. Moreover, there has been
no litigation by a shareholder involving the private offering of Series B
preferred stock or the rescission offer. As of March 31, 2004, a total of
484,014 shares of Series B preferred stock have been converted into 580,817
shares of common stock. There are a total of 8,986 shares of Series B preferred
stock issued and outstanding, which are convertible into 10,783 shares of common
stock.

Because we failed to hold an annual shareholders meeting in fiscal 2003, the
Delaware Court of Chancery may order an annual meeting to be held upon request
by a shareholder.

We did not hold an annual meeting of the shareholders for fiscal 2003
in order to avoid the costs of such a meeting, including the cost of preparing
and mailing a proxy statement and annual report to each of our shareholders.
There were no actions taken in 2003 by the board of directors or our management
that required shareholder approval. Under Delaware law, we are required to hold
an annual shareholders meeting each year. A failure to hold an annual
shareholders meeting does not effect otherwise valid corporate acts or work a
forfeiture or dissolution of the company. However, if we fail to hold an annual
shareholders meeting for a period of 30 days after the date designated in our
bylaws for the annual meeting, the Delaware Court of Chancery may order an
annual meeting to be held upon the application of any of our shareholders. If an
annual meeting is ordered to be held by the court, we would have to incur the
costs of holding the meeting, including the cost of preparing and mailing the
proxy statement and annual report to each of our shareholders. We anticipate
holding an annual shareholders meeting in 2004.

We have indemnification agreements with certain officers and directors that may
require us to indemnify them in a civil or criminal action.

Our certificate of incorporation eliminates in certain circumstances
the liability of directors for monetary damages for breach of their fiduciary
duty as directors. We have entered into indemnification agreements with certain
directors and officers. Each such indemnification agreement provides that we
will indemnify the indemnitee against expenses, including reasonable attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any civil or criminal action or
administrative proceeding arising out of his performance of his duties as a
director or officer, other than an action instituted by the director or officer.
The indemnification agreements will also require that we indemnify the director
or other party thereto in all cases to the fullest extent permitted by
applicable law. Each indemnification agreement will permit the director or
officer that is party thereto to bring suit to seek recovery of amounts due
under the indemnification agreement and to recover the expenses of such a suit
if he or she is successful.

Our Board of Directors has the right to issue additional shares of common stock
and to create a new series of preferred stock which could dilute holders of
common stock.

Our board of directors has the inherent right under applicable Delaware
law, for whatever value the board deems adequate, to issue additional common
shares up to the limit of shares authorized by the certificate of incorporation,
and, upon such issuance, all holders of shares of common stock, regardless of
when they are issued, thereafter generally rank equally in all aspects of that
class of stock, regardless of when issued. Our board of directors likewise has
the inherent right, limited only by applicable Delaware law and provisions of
the Certificate of Incorporation to increase the number of preferred shares in a
series, to create a new series of preferred shares and to establish preferences
and all other terms and conditions in regard to such newly-created series. Any
of those actions will dilute the holders of common shares and also affect the
relative position of the holders of any series of any class. Current
stockholders have no rights to prohibit such issuances nor inherent "preemptive"
rights to purchase any such stock when offered.

Legal Proceedings

An action was brought against us in March 2000 by George Wiseman, a
former employee, in the Third District Court of Salt Lake County, State of Utah.
The complaint alleges that we owe Mr. Wiseman 6,370 shares of our common stock
plus costs, attorney's fees and a wage penalty (equal to 1,960 additional shares
of our common stock) pursuant to Utah law. The action is based upon an extension
of a written employment agreement. We dispute the amount allegedly owed and
intend to vigorously defend against the action.

An action was brought against us on March 7, 2000 in the Third District
Court of Salt Lake County, State of Utah, by the Merrill Corporation that
alleges that we owe the Merrill Corporation approximately $20,000 together with
interest thereon at the rate of 10% per annum from August 30, 1999, plus costs

and attorney's fees. The complaint alleges a breach of contract relative to
printing services. We filed an answer to the complaint. On August 12, 2003, the
court dismissed the action without prejudice.

An action was brought against us on September 11, 2000 by PhotoMed
International, Inc. and Daniel M. Eichenbaum, M.D. in the Third District Court
of Salt Lake County, State of Utah. The action involves an amount of royalties
that are allegedly due and owing to PhotoMed International, Inc. and Dr.
Eichenbaum under a license agreement dated July 7, 1993, with respect to the
sale of certain equipment, plus costs and attorneys' fees. Discovery has taken
place and we have paid royalties of $14,736 to bring all payments up to date
through June 30, 2001. We have been working with PhotoMed and Dr. Eichenbaum to
ensure that the calculations have been correctly made on the royalties paid as
well as the proper method of calculation for the future.

It is anticipated that once the parties can agree on the correct
calculations on the royalties, the legal action will be dismissed. The issue in
dispute concerning the method of calculating royalties is whether royalties
should be paid on returned equipment. Since July 1, 2001, only one Photon(TM)
laser system has been sold and no systems returned. Thus, the amount of
royalties due, according to our calculations, is $600. We intend to make payment
of this amount to PhotoMed and Dr. Eichenbaum and, as a result, to have the
legal action dismissed. However, if the parties are unable to agree on a method
for calculating royalties, there is a risk that PhotoMed and Dr. Eichenbaum
might amend their complaint to request termination of the license agreement and,
if successful, we would lose our right to manufacture and sell the Photon(TM)
laser system.

We received a demand letter dated December 9, 2002 from counsel for Dan
Blacklock, dba Danlin Corp. The letter demands payment in the amount of $65,160
for manufacturing and supplying parts for microkeratome blades. Our records show
that we received approximately $34,824 in parts from the Danlin Corp., but that
the additional amounts that the Danlin Corp contends are owed were from parts
that were received but rejected by us because they had never been ordered. On
August 14, 2003, we agreed to make a $13,650 payment to Danlin Corp. in
settlement of the dispute. We have since made the $13,650 payment to Danlin
Corp.

Mr. Motter is further claiming payment for accrued vacation time during
the 13 years he had been employed by the Company, asserting that he only had a
total of four weeks of vacation during that period. Finally, Mr. Motter is
threatening a shareholder derivative action against us because of the board of
directors' alleged failure to conduct an investigation into conversations that
took place in a chat room on Yahoo. Mr. Motter asserts that certain individuals
participating in the conversations were our officers or directors whose
interests were in conflict with the interest of the shareholders. We believe
that Mr. Motter's claims and assertions are without merit and intend to
vigorously defend against any legal action that Mr. Motter may bring.

On January 24, 2003, an action was brought by Dr. John Charles Casebeer
against us in the Montana Second Judicial District Court, Silver Bow County,
State of Montana (Civil No. DU-0326). The complaint alleges that Dr. Casebeer
entered into a personal services contract with us memorialized by a letter
agreement dated April 20, 2002, with it being alleged that Dr. Casebeer fully
performed his obligations. Dr. Casebeer asserts that he is entitled to $43,750
per quarter for consultant time and as an incentive to be granted each quarter
$5,000 in options issued at the fair market value. An additional purported
incentive was $50,000 in shares of stock being issued at the time a formalized
contract was to be signed by the parties. In the letter it is provided that at
its election, we may pay the consideration in the form of stock or cash and that
stock would be issued within 30 days of the close of the quarter. Prior to the
litigation, we issued 43,684 shares to Dr. Casebeer. The referenced letter
provides that termination may be made by either party upon giving 90 days
written notice. Notice was given by us in early November 2002. We filed an
answer in defense of the action. The issues included whether or not Dr. Casebeer
fully performed as asserted. The case has been settled through the issuance of
300,000 additional shares of our common stock to Dr. Casebeer.

Analyzer(TM). The complaint also alleges that on July 11, 2002, we issued a
press release falsely announcing that we had received a purchase order from
Valdespino Associates Enterprises and Westland Financial Corporation for 200
sets of our entire portfolio of products, with $70 million in systems to be
delivered over a two-year period, then another $35 million of orders to be
completed in the third year. As a result of these statements, the complaint
contends that the price of our shares of common stock was artificially inflated
during the period from April 25, 2001 through May 14, 2003, and the persons who
purchased our common shares during that period suffered substantial damages. The
complaint requests judgment for unspecified damages, together with interest and
attorney's fees.

We were issued a Directors and Officers Liability and Company
Reimbursement Policy by United States Fire Insurance Company for the period from
July 10, 2002 to July 10, 2003 that contains a $5,000,000 limit of liability,
which is excess of a $250,000 retention. The officers and directors named in the
consolidated cases have requested coverage under the policy. U.S. Fire is
currently investigating whether it may have a right to deny coverage for the
consolidated cases based upon policy terms, conditions and exclusions or to
rescind the policy based upon misrepresentations contained in our application
for insurance.

In the event U.S. Fire determines that we or the former officers and
directors named in the consolidated cases are not entitled to coverage under the
policy, or that it is entitled to rescind the policy, or should we be declared
in default under the non-waiver agreement, for not making the monthly payments
in a timely manner that are owed to U.S. Fire, then we agree to pay U.S. Fire,
on demand, the full amount of all costs advanced by U.S. Fire, except for those
amounts that we may have reimbursed to U.S. Fire pursuant to the monthly
payments due under the non-waiver agreement.

On July 10, 2003, a complaint was filed in the United States District
Court, District of Utah captioned Innovative Optics, Inc. and Barton Dietrich
Investments, L.P. v. Paradigm Medical Industries, Inc., Mackey Price & Thompson,
Thomas Motter, Mark Miehle and John Hemmer, Case No. 2:03 CV 00582DB. The
complaint claims that Innovative and Barton entered into an asset purchase
agreement with us on January 31, 2002, in which we agreed to purchase all the
assets of Innovative in consideration for the issuance of 1,310,000 shares of
the Company's common stock to Innovative. The complaint claims we breached the
asset purchase agreement. The complaint also claims that we allegedly made false
and misleading statements pertaining to the Blood Flow Analyzer(TM) and
concerning a purchase order from Valdespino Associates Enterprises and Westland
Financial Corporation. The purpose of these statements, according to the
complaint, was to induce Innovative to sell its assets and purchase the shares
of our common stock at artificially inflated prices while simultaneously
deceiving Innovative and Barton into believing that the Company's shares were
worth more than they actually were. The complaint contends that had Innovative
and Barton known the truth they would not have sold Innovative to us, would not
have purchased our stock for the assets of Innovative, or would not have
purchased the stock at the inflated prices that they allegedly paid. The
complaint further contends that as a result of the allegedly false statements,
Innovative and Barton suffered substantial damages in an amount to be proven at
trial.

