##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the Year Ended December 31, 2007
 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.)
 17080 Newhope Street
Fountain Valley, CA 92708
 (Address of principal executive offices) (Zip Code)
  (Issuers telephone number)
   o
 þ o
 o
  Rule 12b-2). o þ
    DOCUMENTS INCORPORATED BY REFERENCE
  o þ




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##### 



Sutura, Inc.
Annual Report on Form 10-KSB
 Table of Contents
 Part IItem 1. Description of business
3Item 2. Description of property
12Item 3. Legal proceedings
13Item 4. Submission of matters to a vote of security holders
13Part IIItem 5. Market for common equity and related stockholder matters
14Item 6. Managements discussion and analysis or plan of operation
15Item 7. Financial statements
21Item 8. Changes in and disagreements with accountants on accounting and financial disclosure
22Item 8A. Controls and procedures
22Item 8b. Other Information
22Part IIIItem 9. Directors and executive officers of the registrant; Compliance with Section 16(a) of
the Securities Exchange Act of 1934; 
Code of ethics
23Item 10. Executive compensation
26Item 11. Security ownership of certain beneficial owners and management and related stockholder
matters
28Item 12. Certain relationships and related transactions
32Item 13. Exhibits
34Item 14. Principal accountant fees and services
36EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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Part I
 
 Item 1. Description of Business
 Cautionary Note Regarding Forward-Looking Statements
   Overview
   History
   3




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Recent Developments
 Recent 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
  Past Officer Litigation
  Officer and Director Resignations
       4




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Loan from Whitebox and Repayment
  Patent Infringement Litigation
  Business Strategy
   -
    
    Continue to develop features that make our products safe, easy to use and
reliable.-
    
    Focus our product offering such that we have a solution for a suturing
technique for the application of the SuperStitch EL.-
    
    Develop strategic partnership(s) for sales, distribution and physician
clinical training.-
    
    Expand our international distribution through distributors that are willing
to invest in local product specialists dedicated to our products.
 5




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Technology
   Patents and Proprietary Rights
   Manufacturing
  6




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Research & Development
    SuperStitch Products
 F8 & F6 Superstitch.
 7




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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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-
    
    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
  
 Item 2. Description of Property
   12




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Item 3. Legal Proceedings
   Pham v. Nobles, et al.
 
 Item 4. Submission of Matters to a Vote of Security Holders
  13




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Part II
 
 Item 5. Market for Common Equity and Related Stockholder Matters
 Market Information
   PERIOD
    
    HIGH
    
    LOWFiscal Year
Ended December 31, 2006
    
    First Quarter
    
    
    $0.80
    
    
    
    $0.30Second Quarter
    
    
    $0.62
    
    
    
    $0.08Third Quarter
    
    
    $0.15
    
    
    
    $0.05Fourth Quarter
    
    
    $0.10
    
    
    
    $0.03Fiscal Year
Ended December 31, 2007
    
    First Quarter
    
    
    $0.10
    
    
    
    $0.05Second Quarter
    
    
    $0.10
    
    
    
    $0.07Third Quarter
    
    
    $0.09
    
    
    
    $0.05Fourth Quarter
    
    
    $0.09
    
    
    
    $0.04
   Dividends
  14




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Recent Sales of Unregistered Securities
  
 Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
  General
    15




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Critical
Accounting Policies and Estimates
  Principles
of consolidation
  Use of
Estimates
  Foreign
Currency Translation and Transactions
  Revenue
Recognition
  16




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Accounts
Receivable
  Inventories
  Valuation
of Long-Lived Assets
  Research
and Development Costs
  Stock-Based
Compensation
   Debt
with Stock Purchase Warrants and Beneficial Conversion Features
  17




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Reclassification
of Expenses
  Financial Condition and Results of Operations for the year ended December 31, 2007 compared to year ended December 31, 2006
  Net
Sales
 
 Cost
of Sales
  18




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Research and Development
  General
and Administrative
   Sales
and Marketing
  19




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Interest
Income/expense
  Twelve months
    
    
    Twelve monthsInterest expenses
    
    2007
    
    
    2006Note payable related party in Euros
    
    $
    12,191
    
    
    $
    10,321Note payable officer
    
    
    74,112
    
    
    
    68,623Whitebox I
    
    
    846,916
    
    
    
    786,000Whitebox Ia Interest note
    
    
    6,072
    
    
    
    Fusion
    
    
    
    
    
    
    11,971Whitebox II
    
    
    387,900
    
    
    
    274,000Whitebox IIa Interest note
    
    
    2,781
    
    
    
    Whitebox III
    
    
    711,425
    
    
    
    560,000Whitebox IIIa Interest note
    
    
    4,879
    
    
    
    Idylwood Partners L.P.
    
