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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, 2006
 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
 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
    
    
    15Item 3. Legal proceedings
    
    
    15Item 4. Submission of matters to a vote of security holders
    
    
    16Part IIItem 5. Market for common equity and related stockholder matters
    
    
    17Item 6. Managements discussion and analysis or plan of operation
    
    
    18Item 7. Financial statements
    
    
    24Item 8. Changes in and disagreements with accountants on accounting and financial disclosure
    
    
    24Item 8A. Controls and procedures
    
    
    24Item 8B. Other Information
    
    
    24Part IIIItem 9. Directors and executive officers of the registrant; Compliance with Section 16(a) of
the Securities Exchange Act of 1934; Code of ethics
    
    
    24Item 10. Executive compensation
    
    
    27Item 11. Security ownership of certain beneficial owners and management and related stockholder matters
    
    
    31Item 12. Certain relationships and related transactions
    
    
    34Item 13. Exhibits
    
    
    36Item 14. Principal accountant fees and services
    
    
    38EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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Part I
 Forward-Looking Statements
   
 Item 1. Description of Business
   3




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Overview
 
   Recent Developments
 Stockholder Litigation
  4




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Patent Infringement Litigation
  5




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Recent Financings with Whitebox
     6




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(i)
    
    the shares issued in connection upon payment or conversion of the
Whitebox V Notes and the Option Notes;(ii)
    
    the shares issued in connection with prior financings with
affiliates of Whitebox;(iii)
    
    the common stock issuable upon conversion of secured convertible
notes issued in connection with the prior financings, and(iv)
    
    the common stock issuable upon exercise of warrants issued in
connection with the prior financings.
 Engagement of Investment Banking Firm
  SuperStitch Products
   7




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Suturas current products are:
 F5 Superstitch.
 F8 & F6 Superstitch.
 Superstitch Guidewire.
 F12 & F18 Superstitch.
 Superstitch
ASD & Superstitch PFO.
 8




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Business Strategy
   -
    
    Continue to develop features that make our products safe, easy to use and
reliable.-
    
    Expand our product offering such that we have a solution for every potential
need for suturing tissue.-
    
    Explore strategic alternative(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.
 Sales, Marketing and Distribution
   9




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Manufacturing
   Competition
 
 10




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-
    
    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.
 Patents and Proprietary Rights
    11




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Government Regulation
 
   12




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13




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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.
   Product Liability and Insurance
  14




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Item 2. Description of Property
   
 Item 3. Legal Proceedings
   15




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Item 4. submission of Matters to a Vote of Security Holders
      Name
    
    Votes For
    
    Votes WithheldRichard Bjorkman
    
    
    173,099,851
    
    
    
    28,752,496John Crew, M.D.
    
    
    173,075,933
    
    
    
    28,776,417Anthony Nobles
    
    
    175,363,164
    
    
    
    28,755,796Dr. Richard Moran
    
    
    173,242,936
    
    
    
    28,609,411Egbert Ratering
    
    
    173,099,851
    
    
    
    28,752,496David Teckman
    
    
    200,191,832
    
    
    
    28,752,496Charles Terrell, Sr.
    
    
    173,226,236
    
    
    
    28,626,111
  Votes For Votes Against Votes Abstained
   16




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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, 2005
    
    First Quarter
    
    $
    1.35
    
    
    $
    0.60Second Quarter
    
    $
    0.96
    
    
    $
    0.42Third Quarter
    
    $
    1.40
    
    
    $
    0.48Fourth Quarter
    
    $
    0.99
    
    
    $
    0.50Fiscal Year Ended December 31, 2006
    
    First Quarter
    
    $
    0.80
    
    
    $
    0.30Second Quarter
    
    $
    0.62
    
    
    $
    0.08Third Quarter
    
    $
    0.15
    
    
    $
    0.05Fourth Quarter
    
    $
    0.10
    
    
    $
    0.03
   Dividends
  Recent Sales of Unregistered Securities
    17




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Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
      18




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19




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20




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Financial Condition and Results of Operations for the year ended
December 31, 2006 compared to year ended December 31, 2005
    21




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22




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Twelve months
    
    
    Twelve monthsInterest expenses.
    
    2006
    
    
    2005Note payable related party in Euros
    
    $
    10,321
    
    
    $
    7,916Note payables
    
    
    
    
    
    
    9,505Note payable officer
    
    
    68,623
    
    
    
    54,929Convertible notes officers
    
    
    
    
    
    
    145,376Whitebox I
    
    
    786,000
    
    
    
    786,000Fusion
    
    
    11,971
    
    
    
    32,889Whitebox II
    
    
    274,000
    
    
    
    161,556Whitebox III
    
    
    560,000
    
    
    
    175,778Idylwood Partners L.P.
    
