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 September 30, 1996, 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)

  1772 West 2300 South                          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 its most recent fiscal year were
$294,993.
                                                      
      The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of December 20, 1996 was
$8,107,000.

      As of December 20, 1996, Registrant had outstanding
3,214,208 shares of Common Stock, 121,704 shares of Series A
Preferred Stock, and 442,023 shares of Series B Preferred Stock.

                 DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registration Statement on Form SB-2, as
filed on March 19, 1996, and amendments thereto are incorporated
by reference into Part IV 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, sells and markets ophthalmic surgical
systems designed for minimal invasive cataract treatment.  The
Company currently markets an ultrasonic cataract removal system
and related disposable products and accessories.  The Company is
developing a laser cataract surgery system which it believes is
superior to current ultrasound technology and which it hopes will
become the preferred worldwide, state-of-the-art system for
cataract treatment.  The Company's laser products are designed to
improve current technology and to permit applications which are
not currently available using conventional ultrasonic systems, or
other traditional medical instruments.  Although the Company is
presently utilizing its core proprietary technology and expertise
in developing its fully integrated laser surgery system to
perform surgical treatment procedures to remove cataracts, the
Company intends to expand the use of its laser systems to treat
other ophthalmic disorders, as well as non-ophthalmic surgical
treatments.

      The Company estimates that there are over 44,000
ophthalmologists worldwide, approximately 16,000 of which are in
the United States.  Since the first use of ophthalmic ultrasound
and laser surgical devices in the early 1970's, new technical
delivery systems and laser wavelengths have broadened the
applications for which ophthalmologists have used these devices
in treating eye disorders.  Industry sources estimate that at
least 90% of all ophthalmologists practicing in the United States
currently use some form of ultrasonic and/or laser system for one
or more eye treatments.

      The Company believes that in 1993 approximately 3.7 million
cataract surgeries were performed worldwide that could have been
done with the Company's products.  Cataract surgery is the single
largest volume and revenue producing surgical procedure for
ophthalmologists worldwide.  Industry sources report that in 1993
over 80% of all cataract procedures in the United States were
performed using a method called phacoemulsification or "phaco,"
which employs an ultrasonic probe device.  The Company
manufacturers and sells such a device, the Precisionist(trademark) 
system. However, the Company believes phaco systems can be difficult
for ophthalmic surgeons to master and are limited in their ability to
be the most minimally invasive method possible.  The Company has
developed a proprietary patented laser system and unique probe
for laser cataract removal that may alleviate these difficulties
associated with phaco systems.  That development was done in
cooperation with Daniel M. Eichenbaum, M.D., a United States
cataract surgeon and medical device engineer.  Dr. Eichenbaum
serves on the Company's Clinical Advisory Board and is the
Company's primary technical consultant for the laser cataract
application.

      This laser system, the Photon(trademark) laser cataract 
system, is intended to be easier to use and safer than present phaco
cataract surgery systems.  The probe is smaller than typical
probes employing ultrasonic technology and delivers laser energy
directly to the desired area with a blunt end and therefore,
unlike the sharp open-ended ultrasonic probes, causes no
vibration throughout the rest of the eye which can damage other
delicate eye structures.  The Company is not aware of any
circumstance where the Photon(trademark) laser cataract could not be used
for cataract surgery other than where a patient's health would
not enable him or her to undergo any type of surgery.  There is
no assurance, however, that disadvantages or problems unique to
the Photon(trademark) laser cataract system will not be discovered during
clinical trials or following United States Food and Drug
Administration ("FDA") market approval.  Because of the
advantages of the Photon(trademark) laser cataract system, the Company
believes that it is positioned to significantly change the
ophthalmic surgical marketplace.  In addition, the Company
believes that its laser system is capable of being configured
with specialty probes for use in surgical procedures unrelated to
ophthalmics, such as plastic surgery, urology and orthopedics. 
These potential non-ophthalmic applications present substantial
growth opportunities including sales within the equipment market
and disposables sales, conducted either directly or through
strategic licensing.  However, potential non-ophthalmic uses of
the Company's laser system are still in the early planning stages
and there is no assurance that these applications will be
developed or approved.  For the near future, the Photon(trademark) laser
cataract system's only target application is cataract removal.

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 entered into a
merger agreement with the Company wherein 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").  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.

      The predecessor company of French Bar was formed on June
16, 1970 as Woodlike Industries, Inc. ("Woodlike").  Woodlike was
organized to design, manufacture, and market building and
construction materials and decorative products made from
bituminous materials, such as plastics, fiber glass and rigid
polyurethane foam.  In April 1972, Woodlike conducted a small
public offering of its common stock.  However, by early 1974,
Woodlike had ceased operations, disposed of its assets and began
looking for a merger candidate with viable business operations.

      In April 1984, Woodlike merged with French Bar Mines, Inc.,
a Montana corporation.  As part of the merger, Woodlike changed
its name from Woodlike Industries, Inc. to French Bar Industries,
Inc. and new management assumed control.  French Bar operated a
mining and tourist business in Montana.  However, it never
generated significant revenues.  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.

      Disorders of the Eye Overview.  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 Overview.  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 way 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 20% of all foreign surgeries.

      Laser Technology Overview.  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 eximer
laser is currently undergoing clinical trials for 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 (iridotomies). 
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
applications, however, must be tested in clinical trials and be
approved by the FDA.

Products

      The Company's principal products are a fully-integrated
laser-assisted surgery system and an ultrasonic surgery 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(trademark) phaco
system for cataract surgery.  The Company also has completed its
pre-clinical 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 Devise Exemption ("IDE") application
submitted to support its filing made in October 1994.  The IDE
was conditionally approved by the FDA in February 1995 upon the
Company's final submission of its product specifications data. 
Final IDE approval was granted in May 1995.  Clinical trials were
begun in April 1996 and were completed in December 1996.

      The Company's solid-state pulsed Nd:YAG (Neodymium:
Yttrium-Aluminum-Garnet) laser system and patented proprietary
hand-held fiber optic laser probe are designed to allow greater
precision when removing cataract tissue from the eye than the
ultrasonic phacoemulsification method presently used.  This
system provides for the introduction of a probe into the eye in
direct contact with the cataract and the performance of three
surgical functions simultaneously:  (i) plasmatization
(disintegration) of the hardened cataract, (ii) irrigation of the
surgical area and (iii) removal of the plasmatized cataract from
the eye through aspiration (suction).  As far as the Company can
determine, no other 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.  Pre-clinical studies to date indicate
that the precision and energy containment afforded by the
Company's laser delivery technology presents the opportunity for
significantly less trauma to adjacent tissue and fewer adverse
effects from thermal and acoustic shock, which should lead to
greater efficacy, safety and ease of use for the procedure.  The
safety, precision and ease of use afforded by the Company's laser
cataract system is anticipated to create a significant demand by
ophthalmic users of current ultrasonic surgical systems. 
Additionally, the Company believes that this system will expand
market demand to ophthalmologists who presently do not use a
surgical system for cataract surgery because of present or
perceived difficulties and/or risks.  There is, however, no
assurance that the above-referenced market demand will in fact
materialize.

      The Company's laser system is based upon the scientific
principle that short-pulsed, high repetition rate 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, due to their use of high frequency
shock waves and vibration to fragment the cataract, ultrasonic
surgical systems can make the procedure difficult and present
unnecessary risk of complication both during and after surgery. 
In contrast, the Company's laser system, which utilizes short,
centralized energy bursts, permits 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 only affects tissues it comes into
direct contact with.

      The Company's product development strategy is initially to
commercialize its core technologies for participation in the
cataract surgery market.  To do this the Company has designed its
proprietary ultrasonic and laser surgical systems with
fully-integrated control software, aspiration fluidics systems
and disposable or semi-disposable delivery systems and
accessories.  The laser system, which the Company expects to be
completed and shipped internationally in mid-1997, is designed on
a modular format allowing for upgrade or replacement of the core
surgical system components.  Further, the Company has filed a
patent with the United States Patent and Trademark Office for an
outpatient surgical instrument to provide a unique, less invasive
means of correcting refractive disorders, including
nearsightedness, farsightedness and astigmatism.  The Company
believes that this corneal surgery system is a unique
computerized tracking and microsurgical tissue cutting system
utilizing ultrasound technology for performing radial keratotomy
surgery.  The patent application is based on the product sensing
and adjusting operations related to the physiology of the eye by
a movable cutter that will not require biological modification of
the cornea.  There is, however, no assurance that the Company
will be awarded this patent or that the Company will be able to
fully develop or commercialize this product.

      Initially, the Company will offer three ophthalmic cataract
surgery systems:  (i) the Precisionist(trademark) phaco system, an
ultrasonic cataract system, (ii) the Precisionist(trademark) Thirty
Thousand ocular surgery system, an ultrasonic cataract surgery
system that can be upgraded to the Photon(trademark) laser cataract system
with the installation of the laser module, and (iii) the Photon(trademark)
laser cataract system.  The combination of these systems forms a
complete small-incision cataract surgery equipment offering for
all practitioners, at all technology and price levels.  A summary
of the key attributes of the Company's surgical systems follows:

      Precisionist(trademark) Phaco System.  This system is designed for
the steadily growing domestic and international cataract surgery
market.  This system is differentiated by being lower in price
and less expensive to operate on a per surgery basis. 
Additionally, it is compact, easier to use and carries an
extended two year warranty based on advanced proprietary
electronics design and increased reliability.  Although compact,
the Precisionist(trademark) is comparable in performance to current
ultrasonic systems.  The system utilizes a proprietary
"smart-pump" software algorithm to control the aspiration in a
manner that "senses" potential vacuum build-up in the eye and
adjusts aspiration flow to eliminate pressure in the eye to
provide a surgical environment in the eye that eliminates the
majority of the problems of fluidic surge and chamber maintenance
problems associated with ultrasound.  The system also features
automated "hands free" priming and tuning, and an advanced
pneumatic pump system to drive the vitrector cutter, which is
capable of operating at 600 cuts per minute for both anterior
cataract and posterior vitrectomy (retinal) applications.

      Precisionist(trademark) Thirty Thousand Ocular Surgery System.  As
the base system for the Photon(trademark) laser cataract system, the
Precisionist(trademark) Thirty Thousand system offers advanced programmable
memories, a VGA color graphic display screen and additional
surgical modalities and controls not offered on the lower priced
Precisionist(trademark).  The Precisionist(trademark) Thirty Thousand 
is intended for installations that want to upgrade to the 
Photon(trademark) laser cataract system when it becomes available.  
The upgrade is accomplished by installation of the Photon(trademark)
laser cataract module into the cabinet and installing a "software 
link."  The Company obtained 510(k) clearance to market this product 
in October 1995.

