SECURITIES AND EXCHANGE COMMISSION
                                                                
                 Washington, D.C. 20549

                        Form 10-KSB

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 1997, or 

     [ ]  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. 
         (Name of small business issuer in its charter)

      DELAWARE                                       87-0459536
(State or other jurisdiction                    (I.R.S. Employer 
of incorporation or organization)         Identification Number)

1127 West 2320 South, Suite A                           84119
Salt Lake City, Utah                                 (Zip Code)
(Address of principal executive offices)

    Registrant's telephone number, including 
      area code:  (801) 977-8970
                                                       
Securities registered pursuant to Section 12(b) of the Act:  

                                   Name of each exchange 
Title of each Class                on which registered 
-------------------                ----------------------
        None                               None                  
  
   Securities registered pursuant to Section 12(g) of the Act:
                                                                
                  Common Stock, $.001 Par Value                 
                        (Title of Class)

      Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such 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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

      Registrant's revenues for the fiscal year ended December
31, 1997 were $464,062.
                                                       
      The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 31, 1998 was
approximately $8,969,000 based on the closing price on that date
on the Nasdaq SmallCap Market.

      As of March 31, 1998, Registrant had outstanding 3,798,939
shares of Common Stock, 50,122 shares of Series A Preferred
Stock, 45,381 shares of Series B Preferred Stock, and 29,980
shares of Series C Preferred Stock.

                                                                
                 DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the definitive Proxy Statement to be delivered
to shareholders in connection with the Annual Meeting of
Shareholders to be held June 8, 1998 are incorporated by
reference into Part III hereof.

                                              Transitional Small
Business Disclosure Format (check one): Yes [ ]  No [X] 

<PAGE>

                            PART I

Item 1. Description of Business

General

      Paradigm Medical Industries, Inc. (the "Company" or
"Registrant") develops, manufactures, sources, markets and sells
ophthalmic surgical and diagnostic equipment and instrumentation.
The Company's surgical equipment is designed for minimally
invasive cataract treatment. The Company markets two ultrasonic
cataract surgery systems with related disposable products,
instruments and accessories.  One of the ultrasound systems, the
Precisionist Thirty Thousand(trademark), is manufactured as the
base surgery system for the Company's Ophthalmic Surgical
Workstation(trademark). The Company is currently developing a
laser cataract surgery system that would be the Company's third
minimally invasive cataract removal system.  If successfully
developed and approved for medical uses, the Company plans to
market the laser system as a plug-in module for its Ophthalmic
Surgical Workstation. The Company's diagnostic product is the
Blood Flow Analyzer(trademark).  This product is a portable
computerized system for which the Company has secured a license
granting it the right to market the product in the United States. 
The system measures pulsatile blood flow and intraocular pressure
in the eye as a means of detecting and treating glaucoma.

      Cataract surgery is the single largest volume and revenue
producing outpatient surgical procedure for ophthalmologists
worldwide.  Most cataract procedures in the United States are
performed using a method called phacoemulsification or "phaco,"
which employs an ultrasonic probe device.  The Company
manufacturers and sells two phacoemulsification systems, one a
stand-alone unit, the Precisionist 3000 Plus(trademark) system,
and the second as the base device for the Company's new
Photon(trademark) Laser Cataract Workstation, the Precisionist
Thirty Thousand(trademark).  However, the Company believes phaco
systems can be difficult for many ophthalmic surgeons to master
and are limited in their ability to be the most minimally
invasive method possible.  The Company is developing a
proprietary patented laser system and unique probe for laser
cataract removal which the Company believes can alleviate these
difficulties associated with phaco systems.  The Company intends
to make the patented laser system part of its Workstation if and
when cleared by the Food and Drug Administration (the "FDA"). 
The development of the laser cataract system is being done in
cooperation with ophthalmic surgeons in the United States and
through research and development work being conducted under
contract with Dixon Medical Laser Laboratory at the University of
Utah in Salt Lake City.

      The Company believes its laser system will be easier to use
and safer than present phaco cataract surgery systems.  The probe
will be smaller than typical probes employing ultrasonic
technology and will deliver laser energy directly to the desired
area with a blunt end and, unlike the sharp open-ended ultrasonic
probes, will cause no vibration throughout the rest of the eye
which can damage other delicate eye structures.  However, during
Phase I of the FDA clinical trials of the laser system the
Company discovered that the system may not effectively remove
harder grade cataracts.  The Company is thus requesting FDA
approval to conduct expanded Phase II clinical studies of the
laser system to refine the system to remove a broader range of
cataracts.  There is no assurance, however, that this limitation
can be overcome, that the FDA will authorize and approve Phase II
clinical trials, or that if approved, additional disadvantages or
problems unique to the Photon(trademark) laser cataract system
will not be discovered during Phase II clinical trials or
following FDA approval of the system.  

      Besides cataract surgery, the Company believes that its
Photon(trademark) Laser Workstation is capable of being
configured with specialty probes for use in other ophthalmic
surgical procedures.  The Company also intends to configure the
Workstation to perform glaucoma laser surgery.  These potential
applications could represent substantial growth opportunities
including sales of equipment and disposables.  However, there can
be no assurance that these applications will be developed or
approved. Further, there is no guarantee that the Workstation
will be accepted by the ophthalmic surgery market in this
capacity.

   In June 1997, the Company received FDA clearance to market the
Blood Flow Analyzer(trademark) for detection of glaucoma and
other retina related diseases. The device measures not only
intraocular pressure but also pulsatile ocular blood flow, the
reduction of which may cause nerve fiber bundle death through
oxygen deprivation thus resulting in visual field loss.
      
Background

      Corporate History.  The Company's business originated with
Paradigm Medical, Inc., a California corporation formed in
October 1989 ("PMI").  PMI developed the Company's present
ophthalmic business and was operated by its founders Thomas F.
Motter and Robert W. Millar.  In May 1993, PMI merged with and
into the Company.  At the time of the merger, the Company was a
dormant public shell existing under the name French Bar
Industries, Inc. ("French Bar").  French Bar had operated a
mining and tourist business in Montana.  Prior to its merger with
PMI in 1993, French Bar had disposed of its mineral and mining
assets in a settlement of outstanding debt and had returned to
the status of a dormant entity.  Pursuant to the merger, the
Company caused a 1-for-7.96 reverse stock split of its shares of
Common Stock.  The Company then acquired all of the issued and
outstanding shares of Common Stock of PMI using shares of its own
Common Stock as consideration.  As part of the merger, the
Company changed its name from French Bar Industries, Inc. to
Paradigm Medical Industries, Inc. and the management of PMI
assumed control of the Company.  In April 1994, the Company
caused a 1-for-5 reverse stock split of its shares of Common
Stock.  In February 1996, the Company redomesticated to Delaware
pursuant to a reorganization.

Overview

      Disorders of the Eye.  The human eye is a complex organ
which functions much like a camera, with a lens in front and a
light-sensitive screen, the retina, in the rear.  The intervening
space contains a transparent jelly-like substance, the vitreous,
which together with the outer layer, the sclera and cornea, helps
the eyeball to maintain its shape.  Light enters through the
cornea, a transparent domed window at the front of the eye.  The
size of the pupil, an aperture in the center of the iris,
controls the amount of light that is then focused by the lens
onto the retina as an upside-down image.  The lens is the
internal optical component of the eye and is responsible for
adjusting focus.  The lens is enclosed in a capsule.  The retina
is believed to contain more than 130 million light-receptor
cells.  These cells convert light into nerve impulses that are
transmitted right side up by the optic nerve to the brain, where
they are interpreted.  Muscles attached to the eye control its
movements.  

      Birth defects, trauma from accidents, disease and age
related deterioration of the components of the eye can all
contribute to eye disorders.  The most common eye disorders are
either pathological or refractive.  Many pathological disorders
of the eye can be corrected by surgery.  These include cataracts
(clouded lenses), glaucoma (elevated pressure in the eye),
corneal disorders such as scars, defects and irregular surfaces
and vitro-retinal disorders such as the attachment of membrane
growths to the retina causing blood leakage within the eye.  All
of these disorders can impair vision.  Many refractive disorders
can be corrected through the use of eyeglasses and contact
lenses.  Myopia (nearsightedness), hyperopia (farsightedness) and
presbyopia (inability to focus) are three of the most common
refractive disorders.

      Ultrasound Technology.  Ultrasound devices have been used
in ophthalmology since the late 1960's for diagnostic and
surgical applications when treating or correcting eye disorders. 
In diagnostics, ultrasound instruments are used to measure
distances and shapes of various parts of the eye for prescription
of eyeglasses and contact lenses and for calculation of lens
implant prescriptions for cataract surgery treatment.  These
devices emit sound waves through a hand-held probe that is placed
onto or near the eye with the sound waves emitted being reflected
by the targeted tissue.  The reflection "echo" is computed into
a distance value that is presented as a visual image, or
cross-section of the eye, with precise measurements displayed and
printed for diagnostic use by the surgeon.

      Surgical use of ultrasound in ophthalmology is limited to
treatment of cataractous lenses in the eye through a procedure
called phacoemulsification or "phaco."  A primary objective of
cataract surgeries is the removal of the opacified (cataractous)
lens through an incision that is as small as possible.  The
opacified lens is then replaced by a new synthetic lens
intraocular implant ("IOL").  Phaco technology involves a process
by which a cataract is broken into small pieces using ultrasonic
shock waves delivered through a hollow, open-ended metal needle
attached to a hand-held probe.  The fragments of cataractous
tissue are then removed through aspiration.  Phaco systems were
first designed in the late 1960's after various attempts by
surgeons to use other techniques to remove opacified lens,
including crushing, cutting, freezing, drilling and applying
chemicals to the cataract.  By the mid-1970's, ultrasound had
proven to be the most effective technology to fragment cataracts. 
Industry sources indicate that phaco cataract treatment is the
technology for cataract removal used in over 80% of surgeries in
the United States and over 20% of all foreign surgeries.

      Laser Technology.  The term "laser" is an acronym for Light
Amplification by Stimulated Emission of Radiation.  Lasers have
been commonly used for a variety of medical and ophthalmic
procedures since the 1960's.  Lasers emit photons of light into
a highly intense beam of energy that typically radiates at a
single wavelength or color.  Laser energy is generated and
intensified in a laser tube or solid-state cavity by charging and
exciting photons of energy contained within material called the
lazing medium.  This stored light energy is then delivered to
targeted tissue through focusing lenses by means of optical
mirrors or fiber optics.  Most laser systems use solid state
crystals or gases as their lazing medium.  Differing wavelengths
of laser light are produced by the selection of the lazing
medium.  The medium selected determines the laser wavelength
emitted, which in turn is absorbed by the targeted tissue in the
body.  Different tissues absorb different wavelengths or colors
of laser light.  The degree of absorption by the tissue also
varies with the choice of wavelength and is an important variable
in treating various tissue.  In a surgical laser, light is
emitted in either a continuous stream or in a series of short
duration "pulses," thus interacting with the tissue through heat
and shock waves, respectively.  Several factors, including the
wavelength of the laser and the frequency and duration of the
pulse or exposure, determine the amount of energy that interacts
with the targeted tissue and, thus, the amount of surgical effect
on the tissue.

      Lasers are widely accepted in the ophthalmic community for
treatment of certain eye disorders and are popular for surgical
applications because of their relatively non-invasive nature.  In
general, ophthalmic lasers, such as argon, Nd:YAG and excimer
(argon-fluoride) are used to coagulate, cut or ablate targeted
tissue.  The argon laser is used to treat leaking blood vessels
on the retina (retinopathy) and retinal detachment.  The excimer
laser was recently tested in clinical trials for limited use in
corneal refractive surgery.  The Nd:YAG pulsed laser is used to
perforate clouded posterior capsules (posterior capsulotomy) and
to relieve glaucoma-induced elevated pressure in the eye
(iridotomy, trabeulorplasty, transcleral cyclophotocoqulation). 
Argon, Nd:YAG and excimer lasers are primarily used for one or
two clinical applications each.  In contrast to these
conventional laser systems, the Company's Photon(trademark) laser
cataract system is designed to be used for multiple ophthalmic
applications, including certain new applications that may be made
possible with the Company's proprietary technology.  Such new
applications, however, must be tested in clinical trials and be
approved by the FDA.

Products

      The Company's principal surgical product is an ultrasonic
system for use by ophthalmologists to perform surgical treatment
procedures to remove cataracts.  In 1990, the Company received
clearance from the FDA pursuant to Section 510(k) of the Food,
Drug and Cosmetics Act (the "FDC Act") on its Precisionist
3000(trademark) phaco system for cataract surgery, which system
was upgraded to the Precisionist 3000 Plus(trademark) in 1994. 
The Company also completed its preclinical in vitro and in vivo
(animal) testing of its Photon(trademark) laser cataract
solid-state laser cataract surgical system and submitted a
Section 510(k) Premarket Notification to the FDA for the Photon(trademark)
laser cataract system in September 1993, with a follow-up
Investigational Device Exemption ("IDE") application submitted in
October 1994 to provide additional clinical data through human
cases to support its earlier filing.  The IDE was approved in May
1995.  Phase I clinical trials were begun in April 1996 with
surgeries completed in December 1996.  Patient follow-up
examinations as mandated by the FDA study were completed in July
1997, and the Company submitted its final report to the FDA
thereafter.  During the Phase I clinical trials the Company
discovered that the Nd:YAG (Neodymium: Yttrium-Aluminum-Garnet)
laser system may not effectively remove harder grade cataracts. 
The Company is now requesting FDA approval to conduct expanded or
Phase II clinical studies of the laser system in hopes of
refining that system to remove a broader range of cataracts. 
There is no assurance, however, that this limitation can be
overcome.

      Precisionist 3000 Plus(trademark) System.  The Precisionist
3000 Plus(trademark) system (the "3000 Plus(trademark)") is the
Company's first cataract surgery system, having been developed in
1992 and enhanced in 1994.  The system is compact, portable and
simple to operate with a very low operating cost.  The primary
market for the 3000 Plus(trademark) is in foreign countries where
phaco technology is emerging and price-points are relatively low. 
The 3000 Plus(trademark) is also a good replacement or back-up system.  The
system features a simple analog presentation of the ultrasound
phaco equipment, irrigation and aspiration fluidics using the
Company's second generation SmartPump(trademark) technology to
"sense" and avoid vacuum surges in the eye that can occur during
high aspiration surgical techniques.  The 3000 Plus is noted for
its smooth and effective cataract cutting capability and its low
cost reusable fluidics tubing set.  The 3000 Plus(trademark)
provides the basic standard features for phaco surgery including:
automated priming and tuning, error detection of ultrasound
handpiece and tip functions, audible vacuum feedback tones,
ultrasound energy metering, pneumatic high-speed anterior
vitrectomy and bipolar electrosurgery (coagulation).  The system
can be ordered with a mobile cart including integrated irrigation
support for a more permanent installation.

      Precisionist Thirty Thousand(trademark).  The Precisionist
Thirty Thousand(trademark) (the "Thirty Thousand(trademark)") is the
Company's core phaco surgical technology and the base system for
its Ocular Surgery Workstation.  The Thirty Thousand(trademark)
was placed into production and sale in 1997.  As a phaco cataract
surgery system, the Company believes the Thirty
Thousand(trademark) is equal or superior to the present
competitive systems in the United States.  The system features a
graphic color display and unique proprietary on-board computer
and graphic user interface linked to soft-keys for flexible
programmable operation.  The system provides real-time
"on-the-fly" adjustment capabilities for each surgical parameter
during the surgical procedure for high-volume applications.  In
addition, the Thirty Thousand(trademark) provides one hundred
pre-programmable surgery set-ups, with a second level of
sub-programmed custom modes within each major surgical screen
(i.e., ultrasound phaco and irrigation/aspiration modes).  The
Thirty Thousand(trademark) features the Company's third
generation SmartPump(trademark) technology which utilizes the
micro-processing capabilities of the system to monitor all
activities of the vacuum aspiration and irrigation system and to
sense automatically a vacuum surge and adjust the internal vacuum
level of the system to normalize the in-line fluidics and
stabilize the eye during surgery without surgeon intervention. 
In addition to the full complement of surgical modalities (e.g.
irrigation, aspiration, bipolar coagulation, anterior
vitrectomy), system automation includes "dimensional" audio
feedback of vacuum levels and voice confirmation for major system
functions, providing an intuitive environment in which the
advanced phaco surgeon can concentrate on the surgical technique
rather than the equipment.  The Company is now under development
of a Generation II version of its surgical fluidics system which
it intends to offer as a feature enhancement.

      Photon(trademark) Workstation.  The Ocular Surgery
Workstation which comprises the base system for the Precisionist
Thirty Thousand(trademark) is the first system known by the
Company which uses the expansive capabilities of today's advanced
computer technology to offer seamless open architecture
expandability of the system hardware and software modules.  The
Workstation utilizes an embedded computer developed for the
Company.  The computer is controlled by a proprietary software
system developed by the Company that interfaces with all
components of the system: ultrasound, fluidics (irrigation),
aspiration, venting, coagulation and anterior vitrectomy
(pneumatic).  Each component is controlled as a peripheral module
within this fully integrated system. This approach allows for
seamless expansion and refinement of the Workstation with the
ability to add other hardware and software features.  Expansion
hardware such as the Company's Photon(trademark) laser system,
when approved by the FDA, and hardware for additional surgical
applications are easily implemented by means of a pre-existing
expansion rack which resides in the base of the Workstation. 
These expanded capabilities could include, but would not be
limited to: laser systems, video surgical fiber optic imaging,
cutting and electrosurgery equipment.  However, there is no
guarantee that the Workstation will be accepted in the market
place.

      Photon(trademark) Laser Cataract System.  The
Photon(trademark) laser cataract system, which is still subject
to FDA approval, is designed to be installed as an upgrade or
add-on to the Company's Ocular Surgery Workstation.  The main
elements of the laser system are the Nd:YAG laser module,
Photon(trademark) laser software package and interchangeable
disposable hand-held fiber optic laser probe.  The
Photon(trademark) laser utilizes the on-board microprocessor
computer of the Workstation to generate short pulse laser energy
developed through a patented hand-held fiber optic probe to
targeted tissue inside the eye, while simultaneously irrigating
the eye and aspirating the diseased cataract tissue from the eye. 
The probe is smaller in diameter than conventional ultrasound
phaco tips and presents no damaging vibration or heat build-up in
the eye.  The Company's Phase I clinical trials demonstrated that
this probe can easily reduce the size of the cataract incision
from 3.0 mm to under 2.0 mm thereby reducing surgical trauma and
complementing current foldable intraocular implant technology. 
The laser probe may also eliminate any possibility for burns
around the incision and may therefore be used with cataract
surgery techniques which utilize a more delicate clear cornea
incision without suture.  However, this system may not
effectively remove harder grade cataracts.  The Company intends
to refine the laser delivery system and laser cataract surgical
technique through expanded clinical study.  As far as the Company
can determine, no integrated single laser probe is presently
available on the market that uses laser energy directly,
contained in an enclosed probe, to plasmatize cataract tissue at
a precise location inside the eye while simultaneously irrigating
and aspirating the site.  

      The Company's laser system is based upon the concept that
pulsed  laser energy produced with the micro-processor controlled
Nd:YAG laser system provides ophthalmic surgeons with a more
precise and less traumatic alternative in cataract surgery. 
Although conventional ultrasonic surgical systems have proven
effective and reliable in clinical use for many years, their use
of high frequency shock waves and vibration to fragment the
cataract can make the procedure difficult and present risk of
complication both during and after surgery.  In contrast, the
Company's laser system, which utilizes short centralized energy
bursts, should permit the delivery of the laser beam with less
trauma to adjacent tissue.  Therefore, unlike ultrasonic systems,
whose vibrations and shock waves affect (and can damage)
non-cataractous tissues within the eye, the Company's
Photon(trademark) laser cataract system should only affect
tissues it comes into direct contact with.
      
      Blood Flow Analyzer(trademark) (Paradigm BFA(trademark)). 
This is the Company's first ophthalmic diagnostic device.  The
device is manufactured by OBF. Labs and will be marketed by the
Company pursuant to a license agreement.  The device is designed
to detect glaucoma at an earlier stage than is presently
possible.  The device utilizes a proprietary patented pneumatic
probe which is placed on the cornea of an eye to measure the
intraocular pressure within the eye.  The device is unique in
that it reads a series of intraocular pressure pulses over a
short period of time (approximately five seconds) and generates
a waveform profile which can be correlated to blood flow volume
within the eye.  The pressure derived blood flow volume is
calculated by a proprietary software algorithm developed by one
of the Company's directors, David M. Silver, Ph.D.  The device
presents a numerical intraocular pressure (IOP) reading and blood
flow analysis (BFA) rating in a concise printout which can be
affixed to the patient history file.  In addition, the data
generated by the device can be downloaded to most personal
computer systems for advanced database patient information
development and management.  The blood flow analyzer utilizes a
single-use disposable cover for its corneal probe which is
shipped in sterile packages to customers.  This probe tip cover
provides accurate readings and acts as a prophylactic barrier for
the patient.  OBF Labs has been issued a patent in the European
economic community and has a patent pending in the United States
and Japan.  The FDA has cleared the analyzer for marketing in the
United States and the Company commenced selling this device in
September 1997.  This diagnostic product will permit the Company
to immediately expand its market to approximately 35,000
optometric practitioners in the United States in addition to the
approximately 18,000 ophthalmic practitioners who currently
perform eye surgeries and are candidates for the Company's
surgical systems.