The purpose of these statements, according to the complaint, was to
induce investors to purchase shares of our Series E preferred stock in a private
placement transaction at artificially inflated prices. The complaint contends
that as a result of these statements, the investors that purchased shares of our
Series E preferred stock in the private offering suffered substantial damages to
be proven at trial. The complaint also alleges that we sold Series E preferred
shares without registering the sale of such shares or obtaining an exemption
from registration. The complaint requests rescission, compensatory damages and
treble damages, including interest and attorneys' fees. We filed an answer to
the complaint. We believe the complaint is without merit and intend to
vigorously defend our interests in the action. If we are not successful in

defending and protecting our interests in the action, resulting in a judgment
against us for substantial damages, and U.S. Fire denies coverage in the
litigation under the Directors and Officers Liability and Company Reimbursement
Policy, we would not be able to pay such liability and, as a result, would be
forced to seek bankruptcy protection.

An action was filed on June 20, 2003 in the Third Judicial District
Court, Salt Lake County, State of Utah (Civil No. 030914195) by CitiCorp Vendor
Finance, Inc., formerly known as Copelco Capital, Inc. The complaint claims that
$49,626 plus interest is due for the leasing of two copy machines that were
delivered to our Salt Lake City facilities on or about April of 2000. The action
also seeks an award of attorney's fees and costs incurred in the collection. We
dispute the amounts allegedly owed, asserting that the equipment we returned to
the leasing company did not work properly. A responsive pleading has not yet
been filed. We are currently engaged in settlement discussions with CitiCorp.

An action was filed in June, 2003 in the Third Judicial District Court,
Salt Lake County, State of Utah (Civil No. 030914719) by Franklin Funding, Inc.
in which it alleges that we had entered into a lease agreement for the lease of
certain equipment for which payment is due. It is claimed that there is due and
owing approximately $89,988 after accruing late fees, interest, repossession
costs, collection costs and attorneys' fees. On August 28, 2003, we agreed to a
settlement of the case with Franklin Funding by agreeing to make 24 monthly
payments of $2,300 to Franklin Funding, with the first monthly payment due on
August 29, 2003.

We received demand letters dated July 18, 2003, September 26, 2003 and
November 10, 2003 from counsel for Douglas A. MacLeod, M.D., a shareholder of
the company. In the July 18, 2003 letter, Dr. MacLeod demands that he and
certain entities with which he is involved or controls, namely the Douglas A.
MacLeod, M.D. Profit Sharing Trust, St. Marks' Eye Institute and Milan Holdings,
Ltd., be issued a total of 2,296,667 shares of our common stock and warrants to
purchase 1,192,500 shares of our common stock at an exercise price of $.25 per
share. Dr. MacLeod claims that these common shares and warrants are owing to him
and the related entities under the terms of a mutual release dated January 16,
2003, which he and the related entities entered into with us. Dr. MacLeod
renewed his request for these additional common shares and warrants in the
September 26, 2003 and November 10, 2003 demand letters. We believe that Dr.
MacLeod's claims and assertions are without merit and that neither he nor the
related entities are entitled to any additional shares of our common stock or
any additional warrants under the terms of the mutual release. We intend to
vigorously defend against any legal action that Dr. MacLeod may bring.

On August 3, 2003, a complaint was filed against us by Corinne Powell,
a former employee, in the Third Judicial District Court, Salt Lake County, State
of Utah (Civil No. 030918364). Defendants consist of the Company and Randall A.
Mackey, Dr. David M. Silver and Keith D. Ignotz, directors of the company. The
complaint alleges that at the time we laid off Ms. Powell on March 25, 2003, she
was owed $2,030 for business expenses, $11,063 for accrued vacation days,
$12,818 for unpaid commissions, the fair market value of 50,000 stock options
exercisable at $5.00 per share that she claims she was prevented from
exercising, attorney's fees and a continuing wage penalty under Utah law. We
dispute the amounts allegedly owed and intend to vigorously defend and protect
our interests in the action.

On September 10, 2003, an action was filed against us by Larry Hicks in
the Third Judicial District Court, Salt Lake County, State of Utah, (Civil No.
030922220), for payments due under a consulting agreement with us. The complaint
claims that monthly payments of $3,083 are due for the months of October 2002 to
October 2003 under a consulting agreement and, if the agreement is terminated,
for the sum of $110,000 minus whatever we have paid Mr. Hicks prior to such
termination, plus costs, attorney's fees and a wage penalty pursuant to Utah
law. We dispute the amount allegedly owed and intend to vigorously defend
against such action.

We are not a party to any other material 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 our financial
condition or results of operations.

SELLING SECURITYHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004 by each of the holders of
Series E preferred stock (the "Selling Series E Preferred Shareholder"),
assuming each of the Selling Series E Preferred Shareholders elects to exercise
his or her conversion rights to convert the Series E Preferred shares (the
"Series E Shares") into shares of common stock, at a conversion price equal to
$1.875 per share of common stock, the number of shares of common stock to be
sold by each Selling Series E Preferred Shareholder, and the percentage of each
Selling Series E Preferred Stockholder after the sale of common stock included
in this prospectus.

Shares Beneficially Number of
Owned Prior to Shares Being Shares Beneficially
Offering Offered Owned After Offering
Shareholders Number Percent Number Percent
------------ ------ ------- ------ -------

John T. Ablamsky 32,000 * 32,000 0 *
Steven J. Ablamsky 32,000 * 32,000 0 *
Morris Ades 26,667 * 26,667 0 *
BNB Associates Investments LP (1) 40,000 * 40,000 0 *
Dr. Ronald A. and Karen A. Balkin 133,333 * 133,333 0 *
Jerry Bassin 26,667 * 26,667 0 *
Dr. Valery Berger 200 * 200 0 *
Dr. Richard G. Bowe, IRA 26,667 * 26,667 0 *
Roland A. Catalano, IRA 80,000 * 80,000 0 *
Chicago Investments, Inc. (2) 80,000 * 80,000 0 *
Henry A. Fredericks Sep. Property Trust
dated 10/12/88 (3) 26,667 * 26,667 0 *
Robert L. Frome (4) 66,667 * 66,667 0 *
John Harte 53,333 * 53,333 0 *
Scott A. Jernigan 25,833 * 25,833 0 *
KSH Strategic Investment Fund I, LP (5) 207,333 * 207,333 0 *
Albert F. Kinzinger, Jr. 45,000 * 45,000 0 *
Albert F. Kinzinger, Sr., IRA 26,667 * 26,667 0 *
Arthur Klansky 3,333 * 13,333 0 *
James H. Levi 11,667 * 11,667 0 *
Dr. Michael B. Limberg (6) 179,580 * 92,000 87,580 *
Mid-Lakes Profit Sharing Trust
dated 1/1/66 (7) 26,667 * 26,667 0 *
James A. Milgard 200,000 * 200,000 0 *
Kay Murcer 10,667 * 10,667 0 *
Jules M. Ness, Jr. 26,667 * 26,667 0 *
Perceptive Life Sciences Master Fund (8) 44,132 * 44,132 0 *
David Peterson 2,500 * 2,500 0 *
Dr. Soleiman Rabanipour 13,333 * 13,333 0 *
Marsha and Barry Reiss 5,333 * 5,333 0 *
Edwin W. and Cheryl S. Richardson 26,667 * 26,667 0 *
Joel Schoenfeld, IRA 26,667 * 26,667 0 *
Judy Shapiro Trust dated 5/15/01 (9) 53,333 * 53,333 0 *
Shadow Capital LLC (10) 53,333 * 53,333 0 *
Rick Siskey 37,767 * 37,767 0 *
Ronit Sucoff 53,333 * 53,333 0 *
White Living Trust (11) 13,333 * 13,333 0 *
Jeffrey A. Wietzman 13,333 * 13,333 0 *
James C. Wilson 53,333 * 53,333 0 *
--------- --------- ------
TOTAL 1,794,012 1,706,432 87,580

-----------------
* Less than 1%

(1) The managing partner of BNB Associates Investments LP is Benjamin
Bollag, who exercises sole voting and investment powers.
(2) The president of Chicago Investments, Inc. is Linda Gallenberger, who
exercises sole voting and investment powers.
(3) The trustee of Henry A. Fredericks Sep. Property Trust is James D.
White, who exercises sole voting and investment powers.
(4) Mr. Frome is a former director of Paradigm.
(5) The managing partners of KSH Strategic Investment Fund I, LP are Cary
W. Sucoff and Harvey R. Kohn, who exercise shared voting and investment
powers.
(6) Dr. Limberg is a consultant to Paradigm.
(7) The trustee of the Mid-Lakes Profit Sharing Trust dated 1/1/66 is John
Harte, who exercises sole voting and investment powers.
(8) The director of Perceptive Life Sciences Master Fund is Joseph Adelman,
who exercises sole voting and investment powers.
(9) The trustees of the Judy Shapiro Trust dated 5/15/01 are Alan and Judy
Shapiro, who exercise shared voting and investment powers.
(10) The manager of Shadow Capital LLC is B. Kent Garlinghouse, who
exercises sole voting and investment powers.
(11) The trustees of the White Living Trust are James and Jean Ann White,
who exercise shared voting and investment powers.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004 by each of the Series E
preferred shareholders holding warrants (the "Selling Series E
Securityholders"), assuming each of the Selling Series E Securityholders elects
to exercise the warrants held by such Selling Securityholder to purchase shares
of common stock at an exercise price of $4.00 per share, the number of shares of
common stock to be sold by each Selling Series E Securityholder, and the
percentage of each Selling Series E Securityholder after the sale of common
stock included in this prospectus.

John T. Ablamsky 35,000 * 3,000 32,000 *
Steven J. Ablamsky 35,000 * 3,000 32,000 *
Morris Ades 30,500 * 2,500 26,667 *
BNB Associates Investments LP (1) 43,750 * 3,750 40,000 *
Dr. Ronald A. and Karen Balkin 155,833 * 12,500 133,333 *
Jerry Bassin 29,167 * 2,500 26,667 *
Dr. Valery Berger 2,500 * 2,500 0 *
Michael Bollag 3,750 * 3,750 0 *
Dr. Richard G. Bowe, IRA 29,167 * 2,500 26,667 *
Craig S. Brewer 5,000 * 5,000 0 *
Roland A. Catalano, IRA 87,500 * 7,500 80,000 *
Chicago Investments, Inc. (2) 87,500 * 7,500 80,000 *
Jack Dushey 2,500 * 2,500 0 *
Henry A. Fredericks Sep. Property Trust
dated 10/12/88 (3) 29,167 * 2,500 26,667 *
Robert L. Frome (4) 72,917 * 6,250 66,667 *
Richard E. Gerzof 1,250 * 1,250 0 *
John Harte 58,333 * 5,000 53,333 *
Scott Jernigan 5,000 * 5,000 0 *
KSH Strategic Investment Fund I., LP (5) 237,333 1.0% 20,000 207,333 *
Terry F. King 2,500 * 2,500 0 *
Albert F. Kinzinger, Jr. 49,220 * 4,220 45,000 *
Albert F. Kinzinger, Sr., IRA 29,167 * 2,500 26,667 *
Arthur Klansky 14,583 * 1,250 13,333 *
Helen Kohn 5,000 * 5,000 0 *
James H. Levi 14,499 * 2,500 11,999 *
Dr. Michael B. Limberg (6) 188,955 * 9,375 179,580 *
Mid-Lakes Profit Sharing Trust
dated 1/1/66 (7) 29,167 * 2,500 26,667 *
James A. Milgard 218,750 * 18,750 200,000 *
Kay Murcer 11,667 * 1,000 10,667 *
Jules M. Ness, Jr. 39,167 * 2,500 26,667 *
OTATO Limited Partnership (8) 12,500 * 12,500 0 *
Michael Pancer Profit Sharing Plan 2,500 * 2,500 0 *
Perceptive Life Sciences Master Fund (9) 64,132 * 20,000 44,132 *
David Peterson 3,750 * 1,250 2,500 *
Dr. Soleiman Rabanipour 14,583 * 1,250 13,333 *
Marsha and Barry Reiss 5,833 * 500 5,333 *
Dr. Sheldon Rabin, IRA 5,000 * 5,000 0 *
Edwin W. and Cheryl S. Richardson 29,167 * 2,500 26,667 *
Joel Schoenfeld, IRA 29,167 * 2,500 26,667 *
Judy Shapiro (10) 58,333 * 5,000 53,333 *
Shadow Capital LLC (11) 53,333 * 5,000 53,333 *
Richard C. Siskey 47,766 * 10,000 37,766 *
Ronit Sucoff 108,333 * 5,000 103,333 *
WEC Asset Management LLC (12) 10,000 * 10,000 0 *
White Living Trust (13) 14,583 * 1,250 13,333 *
Jeffrey A. Wietzman 14,583 * 1,250 13,333 *
James C. Wilson 56,333 * 5,000 53,333 *
----------- ----------- -----------
TOTAL 2,059,405 241,095 1,818,310
-----------------