      Photon(trademark) Laser Cataract System.  As the Company's premier
ophthalmic surgical laser surgery system, the Photon(trademark) laser
cataract system, utilizes an on-board microprocessor computer to
generate short pulse laser energy delivered through a patented
hand-held fiber optic probe to the targeted tissue inside the
eye, while simultaneously irrigating the eye and aspirating
unwanted cataract tissue and fluids.  The system is expandable
with both software and hardware modules, including the actual
laser system.  Another feature of the system is its containment
of energy.  The probe is designed so that the energy used to
emulsify the cataract is contained in a photo vaporization
chamber.  The energy used to remove the cataract is not exposed
to the other contents of the eye.  The system also permits the
surgeon to use standard clinical treatment parameters, or to
customize surgical parameters through an on-screen menu display. 
The modular technology of the laser fluidics systems allows for
upgrade of the Precisionist Thirty Thousand system to the Photon(trademark)
laser cataract surgical system.  The system also allows cataract
removal through incisions in the 2 to 3 mm range as opposed to
the 3 to 6 mm range currently performed with ultrasound systems. 
The Company believes that the trend in intraocular lens
development to reduce the size of intraocular lens implants which
are placed in the eye during cataract surgery will make its laser
system which has smaller incision requirements more attractive. 
There is no assurance, however, that smaller intraocular lenses
or lenses which can be folded or injected, thus minimizing the
size of the incision required to insert the lenses, will be
developed.

      Accessory Instruments and Disposables.  Both the
Precisionist and Photon(trademark) laser cataract surgical systems utilize
accessory instruments and disposables, some of which are
proprietary to the Company.  These include replacement ultrasound
and laser probes, disposable vitrectomy cutters, diathermy probes
and sundry tips, fluidic cassette packs and tubing sets and other
disposable accessories.

Marketing and Sales

      General.  Cataract surgery is currently the most common
ophthalmic surgical procedure and is performed on approximately
3.7 million patients worldwide each year.  In the United States,
industry analysts predict that the number of cataract surgeries
will increase modestly over the next few years, with such modest
growth due to changes and uncertainties in the health care and
insurance industries.  However, by the early 2000's, analysts
predict strong growth in the number of cataract surgeries as the
health care industry stabilizes, the baby boomer population
matures and the elderly population expands.  A primary objective
of cataract surgery is to remove the opacified (cataractous) lens
through an incision that is as small as possible.  Currently,
there are two primary methods of cataract extraction:  manual
ECCE (extracapsular cataract extraction) and ultrasound
phacoemulsification-aspiration (phaco).  The manual ECCE method
consists of forcing the cataractous lens out of the eye and
generally requires an incision measuring 9 to 11 millimeters
long.  The ultrasound phaco method, on the other hand, involves
only a 3 to 6 millimeter incision to achieve the same result, but
can be a difficult procedure to perform and is accompanied by
potential risks, including inadvertent perforation of the
posterior capsule and damage to the cornea, iris and surrounding
tissue.  

      According to the Healthcare Blue Book there are
approximately 6,800 hospitals and 1,800 ambulatory outpatient
surgery centers in the United States.  The Company estimates that
there are an additional 22,000 hospitals and 3,500 ambulatory
outpatient surgery centers worldwide (there are 1,200 hospitals
in Canada alone).  It is the Company's belief through its
participation in the ophthalmic surgical market that an excess of
80% of hospitals and surgery centers offer cataract removal
surgery to their patients.

      Medical Laser Insight reports that there are approximately
44,000 ophthalmologists in the world and 16,000 ophthalmologists
in the United States.  Frost and Sullivan report that 83% of
United States cataract surgeries were performed using ultrasonic
phaco in 1993.  Internationally, trade publications have reported
the use of ultrasonic phaco to be approximately 20% of all
cataract surgeries.  Notwithstanding this high acceptance of the
technology, ultrasonic phaco can present limitations and
difficulties to the surgeon.  The August 15, 1993 issue of
Ophthalmology Times reported that 42% of ophthalmologists
surveyed from the American Society of Cataract and Refractive
Surgery anticipated using a laser system for cataract removal by
the year 2000.  The Company believes that a significant
population of domestic and international ophthalmologists
anticipate, and will embrace, the laser technology for cataract
removal, thereby replacing a technology that was introduced in
the early 1970's.

      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 consumables 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.  The Company
believes this is or will become a worldwide phenomena.

      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.

      The Company believes that the ophthalmic surgical device
market will see increased growth during the next several years. 
Further, the Company believes that the international market is
maturing and thus provides a large market for both replacement
and original cataract removal devices.  However, there is no
assurance that the Company's industry or markets will continue to
grow or that health care reforms will not  have a material
adverse effect on the market for the Company's products.

      Current Market Acceptance and Potential.  As of November
30, 1996, the Company had distributed 83 Precisionist(trademark) phaco
systems since the system was introduced in mid-1992.  The
principal purchasers have been ophthalmologists and clinics
throughout the world.  The Company currently has orders for 95
laser systems, including 61 orders from purchasers in 21
countries, including Argentina, Austria, Brazil, Cyprus, Egypt,
England, Greece, India, Indonesia, Iran, Italy, Korea, Mexico,
Oman, Pakistan, Peru, Spain, Taiwan, Thailand, Turkey, and the
United States.  As of November 30, 1996, the aggregate purchase
price for these orders exceeds $6,000,000.

      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 10 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.

      The Company believes that the market for cataract surgical
systems will continue to grow as current systems are replaced
with newer, advanced, lower cost systems, as ophthalmologists in
emerging countries adopt the procedure and as surgeons migrate
from hospital-based surgical practices to outpatient surgery
centers.  The number of surgeons performing phaco cataract
removal has grown dramatically in the United States since 1988. 
The Company believes that the generally more conservative
international market will follow this growth pattern.  A summary
of the ophthalmic surgeons using the phaco method follows:

<TABLE>
<CAPTION>
                1988    1989    1990    1991    1992    1993
                ----    ----    ----    ----    ----    ----
<S>             <C>     <C>     <C>     <C>     <C>     <C>
United States    19%     40%     57%     69%     71%     81%
International     5%      7%     10%     12%     15%     20%

</TABLE>

      During 1993, the United States ophthalmic surgical device
market generated $631.2 million in revenues.  The Company
estimates that the United States' ophthalmic surgical device
market generated at least the same amount of revenue in 1994. 
The Company estimates that thousands of hospitals internationally
will replace or install cataract removal systems in the next five
years.  Because of recent uncertainty and change in the health
care industry, including health care reform and Government
reimbursement programs, facilities have been hesitant to replace
their current phaco systems in the United States because of the
substantial cost involved.  However, as the United States
population grows older and as the industry stabilizes, industry
analysts predict that increased numbers of cataract and other eye
disorder surgeries and industry stability will motivate a large
number of system replacements, especially since many facilities
currently are not replacing or upgrading the systems they have
been using for several years.  The Company believes that this
environment will provide substantial marketing opportunities to
sell both its phaco laser systems as a replacement to the older
and outdated phaco systems still being used.

      Marketing Strategy.  The Company typically markets its
products internationally through a network of dealers and
domestically through manufacturer's representatives.  As of
November 30, 1996, the Company had three direct domestic sales
representatives and 16 manufacturer's representatives in the
United States and 32 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 markets its products by identifying
customers through internal market research, trade shows, and
customer networking.  In addition, the Company 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.

      To garner sales from the introduction of its laser system,
the Company is marketing its products through a unique strategy. 
The Company offers the ultrasonic Precisionist(trademark) system with an
unconditional arrangement under which the customer may upgrade to
a Photon(trademark) laser cataract system when that system receives final
FDA approval and systems become available.  Under this
arrangement, the customer receives full credit for the purchase
price of the Precisionist(trademark) system against the price of the new
Photon(trademark) laser cataract system.  As of November 30, 1996, the
Company had distributed 83 Precisionist(trademark) systems since the first
system was introduced in mid-1992.  The principal purchasers have
been international ophthalmologists who purchased the system
through Surgidev Corporation in Goleta, California, a
manufacturer and distributor of IOL implants.  Surgidev
Corporation purchased those systems at wholesale from the Company
for resale to their international dealer-customers.  After the
contract with Surgidev Corporation expired in 1994, the Company
increased sales by reducing its dependence on Surgidev
Corporation and by selling directly through local international
dealers in 32 different countries.  The Company hired two direct
sales representatives in the United States in December 1994 and
a third sales representative in October 1996.  The domestic
direct sales force is intended to increase the Company's domestic
market coverage.

      A key advantage the Company has over other competitive
producers of phaco systems is the ability to upgrade the
ultrasound Precisionist(trademark) system to a laser system at a future
date.  The Company began marketing a trade-up program in early
1994 to allow any purchaser of one of the Company's ultrasound
systems to upgrade, by paying the price difference, to a Photon(trademark)
laser cataract system when those systems become available.  To
the Company's knowledge, no other ultrasound system or laser
company has the ability to offer an upgrade program.
      
      Product advertising is focused in the three industry trade
newspapers, Ocular Surgery News, Ophthalmology Times and Eyecare
Technology.  Most of the ophthalmologists in the United States
receive these three magazines through professional subscription
programs.  Product publicity for the Company's laser surgical
system is ongoing.  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
manufacture 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 sub-contracts the manufacture of its
Precisionist(trademark) and Photon(trademark) laser cataract systems 
to one of its shareholders, Zevex International, 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
Photon(trademark) laser cataract system, except for the laser cavity and
unique surgical probes.  Under the terms of the agreement, the
Company will pay Zevex a total of $1,000,000 in the form of
periodic milestone payments for engineering and design services
relating to the completion of a prototype of the Company's Photon
laser cataract system and 19 other such systems.  To receive the
final milestone payments, including a $140,000 incentive bonus,
Zevex must deliver the prototype and 19 other systems to the
Company fully assembled and operational by March 31, 1997.  In
addition, the system must be validated according to IEC 601
standards by June 15, 1997.  The Company agrees to purchase each
completed system from Zevex at a cost equal to the lesser of
$19,000 or the actual cost for Zevex to manufacture the system,
plus 30%.  The term of the agreement is for three years. 
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.  

      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") under a
separate manufacturing agreement which expired June 1, 1996.  The
Company is negotiating with Sunrise to renew the agreement.  The
President and Chief Executive Officer of Sunrise is currently on
the Company's Board of Directors.  The Company is in the process
of establishing an internal laser cataract probe manufacturing
facility and plans all probe production 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.