      Accessory Instruments and Disposables.  In addition to the
cataract surgery equipment, the Company is aggressively pursuing
development and product introductions for a range of cataract
surgery instruments and accessories that will be sold with its
surgical systems and to fit other competitive systems.  In
January 1998, the Company received FDA 510(k) clearance for a
line of proprietary titanium ultrasonic phaco needles it
manufactures in its Salt Lake City facility.  The needles will be
released for sale in May 1998 in sterile packs.  In February
1998, the Company completed engineering on a proprietary line of
irrigation/aspiration probes and tips of which FDA 510(k)
clearance was requested in March 1998 and is anticipated in May
1998 with product release targeted for July 1998.  These
products, and additional instruments, were previously sourced
from third-party vendors.  The Company believes that by
developing its own instruments and accessories it can  improve
product performance, introduce innovative differentiation and
improve sales margins. All of the Company's surgical and
diagnostic systems utilize or will utilize accessory instruments
and disposables, some of which are proprietary to the Company. 
These include replacement ultrasound tips, sleeves, tubing sets
and fluidics packs, laser cataract probes, glaucoma fiber optic
probes and a prophylactic transducer sleeve required for the
blood flow analyzer probe.  The Company intends to expand its
disposable accessories as it further penetrates the cataract
surgery market and expands the treatment applications for its
Workstation.  

Marketing and Sales 

      Ophthalmologists are mainly office-based and perform their
surgeries in local hospitals or surgical centers that provide the
necessary surgical equipment and supplies.  Ophthalmologists are
generally involved in decisions relating to the purchase of
equipment and accessories for their independent ambulatory
surgical centers and for the hospitals with which they are
affiliated.  This provides the opportunity for direct, targeted,
personal selling, responsive high quality customer service and
short buying cycles to achieve a product sale in the office or
hospital.  Hospitals also comprise a significant market as recent
demand for ultrasonic surgery technology has put pressure on the
ophthalmologist, who in turn persuades the hospital to install
the latest technology system so that they can offer this
procedure to their patients and the community. 

      Industry analysts report that the United States ophthalmic
surgical device market has been characterized by slower growth in
recent years.  This has apparently been caused by the uncertainty
and potential reforms associated with the health care industry. 
Further, hospitals have been inclined to keep their older phaco
machines longer than expected as they have been forced to mind
budgets more carefully and have become less willing to invest in
capital equipment until more information on health care reform
becomes available.  However, analysts predict that the ophthalmic
surgical device market will see renewed growth in the coming
years as the health care environment stabilizes and as the
growing elderly population produces an increased number of
cataract surgeries.  As a consequence of these factors, the
market should see a greater rate of replacement of older machines
that hospitals and surgeons have been postponing for longer than
usual.

      Current Market Acceptance and Potential.  As of March 31,
1998, the Company had distributed over 60 Precisionist 3000 and
3000 Plus(trademark) phaco systems since the introduction of the
systems, nine of the new Precisionist Thirty Thousand(trademark)
Workstations and six Photon(trademark) Laser Phaco(trademark)
Workstations.  The principal purchasers have been
ophthalmologists and clinics in many countries throughout the
world.  The Company believes that the market for its products is
being driven by:  (i) the aging of the population, which is
evidenced by the domestic and international cataract surgery
volume growth trend over the past ten years, (ii) the entry by
emerging countries (including China, Russia, and other countries
in Asia, Eastern Europe and Africa) into advanced technology
medical care for their populations, (iii) increased awareness
worldwide of the benefits of the minimally invasive phaco
cataract procedure and (iv) the introduction of technology
improvements such as the Company's laser system.

      Marketing Organization.  The Company markets its products
internationally through a network of dealers  and domestically
through a direct sales representative and manufacturer's
representatives.  As of March 31, 1998, the Company had six
direct domestic sales representatives and one manufacturer's
representatives in the United States and 21 foreign dealers.  All
of these sales representatives are assigned exclusive territories
and have entered into contracts with the Company that contain
performance quotas.  The Company also plans to continue to market
its products by identifying customers through internal market
research and trade shows.  The Company also utilizes a Clinical
Advisory Board comprised of leading ophthalmic surgeons in the
United States and Europe who speak at conventions, train
ophthalmologists and visit foreign doctors and dealers to promote
the Company's products.

      The Company when marketing its surgical Workstation will
emphasize the expandable features of the Workstation.  The
Company's marketing approach will be to focus on the
upgradeability of the Workstation and to develop the image of the
Workstation as the most versatile, upgradeable and cost effective
surgical equipment available.  The Company will continue to focus
its sales efforts towards ophthalmic hospital and surgical center
facilities specializing in cataract surgery.  However, as systems
are installed, the Company will expand its focus to provide
additional ophthalmic and non-ophthalmic surgical applications as
part of its Workstation.  Additional surgical applications will
expand the market for the Workstation as well as associated sales
of disposable surgical products.

      The Company disseminated the innovative capabilities of its
products through advertisement and printed materials at the
Company's annual exhibition at the annual meeting of the American
Academy of Ophthalmology in San Francisco, California in October
1997.  The theme of the Company's advertisement for its Ocular
Surgery Workstation was "The Future of Phaco is the Future of
Ophthalmic Surgery."  The Company will expand upon the concept of
the "Workstation" with additional advanced laser and surgical
capabilities.  The Company has also launched a campaign for the
Blood Flow Analyzer.  The product was introduced to the
ophthalmic marketplace at the American Academy of Ophthalmology
meeting in October 1997 and to the Optometric marketplace at the
California Optometric Association and Vision Expo Easy New York
meetings.  The theme of the Company's advertisement for its Blood
Flow Analyzer was "Don't Miss Half of Your Glaucoma Patients...
A Fast, Clinically Proven Test For Ocular Blood Flow"  See
"Business--Products."

      Product advertising is focused in the three industry trade
newspapers, Ocular Surgery News, Ophthalmology Times and the
American Optometric Association News.  Most of the
ophthalmologists or optometrists in the United States receive one
or more of these magazines through professional subscription
programs.  The media has shown strong interest in the Company's
technology and products, as evidenced by several recent front
page articles in these publications.

      Manufacturing and Raw Materials.  Currently, the Company
has a small manufacturing and warehousing facility.  All
components and the finished surgical systems are manufactured
under subcontracting arrangements.  All subcontractors are
located within the United States.  None of these companies
manufactures products that compete with the Company's products. 
All component and systems manufacturing is performed under a
system of quality control and testing.  As a condition to such
contracting, each subcontractor's manufacturing facilities and
personnel must comply with the Good Manufacturing Practices (GMP)
guidelines established by the FDA, as well as similar guidelines
established by foreign governments.

      The Company subcontracts the manufacturing of some of its
ancillary instruments, accessories and consumables through
specified vendors in the United States.  These products are
contracted in quantities and at costs consistent with the
Company's financial capabilities and pricing needs.

      The Company currently subcontracts the manufacture of its
Workstation and Precisionist Thirty Thousand to one of its
stockholders, Zevex International, Inc. ("Zevex"), which is
located in Salt Lake City, Utah.  See "Item 12. Certain
Relationships and Related Transactions."  

      The laser cavity, optical train and power source for the
Photon(trademark) laser cataract system are supplied by Sunrise
Technologies, Inc. in Fremont, California ("Sunrise").  The
Company is in the process of establishing an internal laser
cataract probe manufacturing facility and plans to have all probe
production take place in Salt Lake City.  The remaining operating
elements of the Photon(trademark) laser cataract system, the
computer controller, fluidics and ancillary surgical modalities,
are developed through Zevex.  Although substantial reliance is
currently placed with Zevex and Sunrise, the Company believes it
would be able to find alternative manufacturers for its products
currently manufactured by these two sources.  The Company also
believes that there are multiple sources of raw materials that
are used or could be used in its products.  See "Item 12. Certain
Relationships and Related Transactions".

      The Blood Flow Analyzer(trademark) is manufactured by OBF
Labs.  The analyzer may be repackaged by the Company using a
module cover designed by the Company and may also be marketed
under the Company's trade name and mark regardless of whether it
is repackaged.  The Company's License and Manufacturing Agreement
with OBF Labs continues through December 31, 2000 and is
automatically renewable for successive one year additional terms,
unless either party gives written notice to the other party at
least 90 days prior to the expiration of the term.  Service for
the Company's products is overseen from its Salt Lake City, Utah
headquarters and is augmented by its international dealer
network, which dealers also provide technical service and repair. 
Installation, on-site training and a 12 to 18 month warranty are
included as the standard terms of sale.  The Company provides
distributors with replacement parts at no charge during the
warranty period.  To date, the Company has incurred minimal
expenses under this warranty program.  International distributors
are responsible for installation, repair and other customer
service to installed systems in their territory.  All system
parts are modular sub-components that are easily removed and
replaced.  The Company maintains an adequate parts inventory and
provides 24 hour replacement parts shipment to its dealers. 
After the warranty period expires, the Company offers one year
service contracts to its domestic customers and will continue to
sell parts to international dealers who in turn create their own
service plans with their customers.  As of March 31, 1998, the
Company has not sold any one year service contracts.

      Third-Party Reimbursement.  It is expected that the
Company's laser systems and diagnostic system will generally be
purchased by ophthalmologists and hospitals as well as
optometrists who will then bill various third-party payors for
the health care services provided to their patients.  These
payors include Medicare, Medicaid and private insurers. 
Government agencies generally reimburse at a fixed rate based on
the procedure performed.  Some of the potential procedures for
which the Photon(trademark) laser cataract systems may be used,
may be determined to be elective in nature, and third-party
reimbursement may not be available for such procedures, even if
approved by the FDA.  In addition, third-party payors may deny
reimbursement if they determine that the procedure was
unnecessary, inappropriate, not cost-effective, experimental or
used for a non-approved indication.  There can be no assurance
that reimbursement from third-party payors will be available, or
if available, that reimbursement will not be limited, thereby
having a material adverse effect on the Company's ability to
develop new products on a profitable basis, its operating results
and financial condition.

Research and Development

      The Company's primary market is the cataract  surgery
market as well as the related retinal clinical diagnostic market. 
However, the Company believes that its laser systems may
potentially have broader ophthalmic applications.  Consequently,
the Company believes that a strong research and development
capability is important for the Company's future.  The Company
has enlisted several recognized and respected consultants and
other technical personnel to act in technical and medical
advisory capacities.  Several of these consultants serve on the
Company's Clinical Advisory Board to provide expert and technical
support for current and proposed products, programs and services
of the Company.  In addition, the Company is conducting an
extensive research program in conjunction with the Dixon Medical
Laser Lab at the University of Utah.  The research is aimed at
improving the laser system performance for cataract surgery and
exploring additional surgical applications.  

      The Company believes its research and development
capabilities provide it with the ability to respond to regulatory
developments that may, from time to time, require the Company to
deal effectively with U.S. and foreign government entities that
oversee the Company's products.  The Company intends to continue
investing in research and development and to strengthen its
ability to enhance existing products and develop new products. 
The Company spent $288,854 on research development in fiscal year
ended September 30, 1996, $480,584 in the three months ended
December 31, 1996 and $540,148 in fiscal year ended December 31,
1997.

Competition

      General.  The Company is subject to competition in the
cataract and the glaucoma surgery markets, and the glaucoma
diagnostic market from two principal sources: (i) manufacturers
of competing ultrasound systems used when performing cataract
treatments and (ii) developers of technologies for ophthalmic
diagnostic and surgical used from treatment.  The surgical
equipment industry is dominated by a few large companies that are
well established in the marketplace, have experienced management,
are well financed and have well recognized trade names and
product lines.  The Company believes that the combined sales of
five entities account for over 90% of the ophthalmic surgery
market.  The remaining market is fragmented among emerging
smaller companies, some of which are foreign.  The ophthalmic
diagnostic market has a similar composition.

      Most major competitors either entered or expanded into the
cataract or glaucoma markets through the acquisition of smaller,
entrepreneurial high-technology manufacturing companies. 
Therefore, because existing competitors or other entities
desiring to enter the market could conceivably acquire current
entrepreneurial enterprises with small market activity, any and
all competitors must be considered to be formidable.

      The Cataract Surgical System Industry.  Presently, products
currently in use are offered by the major manufacturers utilizing
ultrasonic technology.   Those systems rely on accessories
including single-use cassette packs and other ancillary surgical
disposables such as saline solution, sutures and intraocular
lenses for their profits.  The cassette packs are required for
fluid and tissue collection during the surgical procedure.  The
cassette packs are generally unique and proprietary to their
respective systems and represent a barrier to entry for
third-party, lower-cost after-market suppliers.  While there is
growing market resistance in the United States and
internationally to single-use cassettes, the Company anticipates
that manufacturers of ultrasound equipment will continue to
develop and enhance their present ultrasound products in order to
protect their investments in system and cassette technology and
to protect their profits from sales of these cassettes and
accessories.  The Company's Precisionist Thirty
Thousand(trademark) ultrasonic phaco system has the ability to
use either reusable or single-use disposable components.  The
Photon(trademark) laser cataract system will utilize probes and
cassette packs designed for single-use and semi-disposable
instruments priced at a level consistent with the demands of
health care cost containment.  This will allow the health care
providers a substantial measure of cost containment, while
providing the Company with the quality control and income
capability of cassette sales.

      The typical list price of a competitive advanced ultrasonic
system ranges from approximately $60,000 to $100,000.  Lower cost
models generally have a list price ranging from approximately
$30,000 to $60,000.  The list price for the Company's
Precisionist 3000 Plus(trademark) System, which is comparable to
advanced ultrasonic systems, is $45,500.  The list price for the
Precisionist Thirty Thousand(trademark) ocular surgery system is
$89,900.  The Company's Photon(trademark) Laser Phaco(trademark) will be
sold at a price of approximately $119,000.  The international
market, with significantly lower medical budgets, has not been
able to justify the expense of using disposable components. 
Budgetary constraints have limited current manufacturers from
gaining a significant share of the international ultrasound
equipment market, and has provided a niche for the emerging
smaller companies discussed above.

      Ultrasound Equipment Manufacturers.  As a relatively recent
entrant into the cataract surgical equipment market with a newer
equipment line, the Company is establishing itself and, as yet,
does not hold a significant share of the market.  The Company
currently recognizes Bausch & Lombe, Alcon Laboratories, and
Allergan Medical Optics as its primary competitors in the
ultrasound phaco cataract equipment market.

      Laser Equipment Manufacturers.  To the Company's knowledge,
there are several other companies attempting to develop laser
equipment for cataract surgery.  Based on the information
currently available to the Company, these competitive laser
companies appear to offer a less viable means of treating
cataracts using laser technology.   The Company believes that
there is presently no directly competing Nd:YAG laser-assisted
cataract surgical system available in the market.  The Company
also believes that its product is sufficiently distinctive and,
if properly marketed, can capture a significant share of the
cataract surgical device market.  However, there are substantial
risks in undertaking a new venture in an established and already
highly competitive industry.  In the short-term, the Company is
seeking to exploit these opportunities.  Depending upon further
developments, the Company may ultimately exploit those
opportunities through a merger with a stronger entity already
established or one that desires to enter the medical industry.  

      The Company believes that its ability to compete
successfully will depend on its capability to create and maintain
advanced technology, develop proprietary products, attract and
retain scientific personnel, obtain patent or other proprietary
protection for its products and technologies, obtain required
regulatory approvals and manufacture, assemble and successfully
market products either alone or through third parties.

      The Retinal Diagnostic Market.  The Glaucoma Research
Foundation suggests that with the aging of the so-called baby
boom generation, there will be an increase of macular
degeneration and glaucoma in the United States, the leading
causes of adult blindness worldwide.  The damage caused by these
diseases is irreversible.  The preconditions for the onset of
macular degeneration or glaucoma are low ocular blood flow and
high intraocular pressure.  Diagnostic screening is important for
individuals susceptible to these diseases.  People in high risk
categories include: African Americans over 40 years of age, all
persons over 60 years of age, persons with a family history of
glaucoma or diabetes, and the very near sighted.  The Glaucoma
Research Foundation recommends that these high risk individuals
be tested once every two years for glaucoma.  According to the
U.S. Census Bureau, in 1995 there were over 30 million adults 65
years of age and older and 8 million African Americans 45 years
of age and older.  The Glaucoma Research Foundation reports that
glaucoma currently accounts for more than 7 million visits to
physicians annually.  

      The Company is subject to intense competition in the
ophthalmic diagnostic market from well-financed, established
companies with recognizable trade names and product lines and new
and developing technologies.  The industry is dominated by
several large entities which the Company believes account for the
majority of diagnostic equipment sales.  The Company expects to
derive revenues initially from the sale of its blood flow
analyzer and later through the sale of disposable accessories for
that device.  The device is designed to detect glaucoma in an
earlier stage than is presently possible.  In addition, the
device performs tonometry and blood flow analysis.  The Company
anticipates that the blood flow analyzer will have a list price
ranging from approximately $13,500 and $20,000.  Other ophthalmic
diagnostic devices which do not detect glaucoma in the early
stages of the disease as does the Company's analyzer retail at
comparable prices.  The Company thus believes that it can compete
in the diagnostic market place based upon the lower price and
improved diagnostic functions of the analyzer.

      The Glaucoma Surgery Market.  The glaucoma surgery market
is similar in composition to the retinal diagnostic market.  The
market is dominated by several large companies.  Because there
are existing glaucoma and laser surgery products in the market,
the Company hopes to be able to enter the market relatively
quickly through FDA Section 510(k) clearance of its new systems
and products.  The Company believes that it can compete in this
established marketplace since it will be offering its glaucoma
surgery system as an add-on to its Workstation.  The Company
believes that its Workstation will give the Company a competitive
advantage to gain a position in the marketplace.  

Intellectual Property Protection

      The Company's cataract surgical products are proprietary in
design, engineering and performance.  The Company's ultrasonic
products have not been patented to date because the primary
technology for ultrasonic tissue fragmentation, as available to
all competitors in the market, is mainly in the public domain.

      The Photon(trademark) laser cataract system is protected
under a United States patent issued in 1987 to Daniel M.
Eichenbaum, M.D. and subsequently assigned by Photomed
International, Inc. ("Photomed") and a Japanese patent issued in
1997 to the Company for the utility and methods of laser
ablation, aspiration and irrigation of tissue through a hand-held
probe of a unique design.  The Company secured the exclusive
worldwide right to this patent shortly after its issue, and to
the international patents pending, from Photomed by means of a
license agreement (the "License Agreement").  The License
Agreement was amended on December 5, 1997 to allow Photomed the
right to conduct research, development and marketing utilizing
the patent in certain medical sub-specialties other than
ophthalmology for which the Company would receive royalty
payments equal to 1% of the proceeds from the net sales of
products utilizing the patent.  See "Management" and "Certain
Relationships and Related Transactions."

      OBF Labs, the manufacturer of the Blood Flow
Analyzer(trademark) that the Company markets in the United States
under a non-exclusive license agreement, has been granted a
patent in the European Economic Community and has patents pending
in the United States and Japan.

      Although the Company's trademarks are important to its
business, it is not the Company's policy to pursue trademark
registrations for its trademarks associated with its products. 
Consequently, the Company relies on common law trademark rights
to protect its unregistered trademarks, although common law
trademark rights do not provide the Company with the same level
of protection as would U.S. federal registered trademarks. 
Common law trademark rights only extend to the geographical area
in which the trademark is actually used while U.S. federal
registration prohibits the use of the trademark by any party
anywhere in the United States.

      The Company also relies on trade secret law to protect some
aspects of its intellectual property.  All of the Company's key
employees, consultants and advisors are required to enter into a
confidentiality agreement with the Company.  Most of the
Company's third-party manufacturers and formulators are also
bound by confidentiality agreements with the Company.

Regulation

      The Company's surgical and diagnostic systems are regulated
as medical devices by the FDA under the FDC Act.  As such, these
devices require Premarket clearance or approval by the FDA prior
to their marketing and sale.  Such clearance or approval is
premised on the production of evidence sufficient for the Company
to show reasonable assurance of safety and effectiveness
regarding its products.  Pursuant to the FDC Act, the FDA
regulates the manufacture, distribution and production of medical
devices in the United States and the export of medical devices
from the United States.  Noncompliance with applicable
requirements can result in fines, injunctions, civil penalties,
recall or seizure of products, total or partial suspension of
production, denial of Premarket clearance or approval for
devices, recommendations by the FDA that the Company not be
allowed to enter into government contracts, and criminal
prosecution.

      Following the enactment of the Medical Device Amendments to
the FDC Act in May 1976, the FDA began classifying medical
devices in commercial distribution into one of three classes:
Class I, II or III.  This classification is based on the controls
that are perceived to be necessary to reasonably ensure the
safety and effectiveness of medical devices.  Class I devices are
those devices, the safety and effectiveness of which can
reasonably be ensured through general controls, such as adequate
labeling, advertising, Premarket notification and adherence to
the FDA's Good Manufacturing Practice ("GMP") regulations.  Some
Class I devices are exempt from some of the general controls. 
Class II devices are those devices the safety and effectiveness
of which can reasonably be assured through the use of special
controls, such as performance standards, postmarket surveillance,
patient registries and FDA guidelines.  Class III devices are
devices that must receive Premarket approval by the FDA to ensure
their safety and effectiveness.  Generally, Class III devices are
limited to life-sustaining, life-supporting or implantable
devices, or to new devices that have been found not to be
substantially equivalent to legally marketed devices.

