UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D. C.

                                  FORM 10-QSB/A

          |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934

                      For Quarter Ended September 30, 2004

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
              SECURITIES EXCHANGE ACT OF 1934

                      For the Transition Period From ___ to

                         Commission File Number: 0-28498

                        PARADIGM MEDICAL INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)


                  Delaware                                   87-0459536
         (State or other jurisdiction of                  (I.R.S. Employer
         incorporation or organization)                  Identification No.)

      2355 South 1070 West, Salt Lake City, Utah                84119
       (Address of principal executive office)                (Zip Code)

       Registrant's telephone number, including area code: (801) 977-8970

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the  Securities  Exchange Act of
1934 during the preceding 12 months (or for shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. YES |X| NO |_|

         Indicate  by  check  mark  whether  the  small  business  issuer  is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:

         Common Stock, $.001 par value                     25,509,868  
         -----------------------------                 ----------------
                  Title of Class                       Number of Shares
                                                       Outstanding as of
                                                       September 30, 2004
         Class A Warrant to Purchase
         One Share of Common Stock                          1,000,000   
         -----------------------------                 ------------------
                  Title of Class                       Number of Warrants
                                                       Outstanding as of
                                                       September 30, 2004




                        PARADIGM MEDICAL INDUSTRIES, INC.
                                   FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2004


                                      INDEX



PART I - FINANCIAL INFORMATION
                                                                                                               
Item 1.  Financial Statements....................................................................................... 1

         Condensed Balance Sheet (unaudited) - September 30, 2004................................................... 1

         Condensed Statements of Operations (unaudited) for the three and nine months ended
         September 30, 2004 and September 30, 2003.................................................................. 2

         Condensed Statements of Cash Flows (unaudited) for the nine months
         ended September 30, 2004 and September 30, 2003 ........................................................... 3

         Notes to Condensed Financial Statements (unaudited)........................................................ 4

Item 2.  Management's Discussion and Analysis or
         Plan of Operation ......................................................................................... 6

Item 3.  Controls and Procedures  .................................................................................. 13

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.......................................................................................... 14

Item 2.  Changes in Securities...................................................................................... 20

Item 3.  Defaults Upon Senior Securities............................................................................ 20

Item 4.  Submission of Matters to a Vote of Security Holders........................................................ 20

Item 5.  Other Information.......................................................................................... 20

Item 6.  Exhibits and Reports on Form 8-K........................................................................... 21

Signature Page ..................................................................................................... 24


                                       i


                        PARADIGM MEDICAL INDUSTRIES, INC.
                             CONDENSED BALANCE SHEET
                                   (UNAUDITED)


                                                             September 30,  2004


ASSETS
Current Assets
  Cash & Cash Equivalents                                       $       188,000
  Receivables, Net                                                      726,000
  Inventory                                                             770,000
  Prepaid Expenses                                                       88,000
                                                                ---------------
               Total Current Assets                                   1,772,000

Intangibles, Net                                                        679,000
Property and Equipment, Net                                             135,000
                                                                ---------------
               Total Assets                                     $     2,586,000
                                                                ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Trade Accounts Payable                                                653,000
  Accrued Expenses                                                      990,000
  Current Portion of Long-term Debt                                      53,000
                                                                ---------------
               Total Current Liabilities                              1,696,000
  Long-term Debt                                                         22,000
                                                                ---------------
               Total Liabilities                                      1,718,000
                                                                ===============
Stockholders' Equity:
Preferred Stock, Authorized:
5,000,000 Shares, $.001 par value
     Series A
        Authorized:  500,000 shares; issued and
        outstanding: 5,627 shares at September 30, 2004                       -
     Series B
        Authorized:  500,000 shares; issued and
        outstanding: 8,986 shares at September 30, 2004                       -
     Series C
        Authorized:  30,000 shares; issued and
        outstanding: zero shares at September 30, 2004                        -
     Series D
        Authorized:  1,140,000 shares; issued and
        outstanding: 5,000 shares at September 30, 2004                       -
     Series E
        Authorized:  50,000; issued and
        outstanding: 1,000 at September 30, 2004                              -
     Series F
        Authorized:  50,000; issued and
        outstanding: 4,598.75 at September 30, 2004                           -
     Series G
        Authorized:  2,000,000; issued and
        outstanding: 1,981,560 at September 30, 2004                      2,000
Common Stock, Authorized:
80,000,000 Shares, $.001 par value; issued and
outstanding: 25,509,868 at September 30, 2004                            25,000
Additional paid-in-capital                                           57,470,000
Accumulated Deficit                                                 (56,629,000)
                                                                ---------------
               Total Stockholders' Equity                               868,000
                                                                ---------------
               Total Liabilities and Stockholders' Equity       $     2,586,000
                                                                ===============

                                       1


See accompanying notes to condensed financial statements



                        PARADIGM MEDICAL INDUSTRIES, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                     Three Months Ended                     Nine Months Ended
                                                        September 30,                         September 30,
                                                  2004               2003                 2004              2003
                                             -----------------------------------    ---------------------------------
                                                                                                      
Sales                                        $       899,000    $       853,000     $    2,288,000    $     2,225,000

Cost of Sales                                        358,000            354,000            859,000          1,237,000
                                             ---------------    ---------------     --------------    ---------------
                                                                                     
               Gross Profit                          541,000            499,000          1,429,000            988,000

Operating Expenses:
  Marketing and Selling                              198,000            171,000            547,000            711,000
  General and Administrative                         276,000            331,000            703,000          1,867,000
  Research, development and service                  163,000            203,000            543,000            789,000
  Impairment of assets                                     -                  -                  -            159,000
                                             ---------------    ---------------     --------------    ---------------

               Total Operating Expenses              637,000            705,000          1,793,000          3,526,000
                                             ---------------    ---------------     --------------    ---------------

Operating Income (Loss)                              (96,000)          (206,000)          (364,000)        (2,538,000)

Other Income and (Expense):
  Interest Income                                          -                  -                  -              3,000
  Interest Expense                                   (11,000)            (4,000)           (40,000)           (17,000)
  Other Income (Expense                              588,000            247,000            592,000            247,000
                                             ---------------    ---------------     --------------    ---------------

    Total Other Income and (Expense)                 577,000            243,000            552,000           (233,000)
                                             ---------------    ---------------     --------------    ---------------
Net income (loss) before provision
    for income taxes                                 481,000             37,000            188,000         (2,305,000)

Income taxes                                               -                  -                  -                  -
                                             ---------------    ---------------     --------------    ---------------

Net income (loss)                            $       481,000    $        37,000     $      188,000    $    (2,305,000)
                                             ===============    ===============     ==============    ===============

Net income (loss) Per Common Share
      - Basic and Diluted                    $          0.02                  -     $         0.01    $          (.10)
                                             ===============    ===============     ==============    ===============
                                                                                    
Weighted Average Outstanding
    Shares - Basic                                25,373,000         23,668,000         25,373,000         22,795,000
                                             ===============    ===============     ==============    ===============

           - Diluted                              27,675,000         26,752,000         27,675,000         22,795,000
                                             ===============    ===============     ==============    ===============
                                                                                      


See accompanying notes to condensed financial statements.