      Installation, Service and Training.  The Company installs
and maintains its products through its international dealers or
representatives and domestic direct sales force.  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 the date of this
prospectus, the Company has not sold any one year service
contracts.

      Third-Party Reimbursement.  It is expected that the
Company's laser systems will generally be purchased by
ophthalmologists and hospitals which 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
materially adversely affecting the Company's ability to develop
new products on a profitable basis.

Research and Development

      The Company's primary product development strategy is to
commercialize its core technology for participation in the
cataract surgery market.  Further, the Company believes that its
laser systems may potentially have broader ophthalmic
applications, as well as non-ophthalmic medical and dental
applications.  Consequently, the Company believes that a strong
research and development capability is important for the
Company's future.  The Company, therefore, has contacted several
recognized and respected consultants and other technical
personnel to act in technical and medical advisory capacities. 
Several of these consultants have been organized to form a
Clinical Advisory Board which provides the Company with expert
and technical support for current and proposed products, programs
and services.

      The Company also believes its research and development
capabilities provides it with the ability to respond to
regulatory developments that may, from time to time, require the
Company to effectively deal with U.S. and foreign government
entities who oversee the Company's products.  The Company intends
to continue investing in research and development and strengthen
its ability to enhance existing products and develop new
products.  The Company spent $207,451 on research and development
in fiscal year 1994, $236,043 in fiscal year 1995 and $192,917 in
fiscal year 1996.

Competition

      General.  The Company is subject to competition from two
principal sources:  (i) manufacturers of competing ultrasound
systems for performing cataract treatments and (ii) developing
technologies for cataract and ophthalmic surgical treatment.  The
cataract surgical equipment industry is dominated by a few large
companies who 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 Company's market.  The remaining market is fragmented among
emerging smaller companies, some of which are foreign.

      Most major competitors either entered or expanded into the
market 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, their products cannot be
ignored even though, under current circumstances, they may not
appear to be formidable competitors. 

      The Cataract Surgical System Industry.  Presently, products
currently in use are offered by the major manufacturers utilizing
ultrasonic technology.   Additionally, those systems rely on
accessories including single-use cassette packs and other
ancillary surgical disposables such as saline solution, sutures
and intraocular lens 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(trademark) ultrasonic phaco system
has the ability to use either reusable or single-use disposable
components.  The Photon(trademark) laser cataract system utilizes 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 the quality control and income capability
from 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(trademark) Phaco System, which is comparable to advanced
ultrasonic systems, is $45,500.  The list price for the
Precisionist(trademark) Thirty Thousand 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 Alcon Laboratories/Surgical Division, Storz
Instruments, Allergan Medical Optics and Chiron Vision as its
primary competitors in the ultrasound phaco cataract removal
market.

      Laser Equipment Manufacturers.  Ophthalmic surgical
equipment offered, or being readied for market, in the United
States is typically presented or displayed at the American
Academy of Ophthalmology held each year in November.  Prior to
1993, no fully operational laser-assisted cataract surgery system
was ever present or displayed as a commercial product.  In
November 1993, October 1995 and October 1996, however, the
Company presented the Photon(trademark) laser cataract system at the
American Academy of Ophthalmology meeting.

      To the Company's knowledge, only four other companies have
attempted 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.  Based on the
Company's opinion that the Photon(trademark) laser cataract system 
is not only operational, but also meets many of the market's
requirements for immediate commercialization, the Company
believes that, at least for the immediate future, there is no
directly competing laser-assisted cataract surgical system
available to 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 always 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 other parties.

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 Company intends, however, to file patents on its proprietary
cassette system utilized in both the ultrasonic Precisionist(trademark)
Thirty Thousand system and in its Photon(trademark) laser cataract system. 
Such patents will be filed prior to product shipments being made
internationally and in the United States.

      The Photon(trademark) laser cataract 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.  The Company secured the
exclusive worldwide right to this patent shortly after its issue,
and to the international patents pending, from Dr. Eichenbaum by
means of a license agreement that entitled Dr. Eichenbaum to a
royalty payment equal to 1% of the proceeds from the net
commercial sales of the Photon(trademark) laser cataract system and
accessories in all medical specialties.  The Royalty Agreement
terminates July 7, 2003.  The Company has also entered into a
Consulting Agreement with Dr. Eichenbaum which provides him with
consulting fees equal to $25,000 per year through July 7, 2003. 
Dr. Eichenbaum is also the Company's lead technical engineering
and clinical investigator for the Photon(trademark) laser cataract system
and is a member of the Company's Clinical Advisory Board.

      The Company has filed for a United States patent on an
innovative corneal surgery system to treat nearsightedness,
farsightedness and astigmatism.  This device utilizes the
Company's core ultrasound technology.  This device presents a
novel means of reducing or eliminating corneal refractive surgery
complications and improving the post-operative outcome for radial
keratotomy refractive surgery.  It is designed to be an
alternative to expensive corneal refractive lasers.  The Company
intends to continue its development of patentable technology
products for manufacture and sale, or for licensing to strategic
partners in ophthalmology and other medical specialties.

      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 systems are regulated as medical
devices by the FDA under the FDC Act.  As such, these devices
require premarket clearance or premarket approval by the FDA
prior to commercialization.  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 route 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 pre-marketing approval ("PMA"), the manufacturer or
distributor may seek FDA 510(k) premarket clearance for the
device by filing a 510(k) premarket notification.  The 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.  By regulation, the FDA has
no specific time limit by which it must respond to a 510(k)
notification.  The FDA has recently been requiring more rigorous
demonstrations of substantial equivalence in connection with
510(k) notifications and in many cases, the time periods required
for product approvals have increased.  There can be no assurance
that the Company will obtain 510(k) premarket clearance for any
of the future devices for which the Company seeks such clearance.

      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 continued operations.

      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 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 usually done with a limited number of patients at one clinical
trial site.  If the results of the first study phase are
promising, the sponsor 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 company 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 company
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 a lengthy and
expensive one, 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 FDA 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 a performance
standard, and to comply with labeling and certification
requirements.  Various warning labels must be affixed to the
laser, depending on the class of the product under the
performance standard.

      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 hazardous or potentially hazardous
substances.  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
profitability.  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 these countries, the Company also expects 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, Spain and Scandinavia, have not
developed a regulatory agency for intensive supervision of such
devices.  Instead, they generally have been willing to accept the
approval of the FDA.  Therefore, a PMA, 510(k) or approved IDE
from the FDA is tantamount to approval in those countries.  These
countries and most third world countries have simply deferred
direct discretion to the licensed practicing surgeons themselves
to determine, along with other professional discretion, the
nature of devices that they will use in medical procedures.  Both
the Precisionist(trademark) system (the Company's ultrasonic system) and
the Photon(trademark) laser cataract system (the Company's laser-assisted
system) are devices requiring such approval.  Therefore, a
significant aspect of the acceptance of the devices in the market
is, in large part, the effectiveness of the Company in obtaining
the necessary approvals.  Having an approved IDE will allow the
Company, once adequate funding is available, to obtain export
rights to manufacture and ship over $6 million in backlog orders
it has received from international dealers.

Regulatory Status of Products

      The Precisionist(trademark) and the Precisionist(trademark)
Thirty Thousand Ocular Surgery Systems.  Pursuant to Section 510(k)
of the Food Drug and Cosmetic Act ("FD&C"), the FDA granted market
clearance for the commercialization of the Precisionist(trademark)
system in 1990 and the Precisionist(trademark) Thirty Thousand 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 third
world countries, including several countries in the Middle East
and Latin America, those areas are open for sales.

      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.  The Company has acquired
permission from the FDA to manufacture the device, and export
approval from the United States is pending.  The Company expects
to have systems available for delivery outside the United States
by March 1997.  Photon(trademark) laser cataract sales may commence in
foreign markets as soon as the Company has devices available for
delivery.  Orders can also be delivered to dealers and
manufacturer's representatives in such countries as Japan and
Korea where the dealers will make applications for approval. 

      With regard to the United States, although the Photon(trademark)
laser cataract system is uniquely configured in an original and
proprietary manner, its distinctive component is the laser system
it employs.  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 submitted its Premarket Notification under
Section 510(k) of the FD&C Act for the Photon(trademark) laser cataract
system in September 1993.  The FDA requested clinical support
data for claims made in the 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 successfully completed
the clinical surgeries in December 1996.  The Company has also
provided the FDA with other operational, clinical and safety data
and results that the Company believes qualifies the Photon(trademark) laser
cataract system for "substantial equivalence" to medical devices
previously cleared for commercialization.  The Company received
its documentation for Export of Unapproved Devices from the FDA
as soon as the IDE was granted and is now completing this
documentation.  With permission to export, the Company can
manufacture the Photon(trademark) laser cataract system in the United
States and export against its international customer backlog.

Employees

      As of December 20, 1996, the Company had 15 full-time
employees.  This number does not include the Company's 16
manufacturer's representatives who are independent contractors
rather than employees of the Company.  The Company also utilizes
13 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.  The Company
considers its relations with its employees to be good.


Item 2. Description of Properties

      The Company's executive offices are currently located at
1772 West 2300 South, Salt Lake City, Utah.  This facility
consists of approximately 5,400 square feet of leased office
space under a one year lease that will expire on December 31,
1997.  The facility is leased from Tri-Cox, L.C., a Utah limited
liability company at a base monthly rate of $2,972 plus a monthly
common maintenance area fee of $354.  Pursuant to the lease, the
Company pays all insurance on the premises.  The Company believes
it will be able to either enter into a new lease after the
current lease expires or find new space to lease.  The Company
believes that this facility is adequate and satisfies its needs
for the foreseeable future.

Item 3. Legal Proceedings

      On November 25, 1996, the Company was served with a Summons
and Complaint in an action commenced in the United States
District Court for the Southern District of New York against the
Company by Federman Associates, Inc. ("Federman Associates"), a
New York based investment banking company, and its principal
officer, Hyman L. Federman ("Federman").  The action is based
upon a March 31, 1995, agreement between Federman Associates and
the Company (the "Agreement") in which Federman Associates agreed
to obtain $5,000,000 to $8,000,000 in capitalization for the
Company prior to December 31, 1995 in exchange for the right to
purchase a five percent (5%) equity position in the Company for
$25,000 and the payment of $3,000 per month for a period of 36
months.  The action is also based upon the additional services
Federman Associates alleges it performed for the Company. 