      There are two principal methods by which FDA approval may
be obtained.  One method is to seek FDA approval through a
Premarket notification filing under Section 510(k) of the FDC
Act.  If a manufacturer or distributor of a medical device can
establish that a proposed device is "substantially equivalent" to
a legally marketed Class I or Class II medical device or to a
pre-1976 Class III medical device for which the FDA has not
called for a premarketing approval ("PMA"), the manufacturer or
distributor may seek FDA Section 510(k) Premarket clearance for
the device by filing a Section 510(k) Premarket notification. 
The Section 510(k) notification and the claim of substantial
equivalence will likely have to be supported by various types of
data and materials, possibly including clinical testing results,
obtained under an Investigational Device Exemption ("IDE")
granted by the FDA.  The manufacturer or distributor may not
place the device into interstate commerce until an order is
issued by the FDA granting Premarket clearance for the device. 
There can be no assurance that the Company will obtain Section
510(k) Premarket clearance for any of the future devices for
which the Company seeks such clearance including the Photon(trademark)
Laser.

      The FDA may determine that the device is "substantially
equivalent" to another legally marketed Class I, Class II or
pre-1976 Class III device for which the FDA has not called for a
PMA, and allow the proposed device to be marketed in the United
States.  The FDA may determine, however, that the proposed device
is not substantially equivalent, or may require further
information, such as additional test data, before the FDA is able
to make a determination regarding substantial equivalence.  A
"not substantially equivalent" determination or a request for
additional information could delay the Company's market
introduction of its products and could have a material adverse
effect on the Company's business, operating results and financial
condition.

      The alternate method to seek approval is to obtain
Premarket approval from the FDA.  If a manufacturer or
distributor of a medical device cannot establish that a proposed
device is substantially equivalent to another legally marketed
device, whether or not the FDA has made a determination in
response to a Section 510(k) notification, the manufacturer or
distributor will have to seek Premarket approval for the proposed
device.  A PMA application would have to be submitted and be
supported by extensive data, including preclinical and clinical
trial data to prove the safety and efficacy of the device.  If
human clinical trials of a proposed device are required and the
device presents a "significant risk," the manufacturer or the
distributor of the device will have to file an IDE application
with the FDA prior to commencing human clinical trials.  The IDE
application must be supported by data, typically including the
results of animal and mechanical testing.  If the IDE application
is approved, human clinical trials may begin at a specific number
of investigational sites, and the approval letter could include
the number of patients approved by the FDA.  An IDE clinical
trial can be divided into several parts or Phases.  Sometimes, a
company will conduct a feasibility study to confirm that a device
functions according to its design and operating parameters.  This
is usual clinical trial site.  If the Phase I results are
promising, the applicant may, with the FDA's permission, expand
the number of clinical trial sites and the number of patients to
be treated to assure reasonable stability of clinical results. 
Phase II studies are performed to confirm predictability of
results and the absence of adverse reactions.  The applicant may,
upon receipt of the FDA's authorization, subsequently expand the
study to a third phase with a larger number of clinical trial
sites and a greater number of patients.  This involves longer
patient follow-up times and the collection of more patient data. 
Product claims, labeling and core data for the PMA are derived
primarily from this portion of the clinical trial.  The applicant
may also, upon receipt of the FDA's permission, consolidate one
or more of such portions of the study.  Sponsors of clinical
trials are permitted to sell those devices distributed in the
course of the study, provided such compensation does not exceed
recovery of the costs of manufacture, research, development and
handling.  Although both approval methods may require clinical
testing of the device in question under an approved IDE, the
Premarket approval procedure is more complex and time consuming.

      Upon receipt of the PMA application, the FDA makes a
threshold determination whether the application is sufficiently
complete to permit a substantive review.  If the FDA determines
that the PMA is sufficiently complete to permit a substantive
review, the FDA will "file" the application.  Once the submission
is filed, the FDA has by regulation 90 days to review it;
however, the review time is often extended significantly by the
FDA asking for more information or clarification of information
already provided in the submission.  During the review period, an
advisory committee may also evaluate the application and provide
recommendations to the FDA as to whether the device should be
approved.  In addition, the FDA will inspect the manufacturing
facility to ensure compliance with the FDA's GMP requirements
prior to approval of a PMA.  While the FDA has responded to PMA
applications within the allotted time period, PMA reviews
generally take approximately 12 to 18 months or more from the
date of filing to approval.  The PMA process is lengthy and
expensive, and there can be no assurance that such approval will
be obtained for any of the Company's products determined to be
subject to such requirements.  A number of devices for which PMA
approval has been sought by other companies have never been
approved for marketing.

      Any products manufactured or distributed by the Company
pursuant to a premarket clearance notification or PMA are or will
be subject to pervasive and continuing regulation by the FDA. 
The FDC Act also requires that the Company's products be
manufactured in registered establishments and in accordance with
GMP regulations.  Labeling, advertising and promotional
activities are subject to scrutiny by the FDA and, in certain
instances, by the Federal Trade Commission.  The export of
medical devices is also subject to regulation in certain
instances.  In addition, the use of the Company's products may be
regulated by various state agencies.

      All lasers manufactured for the Company are subject to the
Radiation Control for Health and Safety Act administered by the
Center for Devices and Radiological Health of the FDA.  The law
requires laser manufacturers to file new product and annual
reports and to maintain quality control, product testing and
sales records, to incorporate certain design and operating
features in lasers sold to end users pursuant to specific
performance standards, and to comply with labeling and
certification requirements.  Various warning labels must be
affixed to the laser, depending on the class of the product, as
established by the performance standards.

      Although the Company believes that it and its manufacturers
currently comply and will continue to comply with all applicable
regulations regarding the manufacture and sale of medical
devices, such regulations are always subject to change and depend
heavily on administrative interpretations.  There can be no
assurance that future changes in review guidelines, regulations
or administrative interpretations by the FDA or other regulatory
bodies, with possible retroactive effect, will not materially
adversely affect the Company.  In addition to the foregoing, the
Company is subject to numerous federal, state and local laws
relating to such matters as safe working conditions,
manufacturing practices, environmental protection, fire hazard
control and disposal of potentially hazardous substance.  There
can be no assurance that the Company will not be required to
incur significant costs to comply with such laws and regulations
and that such compliance will not have a material adverse effect
upon the Company's ability to conduct business.

      The Company and the manufacturers of the Company's products
may be inspected on a routine basis by both the FDA and
individual states for compliance with current GMP regulations and
other requirements.

      Congress has considered several comprehensive federal
health care programs designed to broaden coverage and reduce the
costs of existing government and private insurance programs. 
These programs have been the subject of criticism within Congress
and the health care industry, and many alternative programs and
features of programs have been proposed and discussed. 
Therefore, the Company cannot predict the content of any federal
health care program, if any is passed by Congress, or its effect
on Company and its business.  Some measures that have been
suggested as possible elements of a new program, such as
government price ceilings on nonreimbursable procedures and
spending limitations on hospitals and other healthcare providers
for new equipment, could have an adverse effect on the Company's
business, operating results or financial condition.  Uncertainty
concerning the features of any health care program considered by
the Congress, its adoption by the Congress and the effect of the
program on the Company's business could result in volatility of
the market price of the Company's Common Stock.

      Furthermore, the introduction of the Company's products in
foreign countries may require the Company to obtain foreign
regulatory clearances.  The Company believes that only a limited
number of foreign countries have extensive regulatory
requirements, including France, Germany, Korea and Japan.  The
time involved for regulatory approval in foreign countries varies
and can take a number of years.  During the period in which the
Company will be attempting to obtain the necessary regulatory
approvals in order to market its products on a limited basis in
certain European, Latin American and Asian countries where its
products satisfy applicable regulatory standards.  There is no
assurance that the Company's products will be approved by the FDA
or other governmental agencies for intended applications in the
United States and targeted foreign markets, nor is there any
assurance that the FDA will approve the export of the Company's
products, which approval is required on a country-by-country
basis for applications not yet approved in the United States.

      A number of European and other economically advanced
countries, including Italy, Norway, Spain and Sweden, have not
developed regulatory agencies for intensive supervision of such
devices.  Instead, they generally have been willing to accept the
approval of the FDA.  Therefore, a PMA, Section 510(k) or
approved IDE from the FDA is tantamount to approval in those
countries.  These countries and most developing countries have
simply deferred direct discretion to licensed practicing surgeons
to determine the nature of devices that they will use in medical
procedures.  The Company's two ultrasound systems, the Photon(trademark)
laser cataract system the Company is developing and the ocular
blood flow analyzer are all devices which require FDA approval. 
Therefore, a significant aspect of the acceptance of the devices
in the market is the effectiveness of the Company in obtaining
the necessary approvals.  Having an approved IDE allows the
Company to export a product to qualified investigational sites.

Regulatory Status of Products

      The Precisionist 3000 Plus(trademark) and the Precisionist
Thirty Thousand(trademark) Systems.  Pursuant to Section 510(k) of the FDC
Act, the FDA granted market clearance for the commercialization
of the Precisionist 3000 Plus(trademark) system in 1990 and the
Precisionist Thirty Thousand(trademark) system in 1995, thereby
allowing the Company to sell these devices in the United States
for their intended use as cataract surgical systems.  That
clearance, in turn, has allowed for similar approvals in several
foreign countries, allowing sales to be undertaken in all of
those countries.  Because no approvals are required in many
developing countries, including several countries in the Middle
East and Latin America, those areas are potentially viable
markets.

      Applications for approval in other western countries,
including Germany and France, are currently pending.  Under
present circumstances, although there is no assurance, approval
of the German application is expected.  Because France places
substantial credence in German approvals, it is expected that
approval in France will follow sometime thereafter.  In Japan and
Korea, the Company has provided the Precisionist(trademark) system to
established dealers that have applied for approval in those
respective countries.

      The Photon(trademark) Laser Cataract System.  The Company acquired
permission from the FDA to manufacture the device and approval to
export it to qualified investigator sites outside the United
States under an open IDE granted by the FDA in May 1995. 
Although the Photon(trademark) laser cataract system is uniquely
configured in an original and proprietary manner, the laser
system, a Nd:YAG laser, is not proprietary to the device or the
Company and is widely used in the medical industry and other
industries as well.  Of particular significance is the fact that
this particular component has received previous market clearance
from the FDA for other ophthalmic and medical applications.  Also
of significance is the Company's belief that the surgical
treatment method used with the Photon(trademark) laser cataract
is similar to the current ultrasound cataract treatment employed
by ophthalmologists. The Company thus believes that it can obtain
Section 510(k) clearance for the Photon(trademark) laser cataract
system sometime in 1998.

      The Company submitted its Premarket Notification under
Section 510(k) of the FDC Act for the Photon(trademark) laser
cataract system in September 1993.  The FDA requested clinical
support data for claims made in the Section 510(k) Premarket
Notification, and in October 1994 the Company submitted an IDE
application to provide for a "modest clinical study" in order to
collect the data required by the FDA for clearance of the Photon(trademark)
laser cataract system.  The FDA granted this IDE in May 1995. 
The Company began human clinical trials in April 1996 and
completed the clinical surgeries in December 1996.  Through the
clinical trials the Company discovered that the Photon(trademark) laser
cataract system may not effectively remove harder grade
cataracts. The Company thus plans to request FDA approval to
conduct experimental or Phase II clinical studies in hopes of
refining the laser system to remove such cataracts.  There is no
guarantee, however, that the Company will be successful in
improving the laser system to remove harder grade cataracts.

      Blood Flow Analyzer(trademark) (Paradigm BFA(trademark)).  The FDA
granted market clearance pursuant to Section 510(k) of the FDC
Act, for the commercial sale of the Paradigm Blood Flow Analyzer
in June 1997 for the intended use and claims of applanation
tonometry and blood flow analysis.  The clearance allows
immediate marketing in the United States for this new product and
allows the Company to expand its product base into the ophthalmic
office and optometric office with a diagnostic system.

Employees

      As of March 31, 1998, the Company had 19 full-time
employees.  This number does not include the Company's
manufacturer's representatives who are independent contractors
rather than employees of the Company.  The Company also utilizes
several consultants and advisors.  There can be no assurance that
the Company will be successful in recruiting or retaining key
personnel.  None of the Company's employees is a member of a
labor union and the Company has never experienced any business
interruption as a result of any labor disputes.

Item 2. Description of Property

      The Company's executive offices are currently located at
1127 West 2320 South, Suite A, Salt Lake City, Utah.  This
facility consists of approximately 4,397 square feet of leased
office space under a three year lease that will expire on
December 31, 2000 with an additional three year renewal option. 
The facility is leased from Eden Roc, a California partnership,
at a base monthly rate of $3,315 plus a monthly common
maintenance area fee.  The base monthly rent increases to $3,415
and $3,518 for the second and third years of the lease,
respectively.  Pursuant to the lease, the Company pays all real
estate and personal property taxes and the insurance costs on the
premises.  The Company believes that this facility is adequate
and satisfies its needs for the foreseeable future.

Item 3. Legal Proceedings

      The Company is not a party to any legal proceedings and is
not aware of any threatened legal proceedings which may be
brought against it.

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

      None.
                                                                
               PART II

Item 5. Market for Common Equity and Related Stockholder Matters

      The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, $.001 par value per share, and
5,000,000 shares of Preferred Stock, $.001 par value per share. 
The Company has created three classes of Preferred Stock,
designated as Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock.

      The Company's Common Stock, Class A Warrants trade on the
Nasdaq SmallCap Market under the respective symbols of "PMED",
and "PMEDW".  Prior to July 22, 1996, there was no public market
for the Common Stock.   The following are the high and low sales
prices for the Common Stock as reported by Nasdaq.

<TABLE>
<CAPTION>

  Period (Calendar Year)                     Price Range
  ----------------------                     -----------
                                           High        Low
                                           ----        ---
   <S>                                     <C>         <C>
   1996
      Third Quarter (since 
       July 22, 1996) . . . . . . . . . . . .  6       2
      Fourth Quarter . . . . . . . . . . . .  5-5/8    2-7/8
                                                       
   1997
      First Quarter  . . . . . . . . . . . .  6-3/8    3
      Second Quarter . . . . . . . . . . . .  5-3/4    3
      Third Quarter. . . . . . . . . . . . .    6      1-9/16
      Fourth Quarter . . . . . . . . . . . .  4-5/8    2-7/16

   1998
      First Quarter. . . . . . . . . . . . . 4-11/16   2-7/8

</TABLE>

      The Company's Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock are not publicly traded.

      The Company has never paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future.  The Company must pay
cash dividends to holders of its Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock before it can pay
any cash dividend to holders of its Common Stock.  Dividends paid
in cash pursuant to outstanding shares of the Company's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock are only payable from surplus earnings of the Company and
are non-cumulative and therefore, no deficiencies in dividend
payments from one year will be carried forward to the next.  The
Company currently intends to retain future earnings, if any, to
fund the development and growth of the Company's proposed
business and operations.  Any payment of cash dividends in the
future on the Common Stock will be dependent upon the Company's
financial condition, results of operations, current and
anticipated cash requirements, plans for expansion, restrictions,
if any, under any debt obligations, as well as other factors that
the Company's Board of Directors deem relevant.  The Company
issued 6,764 shares of its Series A Preferred Stock and 6,017
shares of its Series B Preferred Stock on January 8, 1996 as a
stock dividend to Series A and Series B shareholders of record as
of December 31, 1994.

      As of March 31, 1998, there were 3,798,939 record holders
of Common Stock, 50,122 record holders of Series A Preferred
Stock, 45,381 record holders of Series B Preferred Stock, and
29,980 record holders of Series C Preferred Stock.

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

General

      The following Management's Discussion and Analysis of
Financial Condition and Results of Operations, which should be
read in conjunction with the Financial Statements (including the
notes thereto), contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. 
The Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge of its
business and operations.  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 has changed its fiscal year to the period
from January 1 to and including December 31.

      The Company is engaged in the development, manufacture and
sale of ophthalmic surgical devices designed to perform minimally
invasive cataract removal surgery.  Paradigm's activities for the
fiscal year ended December 31, 1997 include international and
domestic sales of the Precisionist 3000 Plus(trademark) Phaco system,
research and developments of the Precisionist Thirty Thousand(trademark)
and the Photon(trademark) laser cataract system, and primary research for
other new products and businesses.  

Results of Operations 

      Fiscal year Ended December 31, 1997 Compared to Fiscal Year
Ended September 30, 1996.

      Sales increased by $211,928, or 84%, to $464,062 for the
twelve months ended December 31, 1997 from $252,134 for the
twelve months ended September 30, 1996.  Sales of product in the
surgical equipment market are contingent upon customer
evaluation.  Based on the evaluation of the products shipped in
the Company's initial new product launch in 1997, five units were
returned and certain software and hardware revisions were
identified and corrected.  The increase in sales in 1997 was a
result of the Company launching the Photon Ocular Surgery System(trademark)
and the Precisionist Thirty Thousand(trademark), the latest generation of
Paradigm products on March 31, 1997.  

      Cost of sales increased $91,706, or 51%, to $271,716 for
the twelve months ended December 31, 1997 from $180,010 for the
twelve months ended September 30, 1996, as a result of the
increased sales.  The gross margin for the twelve months ended
December 31, 1997 of 28.2% was slightly lower than the gross
margin for the twelve months ended September 30, 1996 of 28.6%,
primarily as a result of the amortization of capitalized
engineering and design charges of $61,440 in 1997 which reduced
the gross margin from 41.4% to 28.2%.

      Marketing and selling expenses increased by $374,813, or
173%, to $590,941 for the twelve months ended December 31, 1997
from $216,128 for the fiscal year ended September 30, 1996.  The
increase was a result of the Company adding two additional sales
representatives and increasing promotional activity in
anticipation of launching the Photon Ocular Surgery
System(trademark) and the Precisionist Thirty Thousand during the
first quarter of 1997, and the resulting service expenses
associated with installing identified software and hardware
revisions.

      General and administrative expenses increased by $979,047,
or 119%, to $1,802,238 for the twelve months ended December 31,
1997 from $823,191 for the twelve months ended September 30,
1996.  This was the result of an increase in personnel and costs
associated with pre-production and new product launch activities.

      Research and development expenses increased by $251,294, or
87%, to $540,148 for the twelve months ended December 31, 1997
from $288,854 for the twelve months ended September 30, 1996. 
This was the result of hiring four additional employees and costs
associated with developing new products for the Company.

      Three months Ended December 31, 1996 Compared to Three
months Ended December 31, 1995.

      Sales decreased by $29,754, or 45%, to $35,651 for the
three months ended December 31, 1996 from $65,405 for the
comparable period in 1995.  This decrease was a result of
decreased sales of the Precisionist Phaco System resulting from
the Company focusing its limited resources on the development of 
the Photon Ocular Surgery System(trademark) and the Precisionist
ThirtyThousand(trademark), the next generation of Paradigm
products scheduled for launch in March, 1997.  Cost of sales
decreased $2(trademark)25, or 53%, to $21,061 for the three
months ended December 31, 1996 from $45,286 for the comparable
period in 1995, as a result of the decreased sales.  The gross
margin for the three months ended December 31, 1996 of 41% is up
from the gross margin for the comparable period in 1995 of 31%
because sales in 1995 included more parts and accessories which
have a lower gross margin.

      Marketing and selling expenses increased by $76,132, or
82%, to $168,880 for the three months ended December 31, 1996
from $92,748 for the comparable period in 1995.  The increase was
a result of the Company adding two additional sales
representatives and increasing promotional activities in
anticipation of launching the Photon Ocular Surgery System(trademark) and
the Precisionist ThirtyThousand(trademark). 

      General and administrative expenses increased by $425,041,
or 251%, to $594,520 for the three months ended December 31, 1996
from $169,479 for the comparable period in 1995.  This was the
result of an increase in personnel and costs associated with
pre-production activities.

      Research and development expenses increased by $429,920, or
848%, to $480,584 for the three months ended December 31, 1996
from $50,664 for the comparable period in 1995.  This was the
result of hiring four additional employees and costs associated
with developing new products.

      Fiscal Year Ended September 30, 1996 Compared to Fiscal
Year Ended September 30, 1995.

      Sales decreased by $255,450, or 50%, to $252,134 in fiscal
year ended September 30, 1996 from $507,584 for the comparable
period in 1995.  This decrease was a result of a reduction in the
sales of the Precisionist Phaco System resulting from the Company
focusing its limited financial resources on the public offering. 
Cost of sales decreased $86,338, or 32%, to $180,010 in fiscal
year ended September 30, 1996 from $266,348 for the comparable
period in 1995, as a result of the reduced sales.  The gross
margin in fiscal 1996 of 29% is down from the gross margin for
the comparable period in 1995 of 48% because sales in 1996
included more parts and accessories which have a lower gross
margin.

      Marketing and selling expenses decreased by $212,137, or
50%, to $216,128 in fiscal year ended September 30, 1996 from
$428,265 for the comparable period in 1995.  The decrease was a
result of the Company focusing its limited financial resources on
the public offering.  The Company expects to increase its
marketing and selling activities now that the public offering has
been completed.