                                       2


                        PARADIGM MEDICAL INDUSTRIES, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



                                                               Nine Months Ended September 30,
                                                                  2004                2003
                                                              (Unaudited)          (Unaudited)
Cash Flows from Operating Activities:
-------------------------------------
                                                                                          
  Net Income (Loss)                                         $        188,000    $       (2,305,000)
  Adjustment to Reconcile Net Loss to Net
    Cash Used In Operating Activities:
    ----------------------------------
       Depreciation and Amortization                                 112,000               268,000
       Issuance of Stock Option/Warrant for Services                       -                83,000
       Issuance of Common Stock for Settlement
           of potential litigation                                         -               190,000
       Increase/decrease in Inventory Reserve                       (226,000)              382,000
       (Recovery of) provision for Losses on Receivables             (46,000)               83,000
       Impairment of Intangible and other assets                           -               159,000
       Gain on sale of investment                                   (532,000)                    -
       Gain on Settlement of obligations                             (21,000)             (247,000)
       Loss on disposal of assets                                      6,000                     -
(Increase) Decrease from Changes in:
       Trade Accounts Receivable                                      28,000               161,000
              Inventories                                            459,000               402,000
       Prepaid Expenses                                               53,000              (215,000)
Increase (Decrease) from Changes in:
       Trade Accounts Payable                                        (32,000)             (120,000)
       Accrued Expenses and Deposits                        ----------------    ------------------

       Net Cash Used in Operating Activities                        (440,000)             (712,000)          
                                                            ----------------    ------------------
                                                      
Cash Flow from Investing Activities:
------------------------------------
  Purchase of Property and Equipment                                       -                (1,000)
  Disposal of Property and Equipment                                       -                 6,000
  Proceeds from the sale of assets                                     6,000                     -
  Proceeds from the sale of investment                               532,000                     -

  Net Cash Provided By Investing Activities                          538,000                 5,000       
                                                            ----------------    ------------------

Cash Flows from Financing Activities:
-------------------------------------
  Additions to notes payable                                               -                     -
  Principal Payments on Notes Payable                                (42,000)              (63,000)
  Proceeds from Short-Term Borrowing                                       -                90,000
  Sale of stock and exercise of warrants                                   -               429,000
  Sale of stock and exercise of warrants Series G                          -               270,000  
                                                            ----------------    ------------------

  Net Cash (Used In) Provided By Financing Activities                (42,000)              726,000 
                                                            ----------------    ------------------

  Net increase in Cash and Cash Equivalents                           56,000                19,000

Cash and Cash Equivalents at Beginning of Period                     132,000               194,000
                                                            ----------------    ------------------

Cash and Cash Equivalents at End of Period                  $        188,000    $          213,000
                                                            ================    ==================

Supplemental Disclosure of Cash Flow Information:
  Cash Paid for Interest                                    $          9,000    $           17,000
                                                            ================    ==================

  Cash Paid for Income Taxes                                $              -    $                -   
                                                            ================    ==================



See accompanying notes to condensed financial statements


                                        3


                        PARADIGM MEDICAL INDUSTRIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)



Significant Accounting Policies
-------------------------------

The  accompanying  condensed  financial  statements  of the  Company  have  been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange  Commission.  Certain  information  and  disclosures
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in the United  States  have been  condensed  or
omitted  pursuant  to such  rules and  regulations.  These  condensed  financial
statements  reflect  all  adjustments   (consisting  only  of  normal  recurring
adjustments) that, in the opinion of management, are necessary to present fairly
the  results of  operations  of the Company  for the  periods  presented.  These
condensed financial  statements should be read in conjunction with the financial
statements  and the notes thereto  included in the Company's  Form 10KSB for the
year ended  December 31, 2003.  The results of operations for the three and nine
months ended September 30, 2004, are not  necessarily  indicative of the results
that may be expected for the fiscal year ending December 31, 2004.

Going Concern 
-------------

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities in the normal course of business.  Historically, the Company has not
demonstrated  the ability to generate  sufficient  cash flows from operations to
satisfy its  liabilities  and sustain  operations,  and the Company has incurred
significant  losses.  These factors raise  substantial doubt about the Company's
ability to continue as a going concern.

The  Company's  continuation  as a going  concern is dependent on its ability to
generate  sufficient  income and cash flow to meet its  obligations  on a timely
basis and/or  obtain  additional  financing  as may be required.  The Company is
actively seeking options to obtain additional capital and financing.

In  addition,  the  Company  has taken  significant  steps to  reduce  costs and
increase  operating  efficiencies.  Specifically,  the Company  has  established
procedures   to   more   efficiently   manage   inventory   purchases,   reduced
administrative personnel, and significantly reduced the use of consultants,  all
of which has resulted in large decreases in expenses.  However,  the sales force
increased from three to five representatives in June, which has resulted in more
payroll,  travel and other selling  expenses.  Although  these cost savings have
significantly  reduced the Company's  losses and ongoing cash flow needs, if the
Company  is  unable  to obtain  equity  or debt  financing,  it may be unable to
continue  development  of its  products  and may be  required  to  substantially
curtail or cease operations.

Net loss Per Share 
------------------

Net loss per common share is computed on the weighted  average  number of common
and common  equivalent  shares  outstanding  during each  period.  Common  stock
equivalents  consist of convertible  preferred  stock,  common stock options and
warrants.  Common equivalent shares are excluded from the computation when their
effect is anti-dilutive.  Other common stock  equivalents  consisting of options
and  warrants to purchase  6,427,000  and  5,704,000  shares of common stock and
preferred stock  convertible into 2,302,000 and 2,384,000 shares of common stock
at September  30, 2004 and 2003,  respectively,  have not been  included in loss
periods because they are anti-dilutive.

                                       4


For the three  months  ended  September  30, 2004 the  options  and  warrants to
purchase  6,427,000 shares of common stock were excluded because of the treasury
stock method.

The  following  table is a  reconciliation  of the  basic and  diluted  weighted
average shares for the three and nine month periods ended September 30, 2004 and
September 30, 2003:




                                                     Three Months Ended                 Nine Months Ended
                                                     September 30,                      September 30,
                                                     2004              2003             2004              2003
                                                                                                 
Basic weighted average shares outstanding            25,373,000       23,668,000       25,373,000     22,795,000
Common stock equivalents-convertible
   preferred stock                                    2,302,000        2,384,000        2,302,000              -
Dilutive effect of stock options                                         700,000                                
----------------------------------------------------------------------------------------------------------------
                                                                                        
Diluted weighted average shares outstanding          27,675,000       26,752,000       27,675,000     22,795,000 
                                                     ===========================================================


Preferred Stock Conversions 
---------------------------

Under the Company's Articles of Incorporation,  holders of the Company's Class A
and Class B Preferred  Stock have the right to convert such stock into shares of
the  Company's  common  stock at the rate of 1.2 shares of common stock for each
share of preferred  stock.  During the nine months ended  September 30, 2004, no
shares of Series A  Preferred  Stock and no shares of Series B  Preferred  Stock
were converted to the Company's Common Stock.

Holders of Series D Preferred  have the right to convert  such stock into shares
of the Company's  common stock at the rate of one share of common stock for each
share of preferred  stock.  During the six months ended  September  30, 2004, no
shares of Series D Preferred Stock were converted to the Company's Common stock.

Holders of Series E Preferred  have the right to convert  such stock into shares
of the  Company's  common  stock at the rate of 53.3 shares of common  stock for
each share of preferred  stock.  During the six months ended September 30, 2004,
no shares of Series E Preferred  Stock were  converted to the  Company's  Common
stock.

Holders of Series F Preferred  have the right to convert  such stock into shares
of the  Company's  common  stock at the rate of 53.3 shares of common  stock for
each share of preferred  stock.  During the six months ended September 30, 2004,
no shares of Series F Preferred  Stock were converted to shares of the Company's
Common stock.

Holders of Series G Preferred  have the right to convert  such stock into shares
of the Company's  common stock at the rate of one share of common stock for each
share of preferred  stock.  During the six months ended  September  30, 2004, no
shares of Series G Preferred  Stock were  converted  to shares of the  Company's
Common stock.

Stock - Based Compensation 
--------------------------

For stock  options and warrants  granted to employees,  the Company  employs the
footnote disclosure  provisions of Statement of Financial  Accounting  Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 encourages
entities to adopt a fair-value  based method of accounting  for stock options or
similar  equity  instruments.  However,  it also  allows an  entity to  continue
measuring   compensation   cost   for   stock-based   compensation   using   the
intrinsic-value  method of accounting  prescribed by Accounting Principles Board
(APB)  Opinion No. 25,  Accounting  for Stock Issued to Employees  (APB 25). The
Company has elected to  continue to apply the  provisions  of APB 25 and provide
pro forma footnote disclosures required by SFAS No. 123. No stock-based employee
compensation cost is reflected in net income, as all options granted under those
plans had an  exercise  price equal to or greater  than the market  value of the
underlying common stock on the date of grant.

Stock options and warrants granted to  non-employees  for services are accounted
for in accordance with SFAS 123 which requires expense  recognition based on the
fair value of the  options/warrants  granted.  The Company  calculates  the fair
value of options and warrants granted by use of the Black-Scholes pricing model.
The following table  illustrates the effect on net income and earnings per share
if the  Company  had  applied  the fair  value  recognition  provisions  of FASB
Statement No. 123,  "Accounting  for Stock-Based  Compensation,"  to stock-based
employee compensation.