* Less than 1%

(1) The managing partner of BNB Associates Investments LP is Benjamin
Bollag, who exercises sole voting and investment powers.
(2) The president of Chicago Investments, Inc. is Linda Gallenberger, who
exercises sole voting and investment powers.
(3) The trustee of Henry A. Fredericks Sep. Property Trust is James D.
White, who exercises sole voting and investment powers.
(4) Mr. Frome is a former director of Paradigm.
(5) The managing partners of KSH Strategic Investment Fund I, LP are Cary
W. Sucoff and Harvey R. Kohn, who exercise shared voting and investment
powers.
(6) Dr. Limberg is a former consultant to Paradigm.
(7) The trustee of the Mid-Lakes Profit Sharing Trust dated 1/1/66 is John
Harte, who exercises sole voting and investment powers.
(8) The chief financial officer of OTATO Limited Partnership is James W.
Santori, who exercises sole voting and investment powers.
(9) The director of Perceptive Life Sciences Master Fund is Joseph Adelman,
who exercises sole voting and investment powers.
(10) The trustees of the Judy Shapiro Trust dated 5/15/01 are Alan and Judy
Shapiro, who exercise shared voting and investment powers.
(11) The manager of Shadow Capital LLC is B. Kent Garlinghouse, who
exercises sole voting and investment powers.
(12) The managing director of WEC Asset Management LLC is Daniel J. Saks,
who exercises sole voting and investment powers.
(13) The trustees of the White Living Trust are James and Jean Ann White,
who exercise shared voting and investment powers.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004 by each of the holders of
Series F preferred stock (the "Selling Series F Preferred Shareholder"),
assuming each of the Selling Series F Preferred Shareholders elects to exercise
his or her conversion rights to convert the Series F preferred shares (the
"Series F Shares") into shares of common stock, at a conversion price equal to
$1.875 per share of common stock, the number of shares of common stock to be
sold by each Selling Series F Preferred Shareholder, and the percentage of each
Selling Series F Preferred Stockholder after the sale of common stock included
in this prospectus.

Al Kim Associates Profit Sharing Plan 41,000 * 41,000 0 *
Judge Hugh Arnold 4,000 * 4,000 0 *
Edwin R. Bindseil 11,600 * 11,600 0 *
Timothy S. Borne 44,000 * 44,000 0 *
Bert E. Brodsky 25,000 * 25,000 0 *
Bru Holding Co. LLC (1) 62,000 * 62,000 0 *
Dennis R. and Rosemary Casey 42,667 * 42,667 0 *
Jason Kyu Cho 46,000 * 46,000 0 *
James S. Cobb 50,872 * 50,872 0 *
Neil S. Coleman 74,000 * 74,000 0 *
James F. Corman 26,667 * 26,667 0 *
Deutsche Asset Management
HealthScience Fund I, Ltd. (2) 245,707 1.1% 245,707 0 *
Donald J. Ekman 14,000 * 14,000 0 *
Forrest Living Trust (3) 5,600 * 5,600 0 *
Richard Friedman 44,000 * 44,000 0 *
Robert Girards 11,000 * 11,000 0 *
Ronald G. Goldy 11,000 * 11,000 0 *
R. Steven Graves 13,000 * 13,000 0 *
Lou Hammer 10,667 * 10,667 0 *
Richard Harriton 11,000 * 11,000 0 *
Michael E. Hubner 10,667 * 10,667 0 *
Roger C. Husted, M.D. 11,000 * 11,000 0 *

Russell Ingrum 11,600 * 11,600 0 *
John Harte Money Purchase Plan 22,000 * 22,000 0 *
Lonnie Johnson 26,667 * 26,667 0 *
Joseph Berland Revocable Trust (4) 11,000 * 11,000 0 *
KMF Partners, LP (5) 160,000 * 160,000 0 *
KSH Strategic Investment
Fund I, LP (6) 63,600 * 63,600 0 *
Kachel, Spiller & Co. (7) 8,000 * 8,000 0 *
Arthur Klansky 13,333 * 13,333 0 *
Michael B. Koerner 10,667 * 10,667 0 *
Stephen Leiter 10,667 * 10,667 0 *
Stanley Levine 10,667 * 10,667 0 *
Loving Care Agency, Inc. (8) 11,000 * 11,000 0 *
James J. Lucey 22,000 * 22,000 0 *
Michael C. Manis 10,667 * 10,667 0 *
Judy G. Marcucilli and
Theodore J. Marcucilli 23,000 * 23,000 0 *
Jeffrey Markowitz 44,000 * 44,000 0 *
Paul C. Matthews 43,600 * 43,600 0 *
Myron S. Mayer 10,667 * 10,667 0 *
John McClenon 11,000 * 11,000 0 *
Ryan L. Molleur 15,000 * 15,000 0 *
Richard Moskow 10,667 * 10,667 0 *
Kay Murcer 15,000 * 15,000 0 *
Jules M. Ness 16,456 * 16,456 0 *
Harvey A. Newman 10,667 * 10,667 0 *
Jerold Novack 20,000 * 20,000 0 *
Orion Operating Corporation (9) 30,000 * 30,000 0 *
Steven G. Orshan 16,456 * 16,456 0 *
OTATO Limited Partnership (10) 80,000 * 80,000 0 *
Parisol Corporation (11) 43,600 * 43,600 0 *
Donald E. Paxton 11,000 * 11,000 0 *
Richard Pizitz 9,600 * 9,600 0 *
ProMed Partners, L.P. (12) 260,693 1.1% 260,693 0 *
ProMed Partners II, L.P. (13) 26,987 * 26,987 0 *
Dennis Pudvah and Emma Pudvah 8,000 * 8,000 0 *
Robert John Molleur Trust (14) 6,000 * 6,000 0 *
Ronald S. Dungan Trust
dated 9/27/97(15) 11,600 * 11,600 0 *
Susan G. Rosenthal 10,667 * 10,667 0 *
Allan P. Rothstein 44,000 * 44,000 0 *
A. Lee Royal 11,000 * 11,000 0 *
Bruce Rubin 5,000 * 5,000 0 *
Shadow Capital, LLC (16) 22,000 * 22,000 0 *
Ronald Shapiro and Susan Shapiro 8,800 * 8,800 0 *
Michael Shinn 5,000 * 5,000 0 *
Robert Spira 20,000 * 20,000 0 *
Stream Restaurant Associates, Inc.
Money Purchase Pension Plan
dated 1/1/84 (17) 26,240 * 26,240 0 *
Adam D. Stolpen 16,000 * 16,000 0 *
Jeffrey Sucoff 20,000 * 20,000 0 *
Edmund Tennenhaus 50,027 * 50,027 0 *
Douglas L. Weed 11,000 * 11,000 0 *
---------- ---------- -----------
TOTAL 2,181,042 2,181,042 0

--------------
* Less than 1%

(1) The manager of Bru Holding Co. LLC is Bruce Toll, who exercises sole
voting and investment powers.
(2) The managing directors of Deutsche Asset Management Health Science Fund
I, Ltd. are Barry Kurokawa and David B. Muskett, who exercise shared
voting and investment powers.
(3) The trustees of Forrest Living Trust are James and Lisa Forrest, who
exercise shared voting and investment powers.
(4) The trustee of the Joseph Berland Revocable Trust is Joseph Berland,
who exercises sole voting and investment powers.
(5) The general partner of KMF Partners, LP is Karen Fleiss, who exercises
sole voting and investment powers.
(6) The managing directors of KSH Strategic Investment Fund I, LP are Cary
W. Sucoff and Harvey R. Kohn, who exercise shared voting and investment
powers.
(7) The president of Kachel, Spiller & Co. is Allan B. Kachel, who
exercises sole voting and investment powers.
(8) The president of Loving Care Agency, Inc. is Emily Karzhervsky, who
exercises sole voting and investment powers.
(9) The president and sole owner of Orion Operating Corporation is Carlyle
Macharg, who exercises sole voting and investment powers.
(10) The chief financial officer of OTATO Limited Partnership is James W.
Santori, who exercises sole voting and investment powers.
(11) The president of Parisol Corporation is Moshe Levy, who exercises sole
voting and investment powers.
(12) The managing directors of ProMed Partners, L.P. are Barry Kurokawa and
David B. Muskett, who exercise shared voting and investment powers.
(13) The managing directors of ProMed Partners II, L.P. are Barry Kurokawa
and David B. Muskett, who exercise shared voting and investment powers.
(14) The trustee of the Robert John Molleur Trust is Robert J. Molleur, who
exercises sole voting and investment powers.
(15) The trustee of the Ronald S. Dungan Trust dated 9/21/97 is Ronald S.
Dungan, who exercises sole voting and investment powers.
(16) The manager of Shadow Capital, LLC is B. Kent Garlinghouse, who
exercises sole voting and investment powers.
(17) The trustee of Stream Restaurant Associates, Inc. Money Purchase
Pension Plan dated 1/1/84 is Martin J. Schwimmer, who exercises sole
voting and investment powers.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004 by each of the Series F
Preferred Shareholders holding warrants (the "Selling Series F
Securityholders"), assuming each of the Selling Series F Securityholders elects
to exercise the warrants held by such Selling Securityholder to purchase shares
of common stock at an exercise price of $4.00 per share, the number of shares of
common stock to be sold by each Selling Series E Securityholder, and the
percentage of each Selling Series E Securityholder after the sale of common
stock included in this prospectus.

