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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
   SUTURA, INC.
  
 Delaware
    
    84-1010269(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
   
  x o
  o x
  o x




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PART IItem 1.
    
    Financial Statements
    
    
    1Consolidated Balance Sheet on March 31, 2006 (Unaudited)Consolidated Statement of Operations for the three month periods ended March 31, 2006 and 2005 (Unaudited)
    
    
    2Consolidated Statement of Cash Flows for the three month periods ended March 31, 2006 and 2005(Unaudited)
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Controls and ProceduresPART IIItem 1.
    
    Legal Proceedings
    
    
    20Item 2.
    
    Changes In Securities
    
    
    21Item 3.
    
    Defaults Upon Senior Securities
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21Item 5.
    
    Other Information
    
    
    21Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    21Signatures
    
    
    23EX-31.1EX-31.2EX-32.1




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PART I: FINANCIAL INFORMATION
 
 Item 1.
 
 
 ASSETSCURRENT ASSETS:Cash & cash equivalents
    
    $
    539,940Accounts Receivable, Net
    
    
    164,808Inventory
    
    
    375,819Prepaid expenses
    
    
    600,450Total current assets
    
    
    1,681,017PROPERTY AND EQUIPMENT, net
    
    
    588,234DEPOSITS
    
    
    178,528$
    2,447,780LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    4,783,793Loan payable  officers
    
    
    132,505Customer deposits
    
    
    1,170,975Notes payable  officers
    
    
    857,784Notes payable
    
    
    124,579Total current liabilities
    
    
    7,069,636LONG TERM LIABILITIES:Convertible notes payable- net of beneficial conversion feature
    
    
    13,457,856COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS 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;
186,637,990 shares issued and outstanding
    
    
    186,638Additional paid in capital
    
    
    42,817,363Accumulated deficit
    
    
    (60,185,839
    )Other comprehensive loss
    
    
    (897,875
    )Total stockholders deficit
    
    
    (18,079,712
    )$
    2,447,780
  1




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2006
    
    
    2005NET SALES
    
    $
    243,111
    
    
    $
    28,395COST OF GOODS SOLD(1)
    
    
    625,282
    
    
    
    434,962GROSS LOSS
    
    
    (382,171
    )
    
    
    (406,567
    )OPERATING EXPENSES:Research and development(1)
    
    
    126,906
    
    
    
    91,300General and administrative(1)
    
    
    1,413,690
    
    
    
    503,100Sales and marketing(1)
    
    
    475,464
    
    
    
    197,459Total operating expenses
    
    
    2,016,059
    
    
    
    791,859OPERATING LOSS
    
    
    (2,398,230
    )
    
    
    (1,198,426
    )OTHER INCOME (EXPENSE)Interest Income
    
    
    14,055
    
    
    
    274Interest Expense(2)
    
    
    (1,164,596
    )
    
    
    (998,484
    )Other Income
    
    
    
    
    
    
    (106,460
    )Total other income (expense), net
    
    
    (1,150,541
    )
    
    
    (1,104,670
    )NET LOSS
    
    
    (3,548,771
    )
    
    
    (2,303,096
    )OTHER COMPREHENSIVE GAIN (LOSS)Translation adjustment
    
    
    (11,901
    )
    
    
    130,689COMPREHENSIVE LOSS
    
    $
    (3,560,672
    )
    
    $
    (2,172,407
    )BASIC AND DILUTED NET LOSS PER SHARE
    
    $
    (0.02
    )
    
    $
    (0.02
    )BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING*
    
    
    185,417,425
    
    
    
    151,753,215*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 unaudited consolidated
financial statements.(1)Includes stock-based compensation charges of:Cost of good sold
    
    
    86,091
    
    
    
    Research and development
    
    
    16,717
    
    
    
    General and administrative
    
    
    371,748
    
    
    
    Sales and Marketing
    
    
    47,443
    
    
    
    (2)Includes amortization of beneficial conversion
feature and warrants issued.
    
    
    720,503
    
    
    
    696,718
  2




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2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (3,548,771
    )
    
    $
    (2,303,096
    )Adjustments to reconcile net loss to net cash used
in operating activities:Depreciation and amortization
    
    
    63,951
    
    
    
    88,485Beneficial conversion feature
    
    
    720,503
    
    
    
    696,718Stock based compensation expenses- employees
    
    
    535,561
    
    
    
    Stock based compensation expenses- non employees
    
    
    12,544
    
    
    
    (Increase) decrease in current assets:Accounts receivables
    
    
    (63,020
    )
    
    
    (9,515
    )Inventory
    
    
    (127,711
    )
    
    
    (85,173
    )Prepaid expenses
    
    
    (1,554
    )
    
    
    4,105Increase (decrease) in current liabilities:Accounts payable and accrued liabilities
    
    
    713,974
    
    
    
    480,063Accrued payroll
    
    
    16,358
    
    
    
    47,856Customer deposits
    
    
    
    
    
    
    Total Adjustments
    
    
    1,870,606
    
    
    
