##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Year Ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from      to
 Commission file number: 000-25548
 SUTURA, INC.
 (Name of small business issuer in its charter)
 DELAWARE
    
    84-1010269(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 (Address of principal executive offices) (Zip Code)
  (Issuers telephone number)
   o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
      o þ




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##### 



PART IItem 1. Business
3Item 1A. Risk Factors
12Item 1B Unresolved Staff Comments
12Item 2. Properties
12Item 3. Legal Proceedings
12Item 4. Submission of Matters to a Vote of Security Holders
13PART IIItem 5. Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity
Securities
13Item 6 Selected Financial Data
14Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
15Item 7A Quantitative and Qualitative Disclosure About Market Risk
25Item 8. Financial Statements and Supplementary Data
25Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
25Item 9A(T). Controls and Procedures
25Item 9b. Other Information
26PART IIIItem 10. Directors, Executive Officers and Corporate Governance
27Item 11. Executive Compensation
29Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
32Item 13. Certain Relationships and Related Transactions and Director Independence
36Item 14. Principal Accounting Fees and Services
38Item 15. Exhibits, Financial Statement Schedules
39EX-2.2EX-31.1EX-31.2EX-32.1EX-32.2
  2




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Cautionary Note Regarding Forward-Looking Statements
    
    
    general economic conditions;
    
    Our ability to consummate the proposed sale of our assets;
    
    Our ability to pay amounts owed on our secured notes when the notes mature;
    
    our future capital needs and our ability to obtain financing; and
 3




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
    
    other risks and uncertainties as may be detailed from time to time in
our public announcements and filings with the Securities and Exchange
Commission (SEC).
    Overview
  History
   4




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Recent Developments
 Reduced Operations
  Agreement to Sell Our Assets
   5




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Resignation of Mr. Nobles
  Business Strategy
  Technology
   6




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Patents and Proprietary Rights
  Manufacturing
   Research & Development
  7




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SuperStitch Products
 F8 & F6 Superstitch
 Superstitch Guide-Wire
 F12 Superstitch
 SuperStitch EL
 Sales, Marketing and Distribution
  8




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Competition
   
    
    Angio-Seal®device, sold by the Daig division of St. Jude Medical,
Inc. and developed by Kensey Nash Corporation, seals the puncture site through
the use of a collagen plug on the outside of the artery connected by a suture to
a biodegradable anchor which is inserted into the artery.
    
    The Closer device, sold by Perclose, Inc., a subsidiary of Abbott
Laboratories, seals the puncture site through the use of a suture device that
enables a physician to perform a minimally invasive replication of open surgery.
    
    The StarClose device, sold by Perclose, Inc., a subsidiary of Abbott
Laboratories, seals the tract above the puncture site through the use of a
staple.
 Government Regulation
   9




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10




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##### Table of Contents




    
    fines, injunctions, and civil penalties;
    
    recall or seizure of products;
    
    operating restrictions, partial suspension or total shutdown of production;
    
    refusing requests for 510(k) clearance or PMA approval of new products;
    
    withdrawing 510(k) clearance or PMA approvals already granted; and
    
    criminal prosecution.
  11




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Product Liability and Insurance
  
   
   
    
  12




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##### Table of Contents



Pham v. Nobles, et al.
 
   
  
  MARKET INFORMATION
   PERIOD
    
    HIGH
    
    
    LOWFiscal Year Ended December 31, 2007
    
    First Quarter
    
    $
    0.10
    
    
    $
    0.05Second Quarter
    
    $
    0.10
    
    
    $
    0.065Third Quarter
    
    $
    0.094
    
    
    $
    0.05
 13




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PERIOD
    
    HIGH
    
    
    LOWFourth Quarter
    
    $
    0.09
    
    
    $
    0.04Fiscal Year Ended December 31, 2008
    
    First Quarter
    
    $
    0.08
    
    
    $
    0.05Second Quarter
    
    $
    0.08
    
    
    $
    0.051Third Quarter
    
    $
    0.08
    
    
    $
    0.06Fourth Quarter
    
    $
    0.06
    
    
    $
    0.001
   DIVIDENDS
  RECENT SALES OF UNREGISTERED SECURITIES
  
   14




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Reduced Operations
  15




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Agreement to Sell Our Assets
     16




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Revenue Recognition
 17




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Three months ended
    
    Three months ended
    
    Year ended
    
    Year endedDec 31, 2008
    
    Dec 31, 2007
    
    Dec 31, 2008
    
    Dec 31, 2007Sales in USA
    
    $
    0
    
    
    
    0
    %
    
    $
    2,046
    
    
    
    3
    %
    
    $
    5,405
    
    
    
    1
    %
    
    $
    21,999
    
    
    
    9
    %Sales in Europe
    
    
    68,881
    
    
    
    69
    %
    
    
    36,684
    
    
    
    47
    %
    
    
    339,456
    
    
    
    76
    %
    
    
    139,542
    
    
    
    55
    %Sales Far East
    
    
    31,000
    
    
    
    31
    %
    
    
    39,500
    
    
    
    50
    %
    
    
    104,050
    
    
    
    23
    %
    
    
    90,500
    
    
    
    36
    %Total sales
    
    $
    99,881
    
    
    
    100
    %
    
    $
    78,230
    
    
    
    100
    %
    
    $
    448,911
    
    
    
    100
    %
    
    $
    252,041
    
    
    
    100
    %
 Three months ended
    
    Three months ended
    
    Year ended
    
    Year endedDec 31, 2008
    
    Dec 31, 2007
    
    Dec 31, 2008
    
    Dec 31, 2007Sales major
countriesFrance
    
    $
    10,626
    
    
    
    11
    %
    
    $
    16,272
    
    
    
    21
    %
    
    $
    101,139
    
    
    
    23
    %
    
    $
    67,319
    
    
    
    27
    %Russia
    
    
    58,255
    
    
    
    58
    %
    
    
    
    
    
    
    0
    %
    
    
    211,797
    
    
    
    47
    %
    
    
    
    
    
    
    0
    %Hong Kong
    
    $
    31,000
    
    
    
    31
    %
    
    $
    39,500
    
    
    
    50
    %
    
    $
    104,050
    
    
    
    23
    %
    
    $
    90,500
    
    
    