      General and administrative expenses increased by $415,388,
or 102%, to $823,191 in fiscal year ended September 30, 1996 from
$407,803 for the comparable period in 1995.  This increase was
the result of the increased administrative costs related to
preparation for the public offering of the Company's Common
Stock.  The Company expects to increase its staff significantly
to support the activities associated with the introduction of the
Photon(trademark) laser cataract system.

      Research and development expenses increased by $52,811, or
22%, to $288,854 in fiscal year ended September 30, 1996 from
$236,043 for the comparable period in 1995.  The Company expects
the amount spent on research and development for the
Photon(trademark) laser cataract system and other new products to
increase in fiscal 1997.

      In fiscal year ended September 30, 1996, the Company
incurred $179,000 of expenses in connection with obtaining the
relinquishment of certain anti-dilution rights.  See "Item 12. 
Certain Relationships and Related Transactions."

Upgrades

      To garner sales, the Company offers the ultrasonic
Precisionist(trademark) system with an unconditional arrangement
under which the customer may trade in their
Precisionist(trademark) system to upgrade to a Precisionist
Thirty Thousand(trademark) Ocular Surgery System(trademar(.  Under this
arrangement, the customer receives full credit for the trade in
purchase price of the Precisionist(trademark) system against the
price of the new Precisionist Thirty Thousand(trademark) Ocular
Surgery System(trademark).  As of December 31, 1997, the Company
has distributed approximately 51 Precisionist(trademark) systems
under this provision.  The gross margin on these original sales
was approximately $295,000 or 32%.  If all of these customers
were to exercise their upgrade privilege, the Company would
exchange the Precisionist(trademark) system for the Company's new
Precisionist Thirty Thousand(trademark) Ocular Surgery
System(trademark) and refurbish the ultrasonic
Precisionist(trademark) systems and sell them in the
international market.  Any losses on the sale of the refurbished
Precisionist(trademark) systems, which are not expected to be
significant, would reduce the gross margin on the Precisionist
Thirty Thousand(trademark) Ocular Surgery System(trademark)
sales.  The total gross margin on the upgrade sales is estimated
to be $1,677,000 or 41%.  As of December 31, 1997, there have
been two trade in sales in which the customer has upgraded a
Precisionist(trademark) system to the Precisionist Thirty
Thousand(trademark) Ocular Surgery System(trademark).

Liquidity and Capital Resources

      The Company used cash in operating activities of $2,644,908
for the twelve months ended December 31, 1997 compared to
$1,315,399 for the twelve months ended September 30, 1996.  The
increase of cash used by operating activities in 1997 is
primarily attributable to the higher net loss in 1997.  The
Company received cash from investing activities of $118,889 for
the twelve months ended December 31, 1997 compared to cash used
in investing activities of $590,921 in fiscal 1996.  In 1997 the
Company received proceeds of $499,742 from the sale of marketable
debt securities and expended $20,017 on property and equipment
and capitalized engineering and design charges.  In 1996 the
Company spent $91,179 on property and equipment and $499,742 on
marketable debt securities.  The company received $943,589 from
financing activities in 1997, primarily from the issuance of
notes payable.  This compares to $4,608,254 in 1996, which
resulted from the issuance of common stock and warrants, offset
principal payments on notes payable.

      In May 1997, the Company established a $636,000 line of
credit with Merrill Lynch Business Financial Services, Inc.
("Merrill Lynch") and a $350,000 line of credit with Bear Stearns
Securities Corp. ("Bear Stearns") on a secured basis.  As of
December 31, 1997, the Company had liquidated the underlying
collateral and repaid the lines of credit with Merrill Lynch and
Bear Stearns.  

      As discussed above, the Company incurred a net loss of
$2,774,594 and negative cash flows from operating activities of
$2,644,908 for the year ended December 31, 1997.  As of December
31, 1997, the Company had an accumulated deficit of $8,023,006. 
In March 1998, the Company completed the private placement of
20,030 shares of Class C Preferred Stock at $100 per share
resulting in net proceeds of approximately $1,700,000, net of
offering expenses.  Management believes that these net proceeds,
plus existing working capital, will be sufficient to assure
continuation of the Company's operations through December 31,
1998.  Management projects significant revenues from the
successful re-launch of its new product, sales from additional
products and certain strategic alliances to market their
products.  However, no assurances can be given that management's
plans will be successful in achieving profitability or positive
cash flows.

      The Company will seek funding to meet its working capital
requirements through collaborative arrangements and strategic
alliances, additional public offerings and/or private placements
of its securities, or bank borrowings.  There can be no
assurance, however, that additional funds, if required, will be
available from any of the foregoing or other sources on favorable
terms, if at all.

      At December 31, 1997, the Company had net operating loss
carryforwards (NOLs) of approximately $7,073,000 and research and
development tax credit carryforwards of approximately $64,000. 
These carryforwards are available to offset future taxable
income, if any, and expire in the years 2005 through 2012. 
Because the Company has yet to recognize significant revenue from
the sale of its Photon(trademark) laser cataract system and other products,
a 100% valuation allowance has been provided for these deferred
tax assets.  The Company's ability to use its NOLs to offset
future income taxes may be subject to restrictions enacted in the
United States Internal Revenue Code of 1986, as amended.  These
restrictions could limit the Company's future use of its NOLs if
there is a cumulative ownership change of more than 50%, which
would include the changes of ownership related to any public
offering. 

Effect of Inflation and Foreign Currency Exchange

      The Company has not realized a reduction in the selling
price of the Precisionist phaco system as a result of domestic
inflation.  Nor has the Company experienced unfavorable profit
reductions due to currency exchange fluctuations or inflation
with its foreign customers.

Impact of New Accounting Pronouncements

      In June 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard (SFAS)
No. 130 ("SFAS 130"), "Reporting Comprehensive Income", and SFAS
No. 131 ("SFAS 131"), "Disclosures About Segments of an
Enterprise and Related Information".  SFAS 130 establishes
standards for reporting and display of comprehensive income in
the financial statements.  Comprehensive income is the total of
net income and all other non-owner changes in equity.  SFAS 131
requires that companies disclose segment data based on how
management makes decisions about allocating resources to segments
and measuring their performance.  In addition, in February 1998
the FASB issued SFAS No. 132 ("SFAS 132"), "Employers'
Disclosures About Pensions and Other Postretirement Benefits",
concerning employer disclosure about pension plans and other
postretirement benefits.  SFAS 130, SFAS 131 and SFAS 132 are
effective for fiscal years beginning after December 15, 1997. 
Adoption of the standards is not expected to have an effect on
the Company's financial statements, financial position or results
of operations.

      The Company has reviewed all other recently issued, but not
yet adopted, accounting standards in order to determine their
effects, if any, on the results of operations or financial
position of the Company.  Based on that review, the Company
believes that none of these pronouncements will have a
significant effect on current or future earnings or operations.

Year 2000

      The year 2000 issue is the result of computer programs
being written using two digits rather than four to define the
applicable year.  Management of the Company does not anticipate
that any significant modification or replacement of the Company's
software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will
incur significant operating expenses to make any such computer
system improvements.  The Company is not able to determine,
however, whether any of its suppliers, lenders, or service
providers will need to make any such software modifications or
replacements or whether the failure to make such software
corrections will have an effect on the Company's operations or
financial condition.

Item 7.  Financial Statements

Report of Independent Accountants  . . . . . . .          F-1

Balance Sheet . . .. . . . . . . . . . . . . . .          F-2

Statements of Operations. .  . . . . . . . . . .          F-3

Statements of Changes in Stockholders' Equity .    F-4 to F-7

Statements of Cash Flows. . . . . . . . . . . .    F-8 to F-9

Notes to Financial Statements . . . . . . . . .    F-10 to F-24

<PAGE>

              REPORT OF INDEPENDENT ACCOUNTANTS


The Board of Directors of
Paradigm Medical Industries, Inc.:

We have audited the accompanying balance sheets of Paradigm
Medical Industries, Inc. (the Company) as of December 31, 1997
and 1996, and the related statements of operations, changes in
stockholders' equity, and cash flows for the year ended December
31, 1997, the three month period ended December 31, 1996 and the
year ended September 30, 1996.  These financial statements are
the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial
statements based on our audits.  

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Paradigm Medical Industries, Inc. as of December 31, 1997 and
1996, and the results of its operations and its cash flows for
the year ended December 31, 1997, the three month period ended
December 31, 1996 and the year ended September 30, 1996 in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Salt Lake City, Utah
April 10, 1998

<PAGE>
<TABLE>
<CAPTION>
                        BALANCE SHEETS
              as of December 31, 1997 and 1996
                                                                
     

   ASSETS                           1997          1996     
   ------                           ----          ----
<S>                            <C>            <C>
Current assets:
 Cash and cash equivalents     $    886,558   $ 2,468,988 
 Marketable debt 
  securities, available-
  for-sale                            -            509,411
 Trade accounts 
  receivable                        120,853        18,228 
 Inventories                        833,930       241,746 
 Prepaid expenses                    15,787        24,093 
                                  ---------     ---------
   Total current assets           1,857,128     3,262,466 

Debt offering costs                 164,776         -    
Capitalized engineering 
 and design charges                 309,396         -    
Property and equipment, net         121,274       129,494 
                                  ---------     ---------
   Total assets                 $ 2,452,574   $ 3,391,960 
                                ===========   ===========

<CAPTION>

      LIABILITIES AND STOCKHOLDERS' EQUITY 
<S>                             <C>           <C> 
Current liabilities:
 Accounts payable               $    243,206  $    35,767 
 Accounts payable - 
  related party                      458,467      200,000 
 Accrued liabilities                 349,930      277,473 
 Notes payable - current               3,620        3,278 
                                ------------  -----------
   Total current liabilities       1,055,223      516,518 

Notes payable, less 
 current portion                   1,081,996       15,605 
                                 -----------   ----------
   Total liabilities               2,137,219      532,123 
                                  ----------   ----------

Commitments (Notes 5, 11 and 12)

Stockholders' equity: 
 Preferred stock, Authorized:  
  5,000,000 $.001 par value 
  shares
   Series A, Authorized:  
    500,000 shares; issued 
    and outstanding: 50,122 
    $.001 par value shares at 
    December 31, 1997 (aggregate 
    liquidation preference of 
    $50,122 at December 31, 
    1997) and 121,704 $.001 
    par value shares at 
    December 31, 1996.                   50          122 
   Series B, Authorized: 
    500,000 shares; issued 
    and outstanding: 45,383 
    $.001 par value shares 
    at December 31, 1997 
    (aggregate liquidation 
    preference of $181,532 
    at December 31, 1997) and 
    448,398 $.001 par value 
    shares at December 31, 1996.         45          448 
   Additional paid-in capital, 
    preferred stock                 318,355    1,900,637 
 Common stock, Authorized:
  20,000,000 $.001 par value 
  shares; issued and 
  outstanding: 3,798,931 
  shares at December 31, 1997 
  and 3,194,061 shares at 
  December 31, 1996.                  3,799        3,194 
 Additional paid-in capital, 
  common stock                    8,280,142    6,261,097 
 Treasury stock, 2,600 
  shares, at cost                    (3,777)      (3,777)
 Unearned compensation             (260,253)     (63,141)
 Accumulated deficit             (8,023,006)  (5,248,412)
 Unrealized gain on 
  marketable debt securities, 
  available-for-sale                   -           9,669 
                                  ---------    ---------
    Total stockholders' equity      315,355    2,859,837
                                  ---------    ---------
    Total liabilities and 
     stockholders' equity       $ 2,452,574  $ 3,391,960 
                                ===========  ===========
</TABLE>
         The accompanying notes are an integral part
            of the financial statements
                             2

<PAGE>

                   STATEMENTS OF OPERATIONS
             for the year ended December 31, 1997, 
     the three month periods ended December 31, 1996 and 1995
            and the year ended September 30, 1996
<TABLE>
<CAPTION>
                            Three month               Three month
               Year ended   period ended Year ended  period ended
               December 31, December 31, September   December 31,
                  1997          1996      30, 1996       1995
               -----------  -----------  ---------   -----------
                                                     (Unaudited)
<S>             <C>         <C>          <C>         <C>
Sales           $  464,062  $   35,651   $  252,134  $    65,405 

Cost of sales      271,716      21,061      180,010       45,286 
Amortization of 
 capitalized 
 engineering 
 and design 
 charges            61,440        -            -          -    
                  --------    --------    --------     --------
Net cost of sales  333,156      21,061     180,010       45,286 
                  --------    --------    --------     --------
   Gross profit    130,906      14,590      72,124       20,119 
                  --------    --------    --------     --------
Operating 
  expenses:
 Marketing and 
  selling          590,941     168,880     216,128       92,748 
 General and 
  administrative 1,802,238     594,520     823,191      169,479 
 Research and 
  development      540,148     480,584     288,854       50,664 
                 ---------    --------   ---------   ----------
  Total 
   operating 
   expenses      2,933,327   1,243,984   1,328,173      312,891 
                ----------   ---------   ---------     --------
Operating loss  (2,802,421) (1,229,394) (1,256,049)    (292,772)
                ----------   ---------   ---------     --------
Other income 
  (expense):
 Cost associated 
  with relin-
  quishment of 
  anti-dilution 
  rights              -           -       (179,000)    (179,000)
 Interest income   57,303      31,474       42,859        2,720 
 Interest expense (29,476)       (483)     (56,829)      (2,204)
                  --------     ------     --------      ------- 
                   27,827      30,991     (192,970)    (178,484)
                  -------      ------     --------     --------
Net loss       (2,774,594) (1,198,403)  (1,449,019)    (471,256)

Return of 
 stock dividend 
 on 12% Series B 
 Preferred Stock      -           -            848         -    
               ----------    ---------   ---------    ----------
Net loss 
 attributable to 
 common share-
 holders      $(2,774,594) $(1,198,403) $(1,448,171)  $ (471,256)
              ===========  ===========  ===========   ==========
Basic and 
 diluted loss 
 per common 
 share (Note 
 1)                $(.76)        $(.38)       $(.66)      $(.20)
              ==========   ===========   ==========   =========
Weighted 
 average 
 shares 
 outstanding   3,663,115     3,182,830    2,192,881   2,352,031 
              ==========   ===========   ==========   =========
</TABLE>

      The accompanying notes are an integral part of the
                       financial statements
                                3
<PAGE>

           PARADIGM MEDICAL INDUSTRIES, INC.

         STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
            for the year ended December 31, 1997, 
         the three month period ended December 31, 1996
            and the year ended September 30, 1996

<TABLE>
<CAPTION>                                                       
                         Preferred Stock               
     ------------------------------------------------------------
                                                   Series A
                                                   Committed
            Series A       Series B              to be issued
            ----------        ---------          ------------
            No. of                                     No. of
            Shares    Amount  Shares    Amount         Shares
            -----     ------  -------   ------         --------
<S>         <C>       <C>     <C>       <C>           <C>
Balance
at
September
30, 1995    116,000   $403,680 493,000  $1,653,120     6,764

Issuance
of 6%
Series A
Preferred
Stock
dividend      6,764     27,056                         (6,764)   

Issuance
of 12%
Series B
Preferred
Stock
dividend                        6,017        24,068              
      

Conversion
of no par
value
preferred
shares to
$.001 par
value
preferred
shares
upon
reincorp-
oration
in
Delaware               (430,613)           (1,676,689)           
    
Redemption
of
recision
offer of
Series B
Preferred
Stock                          (32,962)       (33)              
            -------    ------- -------      -------    ------- 
Balance
at
September
30, 1996    122,764       123  466,055        466               
     
Con-
version 
of
preferred
stock to
common
stock       (1,060)       (1)  (17,657)       (18)
            -------    ------- -------      -------    -------

Balance
at
December
31, 1996    121,704       122  448,398       448 

Conversion
of
preferred
stock to
common
stock       (71,582)     (72)  (403,015)      403
            -------    ------- -------     -------     -------   
                                                              
Balance
at
December
31, 1997     50,122   $   50    45,383      $   45     $ -    
            =======    ======= =======     =======    =======   

</TABLE>
                           -Continued-
             The accompanying notes are an integral 
               part of the financial statements
                                4
<PAGE>

<TABLE>
<CAPTION>
                                                                
                                  Preferred Stock               
    ------------------------------------------------------------
            Series A          Series B 
            Committed         Committed          Additional
            to be issued      to be issued       Paid in
            -------------     -------------      Capital,    
                        No of                    Preferred
            Amount      Shares      Amount       Stock 
            ------      -------     ------       --------
<S>         <C>         <C>         <C>         <C>
Balance
at
September
30, 1995    $27,056       6,017     $24,068

Issuance
of 6%
Series A
Preferred
Stock
dividend    (27,056)
 
Issuance
of 12%
Series B
Preferred
Stock
dividend                 (6,017)    (24,068)

Conversion
of no par
value
preferred
shares to
$.001 par
value
preferred
shares
upon
reincorp-
oration
in
Delaware                                      $2,107,302

Redemption
of
recision
offer of
Series B
Preferred
Stock                                           (131,815)
            -------     -------     -------      -------
Balance
at
September
30, 1996                                       1,975,487 
     
Con-
version 
of
preferred
stock to
common
stock                                            (74,850)
            -------     -------     -------      -------

Balance
at
December
31, 1996                                       1,900,637

Conversion
of
preferred
stock to
common
stock                                         (1,582,282)
            -------     -------     -------  ----------         
                                                  
Balance
at
December
31, 1997    $  -        $  -        $  -        $318,355
            =======     =======     =======    ========   
</TABLE>
            The accompanying notes are an integral part 
               of the financial statements
                            4
<PAGE>                                                          
                    PARADIGM MEDICAL INDUSTRIES, INC.

                                                                
  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, Continued
          for the year ended December 31, 1997, 
      the three month period ended December 31, 1996
          and the year ended September 30, 1996
                                                                
<TABLE>
<CAPTION>                                                       
         
            Common Stock                            Treasury Stock
            ------------            Additional       ------------
            No. of                  Paid in Capital    No. of
            Shares      Amount      Common Stock       Shares
            ----------  ----------  -------------      -------

<S>         <C>         <C>           <C>             <C>
Balance at
September
30, 1995    1,985,573     $980,378                       2,600   

Issuance
of common
stock
previously
accrued
as a
liability
for
services
rendered
in
connection
with Series
B Preferred 
Stock
offering       25,000       10,251 

Issuance
of common
stock for
relinquish-
ment of
anti
-dilution
rights         20,000       30,000 

Transfer of
common
stock
from
Company 
officers
for relin-
quishment
of anti-
dilution
rights                              $ 149,000

Issuance
of common
stock for
future
services    101,025          151,538                            
                             
Amortization
of unearned
compensation

</TABLE>
                       -Continued-
            The accompanying notes are an integral
                part of the financial statements
                         5
<PAGE>

<TABLE>
<CAPTION>  
                                                     Unearned
                                                  Gain(Loss) on 
            Treasury Stock                         Marketable Debt
            ------------                             Securities
                        Unearned    Accumulated      Available
            Amount      Compensation   Deficit      for sale
            ----------  ----------  -------------   -----------
<S>         <C>         <C>         <C>             <C>
Balance at
September
30, 1995    $ (3,777)               $(2,600,990)

Issuance
of common
stock
previously
accrued
as a
liability
for
services
rendered
in
connection
with Series
B Preferred 
Stock
offering

Issuance
of common
stock for
relinquish-
ment of
anti
-dilution
rights      

Transfer of
common
stock
from
Company 
officers
for relin-
quishment
of anti-
dilution
rights      

Issuance
of common
stock for
future
services                $(151,538)

Amortization
of unearned
compensation               69,455

</TABLE>
          The accompanying notes are an integral
              part of the financial statements
                        5
<PAGE>
                                                                
                 PARADIGM MEDICAL INDUSTRIES, INC.
                                                                
       STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, Continued
                                                                
                     for the year ended December 31, 1997, 
             the three month period ended December 31, 1996
                  and the year ended September 30, 1996
                                                                
                                --------                

<TABLE>
<CAPTION>                                                       
         
                                                                
            Common Stock            Additional     Treasury Stock 
            ------------                         ----------------
              No. of              Paid-in-capital,    No. of    
             Shares     Amount      Common Stock       Shares    
            --------    ------      ------------       ------
<S>          <C>        <C>         <C>               <C>
Issuance
of warrants
in
connection 
with
private
placement
of notes
(net of
offering
costs of
$2,175)                             $  27,825

Conversion
of no par
value common 
shares to
$.001 par
value common 
shares upon
reincorp-
oration in 
Delaware               $(1,170,035) 1,170,035

Issuance of
common
stock for
initial
public
offering
(net of
offering
costs of
$1,509,569) 1,000,000        1,000  4,739,431                   

Issuance
of
common
stock        40,000             40     99,960                   
                                            

Un-
realized
loss on
market-
able debt 
securities,
available-
for-sale 

Net loss
for the
year ended
September
30, 1996                                                        
            -------     -------     -------      -------
                                                                
         
Balance
at September
30, 1996    3,171,598     3,172     6,186,251       2,600
            ---------   -------     ---------    --------        
</TABLE>
                           -Continued-
         The accompanying notes are an integral part
              of the financial statements

<PAGE>
<TABLE>
<CAPTION>
                                                      Unrealized
                                                     Gain(Loss) 
            Treasury Stock                          on Marketable
            --------------                         Debt Securities
                         Unearned     Accumulated    Available
             Amount     Compensation    Deficit       -for-sale  
            --------    -----------    ------------  ------------
<S>         <C>         <C>            <C>           <C>
Issuance
of warrants
in
connection 
with
private
placement
of notes
(net of
offering
costs of
$2,175)

Conversion
of no par
value common 
shares to
$.001 par
value common 
shares upon
reincorp-
oration in 
Delaware

Issuance of
common
stock for
initial
public
offering
(net of
offering
costs of
$1,509,569)
 
Issuance
of
common
stock                                             

Un-
realized
loss on
market-
able debt 
securities,
available-
for-sale                                              $(13,703)

Net loss
for the
year ended
September
30, 1996                            $(1,499,019)
            -------     -------     -----------       ---------

Balance
at September
30, 1996     (3,777)     (82,083)   (4,050,009)        (13,703)
            ========    =========   ============      ========= 
    
      
</TABLE>
            The accompanying notes are an integral part
                 of the financial statements
                           6
<PAGE>
                                                                
                   PARADIGM MEDICAL INDUSTRIES, INC.