    
    60,000
    
    
    
    40,500Whitebox IV
    
    
    
    
    
    
    21,444Whitebox V
    
    
    120,000
    
    
    
    5,667Whitebox Va
Interest note
    
    
    900
    
    
    
    Whitebox VI
    
    
    98,333
    
    
    
    Whitebox VIa
Interest note
    
    
    900
    
    
    
    Synapse
    
    
    18,667
    
    
    
    Whitebox VII
    
    
    107,267
    
    
    
    Notes
Officers
    
    
    20,000
    
    
    
    Whitebox VIII
    
    
    22,000
    
    
    
    Pandorra
    
    
    2,000
    
    
    
    Other
    
    
    (17,349
    )
    
    
    16,071$
    2,478,997
    
    
    $
    1,794,596
 Twelve months
    
    
    Twelve monthsBeneficial conversion amortization
    
    2007
    
    
    2006Whitebox I
    
    $
    582,754
    
    
    $
    1,165,509Fusion
    
    
    
    
    
    
    144,153Whitebox II
    
    
    67,876
    
    
    
    135,752Repricing warrants Whitebox II
    
    
    
    
    
    
    41,362Whitebox III
    
    
    606,896
    
    
    
    503,353Loan Commitment warrants
    
    
    103,192
    
    
    
    Repricing warrants Whitebox III
    
    
    
    
    
    
    92,520Idylwood Partners L.P.
    
    
    34,722
    
    
    
    48,611Whitebox V
    
    
    401,468
    
    
    
    12,660Total conversion feature expense
    
    $
    1,796,909
    
    
    $
    2,143,920Total interest expenses
    
    $
    4,275,905
    
    
    $
    3,938,516
 Other
Income
  20




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Liquidity and Capital Resources
   
 Item 7. Financial Statements
  21




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Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
 Evaluation
of disclosure controls and procedures
 Sarbanes-Oxley Act of 2002
 Managements annual report on internal control over financial reporting
 Internal Control Integrated Framework
 Attestation report of the registered public accounting firm
  Changes in internal control over financial reporting
  
 Item 8B. Other Information
  
 22




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Part III
  Item 9. Directors and Executive Officers of the Registrant, Compliance with Section 16(a) of the
Exchange Act; Code of Ethics
  David Teckman,
 Richard Bjorkman,
 Anthony
Nobles,
 23




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Egbert Ratering
 Richard Moran, Ph.D. ,
 John Crew, M.D.
 24




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Charles Terrell, Sr.
 Audit Committee Financial Expert
  Section 16(a)  Beneficial Ownership Reporting Compliance
  Code of Ethics
  25




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Item 10. Executive Compensation
 Executive Employment Agreements
 NOBLES EMPLOYMENT AGREEMENT
  RATERING EMPLOYMENT AGREEMENT
  BJORKMAN EMPLOYMENT AGREEMENT
  TECKMAN EMPLOYMENT AGREEMENT
  26




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Compensation
  
 OTHER ANNUALNAME AND PRINCIPAL POSTION
    
    YEAR
    
    
    SALARY
    
    
    INTEREST
    
    
    COMPENSATIONDavid Teckman
    
    
    2007
    
    
    $
    250,000
    (1)
    
    $
    0
    
    
    $
    7,150
    (6)Chief executive officer and President
    
    
    2006
    
    
    $
    1
    (1)
    
    $
    0
    
    
    $
    0Richard Bjorkman
    
    
    2007
    
    
    $
    90,000
    (2)Chief Financial Officer and Executive
    
    
    2006
    
    
    $
    26,250
    (2)
    
    $
    0
    
    
    $
    0Vice PresidentAnthony Nobles, PhD
    
    
    2007
    
    
    $
    250,000
    (3)
    
    $
    173,147
    (7)
    
    $
    7,800
    (6)Chairman,Chief Scientific officer
    
    
    2006
    
    
    $
    250,000
    (3)
    
    
    
    
    
    $
    7,800
    (6)2005
    
    
    $
    92,877
    (3)
    
    
    
    
    
    $
    2,898
    (5)Egbert Ratering
    
    
    2007
    
    
    $
    151,706
    (4)
    
    $
    128,052
    (7)
    
    $
    11,540
    (6)Executive Vice President
    
    
    2006
    
    
    $
    137,983
    (4)
    
    
    
    
    
    $
    10,618
    (6)2005
    
    
    $
    54,000
    (4)
    
    
    
    
    
    $
    5,400
    (5)
 
 (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.(2)
    