      Federman and Federman Associates assert in their first
claim for relief that they fully performed the Agreement and are
therefore entitled to 256,780 shares of the Company's common
stock and $3,000 per month for a period of 36 months commencing
July 1996.  In their second claim for relief, Federman and
Federman Associates claim that they "were ready, able and willing
to perform" the Agreement, but were prevented from performing the
Agreement by the Company not filing a Registration Statement with
the Securities and Exchange Commission (the "Commission") within
the requisite time period.  In the final claim for relief,
Federman claims he is personally owed 100,000 shares of Common
Stock for the additional services he claims to have performed.

      It should be noted that Federman passed away during the
last week of November, 1996.  The lawsuit will be therefore be
turned over to Federman's estate.  The Company believes the
Complaint brought by Federman Associates and Federman is without
merit as Federman Associates did not obtain the required
capitalization for the Company prior to December 31, 1995 and
there was no agreement between Federman and the Company for the
payment of services performed by Federman.  The Company intends
to vigorously defend the action.  Nevertheless, in the event the
Company does not prevail in its defenses, the lawsuit could have
a material adverse impact on the Company's financial condition
and could result in dilution to the Company's shareholders.

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 Company's Common Stock, Class A Warrants and Units
(each Unit consisting of one share of Common Stock and one Class
A Warrant) trade on the Nasdaq SmallCap Market under the
respective symbols of "PMED", "PMEDW" and "PMEDU".  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 
      (through December 20, 1996). . 5-5/8      

</TABLE>

      The Company's Series A Preferred Stock and Series B
Preferred Stock are not 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 and Series B
Preferred 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 and Series B 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 deems relevant.  The Company
issued 6,764 shares of its Series A Preferred and 6,017 shares of
its Series B Preferred on January 8, 1996 as a stock dividend to
Series A and Series B shareholders of record as of December 31,
1994.

      As of December 20, 1996, there were 612 record holders of
Common Stock, 21 record holders of Series A Preferred Stock and
36 record holders of Series B Preferred Stock.


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

General

      The following discussion and analysis of the Company's
financial condition and results of operations should be read in
conjunction with the Financial Statements (including the notes
thereto), and the other information included elsewhere herein. 
The Company's fiscal year runs from October 1 to and including
September 30.

      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
fiscal years ending September 30, 1994, 1995 and 1996 include
international and domestic sales of the Precisionist Phaco
system, research and development for the Photon(trademark) laser cataract
system and primary research for other new products and
businesses.

Results of Operations 

      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
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 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 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 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 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 1996, the Company incurred $179,000 of expenses
in connection with obtaining the relinquishment of certain
anti-dilution rights.  See "Item 13.  Certain Relationships and
Related Transactions."

      Fiscal Year Ended September 30, 1995 Compared to Fiscal
Year Ended September 30, 1994.  

      Sales increased by $39,703, or 8%, to $507,584 in fiscal
1995 from $467,881 in fiscal 1994.  This increase was primarily
due to increased sales of the Company's Precisionist Phaco System
and the sale of one prototype Photon(trademark) laser cataract system. 
Cost of sales decreased $42,098, or 14%, to $266,348 in fiscal
1995 from $308,446 in fiscal 1994.  Cost of sales decreased as a
percentage of net revenues to 52% in 1995 as compared to 66% in
1994.  The reduction in cost of sales as a percentage of net
revenues was the result of increased unit sales in 1995 at higher
retail prices through a direct sales force in the United States
and a reduction in cost of sales on a per unit basis resulting
from lower component and accessory prices in 1995.

      Marketing and selling expenses increased by $77,483, or
22%, to $428,265 in fiscal 1995 from $350,782 in fiscal 1994. 
This increase was primarily due to expanded marketing,
advertising and publicity activities related to the FDA approval
of the laser-ready Precisionist Thirty Thousand ocular surgery
system, the Company's laser upgrade sales program, expanded
convention activities including symposiums, live demonstrations
of the laser system, expanded training courses and attendance at
the European Society of Cataract and Refractive Surgery meeting
to expand international distribution and backlog.  

      General and administrative expenses increased by $70,518,
or 21%, to $407,803 in fiscal 1995 from $337,285 in fiscal 1994. 
This increase was the result of increased administrative costs
related to preparation for the planned public offering of the
Company's Common Stock and the expansion of sales activities. 
The Company anticipates increasing its staff significantly to
support the activities associated with the introduction of the
Photon(trademark) laser cataract system.

      Research and development expenses increased by $28,592, or
14%, to $236,043 in fiscal 1995 from $207,451 in fiscal 1994. 
This increase was due to the continued development of the Photon(trademark)
laser cataract System, including costs associated with
development, submission and management of the premarket
notification and investigational clinical trial plan through the
FDA.  The Company expects the amount spent on research and
development for the Photon(trademark) laser cataract system and new
products to increase in fiscal 1996.

Liquidity and Capital Resources

      The Company used cash in operating activities of $1,315,399
in fiscal 1996 compared to $979,848 for the comparable period in
1995.  The increase in cash used in fiscal 1996 was a result of
the higher loss during that period.  The Company used cash in
investing activities of $590,921 in fiscal 1996 compared to
$40,681 for the comparable period in 1995.  These operating and
investing cash outflows were financed primarily from the proceeds
of private placements of the Company's preferred stock and Bridge
Notes and the public offering.

      The Company generated $6,250,000 from the public offering
of its Common Stock before deducting expenses totaling
$1,509,569.  The Company generated $575,000 from the private
placement of Bridge Notes in fiscal 1996.  In fiscal 1996, the
Company made $611,256 in principal and interest payments to
retire the Bridge Notes and $61,829 in principal payments on
long-term debt.  During fiscal 1995, the Company received
proceeds from the private placement of its Series B Convertible
Preferred Stock in the net amount of $1,469,650.  During fiscal
1995, the Company made $143,261 in principal payments on
long-term debt.

      The Company used cash in operating activities of $979,848
in fiscal 1995, compared to cash used in operating activities of
$794,528 in fiscal 1994.  The increase in cash used was a direct
result of the increase in operating expenses, which was only
partially offset by increased gross profit from product sales. 
The Company used cash in investing activities of $40,681 in
fiscal 1995, compared to cash used in investing activities of
$12,112 in fiscal 1994.  The increase in cash used in fiscal 1995
is primarily a result of the Company's purchase of an automobile
using proceeds from a bank loan.  These operating and investing
cash outflows were financed primarily from the proceeds of
private placements of the Company's preferred and common stock.
      
      From May 1994 to September 1995, the Company raised a total
of $1,972,000 from a private placement of its Series B
Convertible Preferred Stock.  In fiscal 1994 the net proceeds
from this private placement were approximately $183,470 after
deducting commissions and expenses totaling $59,530, and in
fiscal 1995 the net proceeds were $1,469,650 after deducting
commissions and expenses totaling $259,350.  Through April 1994
the Company raised a total of $464,000 from a private placement
of its Series A Convertible Preferred Stock.  The net proceeds
from this private placement were $403,680 after deducting
commissions and expenses totaling $60,320.  During fiscal 1994
the Company also raised $108,225 from the issuance of its common
stock.  Such proceeds were for working capital purposes,
including general and administrative expenses, research and
development related to the Company's present and new products and
to repay $12,807 of long-term debt in fiscal 1994 and $143,260 of
long-term debt in fiscal 1995.  

      In March 1993, the Company obtained a loan from the Utah
Technology Finance Corporation ("UTFC") in the amount of $50,000. 
The loan bears interest at a rate of 4% above the prime rate per
annum.  In September 1993, the Company obtained a second loan
from UTFC in the amount of $40,000.  The loan bears interest at
a rate of 4% above the prime rate per annum.  The proceeds from
both loans were used for working capital purposes, including
general and administrative expenses and research and development
related to the Company's present and new products.  The UTFC
loans were paid off from the proceeds of the Company's public
offering. In September 1995, the Company obtained a 9.95% loan
from a bank to purchase an automobile.  

      The Company expects that the net proceeds of the public
offering will enable it to meet its liquidity and capital
requirements for approximately 12 months following the completion
of the offering in July 1996.  There can be no assurance that the
Company can generate sufficient revenues from product sales to
satisfy its working capital requirements after such time.  The
Company's working capital requirements will depend upon numerous
factors, including progress of the Company's research and
development program for the development of new products and new
applications for its present core product, the success of its
regulatory programs with domestic and foreign agencies for its
new products, the levels of resources devoted by the Company to
the development of manufacturing and marketing capabilities,
technological advances, the status of competitors and the success
or lack thereof of the Company's marketing efforts.  To meet its
short-term and long-term requirements, including research and
development activities, the Company may be required to obtain
additional financing.  The Company currently has a $600,000 line
of credit with Key Bank related to accounts receivable and
inventory financing.  The Company may 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 September 30, 1996, the Company had net operating loss
carryforwards (NOLs) of approximately $3,300,000 and research and
development tax credit carryforwards of approximately $47,700. 
These carryforwards are available to offset future taxable
income, if any, and expire in the years 2005 through 2011. 
Because the Company has yet to recognize significant revenue from
the sale of its Photon(trademark) laser cataract System, a valuation
allowance has been provided in full for these deferred tax
assets.  The Company's ability to use its NOLs to offset future
income 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 the 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

      The Company intends to adopt the disclosure approach
provided for in Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock Based Compensation, with
respect to options and warrants granted to employees.  Because
the Company has only a minimal investment in long-lived assets,
the adoption of SFAS 121, Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of, and which will occur October
1, 1996, is not expected to have an impact on the Company.

<PAGE>

Item 7.  Financial Statements and Supplementary Data

Report of Independent Accountants . . . . . . . .    F-2

Balance Sheet . . . . . . . . . . . . . . . . . .    F-3

Statements of Operations. . . . . . . . . . . . .    F-4

Statements of Changes in Stockholders' Equity . .  F-5 to F-7

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

Notes to Financial Statements . . . . . . . . . . .F10 to F-21

<PAGE>

       REPORT OF INDEPENDENT ACCOUNTANTS


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

We have audited the accompanying balance sheet of Paradigm
Medical Industries, Inc. (the Company) as of September 30, 1996,
and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended
September 30, 1996 and 1995.  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 September 30, 1996,
and the results of its operations and its cash flows for the
years ended September 30, 1996 and 1995 in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Coopers & Lybrand L.L.P.
Salt Lake City, Utah
November 8, 1996


<PAGE>
             Paradigm Medical Industries, Inc.                  