    36
    %
  Three months ended
    
    Three months ended
    
    Year ended
    
    Year endedDec 31, 2008
    
    Dec 31, 2007
    
    Dec 31, 2008
    
    Dec 31, 2007Sales major
customersCustomer 1
    
    $
    58,255
    
    
    
    58
    %
    
    $
    
    
    
    
    0
    %
    
    $
    211,797
    
    
    
    47
    %
    
    $
    
    
    
    
    0
    %Customer 2
    
    
    31,000
    
    
    
    31
    %
    
    
    39,500
    
    
    
    50
    %
    
    
    104,050
    
    
    
    23
    %
    
    
    90,500
    
    
    
    36
    %Customer 3
    
    
    10,626
    
    
    
    11
    %
    
    
    10,460
    
    
    
    13
    %
    
    
    55,801
    
    
    
    12
    %
    
    
    45,337
    
    
    
    18
    %Customer 4
    
    
    0
    
    
    
    0
    %
    
    
    5,811
    
    
    
    7
    %
    
    
    45,338
    
    
    
    10
    %
    
    
    21,982
    
    
    
    9
    %
   18




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Financial Condition and Results of Operations for the year ended December 31, 2008 compared to the
year ended December 31, 2007
 19




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20




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nd
 21




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Twelve months
    
    
    Twelve months2008
    
    
    2007Interest expenses.Note payable related party in Euros
    
    $
    14,094
    
    
    $
    12,191Note payable officer
    
    
    100,052
    
    
    
    74,112Whitebox I
    
    
    358,431
    
    
    
    797,790Whitebox I Consent fee amortization
    
    
    98,252
    
    
    
    49,126Whitebox Ia Interest note
    
    
    24,288
    
    
    
    6,072Whitebox II
    
    
    370,800
    
    
    
    365,400Whitebox II Consent fee amortization
    
    
    45,000
    
    
    
    22,500Whitebox IIa Interest note
    
    
    11,124
    
    
    
    2,781Whitebox III
    
    
    865,200
    
    
    
    658,925Whitebox III Consent fee amortization
    
    
    105,000
    
    
    
    52,500Whitebox IIIa Interest note
    
    
    19,516
    
    
    
    4,879Idylwood Partners L.P.
    
    
    
    
    
    
    60,000Whitebox V
    
    
    60,000
    
    
    
    120,000Whitebox Va Interest note
    
    
    1,800
    
    
    
    900Whitebox VI
    
    
    60,000
    
    
    
    98,333Whitebox VIa Interest note
    
    
    1,800
    
    
    
    900Synapse
    
    
    29,333
    
    
    
    18,667Whitebox VII
    
    
    204,000
    
    
    
    107,267Notes Officers
    
    
    48,000
    
    
    
    20,000Whitebox VIII
    
    
    58,000
    
    
    
    22,000Other
    
    
    
    
    
    
    (15,350
    )$
    2,474,690
    
    
    $
    2,478,996
 Twelve months
    
    
    Twelve months2008
    
    
    2007Beneficial conversion amortizationWhitebox I
    
    $
    
    
    
    $
    582,754Whitebox I BCF consent fee
    
    
    81,680
    
    
    
    40,840Whitebox II
    
    
    
    
    
    
    67,876Whitebox II BCF consent fee
    
    
    37,412
    
    
    
    18,706Whitebox III
    
    
    
    
    
    
    1,079,365Whitebox III BCF consent fee
    
    
    87,292
    
    
    
    43,646Idylwood Partners L.P.
    
    
    
    
    
    
    34,722Whitebox V
    
    
    248,302
    
    
    
    401,468Total conversion feature expense
    
    $
    454,687
    
    
    $
    2,269,377Total interest expenses
    
    $
    2,929,376
    
    
    $
    4,748,373
   22




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Reduced Operations
  Agreement to Sell Our Assets
   23




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24




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Disclosure Controls and Procedures
  25




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Managements Annual Report on Internal Control Over Financial Reporting
   Internal
ControlIntegrated Framework
  Changes in Internal Control Over Financial Reporting
  
   26




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Brian Abraham
 Richard Bjorkman
 David Kernan
 27




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John C. Kopchik
 Anthony Nobles
 Mark M. Strefling
 28




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Richard Vigilante
  Audit Committee Financial Expert
    CODE OF ETHICS
  
  Executive Employment Agreements
 29




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NOBLES EMPLOYMENT AGREEMENT
  RATERING EMPLOYMENT AGREEMENT
  BJORKMAN EMPLOYMENT AGREEMENT
  TECKMAN EMPLOYMENT AGREEMENT
  30




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COMPENSATION
  
 OTHER ANNUALNAME
AND PRINCIPAL POSITION
    
    YEAR
    
    SALARY
    
    INTEREST
    
    COMPENSATIONDavid Teckman
    
    
    2008
    
    
    $
    250,000
    (1)
    
    
    
    
    
    $
    307,261
    (6)Chief executive officer and President
    
    
    2007
    
    
    $
    250,000
    (1)
    
    
    
    
    
    $
    7,150
    (6)2006
    
    
    $
    1
    (1)
    
    
    
    
    
    $
    0
    (6)Richard Bjorkman
    
    
    2008
    
    
    $
    145,500
    (2)
    
    
    
    
    
    $
    37,500
    (7)Chief Financial Officer and Executive
    
    
    2007
    
    
    $
    90,000
    (2)
    
    
    
    
    
    
    0Vice President
    
    
    2006
    
    
    $
    26,250
    (2)
    
    
    
    
    
    $
    0Anthony Nobles, PhD
Chairman,Chief Scientific officer
    
    
    2008
    
    
    $
    250,000
    (3)
    
    $
    180,072
    (8)
    
    $
    111,966
    (9)2007
    
    
    $
    250,000
    (3)
    
    $
    173,147
    (8)
    
    $
    7,800
    (9)2006
    
    
    $
    250,000
    (3)
    
    
    
    
    
    $
    7,800
    (9)Egbert Ratering
Executive Vice President
    
    
    2008
    
    
    $
    172,044
    (4)
    
    
    
    
    
    $
    37,398
    (9)2007
    
    
    $
    151,706
    (4)
    
    $
    128,052
    (8)
    
    $
    11,540
    (9)2006
    
    
    $
    137,983
    (4)
    
    
    
    
    
    $
    10,618
    (9)Brian Abraham
    
    
    2008
    
    
    $
    0
    (5)
    
