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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Year Ended December 31, 2008


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)

(714) 437-9801

(Issuer’s telephone number)

Securities registered under section 12(b) of the Exchange Act: None.

Securities registered under section 12 (g) of the Exchange Act: Common stock, Par value $.001

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. YES o NO þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained in herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

The issuer’s net sales for the most recent fiscal year were $448,911.

The aggregate market value of the voting stock held by non-affiliates based upon the last sale price on April 9, 2009 was approximately $55,655.

As of April 15, 2009, the Company had 337,816,037 shares of its Common Stock, $0.001 par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

Transitional Small Business Disclosure Format (Check one): YES o NO þ

PART I

ITEM 1. BUSINESS

Cautionary Note Regarding Forward-Looking Statements

In this annual report, references to “Sutura,” “the Company,” “we,” “us,” and “our” refer to Sutura, Inc. and its subsidiaries.

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management, markets for stock of Sutura, Inc. and other matters. Statements in this report that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements, including, without limitation, those relating to the future business prospects, revenues and income of Sutura, Inc., wherever they occur, are necessarily estimates reflecting the best judgment of the senior management of Sutura, Inc. on the date on which they were made, or if no date is stated, as of the date of this report. These forward-looking statements are subject to risks, uncertainties and assumptions, including those described in the “Risk Factors” described below, that may affect the operations, performance, development and results of our business. Because the factors discussed in this report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should understand that the following important factors, section could affect our future results and could cause those results to differ materially from those expressed in such forward-looking statements:

	•		general economic conditions;

	•		Our ability to consummate the proposed sale of our assets;

	•		Our ability to pay amounts owed on our secured notes when the notes mature;

	•		our future capital needs and our ability to obtain financing; and

•

other risks and uncertainties as may be detailed from time to time in our public announcements and filings with the Securities and Exchange Commission (“SEC”).

Although we believe that our expectations are reasonable, we cannot assure you that our expectations will prove to be correct. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, believed, estimated, expected or intended.

Except to the extent required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report may not occur.

GENERAL

Overview

Sutura(R), Inc. is a medical device company that has developed a line of innovative, minimally invasive vascular suturing devices to suture vascular structures during open surgery and catheter-based procedures. The Company meets the definition of a “smaller reporting company” as such term is defined in Rule 12(b)2 of the Securities Exchange Act of 1934, as amended. Sutura currently has 28 employees, and maintains its headquarters in Fountain Valley, California, in a 20,000 square foot facility. This facility is a QSR (Food and Drug Administration — Quality Systems Regulations) and ISO (International Standards Organization) certified freestanding facility with 2,000 square feet of cleanroom space and an additional 3,200 square feet convertible to cleanroom, if required. Sales offices (with warehouse space) of approximately 1,000 square feet each are leased in Amsterdam, the Netherlands and La Gaude, France to support sales and marketing efforts in Europe. “Sutura(R)” and “SuperStitch(R)” are registered trademarks.

History

Sutura, Inc. (“Prior Sutura”) was incorporated in Delaware on August 14, 1996, under the name NR Medical, Inc., and changed its name in July 1998 to Sutura, Inc. References to Prior Sutura include Sutura, Inc. and its wholly-owned subsidiary.

Merger Transaction, the separate existence of Prior Sutura ceased and Technology Visions Group, Inc. continued as the surviving corporation under Delaware law. As part of the Merger Transaction, the name of the Company was changed to Sutura, Inc. Further, pursuant to the Merger Transaction, the Company issued 174,948,338 shares of common stock in the aggregate to the former stockholders of Prior Sutura and, as a result, the stockholders of Prior Sutura own approximately 95% of the Company. Accordingly, the merger has been accounted for as a recapitalization of Prior Sutura.

Recent Developments

Reduced Operations

At the end of October 2008 the Board of Directors and executive officers of Registrant reviewed our operations and cash position and determined that it was highly likely that we would be unable to continue as a going concern beyond December 31, 2008. In particular, the Board determined that it was unlikely that available cash, less current liabilities, would be sufficient to sustain operations at current levels beyond December 31, 2008. Further, given the current financial markets, we believed that it was highly unlikely that we would be able to obtain additional financing on acceptable terms, if at all. Accordingly, we began evaluating possible reductions in our operations to conserve cash and other assets for the benefit of our shareholders and creditors.