                                       5



                                            Three Months Ended September 30,    Nine Months Ended September 30,
                                               2004              2003               2004             2003
                                            -----------       ----------         ---------        ----------
                                                                                              
Net income (loss) - as reported             $   481,000           37,000           188,000        (2,305,000)

Deduct:  total stock-based employee
compensation determined under fair value
based method for all awards, net of
related tax effects                             (93,000)         (48,000)         (266,000)         (359,000)

Net income (loss) - pro forma               $   388,000          (11,000)          (78,000)       (2,651,000)
                                            -----------       ----------         ---------        ----------
                                                                                                          
Earnings per share:
     Basic and diluted - as reported        $      0.02                -              0.01             (0.10)
     Basic and diluted - pro forma          $      0.01                -             (0.00)            (0.12)


Related Party Transactions 
--------------------------

Payments  for legal  services to the firm of which the  chairman of the board of
directors  is a partner  were  approximately  $55,000  and $23,000 for the three
months ended September 30, 2004 and 2003, respectively.

Accrued Expenses 
----------------

Accrued expenses consist of the following at September 30, 2004:

        Accrued consulting and litigation reserve              $   498,000
        Accrued payroll and employee benefits                      142,000
        Sales taxes payable                                         40,000
        Customer deposits                                           10,000
        Accrued royalties                                           17,000
        Deferred revenue                                            73,000
        Warranty and return allowance                              154,000
        Other accrued expenses                                      56,000
                                                               -----------
         Total                                                 $   990,000
                                                               ===========

         During  the  quarter  ended  June 30,  2004,  the  Company  recorded  a
reduction in the warranty accrual of approximately  $308,000. This reduction was
a result of a comprehensive analysis by management regarding historical warranty
costs.  Historically,  the Company has recorded a monthly  warranty  expense and
related increase to the warranty accrual;  however,  in recent periods the usage
of the warranty  accrual has  continued to decline.  After  reviewing the recent
historical  data,  management  determined  that the warranty  accrual  should be
reduced by approximately  $308,000.  Management will continue to closely monitor
the warranty accrual usage to ensure that the proper amount has been accrued.

Sale of Investment
------------------

In July  2004,  the  Company  sold its  investment  in  International  Bioimmune
Systems, Inc. (IBS) for $532,000 cash. Because, for book purposes, the Company's
investment in IBS had previously been reduced to $0, the full amount of $532,000
was recorded as a gain in the quarter ended September 30, 2004.

Item 2:  Management's Discussion and Analysis or Plan of Operation

         This  report  contains   forward-looking   statements  and  information
relating  to the  Company  that is based on  beliefs  of  management  as well as
assumptions made by, and information  currently  available to management.  These
statements  reflect its current view respecting future events and are subject to
risks,  uncertainties  and  assumptions,  including the risks and  uncertainties
noted  throughout  the document.  Although the Company has attempted to identify
important  factors  that could  cause the actual  results to differ  materially,
there may be other factors that cause the forward-looking statements not to come
true as anticipated,  believed,  projected,  expected or intended. Should one or
more  of  these  risks  or  uncertainties  materialize,   or  should  underlying
assumptions  prove  incorrect,  actual results may differ  materially from those
described herein as anticipated,  believed,  projected,  estimated,  expected or
intended.

                                       6


Critical Accounting Policies

         Revenue Recognition.  The Company recognizes revenue in compliance with
Staff Accounting Bulletin 101, Revenue Recognition in Financial  Statements (SAB
101), as revised by Staff Accounting  Bulletin No. 104, Revenue Recognition (SAB
104). SAB 101 and SAB 104 detail four criteria that must exist before revenue is
recognized:

         1. Persuasive  evidence of an arrangement  exits.  Prior to shipment of
product,  the Company  requires a signed purchase order and,  depending upon the
customer,  a down  payment  toward the final  invoiced  price or full payment in
advance with certain international product distributors.

         2. Delivery and  performance  have occurred.  Unless the purchase order
requires specific  installation or customer  acceptance,  the Company recognizes
revenue  when  the  product  ships.  If the  purchase  order  requires  specific
installation or customer  acceptance,  the Company  recognizes revenue when such
installation  or  acceptance  has occurred.  Title to the product  passes to the
customer upon shipment.  This revenue  recognition  policy does not differ among
the various different product lines. The Company guarantees the functionality of
its product.  If its product does not function as marketed  when received by the
customer,  the Company  either  makes the  necessary  repairs on site or has the
product  shipped to the Company for the repair  work.  Once the product has been
repaired and retested for functionality,  it is re-shipped to the customer.  The
Company provides  warranties that generally extend for one year from the date of
sale. Such warranties  cover the necessary parts and labor to repair the product
as well as any  shipping  costs that may be  required.  The Company  maintains a
reserve for estimated  warranty  costs based on its  historical  experience  and
management's current expectations.

         3.  The  sales  price  is fixed or  determinable.  The  purchase  order
received from the customer  includes the  agreed-upon  sales price.  The Company
does not accept customer orders, and therefore do not recognize  revenue,  until
the sales price is fixed.

         4. Collectibility is reasonably assured.  With limited exceptions,  the
Company  requires down payments on product prior to shipment.  In some cases the
Company  requires  payment in full prior to shipment.  The Company also performs
credit checks on new customers and ongoing credit checks on existing  customers.
The Company  maintains an allowance for doubtful  accounts  receivable  based on
historical experience and management's current expectations.

         Recoverability  of  Inventory.  Since its  inception,  the  Company has
purchased several complete lines of inventory. In some circumstances the Company
has been able to utilize  certain items acquired and others remain unused.  On a
quarterly  basis,  the Company  attempts to identify  inventory  items that have
shown  relatively no movement or very slow movement.  Generally,  if an item has
shown  little  or no  movement  for  over a  year,  it is  determined  not to be
recoverable  and a reserve is  established  for that item.  In addition,  if the
Company identifies products that have become obsolete due to product upgrades or
enhancements, a reserve is established for such products. The Company intends to
make efforts to sell these items at significantly  discounted  prices.  If items
are sold, the cash received would be recorded as revenue,  but there would be no
cost of sales on such items due to the reserve  that has been  recorded.  At the
time of  sale,  the  inventory  would  be  reduced  for the  item  sold  and the
corresponding inventory reserve would also be reduced.

         Recoverability of Goodwill and Other Intangible  Assets.  The Company's
intangible   assets  consist  of  goodwill,   product  and  technology   rights,
engineering and design costs,  and patent costs.  Intangibles  with a determined
life are amortized on a straight-line  basis over their  determined  useful life
and are also  evaluated  for  potential  impairment  if events or  circumstances
indicate that the carrying  amount may not be recoverable.  Intangibles  with an
indefinite  life,  such as  goodwill,  are not  amortized  but  are  tested  for
impairment on an annual basis or when events and circumstances indicate that the
asset may be impaired.  Impairment  tests include  comparing the fair value of a
reporting unit with its carrying net book value,  including  goodwill.  To date,
the Company's  determination  of the fair value of the  reporting  unit has been
based on the estimated future cash flows of that reporting unit.

         Allowance for Doubtful  Accounts.  The Company records an allowance for
doubtful accounts to offset estimated  uncollectible  accounts  receivable.  Bad
debt  expense  associated  with the  increases  in the  allowance  for  doubtful
accounts  is  recorded  as part  of  general  and  administrative  expense.  The
Company's  accounting policy generally is to record an allowance for receivables
over 90 days past due unless there is  significant  evidence to support that the
receivable is collectible.

                                       7


General

         The  following  Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations,  contains forward-looking statements, which
involve  risks and  uncertainty.  The  Company's  actual  results  could  differ
materially  from those  anticipated  in these  forward-looking  statements  as a
result of certain factors  discussed in this section.  The Company's fiscal year
is from January 1 through December 31.

         The Company is engaged in the design, development, manufacture and sale
of high technology  diagnostic and surgical eye care products.  Given 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.  As  seen in the  results  for the  three  months  ended
September  30,  2004,  diagnostic  products  have been the  major  focus and the
Photon(TM) and other extensive  research and development  projects have been put
on  hold  pending  future  evaluation  when  the  Company's  financial  position
improves.  The  Company  does not  focus on a  specific  diagnostic  product  or
products but, instead, on this entire diagnostic product group.