<TABLE>
<CAPTION>

                      BALANCE SHEET
                 as of September 30, 1996
                         --------                               

                                   
ASSETS
<S>                                            <C>
Current assets:
  Cash and cash equivalents                     $ 3,040,152 
      Marketable debt securities, 
        available-for-sale                          486,039 
      Trade accounts receivable                      55,454 
      Inventories                                   369,045 
      Prepaid expenses                               18,361 
                                                -----------
      Total current assets                        3,969,051 

Deferred charges                                    100,000 
Property and equipment, net                         123,544 
                                                -----------

      Total assets                              $ 4,192,595 
                                                ===========

<CAPTION>
      LIABILITIES AND STOCKHOLDERS' EQUITY 
<S>                                            <C> 
Current liabilities:
  Accounts payable                             $     38,656 
  Accrued liabilities                               118,359 
  Note payable to bank-current                        3,198 
                                               ------------
      Total current liabilities                     160,213 

Note payable, less current portion                   16,455 
                                               ------------
      Total liabilities                             176,668 
                                               ------------

Commitments (Notes 4, 10 and 11)

Stockholders' equity: 
  Preferred stock, Authorized:  
  5,000,000 $.001 par value shares
    Series A, Authorized:  500,000 shares;
      issued and outstanding: 122,764 $.001
      par value shares (aggregate liquidation 
      preference of $122,764)                           123
    Series B, Authorized: 500,000 shares; 
      issued and outstanding: 466,055 $.001 
      par value shares (aggregate liquidation 
      preference of $1,864,220)                         466 
    Additional paid-in capital, preferred stock   1,975,487 
    Common stock, Authorized: 20,000,000 shares;
      Issued: 3,174,198 shares; Outstanding:
      3,171,598 shares; $.001 par value               3,172 
    Additional paid-in capital, common stock      6,186,251 
    Treasury stock, 2,600 shares, at cost            (3,777)
    Unearned compensation                           (82,083)
    Accumulated deficit                          (4,050,009)
    Unrealized loss on marketable debt 
      securities, available-for-sale                (13,703)
                                                ------------
      Total stockholders' equity                  4,015,927 
                                                ------------
      Total liabilities and 
        stockholders' equity                    $ 4,192,595 
                                                ===========
</TABLE>

            The accompanying notes are an integral
               part of the financial statements
                            F - 3

<PAGE>
       
                   Paradigm Medical Industries, Inc.            

<TABLE>
<CAPTION>
                       
                     STATEMENTS OF OPERATIONS
         for the years ended September 30, 1996 and 1995

                                          1996         1995
                                          ----         ----
<S>                                 <C>             <C>
Sales                               $   252,134     $  507,584 
Cost of sales                           180,010        266,348 
                                    -----------     ----------
     Gross profit                        72,124        241,236 
                                    -----------     ----------

Operating expenses:
  Marketing and selling                 216,128        428,265 
  General and administrative            823,191        407,803 
  Research and development              288,854        236,043 
                                    -----------     ----------
     Total operating expenses         1,328,173      1,072,111 
                                    -----------     ----------
Operating loss                       (1,256,049)      (830,875)
                                    -----------     ----------

Other income (expense):
  Stock issued for relinquishment
    of anti-dilution rights            (179,000)        (3,425)
  Interest income                        42,859         10,124 
  Interest expense                      (56,829)        (8,381)
                                     ----------     ----------
                                       (192,970)        (1,682)
                                     ----------     ----------

Net loss                             (1,449,019)      (832,557)

Preferred stock dividend on 6% 
  Series A and 12% Series B 
  Preferred Stock                                      (51,124)

Return of stock dividend on 12%
  Series B Preferred Stock                  848                 
                                     ----------     ----------  
  
Net loss attributable to common 
  shareholders                      $(1,448,171)    $ (883,681)
                                    ===========     ==========

Net loss per common share                 $(.61)         $(.38)
                                    ===========     ==========

Shares used in computing net loss 
  per common share                    2,379,121      2,352,031 
                                    ===========     ==========

</TABLE>

              The accompanying notes are an integral
                part of the financial statements
                             F - 4

<PAGE>

                 PARADIGM MEDICAL INDUSTRIES, INC.
             STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
            for the years ended September 30, 1996 and 1995
<TABLE>
<CAPTION>

                                  Preferred Stock
               -------------------------------------------
                     Series A              Series B
               -------------------   --------------------   
                 No. of
                 Shares    Amount     Shares     Amount   
                --------  --------   --------   ---------  
<S>             <C>       <C>        <C>        <C>       
Balance at 
September 30,
1994            116,000   $403,680    60,750   $  183,470     

Issuance of
12% Series B
Preferred Stock 
(net of 
offering
costs of
$259,350)                            432,250    1,469,650

6% Series 
A Preferred 
Stock committed 
to be issued 
as a stock 
dividend                                                    

12% Series B 
Preferred Stock 
committed to  
be issued as a 
stock dividend                                             
                -------   --------   -------    ---------  

Balance at 
September 30,
1995            116,000    403,680   493,000    1,653,120   

Issuance of 6% 
Series A 
Preferred Stock 
dividend          6,764     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
reincorporation 
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   
                ========   =======    =======   ========   

</TABLE>
<PAGE>

          STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
            for the years ended Septembesr 30, 1996 and 1995
<TABLE>
<CAPTION>

                            Preferred Stock
                 -----------------------------------------------------
                       Series A                 Series B         Additional
                 Committed to be issued   Committed to be issued  Paid in
                 ----------------------   ----------------------  Capital,
                   No. of                  No. of                Preferred
                  Shares       Amount      Shares      Amount       Stock
                  ------       ------      ------      ------    -----------
<S>               <C>          <C>         <C>         <C>       <C>
Balance at
September 30,
1994

Issuance of 
12% Series B
Preferred Stock
(net of offering
costs of
$259,350)

6% Series A 
Preferred Stock
committed to
be issued as a
stock dividend     6,764       27,056

12% Series B
Preferred Stock
committed to be
issued as a 
stock dividend                              6,017      $ 24,068
                 --------     --------     ------      --------   --------
Balance at
September 30,
1995              6,764        27,056       6,017        24,068

Issuance of
6% Series A
Preferred
Stock dividend    (6,764)     (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
reincorporation
in Delaware                                                       $2,107,302

Redemption of 
recision offer
of Series B
Preferred 
Stock                                                              (131,815)
                 ---------    --------     --------     -------   ---------
Balance at
September
30, 1996                      $                         $         $1,975,487
                 =========    ========     =========    =======   ==========
</TABLE>

                

                                                 - Continued-

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

                             PARADIGM MEDICAL INDUSTRIES, INC.
              STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, Continued
                     for the years ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
                    Common Stock                         Treasury Stock   
                --------------------     Additional    ------------------ 
                  No. of              Paid-in-capital, No. of            
                  Shares     Amount     Common Stock   Shares    Amount   
                ---------  ---------  ---------------  --------  -------- 
<S>             <C>        <C>        <C>              <C>       <C>      
Balance at 
September 30, 
1994            1,982,148  $ 976,953                     2,600   $(3,777) 

Issuance of
common stock
for relin-
quishment of 
anti-dilution 
rights              3,425      3,425

1995 net loss                                                            

Preferred stock 
dividend on 6% 
Series A and 
12% Series B 
Preferred Stock                                                            
                ---------  ---------                   --------  --------   
Balance at 
September 30, 
1995            1,985,573    980,378                      2,600   (3,777) 

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 
relinquishment 
of anti-dilution 
rights                                $  149,000

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

Amortization 
of unearned 
compensation                                                           

</TABLE>
<PAGE>

            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
                   for the years ended September 30, 1996 and 1995

<TABLE>
<CAPTION>
                                                         Net Unrealized
                                                          Loss on
                            Unearned     Accumulated     Debt Securities,
                          Compensation      Deficit     Available-for-Sale
                          ------------   -----------    ------------------
<S>                       <C>            <C>            <C> 
Balance at
September 30, 1994                       $(1,717,309)

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

1995 net loss                               (832,557)

Preferred stock
dividend on 6%
Series A and 12%
Series B Preferred
Stock                                        (51,124)
                                          -----------

Balance at September
30, 1995                                  (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
relinquishment of
anti-dilution
rights

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

Amortization of
unearned
compensation                  69,455

</TABLE>

                                         - Continued -

                          The accompanying notes are an integral
                             part of the financial statements
                                             F - 6
<PAGE>

                                  PARADIGM MEDICAL INDUSTRIES, INC.

               STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, Continued
                    for the years ended September 30, 1996 and 1995
                                                                              
<TABLE>
<CAPTION>

                    Common Stock                         Treasury Stock      
                --------------------     Additional    ------------------   
                  No. of              Paid-in-capital  No. of              
                  Shares     Amount     Common Stock   Shares    Amount   
                ---------  ---------  ---------------  --------  -------- 
<S>             <C>        <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 
reincorpora-
tion 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

Unrealized 
loss on 
marketable 
debt 
securities, 
available-
for-sale                                                           

1996 net 
loss                                                      
                ---------  ---------  -------------    --------  --------

Balance at 
September 
30, 1996        3,171,598  $   3,172   $6,186,251       2,600    $(3,777)
                =========  =========   ============    =======   ======== 

</TABLE>
<PAGE>

              STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
                 for the years ended September 30, 1996 and 1995

<TABLE>
<CAPTION>
                                                           Net Unrealized
                                                              Loss on
                              Unearned     Accumulated     Debt Securities,
                           Compensation      Deficit      Available-for-sale
                           ------------    -----------    ------------------
<S>                        <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

Unrealized loss on
marketable debt
securities, available-
for-sale                                                       $(13,703)

1996 net loss                                $(1,449,019)
                           ------------     -------------    ------------
Balance at
September 30, 1996         $(82,083)         $(4,050,009)      $(13,703)
                           ============      ============    ============
</TABLE>

                            The accompanying notes are an integral 
                              part of the financial statements
                                             F - 7

<PAGE>

              PARADIGM MEDICAL INDUSTRIES, INC.