    Mr. Bjorkman became an executive officer and employee of the Company on September 21,
2006. Mr. Bjorkman devotes twenty hours per week to the Company on a part time basis. Mr.
Bjorkman receives half of his annual salary of $180,000 for his time at Sutura. The
amounts reflected in the above table reflect the amounts paid to Mr. Bjorkman since his
hire date based on his part time status.(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. Accordingly, the table sets
forth the compensation that Mr. Nobles received since becoming an executive officer of the
Company. Mr. Nobles annual salary is $250,000. The amounts shown paid in 2005 reflect
the amounts paid since becoming an officer on August 19, 2005 following the Merger
Transaction with Prior Sutura. 27




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(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. Accordingly, the table sets
forth the
compensation that Mr. Ratering received since becoming an executive officer of the Company.
Mr. Raterings annual salary is Euro 120,000, which is approximately U.S. $150,000. The
amounts shown paid in 2005 reflect the amounts paid since becoming an officer on August 19,
2005 following the Merger Transaction with Prior Sutura.(5)
    
    These amounts represent automobile allowances from August 19 through December 31,
2005.(6)
    
    These amounts represent automobile allowances for the full years 2007 and
2006.(7)
    
    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.    
 Item 11. Security Ownership of Certain Beneficial Owners and Management
  28




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Common Stock Beneficial Ownership TableNumber 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)
    
    
    111,854,726
    
    
    
    31.30%Grootkasteel, B.V.
    
    
    69,461,329
    
    
    
    20.56%Synapse Capital, LLC (3)
    
    
    27,526,126
    
    
    
    8.08%Whitebox (4)
    
    
    413,734,261
    
    
    
    68.75%EXECUTIVE OFFICERS &
DIRECTORSTeckman, David (5)
    
    
    750,000
    
    
    
    0.22%Bjorkman, Richard (5)
    
    
    450,000
    
    
    
    0.13%Nobles, Anthony PhD(1)
    
    
    103,558,836
    
    
    
    29.12%Ratering, Egbert(2)
    
    
    111,854,726
    
    
    
    31.30%Crew, John MD (6)
    
    
    2,409,346
    
    
    
    0.71%Terrell, Charles, Sr.(7)
    
    
    1,308,478
    
    
    
    0.39%Moran, Richard (5)
    
    
    950,000
    
    
    
    0.28%All directors & officers as a
group(8)
    
    
    151,820,057
    
    
    
    39.86%
 
 *
    
    Indicates less than 1%(1)
    
    Includes 9,687,954 shares of Registrant held by Anthony Nobles,Ph.D.; 6,508,680
shares of Registrant held by The Anthony Nobles Family Limited Partnership; 86,783 shares of
Registrant held by Rhonda Nobles; 69,461,329 shares of Registrant held by GrootKasteel B.V.; and
17,814,090 shares of Registrant issuable upon the exercise of options held by Anthony Nobles,Ph.D..
Anthony Nobles,Ph.D. 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.(2)
    
    Includes 16,343,557 shares of Registrant held by Egbert Ratering; 2,169,560 shares of
Registrant held by Franck Ratering; 2,169,560 shares of Registrant held by Alex Ratering; 2,169,560
shares of Registrant held by Harry Ratering; 69,461,329 shares of Registrant held by GrootKasteel
B.V.; 11,580,090 shares of Registrant issuable 29




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upon conversion of convertible notes and 7,961,070
shares of Registrant 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 Registrant issued to Synapse Fund I LLC and 14,606,335
shares of Registrant issued to Synapse Fund II LLC. Also includes 2,666,666 shares issuable upon
conversion of a promissory note that was issued to Synapse Fund I LLC for the benefit of plaintiffs
in connection with a settlement agreement, of which Synapse I claims a beneficial ownership
interest as to only 848,485 shares and Synapse II claims a beneficial ownership interest as to only
1,018,182 shares. Synapse Capital, LLC is the Manager of each of Synapse Fund I and Synapse Fund
II.(4)
    
    Includes 149,724,259 shares of Registrant 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 Affiliates) and 264,022,064 shares of Registrant issuable to the
Whitebox Affiliates upon conversion of notes and warrants.(5)
    
    Shares issuable upon exercise of options.(6)
    
    Includes 2,300,868 shares of Registrant issuable upon exercise of options and 108,478
shares of Registrant issuable upon the exercise of warrants.(7)
    
    Includes 108,478 shares of Registrant beneficially owned and 1,200,000 shares of
Registrant issuable upon exercise of options.(8)
    