Francis Anderson 8,346 * 8,346 0 *
Darin Baker 2,604 * 2,604 0 *
Alan Beinhacker 541 * 541 0 *
Christopher Brothers 2,604 * 2,604 0 *
James Corman 2,500 * 2,500 0 *
Cyndel & Co., Inc. (1) 12,500 * 12,500 0 *
Lenore Deluca 1,234 * 1,234 0 *
Paul Dorfman 1,287 * 1,287 0 *
Michael Fenton 467 * 467 0 *
Generation Capital Associates (2) 23,035 * 23,208 0 *
Frances Kehoe 1,234 * 1,234 0 *
Helen Kohn 31,800 * 31,800 0 *
Jason Konior 515 * 515 0 *
Nicole Kregar 1,234 * 1,234 0 *
Joe Levine 450 * 450 0 *
James McKeever 1,000 * 1,000 0 *
Damian Maggio 515 * 515 0 *
Lewis Mason 3,887 * 3,887 0 *
Frank Mauro 11,250 * 11,250 0 *
Robert Moulallem 1,000 * 1,000 0 *
Nancy Murdocco 1,234 * 1,234 0 *

Bernard Musmand 450 * 450 0 *
Dr. Joseph R. Nemeth 9,375 * 9,375 0 *
Karen Ann Orlando 1,234 * 1,234 0 *
Barry Pearl 10,000 * 10,000 0 *
John Petrucco 1,320 * 1,320 0 *
Victor Polakof 2,500 * 2,500 0 *
Sal Vatore Ponzo 4,500 * 4,500 0 *
ProMed Partners, L.P.(3) 23,035 * 23,035 0 *
ProMed Partners I (4) 24,440 * 24,440 0 *
ProMed Partners II (5) 2,530 * 2,530 0 *
Mary Ellen Spedale 1,234 * 1,234 0 *
Ronit Sucoff 31,800 * 31,800 0 *
Scott Sucoff 5,928 * 5,928 0 *
Matthew Zagon 2,833 * 2,833 0 *
------------ --------- --------------
TOTAL 230,589 * 230,589 0

--------------
* Less than 1%

(1) The chairman, director and 50% shareholder of Cyndel & Co., Inc. is
Stephen J. Bayern and the president, director and 50% shareholder of
Cyndel is Patrick N. Kolenik, who together exercise shared voting and
investment powers. Messrs. Bayern and Kolenik are each a former
director of Paradigm. On October 1, 1999 and April 1, 2000, Cyndel
entered into consulting agreements with Paradigm to perform unspecified
investment banking services for Paradigm.
(2) The general partner of Generation Capital Associates is Frank E. Hart,
who exercises sole voting and investment powers.
(3) The managing directors of ProMed Partners, L.P. are Barry Kurokawa and
David B. Muskett, who exercise sole voting and investment powers.
(4) The managing directors of ProMed Partners I are Barry Kurokawa and
David B. Muskett, who exercise shared voting and investment powers.
(5) The managing directors of ProMed Partners II are Barry Kurokawa and
David B. Muskett, who exercise shared voting and investment powers.

The following table sets forth information regarding the beneficial
ownership of the our common stock as of March 31, 2004, by each of the holders
of options (the "Selling Optionholders"), assuming each of the Selling
Optionholders elects to exercise his or her options to purchase shares of common
stock at an exercise price equal to $5.00 per share, the number of shares to be
sold by each Selling Optionholder and the percentage of each Selling
Optionholder after the sale of the shares included in this prospectus.

Shares Beneficially Number of
Owned Prior to Shares Being Shares Beneficially
Offering Offered Owned After Offering
Optionholders Number Percent Number Percent
------------- ------ ------- ------ -------

Del Anderson 300 * 300 0 *
Kent Angell 5,000 * 5,000 0 *
Joseph P. Caruso 5,539 * 5,539 0 *
Rafino Dumlao 5,000 * 5,000 0 *
Clint Frederickson 400 * 400 0 *
Lynn M. Frye 4,000 * 4,000 0 *
Robert Gaertner 5,000 * 5,000 0 *
Miguel A. Gonzales 1,000 * 1,000 0 *
James Haydu 2,000 * 2,000 0 *
John P. Haydu 2,000 * 2,000 0 *
Zolton Haydu 15,000 * 15,000 0 *
John W. Hemmer(1) 60,000 * 60,000 0 *
Thomas L. Martin 5,000 * 5,000 0 *
Aziz Mohabbat 10,000 * 10,000 0 *
Thomas F. Motter (2) 289,020 1.2% 143,450 145,570 *
Dale Muir 150 * 150 0 *
Roberto E. Parra 4,000 * 4,000 0 *
Corinne Powell 62,500 * 62,500 0 *
Charles S. Pritchard 4,103 * 4,103 0 *
Ray Rivera 150 * 150 0 *
Zacarri D. Sisneros 15,040 * 15,040 0 *
Anthony Smith 10,000 * 10,000 0 *
-------- -------- -----------
TOTAL 505,202 359,632 145,570

--------------
*Less than 1%.

(1) Mr. Hemmer is the former senior vice president of Paradigm.
(2) Mr. Motter is the former chairman and chief executive officer of
Paradigm.

The following table sets forth information regarding the beneficial
ownership of the our common stock as of March 31, 2004, by each of the holders
of options (the "Selling Optionholders"), assuming each of the Selling
Optionholders elects to exercise his or her options to purchase shares of common
stock at an exercise price equal to $2.75 per share, the number of shares to be
sold by each Selling Optionholder and the percentage of each Selling
Optionholder after the sale of the shares included in this prospectus.

Kent Angell 2,500 * 2,500 0 *
Joseph P. Caruso 2,500 * 2,500 0 *
Rafino Dumlao 2,500 * 2,500 0 *
Lynn M. Frye 1,250 * 1,250 0 *
Robert Gaertner 2,500 * 2,500 0 *
Kathy M. Hand 15,000 * 15,000 0 *
Keith D. Ignotz(1) 125,000 * 125,000 0 *
Cynthia Kozak 6,000 * 6,000 0 *
Randall A. Mackey(2) 325,000 1.4% 325,000 0 *
Thomas L. Martin 2,500 * 2,500 0 *
Heber C. Maughan 30,000 * 30,000 0 *
Mark R. Miehle (3) 233,966 * 165,000 68,966 *
Aziz Mohabbat 50,000 * 50,000 0 *
Luis Mostacero 2,500 * 2,500 0 *
Thomas F. Motter (4) 1,070,570 4.6% 925,000 145,570 *
Roberto E. Parra 2,500 * 2,500 0 *
Corinne Powell 275,000 1.2% 275,000 0 *
Charles S. Pritchard 6,000 * 6,000 0 *
Dr. David M. Silver(5) 341,666 1.4% 325,000 16,666 *
Zacarri D. Sisneros 6,250 * 6,250 0 *
Anthony Smith 6,250 * 6,250 0 *
John Tricarico 6,000 * 6,000 0 *
Petra Yekulis 1,250 * 1,250 0 *
------------ ----------- ----------
TOTAL 2,516,702 2,285,500 231,202

--------------
*Less than 1%.

(1) Mr. Ignotz is a director of Paradigm.
(2) Mr. Mackey is chairman of the board and secretary of Paradigm.
(3) Mr. Miehle is the former president and chief operating officer of
Paradigm.
(4) Mr. Motter is the former chairman and chief executive officer of
Paradigm.
(5) Dr. Silver is a director of Paradigm.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004, by each of the holders of
options (the "Selling Optionholders"), assuming each of the Selling
Optionholders elects to exercise his options to purchase shares of common stock
at an exercise price equal to $6.00 per share, the number of shares to be sold
by each Selling Optionholder and the percentage of each Selling Optionholder
after the sale of the shares included in this prospectus.

Randall A. Mackey(1) 75,000 * 75,000 0 *
Mark R. Miehle(2) 218,966 * 150,000 68,966 *
Dr. David M. Silver(3) 91,666 * 75,000 16,666 *
---------- ------ -------
TOTAL 385,632 300,000 85,632

--------------
*Less than 1%.

(1) Mr. Mackey is chairman of the board and secretary of Paradigm.
(2) Mr. Miehle is the former president and chief operating officer of
Paradigm.
(3) Dr. Silver is a director of Paradigm.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004, by each of the holders of
options (the "Selling Optionholders"), assuming each of the Selling
Optionholders elects to exercise his options to purchase shares of common stock
at an exercise price equal to $4.00 per share, the number of shares to be sold
by each Selling Optionholder and the percentage of each Selling Optionholder
after the sale of the shares included in this prospectus.

Steven J. Bayern (1) 112,500 * 112,500 0 *
Robert L. Frome (2) 216,667 * 150,000 66,667 *
Keith D. Ignotz (3) 75,709 * 75,000 709 *
Patrick N. Kolenik (4) 112,500 * 112,500 0 *
Randall A. Mackey (5) 75,000 * 75,000 0 *
Thomas F. Motter (6) 195,570 * 50,000 145,570 *
Dr. David M. Silver (7) 91,666 * 75,000 16,666 *
---------- --------- -----------
TOTAL 879,612 650,000 229,612

------------
Less than 1%

(1) Mr. Bayern is a former director of Paradigm.
(2) Mr. Frome is a former director of Paradigm.
(3) Mr. Ignotz is a director of Paradigm.
(4) Mr. Kolenik is a former director of Paradigm.
(5) Mr. Mackey is chairman of the board and secretary of Paradigm.
(6) Mr. Motter is the former chairman and chief executive officer of
Paradigm.
(7) Dr. Silver is a director of Paradigm.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004, by each of the holders of
warrants (the "Selling Securityholders"), assuming each of the Selling
Securityholders elects to exercise the warrants held by such Selling
Securityholder to purchase shares of common stock at exercise prices ranging
from $2.38 to $8.125 per share, the number of shares to be sold by each Selling
Securityholder and the percentage of each Selling Securityholder after the sale
of the shares included in this prospectus.

Shares Beneficially Number of
Owned Prior to Shares Being Shares Beneficially
Offering Offered Owned After Offering
Securityholders Number Percent Number Percent
--------------- ------ ------- ------ -------

Consulting for Strategic Growth, Ltd. 40,000 * 40,000 0 *
Cyndel & Co., Inc. (1) 475,000 2.0% 475,000 0 *
John W. Hemmer (2) 75,000 * 75,000 0 *
Kenneth Jerome & Company, Inc. 200,000 * 200,000 0 *
Barry Kaplan Associates 100,000 * 100,000 0 *
Helen Kohn 50,000 * 50,000 0 *
Dr. Michael M. Limberg (3) 479,580 2.1% 300,000 179,580 *
Rodman & Renshaw, Inc. 35,000 * 35,000 0 *
Ronit Sucoff 106,703 * 50,000 53,333 *
---------- ---------- -------
TOTAL 1,553,913 1,325,000 228,913

------------
Less than 1%.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004, by each of the holders of
warrants (the "Selling Securityholders"), assuming each of the Selling
Securityholders elects to exercise the warrants held by such Selling
Securityholder to purchase shares of common stock at an exercise price of $.25
per share, the number of shares of common stock to be sold by each Selling
Securityholder, and the percentage of each Selling Securityholder after the sale
of common stock included in this prospectus.