<TABLE>
<CAPTION>
                  STATEMENTS OF CASH FLOWS
          for the years ended September 30, 1996 and 1995
         
                                          1996          1995    
                                      ------------  -----------
<S>                                   <C>           <C>
Cash flows from 
operating activities:

  Net loss                            $(1,449,019)  $ (832,557)
  Adjustments to reconcile 
    net loss to net cash 
    used in operating 
    activities:
      Depreciation                         17,771        5,518 
      Issuance of common stock 
        for services and 
        relinquishment of anti-
        dilution rights                     179,000        3,425 
      Amortization of unearned 
        compensation                         69,455
      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          49,445       86,458 
          Inventories                        31,855     (378,645)
          Prepaid expenses                    3,282       (6,043)
          Deferred charges                 (100,000)
          Accounts payable                 (255,791)     144,091 
          Accrued liabilities                72,278       (2,095)
                                           --------      -------
            Net cash used in 
              operating activities       (1,315,399)    (979,848)
                                         -----------    ---------
Cash flows from investing activities:
  Purchase of property and equipment        (91,179)     (40,681)
  Purchase of marketable debt 
    securities, available-for-sale         (499,742)            
                                         ----------     --------
       Net cash used in investing 
         activities                        (590,921)     (40,681)
                                         ----------     --------
Cash flows from financing activities:
  Proceeds from issuance of promissory 
    notes and warrants                      575,000
  Debt offering costs                       (41,325)
  Proceeds from other notes payable                       22,549 
  Principal payments on notes payable      (631,829)    (143,260)
  Proceeds from issuance of common 
    stock                                 6,350,000
  Issuance costs - common stock          (1,509,569)
  Proceeds from issuance of preferred 
    stock                                              1,729,000
  Issuance costs - preferred stock                      (259,350)
  Payments for recision offer of 
    Series B preferred stock              (131,848)
  Issuance costs - warrants                 (2,175)             
                                         ---------    ---------- 
      Net cash provided by 
        financing activities             4,608,254     1,348,939 
                                         ---------     ---------
Net increase in cash and 
  cash equivalents                       2,701,934       328,410 

Cash and cash equivalents 
  at beginning of period                   338,218         9,808 
                                        ----------     ---------
Cash and cash equivalents 
  at end of period                     $ 3,040,152     $ 338,218 
                                       ===========     =========

</TABLE>

                         - Continued -

                    The accompanying notes are an integral
                       part of the financial statements
                                    F - 8
<PAGE>

                           PARADIGM MEDICAL INDUSTRIES

<TABLE>
<CAPTION>

                       STATEMENTS OF CASH FLOWS, Continued
                  for the years ended September 30, 1996 and 1995
                                                                
                                          1996            1995  
                                       ---------      ---------- 
<S>                                    <C>            <C>
Supplemental disclosure of 
  cash flow information:
    Cash paid for interest             $  56,829      $   8,895 

Supplemental disclosure of 
  noncash investing and 
  financing activities:
    Preferred stock dividend on 
      6% Series A and 12% 
      Series B Preferred Stock                        $  51,124 
    Issuance of common stock for 
      services rendered in connection 
      with preferred stock offering    $  10,251 
      Common stock issued for 
        future services                $ 151,538 

</TABLE>

                          The accompanying notes are an integral
                            part of the financial statements
                                      F - 9
<PAGE>


                            PARADIGM MEDICAL INDUSTRIES, INC.
                              NOTES TO FINANCIAL STATEMENTS
                                                                

1.    Organization and Significant Accounting Policies:
      ------------------------------------------------

      Organization
      ------------

      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.  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 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).  The Company has recognized minimal
revenue from the sale of its proprietary laser-based product, the
Photon LaserPhaco System (the Photon).  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.  Clinical trials of the Photon commenced in April, 1996. 
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.

      Change in Fiscal Year
      ---------------------

      In August 1996, the Company decided to change its fiscal
year from September 30 to December 31 beginning with the period
subsequent to September 30, 1996.

      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 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 of finished goods of $273,900 and components of $95,147
for the Precisionist and the Photon at September 30, 1996.

      Property and Equipment
      ----------------------

      Property and equipment are recorded at cost.  Replacement
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 related to the private placement of
promissory notes were amortized on a straight-line basis (which
approximates the interest method) over the one year term of the
notes.

      Deferred Charges
      ----------------

      Deferred charges represent the deferral of payments to a
manufacturer for engineering services (see Note 10) and will be
amortized using the units of production method once the
manufacturing of the product begins in 1997.

      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.

      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 are recognized when a product is shipped.

      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.

      Net Loss Per Share
      ------------------

      Net loss per common share is computed on the weighted
average number of common and common equivalent shares outstanding
during each period.  Common stock equivalents consist of
convertible preferred stock, common stock options and warrants. 
Common equivalent shares are excluded from the computation when
their effect is anti-dilutive, except common stock equivalents
related to common stock, stock options and warrants issued within
one year prior to the July 1996 initial public offering, which
have been included as if they were outstanding for all periods
presented.  Other common stock equivalents have not been included
in loss years because they are anti-dilutive.

      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 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.  The Company relies on related party suppliers for
parts and equipment.  In addition, substantially all of the
Company's current products are manufactured and assembled by two
companies who are related parties (see Note 10).  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 is
classified as available-for-sale and carried at market value,
with the unrealized loss, net of deferred taxes, reflected as a
separate component of stockholders' equity.  There were no sales
of available-for-sale securities.

      The cost and estimated market values of marketable debt
securities available-for-sale at September 30, 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       -       $13,703       $486,039


</TABLE>

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


3.    Property and Equipment:
      ----------------------

<TABLE>
<CAPTION>

      Property and equipment consist of the following:
            <S>                                     <C>
            Automobile                              $   26,099 
            Office equipment                            83,541 
            Furniture and fixtures                      10,170 
            Computer equipment                          30,709 
                                                    ----------
                                                       150,519 
            Accumulated depreciation                   (26,975)
                                                    ----------
                                                      $123,544 
                                                    ========== 
</TABLE>

<TABLE>
<CAPTION>

4.    Note Payable:
      ------------
            <S>                                       <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.                           $ 19,653 

            Less current portion                         (3,198)
                                                       --------
                                                       $ 16,455 
                                                       ========

</TABLE>

<TABLE>
<CAPTION>

      The Company's note payable has scheduled maturities for
years ending September 30 as follows:
            <S>                        <C>
            1997                       $  3,198
            1998                          3,531
            1999                          3,899
            2000                          4,305
            2001                          4,720
                                       --------
                                        $19,653
                                       ========
</TABLE>

      Rates currently available to the Company for loans with
similar terms and maturities are used to estimate the fair value
of notes payable.  At June 30, 1996, the carrying value of the
note payable approximates fair value.

      In May 1996, the Company established a one year $600,000
line of credit with a bank which bears interest at 3% above the
prime rate (8 1/4% at September 30, 1996) through November 1996,
after which the interest rate is 1 1/2% above the prime rate. 
Interest is due monthly with principal due May 1997.  The line of
credit is guaranteed by a shareholder of the Company.

5.    Income Taxes:
      ------------

      At September 30, 1996, the Company has net operating loss
carryforwards for income tax purposes of approximately $3,300,000
and research and development tax credit carryforwards of
approximately $47,700.  These carryforwards are available to
offset future taxable income, if any, and expire in the years
2005 through 2011.

<TABLE>
<CAPTION>

      The components of the net deferred tax asset as of
September 30, 1996 are as follows:
      <S>                                         <C>
      Deferred tax assets:
        Net operating loss carryforwards          $ 1,244,000 
        Research and development tax 
          credit carryforwards                         47,700 
        Other                                           3,200 
        Valuation allowance                        (1,294,900)
                                                  -----------
        Net deferred tax asset                    $     -     
                                                  ===========
</TABLE>

      The Company recognized no income tax benefit from the
losses generated in the years ended September 30, 1996 and 1995.

      The valuation allowance increased by approximately $577,100
during fiscal 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, the
Company believes that a full valuation allowance should be
provided.

6.    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 three series of preferred
stock with a total of 5,000,000 authorized shares with a par
value of $.001, including two series with 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 is being 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.

7.    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 no par value,
of which 116,000 shares were issued and outstanding as of
September 30, 1995 and 122,764 issued and outstanding as of
September 30, 1996.  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 the 12% Series B
Preferred Stock, consisting of 500,000 shares with no par value,
of which 493,000 shares were issued and outstanding as of
September 30, 1995 and 466,055 shares were issued and outstanding
as of September 30, 1996.  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.

8.    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, of
which 2,000 were returned to the Company and 500 have expired. 
As of September 30, 1996, 259,174 options are exercisable and no
options have been exercised.

      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.

9.    Warrants:
      --------

      The Company, in conjunction with the $600,000 private
placement (see Note 6), 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.  Subsequent to September 30,
1996, 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. 

10.   Related Party Transactions:
      --------------------------

      The Company has subcontracted the manufacturing of its
Precisionist and Photon LaserPhaco systems to a company (the
"Manufacturer") that is a shareholder.  During fiscal 1996 and
1995, the Company purchased design and manufacturing services
from this company in the amount of $353,949 and $509,837,
respectively.

      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 the
Manufacturer.  Under the provisions of the Agreement, the Company
agrees to pay a total of $1,000,000 to the Manufacturer at
various milestone dates through approximately March 1997 for
engineering and design services.  The first payment of $100,000
was made in September 1996.

      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 of the actual
cost of manufacturing plus a markup.  The Agreement requires the
Manufacturer to deliver 19 complete systems on or about March 31,
1997.

      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 serves as President and Chief Executive
Officer, to purchase certain components for the Photon.  During
fiscal 1996 and 1995, the Company purchased $5,284 and $263,000,
respectively, of materials from this company.

      In 1988, the Company signed an 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 September 30, 1996, no significant
royalties have been earned 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.  During
fiscal 1996 and 1995, the Company paid this firm $234,504 and
$7,500, respectively, for legal services, and as of September 30,
1996, owed this firm $18,816, which is included in accounts
payable.

11.   Leases:
      ------

      Total lease expense for fiscal 1995 and 1996 was $22,880
and $28,954, respectively.  In November 1995, the Company renewed
its lease for office space through November 30, 1996 at a monthly
rent of $1,436.  In December 1996, the Company renewed its lease
through December 1997 at a monthly rent of $2,972.  The lease is
subject to renegotiation at that time.

12.   Export Sales:
      ------------
<TABLE>
<CAPTION>

      Total sales for fiscal 1995 and 1996 include the following
export sales by major geographic area:
      <S>                            <C>            <C>
      Geographic Area                  1995            1996   
      ---------------                --------       ---------
      Europe                         $105,142        $107,161
      Far East                        122,032          46,270
      Middle East                      56,690          72,691
                                     --------        --------
                                     $283,864        $226,122
                                     ========        ========

</TABLE>

13.   Employment Agreements:
      ---------------------

      Effective February 1, 1996, the Company entered into
employee agreements with three officers which expire on February
1, 2001.  The agreements provide for aggregate annual
compensation of $380,000 effective upon completion of the
Offering.  On February 16, 1996 the officers were granted options
to acquire 190,000 shares of common stock at a price of $5.00
under the Company's 1995 Stock Option Plan.