    Calculation includes all shares of Registrant beneficially owned by Anthony Nobles,
Ph.D. (as indicated in footnote 1 above); plus all shares of Registrant beneficially owned by
Egbert Ratering (as indicated in footnote 2 above) less shares of Registrant held by Grootkasteel
B.V. which were included once in the calculation of the Nobles shares; plus all shares of
Registrant beneficially owned by David Teckman, Richard Bjorkman, Richard Moran, Ph.D., Dr John
Crew, MD and Charles Terrell, Sr. Securities Authorized for Issuance Under Equity Compensation Plans
  30




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Number ofSecurities to beissued upon
    
    
    
    Securitiesexercise of
    
    Exercise price of
    
    available foroutstanding
    
    outstanding
    
    future issuanceoptions, warrants
    
    options, warrants
    
    under equityPlan Category
    
    Name of
plan
    
    
    
    
    
    and rights
    
    and rights
    
    compensation plansa
    
    
    
    b
    
    
    
    cEquity compensation
    

Sutura
1999 option plan
    
    
    1
    
    
    
    34,203,119
    
    
    
    0.077
    
    
    
    0Equity compensation
    
    Sutura 2003
options
    
    
    2
    
    
    
    1,084,780
    
    
    
    0.230
    
    
    
    0plans not approved by
    
    Sutura 2004
warrants
    
    
    3
    
    
    
    1,735,648
    
    
    
    0.626
    
    
    
    0security holders
    
    Sutura 2004
warrants
    
    
    4
    
    
    
    2,255,174
    
    
    
    0.626
    
    
    
    0Sutura 2004
warrants
    
    
    5
    
    
    
    2,321,129
    
    
    
    0.626
    
    
    
    0Equity compensation
    
    Sutura 2006
option plan
    
    
    6
    
    
    
    4,380,000
    
    
    
    0.300
    
    
    
    0Sutura 2006
option plan
    
    
    7
    
    
    
    2,950,000
    
    
    
    0.060
    
    
    
    0Sutura 2006
option plan
    
    
    8
    
    
    
    2,400,000
    
    
    
    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 under
this plan as the plan was frozen on the effective date of the
merger.2:
    
    Represents options issued to
consultants having provided investor relations services for Prior Sutura during 2003 that were
assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19,
2005. The options are exercisable for a period of five years.3:
    
    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.4:
    
    Represents warrants issued to consultants having provided investor relations, legal, marketing
and administrative services for Sutura 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 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.6:
    
    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.7:
    
    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.8:
    
    Represents 2,400,000
options issued to members of the Board of Directors and members of
the Clinical Advisory Board. The
options vest in 4 years and are exercisable for a period of 10
years. 31




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Item 12. Certain Relationships and Related Transactions
  plus
   32




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33




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Item 13. Exhibits
 Exhibits3.1
    
    Certificate of Incorporation13.2
    
    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.3
 34




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10.13
    
    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.310.20
    
    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, 2004.5
 35




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10.26
    
    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,
2007.1614.1
    
    Code of ethics for the Board of Directors.614.2
    
    Code of ethics for Executive Officers.631.1
    
    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. 
 Item 14. Principal Accountant Fees and Services
       36




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37




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##### Table of Contents



SIGNATURES
  SUTURA INC
 By:
    
    /s/ BRIAN ABRAHAM, PhD.Brian Abraham, PhD.,
Chief Executive Officer and DirectorDate:
    
    April 15, 2008By:
    
    /s/ RICHARD BJORKMANRichard Bjorkman, Chief Financial Officer,
Vice President
Finance and DirectorDate:
    
    April 15, 2008
  By:
    
    /s/ MARK STREFLINGMark Strefling, Chairman of the Board, DirectorDate:
    
    April 15, 2008By:
    
    /s/ ANTHONY NOBLES, PhD.Anthony Nobles, PhD., President, Chief Operating
Officer, Chief
Scientific Officer and DirectorDate:
    
    April 15, 2008By:
    
    /s/ JOHN KOPCHIKJohn Kopchik, DirectorDate:
    
    April 15, 2008By:
    
    /s/ EGBERT RATERINGEgbert Ratering, Executive Vice
President and DirectorDate:
    
    April 15, 2008
 38




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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




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##### Table of Contents



F-2




---



##### Table of Contents



ASSETSCURRENT ASSETS:Cash & cash equivalents
    
    $
    7,767,196Marketable securities
    
    
    10,782,372Certificates of deposit  Short Term
    
    
    754,616Accounts Receivable, Net
    
    
    31,603Inventory
    
    
    410,569Prepaid expenses
    
    
    54,558Total current assets
    
    
    19,800,914LONG TERM ASSETSProperty & equipment, net
    
    
    251,404Certificates of deposit  Long Term
    
    
    380,702Deposits
    
    
    201,263Total long term assets
    
    
    833,369$
    20,634,283LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    3,358,047Loan payable  officers
    