Shares Beneficially Number of
Owned Prior to Shares Being Shares Beneficially
Offering Offered Owned After Offering (1)
Shareholders Number Percent Number Percent
------------ ------ ------- ------ -------

Paul L. Archambeau, M.D. 255,000 * 51,000 204,000 *
John H. Banzhaf 7,887 * 7,887 0 *
Daniel S. Lipson 250,000 * 50,000 200,000 *
Douglas A. MacLeod, M.D. 1,418,451 5.6% 200,000 1,218,451 4.8%
Douglas A. MacLeod, M.D. Profit
Sharing Trust 500,000 2.0% 100,000 400,000 1.6%
St. Mark's Eye Institute 250,000 1.0% 50,000 200,000 *
Milan Holdings, Ltd. 900,000 3.8% 180,000 720,000 2.8%
Frank G. Mauro 141,975 * 141,975 0 *
Delbert D. Reichardt 7,888 * 7,888 0 *
------------ --------- ---------------
TOTAL 3,731,201 788,750 2,942,451

-------------
Less than 1%.

The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2004, by each of the shareholders
registering shares of common stock for resale (the "Selling Shareholders")
pursuant to registration rights granted to such Selling Shareholders, the number
of shares to be sold by each Selling Shareholder and the percentage of each
Selling Shareholder after the sale of the shares included in this prospectus.

Victoria Albright 382 * 382 0 *
Joseph S. Anile II 112,933 * 112,933 0 *
Paul L. Archambeau, M.D. 0 * 204,000 0 *
Dr. Myron Arlen 9,853 * 9,853 0 *
Scott S. Bair 50,000 * 50,000 0 *
Steven J. Bayern(1) 160,093 * 160,093 0 *
Bear Stearns as Custodian FBO
Leonard Russin, IRA 25,000 * 25,000 0 *
Ellen Bracchi 132 * 132 0 *
John Butler 224,499 * 224,499 0 *
John Butler as Custodian for
Shandy Lee Dunn 382 * 382 0 *
John Richard Butler Jr. 552 * 552 0 *
Carcap, Co. LLC 15,500 * 15,500 0 *
Ray P. Carracciolo 3,698 * 3,698 0 *
John Charles Casebeer, M.D. 43,684 * 43,684 0 *
Leith Clotfelter 116 * 116 0 *
Thomas Clotfelter 116 * 116 0 *
Jarrod R. Eberhardt 4,108 * 4,108 0 *
Erin C. Eberhardt 4,108 * 4,108 0 *
Eberhardt Family Trust (UTD)
dated 3/12/92 (2) 13,353 * 13,353 0 *
Charles George 462 * 462 0 *
Stanley Goldberg Revocable Trust (3) 10,000 * 10,000 0 *
Charles L. Greiter, Custodian for
Christopher B. Breiter 764 * 764 0 *
Charles L. Greiter, Custodian for
Elizabeth A. Breiter 764 * 764 0 *
William D. Greiter 1,528 * 1,528 0 *
Scott Gruder 4,927 * 4,927 0 *
Douglas A. Hester 1,284 * 1,284 0 *
I.O. Assets, Inc. 1,222,825 5.2% 1,222,825 0 *
International Bio-Immune Systems, Inc. 344,000 * 344,000 0 *
JAOR Partners 5,000 * 5,000 0 *
Joshua E. Josephson 924 * 924 0 *
David R. Kahn 180 * 180 0 *
Rodger T. Kame 642 * 642 0 *
Helen Kohn 52,500 * 52,500 0 *
Patrick M. Kolenik (4) 160,093 * 160,093 0 *
Peter Kristensen(5) 50,000 * 50,000 0 *
KSH Strategic Investment Fund I, LP
(6) 32,500 * 32,500 0 *
Stuart J. Lemle 16,328 * 16,328 0 *
Ted Levine 4,927 * 4,927 0 *
Daniel Levinson 1,528 * 1,528 0 *
Dr. Michael M. Limberg (7) 179,580 * 87,580 92,000 *
Sheila G. Lipin 6,163 * 6,163 0 *
William R. Lipin 9,244 * 9,244 0 *
Daniel S. Lipson 0 * 200,000 0 *
Roland Lorenzo 9,853 * 9,853 0 *
Douglas A. MacLeod, M.D. 1,218,450 4.8% 800,000 418,450 1.6%

Douglas A. MacLeod, M.D. Profit
Sharing Trust 0 * 400,000 0 *
George Mansfield 50,466 * 50,466 0 *
F. Brinton McConkie(8) 50,000 * 50,000 0 *
Mentor Corporation (9) 763,651 3.2% 763,651 0 *
Irwin Messer 2,464 * 2,464 0 *
Mark R. Miehle (10) 68,966 * 18,500 50,466 *
Milan Holdings, Ltd. 720,000 3.1% 720,000 0 *
Wilfred H. Newsham and Therese D.
Newshaw Living Trust (UDT)
dated 8/13/92 (11) 924 * 924 0 *
William Norgren 539 * 539 0 *
Phillips, Haskett & Ingwalson, P.C. (12) 6,163 * 6,163 0 *
Frederick C. Phillips 2,311 * 2,311 0 *
Polycore Optical Pte., Ltd. (13) 694,816 3.0% 694,816 0 *
Charles S. Pritchard 51 * 51 0 *
Eric Pfosi 3,641 * 3,641 0 *
Janeen Pfosi 10,052 * 10,052 0 *
Janeen Pfosi, Custodian for
Evan Pfois 3,335 * 3,335 0 *
Janeen Pfosi, Custodian for
Brent Pfosi 3,029 * 3,029 0 *
Richard G. Powell 5,300 * 5,300 0 *
R.F. Lafferty & Co. (14) 100,000 * 100,000 0 *
Dr. Sheldon Rabin 9,853 * 9,853 0 *
D.A. Rorabaugh and Lorraine
Rorabaugh Trust (UTD) dated
5/21/85 (15) 16 * 16 0 *
Dale Rorabaugh 1,541 * 1,541 0 *
David and Dee Russell 1,849 * 1,849 0 *
Thomas O. Sherer 3,819 * 3,819 0 *
St. Mark's Eye Institute 200,000 * 200,000 0 *
Michael W. Stelzer (16) 40,000 * 40,000 0 *
Ronit Sucoff 3,370 * 3,370 0 *
Tov Industrial Products (17) 55,000 * 55,000 0 *
Triton West Group, Inc. (18) 695,991 3.0% 695,991 0 *
Jennifer Wegen, Custodian for
Kaitlin Wegen 10,052 * 10,052 0 *
Jennifer Wegen, Custodian for
Kristine Wegen 7,915 * 7,915 0 *
Jennifer Wegen, Custodian for
Madison Wegen 3,335 * 3,335 0 *
Jennifer Wegen Trust (UAD)
dated 7/24/95 5,778 * 5,778 0 *
Keith Wegen Trust (UAD)
dated 7/24/95 5,778 * 5,778 0 *
Richard O. Williams 3,056 * 3,056 0 *
Gary Wisniewski 1,320 * 1,320 0 *
James D. Wood 1,078 * 1,078 0 *
------------ ------------ ----------
TOTAL 7,542,286 6,981,370 560,916

-------------
Less than 1%.

(1) Mr. Bayern is a former director of Paradigm.
(2) The trustee of the Eberhardt Family Trust (UTD) dated 3/12/92 is
Richard A. Eberhardt, who exercises sole voting and investment powers.
(3) The trustee of the Stanley Goldberg Revocable Trust is Stanley
Goldberg, who exercises sole voting and investment powers.

(4) Mr. Kolenick is a former director of Paradigm.
(5) Mr. Kristensen is a former consultant to Paradigm.
(6) The managing directors of KSH Strategic Investment Fund I, LP are Cary
W. Sucoff and Harvey R. Kohn, who exercise shares voting and investment
powers.
(7) Dr. Limberg is a former consultant to Paradigm.
(8) Mr. McConkie is a former consultant to the Company.
(9) The senior vice president and chief financial officer of Mentor
Corporation is Adel Michael, who exercises sole voting and investment
powers. On October 24, 1999, Mentor entered into an asset purchase
agreement with Paradigm to sell Mentor's cataract surgery product line.
(10) Mr. Miehle is the former president and chief operating officer of
Paradigm.
(11) The trustee of the Wilfred H. Newshaw and Therese D. Newshaw Living
Trust (UDT) dated 8/13/92 are Wilfred H. Newshaw and Therese D Newshaw,
who exercise shared voting and investment powers.
(12) The secretary of Phillips, Haskett & Ingwalson, P.C. is Frederick C.
Phillips, who exercises sole voting and investment powers.
(13) The managing director of Polycore Optical Pte., Ltd. is Sammy Summargo,
who exercises sole voting and investment powers.
(14) The president of R.F. Lafferty & Co. is Henry Hackel, who exercises
sole voting and investment powers.
(15) The trustees of the D.A. Rorabaugh and Lorraine Rorabaugh Trust (UTD)
dated 5/21/85 are Dale A. and Lorraine Rorabaugh, who exercise shared
voting and investment powers.
(16) Mr. Stelzer is the former vice president of operations and chief
operating officer of Paradigm.
(17) The president of Tov Industrial Products is Joseph Frimerman, who
exercises sole voting and investment powers.
(18) The president of Triton West Group, Inc. is E. Edward Jung, who
exercises sole voting and investment powers. On June 30, 2000, Triton
West Group, Inc. entered into a private equity line of credit agreement
with Paradigm.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 80,000,000 shares of common
stock, $.001 par value per share, of which 25,509,868 shares were issued and
outstanding as of January 31, 2004, and 5,000,000 shares of undesignated
preferred stock, $.001 par value per share. We have created seven classes of
preferred stock, designated as Series A preferred stock, Series B preferred
stock, Series C convertible preferred stock, Series D convertible preferred
stock, Series E convertible preferred stock, Series F convertible preferred
stock and Series G convertible preferred stock. The following is a summary of
the material terms and provisions of our capital stock and related securities.
Because it is a summary, it does not include all of the information that is
included in our certificate of incorporation. The text of our certificate of
incorporation, which is attached as an exhibit to this registration statement,
is incorporated into this section by reference.

Common Stock

Voting Rights. The holders of our common stock will have one vote per
share and are not entitled to vote cumulatively for the election of directors.
Generally, all matters to be voted on by stockholders must be approved by a
majority or, in the case of election of directors, by plurality of the votes
cast at a meeting at which a quorum is present and voting together as single
class, subject to any voting rights granted to the holders of any then
outstanding preferred stock.