    
    40,500
    
    
    
    Whitebox IV
    
    
    21,444Whitebox V
    
    
    5,667
    
    
    
    Other
    
    
    16,071
    
    
    
    3,580$
    1,794,596
    
    
    $
    1,377,529
 Twelve months
    
    
    Twelve monthsBeneficial conversion amortization
    
    2006
    
    
    2005Whitebox I
    
    $
    1,165,509
    
    
    $
    4,256,344Fusion
    
    
    144,153
    
    
    
    355,847Whitebox II
    
    
    135,752
    
    
    
    171,094Repricing warrants Whitebox II
    
    
    41,362
    
    
    
    Whitebox III
    
    
    503,353
    
    
    
    147,920Repricing warrants Whitebox III
    
    
    92,520
    
    
    
    Idylwood Partners L.P.
    
    
    48,611Whitebox V
    
    
    12,660
    
    
    
    Total conversion feature expense
    
    $
    2,143,920
    
    
    $
    4,931,205Total expenses
    
    $
    3,938,515
    
    
    $
    6,308,734
 23




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Item 7. Financial Statements
  
 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
   
 Item 8B. Other Information
  
 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,
 24




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Richard Bjorkman,
 Anthony
Nobles
 Egbert Ratering
 25




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Richard Moran, Ph.D.
 John Crew, M.D.
 Charles Terrell, Sr.
 Audit Committee Financial Expert
  26




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Section 16(a)  Beneficial Ownership Reporting Compliance
  Code of Ethics
  
 Item 10. Executive Compensation
 Executive Employment Agreements
 NOBLES EMPLOYMENT AGREEMENT
  RATERING EMPLOYMENT AGREEMENT
  27




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BJORKMAN EMPLOYMENT AGREEMENT
  TECKMAN EMPLOYMENT AGREEMENT
  Compensation
  28




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SUMMARY
COMPENSATION TABLEANNUAL COMPENSATIONNAME
AND PRINCIPAL POSITION
    
    
    YEAR
    
    
    
    SALARY
    
    
    
    BONUS
    
    
    
    OTHER ANNUAL COMPENSATIONDavid Teckman
    
    
    2006
    
    
    $
    1
    (1)
    
    $
    0
    
    
    $
    0Chief executive officer and PresidentRichard Bjorkman
    
    
    2006
    
    
    $
    26,250
    (2)
    
    $
    0
    
    
    $
    0Chief Financial Officer and Executive 
Vice PresidentAnthony Nobles, PhD
    
    
    2006
    
    
    $
    250,000
    (3)
    
    
    
    
    
    $
    7,800
    (6)Chairman, Chief Scientific officer
    
    
    2005
    
    
    $
    92,877
    (3)
    
    
    
    
    
    $
    2,898
    (5)Egbert Ratering
    
    
    2006
    
    
    $
    137,983
    (4)
    
    
    
    
    
    $
    10,618
    (6)Executive Vice President
    
    
    2005
    
    
    $
    54,000
    (4)
    
    
    
    
    
    $
    5,400
    (5)James B. Lahey(7)
    
    
    2005
    
    
    $
    145,000
    (9,12)Chief executive officer and President
    
    
    2004
    
    
    $
    150,000
    (9,12)James A. Giansiracusa(8)
    
    
    2005
    
    
    $
    145,000
    (9,13)
 
 (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 going forward is $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)
    
    Dr. 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 Dr. Nobles received since becoming an executive officer of the
Company. Dr. 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.(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. 29




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(5)
    
    These amounts represent automobile allowances from August 19 through December 31,
2005.(6)
    
    These amounts represent automobile allowances for the full year 2006.(7)
    
    Mr. Lahey served as the Chief Executive Officer and President of the Company
for 2003, 2004 and from January 1, 2005 until consummation of the merger of the
Company and prior Sutura. August 19, 2005. After August 19, 2005, he has served as the
Chief Executive Officer and President of Technology Visions, Inc., a subsidiary of the
Company.(8)
    
    Mr. Gianciracusa served as the Chief Operations Officer and Chief Financial
Officer of the Company for 2003, 2004 and from January 1, 2005 until consummation of
the merger of the Company and prior Sutura. August 19, 2005. After August 19, 2005, he
has served as the Chief Operations Officer and Chief Financial Officer of Technology
Visions, Inc., a subsidiary of the Company.(9)
    