14.   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.

15.   Legal Proceedings:
      -----------------

      On March 31, 1995, the Company entered into an agreement
with an investment banking company to obtain capitalization
through a public offering.  The agreement was deemed terminated
if the required capitalization was not obtained by December 31,
1995.  In a complaint filed in November 1996, the investment
banking company and its principal officer requested 356,780
shares of the Company's common stock, along with monthly payments
of $3,000 for three years, as compensation under the agreement. 
The Company believes the complaint is without merit and intends
to vigorously defend the action.  Nevertheless, in the event the
Company does not prevail in its defenses, the lawsuit could have
a material adverse impact on the Company's financial condition
and could result in dilution to the Company's existing
shareholders.

16.   Subsequent Events:
      -----------------

      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.

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

      Subsequent to September 30, 1996, 1,060 shares of Series A
Preferred Stock and 24,032 shares of Series B Preferred Stock
were converted into 1,272 and 28,838 shares, respectively, of the
Company's common stock.

17.   New Accounting Pronouncements:
      -----------------------------

      The Company intends to adopt the disclosure approach
provided for in Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock Based Compensation", with
respect to options and warrants granted to employees.  Because
the Company has only a minimal investment in long-lived assets,
the adoption of SFAS No. 121, "Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of", is not expected to have
an impact on the Company.

<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

<TABLE>
<CAPTION>

      The executive officers and directors of the Company, their
ages and their positions are set forth below:
  <S>                   <C>         <C>
  Name                  Age         Position
  ----                  ---         --------

  Thomas F. Motter      48          Chairman of the Board,
                                    President and Chief     
                                    Executive Officer
  Robert W. Millar      39          Vice President and Director 
  John W. Hemmer        69          Treasurer, Chief Financial
                                    Officer and Director
  Randall A. Mackey     51          Secretary and Director
  Michael C. Stelzer    49          Director
  William C. Fitzhugh   47          Director
  David W. Light        50          Director
  David M. Silver       55          Director

</TABLE>

      Thomas F. Motter has served as Chief Executive Officer and
a director of the Company since April 1993 and will serve as
Chief Executive Officer and director until a new officer and
director, respectively, are duly elected and qualified.  Mr.
Motter may be elected to successive terms of office.  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's Humphrey Instruments Division,
a company engaged in the development of advanced ophthalmic
diagnostic instruments, serving last as its National Sales
Manager overseeing all domestic sales in its ophthalmic computer
division.  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.  Mr. Motter
has a five-year employment contract with the Company which
expires on February 1, 2001.

      Robert W. Millar has served as Vice President of the
Company since August 1995 and a director of the Company since
April 1993 and will serve as Vice President and director until a
new officer and director, respectively, are duly elected and
qualified.  Mr. Millar may be elected to successive terms of
office.  From January 1991 to April 1993, Mr Millar 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.  Mr. Millar
has a five-year employment contract with the Company which
expires on February 1, 2001.

      John W. Hemmer has been Treasurer, Chief Financial Officer
and a director of the Company since November 1995 and will serve
as Treasurer, Chief Financial Officer and director until a new
officer and director, respectively, are duly elected and
qualified.  Mr. Hemmer may be elected to successive terms of
office.  Since October 1989, Mr. Hemmer has served as a director
and consultant for Sea Pride Industries, Inc., and subsidiaries
in Gulf Breeze, Florida, which developed the first offshore
marine production system licensed and permitted for use in the
Gulf of Mexico.  From March 1992 to July 1994, Mr. Hemmer was
employed as the Secretary and Vice President of Finance of
Advance Electronics, Inc., Kendall Park, New York, which is
engaged in the retail distribution of health and beauty products. 
From May 1989 to October 1991, Mr. Hemmer was employed as the
Chief Financial Officer and a director of Innovative Designer
Products, Inc., engaged in the manufacture of personal beauty
care appliances, located in Kendall Park, New Jersey.  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.  Mr. Hemmer has a five-year
employment contract with the Company which expires on February 1,
2001.

      Randall A. Mackey has been Secretary and a director of the
Company since November 1995 and will serve as Secretary and
director until a new officer and director, respectively, are duly
elected and qualified.  Mr. Mackey may be elected to successive
terms of office.  Since 1989, Mr. Mackey has been a shareholder
of the Salt Lake City law firm 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.

      Michael C. Stelzer joined the Company's Board of Directors
in April 1993 to serve as a director until the Company's next
annual shareholders' meeting at which time Mr. Stelzer may be
elected to successive terms of office.  From June 1989 to April
1993, Mr. Stelzer served as a director of Paradigm Medical, Inc.
which merged with the Company in May 1994.  Mr. Stelzer is
presently Executive Vice President and General Counsel of Rhino
Marketing, Inc. and has practiced law in California since 1980. 
From March 1972 to January 1980, Mr. Stelzer was Comptroller of
Ponderosa Telephone Company.  Mr. Stelzer received a Bachelor of
Science degree in Business Administration from the University of
California, Davis in 1970 and a Juris Doctorate from Humphreys
College in 1979.

      William C. Fitzhugh, M.D. joined the Company's Board of
Directors in November 1995 to serve as a director until the
Company's next annual shareholders' meeting at which time Dr.
Fitzhugh may be elected to successive terms of office.  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 W. Light joined the Company's Board of Directors in
November 1995 to serve as a director until the Company's next
annual shareholders' meeting at which time Mr. Light may be
elected to successive terms of office.  Mr. Light is currently
Chief Executive Officer of Sunrise Technologies, Inc., a medical
laser manufacturer located in Fremont, California.  From 1986 to
1994, Mr. Light was employed by Advanced Polymer Systems, Inc.
("APS"), a public company involved in the development and
manufacture of polymer based delivery systems for the controlled
release of active ingredients and therapeutic agents.  Mr. Light
served as Vice President, Operations of APS from 1989 to 1994 and
as the Chief Financial Officer of APS from 1986 to 1989.  Mr.
Light received a Bachelor of Arts degree in Accounting from Boise
State University and is a Certified Public Accountant.

      David M. Silver, Ph.D joined the Company's Board of
Directors in November 1995 to serve as a director until the
Company's next annual shareholders' meeting at which time Dr.
Silver may be elected to successive terms of office.  Dr. Silver
currently is a member of the Principal Staff of The Johns Hopkins
University Applied Physics Laboratory.  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.  

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.
   
      Daniel M. Eichenbaum, M.D. -- Dr. Eichenbaum is an
ophthalmologist practicing in Murphy, North Carolina.  He
received his medical degree from the Yale School of Medicine in
1969 and performed his residency at the Bascom Palmer Eye
Institute in Miami, Florida.  The Company licenses a patent held
by Dr. Eichenbaum for use in its laser technology.

      Bruce L. Erickson, M.D. -- Dr. Erickson is an
ophthalmologist in Great Falls, Montana. He received his medical
degree at the University of Minnesota in 1979 and performed his
residency at the University of Minnesota.
   
      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.
   
      Doyle Leslie, M.D. -- Dr. Leslie is an ophthalmologist in
Austin, Texas.  He received his medical degree at the University
of Texas, Dallas in 1964, and performed his residency at the
University of  Texas, San Antonio.
   
      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.
   
      David M. Silver, Ph.D. -- Dr. Silver is the Senior
Scientist in the Milton S. Eisenhower Research Center at The
Johns Hopkins University Applied Physics Laboratory.  He received
his Ph.D. from the Iowa State University in 1968, and finished
his postdoctoral fellowship at Harvard University and held a
scientist position at the University of Paris.
   
      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 September 30, 1996.  The Audit Committee of
the Board of Directors consisting of directors John Hemmer, Dr.
David Light, Randall Mackey and Michael Stelzer was formed on
October 27, 1996 and, as a consequence, did not meet during the
1996 fiscal year.  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 consisting of directors John Hemmer, Dr. David Light,
Randall Mackey and Michael Stelzer was also formed on October 27,
1996 and, as a consequence, did not meet during the 1996 fiscal
year.  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 1996 fiscal
year.

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 1996 the Company's officers and
directors holding shares of the Company's Common Stock, through
an oversight, filed late Form 3 reports.

Item 10. Executive Compensation

      The following table contains information regarding
compensation to the Company's Chairman of the Board, President
and Chief Executive Officer and its Vice President for services
in all capacities to the Company for the fiscal years listed.  No
other executive officer of the Company earned compensation in
excess of $100,000.

<TABLE>
<CAPTION>
                                                                
                           Annual Compensation          Awards    
                    -----------------------------   ------------
                                                      Securities
                    Fiscal                            Underlying
                     Year      Salary      Bonus    Options/SARs($)
                   -------    --------    -------   ---------------
<S>                <C>        <C>         <C>       <C>
Thomas F. Motter,
Chairman of the 
Board, President 
and Chief Executive 
Officer             1996    $111,042     $1,000          0<F1>
                    1995      72,000<F1>    300          0
                    1994      68,352         0           0

Robert W. Millar,
Vice President      1996    $ 99,792     $1,000          0<F1>
                    1995      60,265        300          0
                    1994      42,500         0           0

________________

<FN>
<F1>
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.  Such options expire on February 15, 2001.

</TABLE>

Director Compensation  

      Outside directors receive cash compensation in the amount
of $10,000 per year for their services as members of the Board of
Directors and are 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 has adopted a 1995 Stock Option Plan (the
"Plan"), for officers, employees, directors and consultants of
the Company, which became effective on February 16, 1996.  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.  Prior to March 31, 1996, options for all
300,000 shares had been granted.  On May 20, 1996, however, when
an employee terminated her employment with the Company, 2,000
options were returned to the Plan.  Accordingly, there are
presently 2,000 options to be granted under the Plan.  No Plan
Options have been exercised.  The following table contains
information regarding the Plan Options granted to the Company's
executive officers as of the date of this Prospectus:

<TABLE>
<CAPTION>

             Option/SAR Grants to Executive Officers in the  
                  Current Fiscal Year
<S>           <C>           <C>           <C>           <C>
 (a)            (b)            (c)           (d)          (e)
              Number of     $ of Total 
              Securities    Options/SARs
              Underlying    Granted to    Exercise or
              Options/SARs  Employees in  Base Price  Expiration
 Name         Granted(#)    Fiscal Year      ($/Sh)     Date
 ____         ------------  ------------  ----------- ----------

Thomas F.
Motter,
Chairman of
the Board,
President and
Chief Executive
Officer . . .     106,000        35%        $5.00     February
                                                      15, 2001

Robert W.
Millar, Vice
President and
Director . . .     84,000        28%        $5.00     February
                                                      15, 2001

</TABLE>

      Plan Options have also been granted to Jack A. Whiteside
and Corinne Powell, who were each given the right to purchase
50,000 shares of Common Stock at an exercise price of $5.00 per
share.  Mr. Whiteside is the Company's Eastern Sales Manager and
Ms. Powell is the Company's Western Sales Manager and
International Sales Manager.  Of the options granted to Mr.
Whiteside and Ms. Powell, 33,337 options are fully vested to each
of them as of February 16, 1996, with the balance of the options,
or 16,667 options to each of them, to be vested as follows:
16,667 to Mr. Whiteside on December 7, 1996; and 16,667 to Ms.
Powell on December 1, 1996.  