    
    119,858Customer deposits
    
    
    1,006,311Notes payable  officers
    
    
    926,408Notes payable  related party
    
    
    161,823Notes payables
    
    
    100,000Convertible notes payable- net of beneficial conversion
    
    
    3,811,698Total current liabilities
    
    
    9,484,145LONG TERM LIABILITIES:Convertible notes payable- net of beneficial conversion
    
    
    16,556,134Notes payables
    
    
    1,700,000Notes payables officers
    
    
    400,000Total long term liabilities
    
    
    18,656,134COMMITMENTS 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;
272,650,262 shares issued and outstanding
    
    
    272,650Additional paid in capital
    
    
    50,941,329Accumulated deficit
    
    
    (57,661,739
    )Other comprehensive loss
    
    
    (1,058,236
    )Total stockholders deficit
    
    
    (7,505,996
    )$
    20,634,283
  F-3




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##### Table of Contents



2007
    
    
    2006NET SALES
    
    $
    252,041
    
    
    $
    634,569COST OF GOODS SOLD(1)
    
    
    2,256,331
    
    
    
    2,203,690GROSS LOSS
    
    
    (2,004,290
    )
    
    
    (1,569,121
    )OPERATING EXPENSES:Research and development(1)
    
    
    696,448
    
    
    
    547,270General and administrative(1)
    
    
    5,144,733
    
    
    
    4,434,976Sales and marketing(1)
    
    
    627,144
    
    
    
    1,533,128Total operating expenses
    
    
    6,468,325
    
    
    
    6,515,374OPERATING LOSS
    
    
    (8,472,615
    )
    
    
    (8,084,495
    )OTHER INCOME (EXPENSE)Interest Income
    
    
    33,993
    
    
    
    25,396Interest Expense(2)
    
    
    (4,275,905
    )
    
    
    (3,938,516
    )Other Income
    
    
    687,475
    
    
    
    Litigation Settlement
    
    
    23,000,000
    
    
    
    Total other income (expense), net
    
    
    19,445,563
    
    
    
    (3,913,121
    )NET INCOME(LOSS)
    
    
    10,972,948
    
    
    
    (11,997,615
    )

OTHER COMPREHENSIVE LOSSUnrealized Loss on Marketable Securities
    
    
    (44,271
    )
    
    
    
    

Foreign Translation Loss
    
    
    (76,801
    )
    
    
    (51,180
    )COMPREHENSIVE INCOME(LOSS)
    
    $
    10,851,876
    
    
    $
    (12,048,805
    )BASIC AND DILUTED NET INCOME (LOSS) PER
SHARE
    
    $
    0.04
    
    
    $
    (0.06
    )BASIC AND DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING*
    
    
    266,730,827
    
    
    
    209,404,663
  (1)Includes stock-based compensation charges (credits) of:Cost of good sold
    
    $
    60,512
    
    
    $
    61,850Research and development
    
    
    56,832
    
    
    
    61,850General and administrative
    
    
    196,460
    
    
    
    186,488Sales and Marketing
    
    
    16,724
    
    
    
    55,778(2)Includes amortization of beneficial conversion
feature and fair value of warrants of:
    
    $
    1,796,908
    
    
    $
    2,143,920
  F-4




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##### Table of Contents



TOTALADDITIONAL
    
    
    OTHER
    
    
    
    
    
    
    STOCKHOLDERSCOMMON STOCK
    
    
    PAID-IN
    
    
    COMPREHENSIVE
    
    
    ACCUMULATED
    
    
    EQUITYSHARES
    
    
    AMOUNT
    
    
    CAPITAL
    
    
    LOSS
    
    
    DEFICIT
    
    
    (DEFICIT)BALANCE, DECEMBER 31, 2005
    
    
    185,417,282
    
    
    $
    185,418
    
    
    $
    41,542,495
    
    
    $
    (885,974
    )
    
    $
    (56,637,072
    )
    
    $
    (15,795,136
    )Private placement of common stock
    
    
    49,261,530
    
    
    
    49,262
    
    
    
    3,065,015
    
    
    
    
    
    
    
    
    
    
    $
    3,114,277Warrants
issued with placement of stock
    
    
    
    
    
    
    
    
    
    
    805,723
    
    
    
    
    
    
    
    
    
    
    $
    805,723Interest
expenses converted into shares
    
    
    23,268,588
    
    
    
    23,269
    
    
    
    1,618,176
    
    
    
    
    
    
    
    
    
    
    $
    1,641,445Beneficial
conversion feature convertible notes
    
    
    
    
    
    
    
    
    
    
    928,887
    
    
    
    
    