                                                                
       STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, Continued
                      for the year ended December 31, 1997, 
             the three month period ended December 31, 1996
                  and the year ended September 30, 1996

<TABLE>
<CAPTION>                                                       
         
                                                     Treasury   
            Common Stock                               Stock
            ------------            Additional         -------
            No. of                  Paid-in-capital,   No. of 
            Shares      Amount      Common Stock       Shares
            -------     -------     ------------       -------   
<C>         <C>         <C>         <C>               <C> 
Conversion
of
preferred
stock to
common stock 22,463     $    22     $    74,846                 
                                                                
    
Amortization
of unearned
comp-
ensation    

Net change
in un-
realized
gain (loss)
on market-
able debt
securities,
available
-for-sale  

Net loss
for the
three month
period 
ended
December
31, 1996    -------     -------     -------            -------   
 

Balance at
December
31, 1996    3,194,061      3,194    6,261,097             2,600

Conversion
of
preferred
stock to
common
stock         569,518        570    1,582,187 

Issuance
of common
stock for
comp-
ensation       22,852          22      78,179 

Warrants
exercised
for common
stock
(exercised
for 3.33
per share)     12,500           13       41,619 

Issuance of
warrants
for future
consulting
services                                 317,060                

Amortization
of unearned
compensation         

Net change
in unreal-
ized gain
(loss) on
marketable
debt
securities,
available
-for-sale

Net loss
for the
year ended
December
31, 1997             
            -------     -------     -------            -------   
                                                                
Balance
at December
31, 1997    3,798,931    $3,799     $8,280,142          2,600   
            =========   ========    ==========         ========  
</TABLE>
                          -Continued-
        The accompanying notes are an integral part
               of the financial statements
                            7 
<PAGE>

<TABLE>
<CAPTION>
                                                     Unrealized
                                                   Gain(Loss) on 
                                                      Marketable
            Treasury                                    Debt
            Stock                                    Securities
            -------       Unearned     Accumulated   Available
            Amount      Compensation       Deficit     for-sale
            -------     ------------   ------------    -------   
 
<S>         <C>         <C>            <C>            <C>
Conversion
of
preferred
stock to
common stock                                                    
                  
Amortization
of unearned
comp-
ensation                $ 18,942

Net change
in un-
realized
gain (loss)
on market-
able debt
securities,
available
-for-sale                                              $23,372

Net loss
for the
three month
period 
ended
December
31, 1996                                   $1,198,403)
            -------     -------            ----------- ----------
Balance at
December
31, 1996    $(3,777)     (63,141)         (5,248,412)    9,669

Conversion
of
preferred
stock to
common
stock 

Issuance
of common
stock for
comp-
ensation

Warrants
exercised
for common
stock
(exercised
for 3.33
per share)

Issuance of
warrants
for future
consulting
services                (317,060)
 
Amortization
of unearned
compensation             119,948

Net change
in unreal-
ized gain
(loss) on
marketable
debt
securities,
available
-for-sale                                                (9,669)

Net loss
for the
year ended
December
31, 1997                                   (2,774,594)
            -------     -------          ------------      ----- 
Balance
at December
31, 1997     (3,777)    $(260,253)         $(8,023,006    $   -  
            =========   ========           ==========     ========

</TABLE>
                The accompanying notes are an integral part
                      of the financial statements
                              7 
<PAGE>

                 STATEMENTS OF CASH FLOWS
        for the year ended December 31, 1997, 
   the three month periods ended December 31, 1996 and 1995
            and the year ended September 30, 1996
                                                                
<TABLE>
<CAPTION>
                                                                
                            Three month               Three month
               Year ended   period ended Year ended  period ended
               December 31, December 31, September   December 31,
                  1997          1996      30, 1996       1995
               -----------  -----------  ---------   -----------
                                                     (Unaudited)
<S>           <C>          <C>         <C>           <C>     
Cash flows 
  from 
  operating 
  activities:
 Net loss    $(2,774,594) $(1,198,403) $(1,449,019)  $(471,256)
 Adjustments 
  to reconcile 
  net loss to 
  net cash 
  used in 
  operating 
  activities:
   Depreciation   28,237        6,205       17,771        3,642 
   Amortization 
    of capi-
    talized 
    engineering
    and design 
    charges       61,440         -            -            -    
   Issuance of 
    common stock 
    for compensa-
    tion, ser-
    vices and 
    relinquish-
    ment of anti-
    dilution 
    rights        78,201        -         179,000      179,000 
   Amortization 
    of unearned 
    compensation   119,948      18,942       69,455        9,471 
   Amortization  
    of debt 
    offering 
    costs              -           -         41,325        -    
   Issuance of 
    bridge note 
    and warrants 
    for services       -            -        25,000        -    
   Increase 
    (decrease) 
    from changes 
    in:
   Trade accounts 
    receivable    (102,625)     37,226       49,445       52,656 
   Inventories    (592,184)    127,299       31,855       12,372 
   Prepaid 
    expenses        (1,694)     9(trademark)68      (96,718)    
  11,396 
   Accounts 
    payable        207,439      (2,889)    (255,791)      (4,788)
   Accounts 
    payable - 
    related 
    party          258,467     200,000         -            -   
   Accrued 
    liabilities     72,457     159,114       72,278          108 
                  --------    --------     --------     --------
   Net cash 
    used in 
    operating 
    activities  (2,644,908)   (558,238)  (1,315,399)    (207,399)
                ----------     -------    ---------     --------
Cash flows 
  from investing 
  activities:
 Purchase of 
  property and 
  equipment        (20,017)     (12,155)    (91,179)     (10,600)
 Capitalized 
  engineering 
  and design 
  charges         (360,836)         -            -           -  
 Proceeds from 
  the sale of 
  marketable 
  debt 
  securities, 
  available-for
  -sale            499,742          -            -            - 
 Purchase of 
  marketable 
  debt 
  securities, 
  available-for-
  sale                 -            -        (499,742)        - 
                 ---------    ----------     --------    -------
  Net cash 
   provided by 
   (used in) 
   investing 
   activities      118,889       (12,155)    (590,921)   (10,600)
                 ---------     ---------     --------    -------
</TABLE>
            The accompanying notes are an integral part of the
                      financial statements
                               8
<PAGE>

           STATEMENTS OF CASH FLOWS, Continued
           for the year ended December 31, 1997, 
      the three month periods ended December 31, 1996 and 1995
           and the year ended September 30, 1996

<TABLE>
<CAPTION>                                                       
              
                            Three month               Three month
               Year ended   period ended Year ended  period ended
               December 31, December 31, September   December 31,
                  1997          1996      30, 1996       1995
               -----------  -----------  ---------   -----------
                                                     (Unaudited)
<S>            <C>          <C>          <C>         <C>
Cash flows 
  from 
  financing 
  activities:
 Proceeds from 
  lines of 
  credit      $    980,000  $     -      $     -     $       -  
 Repayment of 
  lines of  
  credit          (980,000)       -            -             -  
 Proceeds from 
  issuance of 
  promissory  
  notes and 
  warrants             -          -         575,000       75,000 
 Proceeds 
  from 
  exercise of 
  warrants          41,632        -            -            -   
 Debt offering 
  costs           (164,776)       -         (41,325)        -   
 Proceeds from 
  issuance of 
  notes payable  1,070,000        -            -            -   
 Principal 
  payments on 
  notes payable     (3,267)      (771)      (631,829)    (2,765)
 Proceeds from 
  issuance of 
  common stock        -           -        6,350,000         -  
 Issuance costs 
  - common stock      -           -       (1,509,569)        -  
 Payments for 
  recision offer 
  of Series B 
  preferred stock     -           -         (131,848)        -  
 Issuance costs 
  - warrants          -           -           (2,175)        -  
                ---------     ---------    ----------    -------
  
  Net cash 
   provided by 
   (used in)
   financing 
   activities     943,589         (771)     4,608,254      72,235 
                ---------     --------      ---------     -------
Net increase 
 (decrease) 
 in cash and 
 cash 
 equivalents   (1,582,430)     (571,164)     2,701,934  (145,764)
Cash and 
 cash 
 equivalents 
 at beginning 
 of period      2,468,988     3,040,152        338,218   338,218 
              -----------     ---------      ---------  --------
Cash and cash 
 equivalents 
 at end of 
 period      $    886,558   $ 2,468,988    $ 3,040,152  $ 192,454 
             ============   ===========    ===========  =========

Supplemental 
 disclosure 
 of cash flow 
 information:
Cash paid for 
 interest     $   21,537    $      483     $     56,829   $  2,107


Supplemental 
 disclosure 
 of noncash 
 investing 
 and 
 financing 
 activities:
Issuance of 
 warrants for 
 future 
 consulting 
 services    $  317,060
Issuance of 
 common stock 
 for services 
 rendered in 
 connection 
 with 
 preferred 
 stock
 offering                                   $  10,251   $  10,251
Common stock 
 issued for 
 future 
 services                                   $  151,538  $ 151,538
Equipment 
 purchased 
 with 
 accounts 
 payable                                                $  44,000
Issuance 
 costs for 
 bridge notes 
 and warrants 
 included in 
 accounts payable                                        $  43,500

</TABLE>
                The accompanying notes are an integral
                 part of the financial statements
                            9
<PAGE>
                   NOTES TO FINANCIAL STATEMENTS
                                                                

1.    Organization and Significant Accounting Policies:

      Organization and Nature of Operations

      Effective May 5, 1993, French Bar Industries, Inc. (French
Bar) entered into a merger agreement with Paradigm Medical, Inc.
(Paradigm) a California Corporation incorporated in October 1989. 
The agreement merged French Bar and Paradigm Medical, Inc. into
a single public corporation under the name of Paradigm Medical
Industries, Inc. (the Company).  For accounting purposes the
merger was accounted for as a purchase with Paradigm treated as
the acquirer because the shareholders of Paradigm obtained
control of the Company.  

      Since its inception in October 1989,  the Company has been
engaged in marketing and selling advanced surgical systems for
cataracts, various attachments and disposable accessories and
diagnostic equipment and instrumentation.  The Company is in the
process of introducing a proprietary laser-based surgical machine
which is expected to become its core business.

      The Company is primarily dependent upon a single product
line targeted towards minimally invasive cataract surgery
devices.  Revenues recognized to date primarily represent
revenues from the sale of the Company's conventional ultrasound
cataract surgery machine (the Precisionist) and related accessory
instruments.  The Company has recognized minimal revenue from the
sale of its proprietary laser-based product, the Photon
LaserPhaco System (the Photon).  The Company's surgical and
diagnostic systems are regulated as medical devices by the FDA
under the FDC Act.  In May, 1995 the Company received regulatory
approval to manufacture the Photon in limited quantities and
conduct clinical trials in the U.S. on a limited basis.  The
Company is currently conducting clinical studies.  The Company's
ability to achieve profitability depends upon its ability to
obtain the regulatory approvals required to manufacture and
market the Photon on an unlimited scale.  

      The Company incurred a net loss of $2,774,594 and negative
cash flows from operating activities of $2,644,908 for the year
ended December 31, 1997.  As of December 31, 1997, the Company
had an accumulated deficit of $8,023,006.  In March 1998, the
Company completed the private placement of 20,030 shares of Class
C Preferred Stock at $100 per share (see Note 8), resulting in
net proceeds of approximately $1,700,000, net of offering
expenses.  Management believes that these net proceeds, plus
existing working capital will be sufficient to assure
continuation of the Company's operations through December 31,
1998.  Management projects significant revenues from the
successful re-launch of its new product, sales from additional
products and certain strategic alliances to market their
products.  However, no assurances can be given that management's
plans will be successful in achieving profitability or positive
cash flows.  
      
      Change in Fiscal Year

      In August 1996, the Company changed its fiscal year from
September 30 to December 31 beginning with the period ended
December 31, 1996.  

      Unaudited Information

      In the opinion of management, the accompanying unaudited
financial statements for the three month period ended December
31, 1995 contain all adjustments (consisting only of normal
recurring items) necessary to present fairly the results of
operations and cash flows of the Company for the three month
period ended December 31, 1995.

      Reclassifications

      Certain accounts of the prior year have been reclassified
to conform with the current year's presentation.  These
reclassifications had no effect on the net loss or total assets.

      Cash and Cash Equivalents

      Cash and cash equivalents consist of cash, money market
funds and highly liquid investments with original maturities of
three months or less.  Essentially all of the cash and cash
equivalents balance, which is held by a single bank in Utah, is
not covered by FDIC insurance.

      Inventories

      Inventories are stated at the lower of cost or market, with
cost determined using the weighted average method.  Inventories
consist primarily of finished goods.

      Property and Equipment

      Property and equipment are recorded at cost.  Replacements
and major improvements are capitalized and maintenance and
repairs are charged to expense as incurred.  The cost and related
accumulated
      depreciation of assets sold or otherwise disposed of are
removed from the accounts and any resulting gain or loss is
charged to operations.

      Depreciation of property and equipment is computed using
the straight-line method over the estimated useful lives of the
related assets, which range from five to seven years.

      Debt Offering Costs

      Debt offering costs are capitalized and amortized to
interest expense using the effective interest method over the
life of the related debt.

      Capitalized Engineering and Design Charges

      The capitalized portion of payments to a manufacturer for
engineering and design services (see Note 11) are being amortized
using the straight line method over a five year period.

      Income Taxes

      The Company accounts for income taxes in accordance with
SFAS No. 109, Accounting For Income Taxes.  Deferred income taxes
are provided for differences between the financial statement and
tax bases of assets and liabilities using enacted future tax
rates.

      Net Loss Per Share

      Basic and diluted earnings per share are computed in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share (EPS).  The reported loss per
share for 1996 has been restated to conform to SFAS No. 128. 
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number
of common shares outstanding for the period.  Diluted EPS
reflects the potential dilution from securities or contracts to
issue common stock.  Common equivalent shares are excluded from
the computation of diluted EPS when their effect is antidilutive.

      As of December 31, 1997, December 31, 1996 and September
30, 1996, options to purchase 450,200, 378,940 and 337,660,
respectively, shares of common stock at $5.00 per share were
outstanding.  As of December 31, 1997, December 31, 1996 and
September 30, 1996, warrants to purchase 1,635,565, 1,457,065 and
1,458,125, respectively, shares of common stock at $3.00 - $7.50
per share were outstanding.  As of December 31, 1997, December
31, 1996 and September 30, 1996, preferred stock at a conversion
rate of one share of preferred stock for 1.2 shares of common
shares were outstanding.  None of these common stock equivalents
were included in the computation of diluted loss per share
because the effect would have been antidilutive.

      Use of Estimates

      The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those
estimates.

      Revenue Recognition

      Revenues for sales of the Photon product, are recognized
upon installation and acceptance by the customer.  Revenues for
sales of the Precisionist are recognized when the product is
shipped.

      The Company offers the Precisionist with an unconditional
arrangement under which the customer may trade in their
Precisionist to upgrade to other systems, such as the Photon. 
Under this arrangement, the customer will receive full credit for
the purchase price of the Precisionist against the price of the
other system.  

      Research and Development

      Costs incurred in connection with research and development
activities are expensed as incurred.  These costs consist of
direct and indirect costs associated with specific projects as
well as fees paid to various entities that perform certain
research on behalf of the Company.

      Concentrations of Risk

      The market for ophthalmic lasers is subject to rapid
technological change, including advances in laser and other
technologies and the potential development of alternative
surgical techniques or new pharmaceutical products.  Development
by others of new or improved products, processes or technologies
may make products developed by the Company obsolete or less
competitive.

      The Company's high technology product line requires the
Company to deal with suppliers and subcontractors supplying
highly specialized parts, operating highly sophisticated and
narrow tolerance equipment and performing highly technical
calculations and tasks.  Substantially all of the Company's
current products are manufactured and assembled by two companies
who are related parties (see Note 11).  Although there are a
limited number of suppliers and manufacturers that meet the
standards required of a regulated medical device, management
believes that other suppliers and manufacturers could provide
similar components and services.  A change in supplier or
manufacturer, however, could  cause a delay in manufacturing and
a possible loss of sales, which would affect operating results
adversely.  In addition, since the supplier and manufacturer are
related parties, there can be no assurance that comparable terms
could be obtained.

      The nature of the Company's business exposes it to risk
from product liability claims.  The Company maintains product
liability insurance providing coverage up to $1 million per claim
with an aggregate policy limit of $1 million.  Any losses that
the Company may suffer from any product liability litigation
could have a material adverse effect on the Company.

      A significant portion of the Company's product sales are in
foreign countries.  The economic and political instability of
some foreign countries may affect the ability of medical
personnel to purchase the Company's products and the ability of
the customers to pay for the procedures for which the Company's
products are used.  Such circumstances could cause a possible
loss of sales, which would affect operating results adversely.

      Accounts receivable are due from medical distributors,
surgery centers, hospitals and ophthalmologists located
throughout the U.S. and a number of foreign countries.  The
receivables are generally due within thirty days for domestic
customers and sixty days for international customers.  Credit
losses historically have not been significant.

2.    Investment in Marketable Debt Securities:

      The Company's investment in marketable debt securities at
December 31, 1996 was classified as available-for-sale and was
carried at market value, with the unrealized loss reflected as a
separate component of stockholders' equity.  The Company sold all
of the available-for-sale securities during 1997.

      The cost and estimated market values of marketable debt
securities available-for-sale at December 31, 1996, are as
follows:

<TABLE>
<CAPTION>
                                  Gross      Gross    Estimated
                                Unrealized Unrealized  Market
                         Cost     Gains     Losses     Value
                       --------  --------  --------   --------
<S>                    <C>       <C>       <C>        <C>
Corporate bonds        $499,742   $9,669   $  -       $509,411

</TABLE>

      The marketable debt securities available for sale were due
in one year or less.

3.    Property and Equipment:

<TABLE>
<CAPTION>
Property and equipment consist of the following at December 31,:
                                                                
                                     1997                 1996   
                                 ----------          --------- 
<S>                             <C>                 <C>
Automobile                      $   26,099          $  26,099 
Office equipment                   100,388             83,541 
Furniture and fixtures              17,185             16,280 
Computer equipment                  39,019             36,754 
                                 ---------          ---------   
                                   182,691            162,674 
Accumulated depreciation           (61,417)           (33,180)
                                 ---------          ---------
                                 $ 121,274          $ 129,494 
                                 =========          =========

</TABLE>

4.    Notes Payable:

<TABLE>
<CAPTION>

      Notes payable consist of the following at December 31,:
                                                                
                                   1997                   1996   
                                ----------          ----------
<S>                             <C>                 <C>
Note payable to bank, 
 collateralized by an 
 automobile, bearing 
 interest at 9.95%, 
 payable in monthly 
 installments of $418, 
 final payment due 
 September, 2001                $    15,616          $  18,883 
Unsecured 12% convertible, 
 redeemable notes payable         1,070,000               -    
                                -----------          ---------  
                                  1,085,616             18,883 
Less current portion                 (3,620)            (3,278)
                                -----------          ---------
                                 $1,081,996          $  15,605 
                                ===========          =========
</TABLE>

      In December 1997, the Company sold 21.4 Units in a private
placement, each Unit consisting of a $50,000 unsecured 12%
convertible, redeemable promissory note ("Notes"), for a total
consideration of $1,070,000.  The Company incurred $164,776 in
debt offering costs associated with the private placement.  The
Notes are redeemable at 112% of the face value of each Note and
are also convertible into shares of common stock (one share for
each $2.00 principal amount  of the Note) and mature December
2000.  Interest is due and payable semi-annually.  Principal is
due and payable at the maturity date.  The Company is restricted
from declaring or making any dividend payments at any time so
long as the Notes are outstanding.

      In March 1998, Notes totalling $995,000 were exchanged for
9,950 shares of Series C preferred stock (see Note 8).

      The Company's remaining notes payable after the conversion
have scheduled maturities for years ending December 31, as
follows:

            1998              $ 3,620
            1999                3,997
            2000               79,413
            2001                3,586
                              -------                           
                              $90,616   
                              =======

      Rates currently available to the Company for loans with
similar terms and maturities are used to estimate the fair value
of notes payable.  At December 31, 1997 and 1996, the carrying
value of the notes payable approximates fair value.

5.    Lines of Credit:

      In May 1997, the Company established a $630,000 line of
credit with a financial institution which bears interest at 2.4%
above the 30-day commercial paper rate.  Interest is due monthly
with principal due June 30, 1998.  The line of credit was
collateralized by cash and investments held by the institution. 
As of December 31, 1997, there were no borrowings outstanding on
the line of credit.

