paradigm8ka032608.htm
FORM
8-K/A-4
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of Earliest Event Reported): March 26, 2008
PARADIGM
MEDICAL
INDUSTRIES, INC.
(Exact
name of registrant as specified in this Charter)
|
Delaware
|
0-28498
|
87-0459536
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
2355 South 1070 West,
Salt Lake City,
Utah
|
84119
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
Telephone Number, Including Area Code: (801)
977-8970
Does Not
Apply
(Former
name or former address, if changed since last report)
SECTION
4 Matters Related
to Accountants and Financial Statements
ITEM
4.02 Non-reliance of
Previously Issued Financial Statements or Related Audit Report or Completed
Interim Review
On
December 17, 2007, Paradigm Medical Industries, Inc. (the "Company") received a
letter from the Securities and Exchange Commission (the "Commission") stating
that the staff had reviewed the financial statements and related documents in
the Company's Form 10-KSB for the fiscal year ending December 31,
2006. As a result of its review, the staff had several comments on
the disclosures in the financial statements of the December 31, 2006 Form
10-KSB. The letter additionally stated that in future filings the
Company's Form 10-KSB should be revised in response to the
comments.
On March
14, 2008, the Company filed a letter with the Commission responding to the
December 17, 2007 comment letter from the Commission. After reviewing
the Company's responses to the December 17, 2007 comment letter, the Commission
staff arranged for a telephone conference with the Company's executive officers
on March 26, 2008 to discuss the Company's March 14, 2008
letter. The staff expressed its view during the telephone conference
that the $5,139,010 in convertible notes the Company issued to investors during
the period from April 27, 2005 to December 24, 2007 to obtain funding for the
Company's ongoing operations contained embedded
derivatives. As a consequence, in disclosing these convertible notes
in the financial statements of the Company's Form 10-KSB for the fiscal year
ending December 31, 2006, the Company did not correctly follow the disclosure
requirements of Statement of Financial Accounting Standards No. 133
("SFAS No. 133"), Accounting
for Derivative Instruments and Hedging Activities, which was issued by
the Financial Accounting Standards Board. The staff requested that in
order to comply with the disclosure requirements of SFAS No. 133, the Company
would need to value the convertible notes in the financial statements of its
Form-KSB using a binomial lattice model that values all embedded derivatives in
the convertible notes, such as conversion options, interest rate resets and put
options.
On April
17, 2008 the Company's executive officers had another telephone conference with
the Commission staff to discuss further issues concerning compliance with SFAS
No. 133 by valuing the convertible notes in the financial statements using the
binomial lattice model. The Company was advised during the conference
by the Commission staff that it would not be required to amend its Form 10-KSB
for the fiscal years ended December 31, 2006 and 2005, but the Form 10-KSB for
the fiscal year ended December 31, 2007 must include revised financial
information and disclosures for fiscal 2006 and 2005 as a result of valuing the
convertible notes using the binomial lattice model.
On April
24, 2008, the Company entered into an agreement with Monarch Bay Management
Company to value the Company's convertible notes pursuant to SFAS No. 133 using
the binomial lattice model. Monarch Bay completed its valuation work
on the convertible notes on May 5, 2008. The Company paid a total of
$32,000 for Monarch Bay's valuation report.
Upon
receipt of Monarch Bay's valuation report on the Company's convertible notes,
Louis A. Mostacero, the Company's Vice President of Finance and Chief Financial
Officer, refigured and recalculated the financial statements in the Company's
Form 10-KSB reports for the years ended December 31, 2006 and 2005 and the
Company's Form 10-QSB reports for the periods ended March 31, 2006, June 30,
2006, September 30, 2006, March 31, 2007, June 30, 2007, and September 30,
2007. Mr. Mostacero completed the revisions of these financial
statements on May 9, 2008. On May 9, 2008, an initial draft of these
revised financial statements was forwarded to the Company's independent
accountants, Chisholm, Bierwolf & Nilson, LLC, and the Company's legal
counsel, Mackey Price Thompson & Ostler.