    
    
    
    
    
    $
    928,887Conversion notes payable
    
    
    1,220,708
    
    
    
    1,220
    
    
    
    543,640
    
    
    
    
    
    
    
    
    
    
    $
    544,860Compensation
expenses options employees
    
    
    
    
    
    
    
    
    
    
    365,966
    
    
    
    
    
    
    
    
    
    
    $
    365,966Compensation
expenses options non-employees
    
    
    
    
    
    
    
    
    
    
    114,672
    
    
    
    
    
    
    
    
    
    
    $
    114,672Foreign translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,190
    )
    
    
    
    
    
    $
    (51,190
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,997,615
    )
    
    $
    (11,997,615
    )BALANCE, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,972,948
    
    
    $
    10,972,948BALANCE, DECEMBER 31, 2007
    
    
    272,650,262
    
    
    $
    272,650
    
    
    $
    50,941,329
    
    
    $
    (1,058,236
    )
    
    $
    (57,661,739
    )
    
    $
    (7,505,996
    )
  F-5




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##### Table of Contents

\

2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    10,972,948
    
    
    $
    (11,997,615
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    233,256
    
    
    
    291,348Provision for doubtful debts
    
    
    
    
    
    
    4,468Beneficial conversion feature
    
    
    1,796,908
    
    
    
    2,143,920Stock based compensation expenses- employees
    
    
    330,528
    
    
    
    365,966Stock based compensation expenses- non employees
    
    
    167,274
    
    
    
    114,673Interest expenses converted into shares.
    
    
    1,477,387
    
    
    
    1,641,444Reserve for inventory obsolescence
    
    
    
    
    
    
    250,000(Increase) decrease in current assets:Accounts receivables
    
    
    60,968
    
    
    
    12,772Inventory
    
    
    49,550
    
    
    
    (454,614
    )Prepaid expenses
    
    
    148,460
    
    
    
    182,357Increase (decrease) in current liabilities:Accounts payable and accrued liabilities
    
    
    (621,522
    )
    
    
    752,190Accrued payroll
    
    
    7,851
    
    
    
    (376,127
    )Customer deposits
    
    
    (133,664
    )
    
    
    (31,000
    )Total Adjustments
    
    
    3,516,997
    
    
    
    4,897,396Net cash provided by (used in) operating activities
    
    
    14,489,945
    
    
    
    (7,100,219
    )CASH FLOWS INVESTING ACTIVITIES:Acquisition of property and equipment, net
    
    
    (61,698
    )
    
    
    (158,978
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from private placements
    
    
    100,000
    
    
    
    3,920,000Proceeds from notes payable
    
    
    3,950,000
    
    
    
    2,250,000Purchases of marketable securities
    
    
    (11,961,961
    )
    
    
    Net cash provided by financing activities
    
    
    (7,911,961
    )
    
    
    6,170,000Effect of rate changes on cash and cash equivalents
    
    
    12,754
    
    
    
    10,348NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
    
    
    6,529,040
    
    
    
    (1,078,849
    )CASH & CASH EQUIVALENTS, BEGINNING BALANCE
    
    
    1,238,154
    
    
    
    2,317,003CASH & CASH EQUIVALENTS, ENDING BALANCE
    
    $
    7,767,196
    
    
    $
    1,238,154SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    
  F-6




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F-7




---



##### Table of Contents



Computer software
    
    3 yearsOffice furniture and fixtures
    
    5-7 yearsEquipment
    
    5 years
   F-8




---



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F-9




---



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F-10




---



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F-11




---



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December 31
    
    
    December 312007
    
    
    2006Sales US
    
    $
    21,999
    
    
    $
    282,798Total export
    
    
    230,042
    
    
    
    351,772Total sales
    
    $
    252,041
    
    
    $
    634,569
       F-12




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F-13




---



##### Table of Contents



Acquisition
    
    
    Market
    
    
    Accumulatedcost at
    
    
    value at
    
    
    unrealizedDec 31 2007
    
    
    Dec 31 2007
    
    
    Gain (Loss)Taxable auction rate securities
    
    $
    4,000,232
    
    
    $
    4,000,000
    
    
    $
    (232
    )Government bonds
    
    
    6,339,587
    
    
    
    6,303,767
    
    
    
    (35,820
    )Corporate bonds
    
    
    477,000
    
    
    
    478,605
    
    
    
    1,605Totals
    
    $
    10,816,819
    
    
    $
    10,782,372
    
    
    $
    (34,447
    )
 F-14




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##### Table of Contents



Acquisition
    
    
    Market
    
    
    Accumulatedcost at
    
    
    value at
    
    
    unrealizedDec 31 2007
    
    
    Dec 31 2007
    
    
    Gain (Loss)Short Term Certificates of deposit
    
    $
    760,286
    
    
    $
    754,616
    
    
    $
    (5,670
    )Long Term Certificates of deposit
    
    
    384,855
    
    
    