    $
    0
    
    
    $
    0
 
 (1)
    
    Mr. Teckman became an executive officer and employee of the Company on September 21,
2006. Mr. Teckman worked for the sum of one dollar for the remainder of 2006. His annual
salary during 2007 was $250,000. Mr. Teckman resigned his employment with the Company
effective February 21, 2008. On June 4, 2008, pursuant to the terms of the Separation
Agreement between the Company and Dave Teckman, the Company paid to Mr. Teckman a lump sum
payment of $520,699.24, less applicable withholdings, in exchange for a general release of
all claims that Mr. Teckman has or may have against the Company. As part of the Separation
Agreement, The Company also paid $40,000 of legal fees incurred by Mr. Teckman in
connection with his separation from The Company.(2)
    
    Mr. Bjorkman became an executive officer and employee of the Company on September 21,
2006. Mr. Bjorkman devotes twenty hours 31




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per week to the Company on a part time basis. Mr.
Bjorkman receives half of his annual salary of $300,000 for his time at Sutura. On
February 21, 2008, he was appointed interim Chief Executive Officer of the Company, in
addition to his existing officer positions, and served as interim Chief Executive Officer
until April 4, 2008, at which time he resigned from such interim position and Mr. Abraham
was appointed Chief Executive Officer.(3)
    
    Mr. Nobles became an executive officer and employee of the Company on August 19, 2005
as a result of the merger of the Company with Prior Sutura.(4)
    
    Mr. Ratering became an executive officer and employee of the Company on August 19, 2005
as a result of the merger of the Company with Prior Sutura.(5)
    
    Mr. Abraham became an executive officer and employee of the Company on April 4, 2008.
Mr. Abraham worked for the sum of one dollar for the remainder of 2008.(6)
    
    These amounts represent automobile allowances for the full years 2008 and 2007 as well
as an employment termination compensation of $300,000 in 2008.(7)
    
    These amounts represent a bonus payment equivalent to two months salary.(8)
    
    These amounts represent interest compensation at 8% on the amount of back owed salaries
due such officer for prior years employment that had been accrued on company books per the
end of 2007.(9)
    
    These amounts represent a bonus payment equivalent to two
months salary  in 2008 and automobile
allowances for the  years 2008, 2007 and 2006.    
  32




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NUMBER OF
    
    PERCENTAGE OFSUTURA SHARES
    
    SUTURA SHARESNAME AND ADDRESS OF
    
    BENEFICIALLY
    
    BENEFICIALLYBENEFICIAL OWNER
    
    HELD
    
    OWNED5% STOCKHOLDERS:Nobles, Anthony PhD(1)
    
    
    103,558,836
    
    
    
    29.12
    %Ratering, Egbert(2)
    
    
    112,781,124
    
    
    
    31.48
    %Grootkasteel, B.V.
    
    
    69,461,329
    
    
    
    20.56
    %Synapse Capital LLC (3)
    
    
    24,859,459
    
    
    
    7.36
    %Whitebox (4)
    
    
    336,621,583
    
    
    
    64.15
    %EXECUTIVE OFFICERS &
DIRECTORSAbraham, Brian (5)
    
    
    0
    
    
    
    *Bjorkman,Richard (6)
    
    
    450,000
    
    
    
    *Kernan,David (6)
    
    
    0
    
    
    
    *Strefling,Mark M(5)
    
    
    0
    
    
    
    *Kopchik,John C. (5)
    
    
    0
    
    
    
    *Vigilante,Richard.(5)
    
    
    0
    
    
    
    *All directors & officers as
a group(7)
    
    
    450,000
    
    
    
    0.17
    %
 
 *
    
    Indicates less than 1% 33




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##### Table of Contents



(1)
    
    Includes 9,687,954 shares of the Company held by Anthony Nobles; 6,508,680 shares of the
Company held by The Anthony Nobles Family Limited Partnership; 86,783 shares of the Company
held by Rhonda Nobles; 69,461,329 shares of the Company held by GrootKasteel B.V.; and
17,814,090 shares of the Company issuable upon the exercise of options held by Anthony Nobles.
Anthony Nobles is an officer and director of GrootKasteel B.V. and holds the power to vote all
shares held by The Anthony Nobles Family Limited Partnership. Rhonda Nobles is the spouse of
Mr. Nobles. Mr. Nobles resigned as President, Chief Science Officer and a director of the
Company on January 12, 2009.(2)
    
    Includes 16,343,557 shares of the Company held by Egbert Ratering; 2,169,560 shares of the
Company held by Franck Ratering; 2,169,560 shares of the Company held by Alex Ratering;
2,169,560 shares of the Company held by Harry Ratering; 69,461,329 shares of the Company held
by GrootKasteel B.V.; 12,506,488 shares of the Company issuable upon conversion of convertible
notes and 7,961,070 shares of the Company issuable upon conversion of options held by Egbert
Ratering. Egbert Ratering is an officer and director of GrootKasteel B.V. Franck Ratering,
Alex Ratering and Harry Ratering are members of Mr. Raterings immediate family.(3)
    
    Includes 10,264,866 shares of the Company issued to Synapse Fund I LLC and 14,606,335 shares
of the Company issued to Synapse Fund II LLC. Synapse Capital, LLC is the Manager of each of
Synapse Fund I and Synapse Fund II.(4)
    
    Includes 149,712,197 shares of the Company beneficially owned by Whitebox Advisors, LLC, as
the managing member of each of Pandora Select Partners L.P., a British Virgin Islands limited
partnership; Whitebox Hedged High Yield L.P., a British Virgin Islands limited partnership;
Whitebox Convertible Arbitrage Partners L.P. a British Virgin Islands limited partnership, and
by Gary S. Kohler and Scot W. Malloy, who are employed by Whitebox Advisors (collectively, the
Whitebox Parties), and 186,909,386 shares of the Company issuable to the Whitebox Parties
upon conversion of notes and warrants.(5)
    
    Each of Messrs. Abraham, Kopchik, Strefling and Vigilante are employed by, or employed by an
entity affiliated with, Whitebox Advisors, LLC or one of the Whitebox Parties, but disclaim
any beneficial ownership of any securities benefically owned by Whitebox Advisors, LLC.(6)
    
    Shares issuable upon exercise of options.(7)
    