    While serving as Executive Officers, Mr. Lahey and Mr. Giansiracusa had
agreed to defer their compensation in favor of the Companys operations and progress.
As described in note 9 below, accrued but unpaid salary, debt and interest was
converted into common stock. Since August 19, 2005, each of Messrs. Lahey and
Gianciracusa have received cash compensation as employees of the subsidiary based on
an annual salary of $125,000.(10)
    
    In October 2004, $228,049 of accrued but unpaid salary in favor of Mr. Lahey
was converted into 4,560,988 shares of common stock (pre 12-for-1 reverse stock
split)of the Company and $293,049 of accrued but unpaid salary of Mr. Giansiracusa was
converted into 5,860,988 (pre 12-for-1 reverse stock split) shares of common stock of
the Company. The accrued but unpaid salary was converted in common stock at the rate
of $0.05 per share, reflecting the average of the trading price of the common stock
for the ten day period from October 11, 2004 through October 22, 2004.(11)
    
    As of December 31, 2004, $548,512 of accrued but unpaid salary in favor of
Mr. Lahey was converted into 7,412,319 (pre 12-for-1 reverse stock split) shares of
common stock of the Company. As of December 29, 2004, $548,512 of accrued but unpaid
salary in favor of Mr. Giansiracusa was converted into 7,412,319 (pre 12-for-1 reverse
stock split) shares of common stock of the Company. The accrued but unpaid salary was
converted in common stock at the rate of $0.074 per share, reflecting the average of
the trading price of the common stock for the ten day period of November 23, 2004
through December 7, 2004, reflecting the price of the common stock following the
initial announcement of the Merger.(12)
    
    As of August 19, 2005, the closing date of the merger of the Company and
Prior Sutura, $531,102 of accrued but unpaid 30




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salary in favor of Mr. Lahey was
converted into 598,088 shares of common stock of the Company. The accrued but unpaid
salary was converted in common stock at the rate of $0.888 per share. All compensation
due Mr. Lahey prior to August 19, 2005 was converted to shares of common stock of the
Company. Mr. Lahey has received $45,138 of cash compensation in 2005 as an employee of
the subsidiary.(13)
    
    As of August 19, 2005, the closing date of the merger of the Company and
Prior Sutura, $192,196 of accrued but unpaid salary in favor of Mr. Gianciracusa was
converted into 216,437 shares of common stock of the Company. The accrued but unpaid
salary was converted in common stock at the rate of $0.888 per share. All compensation
due Mr. Gianciracusa prior to August 19, 2005 was converted to shares of common stock
of the Company. Mr. Gianciracusa has received $45,138 of cash compensation in 2005 as
an employee of the subsidiary. Compensation of Directors
   
 Item 11. Security Ownership of Certain Beneficial Owners and Management
   31




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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)
    
    
    102,138,381
    
    
    
    39.41
    %Ratering, Egbert(2)
    
    
    98,854,181
    
    
    
    38.14
    %Grootkasteel, B.V.
    
    
    68,040,874
    
    
    
    26.25
    %Go Industries, Inc.
    
    
    13,494,664
    
    
    
    5.21
    %Novak, Alfred(3)
    
    
    14,969,968
    
    
    
    5.78
    %Synapse Capital Fund(4)
    
    
    24,845,368
    
    
    
    9.59
    %Whitebox(5)
    
    
    243,960,555
    
    
    
    94.14
    %EXECUTIVE OFFICERS & DIRECTORSTeckman, David(6)
    
    
    750,000
    
    
    
    0.29
    %Bjorkman, Richard(6)
    
    
    450,000
    
    
    
    0.17
    %Nobles, Anthony PhD(1)
    
    
    102,138,381
    
    
    
    39.41
    %Ratering, Egbert(2)
    
    
    98,854,181
    
    
    
    38.14
    %Crew, John MD(7)
    
    
    1,709,346
    
    
    
    0.66
    %Terrell, Charles, Sr.(8)
    
    
    633,478
    
    
    
    0.24
    %Moran, Richard(6)
    
    
    250,000
    
    
    
    0.10
    %All directors & officers as a group(9)
    
    
    136,708,965
    
    
    
    52.75
    %
 
 *
    
    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; 68,040,874 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
Dr. 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; 68,040,874 shares of Registrant held by Grootkasteel
B.V.; 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 13,494,664 shares of Registrant held by Go Industries, Inc.; 21,696 shares of
Registrant held by Irwin Novak; 43,392 shares of Registrant held by Jessica Novak; 21,696 shares of
Registrant held by Judi Novak; 43,392 shares of registrant held by Ryan Powell; 43,392 shares of
Registrant held by Taylor Powell; and 32