      Also, in May 1997, the Company established a $350,000 line
of credit with a financial institution which bears interest at
 .25% above the Broker's Daily Call Money Rate as quoted by Bear
Stearns Securities Corp.  Interest is due monthly with principal
due June 30, 1998.  The line of credit was collateralized by cash
and investments held by the institution.  As of December 31,
1997, there were no borrowings outstanding on the line of credit.

      Due to the collateral requirements of these lines of
credit, any borrowings would be limited to cash and investments
restricted for this purpose.

6.    Income Taxes:

      At December 31, 1997, the Company had net operating loss
carryforwards for income tax purposes of approximately $7,073,000
and research and development tax credit carryforwards of
approximately $63,700.  These carryforwards are available to
offset future taxable income, if any, and expire in the years
2005 through 2012.

      The components of the net deferred tax asset as of December
31, 1997 and 1996 are as follows:
                   
<TABLE>
<CAPTION>                                                       
                             1997                 1996           
                          ---------            ---------- 
<S>                       <C>                  <C>
Deferred tax assets:
  Net operating 
   loss carryforwards      $ 2,638,000           $ 1,574,000 
  Research and development 
   tax credit carryforwards     64,000                53,000 
  Other                         73,000               112,000 

  Valuation allowance       (2,775,000)           (1,739,000)
                           -----------            ----------
  Net deferred tax asset   $       -            $      -    
                           =============        =============
</TABLE>

      The Company recognized no income tax benefit from the
losses generated in the year ended December 31, 1997, the three
month period ended December 31, 1996 or the year ended September
30, 1996.

      The valuation allowance increased by approximately
$1,036,000 during the year ended December 31, 1997, $444,100
during the three month period ended December 31, 1996 and
$577,100 during the year ended September 30, 1996, primarily as
a result of the increases in deferred tax assets related to net
operating losses and research and development tax credits.  SFAS
No. 109 requires that a valuation allowance be provided if it is
more likely than not that some portion or all of a deferred tax
asset will not be realized.  The  Company's  ability  to realize
the benefit of its deferred tax asset will depend on the
generation of future taxable income.  Because the Company has yet
to recognize significant revenue from the sale of its laser-based
Photon or other products, the Company believes that a full
valuation allowance should be provided.

7.    Capital Stock:

      In November 1995, the Company obtained the necessary
director and shareholder approvals to reincorporate in Delaware. 
In conjunction with the reincorporation, which was finalized in
February 1996, the Company established two series of preferred
stock with a total of 5,000,000 authorized shares with a par 
value  of  $.001, which  series included certain rights and
privileges similar to the previously issued series A and B
preferred stock, and one series of common stock with a par value
of $.001 and a total of 20,000,000 authorized shares.  All
outstanding shares of the Company were converted on a one-for-one
basis into shares in the new Delaware Corporation.

      In November 1995, the Company granted 50,512 and 50,513
shares of common stock to two individuals who are officers and
directors of the Company.  The shares will be forfeited in the
event either individual resigns or is removed for cause as an
officer and director of the Company within two years from the
date of grant.  The value assigned by the Company's investment
banker of $1.50 per share was charged to compensation expense
ratably over two years.

      During fiscal year 1996, the Company participated in a
private placement of $600,000 of units of its securities.  Each
unit consisted of a $25,000 promissory note with a stated rate of
12% and warrants to purchase 12,500 shares of the Company's
common stock at a price of $3.33 per share.  The value assigned
by the Company's investment banker to the warrants was $.10 per
warrant.  The notes bear interest at an imputed rate of 18% and
were due the earlier of the Company raising at least $4,000,000
through a public offering or December 31, 1996.  The warrants are
exercisable beginning on the date the note is issued and expiring
on December 1, 2000, and are redeemable by the Company under
certain conditions at a price of $.05 per warrant.  The Company
sold 23 units for cash proceeds of $575,000.  An additional
$25,000 unit was issued for services, which amount is included in
operating expenses.  These notes were paid in July 1996 upon the
Company raising $4.7 million through their public offering.

      In December 1995, the Company entered into an agreement
with a significant shareholder which terminated certain
previously granted anti-dilution rights which provided this
shareholder a 5% fixed equity position in the Company.  Under the
terms of the agreement, two of the Company's officers sold a
total of 100,000 shares of their common stock to this shareholder
for $1,000 and the Company issued 20,000 shares to this
shareholder.  Based on the value assigned by the Company's
investment banker of $1.50 per share, the Company recognized
$30,000 of expense for the 20,000 shares issued by the Company
and $149,000 of expense and additional paid-in-capital for the
100,000 shares sold by the officers.  

      In July 1996, the Company closed an initial public offering
(the "Offering") of their securities  selling 1,000,000 units at
a price of $6.25 per unit.  Each unit consists of one share of
common stock and one warrant to purchase one share of common
stock (see Note 9).  The net proceeds to the Company from the
Offering were approximately $4.7 million.

      In August 1996, the Company granted 40,000 restricted
shares of common stock to a consultant as compensation for
services and patent licensing rights.  The shares were valued at
the trading price at date of commitment and charged to
compensation expense.

      In August 1997, the Company entered into an investment
banking agreement with Win Capital Corp. ("Win Capital") for a
two year period which may be extended an additional year.  The
Company pays a retainer to Win Capital of $2,000 per month for
the first six months, $4,000 per month for the second six months
and $6,000 per month for the remainder of the contract.  The
Company also issued a warrant to Win Capital (see Note 10).

8.    Preferred Stock:

      On September 1, 1993 the Company established a series of
non-voting preferred shares designated as the 6% Series A
Preferred Stock, consisting of 500,000 shares with $.001 par
value, of which 121,704 shares were issued and outstanding as of
December 31, 1996 and 50,122 issued and outstanding as of
December 31, 1997.  This series is part of the Company's
5,000,000 authorized shares of non-voting preferred stock.  The
Series A Preferred Stock has the following rights and privileges:

      1.    The holders of the shares are entitled to dividends
at the rate of twenty-four cents ($.24) per share per annum,
payable in cash only from surplus earnings of the Company or in
additional shares of Series A Preferred Stock.  The dividends are
non-cumulative and therefore deficiencies in dividend payments
from one year are not carried forward to the next year.

      2.    Upon the liquidation of the Company, the holders of
the Series A Preferred Stock are entitled to receive, prior to
any distribution of any assets or surplus funds to the holders of
shares of common stock or any other stock, an amount equal to
$1.00 per share, plus any accrued and unpaid dividends related to
the fiscal year in which such liquidation occurs.

      3.    The shares are convertible at the option of the
holder at any time into common shares, based on an initial
conversion rate of one share of Series A Preferred Stock for 1.2
common shares.   

      4.    The holders of the shares have no voting rights.

      5.    The Company may, at its option, redeem all of the
then outstanding shares of the Series A Preferred Stock at a
price of $4.50 per share, plus accrued and unpaid dividends
related to the fiscal year in which such redemption occurs.

      On April 21, 1995, the Company declared a 6% preferred
stock dividend in the amount of $27,056 to all shareholders of
record as of December 31, 1994, which was paid through the
issuance of 6,764 shares of Series A Preferred Stock on January
8, 1996.

      On May 9, 1994, the Company established a series of
non-voting preferred shares designated as 12% Series B Preferred
Stock, consisting of 500,000 shares with $.001 par value, of
which 448,398 shares were issued and outstanding as of December
31, 1996 and 45,383 shares were issued and outstanding as of
December 31, 1997.  This series is also part of the Company's
5,000,000 authorized shares of non-voting preferred stock.  The
Series B Preferred Stock have the following rights and
privileges:

      1.    The holders of the shares are entitled to dividends
at the rate of forty-eight cents ($.48) per share per annum,
payable in cash only from surplus earnings of the Company or in
additional shares of Series B Preferred Stock.  The dividends are
non-cumulative and therefore deficiencies in dividend payments
from one year are not carried forward to the next year.

      2.    Upon the liquidation of the Company, the holders of
the Series B Preferred Stock are entitled to receive, prior to
any distribution of any assets or surplus funds to the holders of
shares of common stock or any other stock, an amount equal to
$4.00 per share, plus any accrued and unpaid dividends related to
the fiscal year in which such liquidation occurs.  Such right,
however, is subordinate to the right of the holders of Series A
Preferred Stock to receive a distribution of $1.00 per share plus
accrued and unpaid dividends.

      3.    The shares are convertible at the option of the
holder at any time into common shares, based on an initial
conversion rate of one share of Series B Preferred Stock for 1.2
common shares. 

      4.    The holders of the shares have no voting rights.

      5.    The Company may, at its option, redeem all of the
then outstanding shares of the Series B Preferred Stock at a
price of $4.50 per share, plus accrued and unpaid dividends
related to the fiscal year in which such redemption occurs.

      On April 21, 1995, the Company declared a 12% preferred
stock dividend in the amount of $24,068 to all shareholders of
record as of December 31, 1994, which was paid through the
issuance of 6,017 shares of Series B Preferred Stock on January
8, 1996.

      In structuring and proceeding with the private offering of
Series B Preferred Stock, the Company may not have complied with
certain aspects of California corporate law and federal and state
securities laws.  The Company decided that, in order to
effectively proceed with its initial public offering, it would
provide its holders of Series B Preferred Stock a rescission
offer.  The rescission offer was designed to reduce any type of
contingent liability the Company may be subject to in connection
with the sale of the Series B Preferred Stock.  The rescission
offer, however, may not fully relieve the Company from exposure
to contingent liability under federal or state securities laws. 
Two shareholders owning a combined total of 32,750 shares
accepted the Recision Offer.  These shareholders were paid $4.00
per share plus interest from the date the Rescission shares were
purchased to July 25, 1996, the date these shareholders were
paid.  In addition, the shareholders returned 212 shares which
had been issued due to the 12% preferred stock dividend.

      Series C Preferred Stock

      In January 1998, the Company's Board of Directors
authorized the issuance of a total of 30,000 shares of non-voting
Class C Preferred Stock, $.001 par value, $100 stated value. 
Each share is convertible into approximately 57.14 shares of
common stock at an initial conversion price, subject to
adjustments for stock splits, stock dividends and certain
combinations or recapitalizations of the Common stock, equal to
$1.75 per share of common stock.  Holders of the shares of Series
C Preferred Stock are entitled to 12% non-cumulative dividends. 
However, the shares shall be entitled to dividends declared on
the Company's common stock on an as-converted basis.

      In March 1998, the Company closed a private placement of
Series C Preferred Stock, selling 20,030 shares at a price of
$100 per share.  The net proceeds to the Company from the private
placement were approximately $1.7 million.

      In January 1998, the Company offered to the holders of the
Notes, through an exchange offer, the right to exchange their
Notes for shares of Series C Preferred Stock.  In March 1998,
Notes totaling $995,000 were exchanged for 9,950 shares of Series
C Preferred Stock, at $100 per share, totaling $995,000.  The
exchange offer has now expired.

9.    1995 Stock Option Plan:

      In November, 1995, the Company's Board of Directors and
shareholders approved the Company's 1995 Stock Option Plan (the
Option Plan) which reserved 300,000 shares of the Company's
authorized but unissued common stock for the granting of stock
options.  In February 1996, 300,000 options to purchase shares of
the Company's common stock at $5.00 per share were granted.  In
June 1997, the Company's shareholders approved an amendment to
the Plan to increase the number of shares of common stock
reserved from issuance thereunder by an aggregate of 300,000
shares.

      The Option Plan provides for the grant of incentive stock
options within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended, and non-qualified stock options to
employees and non-employee directors of the Company.  Incentive
stock options may be granted only to employees.  The Option Plan
is administered by the Board of Directors or a Compensation
Committee, which determines the terms of options granted
including the exercise price, the number of shares subject to the
option, and the exercisability of the option.

      The Company has adopted the provisions of SFAS No. 123. 
Under these provisions, the Company is allowed to continue to
apply Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its Option plan.  Accordingly,
no compensation expense has been recognized as options are
granted at the stock's then market price.  Had compensation
expense for the Company's stock-based compensation plans been
determined based on the value at the grant dates for awards under
the option plans as recommended by SFAS No. 123, the Company's
net loss and loss per share would have been increased to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
                                        Three month 
                         Year ended    period ended  Year ended
                         December 31,  December 31,  September
                            1997          1996        1996
                         -----------   -----------   ---------- 
<S>         <C>          <C>           <C>           <C>
Net loss    As reported  $(2,774,594)  $(1,198,403)  $(1,448,171)
            Pro forma    $(2,927,732)  $(1,266,458)  $(2,098,771)

Basic and 
diluted 
loss per 
share       As reported    $(0.76)      $(0.38)      $(0.66)
            Pro forma      $(0.80)      $(0.40)      $(0.96)

</TABLE>

      The pro forma compensation expense may not be
representative of such expense in future years.

      The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions for all periods: 
expected volatility of 101.8 percent, risk-free interest rate of
5.52 percent, expected life of 5 years, and a dividend yield of
zero.

      Changes in all outstanding options are as follows:

<TABLE>
<CAPTION>
                                   Three month
                 Year ended        period ended
                December 31,       December 31,     September 30,
                    1997                1996            1996
              -----------------  ----------------  -------------
                       Weighted          Weighted        Weighted
                        Average           Average         Average
                       Exercise          Exercise        Exercise
Fixed Options  Shares    Price   Shares    Price   Shares   Price
-------------  -------  ------  --------  ------  -------  ------
<S>            <C>      <C>     <C>       <C>     <C>      <C> 
Outstanding at 
 beginning of 
 period        378,940   $5.00   337,660  $5.00     -         - 
Granted        135,000    5.00    41,280   5.00   340,160   $5.00
Exercised        -         -        -       -       -         - 
Forfeited      (63,740)   5.00      -       -      (2,500)   5.00
               -------           -------          -------
Outstanding 
 at end of   
 period        450,200           378,940          337,660 
               =======           =======          =======
Options 
 exercisable 
 at year-end   323,908           259,174          259,174 
Weighted-
 average fair 
 value of
 options 
 granted 
 during the 
 year            $3.41             $2.35            $2.42 


</TABLE>

      At December 31, 1997, the weighted-average remaining
contractual life of the 450,200 options outstanding is 3.6 years.

10.   Warrants:

      The Company, in conjunction with the $600,000 private
placement (see Note 7), issued warrants to purchase 300,000
shares of the Company's common stock at a price of $3.33 per
share.  These warrants are exercisable and expire on December 1,
2000, and are redeemable by the Company under certain conditions
at a price of $.05 per warrant.  During 1997, warrants were
exercised for 12,500 shares of common stock.

      The Company issued warrants to purchase 25,000 shares of
the Company's common stock at a price of $3.33 per share to a law
firm, of which a director of the Company is a shareholder, as
consideration for legal services.  The warrants are exercisable
beginning March 15, 1997, expire on December 1, 2000, and are
redeemable by the Company under certain conditions at a price of
$.05 per warrant.

      In conjunction with the Offering, the Company issued Class
A warrants to purchase 1,000,000 shares of the Company's common
stock at a price of $7.50 per share.  These warrants are
currently exercisable and expire on July 10, 2001.  These
warrants are subject to redemption by the Company beginning May
17, 1997 at a price of $.05 per warrant, if the closing bid price
of the Company's common stock averages in excess of $8.50 per
share for 30 consecutive business days ending within 15 days of
the date of redemption.

      The Company issued to the Underwriter's of the Offering
warrants to purchase 100,000 shares of the Company's common stock
at a price of $7.50 per share.  These warrants are exercisable on
or after July 10, 1998 and expire on July 10, 2001.  These
warrants are subject to redemption by the Company beginning on
July 10, 1998 at a price of $.05 per warrant, if the Company's
common stock has been trading at a price equal to or above $10.00
per share for 30 consecutive business days ending within 15 days
of the date of redemption.

      In conjunction with its Series A Preferred private
placement, the Company issued warrants to purchase 11,600 shares
of the Company's Series A Preferred Stock at a price of $4.00 per
share at any time prior to May 8, 1999.  These warrants are
subject to redemption by the Company beginning on July 9, 1997 at
a price of $.05 per warrant if the Company redeems all of the
then outstanding shares of Series A stock or the Company's common
stock has been trading at a price equal to or above $7.50 per
share for 20 consecutive business days ending within 15 days of
the date of redemption.

      In connection with its Series B Preferred private
placement, the Company issued warrants to purchase 21,525 shares
of the Company's Common Stock at a price of $3.00 per share. 
These warrants are currently exercisable and expire on December
31, 1999. 

      In connection with an investment banking agreement (see
Note 11), the Company issued a warrant to Win Capital to purchase
up to 191,000 shares of common stock at a purchase price of $3.00
per share.  The warrant is currently exercisable and expires on
August 19, 2000.  The fair value of the warrant of $317,000 has
been recorded as unearned compensation in the stockholders'
equity section and is being recognized as expense over the two
year period of the related agreement.  In March 1998, the Company
issued to Win Capital a warrant to purchase 100,000 shares of the
Company's common stock at a price of $3.00 per share.  The
warrant expires in March 2000.


11.   Related Party Transactions:

      In September 1996, the Company entered into an exclusive
three year design, engineering and manufacturing agreement (the
"Agreement") for its Photon laser cataract system with a company
that is a shareholder ("the Manufacturer").  Under the provisions
of the Agreement, the Company agreed to pay a total of $1,000,000
to the Manufacturer at various milestone dates through
approximately March 1997 for engineering and design services. 
$690,604 of this amount was charged to expense as research and
development; the balance was recorded as capitalized engineering
and design charges.

      In addition, the Company will pay the actual cost of
tooling, plus a two percent mark-up, which is not expected to be
significant.  All items for tooling purposes will belong to the
Company.  The Agreement establishes the purchase price of the
systems at the lessor of a fixed purchase price or the actual
cost of manufacturing plus a markup.  Through December 31, 1997,
the Company had purchased 39 systems under the Agreement.  At
December 31, 1997, $458,467 remains payable to the Manufacturer
under the Agreement.  At December 31, 1997, the Company has a
purchase commitment with the Manufacturer for delivery of
additional systems for approximately $1,150,000.

      The Company purchased research and development services,
design and manufacturing services and systems from the
Manufacturer in the amount of approximately $1,070,000, $310,000
and $350,000, during the year ended December 31, 1997, the three
month period ended December 31, 1996 and the year ended September
30, 1996, respectively.

      The Agreement prohibits the Manufacturer from participating
in any activities, including manufacturing, related to laser
surgical systems for any other company for a period of two years
beyond the term or any renewed term of the Agreement.  The
Agreement includes certain termination provisions, which include
the event that the Company is unable to obtain governmental or
regulatory approvals.  The Agreement is renewable for successive
one year additional terms.

      The Company has contracted with a company, of which one of
the Company's directors served as President and Chief Executive
Officer at the time the agreement was signed, to purchase certain
components for the Photon.  The Company purchased $160,617,
$16,097 and $5,284 for the year ended December 31, 1997, the
three month period ended December 31, 1996 and the year ended
September 30, 1996, respectively, of components from this
company.

      In 1997, the Company signed an amended exclusive patent
license agreement with a company which owns the patent for the
laser-based Photon machine.  This company is owned by a
shareholder of the Company.  The agreement provides for the
payment of a 1% royalty on all sales proceeds related directly or
indirectly, to the Photon machine.  The agreement terminates on
July 7, 2003.  Through December 31, 1997, no significant
royalties have been paid under this agreement.  The Company has
also entered into a consulting agreement with this individual
which provides for annual consulting fees of $25,000 through July
7, 2003.

      A law firm, of which a director of the Company is a
shareholder, has rendered legal services to the Company.  The
Company paid this firm $118,765, $25,468 and $234,504 for the
year ended December 31, 1997, the three month period ended
December 31, 1996 and the year ended September 30, 1996,
respectively.  As of December 31, 1997, the Company owed this
firm $22,849, which is included in accounts payable.

12.   Leases:

      In December 1997, the Company entered into a new lease
agreement for office space at a monthly rent of $3,316.  The base
rent increases to $3,415 and $3,518 for the second and third
years of the lease, respectively.  The lease term expires on
December 31, 2000 with an additional three year renewal option. 
In addition, the Company leases a condominium for approximately
$2,150 per month through 1998.  Total lease expense for the year
ended December 31, 1997, the three month period ended December
31, 1996 and the year ended September 30, 1996 was $53,204,
$11,066 and $28,954, respectively.

      Future minimum lease payments are:

            1998     $  57,972
            1999        40,982
            2000        42,211
                     ---------
                      $141,165

13.   Export Sales:

      Total sales include the following export sales by major
geographic area:

<TABLE>
<CAPTION>
                                 Three month
                   Year ended    period ended     Year ended
                  December 31,   December 31,     September
                     1997           1996              1996
                  ------------   -------------  ---------------
Geographic Area
---------------
<S>                <C>              <C>             <C>
Europe             $ 37,596         $ 17,151        $ 107,161 
Far East             18,328             -              46,270 
Middle East           2,150             -              72,691 
                   --------         --------        ---------
                   $ 58,074         $ 17,151        $ 226,122 
                   ========         ========        =========

</TABLE>

14.   Employment Agreements:

      Effective February 1, 1996, the Company entered into
employment agreements with three officers which expire on
February 1, 2001.  The agreements provide for aggregate annual
compensation of $380,000.  