On May
12, 2008, on the basis of discussions with the Company's independent accountants
and legal counsel, the Company's executive officers determined that the
financial statements in the Form 10-KSB reports for the years ended December 31,
2006 and 2005, and the Form 10-QSB reports for the periods ended March 31, 2006,
June 30, 2006, September 30, 2006, March 31, 2007, June 30, 2007, and September
30, 2007, should no longer be relied upon because of errors in such financial
statements. These errors required material changes to the Company's
financial statements for the years ended December 31, 2006 and 2005 and the
interim periods for the years ended December 31, 2007 and 2006.
On May
16, 2008, the Company filed a Form 10-KSB/A-1 report for the fiscal year ended
December 31, 2007, which included revised financial information and disclosures
for the years ended December 31, 2006 and 2005, as a result of valuing the
convertible notes using the binomial lattice model. Also included in
the Form 10-KSB/A-1 report for the fiscal year ended December 31, 2007 were
revised and restated financial statements for the periods ended March 31, 2006,
June 30, 2006, September 30, 2006, March 31, 2007, June 30, 2007, and
September 30, 2007.
On May
27, 2008, the Company received a letter from the Commission stating that the
staff had reviewed the financial statements and related documents in the
Company's Form KSB/A-1 for the fiscal year ended December 31,
2007. As a result of the review, the staff had several comments on
the financial statements and related disclosures in the Form
10-KSB/A-1 for the fiscal year ended December 31, 2007.
On June
23, 2008, the Company filed a letter with the Commission responding to the May
27, 2008 comment letter from the Commission. On July 22, 2008, the
Company received a letter from the Commission stating that the Commission staff
had received the Company's response letter dated June 23, 2008 and had
additional comments concerning the Form 10-KSB/A-2 for the fiscal year ended
December 31, 2007 and the Company's Form 10-QSB for the quarter ended March 31,
2008. On July 22, 2008 and August 12, 2008, the Company's executive
officers had telephone conferences with the Commission staff to discuss further
issues concerning compliance with SFAS No. 133 in valuing the convertible notes
in the financial statements of the Form 10-KSB/A-2 for the fiscal year ended
December 31, 2007 and the Form 10-QSB for the quarter ended March 31,
2008.
On August
12, 2008, on the basis of discussions with the Commission staff, the Company's
executive officers determined that the financial statements and related
disclosures in the Form 10-KSB/A-2 report for the fiscal year ended December 31,
2007, which report included revised financial information and related
disclosures for the fiscal years ended December 31, 2006 and 2005, and the Form
10-QSB report for the quarter ended March 31, 2008 should no longer be relied
upon because of errors in such financial statements and related
disclosures. The errors related to the Company not correctly
following the disclosure requirements of SFAS No. 133 when valuing the
convertible notes in the financial statements of such Form 10-KSB and Form
10-QSB reports. These errors require material changes to the
financial statements and related disclosures in the Form 10-KSB/A-2 for the
fiscal year ended December 31, 2007, including the revised financial information
and related disclosures for the fiscal years ended December 31, 2006 and 2005,
which were included in said Form 10-KSB/A-2 report for the fiscal year ended
December 31, 2007, and the Form 10-QSB report for the quarter ended March 31,
2008. The Company's executive officers discussed the matters
disclosed in this Form 8-K/A-4 report with the Company's independent
accountants, including that the financial statements and related disclosures of
the Form 10-KSB/A-2 for the fiscal year ended December 31, 2007 and the Form
10-QSB for the quarter ended March 31, 2008 should no longer be relied upon
because of the above-described errors in such financial statements and related
disclosures.
As the
certifying officers, Mr. Mostacero and I believe that, as of the end of the
years ended December 31, 2007, 2006 and 2005, the Company's disclosure controls
and procedures were not effective and adequate because, in disclosing the
convertible notes in the financial statements of the Form 10-KSB reports for the
years ended December 31, 2007, 2006 and 2005 and the interim periods for the
years ended December 31, 2007 and 2006, the Company did not correctly follow the
disclosure requirements of SFAS No. 133 when valuing the convertible notes in
the financial statements of such reports.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
|
|
PARADIGM
MEDICAL INDUSTRIES, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
August 19, 2008
|
By /s/ Raymond P.L.
Cannefax
|
|
|
|
Raymond
P.L. Cannefax
|
|
|
|
President
and Chief Executive Officer
|