Agreement to Sell Our Assets

On December 12, 2008, we entered into an Asset Purchase Agreement with Nobles Medical Technologies, Inc. which contemplates the sale of substantially all of the Company’s assets to Nobles Medical. Since the entry by us and Nobles Medical into a letter of intent related to the asset sale on November 3, 2008, Nobles Medical has been managing the operation and day-to-day business of the Company, subject to such general oversight by the Company’s board of directors as is required for the board to exercise its fiduciary duties. During the period between the signing of the asset purchase agreement and the closing of the asset sale, or the earlier termination of the asset purchase agreement, Nobles Medical will continue to manage the operation and day-to-day business of the Company, subject to such oversight by the Board. The asset purchase agreement provides that, in exchange for $6.75 million and the assumption by Nobles Medical of certain liabilities of the Company, the Company will sell and transfer to Nobles Medical $3.0 million in cash and cash equivalents (less the amount of certain expenses of the Company incurred between November 3, 2008 and the closing date to the extent that such expenses exceed $1.5 million) and all of the non-cash assets of the Company (except for certain excluded assets), free and clear of all liens and encumbrances.

The assets of the Company that are excluded from the asset sale include the Company’s cash and cash equivalents in excess of $3.0 million (less the amount of certain expenses of the Company incurred between November 3, 2008 and the closing date to the extent that such expenses exceed $1.5 million), the Company’s certificate of incorporation, bylaws, corporate minute books, stock ledgers and

similar corporate documents and instruments, and the shares of capital stock or other interests that the Company holds in its subsidiaries.

As of and after the closing date of the asset purchase agreement, Nobles Medical will assume only liabilities related to contracts of the Company that Nobles Medical assumes under the asset purchase agreement, and only to the extent the liabilities arise from performance under the contracts after they have been assumed by Nobles Medical. Nobles Medical will not assume any other liabilities of the Company.

At the closing of the asset sale, the parties have agrees that the $6.75 million purchase price will be paid by Nobles Medical to Whitebox Advisors, LLC for the benefit of certain affiliates of Whitebox Advisors, LLC in exchange for the release by such entities of their security interests in the Company’s assets being sold. Neither the Company nor any of the Company’s stockholders based on their equity holdings in the Company will receive any portion of the purchase price from the sale of the assets.

Mr. Nobles, a former officer and director and current shareholder of the Company, is a director, shareholder and the President and Chief Executive Officer of Nobles Medical.

Resignation of Mr. Nobles

On January 12, 2009, Mr. Nobles resigned from the board and from his positions as President and Chief Science Officer of the Company. He remains an employee of the Company under the terms of his existing employment agreement.

Business Strategy

The Company’s prior business strategy was to become a leader in the engineering, development and manufacturing of minimally invasive vascular and cardiovascular suturing devices. At this time, due to limited cash resources and timing of product development, the Company has decided to sell its assets pursuant to the asset purchase agreement with Nobles Medical. The Company will continue operations on a reduced level until the closing of the asset sale.

Technology

Many fluoroscopically guided catheterization procedures rely on percutaneous access to the vascular system through a puncture in the vessel. Many open surgical procedures are performed directly through the arteriotomy, the tissue planes or through a cannula. Following performance of diagnostic or therapeutic treatments or open surgical intervention through the open arteriotomy, catheter sheath or cannula, the arteriotomy site or vascular tissue must be sutured. As part of a typical procedure, a physician inserts the SuperStitch either directly into the arteriotomy, tissue planes or through an introducer sheath or cannula into the vessel, the heart or other vascular structures.

The Company’s SuperStitch(R) products allow physicians to suture the arteriotomy or vascular tissue using fluoroscopic or ultrasonic

guidance while working through the catheter sheath introducer or cannula as well as direct visualization in an open setting.