15.   Profit Sharing Plan:

      In February 1996, the Company adopted a profit sharing plan
pursuant to which an amount equal to 10% of the pretax profits of
the Company will be set aside for the benefit of the Company's
officers and key employees.  This amount will only be paid if the
Company's qualified pretax profits exceed $10,000,000 for any
fiscal year beginning October 1, 1996 and ending September 30,
2001.  


16.   Savings Plan:

      In November 1996, the Company established a 401(k)
Retirement Savings Plan for the Company's officers and employees. 
The Plan provisions include eligibility after six months of
service, a three year vesting provision and 100% matching
contribution by the Company of up to 3% of a participant's
compensation.  During the year ended December 31, 1997, the
Company contributed $36,136 to the Plan.

<PAGE>

Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

      None.

                                                                
              PART III


Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers  

      The executive officers and directors of the Company, their
ages and their positions are set forth below:

<TABLE>
<CAPTION>

      Name              Age   Position
      ----              ---   --------
<S>                     <C>   <C>
Thomas F. Motter        49    Chairman of the Board, President
                              and Chief Executive Officer
Michael W. Stelzer      50    Vice President of Operations, 
                                Chief Operating Officer and
                                Director
Robert W. Millar        41    Vice President of Engineering and 
                                Manufacturing, and Director
John W. Hemmer          70    Vice President of Finance,
                                Treasurer, Chief Financial
                                Officer and Director
Roy E. Moser            51    Vice President of Corporate
                                Development
Randall A. Mackey       52    Secretary and Director
William A. Fitzhugh     48    Director
David M. Silver         56    Director
Patrick M. Kolenik      46    Director

</TABLE>

      The directors are elected for one year terms which expire
at the next annual meeting of shareholders.  Executive officers
are elected annually by the Board of Directors to hold office
until the first meeting of the Board following the next annual
meeting of shareholders and until their successors have been
elected and qualified.

      Thomas F. Motter has served as Chairman of the Board of the
Company since April 1993.  Since December 12, 1997 and from May
1994 to August 1997, he has served as President and Chief
Executive Officer of the Company.  From June 1989 to April 1993,
Mr. Motter served as Chief Executive Officer of Paradigm Medical,
Inc. which merged with the Company in May 1994.  From September
1990 to April 1992, he was employed by HGM Medical Laser Systems
as general manager of their International Division.  From October
1978 to June 1989, Mr. Motter was employed by SmithKline Beckman,
Humphrey Instruments Division, a company engaged in the
development of advanced ophthalmic diagnostic instruments, his
last position was national sales manager.  Mr. Motter received a
Bachelors of Arts degree in English from Stephen's College in
1970 and a Master of Business Administration from Pepperdine
University in 1975.  

      Michael W. Stelzer has served as Vice President of
Operations and Chief Operating Officer since December 12, 1997. 
From August 8, 1997 to December 12, 1997, he served as President
and Chief Executive Officer of the Company.  Mr. Stelzer joined
the Company's Board of Directors in April 1993.  From June 1989
to April 1993, Mr. Stelzer served as a General Counsel and
director for Paradigm Medical, Inc. which merged with the Company
in May 1994.  From February 1995 to August 1997, Mr. Stelzer
served as the Executive Vice President and Chief Financial
Officer of Rhino Marketing, Inc., a sports related holding
company and was President of one of its subsidiaries.  Prior to
joining Rhino from 1993 to 1995, Mr. Stelzer was President and
General Counsel for MarDec, Inc., a golf accessory marketing
company.  Mr. Stelzer is a licensed attorney with the state of
California and has practiced law in California since 1980.  From
March 1972 to January 1980, Mr. Stelzer was controller of
Ponderosa Telephone Company.  Mr. Stelzer received a Bachelor of
Science degree in Business Management from the University of
California, Davis, in 1970 and a Juris Doctorate from Humphreys
College of Law in 1979.

      Robert W. Millar has served as Vice President of
Engineering and Manufacturing since December 12, 1997 and as a
director of the Company since April 1993.  From April 1995 to
December 12, 1997, Mr. Millar served as Executive Vice President
of the Company.  From January 1991 to April 1993, he was employed
as President by Paradigm Medical, Inc., which merged with the
Company in May 1994.  From January 1990 to January 1991, Mr.
Millar was employed by HGM Medical Laser Systems, serving as
Director of Marketing and Product Management for all ophthalmic
and surgical markets.  From October 1988 to December 1989, Mr.
Millar was employed by Esselte Pendaflex Corporation, a company
engaged in the business of manufacturing and distributing office
supply products.  He served as group product manager for the
customer products division.  From July 1986 to February 1988, Mr.
Millar was employed by TechnaVision Inc. a company engaged in the
manufacture of diagnostic and other equipment.  From February
1980 to July 1986, he was employed by Pogue McJunkin &
Associates, a professional industrial design firm.  Mr. Millar
received a Bachelors of Science degree in Industrial Design from
the College of Design in Detroit, Michigan in 1979.  

      John W. Hemmer, C.F.A., has served as Vice President of
Finance, Treasurer and Chief Financial Officer since December 12,
1997 and as a director of the Company since November 1995.  Since
November 1995 to December 12, 1997, he served as Treasurer and
Chief Financial Officer of the Company.  Since October 1989, Mr.
Hemmer has served as a director and consultant for Sea Pride
Industries, Inc. and its subsidiaries in Gulf Breeze, Florida,
which developed the first offshore marine production system
licensed and permitted for use in the Gulf of Mexico.  He has
also served as a director of International Heritage, Inc., a
multi-level marketing company, since March, 1997.  From March
1992 to July 1994, Mr. Hemmer was employed as the Secretary and
Vice President of Finance of Advance Electronics, Inc., which is
engaged in the retail distribution of health and beauty products. 
From November 1991 to December 1994, Mr. Hemmer was employed as
the Secretary and Treasurer of Belize Agro Industrial
Development, Ltd. which established a Free Trade Zone in Belize
engaged in the production and export of seafood.  He was the
President and Chief Executive Officer of John W. Hemmer, Inc., a
registered broker/dealer firm from May 1987 to May 1989 which
subsequently changed its name to Westfalia Investments Inc., but
retained his registered representative status until March 1995. 
Prior thereto, he was Vice President of Bankers Trust Company in
charge of venture capital and a member of the research and
investment management committees.  Mr. Hemmer was Vice President
of Corporate Finance at Dempsey, Tegler & Company, Inc., a Senior
Analyst at Lazard Freres & Company and an Investment Officer of
The Chase Manhattan Bank.  Mr. Hemmer received a Bachelors of
Arts degree in Economics from Queens College in 1951 and a Master
of Science degree in Banking and Finance from Columbia University
Graduate School of Business in 1952.

      Roy E. Moser has been Vice President of Corporate
Development of the Company since January 1998.  From June 1997 to
January 1998, he served as Vice President of Sales of the
Company.  Prior to joining Paradigm, he served from 1995 to 1997
as General Manager for Medical Development Research Inc.  From
1990 to 1995, Mr. Moser was Vice President, Sales and Marketing
in the international operations of Surgidev Corporation.  Mr.
Moser worked for Inamed Corporation from 1989 to 1990 as Manager,
International Operations.  From 1987 to 1989, he served as
Director of Operations for Surgidev.  Mr. Moser was also employed
from 1982 to 1987 at Allergan Corporation and from 1975 to 1982
at Baxter Health Care.  Mr. Moser received an M.B.A. degree from
National University in 1973 and a Bachelor of Science degree from
California State University in 1983.

      Randall A. Mackey has been Secretary and a director of the
Company since November 1995.  Since 1989, Mr. Mackey has been a
shareholder of the Salt Lake City law firm of Mackey Price &
Williams and its predecessor firms.  From 1979 to 1989, he
practiced law with the Salt Lake City law firm of Fabian &
Clendenin, where he was a shareholder and a director of the firm
from 1982 to 1989.  From 1977 to 1979, Mr. Mackey was associated
with the Washington D.C. law firm of Hogan and Hartson.  Mr.
Mackey received a Bachelor of Science degree in Economics from
the University of Utah in 1968, a Master of Business
Administration degree from Harvard University in 1970, a Juris
Doctor degree from Columbia University in 1975 and a Bachelor of
Civil Law degree from Oxford University in 1977.  Since January
1998, Mr. Mackey has served as a director of Cimetrix
Incorporated, a software development company.

      William C. Fitzhugh, M.D. has been a director of the
Company since November 1995.  Dr. Fitzhugh has operated a private
ophthalmology practice in Twin Falls, Idaho since 1980 and is the
past president of the Idaho Society of Ophthalmology.  Dr.
Fitzhugh received a Bachelor of Science degree in pre-medicine
from the University of Idaho in 1971 and a Medical Degree from
the University of Oregon Medical School in 1976.

      David M. Silver, Ph.D. has been a director of the Company
since November 1995.  Dr. Silver currently is a member of the
principal staff of The Johns Hopkins University Applied Physics
Laboratory and Dunning Professor in the Department of
Ophthalmology School of Medicine at The Johns Hopkins University,
1998-99.  He received a B.S. degree in Chemistry from the
Illinois Institute of Technology in 1962, an M.A. degree from The
Johns Hopkins University in 1964 and a Ph.D. degree from Iowa
State University in 1968.  After a postdoctoral fellowship at
Harvard University and a visiting scientist position at the
University of Paris, Dr. Silver returned to The Johns Hopkins
University in 1970.  Currently, he is Senior Scientist in the
Milton S. Eisenhower Research Center at The Johns Hopkins
University Applied Physics Laboratory. 

      Patrick M. Kolenik has been a director of the Company since
November 1997.  Mr. Kolenik has been Special Assistant to the
President of International Heritage, Inc. since 1996 and
President and Co-Founder of Cyn Del & Co., Inc. since 1992.  He
was a co-founder and director of Win Capital Corp., an investment
banking firm, but resigned as a director in 1996.  From 1969 to
1989, Mr. Kolenik held various positions at Sherwood Securities
Corp., a securities firm, including President and Chief Executive
Officer, Executive Vice President of Trading, Executive Vice
President of Corporate Syndicate and Vice President of Corporate
Finance.  He also served as a director of Sherwood Securities
Corp.  Mr. Kolenik attended Baruch College where he majored in
finance.

Technical and Medical Advisory Personnel  

      The Company utilizes an informal Clinical Advisory Board of
recognized practicing ophthalmic surgeons in technical and
medical advisory capacities.  Outside consultants are generally
used on an ad hoc basis and such individuals do not meet together
as a group and are not compensated.   The Members of the
Company's Clinical Advisory Board are as follows:

      Paul L. Archambeau, M.D. -- Dr. Archambeau is an
ophthalmologist in Santa Rosa, California and a faculty member at
the University of California at San Francisco.  He received his
medical degree at the University of Buffalo Medical School in
1959 and performed his residency at the Mayo Clinic in Rochester,
Minnesota.

      Daniele S. Aron-Rosa, Ph.D, M.D. -- Dr. Aron-Rosa is a
faculty member at the Rothschild Eye Institute in Paris, France. 
She received a doctorate degree in physics from the University of
Paris in 1957 and received her medical degree there in 1962 and
performed her residency at the University of Paris Hospital.

      David C. Brown, III, M.D. -- Dr. Brown is an
ophthalmologist in Fort Myers, Florida.  He received his medical
degree at the University of Florida in 1963 and also performed
his residency at that facility.

      Alan S. Crandall, M.D. -- Dr. Crandall is an
ophthalmologist in Salt Lake City, Utah.  He received his medical
degree at the University of Utah in 1973 and performed his
residency at the University of Pennsylvania

      I. Howard Fine, M.D. --  Dr. Fine is an ophthalmologist
practicing in Eugene, Oregon and a member of the Oregon Health
Sciences University faculty.  Dr. Fine received his medical
degree at Boston University in 1966 and also performed his
residency at that facility.

      Stephane P. Ganem, M.D. -- Dr. Ganem is chairman of the
ophthalmology department at the Rothschild Eye Institute in
Paris, France.
   
      Frederic B. Kremer, M.D. -- Dr. Kremer is an
ophthalmologist in Radnor, Pennsylvania.  He received his medical
degree at the Jefferson Medical Center in 1976 and performed his
residency  at the Wills Eye Hospital in Philadelphia,
Pennsylvania.
  
      Francis A. L'Esperance, M.D. -- Dr. L'Esperance is
President of the American Board of Laser Surgery and a faculty
member at the Columbia College of Physicians and Surgeons.  He
received his medical degree from Harvard Medical School in 1956
and performed his residency at the Massachusetts Eye and Ear
Infirmary.

      Michael B. Limberg, M.D. -- Dr. Limberg is an
ophthalmologist practicing in San Luis Obispo, California.  He
received his medical degree at the University of Utah Medical
School in 1982 and performed his residency at Louisiana State
University.
      
      Marc A. Michelson M.D. -- Dr. Michelson is an
ophthalmologist in Birmingham, Alabama.  He received his medical
degree at the University of Alabama in 1975, and performed his
residency at the Eye Foundation Hospital in Birmingham, Alabama.
   
      Lawrence E. Noble M.D. -- Dr. Noble is an ophthalmologist
in Provo, Utah.  He received his medical degree at the University
of Oregon in 1964, and performed his residency at the Good
Samaritan Hospital.
   
      Jaswant Singh Pannu, M.D. -- Dr. Pannu is an
ophthalmologist in Lauderdale Lakes, Florida.  He received his
medical degree at the University of Miami in 1967 and performed
his residency at the Milwaukee, Wisconsin Veterans Administration
Hospital and at Evanston Hospital in Evanston, Illinois.

      David M. Schneider, M.D. -- Dr. Schneider is an
ophthalmologist in Cincinnati, Ohio.  He received his medical
degree at the University of Cincinnati in 1975, and performed his
residency at the University of Cincinnati.
   
      Jeffrey G. Straus, M.D. -- Dr. Straus is an ophthalmologist
in Metairie, Louisiana.  He received his medical degree at State
University of New York at Buffalo in 1984 and performed his
residency at Ochsner Foundation Hospital and Clinic in New
Orleans, Louisiana.

      Gerald Zelman, M.D. -- Dr. Zelman is a Ophthalmologist in
Manhasset, New York.  He received his medical degree at the
University of Lausanne in 1964, and performed his residency at
the Brooklyn Eye and Ear facility in Brooklyn, New York.

Board Meetings and Committees

      The Board of Directors held a total of five meetings during
the fiscal year ended December 31, 1997.  The Audit Committee of
the Board of Directors consists of directors Michael W. Stelzer,
William C. Fitzhugh and Patrick M. Kolenik.  The Audit Committee
last met on December 12, 1997.  The Audit Committee is primarily
responsible for reviewing the services performed by the Company's
independent public accountants and internal audit department and
evaluating the Company's accounting principles and its system of
internal accounting controls.  The Compensation Committee of the
Board of Directors consists of directors Randall A. Mackey, David
M. Silver and William C. Fitzhugh.  The Compensation Committee
also last met on June 9, 1997.  The Compensation Committee is
primarily responsible for reviewing compensation of executive
officers and overseeing the granting of stock options.  No
director attended fewer than 75% of all meetings of the Board of
Directors during the 1997 fiscal year.

      Pursuant to Nasdaq corporate governance requirements
recently made applicable to Nasdaq SmallCap Market companies, the
Company must have (i) a minimum of two independent directors;
(ii) an audit committee with a majority of independent directors;
and (iii) an annual stockholders meeting.  The Company has and
can presently satisfy each of these requirements.  Messrs.
Fitzhugh, Kolenik, and Silver qualify as independent directors.

Compliance with Section 16(a) of the Securities and Exchange Act
of 1934

      Effective May 1, 1991, the Securities and Exchange
Commission adopted revised rules regarding reporting of
beneficial ownership of securities by officers, directors and
owners of more than 10% of any class of a company's equity
securities.  During fiscal 1997, George J. Barenholtz, then a
director of the Company, through an oversight, filed one late
stock purchase transaction report covering one transaction.

Item 10. Executive Compensation

      The following table sets forth, for each of the last three
fiscal years and for the three month period ended December 31,
1996, the compensation received by Thomas F. Motter, the
Company's Chairman of the Board, President and Chief Executive
Officer, and all other executive officers (collectively, the
"Named Executive Officers") at December 31, 1997 whose salary and
bonus for all services in all capacities exceed $100,000 for the
fiscal year ended December 31, 1997.

<TABLE>
<CAPTION>                                                       
                     Summary Compensation Table
                                                         Other
                                                         Annual
   Name and                                            Compensa-
Principal Position    Period     Salary($)   Bonus($)  tion($)(6)
------------------    ------     ---------   --------  ----------
<S>                   <C>        <C>         <C>        <C>
Thomas F. Motter,     1997<F1>   $129,584       0       $5,250
Chairman of the       1996<F2>     33,750       0          0
Board, President      1996<F3>    111,042    $1,000      3,600
and Chief             1995<F4>     72,000       300        0
Executive Officer


Michael W. Stelzer,   1997<F1>     50,625       0        1,500
Vice President of 
Operations and 
Chief Operating 
Officer

Robert W. Millar,     1997<F1>    114,675       0        5,250
Vice President of     1996<F2>     31,250       0          0 
Engineering and       1996<F3>     99,792     1,000      3,600
Manufacturing         1995<F4>     60,265       300        0

John W. Hemmer,       1997<F1>    112,670       0        5,250
Treasurer, Chief      1996<F2>     30,000       0          0
Financial Officer     1996<F3>     80,000       0       3,600<F7>
and Director          1995<F4>     20,000       0          0

</TABLE>
<PAGE>
                     Continued - Summary Compensation Table     
<TABLE>
<CAPTION>                
                                                    
                    Restricted  Underlying  Long-term All Other 
 Name and            Stock      Options/    Incentive Compensa-
Principal Position  Awards($)   SARs(#)     Payout($) tion($)<F5>
------------------  ------      ---------   --------  ----------
<S>                   <C>        <C>         <C>        <C>
Thomas F. Motter,       0           0           0          0  
Chairman of the         0           0           0          0
Board, President        0           0           0       $6,000
and Chief               0        106,000<F6>    0          0
Executive Officer


Michael W. Stelzer,     0        20,000<F6>     0          0  
Vice President of 
Operations and 
Chief Operating 
Officer

Robert W. Millar,       0           0           0          0  
Vice President of       0           0           0          0  
Engineering and         0           0           0       6,000 
Manufacturing           0      84,000<F6>       0          0  

John W. Hemmer,         0           0           0          0  
Treasurer, Chief        0           0           0          0  
Financial Officer       0      20,000<F6>       0       4,000  
and Director            0           0           0          0  


<FN>
<F1>  For the fiscal year ended December 31, 1997.
<F2>  For the three month period ended December 31, 1996.
<F3>  For the fiscal year ended September 30, 1996.
<F4>  For the fiscal year ended September 30, 1995.
<F5>  The amounts indicated under "Other Annual Compensation" for
      1996 and 1997 consist of payments related to the operation
      of automobiles by the named executive.
<F6>  On February 16, 1996, the Company granted Mr. Motter and
      Mr. Millar options to purchase 106,000 and 84,000 shares,
      respectively, of the Company's Common Stock at an exercise
      price of $5.00 per share.  These options expire on February
      15, 2001.  On January 31, 1996, the Company granted Mr.
      Hemmer options to purchase 20,000 shares of the Company's
      Common Stock at an exercise price of $5.00 per share. 
      These options expire January 30, 2001.  On June 9, 1997,
      the Company granted Mr. Stelzer options to purchase 20,000
      shares of the Company's Common Stock at an exercise price
      of $5.00 per share.  These options expire June 8, 2002.
<F7>  On November 30, 1995, the Company issued Mr. Hemmer 50,513
      shares of the Company's Common Stock as part of his
      compensation for past and future services.
</FN>
</TABLE>

      The following table sets forth information concerning the
exercise of options to acquire shares of the Company's Common
Stock by the Named Executive Officers during the fiscal year
ended December 31, 1997, as well as the aggregate number and
value of unexercised options held by the Named Executive Officers
on December 31, 1997.

<TABLE>
<CAPTION>

   Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal 
           Year-End Option/SAR Values

                      Shares Acquired        Value
    Name              on Exercise(#)      Realized($)
    ----              ---------------     -----------
<S>                   <C>                 <C>
Thomas F. Motter            -0-                 -0-

Robert W. Millar            -0-                 -0-

John W. Hemmer              -0-                 -0-

Michael W. Stelzer          -0-                 -0-


</TABLE>

            (Continued)
<TABLE>
<CAPTION>

               Number of Securities    
                   Underlying            Value of Unexercised
             Unexercised Options/SARs  In-the-Money Options/SARs
             at December 31, 1997(#)   at December 31, 1997($)
             ------------------------- --------------------------
  Name       Exercisable Unexercisable Exercisable Unexcercisable
  ----       ----------- ------------- ----------- --------------
<S>          <C>         <C>           <C>         <C>
Thomas F. 
Motter        106,000        -0-           -0-          -0-

Robert W. 
Millar         84,000        -0-           -0-          -0-

John W. 
Hemmer         20,000        -0-           -0-          -0-

Michael W. 
Stelzer        20,000        -0-           -0-          -0-

</TABLE>

Director Compensation  

      Outside directors receive cash compensation in the amount
of a $5,000 annual retainer, an additional $1,250 for each
quarterly meeting they attend and an additional $500 for each
committee meeting they attend.  Outside directors are also
reimbursed for their expenses in attending Board and committee
meetings.  Directors are not precluded from serving the Company
in any other capacity and receiving compensation therefor.