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1,301,736 of Registrant shares issuable upon exercise of
options held by Alfred Novak. Alfred Novak holds a controlling interest in Go Industries, Inc.
Irwin, Jessica and Judi Novak and Ryan and Taylor Powell are members of Mr. Novaks immediate
family.(4)
    
    Includes 10,253,124 shares of Registrant issued to Synapse Fund I LLC and 14,592,244
shares of Registrant issued to Synapse Fund II LLC. Synapse Capital Fund is the managing member of
both Synapse Fund I and Synapse Fund II.(5)
    
    Includes 72,518,056 shares of Registrant beneficially
owned and 171,442,499 shares of Registrant issuable upon election to
convert promissory notes or exercise warrants. All such shares of Registrant are beneficially owned by 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; Gary S. Kohler and Scot W. Malloy. The number of shares is subject to
adjustment based on various factors, including the trading price of the combined company following
the Merger.(6)
    
    Shares issuable upon exercise of options.(7)
    
    Includes 1,600,868 shares of Registrant issuable upon exercise of options and 108,478
shares of Registrant issuable upon the exercise of warrants.(8)
    
    Includes 108,478 shares of Registrant beneficially owned and 500,000 shares of Registrant
issuable upon exercise of options.(9)
    
    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
  33




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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
    
    
    12,670,000
 
 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 issuanc2:
    
    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 exercisa3:
    
    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 us during 2004 that were assumed by the Company in connection with
the merger of the Company and Prior Sutura on August 19,5:
    
    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. 
 Item 12. Certain Relationships and Related Transactions
  34




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 
     35




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Item 13. Exhibits
 Exhibits
 3.1
    
    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 Agreement7
 36




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10.9
    
    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.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, 2004.3
 37




---



##### Table of Contents



10.23
    
    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 June 7,
2006.810.29
    
    Third Amended Security Agreement,
dated June 7, 2006, by and between Sutura, Inc., and certain
other parties thereto.810.30
    
    Third Amended Patent and Trademark
Security Agreement, dated June 7, 2006, by and between Sutura,
Inc., and certain other parties thereto.810.31
    
    Form of Secured Convertible
Promissory Note, dated June 28,
2006.910.32
    
    Fourth Amended Security Agreement,
dated June 28, 2006, by and between Sutura, Inc., and certain
other parties
thereto.910.33
    
    Fourth Amended Patent and Trademark
Security Agreement, dated June 28, 2006, by and between Sutura,
Inc., and certain other parties
thereto.910.34
    
    Securities Purchase Agreement
dated, August 25, 2006, by and between Sutura, Inc., and certain
other parties
thereto.1010.35
    
    Third Amended Registration Rights
Agreement, dated August 25, 2006, by and between Sutura, Inc.,
and certain other parties thereto.1010.36
    
    Side Agreement, dated
August 25, 2006, by and between Sutura, Inc., and certain
parties thereto.1010.37
    
    Form of Warrant, dated
August 25, 2006.1010.38
    
    Purchase Agreement, dated
December 13,
2006.1110.39
    
    Form of Secured Convertible
Promissory Note, dated December 13, 2006.1110.40
    
    Fourth Amended Security Agreement,
dated December 13, 2006, by and between Sutura, Inc. and certain
other parties thereto.1110.41
    
    Fourth Amended Patent and Trademark
Security Agreement, dated December 13, 2006, by and between
Sutura, Inc., and certain other parties thereto.1110.42
    
    Fourth Amended Registration Rights
Agreement, dated December 13, 2006, by and between Sutura, Inc.,
and certain other parties thereto.1114.1
    
    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
June 13, 2006.9
    
    Previously filed as an exhibit to Form 8-K filed on
July 3, 2006.10
    
    Previously filed as an Exhibit to Form 8-K filed on
August 31, 2006.11
    
    Previously filed as an Exhibit to Form 8-K filed on
December 18, 2006. 
 Item 14. Principal Accountant Fees and Services
  
 38




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##### Table of Contents



39




---



##### Table of Contents



SIGNATURES
  SUTURA INCBy:
    
    /s/ David Teckman

David Teckman, President,Chief Executive Officer and DirectorDate:
    
    April 17, 2007
  By:
    
    /s/ ANTHONY NOBLES

Anthony Nobles, Chairman, President,Chief Science Officer and DirectorDate:
    
    April 17, 2007By:
    
    /s/ RICHARD BJORKMAN

Richard Bjorkman, Executive Vice President, ChiefFinancial Officer and DirectorDate:
    
    April 17, 2007By:
    
    /s/ JOHN CREW, M.D.