    Includes 585,598 shares of the Company issuable upon exercise of options. Calculation
includes all shares of the Company beneficially owned by Brian Abraham, Richard Bjorkman,
David Kernan, John Kopchik, Mark Strefling and Richard Vigilante. 34




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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
  35




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Number ofSecurities to be
    
    Exercise
    
    Securitiesissued upon
    
    price of
    
    available forexercise of
    
    outstanding
    
    future issuanceoutstanding
    
    options,
    
    under equityoptions, warrants
    
    warrants and
    
    compensationPlan Category
    
    Name of plan
    
    
    
    
    
    and rights
    
    rights
    
    plansa
    
    b
    
    cEquity compensation
    
    Sutura 1999 option plan
    
    
    1
    
    
    
    33,020,708
    
    
    
    0.076
    
    
    
    0plans not approved by
    
    Sutura 2004 warrants
    
    
    2
    
    
    
    867,824
    
    
    
    0.626
    
    
    
    0security holders
    
    Sutura 2004 warrants
    
    
    3
    
    
    
    1,821,262
    
    
    
    0.626
    
    
    
    0Sutura 2004 warrants
    
    
    4
    
    
    
    2,321,129
    
    
    
    0.626
    
    
    
    0Equity compensation
    
    Sutura 2006 option plan
    
    
    5
    
    
    
    3,880,000
    
    
    
    0.300
    
    
    
    0Sutura 2006 option plan
    
    
    6
    
    
    
    1,950,000
    
    
    
    0.070
    
    
    
    0Sutura 2006 option plan
    
    
    7
    
    
    
    1,700,000
    
    
    
    0.070
    
    
    
    10,270,000
 
 1:
    
    Represents 41,210,806 option shares available under the option plans of Prior Sutura that were
assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19,
2005. There are no additional shares available for issuance as those plans were frozen on the
effective date of the merger.2:
    
    Represents warrants issued to management of Prior Sutura in 2004 that were assumed by the Company
in connection with the merger of the Company and Prior Sutura on August 19, 2005. The warrants are
exercisable for a period of 5 years.3:
    
    Represents warrants issued to consultants having provided investor relations , legal, marketing
and administrative services for us during 2004 that were assumed by the Company in connection with
the merger of the Company and Prior Sutura on August 19, 2005. The warrants are exercisable for a
period of 5 years.4:
    
    Represents warrants issued to investors as part of private placements during 2004 that were
assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19,
2005. The warrants are exercisable for a period of 5 years.5:
    
    Represents 1,450,000 options issued to consultants and 2,930,000 options issued to key
employees. The options vest in 4 years and are exercisable for a period of 10 years.6:
    
    Represents 1,750,000 options issued to members of the board of directors and members of the
clinical advisory board and 1,200,000 options issued to key employees under the 2006 plan.7:
    
    Represents 2,400,000 options issued to members of the board of directors and clinical advisory
board. The options vest in 4 years and are exercisable for a period of 10 years. 
    36




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plus
    37




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Principal Accountant Fees and Services
 38




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##### Table of Contents



Fee Category
    
    Fiscal 2008 Fees
    
    
    Fiscal 2007 FeesAudit Fees
    
    $
    37,500
    
    
    $
    47,500Audit-related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0Total Fees
    
    $
    37,500
    
    
    $
    47,500
 Audit Fees.
 Audit-related Fees.
 Tax Fees
 All Other Fees.
 Preapproval Policies
   
  2.1
    
    Asset Purchase Agreement, dated December 12, 2008, by and between Sutura, Inc. and
Nobles Medical Technologies, Inc.182.2
    
    First Amendment to Asset Purchase Agreement, dated February 4, 2008, by and between Nobles
Medical technologies, Inc. and Sutura, Inc.3.1
    
    Certificate of Incorporation1
 39




---



##### Table of Contents



3.2
    
    Certificate of Amendment to Certificate of Incorporation23.3
    
    Certificate of Amendment to Certificate of Incorporation73.4
    
    Certificate of Merger73.5
    
    Bylaws74.1
    
    Form of Common Stock Certificate110.1
    
    Sutura Inc. 2001 Stock Option Plan710.2
    
    Sutura Inc. 1999 Stock Option Plan710.3
    
    Employment Agreement with Egbert Ratering710.4
    
    Employment Agreement with Anthony Nobles710.5
    
    Sutura Inc. 2006 Stock Option Plan710.6
    
    Lease for Fountain Valley Location710.7
    
    Sucor License Agreement710.8
    
    Sterilis License Agreement710.9
    
    Option and Distribution Agreement with Getz Bros. & Co., Inc., dated
September 20, 2002710.10
    
    Convertible Promissory Note in Favor of Getz Bros. & Co., Inc., dated
September 20, 2002710.11
    
    Purchase Agreement, dated as of September 17, 2004 by and between Sutura,
Inc. and certain other parties thereto.310.12
    
    Purchase Agreement, dated as of March 24, 2005 by and between Sutura, Inc.
and certain other parties thereto.310.13
    
    Form of Secured Convertible Promissory Note, dated September 17,
2004.310.14
    
    Form of Secured Convertible Promissory Note dated March 24,
2005.310.15
    
    Form of Warrant, dated September 17, 2004.310.16
    
    Form of Warrant dated, March 24, 2005.310.17
    
    Purchase Agreement, dated September 9, 2005 by and between Sutura, Inc.
and certain other parties thereto.310.18
    
    Second Amended Security Agreement, dated September 9, 2005 by and between
Sutura, Inc. and certain other parties thereto.310.19
    
    Second Amended Patent and Trademark Security Agreement, dated September 7,
2005 by and between Sutura, Inc. and certain other parties
thereto.3
 40




---



##### Table of Contents



10.20
    
    Second Amended Registration Rights Agreement, dated September 7, 2005 by
and between Sutura, Inc. and certain other parties thereto.310.21
    
    Form of Secured Convertible Promissory Note, dated September 7,
2005.310.22
    
    Form of Warrant dated September 7, 2004.310.23
    
    Amendment to Secured Convertible Promissory Notes and Warrants, dated
September 7, 2005 by and between Sutura, Inc. and certain other parties
thereto.310.24
    
    Amendment to Secured Convertible Promissory Notes and Warrants, dated
March 31, 2006 by and between Sutura, Inc. and certain other parties
thereto.410.25
    