Employee 401(k) Plan

      In October 1996, the Company's Board of Directors adopted
a 401(k) Retirement Savings Plan.  Under the terms of the 401(k)
plan, effective as of November 1, 1996, the Company may make
discretionary employer matching contributions to its employees
who choose to participate in the plan.  The plan allows the Board
to determine the amount of the contribution at the beginning of
each year.  The Board adopted a contribution formula specifying
that such discretionary employer matching contributions would
equal 100% of the participating employee's contribution to the
plan up to a maximum discretionary employee contribution of 3% of
a participating employee's compensation, as defined by the plan. 
All persons who have completed at least six months' service with
the Company and satisfy other plan requirements are eligible to
participate in the 401(k) plan.

1995 Stock Option Plan

      The Company adopted a 1995 Stock Option Plan (the "Plan"),
for officers, employees, directors and consultants of the Company
on November 7, 1995.  The Plan authorized the granting of stock
options ("Plan Options") to purchase an aggregate of not more
than 300,000 shares of the Company's Common Stock.  On February
16, 1996, options for substantially all 300,000 shares were
granted.  On June 9, 1997, the Company's shareholders approved an
amendment to the Plan to increase the number of shares of Common
Stock reserved from issuance thereunder by an aggregate of
300,000 shares.  That same day, 20,000 options were granted to
the Company's Chief Financial Officer and five outside directors,
one of whom (Michael W. Stelzer) is now the Vice President of
Operations and Chief Operating Officer of the Company.  There are
presently outstanding options to purchase 450,200 shares of the
Company's Common Stock that have been granted under the Plan.  No
such options have been exercised.

      The Plan is administered by the Board of Directors or a
Compensation Committee of not less than two disinterested members
of the Board of Directors.  In general, the Board of Directors or
the Compensation Committee, as the case may be, will select the
person to whom options will be granted and will determine,
subject to the terms of the Plan, the number, exercise, and other
provisions of such options.  Options granted under the Plan will
become exercisable at such times as may be determined by the
Board of Directors or the Compensation Committee, as the case may
be.  

      Options under the Plan may be either incentive stock
options ("ISOs"), as such term is defined in the Internal Revenue
Code of 1986, as amended, or non-ISOs.  ISOs may only be granted
to persons who are employees of the Company.  Non-ISOs may be
granted to any person, including, but not limited to, employees
of the Company, independent agents, consultants, as the Board of
Directors or the Compensation Committee, as the case may be,
believes has contributed, or will contribute, to the success of
the Company.  The Board of Directors or the Compensation
Committee as the case may be, shall determine the exercise price
of options granted under the Plan, provided that, in the case of
ISOs, such price may not be less than 100% (110% in the case of
ISOs granted to holders of 10% of voting power of the Company's
stock) of the fair market value (as defined in the Plan) of the
Common Stock on the date of grant.  The aggregate fair market
value (determined at the time of option grant) of stock with
respect to which ISOs become exercisable for the first time in
any year cannot exceed $100,000.  

      The term of each option shall not be more than 10 years
(five years in the case of ISOs granted to holders of 10% of the
voting power of the Company's stock) from the date of grant.  The
Board of Directors has a right to amend, suspend or terminate the
Plan at any time; provided, however, that unless ratified by the
Company's stockholders, no amendment or change in the Plan will
be effective which would increase the total number of shares
which may be issued under the Plan, materially increase the
benefits accruing to persons granted under the Plan or materially
modify the requirements as to eligibility and participation in
the Plan.  No amendment, supervision or termination of the Plan
shall, without the consent of an employee to whom an option shall
heretofore have been granted, affect the rights of such employee
under such option.

Employment Agreements

      The Company entered into employment agreements with each of
Thomas F. Motter, Robert W. Millar and John W. Hemmer, which
commenced on February 1, 1996 and expire on February 1, 2001. 
The agreements require each employee to devote substantially all
of his working time to the Company, provide that each of them may
be terminated for "cause" (as provided in the agreements) and
prohibit each of them from competing with the Company for two
years following the termination of his employment agreement.  The
agreements provide for the payment of an initial base salary of
$135,000 to Mr. Motter, $125,000 to Mr. Millar and $120,000 to
Mr. Hemmer, and became effective upon the closing of the
Company's public offering on July 25, 1996.  Messrs. Motter,
Millar and Hemmer also each received a grant by the Company of
Employee incentive stock options to purchase 106,000, 84,000 and
20,000 shares respectively, of the Company's Common Stock at a
price of $5.00 per share under the Company's Option Plan.  The
agreements provide for salary increases and bonuses as shall be
determined at the discretion of the Board of Directors.

Profit Sharing Plan

      On February 16, 1996, the Company adopted a Profit Sharing
Plan, pursuant to which an amount equal to 10% of the pretax
profits of the Company will be set aside for the benefit of the
Company's officers and key employees.  This funding will be paid
to the Company's officers and key employees as follows:  Thomas
W. Motter, Chairman of the Board, President and Chief Executive
Officer--30%; Robert W. Millar, Vice President of Engineering and
Manufacturing--25%; John W. Hemmer, Chief Financial Officer and
Treasurer--20%; and a pool of 25% to be allocated among the other
officers and key employees as determined by the Compensation
Committee and approved by the Board of Directors.  This funding
will only be paid if the Company's qualified pretax profits
exceed $10,000,000 for any fiscal year beginning October 1, 1996
and ending December 31, 2001.  If the Company's pretax profits
reach $10,000,000 for any fiscal year, the entire pretax profits
for that year will qualify for the funding.  The plan expires at
the end of its fifth fiscal year on December 31, 2001, when all
funds held will be disbursed.

Limitation of Liability and Indemnification  

      The Company reincorporated in Delaware in February 1996, in
part, to take advantage of certain provisions in Delaware's
corporate law relating to limitations on liability of corporate
officers and directors.  The Company believes that the
reincorporation into Delaware, the provisions of its Certificate
of Incorporation and Bylaws and the separate indemnification
agreements outlined below are necessary to attract and retain
qualified persons as directors and officers.  The Company's
Certificate of Incorporation limits the liability of directors to
the maximum extent permitted by Delaware law.  This provision is
intended to allow the Company's directors the benefit of Delaware
General Corporation Law which provides that directors of Delaware
corporations may be relieved of monetary liabilities for breach
of their fiduciary duties as directors, except under certain
circumstances, including breach of their duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct
or a knowing violation of law, unlawful payments of dividends or
unlawful stock repurchases or redemptions or any transaction from
which the director derived an improper personal benefit.  The
Company's Bylaws provide that the Company shall indemnify its
officers and directors to the fullest extent provided by Delaware
law.  The Bylaws authorize the use of indemnification agreements
and the Company has entered into such agreements with each of its
directors and executive officers.

      There is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company as to
which indemnification is being sought, nor is the Company aware
of any threatened litigation that may result in claims for
indemnification by any director, officer, employee or other
agent.

      Insofar as indemnification for liabilities arising under
the Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.

Item 11. Security Ownership of Certain Beneficial Owners and
Management

      The following table sets forth certain information with
respect to beneficial ownership of the Company's Common Stock as
of March 31, 1998 for (i) each executive officer of the Company
(ii) each director of the Company (iii) each person known to the
Company to be the beneficial owner of more than 5% of the
outstanding shares, and (iv) all directors and officers as a
group.

<TABLE>
<CAPTION>

    Name and Address<F1>    Number of Shares   Percent of       
                                               Ownership<F2>
    -------------------    ----------------   ------------
  <S>                         <C>                <C>
  Thomas F. Motter<F3><F6>    557,056            14.7%
  Douglas MacLeod             418,451            11.0%
  Robert W. Millar<F4><F6>    374,605             9.9%
  William C. Fitzhugh<F5>      69,692             1.8%
  Michael W. Stelzer<F5><F6>   62,935             1.7%
  John W. Hemmer<F5><F6>       50,513             1.3%
  Randall A. Mackey<F5>        50,512             1.3%
  David M. Silver<F5>           7,621             0.2%
  Patrick M. Kolenik<F7>        --                *
  Executive officers and
  directors as a group
  (8 persons)                 1,172,934          30.9%
_______________
<FN>

*     Less than 1%.
<F1>  The address for Mr. Motter, Mr. Millar and Mr. Stelzer is
      c/o Paradigm Medical Industries, Inc., 1127 West 2320
      South, Suite A, Salt Lake City, Utah 84119.  The address
      for Mr. MacLeod is 1002 South 10th Street, Tacoma,
      Washington 98405.  The address for Mr. Fitzhugh is 589
      Sharp Avenue West, Twin Falls, Idaho 83301.  The address
      for Mr. Hemmer is 88 Meadow Road, Briarcliff Manor, New
      York 10510.  The address for Mr. Mackey is 170 South Main
      Street, Suite 900, Salt Lake City, Utah 84101.  The address
      for Mr. Silver is 17 Avalon Court, Bethesda, Maryland
      20816.  The address for Mr. Kolenik is 35 Elizabeth Drive,
      Laurel Hollow, New York 11791.
<F2>  Assumes no exercise of the Class A Warrants, the Bridge
      Warrants and the Attorney's Warrants and no conversion of
      outstanding shares of the Company's Series A, Series B and
      Series C Preferred Stock into Common Stock.
<F3>  Does not include 106,000 options granted to Mr. Motter
      under the Company's 1995 Option Plan.
<F4>  Includes 2,000 shares held by William E. Millar, Mr.
      Millar's father, 1,000 shares held by Michael S. Millar,
      Mr. Millar's brother; and 100 shares to Nathan Glynn, Mr.
      Millar's nephew.  Mr. Millar disclaims beneficial ownership
      of these 3,100 shares.  Does not include 84,000 options
      granted to Mr. Millar under the Company's 1995 Option Plan.
<F5>  Does not include 20,000 options granted to each of the five
      directors under the Company's 1995 Option Plan.
<F6>  Does not include 250 shares of Series C Convertible
      Preferred Stock held by each of the four management
      directors.
<F7>  Does not include 2,000 shares of Series C Convertible
      Preferred Stock held by Patrick M. Kolenik.

</FN>
</TABLE>

Item 12. Certain Relationships and Related Transactions

      The information set forth herein describes certain
transactions between the Company and certain affiliated parties. 
Future transactions, if any, will be approved by a majority of
the disinterested members of the Company and will be on terms no
less favorable to the Company than those that could be obtained
from unaffiliated parties.

      The Company subcontracts the manufacture of its
Precisionist 3000 Plus(trademark) and Precisionist Thirty
Thousand(trademark) Workstation to one of its shareholders,
Zevex, Inc. ("Zevex") which is located in Salt Lake City, Utah. 
On September 23, 1996, the Company entered into a Design,
Engineering and Manufacturing Agreement with Zevex for the
engineering and manufacture of the Workstation and Precisionist
Thirty Thousand(trademark).  As of December 31, 1997, Zevex has
manufactured and delivered 39 systems to the Company.  However,
the agreement can be terminated at any time by the Company if
Zevex fails for two consecutive quarters to timely fulfill the
Company's purchase orders, or by Zevex if the Company fails to
timely make the payments required by the agreement after having
received a 20 day notice from Zevex demanding payment.  Zevex is
also under an exclusive contract with the Company, which expires
September 23, 1999, that prohibits Zevex from manufacturing
complete ultrasound or laser surgical systems for any other
company, without permission from the Company.  For the fiscal
years ended September 30, 1996, the three month period ended
December 31, 1996 and the fiscal year ended December 31, 1997,
the Company purchased design and manufacturing services in the
amounts of $353,949, $30,386 and $1,070,000, respectively, from
Zevex.

      On January 8, 1997, the Company subcontracted the
subassembly of the laser module piece of the Photon(trademark)
Laser Phaco(trademark) from Sunrise Technologies, Inc.
("Sunrise").  During the 12 month period ending December 31,
1997, the Company purchased 10 laser module subassemblies for a
total purchase price of $160,000, from Sunrise whose president
was a member of the Company's Board of Directors at the time the
manufacturing agreement was signed.

      On December 19, 1995, the Company entered into a settlement
and release agreement (the "Settlement Agreement") with Douglas
A. MacLeod, a significant shareholder of the Company.  Pursuant
to this agreement, Mr. MacLeod agreed to terminate certain
anti-dilution rights granted to him by the Company.  Under the
terms of this Settlement Agreement, Mr. MacLeod agreed to
terminate his anti-dilution rights in consideration for the
following: (i) Mr. Motter agreeing to sell to Mr. MacLeod from
his personal holdings 61,111 shares of the Company's Common Stock
at a purchase price of $611.11, (ii) Mr. Millar agreeing to sell
to Mr. MacLeod from his personal holdings 38,889 shares of the
Company's Common Stock at a purchase price of $388.89, and (iii)
the Company agreeing to issue to MacLeod an additional 20,000
shares of Common Stock.  Based on the value assigned by the
Company's investment banker, Kenneth Jerome & Company, Inc., of
$1.50 per share, the Company recognized $30,000 of expense for
the 20,000 shares issued by the Company and $149,000 of expense
and additional paid-in-capital for the 100,000 shares sold by Mr.
Motter and Mr. Millar.  The Company represented in the Settlement
Agreement that a public offering of the Company's securities
would be completed by June 1, 1996.  On May 24, 1996, the Company
and Mr. MacLeod amended the Settlement Agreement to indicate that
a public offering of the Company's securities would be completed
by July 15, 1996.  By order dated July 10, 1996, the Securities
and Exchange Commission declared the Company's Registration
Statement to be effective and following the sale of the Company's
securities, the closing of the public offering occurred on July
25, 1996.

      The Photon(trademark) LaserPhaco(trademark) system is
protected under a United States patent issued in 1987 to Daniel
M. Eichenbaum, M.D. (U.S. Patent Number 4,694,828) for the
utility and methods of laser ablation, aspiration and irrigation
of tissue through a hand-held probe of a unique design and
assigned to Photomed, a corporation owned in part by Dr.
Eichenbaum.  The Company secured the exclusive worldwide right to
this patent shortly after its issue, and to the international
patents pending, from Photomed by means of a License Agreement
that entitled Dr. Eichenbaum to royalty payments equal to 1% of
the proceeds from the net commercial sales of the
Photon(trademark) LaserPhaco(trademark) system and accessories in
all medical specialties.  The License Agreement terminates July
7, 2003.  The License Agreement was amended on December 5, 1997
to allow Photomed the right to conduct research, development and
marketing utilizing the patent in certain medical sub-specialties
other than ophthalmology for which the Company would receive
royalty payments equal to 1% of the proceeds from the net sales
of products utilizing the patent.  

      Mr. Mackey, Secretary and a director of the Company since
September 1995, is President and a shareholder of the law firm of
Mackey Price & Williams, which has rendered legal services to the
Company since February 1995 in connection with this public stock
offering and other corporate matters.  Legal fees and expenses
paid to Mackey Price & Williams for the fiscal year ended
December 31, 1997, the three month period ended December 31, 1996
and the fiscal year ended September 30, 1996 totaled $118,765,
$25,468 and $234,504, respectively.  The Company also granted
Mackey Price & Williams warrants to purchase 25,000 shares of
Common Stock at $3.33 per share in partial payment for legal
services relating to the public stock offering.

      Mr. Kolenik, a director of the Company since November 1997,
is a former director of Win Capital Corp. ("Win"), the Placement
Agent for the Series C Convertible Preferred Stock offering. 
Under the terms of an agency agreement with Win, the Company
agreed to pay to Win a commission equal to 9% of the aggregate
purchase price of the Shares sold, or $269,820.  Win was also
paid a non-accountable expense allowance equal to 3% of the
aggregate purchase price of the Shares sold.  The Company has
also entered into an agreement with Win dated August 20, 1997,
wherein Win agreed to perform unspecified investment banking
services for the Company for a two year period, for which the
Company agreed to pay Win a monthly retainer of $2,000 for the
first six months of the agreement, $4,000 per month for the
second six months, and $6,000 per month for the remainder of the
agreement.  In addition, the Company issued Win Warrants to
purchase 191,000 shares of Common Stock at $3.00 per share in
connection with the investment banking agreement and additional
warrants to purchase 100,000 shares of Common Stock at $3.00 per
share for services rendered in the private placement of Series C
Convertible Preferred Stock.

                                                                
               PART IV

Item 13. 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.

Table No.         Document

 2.1        Amended Agreement and Plan of Merger between Paradigm
            Medical Industries, Inc., a California corporation
            and Paradigm Medical Industries, Inc., a Delaware
            corporation(1)**
 3.1        Certificate of Incorporation(1)
 3.2        Bylaws(1)
 4.1        Warrant Agency Agreement with Continental Stock
            Transfer & Trust Company(3)
 4.2        Specimen Common Stock Certificate (2)
 4.3        Specimen Class A Warrant Certificate(2)
 4.4        Form of Class A Warrant Agreement(2)
 4.5        Underwriter's Warrant with Kenneth Jerome & Co.,
            Inc.(3)
 4.6        Attorney's Warrant with Mackey Price & Williams(1)
 4.7        Warrant to Purchase Common Stock with Win Capital
            Corp.
 4.8        Specimen Series C Convertible Preferred Stock
            Certificate
 4.9        Certificate of the Designations, Powers, Preferences
            and Rights of the Series C Convertible Preferred
            Stock
10.1        Exclusive Patent License Agreement with Photomed(1)
10.2        Consulting Agreement with Dr. Daniel M. Eichenbaum(1)
10.3        Confidential Disclosure Agreement with Zevex, Inc.(1)
10.4        Indemnity Agreement with Zevex International, Inc.(1)
10.5        Manufacturing Agreement with Sunrise Technologies,
            Inc.(1)
10.6        Royalty Agreement dated January 30, 1992, with Dennis
            L. Oberkamp Design Services(1)
10.7        Indemnity Agreement dated January 30, 1992, with
            Dennis L. Oberkamp Design Services(1)
10.8        Royalty Agreement (for Ultrasonic Phaco Handpiece)
            with Dennis L. Oberkamp DesignServices(1)
10.9        Lease Agreement with Eden Roc
10.10       Settlement and Release Agreement with Douglas A.
            MacLeod(1)
10.11       Form of Indemnification Agreement(1)
10.12       1995 Stock Option Plan and forms of Stock Option
            Grant Agreements(1)
10.13       Form of Promissory Note between the Company and third
            parties(1)
10.14       Form of Warrant to Purchase Common Stock between the
            Company and third parties(1)
10.15       Employee's Lock-Up Agreement(1)
10.16       Registering Shareholders Lock-Up Agreement(3)
10.17       Employment Agreement with Thomas F. Motter(1)
10.18       Employment Agreement with Robert W. Millar(1)
10.19       Employment Agreement with Jack W. Hemmer(1)
10.20       Amendment of Settlement and Release Agreement with
            Douglas A. MacLeod(3)
10.21       Design, Engineering and Manufacturing Agreement with
            Zevex, Inc.(5)
10.22       License and Manufacturing Agreement with O.B.F. Labs,
            Ltd.  
10.23       Settlement Agreement with Estate of H.L. Federman
10.24       Agreement with Win Capital Corp.
10.25       12% Convertible, Redeemable Promissory Note
10.26       Securities Exchange Agreement
23.1        Consent of Medical Laser Insight(3)
23.2        Consent of Frost & Sullivan(3)
23.3        Consent of Ophthalmologists Times(3)
               
(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 Amendment No. 3 to
            Registration Statement on Form SB-2, as filed on June
            28, 1996.
(5)         Incorporated by reference from Annual Report on Form
            10-KSB, as filed on December 30, 1996

      (b)  Reports on Form 8-K

      On January 7, 1998, the Company filed a report on Form 8-K
regarding pro forma financial statements as of November 30, 1997.

      On February 18, 1998, the Company filed a report on Form
8-K regarding pro forma financial statements as of December 31,
1997.

      On February 27, 1998, the Company filed a report on Form
8-K regarding pro forma financial statements as of January 31,
1998.

<PAGE>
                                                                
             SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
                                                                 
                               PARADIGM MEDICAL INDUSTRIES, INC.



Dated:  April 14, 1998         Thomas F. Motter                 
                               Chairman of the Board, 
                               President and Chief Executive  
                               Officer


      Pursuant to the requirements of the Securities Act of 1934,
this report has been signed by the following persons in
counterpart on behalf of the Company on the dates indicated.

    Signature                 Title                        Date
    ---------                 -----                        ----

Thomas F. Motter    Chairman of the Board,       April 14, 1998
                    President and Chief 
                    Executive Officer                       
                    (Principal Executive 
                    Officer) 


Michael W. Stelzer  Vice President of            April 14, 1998
                    Operations, Chief
                    Operatingng Officer 
                    and Director


Robert W. Millar    Vice President of            April 14, 1998
                    Engineering and
                    and Manufacturing 
                    and Director           



John W. Hemmer     Vice President of             April 14, 1998
                   Finance, Treasurer, 
                   Chief Financial Officer 
                   and Director (Principal 
                   Financial and Accounting 
                   Officer)


Randall A. Mackey  Secretary and Director        April 14, 1998

-----------------   Director                     April   , 1998
William C. Fitzhugh

-----------------   Director                     April   , 1998
David M. Silver

-----------------   Director                     April   , 1998
Patrick M. Kolenik


<PAGE>