         The  Company has  improved  its  financial  and  operating  performance
through  higher sales,  improving  margins,  and a substantial  reduction in our
costs.

         The   Company   has   displayed   improvement   in  its   manufacturing
efficiencies,  as well as the  timeliness and the quality of its services to its
customers.  For example,  a great deal of the  improvement  is  attributable  to
reforms in  operations,  which enabled  dramatically  improved  availability  of
product and decreased lead times. Additional  reorganization of services enabled
substantially  reduced wait times and reserve  requirements.  Specifically,  the
Company was able to record an increase in income of approximately  $300,000 from
a reduction in warranty reserves. This reduction was a result of a comprehensive
analysis by management  regarding historical warranty costs.  Historically,  the
Company has  recorded a monthly  warranty  expense  and related  increase to the
warranty accrual;  however,  in recent periods the usage of the warranty accrual
has continued to decline. After reviewing the recent historical data, management
determined  that  the  warranty  accrual  should  be  reduced  by  approximately
$300,000. Management will continue to closely monitor the warranty accrual usage
to ensure that the proper amount has been accrued.

         The  increase  in  sales  was  due  primarily  to the  strength  in the
Company's diagnostic products,  specifically the perimetry and topography lines,
as well as strong growth in the Blood Flow  Analyzer(TM)  line, where sales more
than doubled from the year-ago period.

Results of Operations

         Three Months Ended  September 30, 2004,  Compared to Three Months Ended
September 30, 2003

         Net sales for the three months ended  September  30, 2004  increased by
$46,000,  or 5.4%,  to $899,000  as compared to $853,000  for the same period of
2003.  This increase was primarily due to increased sales of the P40 and P45 UBM
Ultrasound  Biomicroscopes  as well as  continued  strength  in the sales of the
Blood Flow Analyzer(TM).

         For the three months ended September 30, 2004, sales from the Company's
diagnostic  products  totaled  $833,000,  or 93% of total revenues,  compared to
$664,000,  or 78% of total  revenues for the same period of 2003.  There were no
sales from the surgical line consisting of the Precissionist Thirty Thousand(TM)
and the Photon(TM)  laser system for the three months ended  September 30, 2004,
compared to $46,000,  or 5% of total revenues,  for the corresponding  period of
2003.  The  remaining  7% of sales,  or $66,000,  during the three  months ended
September 30, 2004 was from parts, disposables, and service revenue.

         Sales of the P40 and P45 UBM  Ultrasound  Biomicroscopes  increased  to
$373,000  during the third  quarter 2004,  or 41% of total  quarterly  revenues,
compared to $211,000,  or 25% of total revenues,  for the same period last year.
Sales of the Blood Flow Analyzer(TM)  increased by $130,000 to $184,000,  or 20%
of total revenues,  for the three months ended  September 30, 2004,  compared to
net sales of $54,000,  or 6% of total  revenues  during the same period in 2003.
Sales from the P37 A/B Scan Ocular Ultrasound  Diagnostic  increased to $98,000,
or 6% of total  revenues,  for the quarter ended September 30, 2004, up slightly
compared to $93,000,  or 11% of total  revenues,  for the same period last year.
Combined  sales of the LD 400 and TKS 5000  Autoperimeters  and the 200  Corneal
Topographer  were $178,000,  or 20% of the total revenues,  for the three months
ended September 30, 2004,  compared to $306,000,  or 36% of total revenues,  for
the same quarter of 2003.

         Sales have been higher for the Company despite,  an industry slow down,
due to the emphasis on the sales of the P40 and P45  Ultrasound  Biomicroscopes,
particularly  in Asian  markets as well an  increased  focus on the sales of the
Blood Flow Analyzer(TM) in the United States market.

         For the three months ended September 30, 2004,  gross profit  increased
slightly by 2%, to 60% of total revenues,  compared to the 58% of total revenues
for the comparable period of 2003.

         Marketing and selling expenses increased by approximately  $27,000,  or
16%, to $198,000,  for the three months ended  September 30, 2004, from $171,000
for the comparable period in 2003. This increase was due mainly to the Company's
initiation  of  an  advertising   campaign  as  well  as  to   prepayments   for
participation  at the American  Academy of  Ophthalmologists  annual show in New
Orleans.

         General and administrative  expenses decreased by $55,000,  or 17 %, to
$276,000 for the three months ended  September  30, 2004,  from $331,000 for the
comparable period in 2003. The general and  administrative  expense savings were
the result of greater focus and cost  containment  measures and more  aggressive
budget management procedures implemented in the second quarter of 2004.

         Research,  development and service expenses decreased $40,000,  or 20%,
for the three months ended September 30, 2004 to $163,000,  compared to $203,000
recorded  in the same  period  of  2003.  Much of the  improvement  was from the
continued benefit of the reorganization of the service  department  initiated in
the second  quarter of 2004,  which is yielding  not only cost  improvement  but
dramatically  lower  response  times and enabled  clean up of the  service  unit
backlogs.

         Other income of mainly consists of a gain recorded from the sale of the
Company's investment in International  Bioimmune Systems, Inc. In July 2004, the
Company sold its investment in International  Bioimmune Systems,  Inc. (IBS) for
$532,000 cash. Because,  for book purposes,  the Company's investment in IBS had
previously  been  reduced to $0, the full amount of $532,000  was  recorded as a
gain in the quarter ended September 30, 2004.


                                       8


         Nine Months Ended  September  30,  2004,  Compared to Nine Months Ended
September 30, 2003

         Net sales  increased  by  $63,000,  or 3%, to  $2,288,000  for the nine
months ended September 30, 2004,  from  $2,225,000 for the comparable  period in
2003. The Company's diagnostic products sales increased by $336,000,  or 19%, to
$2,085,000,  or 91% of revenues,  during the first nine months of 2004  compared
with $1,750,000, or 79% of total revenues, for the comparable period of 2003.

         In the first nine months of 2004,  sales of the  Company's  P40 and P45
UBM Ultrasound Biomicroscopes were $639,000, or 28% of total revenues,  compared
to $421,000,  or 19% of total revenues,  in the same period of 2003.  Sales from
the Blood Flow Analyzer(TM)  increased by $178,000 to $475,000,  or 21% of total
revenues,  during the first two quarters of 2004 compared with $297,000,  or 13%
of total revenues, in the same period of last year.

         During the first nine  months of 2004,  sales from P37 A/B Scan  Ocular
Ultrasound Diagnostic increased to $229,000,  or 10% of total revenue,  slightly
up from the $222,000,  or 10% of total  revenues,  in the same period last year.
Sales  of the  LD  400  and  TKS  5000  Autoperimeters  and  the CT 200  Corneal
Topographer  were slightly  lower in the second  quarter,  with total revenue of
$741,000, or 32% of total revenues, in the first three quarters of 2004 compared
with  $808,000,  or 36% of total  revenues,  during the same period of 2003. 

         Sales of surgical products are at a standstill  pending FDA approval of
the Photon(TM)  laser system.  In the nine month period ended September 30 2004,
the Company  realized a loss of $3,000 in the surgical  line  consisting  of the
Precissionist  Thirty  Thousand  (TM)  and the  Photon(TM)  laser  system.  This
compared to $94,000, for the comparable period of 2003.

         Gross profit for the nine months ended  September 30, 2004 increased by
18% to 62% of total revenues,  compared to 44% of total  revenues,  for the same
period in 2003.  The  increase  was mainly due to an increase in the reserve for
inventory  obsolescence of $382,000 in the nine months ended September 30, 2003.
There was a decrease of $226,000  in the  reserve  during the nine months  ended
September  30,  2004;  however  this  decrease  was the result of a write-off of
inventory  directly  against the  reserve.  The  $382,000  increase in inventory
reserve in 2003  resulted in an increase to cost of sales  whereas the  $226,000
reduction in 2004 resulted in a corresponding reduction to inventory and did not
have any effect on the statement of operations.

         Marketing  and  selling  expenses  decreased  by  $164,000,  or 30%, to
$547,000 for the nine months ended  September  30, 2004,  from  $711,000 for the
comparable  period in 2003.  This  reduction was due primarily to more effective
use  of  marketing  programs.   During  this  period  two  additional  full-time
salespersons were added, a print advertising campaign initiated,  and plans were
made to support a major trade show in the fourth quarter of 2004.