    Agreement and Plan of Merger dated November 22, 2004.510.26
    
    Distributor Agreement with Getz Bros & Co., Inc. dated September 20,
2002.710.27
    
    Distribution Agreement with The Lifemed Group, Inc. dated January 16,
2006.710.28
    
    Form of Secured Convertible Promissory Note, dated March 5,
2007.810.29
    
    Form of Promissory Note, dated May 18, 2007.910.30
    
    Form of Promissory Note, dated July 2, 2007.1010.31
    
    Form of Promissory Note, dated July 16, 2007.1110.32
    
    Amendment to Secured Promissory Notes, effective as of July 1,
2007.1210.33
    
    Form of Convertible Promissory Note, dated September 21, 2007.1310.34
    
    Common Stock Purchase Agreement between Sutura and Grootkasteel, B.V.,
dated November 21, 2007.1410.35
    
    Settlement, License and Release Agreement between Sutura, Abbott
Laboratories and Abbott Vascular, Inc., effective December 3,
2007.1510.36
    
    Convertible Promissory Note, dated December 12, 2007.1610.37
    
    Confidential Separation Agreement Between Sutura, Inc. and david Teckman.1714.1
    
    Code of ethics for the Board of Directors.614.2
    
    Code of ethics for Executive Officers.6
 41




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##### Table of Contents



31.1
    
    Certification of the Chief Executive Officer of Sutura, Inc. pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer of Sutura, Inc. pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer of Sutura, Inc. pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer of Sutura, Inc. pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 1
    
    Previously filed as part of the Form 10-KSB filed in May 1995 and amendments thereto which are hereby incorporated
by reference.2
    
    Previously filed as part of the Form 10-KSB for the period ending December 31, 2001.3
    
    Previously filed as an exhibit to Form 8-K, filed on September 13, 2005.4
    
    Previously filed as an exhibit to Form 8-K filed on March 31, 2006.5
    
    Previously filed as an exhibit to Form 8-K filed on December 1, 2004.6
    
    Previously filed as part of the Form 10-KSB for the period ending December 31, 2003.7
    
    Previously filed as part of the Form 10-KSB for the period ending December 31, 2005.8
    
    Previously filed as an Exhibit to Form 8-K filed on March 7, 2007.9
    
    Previously filed as an Exhibit to Form 8-K filed on May 24, 2007.10
    
    Previously filed as an Exhibit to Form 8-K filed on July 6, 2007.11
    
    Previously filed as an Exhibit to Form 8-K filed on July 19, 2007.12
    
    Previously filed as an Exhibit to Form 8-K filed on September 18, 2007.13
    
    Previously filed as an Exhibit to Form 8-K filed on September 25, 2007.14
    
    Previously filed as an Exhibit to Form 8-K filed on November 26, 2007.15
    
    Previously filed as an Exhibit to Form 8-K filed on December 4, 2007.16
    
    Previously filed as an Exhibit to Form 8-K on December 17, 2007.17
    
    Previously filed as an Exhibit to Form 8-K on June 9, 2008.18
    
    Previously filed as an Exhibit to Form 8-K on December 18, 2008. 42




---



##### Table of Contents



SIGNATURES
  SUTURA INCBy:
    
    /s/ BRIAN ABRAHAM

Brian Abraham, Chief Executive Officer and DirectorDate:
    
    April 15, 2009By:
    
    /s/ RICHARD BJORKMANRichard Bjorkman, Chief Financial Officer, Vice President Finance
and DirectorDate:
    
    April 15, 2009
  By:
    
    /s/ MARK STREFLING

Mark Strefling, Chairman of the Board, DirectorDate:
    
    April 15, 2009By:
    
    /s/ David Kernan, DirectorDate:
    
    April 15, 2009By:
    
    /s/ JOHN KOPCHIKJohn Kopchik, DirectorDate:
    
    April 15, 2009By:
    
    /s/ RICHARD VIGILANTERichard Vigilante, DirectorDate:
    
    April 15, 2009
 43




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##### Table of Contents



SUTURA, INC.
AND SUBSIDIARIES
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets
    
    
    F-3Consolidated Statements of Operations
    
    
    F-4Consolidated Statements of Stockholders Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-7
 F-1




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##### Table of Contents



F-2




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##### Table of Contents



At December
    
    
    At December31,
    
    
    31,2008
    
    
    2007(Restated)ASSETSCURRENT ASSETS:Cash & cash equivalents
    
    $
    1,150,554
    
    
    $
    7,767,196Marketable securities & Certificates of deposits
    
    
    83,021
    
    
    
    8,917,690Current assets held for sale
    
    
    3,413,254
    
    
    
    3,116,028Total current assets
    
    
    4,646,829
    
    
    
    19,800,914LONG TERM ASSETS:Non-current assets held for sale
    
    
    825,331
    
    
    
    833,369Total assets
    
    $
    5,472,160
    
    
    $
    20,634,283LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    
    2,221,666
    
    
    
    3,358,047Loan payable  officers
    
    
    116,985
    
    
    
    119,858Customer deposits
    
    
    894,466
    
    
    
    1,006,311Notes payable  related party
    
    
    166,548
    
    
    
    161,823Convertible notes payable- officers
    
    
    1,000,519
    
    
    
    926,408Convertible notes payable- net of beneficial conversion
    
    
    12,264,153
    
    
    
    3,811,698Total current liabilities
    
    
    16,664,337
    
    
    
    9,484,145LONG TERM LIABILITIES:Convertible notes payable- net of beneficial conversion
    
    
    
    
    
    
    17,028,603Notes payables
    
    
    1,700,000
    
    
    
    1,700,000Notes payables officers
    
    
    400,000
    
    
    
    400,000Total liabilities
    
    
    18,764,337
    
    
    
    28,612,747COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS DEFICITSeries A convertible preferred stock, $0.001 par value;
2,000,000 shares authorized, none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 500,000,000 shares authorized;
issued and outstanding 337,816,037 shares as at December 31, 2008
and 272,650,262 shares at December 31, 2007
    
    
    337,816
    
    
    
    272,650Additional paid in capital
    
    
    56,551,159
    
    
    
    50,941,329Accumulated deficit
    
    
    (69,149,495
    )
    
    
    (58,134,208
    )Other comprehensive loss
    
    
    (1,031,657
    )
    
    
    (1,058,236
    )Total stockholders deficit
    
    
    (13,292,177
    )
    