John Crew, M.D., DirectorDate
    
    April 17, 2007By:
    
    /s/ CHARLES TERRELL, SR.Charles Terrell, Sr., DirectorDate:
    
    April 17, 2007By:
    
    /s/ EGBERT RATERING

Egbert Ratering, Executive Vice President, ChiefFinancial Officer and DirectorDate:By:
    
    Richard Moran, Ph.D., DirectorDate:
    
    April 17, 2007
 40




---



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




---



##### Table of Contents



F-2




---



##### Table of Contents



ASSETSCURRENT ASSETS:Cash & cash equivalents
    
    $
    1,238,154Accounts Receivable, Net
    
    
    89,187Inventory
    
    
    456,007Prepaid expenses
    
    
    16,017Total current assets
    
    
    1,799,365PROPERTY AND EQUIPMENT, net
    
    
    422,151DEPOSITS
    
    
    143,711$
    2,365,226LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    4,498,509Loan payable  officers
    
    
    113,953Customer deposits
    
    
    1,139,975Notes payable  officers
    
    
    857,784Notes payable  related party
    
    
    135,437Convertible notes payable- net of beneficial conversion feature
    
    
    Total current liabilities
    
    
    6,745,658LONG TERM LIABILITIES:Convertible notes payable- net of beneficial conversion feature
    
    
    15,947,678COMMITMENTS AND CONTINGENCIES
    
    
    STOCKHOLDERS DEFICITSeries A convertible preferred stock, $0.001 par value;
2,000,000 shares authorized, issued and outstanding
    
    
    Common stock, $0.001 par value; 500,000,000 shares authorized;
259,168,108 shares issued and outstanding
    
    
    259,169Additional paid in capital
    
    
    48,984,574Accumulated deficit
    
    
    (68,634,687
    )Other comprehensive loss
    
    
    (937,164
    )Total stockholders deficit
    
    
    (20,328,109
    )$
    2,365,226
  F-3




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##### Table of Contents



2006
    
    
    2005NET SALES
    
    $
    634,569
    
    
    $
    238,915COST OF GOODS SOLD(1)
    
    
    2,203,690
    
    
    
    1,869,261GROSS LOSS
    
    
    (1,569,121
    )
    
    
    (1,630,346
    )OPERATING EXPENSES:Research and development(1)
    
    
    547,270
    
    
    
    477,879General and administrative(1)
    
    
    4,434,976
    
    
    
    2,849,839Sales and marketing(1)
    
    
    1,533,128
    
    
    
    1,250,376Total operating expenses
    
    
    6,515,374
    
    
    
    4,578,095OPERATING LOSS
    
    
    (8,084,495
    )
    
    
    (6,208,441
    )OTHER INCOME (EXPENSE)Interest Income
    
    
    25,396
    
    
    
    38,623Interest Expense(2)
    
    
    (3,938,516
    )
    
    
    (6,308,735
    )Other Income
    
    
    
    
    
    
    74,809Total other income (expense), net
    
    
    (3,913,121
    )
    
    
    (6,195,302
    )NET LOSS
    
    
    (11,997,615
    )
    
    
    (12,403,744
    )OTHER COMPREHENSIVE GAIN (LOSS)Translation adjustment
    
    
    (51,190
    )
    
    
    69,060COMPREHENSIVE LOSS
    
    $
    (12,048,805
    )
    
    $
    (12,334,684
    )BASIC AND DILUTED NET LOSS PER SHARE
    
    $
    (0.06
    )
    
    $
    (0.07
    )BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    209,404,663
    
    
    
    169,363,198
 
 *
    
    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.The accompanying notes are an integral part of these financial statements. (1)Includes stock-based compensation charges
(credits) of:Cost of good sold
    
    $
    61,850
    
    
    $
    5,417Research and development
    
    
    61,850
    
    
    
    General and administrative
    
    
    186,488
    
    
    
    24,400Sales and Marketing
    
    
    55,778
    
    
    
    1,952(2)Includes amortization of beneficial conversion
feature and fair value of warrants of:
    
    $
    2,143,920
    
    
    $
    4,931,205
 F-4




---



##### Table of Contents



OTHER
    
    
    DEFICIT
    
    
    TOTALADDITIONAL
    
    
    COMPREHENSIVE
    
    
    ACCUMULATED
    
    
    STOCKHOLDERSCOMMON STOCK
    
    
    PAID-IN
    
    
    INCOME
    
    
    DURING
    
    
    EQUITYSHARES
    
    
    AMOUNT
    
    
    CAPITAL
    
    
    (LOSS)
    
    
    DEVELOPMENT
    
    
    (DEFICIT)BALANCE, DECEMBER 31, 2004
    
    
    159,696,742
    
    
    $
    159,698
    
    
    $
    37,119,169
    
    
    $
    (955,034
    )
    