      Finally, Plan Options were also granted to Jason A. Jahn,
Leslie A. Nunley and Jennifer Kotowski on February 16, 1996, to
purchase 5,000, 2,500 and 2,500 shares of Common Stock,
respectively, at an exercise price of $5.00 per share.  Of the
options granted to Mr. Jahn, 1,000 are fully vested as of
February 16, 1996, with the balance of the options, or 4,000
options, to be vested as follows: 1,000 on January 30, 1997,
1,000 on January 30, 1998, 1,000 on January 30, 1999 and 1,000 on
January 30, 2000.  Of the options granted to Ms. Nunley, 1,000
are fully vested as of February 16, 1996, with the balance of the
options, or 1,500 options, to be vested as follows: 500 on March
16, 1996, 500 on March 16, 1997 and 500 on March 16, 1998.  Of
the options granted to Ms. Kotowski, 500 are fully vested as of
February 16, 1996.  The balance of Ms. Kotowski's options, or
2,000 options, have been returned to the Plan since Ms. Kotowski
terminated her employment with the Company on May 20, 1996. 
Unless properly exercised on or before August 18, 1996, Ms.
Kotowski's 500 vested options shall terminate and be returned to
the Plan.  Mr. Jahn is the Company's Comptroller, Ms. Nunley is
the Company's Customer Sales Manager and Ms. Kotowski was an
accounting clerk of the Company.
 
      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.  

      Plan Options may be either incentive stock options
("ISOs"), as such term is defined in the Internal Revenue Code,
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.  

      Plan Options are evidenced by written agreement containing
in the terms described above which are applicable and such other
terms and conditions consistent with the Plan as the Board of
Directors or the Compensation Committee, as the case may be, may
impose.  The term of each Plan 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 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.

      All Plan Options were granted on February 16, 1996 to award
certain officers and key employees who have been employed by the
Company for a number of years and to help the Company retain
these officers and key employees by providing them with
additional incentives to contribute to the success of the
Company. 

Employment Agreements

      The Company has entered into employment agreements with
each of Thomas F. Motter, Robert W. Millar and Jack W. Hemmer,
which 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,
effective upon the completion of the offering.  Messrs. Motter
and Millar also each received a grant by the Company of Employee
incentive stock options to purchase 106,000 and 84,000 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, the Company's President and Chief Executive
Officer--30%; Robert W. Millar, the Company's Vice
President--25%; John W. Hemmer, the Company's 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 September 30, 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 September 30,
2001.

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 December 20, 1996 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>

                                               Percent of
Name and Address<F1>        Number of Shares   Ownership<F2>
-------------------         ----------------   --------------
<S>                         <C>                <C>
Thomas F. Motter<F3>          588,666           18.6%
Douglas MacLeod               418,451           13.2%
Robert W. Millar<F4>          374,605           11.8%
William C. Fitzhugh            63,071            2.0%
Michael Stelzer                59,071            1.9%
John W. Hemmer                 50,513            1.6%
Randall A. Mackey              50,512            1.6%
David W. Light                   --              *
David M. Silver                 1,000            *
Executive officers and
directors as a group        1,187,438           37.4%

_______________

*     Less than 1%.
<FN>
<F1>
The address for Mr. Motter and Mr. Millar is c/o Paradigm
Medical Industries, Inc., 1772 West 2300 South, Salt Lake City,
Utah 84119.  The address for Mr. MacLeod is 1002 South 10th
Street, Tacoma, Washington 98405.  The address for Mr. Stelzer is
2811 Airpark Drive, Santa Maria, California 93455.  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. Light is 724 Laurel Avenue, Number 511, San Mateo,
California 94401.  The address for Mr. Silver is 17 Avalon Court,
Bethesda, Maryland 20816.

<F2>
Assumes no exercise of the Class A Warrants, the Note
Holders' warrants and the Attorney's Warrants, and no conversion
of shares of the Company's Series A and Series B 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.

</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 purchases the laser cavity, optical train and
power source for the Photon(trademark) laser cataract system from Sunrise
Technologies, Inc. ("Sunrise") of which one of the Company's
directors, David Light, serves as Chief Executive Officer.  These
materials are purchased pursuant to a Manufacturing Agreement
entered into by Sunrise and the Company before Mr. Light joined
the Company's Board of Directors, which expired on June 1, 1996. 
The Company is currently negotiating with Sunrise for a renewal
of this agreement.  For the fiscal years ended September 30, 1995
and 1996, the Company paid Sunrise $263,000 and $5,284,
respectively, for materials purchased.
      
      The Company subcontracts the manufacture of its
Precisionist(trademark) and Photon(trademark) laser cataract systems 
to one of its shareholders, Zevex, Inc. ("Zevex") which is located 
in Salt Lake City, Utah.  On September 22, 1996, the Company entered 
into a Design, Engineering and Manufacturing Agreement with Zevex for
the engineering and manufacture of the Photon(trademark) laser cataract
system, except for the laser cavity and surgical probes.  The
agreement prohibits Zevex from manufacturing invasive ophthalmic
medical lasers for any other company until September 21, 2001. 
For the fiscal year ended September 30, 1995 and 1996, the
Company purchased design and manufacturing services in the
amounts of $509,837 and $353,949, respectively, from Zevex.
      
      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.

      Mr. Mackey, 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 September 30, 1995 and
1996 totaled $7,500 and $234,504, respectively, which was
primarily for legal services related to the public stock
offering.  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.

                                                                
                            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>
<CAPTION>
Table No.         Document
---------         --------
<S>         <C>
 2.1        Amended Agreement and Plan of Merger between Paradigm
            Medical Industries, Inc., a California corporation
            and Paradigm Medical Industries, Inc., a Delaware
            corporation*
 3.1        Certificate of Incorporation*
 3.2        Bylaws*
 4.1        Warrant Agency Agreement with Continental Stock
            Transfer & Trust Company
 4.2        Specimen Common Stock Certificate **
 4.3        Specimen Class A Warrant Certificate**
 4.4        Form of Class A Warrant Agreement**
 4.5        Underwriter's Warrant with Kenneth Jerome & Co., Inc.
 4.6        Attorney's Warrant with Mackey Price & Williams*
10.1        Exclusive Patent License Agreement with Photomed*
10.2        Consulting Agreement with Dr. Daniel M. Eichenbaum*
10.3        Confidential Disclosure Agreement with Zevex, Inc.*
10.4        Indemnity Agreement with Zevex International, Inc.*
10.5        Manufacturing Agreement with Sunrise Technologies,
            Inc.*
10.6        Royalty Agreement dated January 30, 1992, with Dennis
            L. Oberkamp Design Services*
10.7        Indemnity Agreement dated January 30, 1992, with
            Dennis L. Oberkamp Design Services*
10.8        Royalty Agreement (for Ultrasonic Phaco Handpiece)
            with Dennis L. Oberkamp Design Services*
10.9        Commercial Office Lease with Tri-Cox, L.C.
10.10       Settlement and Release Agreement with Douglas A.
            MacLeod*
10.11       Form of Indemnification Agreement*
10.12       1995 Stock Option Plan and forms of Stock Option
            Grant Agreements*
10.13       Form of Promissory Note between the Company and third
            parties*
10.14       Form of Warrant to Purchase Common Stock between the
            Company and third parties*
10.15       Employee's Lock-Up Agreement
10.16       Registering Shareholders Lock-Up Agreement
10.17       Employment Agreement with Thomas F. Motter*
10.18       Employment Agreement with Robert W. Millar*
10.19       Employment Agreement with Jack W. Hemmer*
10.20       Amendment of Settlement and Release Agreement with
            Douglas A. MacLeod***
10.21       Design, Engineering and Manufacturing Agreement with
            Zevex, Inc.
11.1        Statement regarding Computation of Net (Loss) Per
            Share
23.1        Consent of Medical Laser Insight ***
23.2        Consent of Frost & Sullivan ***
23.3        Consent of Ophthalmologists Times ***
27          Financial Data Schedule
      
               
*           Incorporated by reference from Registration Statement
            on Form SB-2, as filed on March 19, 1996.
**          Incorporated by reference from Amendment No. 1 to
            Registration Statement on Form SB-2, as filed on May
            14, 1996.
***         Incorporated by reference from Amendment No. 2 to
            Registration Statement on Form SB-2, as filed on June
            13, 1996.
****        Incorporated by reference from Amendment No. 3 to
            Registration Statement on Form SB-2, as filed on June
            28, 1996.
</TABLE>

      (b)  Reports on Form 8-K

      On August 26, 1996, the Company filed a report on Form 8-K
regarding the change in the Company's fiscal year from September
30 to December 31.

<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:  December 30, 1996     By:  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.

<TABLE>
<CAPTION>

    Signature                 Title                   Date
    ---------                 -----                   ----
<S>                     <C>                       <C>        
Thomas F. Motter        Chairman of the
                        Board, President 
                        and Chief Executive 
                        Officer (Principal
                        Executive Officer)         December 
                                                   30, 1996     

Robert W. Millar        Vice President and
                        Director                   December 
                                                   30, 1996

John W. Hemmer          Treasurer, Chief 
                        Financial Officer
                        and Director 
                        (Principal Financial 
                        and Accounting Officer)    December 
                                                   30, 1996

Randall A. Mackey       Secretary and Director     December 
                                                   30, 1996

--------------------    Director                   December
William C. Fitzhugh                                __, 1996

--------------------    Director                   December
David W. Light                                     __, 1996

David M. Silver         Director                   December
                                                   30, 1996

--------------------    Director                   December
Michael W. Stelzer                                 __, 1996 

</TABLE>

<PAGE>