    1,222,539Net cash used for operating activities
    
    
    (1,678,165
    )
    
    
    (1,080,557
    )CASH FLOWS INVESTING ACTIVITIES:Acquisition of property and equipment, net
    
    
    (98,898
    )
    
    
    (89,336
    )Total cash flow investing activities
    
    
    (98,898
    )
    
    
    (89,336
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from private placements
    
    
    
    
    
    
    100,015Proceeds from notes payable
    
    
    
    
    
    
    1,500,000Net cash provided by financing activities
    
    
    
    
    
    
    1,600,015NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
    
    
    (1,777,063
    )
    
    
    430,122CASH & CASH EQUIVALENTS, BEGINNING BALANCE
    
    
    2,317,003
    
    
    
    623,729CASH & CASH EQUIVALENTS, ENDING BALANCE
    
    $
    539,940
    
    
    $
    1,053,851SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    
  3




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Recently Issued Accounting Pronouncements
  Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,
 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.
      WeightedTotal
    
    priceOUTSTANDING, DECEMBER 2005
    
    
    42,862,253
    
    
    
    0.111Granted in 2006
    
    
    5,625,000Cancelled in 2006
    
    
    (274,284
    )Exercised in 2006
    
    
    OUTSTANDING, MARCH 2006
    
    
    48,212,969
    
    
    
    0.148
 ,
  5




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Net loss, as reported
    
    $
    (2,303,096
    )Deduct: Total stock-based employee compensation
expense determined under fair-value based method
for all awards
    
    
    (29,677
    )Pro forma net loss
    
    $
    (2,332,773
    )Basic and diluted weighted average shares outstanding
    
    
    159,711,681Basic and diluted as reported
    
    $
    (0.01
    )Basic and diluted pro forma
    
    
    (0.01
    )
      6




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March 312006Raw material/WIP
    
    $
    252,421Work in process
    
    
    91,618Finished goods
    
    
    41,780385,819Less: Reserve for obsolescence
    
    
    (10,000
    )$
    375,819
    March 312006Financial consulting Whitebox II
    
    $
    100,000Financial consulting Whitebox III
    
    
    450,333Other prepaid expenses
    
    
    50,117Total prepaid expenses
    
    $
    600,450
   March 312006Computers
    
    $
    359,074Office furniture and fixtures
    
    
    580,233Machinery and equipment
    
    
    2,535,6093,474,916Less: Accumulated depreciation
    
    
    (2,886,681
    )$
    588,234
   March 312006Accounts payable   trade creditors
    
    $
    543,319Accounts payable   legal and professional
    
    
    1,296,152Accrued expenses
    
    
    137,377Accrued compensation
    
    
    2,373,494Accrued interest payable
    
    
    433,452Total accounts payable & accrued expenses
    
    $
    4,783,793
 7




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March 312006Loans payable to officers on demand,
interest free and unsecured.
    
    $
    81,521Loans payable to officers on demand,
interest free and unsecured.
    
    
    50,984$
    132,505
   March 312006Opening balance per January 1st, 2006
    
    $
    1,170,975Applied against shipments
    
    
    0Ending balance per March 31, 2006
    
    $
    1,170,975
   st 
  March 312006Notes payable with interest at 8%
due and demandable on December 31, 2006
    
    $
    124,579
   st
 8




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March 312006Notes payable to officer on demand
bearing interest rate of 8%, unsecured
    
    $
    857,784
        9




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10




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March 312006Whitebox I
    
    $
    6,550,000Whitebox II
    
    
    3,000,000Whitebox III
    
    
    7,000,000$
    16,550,000Beneficial conversion feature
    
    
    (3,092,144
    )$
    13,457,856
  Conversion
    
    Conversion
    
    Warrants
    
    Warrantsshares
    
    price
    
    shares
    
    priceWhitebox I
    
    
    14,464,644
    
    
    
    0.4528
    
    
    
    14,423,512
    
    
    
    0.4541Whitebox II
    
    
    5,425,433
    
    
    
    0.5530
    
    
    
    1,666,667
    
    
    
    0.4500Whitebox III
    
    
    7,595,606
    
    
    
    0.9216
    
    
    
    1,609,197
    
    
    
    0.450027,485,683
    
    
    
    
    
    
    
    17,699,375
    11




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RemainingTotal
    
    Price
    
    LifeOUTSTANDING, DECEMBER 2005
    
    
    6,311,951
    
    
    
    0.6259
    
    
    3.5 YearsWarrants issued to Fusion
    
    
    1,220,565
    
    
    
    0.4464
    
    
    4.0 YearsCancelled in 2006
    
    
    
    
    
    
    
    
    
    
    Exercised in 2006
    
    
    
    
    
    
    
    
    
    
    OUTSTANDING, MARCH 2006
    
    
    7,532,516
    
    
    
    0.6259
    
    
    3.6 Years
   12




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13




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Item 2.
 