    
    (7,978,465
    )Total Liabilities and StockholdersDefict
    
    $
    5,472,160
    
    
    $
    20,634,283
  F-3




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##### Table of Contents



2008
    
    
    2007(Restated)Net revenue
    
    $
    
    
    
    $
    Other income (expense)Interest expense(1)
    
    
    (2,929,377
    )
    
    
    (4,748,374
    )Litigation settlement
    
    
    
    
    
    
    23,000,000Total other income (expense)
    
    
    (2,929,377
    )
    
    
    18,251,626Income (loss) from continued operations
    
    
    (2,929,377
    )
    
    
    18,251,626Discontinued operations:Loss from discontinued operations
    
    
    (8,085,911
    )
    
    
    (7,751,147
    )NET INCOME (LOSS)
    
    
    (11,015,288
    )
    
    
    10,500,479OTHER COMPREHENSIVE GAIN (LOSS)Unrealized
gain (loss) securities
    
    
    (17,646
    )
    
    
    Translation adjustment
    
    
    5,068
    
    
    
    (121,072
    )TOTAL COMPREHENSIVE GAIN (LOSS)
    
    
    (12,578
    )
    
    
    (121,072
    )COMPREHENSIVE (LOSS)
    
    $
    (11,027,866
    )
    
    $
    10,379,407BASIC AND DILUTED NET INCOME (LOSS) FROM CONTINUED OPERATIONS
    
    $
    (0.01
    )
    
    $
    0.07BASIC AND DILUTED NET LOSS FROM DISCONTINUED OPERATIONS
    
    $
    (0.02
    )
    
    $
    (0.03
    )BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
    
    $
    (0.03
    )
    
    $
    0.04BASIC AND DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING*
    
    
    321,435,569
    
    
    
    265,214,687* Weighted average number of shares used to compute
basic and diluted loss per share
is the same since the effect of dilutive
securities is anti-dilutive.(1) Includes amortization of beneficial conversion
feature and warrants issued of:
    
    $
    454,687
    
    
    $
    2,269,377
  F-4




---



##### Table of Contents



ADDITIONAL
    
    
    OTHER
    
    
    
    
    
    
    TOTALCOMMON STOCK
    
    
    PAID-IN
    
    
    COMPREHENSIVE
    
    
    ACCUMULATED
    
    
    STOCKHOLDERSSHARES
    
    
    AMOUNT
    
    
    CAPITAL
    
    
    LOSS
    
    
    DEFICIT
    
    
    DEFICITBALANCE, DECEMBER 31, 2006
    
    
    259,168,108
    
    
    $
    259,169
    
    
    $
    48,984,574
    
    
    $
    (937,164
    )
    
    $
    (68,634,687
    )
    
    $
    (20,328,109
    )Private placement of common stock
    
    
    1,420,455
    
    
    
    1,420
    
    
    
    98,580
    
    
    
    
    
    
    
    
    
    
    $
    100,000Interest expenses converted into shares
    
    
    12,061,699
    
    
    
    12,061
    
    
    
    947,606
    
    
    
    
    
    
    
    
    
    
    $
    959,667Beneficial conversion feature notes commitment fee
    
    
    
    
    
    
    
    
    
    
    412,767
    
    
    
    
    
    
    
    
    
    
    $
    412,767Compensation expenses options employees
    
    
    
    
    
    
    
    
    
    
    330,528
    
    
    
    
    
    
    
    
    
    
    $
    330,528Compensation expenses options non-employees
    
    
    
    
    
    
    
    
    
    
    167,273
    
    
    
    
    
    
    
    
    
    
    $
    167,273Unrealized loss on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,271
    )
    
    
    
    
    
    $
    (44,271
    )Foreign translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,801
    )
    
    
    
    
    
    $
    (76,801
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,500,479
    
    
    $
    10,500,479BALANCE, DECEMBER 31, 2007 (Restated)
    
    
    272,650,262
    
    
    $
    272,650
    
    
    $
    50,941,329
    
    
    $
    (1,058,236
    )
    
    $
    (58,134,208
    )
    
    $
    (7,978,465
    )Conversion of convertible notes payables
    
    
    62,659,400
    
    
    
    62,660
    
    
    
    4,950,093
    
    
    
    
    
    
    
    
    
    
    $
    5,012,753Interest expenses converted into shares
    
    
    2,506,375
    
    
    
    2,506
    
    
    
    198,003
    
    
    
    
    
    
    
    
    
    
    $
    200,509Beneficial conversion feature notes commitment fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Compensation expenses options employees
    
    
    
    
    
    
    
    
    
    
    294,543
    
    
    
    
    
    
    
    
    
    
    $
    294,543Compensation expenses options non-employees
    
    
    
    
    
    
    
    
    
    
    167,194
    
    
    
    
    
    
    
    
    
    
    $
    167,194Unrealized loss on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,511
    
    
    
    
    
    
    $
    21,511Foreign translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,068
    
    
    
    
    
    
    $
    5,068Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,015,288
    )
    
    $
    (11,015,288
    )BALANCE, DECEMBER 31, 2008
    
    
    337,816,037
    
    
    $
    337,816
    
    
    $
    56,551,159
    
    
    $
    (1,031,657
    )
    
    $
    (69,149,495
    )
    
    $
    (13,292,177
    )
  F-5




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##### Table of Contents



2008
    
    
    2007(Restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (11,015,288
    )
    
    $
    10,500,479Adjustments to reconcile net loss to net cash
used in operating activitiesBeneficial conversion feature
    
    
    454,687
    
    
    
    2,269,377Stock based compensation expenses- employees
    
    
    294,543
    
    
    
    330,528Stock based compensation expenses- non employees
    
    
    167,194
    
    
    
    167,274Interest expenses converted into shares
    
    
    200,510
    
    
    
    1,477,387Total Adjustments
    
    
    1,116,934
    
    
    
    4,244,566Increase (decrease) in current liabilities:Accounts payable and accrued liabilities
    
    
    852,641
    
    
    
    (621,522
    )Accrued payroll
    
    
    (1,648,021
    )
    
    
    7,851Customer deposits
    
    
    (111,845
    )
    
    
    (133,664
    )Net cash provided by (used in) continued operations
    
    
    (10,805,579
    )
    
    
    13,997,710Net cash provided by (used in) discontinued operations
    
    
    (31,852
    )
    