Patents and Proprietary Rights

The Company’s policy is to protect its proprietary position by, among other methods, filing United States and foreign patent applications to protect its technology and inventions that are important to its business. The Company has been granted seventeen patents with claims for its SuperStitch technology. The Company has additional patents on file, both domestically and internationally. Although the Company has attempted to protect its technology through the filing of various patents, patents within the medical device industry are uncertain and involve complex and evolving legal and factual questions. The coverage sought by the Company in its patent applications either may be denied or significantly reduced, both before or after the patent is issued. Accordingly, there can be no assurance that any patent applications will result in the issuance of patents or that the patents issued to the Company will provide significant or even sufficient protection or commercial advantage.

Manufacturing

The Company manufactures, assembles, tests and packages its SuperStitch products at its facility in Fountain Valley, California. The Company purchases certain components from various suppliers and relies on single-source suppliers for certain parts to its devices. To date, the Company has not experienced any significant adverse effects resulting from shortages of components.

The Company is required to register as a medical device manufacturer with the Food and Drug Administration (the “FDA”) and is subject to inspections by the FDA for compliance with good manufacturing practices and other applicable regulations. Additionally, in connection with its international sales, the Company is also required to comply with various requirements and standards necessary to permit it to sell its products in other countries. All of these standards and practices require that the Company maintain processes and documentation in a prescribed manner with respect to its manufacturing, testing and quality control activities relating to its products.

Research & Development

Within the United States, the SuperStitch 6F, 8F, 12F and EL devices have been cleared by the FDA under section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”) for use in performing vascular stitching in general surgery, including endoscopic procedures. It is not intended for blind closure of an arteriotomy site. The SuperStitch device is designed for use with or without an access device (e.g., trocar sheath or cannula) for use during minimally invasive surgical procedures, during fluoroscopically guided procedures, or in an open setting. The SuperStitch line of devices are approved in the European Union and CE marked with an indication for use as follows: the SuperStitch is indicated for use in performing vascular stitching in general surgery, including endoscopic procedures. In the EU there is no requirement for the use of fluoroscopic guidance. The research and development of the Company’s products has been primarily performed

under the direction of Mr. Nobles, formerly the President, Chief Operating Officer and Chief Science Officer of the Company, and Ben Brosch, V.P. of Engineering and Research and Development. The Company’s research and development staff have been focused on the recently FDA 510(k) cleared 12F and EL devices along with the current versions of the F6 and F8 SuperStitch products.

SuperStitch Products

F8 & F6 Superstitch. The Company released updated versions of the F6 & F8 SuperStitch products in 2007.

Superstitch Guide-Wire. The Company released the guide-wire version of the SuperStitch, which allows physicians to re-access a vessel during procedures by placing the sutures first and completing the sutures on the vessel after performing additional procedures if they choose. The guide-wire version also enables physicians to use the SuperStitch on patients where they feel that maintaining access is more crucial. The guide-wire version of the F8 & F6 has received FDA 510(k) clearance in the USA as well as the CE mark in Europe.

F12 Superstitch. The Company designed this product to address the growing market of larger sites being used by physicians during procedures such as abdominal aortic aneurysms as well as larger surgical applications. The F12 double suture SuperStitch allows physicians to re-access a vessel during procedures by placing the sutures first and completing the sutures on the vessel after performing additional procedures if they choose. The F12 SuperStitch model received FDA 510(k) clearance in the USA as well as the CE mark in Europe.

SuperStitch EL. The Company has received FDA 510(k) clearance and the CE mark in Europe. This product is an expansion of the SuperStitch technology for vessel closure.

Sales, Marketing and Distribution

The Company’s products are intended for use by physicians for open surgical intervention and fluoroscopically guided procedures. The Company has been selling its products in the European market through its direct sales operation in France and its distribution partners in Italy, ,Russia, Spain, Switzerland and Scandinavia. The Company has attempted to expand sales into the U.S., Germany, the U.K. and several other European countries. The Company distributes its products through an exclusive relationship with Getz Bros. & Co. Inc. in Korea, Japan and the rest of Asia. In certain of the Company’s exclusive distribution relationships, it has accepted advance payments for products. The advance payments are offset against the sale of product to such distributors in the future. In particular, we have accepted advance payments of $1,250,000 from Getz Bros. & Co. Inc. To date, we have shipped only nominal amounts of product to Getz Bros. If the distributor agreements with Getz Bros. are subsequently terminated or expire pursuant to their terms, our agreements with Getz Bros require the Company to repay at termination all advance payments that have not been offset by shipped product.