    380,702
    
    
    $
    (4,153
    )$
    1,145,141
    
    
    $
    1,135,318
    
    
    $
    (9,823
    )
   December 312007Total accounts receivables
    
    $
    87,714Allowance for bad debts
    
    
    (56,111
    )Net accounts receivables
    
    $
    31,603
    December 312007Raw material/WIP
    
    $
    367,473Work in process
    
    
    279,721Finished goods
    
    
    113,375760,569Less: Reserve for obsolescence
    
    
    (350,000
    )$
    410,569
 F-15




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##### Table of Contents



December 312007Computers
    
    $
    357,406Office furniture and fixtures
    
    
    583,740Machinery and equipment
    
    
    2,652,7883,593,934Less: Accumulated depreciation
    
    
    (3,342,530
    )$
    251,404
   December 312007Opening balance per January 1st, 2007
    
    $
    1,139,975Applied against shipments
    
    
    133,664Ending balance per December 31, 2007
    
    $
    1,006,311
   December 312007Accounts payable  trade creditors
    
    $
    227,629Accounts payable  legal and professional
    
    
    53,646Accrued expenses
    
    
    155,110Accrued compensation
    
    
    2,080,446Accrued interest payable
    
    
    841,215$
    3,358,047
 F-16




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##### Table of Contents



December 312007Loans payable to officers on demand,
interest free and unsecured.
    
    $
    58,526Loans payable to officers on demand,
interest free and unsecured.
    
    
    61,333$
    119,858
  st
 December 312007Notes payable to officer on demand
bearing interest rate of 8%, unsecured
    
    $
    926,408
    st  
 December 312007Notes payable with interest at 8%
due and demandable on December 31, 2007
    
    $
    161,823
  F-17




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F-18




---



##### Table of Contents



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



1.
    
    the shares of Common Stock issuable upon conversion of any principal or interest due
under any notes issued in connection with any of the Whitebox financings;2.
    
    the shares of Common Stock issued in connection with any Whitebox financings;3.
    
    the shares of Common Stock issuable upon exercise of any warrants issued in connection
with any Whitebox financings; and4.
    
    the shares of Common Stock issuable upon conversion of principal or interest due under
the note issued to Synapse Capital, LLC in connection with the settlement of the
shareholder litigation.
   
 F-24




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##### Table of Contents



December 31
    
    
    December 312007
    
    
    2006Whitebox I
    
    $
    6,746,500
    
    
    $
    6,550,000Whitebox Ia
    
    
    202,395
    
    
    
    Whitebox II
    
    
    3,090,000
    
    
    
    3,000,000Whitebox IIa
    
    
    92,700
    
    
    
    Whitebox III
    
    
    7,210,000
    
    
    
    7,000,000Whitebox IIIa
    
    
    162,625
    
    
    
    Idylwood Partners LLP
    
    
    
    
    
    
    750,000Whitebox V
    
    
    1,500,000
    
    
    
    1,500,000Whitebox Va
    
    
    30,000
    
    
    
    Whitebox VI
    
    
    1,500,000
    
    
    
    Whitebox VIa
    
    
    30,000
    
    
    
    Synapse settlement note
    
    
    400,000
    
    
    
    Whitebox VIII
    
    
    1,000,000
    
    
    
    $
    21,964,220
    
    
    $
    18,800,000Debt issue costs
    
    
    (193,664
    )
    
    
    (437,832
    )Loan commitment expenses
    
    
    (372,374
    )
    
    
    Beneficial conversion feature
    
    
    (1,030,350
    )
    
    
    (2,414,491
    )$
    20,367,832
    
    
    $
    15,947,678Classified as current liability
    
    $
    3,811,698
    
    
    
    Classified as long term liability
    
    $
    16,556,134
    
    
    $
    15,947,678
  Conversion shares
    
    
    Conversion
    
    
    Intrinsic value per
    
    
    Conversion shares
    
    
    Conversion
    
    
    Intrinsic value perper Dec 31 2006
    
    
    price
    
    
    December
    
    
    per Dec 31 2007
    
    
    price
    
    
    DecemberWhitebox I
    
    
    43,666,667
    
    
    $
    0.1500
    
    
    $
    
    
    
    
    84,331,250
    
    
    
    0.0800
    
    
    $
    Whitebox Ia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,529,938
    
    
    
    0.0800
    
    
    
    Whitebox II
    
    
    20,000,000
    
    
    