         General and administrative expenses decreased by $1,164,000, or 62%, to
$703,000 for the nine months ended  September 30, 2004,  from $1,867,000 for the
same period in 2003.  The  favorable  reduction  in general  and  administrative
expense in 2004 also  reflected the ongoing  results of the Company's new budget
management and cost reduction  programs.  In addition,  during the quarter ended
June 30,  2004,  the Company  recorded a reduction  in the  warranty  accrual of
approximately  $308,000. This reduction was a result of a comprehensive analysis
by management regarding historical warranty costs. Historically, the Company has
recorded  a monthly  warranty  expense  and  related  increase  to the  warranty
accrual;  however,  in recent  periods  the usage of the  warranty  accrual  has
continued to decline.  After reviewing the recent  historical  data,  management
determined  that  the  warranty  accrual  should  be  reduced  by  approximately
$308,000. Management will continue to closely monitor the warranty accrual usage
to  ensure  that  the  proper   amount  has  been   accrued.   The  general  and
administrative  expenses  during the nine months ended  September  30, 2003 also
included  $443,000 in accruals to settle  outstanding  disputes  and $83,000 for
additional allowance for doubtful accounts receivable.


                                       9


         Research,  development and service expenses  decreased by $246,000,  or
45%, to $543,000 for the nine months ended September 30, 2004, from $789,000 for
the same  period  in 2003.  Expenses  associated  with  the  development  of new
products  during the first nine  months of 2004  decreased  compared to the same
period in 2003, as a result of the Company's cost reduction program.

         There was no impairment  of assets for the nine months ended  September
30,  2004,  compared to $159,000 in  impairment  of assets  recorded in the same
period of 2003.

         Other income of mainly consists of a gain recorded from the sale of the
Company's investment in International  Bioimmune Systems, Inc. In July 2004, the
Company sold its investment in International  Bioimmune Systems,  Inc. (IBS) for
$532,000 cash. Because,  for book purposes,  the Company's investment in IBS had
previously  been  reduced to $0, the full amount of $532,000  was  recorded as a
gain in the quarter ended September 30, 2004.

Liquidity and Capital Resources

         The Company used  $440,000  cash in operating  activities  for the nine
months ended September 30, 2004,  compared to $712,000 for the nine months ended
September 30, 2003.  The increase in cash used by operating  activities  for the
nine months ended September 30, 2004 was primarily  attributable to reduction in
accrued expenses and deposits.  The Company's  efforts to  substantially  reduce
costs and manage  current assets and current  liabilities  continued to minimize
cash used for operating  activities.  Net cash used in financing  activities was
$42,000 for the nine months ended  September  30, 2004,  versus cash provided of
$726,000 in the same period in 2003.  During the nine months ended September 30,
2004, the Company did not sell any shares of common or preferred  stock.  In the
past,  the Company  has relied  heavily  upon sales of its common and  preferred
stock to fund  operations.  There can be no assurance  that such equity  funding
will be available on terms acceptable to the Company in the future.

         The Company had working capital of $76,000 as of September 30, 2004. In
the past,  the Company has relied heavily upon sales of its common and preferred
stock to fund  operations.  There can be no assurance  that such equity  funding
will be available on terms acceptable to the Company in the future.  The Company
will continue to seek funding to meet its working capital  requirements  through
collaborative arrangements and strategic alliances,  additional public offerings
and private placements of its securities; and bank borrowings. In July 2004, the
Company sold its investment in International  Bio-Immune Systems, Inc. (IBS) for
$532,000  cash. The Company is uncertain  whether or not the  combination of the
cash  received  from the sale of IBS stock and the  benefits  from  sales of its
products will be sufficient to assure its operations  through December 31, 2004.
The  Company  will  continue  to seek  funding  through  the sale of common  and
preferred stock.

         As  of  September  30,  2004,   the  Company  had  net  operating  loss
carry-forwards  (NOLs) of approximately $36 million.  These  carry-forwards  are
available to offset future taxable  income,  if any, and have begun to expire in
2001 and extend for twenty  years.  The  Company's  ability to use net operating
loss  carryforwards  (NOLs) to offset  future  income is dependant  upon certain
limitations as a result of the pooling  transaction with Vismed and the tax laws
in effect at the time of the NOLs can be  utilized.  The Tax  Reform Act of 1986
significantly limits the annual amount that can be utilized for certain of these
carryforwards as a result of change of ownership.

                                       10


         As of September 30, 2004, the Company had accounts payable of $653,000,
a  significant  portion  of which is over 90 days  past  due.  The  Company  has
contacted  many of the vendors or  companies  that have  significant  amounts of
payables  past  due  in an  effort  to  delay  payment,  renegotiate  a  reduced
settlement  payment,  or  establish  a  longer-term  payment  plan.  While  some
companies have been willing to renegotiate the outstanding amounts,  others have
demanded payment in full. Under certain conditions, including but not limited to
judgments  rendered  against the Company in a court of law, a group of creditors
could  force  the  Company  into  bankruptcy  due to its  inability  to pay  the
liabilities  arising  out of such  judgments  at that time.  In  addition to the
accounts payable noted above, the Company also has non-cancelable  capital lease
obligations  and  operating  lease  obligations  that  require  the  payment  of
approximately $172,000 in 2005, and $14,000 in 2006.

         The  Company  has taken  numerous  steps to reduce  costs and  increase
operating efficiencies. These steps consist of the following:

         1. The Company  closed its San Diego  facility.  In so doing,  numerous
manufacturing,  accounting and management responsibilities were consolidated. In
addition,  such closure resulted in significant  headcount reductions as well as
savings in rent and other overhead costs.

         2. The Company has significantly reduced the use of consultants,  which
has resulted in a large decrease to these expenses.

         3.  The  Company   has   reduced   its  direct   sales  force  to  five
representatives,  which has resulted in less  payroll,  travel and other selling
expenses.

         Because the Company has significantly fewer sales representatives,  its
ability to generate sales has been reduced.

         The  Company has taken  measures to reduce the amount of  uncollectible
accounts  receivable  such as  more  thorough  and  stringent  credit  approval,
improved  training and  instruction  by sales  personnel,  and  frequent  direct
communication  with the  customer  subsequent  to delivery  of the  system.  The
allowance for doubtful accounts was 37% of total  outstanding  receivables as of
September  30, 2004 and 40% as of December 31, 2003.  The allowance for doubtful
accounts  has  decreased  from  $470,000  at  December  31,  2003 to $424,000 at
September  30,  2004.  The  downturn in the economy  worldwide  has  resulted in
increased  difficulty  in collecting  certain  accounts.  Certain  international
dealers have some aged unpaid invoices that have not been resolved.  The Company
has addressed its credit  procedures and collection  efforts and have instituted
changes that require more payments at the time of sale via letters of credit and
not on a credit term basis.

         The Company intends to continue its efforts to reduce the allowance for
doubtful  accounts  as a  percentage  of  accounts  receivable.  The Company has
ongoing  efforts to collect a significant  portion of the sales price in advance
of  the  sale  or in a  timely  manner  after  delivery.  The  majority  of  the
receivables  included in the  allowance  for  doubtful  accounts are a result of
sales  before the  Company  implemented  the  various  changes  to  improve  the
collectibility  of our  receivables.  During the nine months ended September 30,
2004,  the Company had a net recovery of receivables  previously  allowed for of
$46,000 and during the twelve months ended  December 31, 2003, the Company added
a net of $123,000 to the allowance for doubtful  accounts.  The Company believes
that by requiring a large portion of payment  prior to shipment,  it has greatly
improved the collectibility of its receivables.


                                       11


         The  Company   carried  an   allowance   for   obsolete  or   estimated
non-recoverable  inventory of $1,416,000 at September 30, 2004, or approximately
65% of total inventory,  respectively.  This inventory  reserve was decreased by
$226,000  during the nine months ended  September  30, 2004 due to  management's
evaluation of the recoverability of certain inventory items. The Company's means
of expansion and  development  of product has been largely from  acquisition  of
businesses,  product  lines,  existing  inventory,  and the  rights to  specific
products.  Through  such  acquisitions,  the  Company has  acquired  substantial
inventory,  some of which the eventual use and recoverability was uncertain.  In
addition,  the Company has a  significant  amount of  inventory  relating to the
Photon(TM)  laser system,  which does not yet have FDA approval in order to sell
the product domestically. Therefore, the allowance for inventory was established
to reserve for these potential eventualities.