    
    492,234Net cash provided by (used in) operating activities
    
    
    (10,837,430
    )
    
    
    14,489,945CASH FLOWS INVESTING ACTIVITIES:Net cash provided by (used in) discontinued operations
    
    
    8,764,888
    
    
    
    (12,023,659
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from private placements
    
    
    
    
    
    
    100,000Proceeds from (payments to) notes payable
    
    
    (4,560,000
    )
    
    
    3,950,000Net cash provided by (used in) continued operations
    
    
    (4,560,000
    )
    
    
    4,050,000Net cash provided by (used in) discontinued operations
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (4,560,000
    )
    
    
    4,050,000Effect of rate changes on cash and cash equivalents
    
    
    15,900
    
    
    
    12,754NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
    
    
    (6,616,642
    )
    
    
    6,529,040CASH & CASH EQUIVALENTS, BEGINNING BALANCE
    
    
    7,767,196
    
    
    
    1,238,154CASH & CASH EQUIVALENTS, ENDING BALANCE
    
    $
    1,150,554
    
    
    $
    7,767,196SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    1,524,518
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    
  F-6




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F-7




---



##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Current assets held for saleMarketable securities and short-term Certificate of deposit
    
    
    2,500,000
    
    
    
    2,619,298Accounts Receivable, Net
    
    
    16,387
    
    
    
    31,603Inventory, net
    
    
    212,995
    
    
    
    410,569Prepaid expenses
    
    
    683,872
    
    
    
    54,558Total current assets held for sale
    
    
    3,413,254
    
    
    
    3,116,028
 F-8




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Long term assets held for saleProperty & equipment, net
    
    
    607,557
    
    
    
    251,404Certificates of deposit  Long term
    
    
    
    
    
    
    380,702Deposits
    
    
    217,773
    
    
    
    201,263Total long term assets held for sale
    
    
    825,331
    
    
    
    833,369
             
    
    Level 1 Inputs            Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
 F-9




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##### Table of Contents




    
    Level 2 Inputs            Inputs other than quoted prices in active markets
that are observable either directly or indirectly; and
    
    Level 3 Inputs            Unobservable inputs in which there is little or no
market data, which require us to develop our own assumptions.
    Computer software
    
    3 yearsOffice furniture and fixtures
    
    5-7 yearsEquipment
    
    5 years
     Revenue Recognition
 F-10




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F-11




---



##### Table of Contents



F-12




---



##### Table of Contents



F-13




---



##### Table of Contents



F-14




---



##### Table of Contents



st
 
 Reported
    
    RestatedAt December 31,
    
    At December 31,2007
    
    2007Interest Expense
    
    
    (4,275,905
    )
    
    
    (4,748,374
    )NET INCOME
    
    
    10,972,948
    
    
    
    10,500,479
 
 Reported
    
    RestatedAt December 31,
    
    At December 31,2007
    
    2007Convertible notes payable -net of
beneficial conversion
    
    $
    16,556,134
    
    
    $
    17,028,603Accumulated deficit
    
    $
    (57,661,739
    )
    
    $
    (58,134,208
    )
      F-15




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##### Table of Contents



Ending balance per December 31st, 2007
    
    $
    1,006,311
    
    
    $
    1,139,975Applied against shipments
    
    
    111,845
    
    
    
    133,664Ending balance per December 31, 2008
    
    $
    894,466
    
    
    $
    1,006,311
   December 31
    
    
    December 312008
    
    
    2007Accounts payable
    
    $
    193,007
    
    
    $
    281,275Accrued expenses
    
    
    332,399
    
    
    
    155,110Accrued compensation
    
    
    454,759
    
    
    
    2,080,446Accrued interest payable
    
    
    1,241,500
    
    
    
    841,215$
    2,221,666
    
    
    $
    3,358,046
  F-16




---



##### Table of Contents



December 31
    
    
    December 312008
    
    
    2007Loans payable to officers on demand,
interest free and unsecured
    
    $
    58,526
    
    
    $
    58,526Loans payable to officers on demand,
interest free and unsecured
    
    
    58,460
    
    
    
    61,333$
    116,985
    
    
    $
    119,858
  st
 December 31
    
    
    December 312008
    
    
    2007Notes payable with interest at 8%
due and demandable on December 31, 2008
    
    $
    166,548
    
    
    $
    161,823
    F-17




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##### Table of Contents



December 31
    
    December 312008
    
    2007Convertible notes payable to officer
bearing interest rate of 10%, unsecured
    
    $
    1,000,519
    
    
    $
    926,408
          F-18




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F-19




---



##### Table of Contents



F-20




---



##### Table of Contents



F-21




---



##### Table of Contents



F-22




---



##### Table of Contents



F-23




---



##### Table of Contents



F-24




---



##### Table of Contents



December 31
    
    
    December 312008
    
    
    2007Whitebox I
    
    $
    1,733,747
    
    
    $
    6,746,500Whitebox Ia
    
    
    202,395
    
    
    
    202,395Whitebox II
    
    
    3,090,000
    
    
    
    3,090,000Whitebox IIa
    
    
    92,700
    
    
    
    92,700Whitebox III
    
    
    7,210,000
    
    
    
    7,210,000Whitebox IIIa
    
    
    162,625
    
    
    
    162,625Whitebox V
    
    
    
    
    
    
    1,500,000Whitebox Va
    
    
    
    
    
    
    30,000Whitebox VI
    
    
    
    
    
    
    1,500,000Whitebox VIa
    
    
    
    
    
    
    30,000Synapse settlement note
    
    
    
    
    
    
    400,000Whitebox VIII
    
    
    
    
    
    
    1,000,000$
    12,491,467
    
    
    $
    21,964,220Debt issue costs
    
    
    
    
    
    
    (193,664
    )Loan consent fees
    
    
    (124,122
    )
    
    
    (372,374
    )Beneficial conversion feature
    
    
    (103,191
    )
    
    
    (1,030,350
    )$
    12,264,153
    
    
    $
    20,367,833Classified as current liability
    
    $
    12,264,153
    
    
    
    3,811,698Classified as long term liabilty
    
    $
    (0
    )
    
    $
    16,556,134
  Conversion
    
    
    
    
    