Dividends. Holders of common stock are entitled to receive any
dividends declared by our board of directors, subject to the preferential rights
of any preferred stock then outstanding. Dividends consisting of shares of
common stock may be paid to holders of shares of common stock.

Other Rights. Upon our liquidation, dissolution or winding up, the
holders of common stock are entitled preferential to share ratably in any assets
available for distribution to holders of shares of common stock. No holders of
shares are subject to redemption or have preemptive rights to purchase
additional shares of common stock.

Preferred Stock

Our certificate of incorporation provides that 5,000,000 shares of
preferred stock may be issued from time to time in one or more series. Our board
of directors is authorized to fix the voting rights, if any, designations,
powers, preferences, qualifications, limitations and restrictions, applicable to
the shares of each series. Our board of directors may, without stockholder
approval, issue preferred stock with voting and other rights that could
adversely affect the voting power and other rights of the holders of the common
stock and could have anti-takeover effects, including preferred stock or rights
to acquire preferred stock in connection with implementing a stockholder rights
plan. The ability of our board of directors to issue preferred stock without
stockholder approval could have the effect of delaying, deferring or preventing
a change of control with respect to our company or the removal of existing
management. As of August 30, 2003, we have created and issued shares of seven
classes of preferred stock.

Series A, B, C, D, E, F and G Preferred Stock.

The Board of Directors has authorized the issuance of 500,000 shares of
Series A Preferred Stock, 500,000 shares of Series B Preferred Stock, 30,000
shares of Series C Preferred Stock, 1,140,000 shares of Series D Preferred
Stock, 50,000 shares of Series E Preferred Stock, 50,000 shares of Series F
Preferred Stock, and 2,000,000 shares of Series G Preferred Stock. Each of the
shares of preferred stock are convertible into shares of common stock at a
different conversion price. As of January 31, 2004, there were issued and
outstanding 5,627 shares of Series A Preferred Stock convertible into 6,753
shares of our common stock; 8,986 shares of Series B Preferred Stock convertible
into 10,783 shares of our common stock; no shares of Series C Preferred Stock;
5,000 shares of Series D Preferred Stock; 1,000 shares of Series E Preferred
Stock convertible into 53,333 shares of common stock; 4,598.75 shares of Series
F Preferred Stock convertible into 245,267 shares of our common stock; and
1,981,560 shares of Series G Preferred Stock convertible into 1,981,560 shares
of our common stock The voting rights, dividends, conversion rights, redemption
rights, and liquidation rights of the Series A, Series B, Series C, Series D,
Series E, Series F and Series G Preferred Stock are more fully described below.

Series A Preferred Stock

Voting Rights. Except as provided by applicable law, the Series A
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series A preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series A preferred stock is entitled to non-cumulative
preferred dividends at $.24 per share per annum payable, at our option, in cash
from surplus earnings.

Conversion. At any time the Series A preferred stockholder may convert
each share of Series A preferred stock into 1.2 shares of our common stock,
subject to adjustment for stock splits, stock dividends, recapitalizations and
similar transactions involving our common stock.

Other Rights. Upon our liquidation, dissolution, or sale of
substantially all of our assets, the Series A preferred stockholders are
entitled to distributions equal to $1.00 per share, plus accrued and unpaid
dividends. The shares of Series A preferred stock are subject to redemption but
have no preemptive rights to purchase additional shares of Series A preferred
stock or our common stock.

Series B Preferred Stock

Voting Rights. Except as provided by applicable law, the Series B
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series B preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series B preferred stock is entitled to non-cumulative
preferred dividends at $.24 per share per annum payable, at our option, in cash
from surplus earnings.

Conversion. At any time the Series B preferred stockholder may convert
each share of Series B preferred stock into 1.2 shares of our common stock,
subject to adjustment for stock splits, stock dividends, recapitalizations and
similar transactions involving our common stock.

Other Rights. Upon our liquidation, dissolution, or sale of
substantially all of our assets, the Series B preferred stockholders are
entitled to distributions equal to $4.00 per share, plus accrued and unpaid
dividends. The Series B preferred stockholders are entitled to preferential
distributions over all other classes of capital stock, other than Series A
preferred stock. The shares of Series B preferred stock are subject to
redemption but have no preemptive rights to purchase additional shares of Series
B preferred stock or our common stock.

Series C Preferred Stock

Voting Rights. Except as provided by applicable law, the Series C
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series C preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series C preferred stock is entitled to 12%
non-cumulative preferred dividends payable, at our option, in common stock or
cash from surplus earnings.

Conversion. At any time the Series C preferred stockholder may convert
each share of Series C preferred stock into 57.14 shares of common stock,
subject to adjustment for stock splits, stock dividends, recapitalizations and
similar transactions involving our common stock. Any shares of Series C
preferred stock outstanding after January 1, 2002, are automatically converted
into our shares to common stock at the conversion price then in effect.

Other Rights. Upon our liquidation, dissolution or sale of
substantially all of our assets, the Series C preferred stockholders are
entitled to distributions equal to the greater of (i) the amount of
distributions such shares would have received had such holders converted the
Series C preferred stock into common stock immediately prior to liquidation, or
(ii) the stated value of $100.00 per share, plus declared but unpaid dividends.
The Series C preferred stockholders are entitled to preferential distributions
over all other classes of capital stock, other than Series A and Series B
preferred stock. No shares of Series C preferred stock are subject to redemption
or have preemptive rights to purchase additional shares of Series C preferred
stock or our common stock.

Series D Preferred Stock

Voting Rights. Except as provided by applicable law, the Series D
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series D preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series D preferred stock is entitled to 8%
non-cumulative preferred dividends payable, at our option, in common stock or
cash from surplus earnings.

Conversion. At any time the Series D preferred stockholder may convert
each share of Series D preferred stock into one share of common stock, subject
to adjustment for stock splits, stock dividends, recapitalizations and similar
transactions involving our common stock. Any shares of Series D preferred stock
outstanding after January 1, 2002, are automatically converted into our shares
of common stock at the conversion price then in effect.

Other Rights. Upon our liquidation, dissolution or sale of
substantially all of our assets, the Series D preferred stockholders are
entitled to distributions equal to the greater of (i) the amount of
distributions such shares would have received had such holders converted the
Series D preferred stock into common stock immediately prior to liquidation, or
(ii) the stated value of $1.75 per share, plus declared but unpaid dividends.
The Series D preferred stockholders are entitled to preferential distributions
over all other classes of capital stock, other than Series A, Series B and
Series C preferred stock. No shares of Series D preferred stock are subject to
redemption or have preemptive rights to purchase additional shares of Series D
preferred stock or our common stock.

Series E Preferred Stock

Voting Rights. Except as provided by applicable law, the Series E
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series E preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series E preferred stock is entitled to 8%
non-cumulative preferred dividends payable, at our option, in common stock or
cash from surplus earnings.

Conversion. At any time the Series E preferred stockholder may convert
each share of Series E preferred stock into 53.33 shares of common stock,
subject to adjustment for stock splits, stock dividends, recapitalizations and
similar transactions involving our common stock. Any shares of Series E
preferred stock outstanding are automatically converted into shares of our
common stock (i) after January 1, 2005, or (ii) after a registration statement
registering our common shares issuable upon conversion has been effective for a
least 30 days and the average closing price of our common stock for the 20-day
period is at least $3.50 per share.

Other Rights. Upon our liquidation, dissolution or sale of
substantially all of our assets, the Series E preferred stockholders are
entitled to distributions equal to the greater of (i) the amount of
distributions such shares would have received had such holders converted the
Series E preferred stock into common stock immediately prior to liquidation, or
(ii) the stated value of $100.00 per share, plus declared but unpaid dividends.
The Series E preferred stockholders are entitled to preferential distributions
over all other classes of capital stock, other than Series A, Series B, Series C
and Series D preferred stock. No shares of Series E preferred stock are subject
to redemption or have preemptive rights to purchase additional shares of Series
E preferred stock or our common stock.

Series F Preferred Stock

Voting Rights. Except as provided by applicable law, the Series F
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series F preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series F preferred stock is entitled to 8%
non-cumulative preferred dividends payable, at our option, in common stock or
cash from surplus earnings.

Conversion. At any time the Series F preferred stockholder may convert
each share of Series F preferred stock into 53.33 shares of common stock,
subject to adjustment for stock splits, stock dividends, recapitalizations and
similar transactions involving our common stock. Any shares of Series F
preferred stock outstanding are automatically converted into shares of our
common stock (i) after January 1, 2005, or (ii) after a registration statement
registering our common shares issuable upon conversion has been effective for a
least 30 days and the average closing price of our common stock for the 20-day
period is at least $3.50 per share.

Other Rights. Upon our liquidation, dissolution or sale of
substantially all of our assets, the Series F preferred stockholders are
entitled to the greater of (i) the amount of distributions such shares would
have received had such holders converted the Series F preferred stock into
common stock immediately prior to liquidation, or (ii) the stated value of $1.00
per share, plus declared but unpaid dividends. The Series F preferred
stockholders are entitled to preferential distributions over all other classes
of capital stock, other than Series A, Series B, Series C, Series D and Series E
preferred stock. No shares of Series F preferred stock are subject to redemption
or have preemptive rights to purchase additional shares of Series F preferred
stock or our common stock.

Series G Preferred Stock

Voting Rights. Except as provided by applicable law, the Series G
preferred stockholders have neither voting power, nor the right to receive
notice of any meetings of our stockholders. Except as required by law, the
consent of the Series G preferred stockholders is not required or authorized to
take any corporate action.

Dividends. Our Series G preferred stock is entitled to 8%
non-cumulative preferred dividends payable, at our option, in common stock or
cash from surplus earnings.

Conversion. At any time the Series G preferred stockholder may convert
each share of Series G preferred stock into one share of common stock, subject
to adjustment for stock splits, stock dividends, recapitalizations and similar
transactions involving our common stock. Any shares of Series G preferred stock
outstanding are automatically converted into shares of our common stock (i)
after August 1, 2005, or (ii) after a registration statement registering our
common shares issuable upon conversion has been effective for a least 30 days
and the average closing price of our common stock for the 20-day period is at
least $.50 per share.

Other Rights. Upon our liquidation, dissolution or sale of
substantially all of our assets, the Series G preferred stockholders are
entitled to the greater of (i) the amount of distributions such shares would
have received had such holders converted the Series G preferred stock into
common stock immediately prior to liquidation, or (ii) the stated value of $.25
per share, plus declared but unpaid dividends. The Series G preferred
stockholders are entitled to preferential distributions over all other classes
of capital stock, other than Series A, Series B, Series C, Series D, Series E
and Series F preferred stock. No shares of Series G preferred stock are subject
to redemption or have preemptive rights to purchase additional shares of Series
G preferred stock or our common stock.