         On a quarterly basis, the Company attempts to identify  inventory items
that have shown relatively no movement or very slow movement.  Generally,  if an
item has shown little or no movement for over a year, it is determined not to be
recoverable  and a reserve is  established  for that item.  In addition,  if the
Company identifies products that have become obsolete due to product upgrades or
enhancements, a reserve is established for such products. The Company intends to
make efforts to sell these items at significantly  discounted  prices.  If items
are sold, the cash received would be recorded as revenue,  but there would be no
cost of sales on such items due to the reserve  that has been  recorded.  At the
time of  sale,  the  inventory  would  be  reduced  for the  item  sold  and the
corresponding inventory reserve would also be reduced. During the fourth quarter
of 2003,  the Company sold all  inventory and rights  associated  with the Phaco
SIStem(TM) and  Odyssey(TM)  for $125,000.  Because the full amount of inventory
related to the SIStem(TM) and Odyssey(TM)  had been fully  reserved,  no cost of
sales were recorded in connection with this sale, thus resulting in gross profit
equal to the sales price of  $125,000.  The Company does not expect the sales of
these items, if any, to be significant in the future.

         At this time, the Company's Photon(TM) Laser Ocular Surgery Workstation
requires  regulatory FDA approval in order to be sold in the United States.  Any
possible  future  efforts to complete the clinical  trials on the  Photon(TM) in
order to file for FDA approval  would depend on the Company  obtaining  adequate
funding.  The  Company  estimates  that the  liquidity  needed to  complete  the
clinical  trials in order to obtain the  necessary  regulatory  approval  on the
Photon(TM) to be approximately $225,000.

Effect of Inflation and Foreign Currency Exchange

         The Company has not  realized a reduction  in the selling  price of its
products as a result of  domestic  inflation.  Nor has the  Company  experienced
unfavorable profit reductions due to currency exchange fluctuations or inflation
with its foreign customers. All sales transactions to date have been denominated
in U.S. Dollars.

Impact of New Accounting Pronouncements

         In  November  2003,  the EITF  reached a consensus  on Issue  No.00-21,
Revenue Arrangements with Multiple  Deliverables.  EITF Issue No. 00-21 provides
guidance on how to account for certain arrangements that involve the delivery or
performance  of multiple  products,  services  and/or rights to use assets.  The
provisions  of EITF Issue No. 00-21 will apply to revenue  arrangements  entered
into in fiscal periods beginning after June 15, 2003. The adoption of EITF Issue
No. 00-21 did not have a material impact on the Company's  operating  results or
financial condition.


                                       12


         In December  2003,  the FASB issued  Interpretation  No. 46 ("FIN 46R")
(revised  December  2003),  Consolidation  of  Variable  Interest  Entities,  an
Interpretation  of  Accounting  Research  Bulletin  No.  51  ("ARB  51"),  which
addresses how a business enterprise should evaluate whether it has a controlling
interest in an entity  though  means other than  voting  rights and  accordingly
should consolidate the entity. FIN 46R replaces FASB  Interpretation No. 46 (FIN
46), which was issued in January 2003.  Before concluding that it is appropriate
to apply ARB 51 voting interest  consolidation model to an entity, an enterprise
must first determine that the entity is not a variable interest entity (VIE). As
of the effective  date of FIN 46R, an enterprise  must evaluate its  involvement
with all  entities or legal  structures  created  before  February  1, 2003,  to
determine whether consolidation requirements of FIN 46R apply to those entities.
There is no  grandfathering  of existing  entities.  Public companies must apply
either FIN 46 or FIN 46R immediately to entities  created after January 31, 2003
and no later than the end of the first  reporting  period  that ends after March
15,  2005.  The adoption of FIN 46 had no effect on the  Company's  consolidated
financial position, results of operations or cash flows.

         In April 2003, FASB issued SFAS No. 149,  Amendment of Statement 133 on
Derivative  Instruments  and Hedging  Activities.  SFAS 149 amends and clarifies
accounting for derivative instruments,  including certain derivative instruments
embedded  in  other  contracts  and  for  hedging  activities  under  SFAS  133,
Accounting  for  Derivatives  and  Hedging  Activities.  SFAS  149 is  generally
effective for derivative instruments,  including derivative instruments embedded
in certain contracts, entered into or modified after June 30, 2003. The adoption
of SFAS 149 did not have a material impact on the Company's operating results or
financial condition.

         In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments  with  Characteristics  of Both  Liabilities  and  Equity.  SFAS 150
clarifies the accounting for certain financial  instruments with characteristics
of both liabilities and equity and requires that those instruments be classified
as liabilities in statements of financial  position.  Previously,  many of those
financial  instruments  were  classified  as equity.  SFAS 150 is effective  for
financial  instruments entered into or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period  beginning  after June
15,  2003.  On November 7, 2003,  FASB Staff  Position  150-3 was issued,  which
indefinitely  deferred  the  effective  date of SFAS 150 for  certain  mandatory
redeemable  non-controlling interests. As the Company does not have any of these
financial  instruments,  the adoption of SFAS 150 did not have any impact on its
financial statements.

         In December 2003, the Securities and Exchange  Commission  (SEC) issued
Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. SAB 104 revises or
rescinds  portions  of the  interpretive  guidance  included  in Topic 13 of the
codification of staff  accounting  bulletins in order to make this  interpretive
guidance consistent with current authoritative  accounting and auditing guidance
and SEC rules and  regulations.  The adoption of SAB 104 did not have a material
effect on the Company's results of operations or financial position.

Item 3 Controls and Procedures

     a) Evaluation of disclosure controls and procedures.

         Under the  supervision  and with the  participation  of our management,
including our principal  executive officer and principal  financial officer,  we
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and  procedures,  as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities  Exchange  Act of  1934,  as of  September  30,  2004.  Based on this
evaluation,  our principal executive officer and our principal financial officer
concluded  that,  as of the  end of the  period  covered  by  this  report,  our
disclosure  controls and procedures  were  effective and adequately  designed to
ensure that the  information  required to be  disclosed  by us in the reports we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported  within the time periods  specified in applicable  rules
and forms.

     (b) Changes in internal controls over financial reporting.

         During the quarter ended  September 30, 2004,  there has been no change
in our internal control over financial  reporting that has materially  affected,
or is  reasonably  likely  to  materially  affect,  our  internal  control  over
financial reporting.


                                       13


     PART II  Other Information

Item 1. Legal Proceedings

         An action  was  brought  against  the  Company  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 the Company owes Mr.  Wiseman 6,370
shares of its common stock plus costs, attorney's fees and a wage penalty (equal
to 1,960 additional shares of its common stock) pursuant to Utah law. The action
is based  upon an  extension  of a written  employment  agreement.  The  Company
disputes the amount allegedly owed and intends to vigorously  defend against the
action.

         An action was  brought  against the  Company 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 attorney's  fees.  Discovery has
taken place and the Company has paid  royalties of $14,736 to bring all payments
up to date through June 30, 2001. The Company has 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 the Company's  calculations,  is $600. The Company
intends 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,  the  Company  would lose its right to
manufacture and sell the Photon(TM) laser system.

         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." The Company has 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 the Company  falsely
stated in its Securities and Exchange Commission filings and press releases that
it had received  authorization to use an insurance  reimbursement  CPT code from
the  CPT  Code  Research  and  Development  Division  of  the  American  Medical
Association  for  reimbursement  to  doctors 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).  According to the
complaint,  the CPT code was critical.  Without a reimbursement code, physicians
would not  purchase the Blood Flow  Analyzer(TM)  because they could not receive
compensation for performance of medical procedures using the medical device. The
complaint further contends that the Company never received the CPT code from the
American Medical Association at any time.  Nevertheless,  it is alleged that the
Company  continued to misrepresent in its SEC filings and press releases that it
had received the CPT code. It is also alleged that the Company have never made a
full, corrective disclosure with respect to this alleged misstatement.