    0.1500
    
    
    
    
    
    
    
    38,625,000
    
    
    
    0.0800
    
    
    
    Whitebox IIa
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,158,750
    
    
    
    0.0800
    
    
    
    Whitebox III
    
    
    46,666,667
    
    
    
    0.1500
    
    
    
    
    
    
    
    90,125,000
    
    
    
    0.0800
    
    
    
    Whitebox IIIa
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,032,813
    
    
    
    0.0800
    
    
    
    Idylwood Partners LLP
    
    
    15,151,515
    
    
    
    0.0495
    
    
    
    7,576
    
    
    
    
    
    
    
    0.0495
    
    
    
    Whitebox V
    
    
    33,333,333
    
    
    
    0.0450
    
    
    
    166,667
    
    
    
    33,333,333
    
    
    
    0.0450
    
    
    
    500,000Whitebox Va
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666,667
    
    
    
    0.0450
    
    
    
    10,000Whitebox VI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,333,333
    
    
    
    0.0450
    
    
    
    500,000Whitebox VIa
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666,667
    
    
    
    0.0450
    
    
    
    10,000Synapse settlement note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,666,667
    
    
    
    0.1500
    
    
    
    Whitebox VIII
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,285,714
    
    
    
    0.0700
    
    
    
    158,818,182
    
    
    
    
    
    
    $
    174,242
    
    
    
    303,755,131
    
    
    
    
    
    
    $
    1,020,000
 F-25




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##### Table of Contents



plus
 plus
  December 312007Whitebox VII
    
    $
    1,700,000
    F-26




---



##### Table of Contents



plus
   December 312007Officers
    
    $
    400,000
       F-27




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##### Table of Contents



Net deferred tax asset
    
    $
    (14,444,134
    )Inventory Reserve
    
    
    119,000Less valuation allowance
    
    
    (14,325,134
    )Net deferred tax asset
    
    $
    
  December 31
    
    December 312007
    
    2006Tax expense (credit) at statutory rate federal
    
    
    (32
    )%
    
    
    (32
    )%State tax expense net of federal tax
    
    
    (8
    )
    
    
    (8
    )Permanent differences
    
    
    1
    
    
    
    1Valuation allowance
    
    
    39
    
    
    
    39Tax expense at actual rate
    
    
    
    
    
    
    
      F-28




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##### Table of Contents



Year EndingDecember 31,2007
    
    $
    327,6002008
    
    
    337,4092009
    
    
    337,4092010
    
    
    337,4092011
    
    
    337,409Total
    
    $
    1,677,236
      F-29




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##### Table of Contents



Pham v. Nobles, et al.
 F-30




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##### Table of Contents



1st  2nd
 nd  nd
  F-31




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##### Table of Contents



2nd
     .
   F-32




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##### Table of Contents



AggregateWeighted
    
    IntrinsicTotal
    
    price
    
    ValueOUTSTANDING, DECEMBER 31, 2006
    
    
    42,617,899
    
    
    $
    0.103
    
    
    $
    493,159Granted in 2007
    
    
    2,400,000
    
    
    $
    0.0700Cancelled in 2007
    
    
    Exercised in 2007
    
    
    OUTSTANDING, DECEMBER 31, 2007
    
    
    45,017,899
    
    
    $
    0.101
    
    
    $
    691,890
   Remaining
    
    
    AggregateLife in
    
    
    IntrinsicTotal
    
    
    Price
    
    
    years
    
    
    ValueWarrants issued in 2004
    
    
    6,311,951
    
    
    $
    0.6259
    
    
    
    1.3
    
    
    $Warrants Fusion
    
    
    1,220,565
    
    
    
    0.4464
    
    
    
    2.3Warrants Whitebox I
    
    
    14,423,512
    
    
    
    0.4541
    
    
    
    1.7Warrants Whitebox II
    
    
    1,666,667
    
    
    
    0.4500
    
    
    
    2.2Warrants Whitebox III
    
    
    1,609,197
    
    
    
    0.4500
    
    
    
    2.7Warrants Whitebox IV
    
    
    10,400,000
    
    
    
    0.0913
    
    
    
    4.0Cancelled in 2007
    
    
    
    
    
    
    
    
    
    
    Exercised in 2007
    
    
    
    
    
    
    
    
    
    
    Outstanding December 2007
    
    
    35,631,891
    
    
    $
    0.3780
    
    
    
    2.4
    
    
    $
    
 F-33




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##### Table of Contents



F-34




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##### Table of Contents



Recent 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
   Past Officer Litigation
  Loan from Whitebox and Repayment
  F-35




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##### Table of Contents



Patent Infringement Litigation
  F-36