    Intrinsic
    
    
    Conversion
    
    
    Intrinsicshares per
    
    
    Conversion
    
    
    value per
    
    
    shares per
    
    
    value perDec 31 2007
    
    
    price
    
    
    Dec 31 2007
    
    
    Dec 31 2008
    
    
    Dec 31 2008Officer
    
    
    
    
    
    $
    0.0800
    
    
    $
    
    
    
    
    12,506,488
    
    
    $
    Whitebox I
    
    
    84,331,250
    
    
    
    0.0800
    
    
    
    
    
    
    
    21,671,844
    
    
    
    Whitebox Ia
    
    
    2,529,938
    
    
    
    0.0800
    
    
    
    
    
    
    
    2,529,938
    
    
    
    Whitebox II
    
    
    38,625,000
    
    
    
    0.0800
    
    
    
    
    
    
    
    38,625,000
    
    
    
    Whitebox IIa
    
    
    1,158,750
    
    
    
    0.0800
    
    
    
    
    
    
    
    1,158,750
    
    
    
    Whitebox III
    
    
    90,125,000
    
    
    
    0.0800
    
    
    
    
    
    
    
    90,125,000
    
    
    
    Whitebox IIIa
    
    
    2,032,813
    
    
    
    0.0800
    
    
    
    
    
    
    
    2,032,813
    
    
    
    Whitebox V
    
    
    33,333,333
    
    
    
    0.0450
    
    
    
    500,000
    
    
    
    
    
    
    
    Whitebox Va
    
    
    666,667
    
    
    
    0.0450
    
    
    
    10,000
    
    
    
    
    
    
    
    Whitebox VI
    
    
    33,333,333
    
    
    
    0.0450
    
    
    
    500,000
    
    
    
    
    
    
    
    Whitebox VIa
    
    
    666,667
    
    
    
    0.0450
    
    
    
    10,000
    
    
    
    
    
    
    
    Synapse settlement
note
    
    
    2,666,667
    
    
    
    0.1500
    
    
    
    
    
    
    
    2,666,667
    
    
    
    Whitebox VIII
    
    
    14,285,714
    
    
    
    0.0700
    
    
    
    
    
    
    
    
    
    
    
    303,755,131
    
    
    
    
    
    
    $
    1,020,000
    
    
    
    171,316,498
    
    
    $
    0
 F-25




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##### Table of Contents



Weigted
    
    
    AggregateConversion
    
    
    conversion
    
    
    Intrinsicshares
    
    
    price
    
    
    ValueOUTSTANDING, DECEMBER 31, 2007
    
    
    303,755,131
    
    
    $
    0.0726
    
    
    $
    1,020,000Issued
    
    
    12,506,488
    
    
    
    0.0800Cancelled or paid back
    
    
    82,285,714
    
    
    
    0.0493Exercised and converted
    
    
    62,659,406
    
    
    
    0.0800OUTSTANDING, DECEMBER 31, 2008
    
    
    171,316,498
    
    
    $
    0.0812
    
    
    $
    0
    plus
 plus
 F-26




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##### Table of Contents



December 31
    
    December 312008
    
    2007Whitebox VII
    
    $
    1,700,000
    
    
    $
    1,700,000
   plus
      F-27




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##### Table of Contents



INCOME TAX
 December 31
    
    
    December 312008
    
    
    2007Net deferred tax asset
    
    $
    (17,130,498
    )
    
    
    (14,444,134
    )Inventory Reserve
    
    
    105,400
    
    
    
    119,000Less valuation allowance
    
    
    (17,025,098
    )
    
    
    (14,325,134
    )Net deferred tax asset
    
    $
    
    
    
    
    
  December 31
    
    December 312008
    
    2007Tax expense (credit) at statutory rate federal
    
    
    (34
    )%
    
    
    (34
    )%State tax expense net of federal tax
    
    
    (6
    )
    
    
    (6
    )Permanent differences
    
    
    1
    
    
    
    1Valuation allowance
    
    
    39
    
    
    
    39Tax expense at actual rate
    
    
    
    
    
    
    
      F-28




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##### Table of Contents



Year EndingDecember 31,2009
    
    $
    337,4092010
    

    337,4092011
    

    337,4092012
    

    337,4092013
    

    337,409Total
    
    $
    1,687,405
       F-29




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##### Table of Contents



F-30




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##### Table of Contents



Pham v. Nobles, et al.
   Conversions of Debt-to-Equity by Whitebox Affiliates
  Whitebox Convertible Arbitrage Partners, L.P. 
    
    
    25,859,437Whitebox Hedged High yield Partners, L.P. 
    
    
    20,687,550Whitebox Intermarket Partners, L.P. 
    
    
    8,275,012Pandora Select Partners, L.P. 
    
    
    10,343,775
   F-31




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##### Table of Contents



.
     F-32




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##### Table of Contents



Weightedaverageremaining
    
    
    AggegrateWeighted
    
    
    contractual
    
    
    IntrinsicTotal
    
    
    price
    
    

term(years)
    
    
    ValueOUTSTANDING,
DECEMBER, 2007
    
    
    45,017,899
    
    
    $
    0.101
    
    
    
    2.9
    
    
    $
    691,890Granted in 2008
    
    
    Cancelled in 2008
    
    
    (4,467,191
    )
    
    $
    0.143
    
    
    
    
    
    
    
    Exercised in 2008
    
    
    OUTSTANDING,
DECEMBER, 2008
    
    
    40,550,708
    
    
    $
    0.097
    
    
    
    1.7
    
    
    $
    0Exercisable at
December,2008
    
    
    37,660,916
    
    
    $
    0.093
    
    
    
    1.3
    
    
    $
    0
   Weigted
    
    
    Remaining
    
    
    AggegrateAverage
    
    
    Life in
    
    
    IntrinsicTotal
    
    
    Price
    
    
    years
    
    
    ValueOUTSTANDING,
DECEMBER 2007
    
    
    35,631,891
    
    
    $
    0.3780
    
    
    
    2.4
    
    
    $
    Granted in 2008
    
    
    
    
    
    
    
    
    
    
    Cancelled in 2008
    
    
    (1,301,736
    )
    
    
    0.6259
    
    
    
    Exercised in 2008
    
    
    
    
    
    
    
    
    
    
    OUTSTANDING,
DECEMBER 2008
    
    
    34,330,155
    
    
    $
    0.3686
    
    
    
    1.6
    
    
    $
    
   F-33




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##### Table of Contents



F-34