                                       14


         The complaint  also alleges that on July 11, 2002, the Company issued a
press  release  falsely  announcing  that it had received a purchase  order from
Valdespino  Associates  Enterprises and Westland  Financial  Corporation for 200
sets of its 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. The complaint  further alleges that the Company had
never  received a true  purchase  order for its  products.  As a result of these
alleged  misstatements,  the complaint  contends that the price of the Company's
shares of common stock was  artificially  inflated  during the period from April
25, 2001  through May 14,  2003,  and the persons who  purchased or retained the
Company's  common shares during that period suffered  substantial  damages.  The
complaint requests judgment for unspecified damages,  together with interest and
attorney's fees.

         The Company  disputes  having  issued false and  misleading  statements
concerning  the Blood  Flow  Analyzer(TM)  and a purchase  order  from  Westland
Financial Corporation and Valdespino Associates Enterprises.  On April 25, 2001,
the Company issued a press release that stated it had received  authorization to
use common  procedure  terminology  or CPT code number  92120 for the Blood Flow
Analyzer(TM). This press release was based on a letter the Company received from
the CPT Editorial  Research and Development  Department of the American  Medical
Association  stating  that CPT code  number  92120  was the  appropriate  common
procedure  terminology  or CPT code  number for  doctors  to use when  reporting
certain procedures performed with the Blood Flow Analyzer(TM).

         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.  The
Company is  endeavoring  to obtain  reimbursement  by insurance  payors in other
states  where  there is  currently  no  reimbursement  being  made.  The Company
believes it has continued to correctly  represent in its Securities and Exchange
Commission filings that the CPT Editorial Research and Development Department of
the American  Medical  Association  has advised it that CPT code number 92120 is
the  appropriate  CPT  code  for the  Company's  Blood  Flow  Analyzer(TM),  for
reimbursement purposes for doctors using the device.

         On July 11,  2002,  the Company  issued a press  release that stated it
received a purchase  order from Westland  Financial  Corporation  and Valdespino
Associates  Enterprises for 200 complete sets of its 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 the  Company  entered  into with
Westland Financial Corporation for the sale of 200 complete sets of its surgical
and diagnostic equipment to Mexican ophthalmic practitioners.  The press release
also  stated  that  the  initial  order  was for $70  million  of the  Company's
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
the  Company's  equipment,  beginning  in 30 days from the date of the  purchase
order.

         On September  13, 2002,  the board of directors  issued a press release
regarding  the status of the Company's  product sales to the Mexican  ophthalmic
practitioners.  In that press release the board stated that the Company had been
in discussions  for the prior nine months with Westland  Financial  Corporation,
aimed at supplying the Company's  medical device products to the Mexican market.
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,
the Company 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 the Company's  medical device products in Mexico,  but
the Company could not, at the time,  predict or provide any  assurance  that any
transactions would result.

                                       15


         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 July 11,
2003, a complaint was filed in the same United States District Court,  captioned
Lidia 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  Westland
Financial  Corporation and Valdespino Associates  Enterprises,  the price of the
Company's common stock was  artificially  inflated and the persons who purchased
the  Company's  common  shares  during  the class  period  suffered  substantial
damages.  In a press  release  dated July 11,  2003,  captioned  "Milberg  Weiss
announces the filing of a class action suit against Paradigm Medical Industries,
Inc. on behalf of  investors,"  the law firm of Milberg  Weiss  Bershad  Hynen &
Levach LLP, which represents purchasers of the Company's securities in the class
action  suit  filed  on  July  11,  2003,  stated  that  the  Company's  alleged
misrepresentations  caused  the  market  price of the  stock to be  artificially
inflated  during the class  period.  As a result,  it is alleged that  investors
suffered   millions   of  dollars  in  damages   from  the   Company's   alleged
misstatements.

         The cases  request  judgment for  unspecified  damages,  together  with
interest and attorney's  fees. These cases have now been  consolidated  with the
Meyer case into a single action,  captioned In re: Paradigm  Medical  Industries
Securities  Litigation,  Case No.  03-CV-448TC.  The law firm of  Milberg  Weiss
Bershad & Schulman LLP is representing purchasers of the Company's securities in
the consolidated  class action.  On June 28, 2004, a consolidated  amended class
action complaint was filed on behalf of purchasers of the Company's  securities.
The consolidated  complaint is similar to the three class action  complaints and
alleges that the Company made false  representations  regarding the CPT code for
the Blood Flow  Analyzer(TM),  but it includes  additional  allegations that the
Company  failed to disclose in a timely  manner that  doctors  were being denied
reimbursement  for procedures  performed with the Blood Flow  Analyzer(TM).  The
consolidated  complaint  also  alleges  that the Company  made false  statements
regarding the purchase order from Westland Financial  Corporation and Valdespino
Associates  Enterprises.  The Company  believes  the  consolidated  complaint is
without merit and intends to vigorously  defend and protect its interests in the
case.

         The Company was 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 the  Company's
application for insurance.

         The Company has paid $30,000 to U.S.  Fire toward  satisfaction  of the
$250,000 retention that is applicable to the consolidated cases. The Company has
advised U.S.  Fire that it cannot pay the $250,000  retention due to its current
financial  circumstances.  As a  consequence,  on January 8, 2004,  the  Company
entered into a non-waiver  agreement with U.S. Fire in which U.S. Fire agreed to
fund and advance the Company's  retention  obligation in consideration for which
the Company has 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, the Company is 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.  The  Company has made the $5,000
payments  due to U.S.  Fire on February 15, March 15, April 15, May 15, June 15,
and July 15, 2004,  leaving a remaining  retention  obligation  to U.S.  Fire of
$220,000.

         In the event  U.S.  Fire  determines  that the  Company  or its  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 the Company 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 the  Company  agrees to pay U.S.  Fire,  on demand,  the full amount of all
costs  advanced  by U.S.  Fire,  except  for  those  amounts  that  it may  have
reimbursed  to  U.S.  Fire  pursuant  to the  monthly  payments  due  under  the
non-waiver   agreement.   Moreover,   if  U.S.  Fire  denies  coverage  for  the
consolidated  cases  under the  policy,  the  Company  would owe its  litigation
counsel in the class action lawsuits,  for any legal fees not paid by U.S. Fire.
However,  U.S. Fire has  currently  agreed to pay the legal fees relating to the
class action lawsuits.

                                       16


         The Company  will be in default  under the  non-waiver  agreement if it
fails 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 the Company is
not successful in defending and protecting its interests in the cases, resulting
in a judgment against the Company for substantial damages, it would be unable 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. 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 the Company on January 31, 2002, in which the Company  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 the Company  breached the asset  purchase  agreement.  The complaint also
claims  that  the  Company  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 the  Company's  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 the  Company,  would not have
purchased the Company's  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 the Company 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
the Company's common stock issued to Innovative in the transaction declined, and
Innovative and Barton suffered damages in an unspecified  amount to be proven at
trial. The Company filed an answer to the complaint and also filed counterclaims
against  Innovative and Barton for breach of contract.  The Company believes the
complaint  is without  merit and  intends to  vigorously  defend and protect its
interests  in the action.  If the Company is not  successful  in  defending  and
protecting its interests in this action, and a judgment for substantial  damages
is entered against it, and U.S. Fire denies coverage in the litigation under the
Directors and Officers Liability and Company  Reimbursement  Policy, the Company
would be unable 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." The Company has 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
the Company  falsely  stated in Securities and Exchange  Commission  filings and
press  releases  that  it  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).



                                       17


         The purpose of these  statements,  according to the  complaint,  was to
induce investors to purchase shares of the Company's 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 the  Company's  Series  E  preferred  stock in the  private  offering
suffered  substantial  damages to be proven at trial. The complaint also alleges
that the Company 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
attorney's  fees.  The  Company  filed an answer to the  complaint.  The Company
believes the  complaint is without  merit and intends to  vigorously  defend its
interests  in the action.  If the Company is not  successful  in  defending  and
protecting its interests in the action,  resulting in a judgment  against it for
substantial  damages,  and U.S. Fire denies coverage in the litigation under the
Directors and Officers Liability and Company  Reimbursement  Policy, the Company
would be unable 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 the Company's 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.  The Company disputes the amounts allegedly owed, asserting that the
equipment it returned to the leasing company did not work properly. A responsive
pleading  has been  filed.  The  Company  is  currently  engaged  in  settlement
discussions with CitiCorp.