Warrants

Between June 10, 1997 and January 31, 2004, we issued warrants to
individuals and entities to purchase shares of our common stock at exercise
prices ranging from $.16 per share to $8.125 per share. The warrants all contain
provisions that protect the holders against dilution by adjustment of the
exercise price per share and the number of shares issuable upon exercise thereof
upon the occurrence of certain events, including stock splits, stock dividends,
mergers, and the sale of substantially all of our assets. We are not required to
issue fractional shares of common stock, and in lieu thereof we will make a cash
payment based upon the current market value of such fractional shares. A holder
of these warrants will not possess any rights as a shareholder unless and until
the holder exercises the warrants.

The warrants that are currently issued and have not been exercised, and
the exercise price and expiration date of such warrants are as follows:

o Class A Warrants to purchase 1,000,000 shares of common stock at
an exercise price of $7.50 per share, exercisable through July 10,
2004.

o Warrants issued to Series E preferred stockholders to purchase
241,095 shares of common stock at an exercise price of $4.00 per
share, exercisable through May 23, 2006.

o Warrants issued to Series F preferred stockholders to purchase
251,114 shares of common stock at an exercise price of $4.00 per
share, exercisable through August 20, 2006.

o Warrants issued to Kenneth Jerome & Company, Inc. to purchase
200,000 shares of common stock at exercise prices ranging from
$7.50 to $8.125 per share, exercisable through January 10, 2004.

o Warrants issued to KSH Investment Group to purchase 280,400 shares
of common stock at exercise prices ranging from $2.38 to $2.69 per
share, exercisable through March 1, 2004.

o Warrants issued to Cyndel & Company, Inc. to purchase 475,000
shares of common stock at exercise prices ranging from $3.00 to
$4.00 per share, exercisable during the period of August 10, 2005
and February 7, 2006.

o Warrants issued to Dr. Michael B. Lindberg to purchase 300,000
shares of common stock at exercise prices ranging from $4.00 to
$6.75 per share, exercisable during the period of from December 1,
2008 through June 1, 2011.

o Warrants issued to R.F. Lafferty & Co., Inc. to purchase 100,000
shares of common stock at an exercise price ranging from of $4.00
per share, exercisable through October 15, 2004.

o Warrants issued to John W. Hemmer to purchase 75,000 shares of
common stock at an exercise price of $7.50 per share, exercisable
through January 24, 2005.

o Warrants issued to Helen Kohn and Ronit Sucoff to purchase 50,000
shares each of common stock at an exercise price of $4.00 per
share, exercisable through February 7, 2006.

o Warrants issued to Barrry Kaplan Associates to purchase 100,000
shares of common stock at an exercise price of $3.00 per share,
exercisable through May 15, 2004.

o Warrants issued to Rodman & Renshaw to purchase 35,000 shares of
common stock at an exercise price of $2.00 per share, exercisable
through May 13, 2006.

o Warrants issued to Innovative Optics, Inc, to purchase 250,000
shares of common stock at an exercise price of $5.00 per share,
exercisable through January 31, 2005.

o Warrants issued to Paul L. Archanbeau, M.D., John H. Banzhaf,
Daniel S. Lipson, Douglas A. MacLeod, M.D., Douglas A. MacLeod,
M.D. Profit Sharing Trust, St. Mark's Eye Institute, Milan
Holdings, Inc., Frank G. Mauro, and Delbert G. Reichardt to
purchase an aggregate of 788,750 shares of common stock at an
exercise price of $.25 per share, exercisable through September 6,
2005.

o Warrants issued to Timothy R. Forstrom to purchase 200,000 shares
of common stock at an exercise price of $.16 per share,
exercisable through April 30, 2006.

o Warrants issued to certain investors in a private placement
transaction to purchase an aggregate of 422,634 shares of common
stock at an exercise price of $.75 per share, exerciseable through
June 25, 2005.

o Warrants issued to Series G Preferred warrantholders to purchase
470,589 shares of common stock at an exercise price of $.50 per
share, exercisable through September 1, 2006.

Certain Provisions of Certificate of Incorporation. Our Certificate of
Incorporation provides that to the fullest extent permitted by Delaware law, our
directors shall not be liable to us and our stockholders. The Certificate of
Incorporation also contains provisions entitling the officers and directors to
indemnification by us to the fullest extent permitted by the Delaware General
Corporation Law.

Indemnification Agreements. We have entered into indemnification
agreements with our officers and directors. Such indemnification agreements
provide that we will indemnify its officers and directors against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
arising out of threatened, pending or completed legal action against any officer
or director to the fullest extent permitted by the Delaware General Corporate
Law.

Transfer and Warrant Agent. Our transfer agent and registrar for our
common stock and the Warrant Agent for the Class A warrants is Continental Stock
Transfer & Trust Company, New York, New York.

PLAN OF DISTRIBUTION

We may solicit the exercise of Class A warrants through a registered or
licensed broker-dealer. Upon exercise of Class A warrants, Paradigm will pay
such soliciting broker-dealer a fee of 5% of the aggregate exercise price of
Class A warrants exercised, if: (i) the market price of the common stock on the
date the Class A warrant is exercised is greater than the then exercise price of
the Class A warrant; (ii) the exercise of the Class A warrant was solicited by a
member of the National Association of Securities Dealers, Inc.; (iii) the Class
A warrant is not held in a discretionary account; (iv) disclosure of the
compensation arrangements was made by delivery of this prospectus or otherwise)
both at the time of the offering and at the time of exercise of the Class A
warrant; and (v) the solicitation of exercise of the Class A warrant is not in
violation of Regulation M.

In connection with the solicitation of the Class A warrant exercises,
the soliciting broker-dealer will be prohibited from engaging in any
market-making activities with respect to Paradigm's securities for the period
commencing either two or nine business days (depending on the market price of
the common stock) prior to any solicitation activity for the exercise of Class A
warrants until the later of (a) the termination of such solicitation activity,
or (b) the termination (by waiver or otherwise) of any right which the
soliciting broker-dealer may have to receive a fee for the exercise of Class A
warrants following such solicitation. As a result, the soliciting broker-dealer
may be unable to provide a market for Paradigm's securities, should it desire to
do so, during certain periods while the respective Class A warrants are
exercisable.

We do not plan to solicit Series E or Series F preferred stockholders
regarding the conversion of their Series E or Series F preferred shares into
shares of common stock, which have been registered for resale upon conversion.

The resale of the common stock by the Series E and Series F preferred
stockholders that elect to convert their respective shares of Series E and
Series F preferred stock to shares of common stock and the holders of Class A
warrants, Kenneth Jerome warrants, Cyndel warrants and warrants issued to Dr.
Michael B. Limberg, Consulting for Strategic Growth, Ltd., John W. Hemmer, Helen
Kohn, Ronit Sucoff, Barry Kaplan Associates, Rodman & Renshaw, Inc., Paul L.
Archambeau, M.D., John H. Banzhaf, Daniel S. Lipson, Douglas A. MacLeod, M.D.,
Douglas A. MacLeod, M.D. Profit Sharing Trust, St. Mark's Eye Institute, Milan
Holdings, Ltd., Frank G. Mauro and Delbert D. Reichardt that elect to exercise
their respective warrants and purchase common stock (collectively, the "Selling
Securityholders"), may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling Securityholders)
in the Nasdaq SmallCap Market or in negotiated transactions, a combination of
such methods of sale or otherwise. Sales may be made at fixed prices which may
be changed, at market prices prevailing at the time of sale, or at negotiated
prices.

Selling Securityholders may effect such transactions by selling their
shares of common stock directly to purchasers, through broker-dealers acting as
agents for the Selling Securityholders or to broker-dealers who may purchase
securities as principals and thereafter sell the common stock from time to time
in the over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers for whom such broker-dealers act as agents or to whom they may sell
as principals or otherwise (which compensation as to a particular broker-dealer
may exceed customary commissions). The Selling Securityholders will pay all
commissions, transfer taxes, and other expenses associated with the sale of
common stock by them.

The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities by them might be deemed to be
underwriting discounts and commissions under the Securities Act. We have agreed
to indemnify the Selling Securityholders against certain liabilities under the
Securities Act.

The only Selling Securityholders who are affiliates of broker-dealers
are Steven J. Bayern and Patrick N. Kolenik, who are each an officer, a director
and a shareholder of Win Capital Corp. Messrs. Bayern and Kolenik each received
stock options as consideration for services as a director of Paradigm. At no
time has Mr. Bayern or Mr. Kolenik had any agreements or understandings,
directly or indirectly, with any person to distribute the stock options or the
underlying common shares to be issued in connection with the exercise of such
options.

From time to time this prospectus will be supplemented and amended as
required by the Securities Act of 1933, as amended. During any time when a
supplement or amendment is so required, the Selling Securityholders are to cease
sales until the prospectus has been supplemented or amended. Pursuant to the
registration rights granted to certain of the Selling Securityholders, we have
agreed to update and maintain the effectiveness of this prospectus. Certain of
the Selling Securityholders also may be entitled to sell their shares without
the use of this prospectus, provided that they comply with the requirements of
Rule 144 promulgated under the Securities Act.

EXPERTS

The consolidated financial statements of the Company appearing in the
Company's Annual Report (Form 10-KSB) for the year ended December 31, 2003, have
been audited by Tanner & Co., independent auditors, as indicated in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in auditing and
accounting.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered
hereby and certain other legal matters in connection have been passed upon for
us by Mackey Price & Thompson, Salt Lake City, Utah.

AVAILABLE INFORMATION

We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended and, in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information filed by Paradigm can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 at prescribed rates. In addition, the Commission maintains a web site at
http:/www.sec.gov containing reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission,
including Paradigm.

We have filed with the Commission a Registration Statement (together
with all amendments and exhibits, the "Registration Statement") on Form S-3
under the Securities Act of 1933, as amended, with respect to the common stock
offered pursuant to this prospectus. This prospectus does not contain all the
information set forth in the registration statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this prospectus as to the contents of any agreement or other
document referred to herein are not necessarily complete and reference is made
to the copy of such agreement or to the registration statement and to the
exhibits and schedules filed therewith. Copies of the material containing this
information may be obtained from the Commission upon payment of the prescribed
fee.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents filed by us with the Commission are
incorporated herein by reference:

(1) Amendment No. 3 to Registration Statement on Form SB-2, as filed
on February 27, 2004;
(2) Current Report on Form 8-K, as filed on March 28, 2004;
(3) Annual Report on Form 10-KSB/A for the fiscal year ended December
31, 2003, as filed on April 15, 2003; and
(4) Amendment No. 4 to Registration Statement on Form SB-2, as filed
on April 21, 2004.

All documents subsequently filed by Paradigm with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended and prior to the termination of this offering, shall be deemed
to be incorporated by reference in this prospectus. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

We will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
that have been incorporated herein by reference, other than Exhibits to such
documents (unless such Exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Heber C. Maughan,
interim chief executive officer, Paradigm Medical Industries, Inc., 2355 South
1070 West, Salt Lake City, Utah 84119.