    $
    (44,233,328
    )
    
    $
    (7,909,495
    )Recapitalisation on reverse merger
    
    
    10,468,945
    
    
    
    10,469
    
    
    
    (276,585
    )
    
    
    
    
    
    
    
    
    
    $
    (266,116
    )Private placement of common stock
    
    
    111,277
    
    
    
    111
    
    
    
    99,901
    
    
    
    
    
    
    
    
    
    
    $
    100,012Beneficial conversion feature
convertible notes
    
    
    
    
    
    
    
    
    
    
    2,556,118
    
    
    
    
    
    
    
    
    
    
    $
    2,556,118Conversion notes payable Officers
    
    
    15,140,318
    
    
    
    15,140
    
    
    
    2,012,124
    
    
    
    
    
    
    
    
    
    
    $
    2,027,264Compensation expenses options employees
    
    
    
    
    
    
    
    
    
    
    31,768
    
    
    
    
    
    
    
    
    
    
    $
    31,768Foreign translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,060
    
    
    
    
    
    
    $
    69,060Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,403,744
    )
    
    $
    (12,403,744
    )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
    )
  F-5




---



##### Table of Contents



2006
    
    
    '2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (11,997,615
    )
    
    $
    (12,403,744
    )Adjustments to reconcile net loss to net cash used
in operating activities:Depreciation and amortization
    
    
    291,348
    
    
    
    283,186Provision for doubtful debts
    
    
    4,468
    
    
    
    Amortization of Beneficial conversion feature
    
    
    2,143,920
    
    
    
    4,931,205Stock based compensation expenses- employees
    
    
    365,966
    
    
    
    31,769Stock based compensation expenses- non employees
    
    
    114,673
    
    
    
    Interest expenses converted into shares.
    
    
    1,641,444
    
    
    
    Reserve for inventory obsolescence
    
    
    250,000
    
    
    
    (Increase) decrease in current assets:Accounts receivables
    
    
    12,772
    
    
    
    (101,785
    )Inventory
    
    
    (454,614
    )
    
    
    (248,108
    )Prepaid expenses
    
    
    182,357
    
    
    
    (732,301
    )Increase (decrease) in current liabilities:Accounts payable and accrued liabilities
    
    
    752,186
    
    
    
    304,981Accrued payroll
    
    
    (376,127
    )
    
    
    (380,793
    )Customer deposits
    
    
    (31,000
    )
    
    
    (3,317
    )Total Adjustments
    
    
    4,897,392
    
    
    
    4,084,836Net cash used for operating activities
    
    
    (7,100,223
    )
    
    
    (8,318,908
    )CASH FLOWS INVESTING ACTIVITIES:Acquisition of property and equipment, net
    
    
    (158,978
    )
    
    
    (184,270
    )Cash balance Tvgr Subsidiary
    
    
    
    
    
    
    1,703Total cash flow investing activities
    
    
    (158,978
    )
    
    
    (182,567
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from private placements
    
    
    3,920,000
    
    
    
    22,617Proceeds from notes payable
    
    
    2,250,000
    
    
    
    10,500,000Pay off notes payables
    
    
    
    
    
    
    (327,868
    )Net cash provided by financing activities
    
    
    6,170,000
    
    
    
    10,194,749Effect of rate changes on cash and cash equivalents
    
    
    10,352
    
    
    
    NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
    
    
    (1,078,849
    )
    
    
    1,693,274CASH & CASH EQUIVALENTS, BEGINNING BALANCE
    
    
    2,317,003
    
    
    
    623,729CASH & CASH EQUIVALENTS, ENDING BALANCE
    
    $
    1,238,154
    
    
    $
    2,317,003SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    
    
    
    $
    1,347,648Income taxes
    
    $
    
    
    
    $
    
  F-6




---



##### Table of Contents



F-7




---



##### Table of Contents



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




---



##### Table of Contents



F-9




---



##### Table of Contents



F-10




---



##### Table of Contents



2005Net loss, as reported
    
    $
    (12,403,744
    )Total stock-based employee compensation expense
determined under fair-value based method for all
awards, net of tax
    
    
    (118,707
    )Pro forma net loss
    
    $
    (12,522,451
    )Basic and diluted weighted average shares outstanding
    
    
    169,363,198Basic and diluted as reported
    
    $
    (0.07
    )Basic and diluted pro forma
    
    
    (0.07
    )
   F-11




---



##### Table of Contents



2006
    
    2005Sales US
    
    $
    282,798
    
    
    $
    107,191Total export
    
    
    351,772
    
    
    
    131,724Total sales
    
    $
    634,569
    
    
    $
    238,915
   F-12




---



##### Table of Contents



1.
    