      14




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15




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16




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Financial Condition and Results of Operations for the three months period ended March 31, 2006
compared to three months period ended March 31, 2005
      17




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18




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March 31
    
    
    March 312006
    
    
    2005Interest expenses.Note payables
    
    $
    2,467
    
    
    $
    5,670Note payable officer
    
    
    17,156
    
    
    
    16,732Convertible notes officers
    
    
    0
    
    
    
    83,905Whitebox I
    
    
    196,500
    
    
    
    196,500Fusion
    
    
    11,971
    
    
    
    2,889WhiteboxII
    
    
    60,000
    
    
    
    8,000Whitebox III
    
    
    140,000
    
    
    
    0Other
    
    
    16,000
    
    
    
    (11,930
    )$
    444,094
    
    
    $
    301,766Beneficial conversion and warrant amorizationWhitebox I
    
    $
    291,377
    
    
    $
    649,973Fusion
    
    
    144,153
    
    
    
    17,939Whitebox II
    
    
    33,938
    
    
    
    28,806Repricing options Whitebox II
    
    
    41,362
    
    
    
    0Whitebox III
    
    
    117,153
    
    
    
    0Repricing options Whitebox III
    
    
    92,520
    
    
    
    0$
    720,503
    
    
    $
    696,717
     19




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PART II: OTHER INFORMATION
 
 ITEM 1
     20




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ITEM 2
  
 ITEM 3
  
 ITEM 4
  
 ITEM 5
  
 ITEM 6
 (a)
    
    Exhibits
 ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation.(1)3.2
    
    Certificate of Amendment to Certificate of Incorporation.(2)3.3
    
    Certificate of Amendment to Certificate of Incorporation.(6)3.4
    
    Certificate of Merger.(6)3.5
    
    Bylaws.(6)4.1
    
    Form of Common Stock Certificate.(1)10.1
    
    Sutura Inc. 2001 Stock Option Plan.(6)10.2
    
    Sutura Inc. 1999 Stock Option Plan.(6)10.3
    
    Employment Agreement with Egbert Ratering.(6)10.4
    
    Employment Agreement with Anthony Nobles.(6)10.5
    
    Sutura Inc. 2006 Stock Option Plan.(6)10.6
    
    Lease for Fountain Valley Location.(6)10.7
    
    Sucor License Agreement.(6)10.8
    
    Sterilis License Agreement.(6)10.9
    
    Option and Distribution Agreement with Getz Bros. & Co., Inc., dated September 20, 2002.(6)10.10
    
    Convertible Promissory Note in Favor of Getz Bros. & Co., Inc., dated September 20, 2002.(6)
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ExhibitNumber
    
    Description10.11
    
    Purchase Agreement, dated as of September 17, 2004 by and between Sutura,
Inc. and certain other parties thereto.(3)10.12
    
    Purchase Agreement, dated as of March 24, 2005 by and between Sutura, Inc.
and certain other parties thereto.(3)10.13
    
    Form of Secured Convertible Promissory Note, dated September 17, 2004.(3)10.14
    
    Form of Secured Convertible Promissory Note dated March 24, 2005.(3)10.15
    
    Form of Warrant, dated September 17, 2004.(3)10.16
    
    Form of Warrant dated, March 24, 2005.(3)10.17
    
    Purchase Agreement, dated September 9, 2005 by and between Sutura, Inc. and
certain other parties thereto.(3)10.18
    
    Second Amended Security Agreement, dated September 9, 2005 by and between
Sutura, Inc. and certain other parties thereto.(3)10.19
    
    Second Amended Patent and Trademark Security Agreement, dated September 7, 2005 by and between Sutura, Inc. and certain other
parties thereto.(3)10.20
    
    Second Amended Registration Rights Agreement, dated September 7, 2005 by and between Setura, Inc. and certain other parties
thereto.(3)10.21
    
    Form of Secured Convertible Promissory Note, dated September 7, 2005.(3)10.22
    
    Form of Warrant dated September 7, 2004.(3)10.23
    
    Amendment to Secured Convertible Promissory Notes and Warrants, dated September 7, 2005 by and between Sutura, Inc. and certain other parties
thereto.(3)10.24
    
    Amendment to Secured Convertible Promissory Notes and Warrants, dated March 31, 2006 by and between Sutura, Inc. and certain
other parties thereto.(4)10.25
    
    Agreement and Plan of Merger dated November 22, 2004.(5)10.26
    
    Distributor Agreement with Getz Bros & Co., Inc. dated September 20, 2002.(6)10.27
    
    Distribution Agreement with The Lifemed Group, Inc. dated January 16, 2006.(6)31.1
    
    Certification of the Chief Executive Officer of Sutura, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer of Sutura, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer of Sutura, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (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 an exhibit to Form 10-KSB for the period ending December 31, 2005. b)
    
    Reports on Form 8-K
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SUTURA, INC.
RegistrantDate: May 22, 2006
    By:

/s/
ANTHONY NOBLESAnthony Nobles, President and Chief Executive OfficerDate: May 22, 2006
    By:

/s/
EGBERT RATERINGEgbert Ratering, Chief Financial Officer 23