No dealer, salesman or any other person
has been authorized to give information
or to make any representations other 18,849,558 Shares of Common Stock
than those contained in this Prospectus,
and, if given or made, such information
or representations must not be relied
upon as having been authorized by
Paradigm or the Underwriter. This
Prospectus does not constitute an offer
to sell or a solicitation of any offer PARADIGM MEDICAL INDUSTRIES, INC.
to buy any of the securities offered
hereby by anyone in any jurisdiction in -----------------
which such offer or solicitation is not
authorized or in which the person making PROSPECTUS
such offer or solicitation is not
qualified to do so or to anyone to whom -----------------
it is unlawful to make such offer or
solicitation. Neither the delivery of
this Prospectus nor any sale made
hereunder shall, under any
circumstances, create any implication
that there has been no change in the
affairs of Paradigm since the date
hereof. April 21, 2004

---------------------

TABLE OF CONTENTS

Page

Prospectus Summary................... 2
Risk Factors ....................... 4
Selling Securityholders.............. 19
Description of Securities............ 31
Plan of Distribution................. 36
Experts.............................. 37
Legal Matters........................ 37
Available Information................ 37
Documents Incorporated by Reference.. 37

II-1

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the expenses payable by the Company in
connection with the issuance and distribution of the securities being
registered, other than underwriting discount (all amounts except the Securities
and Exchange Commission filing fee and the NASD fee are estimated):

Filing fee -- Securities and Exchange Commission.......... $ 102
NASD fee.................................................. 2,000
Printing and engraving expenses........................... 500
Legal fees and disbursements.............................. 5,000
Accounting fees and disbursements......................... 1,500
Blue Sky fees and expenses (including legal fees)......... 0
Miscellaneous............................................. 250
--------
Total expenses............................................ $ 9,352

Item 15. Indemnification of Directors and Officers

Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware Law") empowers a Delaware corporation to indemnify any person who
is, or is threatened to be made, a party to any threatened, pending or completed
legal action, suit or proceedings, whether civil, criminal, administrative or
investigative (other than action by or in the right of such corporation), by
reason of the fact that such person was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his or her conduct was illegal.
A Delaware corporation may indemnify officers and directors in an action by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of his
or her duty. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such officer or director
actually and reasonably incurred.

In accordance with the Delaware Law, the Certificate of Incorporation
of the Company contains a provision to limit the personal liability of the
directors of the Company for violations of their fiduciary duty. This provision
eliminates each director's liability to the Registrant or its stockholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.

The Company may not indemnify an individual unless authorized and a
determination is made in the specific case that indemnification of the
individual is permissible in the circumstances because his or her conduct was in
good faith, he or she reasonably believed that his or her conduct was in, or not
opposed to, the Company's best interests and, in the case of any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct was
unlawful. The Company may not advance expenses to an individual to whom the
Company may ultimately be responsible for indemnification unless authorized in
the specific case after the individual furnishes the following to the Company: a
written affirmation of his or her good faith belief that his or her conduct was
in good faith, that he or she reasonably believed that his or her conduct was
in, or not opposed to, the Company's best interests and, in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful and (2) the individual furnishes to the Company a written
undertaking, executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the standard of
conduct referenced in part (1) of this sentence. In addition to the individual
furnishing the aforementioned written affirmation and undertaking, in order for
the Company to advance expenses, a determination must also be made that the
facts then- known to those making the determination would not preclude
indemnification.

II-2

All determinations relative to indemnification must be made as follows:
(1) by the Board of Directors of the Company by a majority vote of those present
at a meeting at which a quorum is present, and only those directors not parties
to the proceeding shall be counted in satisfying the quorum requirement; or (2)
if a quorum cannot be obtained as contemplated in part (1) of this sentence, by
a majority vote of a committee of the Board of Directors designated by the Board
of Directors of the Company, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee; or (3) by special legal counsel selected by the Board of Directors or
its committee in the manner prescribed in part (1) or part (2) of this sentence
(however, if a quorum of the Board of Directors cannot be obtained under part
(1) of this sentence and a committee cannot be designated under part (2) of this
sentence, then a special legal counsel shall be selected by a majority vote of
the full board of directors, in which selection directors who are parties to the
proceeding may participate); or (4) by the shareholders, by a majority of the
votes entitled to be cast by holders of qualified shares present in person or by
proxy at a meeting.

The Company has also entered into Indemnification Agreements with its
executive officers and directors. These Indemnification Agreements are
substantially similar in effect to the Bylaws and the provisions of our
Certificate of Incorporation relative to providing indemnification to the
maximum extent and in the manner permitted by the Delaware General Corporation
Law. Additionally, such Indemnification Agreements contractually bind the
Company with respect to indemnification and contain certain exceptions to
indemnification, but do not limit the indemnification available pursuant to our
Bylaws, our Certificate of Incorporation or the Delaware General Corporation
Law.

Item 16. Exhibits

(a) Exhibits
--------

The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.

Exhibit
No. Document Description
------- --------------------
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 Amended Certificate of Incorporation(10)
3.3 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 Specimen Series C Convertible Preferred Stock Certificate(4)
4.8 Certificate of the Designations, Powers, Preferences and Rights
of the Series C Convertible Preferred Stock(4)
4.9 Specimen Series D Convertible Preferred Stock Certificate (6)
4.10 Certificate of the Designations, Powers, Preferences and Rights
of the Series D Convertible Preferred Stock (7)
4.11 Warrant to Purchase Common Stock with Cyndel & Co. (6)
4.12 Warrant to Purchase Common Stock with R.F. Lafferty & Co., Inc.
(6)
4.13 Warrant to Purchase Common Stock with Dr. Michael B. Limberg (7)
4.14 Warrant to Purchase Common Stock with John W. Hemmer (7)
4.15 Stock Purchase Warrant with Triton West Group, Inc.(9)
4.16 Warrant to Purchase Common Stock with KSH Investment Group,
Inc.(9)
4.17 Warrant to Purchase Common Stock with Consulting for Strategic
Growth, Ltd.(9)
4.18 Certificate of Designations, Powers, Preferences and Rights of
the Series G Convertible Preferred Stock (14)
5.1 Opinion of Mackey Price & Thompson
10.1 Exclusive Patent License Agreement with PhotoMed(1)
10.2 Consulting Agreement with Dr. Daniel M. Eichenbaum(1)
10.3 1995 Stock Option Plan (1)
10.4 Employment Agreement with Thomas F. Motter (5)
10.5 Stock Purchase Agreement with Ocular Blood Flow, Ltd. and Malcolm
Redman (7)
10.6 Consulting Agreement with Malcolm Redman (7)
10.7 Royalty Agreement with Malcolm Redman (7)
10.8 Registration Rights with Malcolm Redman (7)
10.9 Employment Agreement with Mark R. Miehle (8)

II-3

10.10 Agreements with Steven J. Bayern and Patrick M. Kolenik (8)
10.11 Private Equity Line of Credit Agreement with Triton West Group,
Inc. (9)
10.12 Asset Purchase Agreement with Innovative Optics, Inc. and Barton
Dietrich Investments, L.P.(10)
10.13 Escrow Agreement with Innovative Optics, Inc., Barton Dietrich
Investments, L.P. (10)
10.14 Assignment and Assumption Agreement with Innovative Optics,
Inc.(10)
10.15 General Assignment and Bill of Sale with Innovative Optics,
Inc.(10)
10.16 Non-Competition and Confidentiality Agreement with Mario F.
Barton(10)
10.17 Termination of Employment Agreement with Mark R. Miehle(12)
10.18 Consulting Agreement with Mark R. Miehle(12)
10.19 Employment Agreement with Jeffrey F. Poore (13)
10.20 License Agreement with Sunnybrook Health Science Center(15)
10.21 Major Account Facilitator Contract(15)
10.22 Mutual Release with Douglas A. MacLeod, M.D. and others(15)
10.23 Purchase Agreement with American Optisurgical, Inc.(15)
10.24 Purchase Order with Westland Financial Corporation(16)
10.25 Non-Waiver Agreement with United States Fire Insurance
Company(16)
10.26 Employment Agreement with John Y. Yoon(17)
10.27 Consulting Agreement with Dr. John Charles Casebeer (18)
10.28 Consulting Agreement with Kinexsys Corporation (18)
23.1 Consent of Mackey Price & Thompson (included in Exhibit 5.1)
23.2 Consent of Tanner & Co.

-----------------
(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 Report on Form 10-QSB, as filed on
November 12, 1998.
(6) Incorporated by reference from Registration Statement on Form
SB-2, as filed on April 29, 1999.
(7) Incorporated by reference from Quarterly Report on Form 10-QSB,
as filed on August 16, 2000.
(8) Incorporated by reference from Quarterly Report on Form 10-QSB,
as filed on November 1, 2000.
(9) Incorporated by reference from Quarterly Report on Form 10-KSB,
as filed on April 16, 2001.
(10) Incorporated by reference from Current Report on Form 8-K, as
filed on March 5, 2002.
(11) Incorporated by reference from Amendment No. 1 to Registration
Statement on Form S-3, as filed on March 20, 2002.
(12) Incorporated by reference from Quarterly Report on Form 10-QSB,
as filed on November 18, 2002.
(13) Incorporated by reference from Registration Statement on Form
SB-2, as filed on July 7, 2003.
(14) Incorporated by reference from Quarterly Report on Form 10-QSB,
as filed on November 14, 2003.
(15) Incorporated by reference from Amendment No. 2 to Registration
Statement on Form SB-2, as filed on December 15, 2003.
(16) Incorporated by reference from Amendment No. 3 to Registration
Statement on Form SB-2, as filed on February 27, 2004.
(17) Incorporated by reference from Current Report on Form 8-K, as
filed on March 23, 2004.
(18) Incorporated by reference from Annual Report on Form 10-KSB, as
filed on April 14, 2004.

(b) Reports on Form 8-K
-------------------

No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 2003.

Item 28. Undertakings

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 (the "Securities Act");

II-4

(ii) To reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and

(iii) To include any additional or changed material
information on the plan of distribution.

(2) That, for determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.

(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.

(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
preceding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

The undersigned registrant also undertakes that:

(1) For purposes of determining any liability under the Securities Act,
treat the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1), or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial bona
fide offering of those securities.

II-5

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, in Salt Lake City,
State of Utah, on the 21st day of April, 2004.

PARADIGM MEDICAL INDUSTRIES, INC.

By: /s/ John Y. Yoon
-----------------
John Y. Yoon, President and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John Y. Yoon as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all Exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated:

Signature Title Date

/s/ John Y. Yoon President and Chief Executive April 21, 2003
---------------------- Officer
John Y. Yoon

/s/ Randall A. Mackey Chairman of the Board and April 21, 2003
---------------------- Secretary
Randall A. Mackey

/s/ David M. Silver Director April 21, 2003
----------------------
David M. Silver

/s/ Keith D. Ignotz Director April 21, 2003
----------------------
Keith D. Ignotz

/s/ Luis A. Mostacero Controller (Principle Financial April 21, 2003
---------------------- and Accounting Officer)
Luis A. Mostacero

II-6