    Requires an entity to recognize a servicing asset or servicing liability each time it
undertakes an obligation to service a financial asset by entering into a servicing
contract.2.
    
    Requires all separately recognized servicing assets and servicing liabilities to be
initially measured at fair value, if practicable.3.
    
    Permits an entity to choose Amortization method or Fair value measurement method
for each class of separately recognized servicing assets and servicing liabilities:4.
    
    At its initial adoption, permits a one-time reclassification of available-for-sale
securities to trading securities by entities with recognized servicing rights, without
calling into question the treatment of other available-for-sale securities under Statement
115, provided that the available-for-sale securities are identified in some manner as
offsetting the entitys exposure to changes in fair value of servicing assets or servicing
liabilities that a servicer elects to subsequently measure at fair value.5.
    
    Requires separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and servicing liabilities.
   F-13




---



##### Table of Contents



F-14




---



##### Table of Contents



December 312006Raw material/WIP
    
    $
    298,065Work in process
    
    
    292,030Finished goods
    
    
    215,912806,007Less: Reserve for obsolescence
    
    
    (350,000
    )$
    456,007
 F-15




---



##### Table of Contents



December 312006Computers
    
    $
    360,618Office furniture and fixtures
    
    
    583,497Machinery and equipment
    
    
    2,596,1103,540,225Less: Accumulated depreciation
    
    
    (3,118,075
    )$
    422,151
   December 312006Opening balance per January 1st, 2006
    
    $
    1,170,975Applied against shipments
    
    
    31,000Ending balance per Dec 31, 2006
    
    $
    1,139,975
   December 312006Accounts payable   trade creditors
    
    $
    731,204Accounts payable   legal and professional
    
    
    1,033,339Accrued expenses
    
    
    565,030Accrued compensation
    
    
    2,026,038Accrued interest payable
    
    
    142,898Total accounts payable & accrued expenses
    
    $
    4,498,509
 F-16




---



##### Table of Contents



December 312006Loans payable to officers on demand,
interest free and unsecured.
    
    $
    58,526Loans payable to officers on demand,
interest free and unsecured.
    
    
    55,427$
    113,953
  st
 December 312006Notes payable to officer on demand
bearing interest rate of 8%, unsecured
    
    $
    857,784
   st
 December 312006Notes payable with interest at 8%
due and demandable on December 31, 2007
    
    $
    135,437
  F-17




---



##### Table of Contents



F-18




---



##### Table of Contents



F-19




---



##### Table of Contents



F-20




---



##### Table of Contents



F-21




---



##### Table of Contents



(i)
    
    the shares issued in connection upon payment or conversion of the
December 2006 Notes and the Option Notes;(ii)
    
    the shares issued in connection with prior financings with
affiliates of Whitebox;(iii)
    
    the common stock issuable upon conversion of secured convertible
notes issued in connection with the prior financings, and(iv)
    
    the common stock issuable upon exercise of warrants issued in
connection with the prior financings.
  September 30
    
    
    Conversion
    
    
    Conversion
    
    
    Intrinsic2006
    
    
    rate
    
    
    shares
    
    
    valueWhitebox I
    
    $
    6,550,000
    
    
    $
    0.1500
    
    
    
    43,666,667
    
    
    $
    0Whitebox II
    
    
    3,000,000
    
    
    
    0.1500
    
    
    
    20,000,000
    
    
    
    0Whitebox III
    
    
    7,000,000
    
    
    
    0.1500
    
    
    
    46,666,667
    
    
    
    0Idylwood Partners LLP
    
    
    750,000
    
    
    
    0.0495
    
    
    
    15,151,515
    
    
    
    7,576Whitebox V
    
    
    1,500,000
    
    
    
    0.0450
    
    
    
    33,333,333
    
    
    
    166,667Total convertible loans
    
    $
    18,800,000
    
    
    
    
    
    
    
    158,818,182
    
    
    $
    174,242Beneficial conversion feature
    
    
    (2,414,491
    )Debt issue costs
    
    
    (437,832
    )Net total
    
    $
    15,947,678
     F-22




---



##### Table of Contents



Net deferred tax asset
    
    $
    18,045,065Inventory Reserve
    
    
    (119,000
    )Less valuation allowance
    
    
    17,926,065Net deferred tax asset
    
    $
    
  December 31
    
    December 312006
    
    2005Tax 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-23




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##### Table of Contents



Year EndingDecember 31,2007
    
    
    
    
    
    $
    327,6002008
    
    
    