         The Company 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 the Company's
common stock and warrants to purchase 1,192,500 shares of its 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 the  Company.  Dr.  MacLeod  renewed his request for these  additional
common  shares and  warrants in the  September  26, 2003 and  November  10, 2003
demand letters.  The Company  believes 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 its common stock or any additional  warrants under the
terms of the mutual release.  The Company  intends to vigorously  defend against
any legal action that Dr. MacLeod may bring.

         On August 3, 2003, a complaint was filed against the Company 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 the Company 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.  The  Company  disputes  the  amounts  allegedly  owed and  intends to
vigorously defend and protect its interests in the action.

                                       18


         On September 10, 2003, an action was filed against the Company 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 the
Company.  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 the Company has
paid Mr. Hicks prior to such termination, plus costs, attorney's fees and a wage
penalty pursuant to Utah law. The Company disputes the amount allegedly owed and
intends to vigorously defend against such action.

         On May 25, 2004,  an action was brought  against the Company by Jeffrey
F. Poore,  former President and Chief Executive  Officer of the company,  in the
Third  Judicial  District  Court of Salt Lake  County,  State of Utah (Civil No.
040910875).  The complaint  alleges that the Company  unlawfully  terminated the
written employment agreement between Mr. Poore and the Company. As a result, Mr.
Poore demands judgment against the Company for $350,000, representing his annual
salary for the two remaining  years under the  employment  agreement,  for money
judgment  based on the value of his benefits for the two  remaining  years under
the employment  agreement,  including profit sharing plans, 401(k) and cafeteria
plans,  health,  hospitalization,  dental,  disability and other insurance plans
canceled by the Company,  and for money judgment equal to the value of the stock
options granted to him under the employment agreement.  The Company disputes the
amounts allegedly owed in the complaint and believes that there was a sufficient
basis to  terminate  Mr.  Poore's  employment  for cause  under the terms of the
employment  agreement.  Accordingly,  the Company  intends to vigorously  defend
against the action.

         On August 9, 2004,  a third party  complaint  was  brought  against the
Company by Wakefield  Eye Center.  The  original  action was brought by American
Express Business Corporation against Westfield Eye Center on May 27, 2004 in the
District Court, Clark County, State of Nevada (Civil No. A486307, Dept. No. XXI)
concerning the financing of the purchase of a Blood Flow Analyzer(TM)  involving
Westfield Eye Center. The transaction took place during the latter half of 2001.
Westfield  Eye Center takes the position that if there is liability of Westfield
to American  Express  this  liability  is  ultimately  the Company and the other
third-party defendants.  The amount being sought against Westfield Eye Center by
American Express in the original action includes the sum of $29,765.83, together
with  interest and  attorney's  fees.  Westfield's  alleged  claims  against the
Company  include fraud,  breach of contract,  promissory  estoppel,  declaratory
relief, negligence,  negligent supervision,  damages for injuries resulting from
actions of employee/contractor,  wilful and wanton misconduct,  conspiracy,  and
breach of fiduciary  duty as well as costs and attorney's  fees.  Westfield also
seeks  punitive  damages.  The  Company  has filed an answer to the third  party
complaint in which we deny liability.  Formal  discovery in the matter involving
us has not commenced. The Company intends to vigorously defend the action.

         The  Company  is 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 its
financial condition or results of operations.

                                       19


Item 2. Changes in Securities

         None.

Item 3. Defaults Upon Senior Securities

         None

Item 4. Submission of Matters to a Vote of Security Holders

         None.

Item 5. Other Information

         On September 28, 2004, the Company  entered into an Investment  Banking
Agreement with Alpha Advisory  Services,  Inc. Under the terms of the Agreement,
Alpha  Advisory  Services is to use its best  efforts to provide  the  following
services to the Company:  (i) review of and make  recommendations  regarding the
Company's  business plan and  promotional  materials;  (ii) identify and contact
potential investors in the United States and Europe for potential  investment in
the Company's  securities;  (iii) organize meetings with potential investors and
participate in such meetings;  and (iv) assist the Company in future financings,
mergers, acquisitions and potential buyouts.

         The term of the Agreement is for a period of three months,  which is to
be automatically  renewed for successive  one-year terms.  Following the initial
three month  period,  either  party may  terminate  the  agreement  upon 15 days
written  notice to the other  party.  In  consideration  for the  services to be
performed  under the agreement,  Alpha Advisory  Services is to receive a fee of
$3,000 per month,  plus reasonable  travel and other expenses,  plus warrants to
purchase  25,000  shares of the  Company's  common stock at $.15 per share.  The
warrants are exerciseable,  on a cashless basis, over a two year period from the
date of issuance.

         On October 25,  2004,  the Company  entered  into a  Manufacturing  and
Distribution  Agreement  with  E-Technologies,  Inc., a Iowa based  developer of
software and related technology for technical  applications.  Under the terms of
the  agreement,  E-Technologies  granted to the Company the  exclusive  right to
manufacture,  market,  sell and  distribute  an ultrasonic  biomicroscope.  Upon
execution  of the  agreement,  the Company paid  $30,000 to  E-Technologies  for
engineering costs associated with the development of the biomicroscope. Once the
bioimicroscope  receives FDA approval,  the Company agrees to pay E-Technologies
an additional fee of $45,000.

         In consideration  for the exclusive right to manufacture and distribute
the  biomicroscope,  the Company agrees to pay  E-Technologies the sum of $5,000
for each of the first 25  biomicroscopes  sold by the Company.  Thereafter,  the
Company agrees to pay  E-Technologies  the sum of $4,000 for each  biomicroscope
sold. As an additional  condition,  the Company agrees to sell 25 biomicroscopes
during the first 12 months after the  biomicroscope  receives FDA approval.  The
agreement is effective for a term of two years.  After the expiration of the two
year period,  the agreement is to  automatically  renew for  additional one year
periods,  unless either party elects to terminate the agreement upon at least 30
days prior  written  notice to the other party before the end of any term of the
agreement.

                                       20


Item 6. Exhibits and Reports on Form 8-K

     (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)
4.1           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)
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)
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)



                                       21



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)
10.29         Stock Purchase and Sale Agreement with William Ungar(19)
10.30         Employment Agreement with Aziz A. Mohabbat(20)
10.31         Investment   Banking   Agreement  with  Alpha  Advisory  Services,
              Inc.(21)
10.32         Manufacturing  and  Distribution  Agreement  with  E-Technologies,
              Inc.(21)
31.1          Certification  pursuant to 18 U.S.C.  Section  1350, as enacted by
              Section 302 of the Sarbanes-Oxley Act of 2002
31.2          Certification  pursuant to 18 U.S.C.  Section  1350, as enacted by
              Section 302 of the Sarbanes-Oxley Act of 2002
32.1          Certification  pursuant  to 18 U.S.C.  Section  1350,  as  adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2          Certification  pursuant  to 18 U.S.C.  Section  1350,  as  adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

(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 Report on Form 10-QSB,  as filed on
              August 16, 2000.
(8)           Incorporated by reference from Report on Form 10-QSB,  as filed on
              November 1, 2000.
(9)           Incorporated by reference from 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 Report on Form 10-QSB,  as filed on
              November 18, 2002.


                                       22


(13)          Incorporated  by  reference  from  Registration  Statement on Form
              SB-2, as filed on July 7, 2003.
(14)          Incorporated by reference from 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.
(19)          Incorporated by reference from Report on Form 10-QSB,  as filed on
              August 16, 2004
(20)          Incorporated  by reference  from  Amendment No. 6 to  Registration
              Statement on Form SB-2, as filed on October 20, 2004.
(21)          Incorporated by reference from Report  on Form 10-QSB, as filed on
              November 15, 2004.


     (b)  Reports on Form 8-K

         No reports were filed by the Company during the quarter ended September
30, 2004.


                                       23


                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned  thereunto duly
authorized.


                                           PARADIGM MEDICAL INDUSTRIES, INC.



 November 16, 2004                          /s/John Y. Yoon        
                                           -------------------------------------
                                           John Y. Yoon
                                           President and Chief Executive Officer



 November 16, 2004                          /s/ Luis A. Mostacero 
                                           -------------------------------------
                                           Luis A. Mostacero, Controller



                                       24