    
    
    
    327,6002009
    
    
    
    
    
    
    327,6002010
    
    
    
    
    
    
    327,6002011
    
    
    
    
    
    
    327,600Total
    
    
    
    
    
    $
    1,638,000
       F-24




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##### Table of Contents



F-25




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##### Table of Contents



Patent Infringement Litigation
       F-26




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##### Table of Contents



rd th
      F-27




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##### Table of Contents



.
    rd st
  1999 Plan
    
    2001 plan
    
    2006 plan
    
    TVGR
    
    TotalOUTSTANDING, DECEMBER 2005
    
    
    35,700,117
    
    
    
    6,595,469
    
    
    
    0
    
    
    
    566,667
    
    
    
    42,862,253Granted in 2006
    
    
    
    
    
    
    
    
    
    
    8,575,000
    
    
    
    
    
    
    
    8,575,000Cancelled in 2006
    
    
    (412,218
    )
    
    
    (6,595,469
    )
    
    
    (1,245,000
    )
    
    
    (566,667
    )
    
    
    (8,819,354
    )Exercised in 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OUTSTANDING, DECEMBER 2006
    
    
    35,287,899
    
    
    
    0
    
    
    
    7,330,000
    
    
    
    0
    
    
    
    42,617,899
 F-28




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##### Table of Contents



AggegrateIntrinsicTotal
    
    Weighted price
    
    ValueOUTSTANDING, DECEMBER 2005
    
    
    42,862,253
    
    
    
    0.111
    
    
    $
    18,327,247Granted in 2006
    
    
    8,575,000Cancelled in 2006
    
    
    (8,819,354
    )Exercised in 2006
    
    
    OUTSTANDING, DECEMBER 2006
    
    
    42,617,899
    
    
    
    0.103
    
    
    $
    493,159
 OPTIONS EXERCISABLE END OF DECEMBER 2006EXERCISE
    
    ISSUE
    
    NEW NUMBER
    
    NUMBERPRICES
    
    DATE
    
    OUTSTANDING
    
    EXERCISABLE$
    0.0230
    
    
    Feb-99
    
    
    1,431,913
    
    
    
    1,431,913$
    0.0254
    
    
    Feb-99
    
    
    18,441,260
    
    
    
    18,441,260$
    0.1152
    
    
    Nov-99
    
    
    6,508,680
    
    
    
    6,508,680$
    0.1152
    
    
    Jan-00
    
    
    3,037,384
    
    
    
    3,037,384$
    0.1844
    
    
    Apr-99
    
    
    1,301,736
    
    
    
    1,301,736$
    0.2305
    
    
    Nov-99
    
    
    2,972,298
    
    
    
    2,972,298$
    0.2305
    
    
    May-00
    
    
    65,088
    
    
    
    65,088$
    0.2305
    
    
    Aug-00
    
    
    444,760
    
    
    
    444,760$
    0.2305
    
    
    May-03
    
    
    1,084,780
    
    
    
    1,084,780$
    0.3000
    
    
    Jan-06
    
    
    4,380,000
    
    
    
    1,095,000$
    0.0600
    
    
    Oct-06
    
    
    2,950,000
    
    
    
    184,375TOTAL:
    
    
    
    
    
    
    42,617,899
    
    
    
    35,287,899
   F-29




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##### Table of Contents



Remaining
    
    
    AggregateLife in
    
    
    IntrinsicTotal
    
    
    Price
    
    
    years
    
    
    ValueWarrants issued in 2004
    
    
    6,311,951
    
    
    
    0.6259
    
    
    
    2.3Warrants Fusion
    
    
    1,220,565
    
    
    
    0.4464
    
    
    
    3.3Warrants Whitebox I
    
    
    14,423,512
    
    
    
    0.4541
    
    
    
    2.7Warrants Whitebox II
    
    
    1,666,667
    
    
    
    0.4500
    
    
    
    3.2Warrants Whitebox III
    
    
    1,609,197
    
    
    
    0.4500
    
    
    
    3.7Warrants Whitebox IV
    
    
    10,400,000
    
    
    
    0.0913
    
    
    
    5.0Cancelled in 2006
    
    
    
    
    
    
    
    
    
    
    Exercised in 2006
    
    
    
    
    
    
    
    
    
    
    OUTSTANDING, DECEMBER 2006
    
    
    35,631,891
    
    
    
    0.3780
    
    
    
    3.4
    
    
    $
    0
      Stockholder Litigation
  F-30




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##### Table of Contents














Recent Financings with Whitebox


F-31




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##### Table of Contents



Engagement of Investment Banking Firm
  F-32