Competition

Competition in the market includes conventional manual compression devices, mechanical compression devices, general surgical suturing systems, common suture and needle holder systems for open surgery, collagen plug devices and suture/staple devices. Many of the Company’s competitors have substantially greater name recognition and financial resources than does the Company, or have pre-market approval from the FDA for more specific claims, all of which may provide a competitive advantage. Further, certain of the Company’s competitors have greater financial resources and expertise in research and development, manufacturing, marketing and regulatory affairs than does the Company.

The three principal competitive vascular sealing devices are:

	•		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

The Company’s products are comprehensively regulated in the United States as “medical devices” by the FDA under the FDC Act and implementing regulations and require pre-market clearance or approval by the FDA prior to commercialization. Further, material changes or modifications to medical devices are also subject to FDA review and clearance or approval. Pursuant to the FDC Act, the FDA also regulates the research, testing, manufacture, safety, labeling, storage, recordkeeping, advertising, distribution and production of medical devices in the U.S. Noncompliance with the applicable requirements can result in warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the government to grant pre-market clearance or pre-market approval for devices, and criminal prosecution.

Generally, before a new device can be introduced into the U.S. marketplace, the manufacturer or distributor must obtain FDA clearance of a 510(k) notification or approval of a pre-market approval (“PMA”) application. If a medical device manufacturer or distributor can establish that a device is “substantially equivalent” to a “predicate device” which is legally marketed as a class I or class II device or to a pre-amendment class III device for which the FDA has not called for PMAs, the manufacturer or distributor may seek clearance from the FDA

to market the device by submitting a 510(k) notification. A 510(k) notification may need to be supported by appropriate data, including clinical data, establishing the claim of substantial equivalence to the satisfaction of the FDA. After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance or could require a PMA approval. The FDA requires each manufacturer to make this determination in the first instance, but the FDA can review any such decision. If the FDA disagrees with a manufacturer’s decision not to seek a new 510(k) clearance, the agency may retroactively require the manufacturer to seek 510(k) clearance or PMA approval. The FDA also can require the manufacturer to cease marketing or recall the modified device until 510(k) clearance or PMA approval is obtained. Following submission of the 510(k) notification, the manufacturer or distributor may not place the device into commercial distribution until an order is issued by the FDA. No law or regulation specifies the time limit by which the FDA must respond to a 510(k) notification. The FDA’s 510(k) clearance pathway usually takes from four to 12 months, but it may take longer. If a manufacturer or distributor of a medical device cannot establish that a proposed device is substantially equivalent to a predicate device, the manufacturer or distributor must seek pre-market approval of the device through submission of a PMA application, which requires proof of the safety and effectiveness of the device to the FDA’s satisfaction. The PMA approval pathway is much more costly, lengthy and uncertain. It generally takes from one to three years or even longer. A PMA application must provide extensive preclinical and clinical trial data and also information about the device and its components regarding, among other things, device design, manufacturing and labeling. As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with Quality System Regulation, or QSR, requirements, which impose elaborate testing, control, documentation and other quality assurance procedures.

Upon submission, the FDA determines if the PMA application is sufficiently complete to permit a substantive review, and, if so, the application is accepted for filing. The FDA then commences an in-depth review of the PMA application, which typically takes one to three years, but may take longer. The review time is often significantly extended as a result of the FDA asking for more information or clarification of information already provided. The FDA also may respond with a “not approvable” determination based on deficiencies in the application and require additional clinical trials that are often expensive and time consuming and can delay approval for months or even years. During the review period, an FDA advisory committee, typically a panel of clinicians, may be convened to review the application and recommend to the FDA whether, or upon what conditions, the device should be approved. Although the FDA is not bound by the advisory panel decision, the panel’s recommendation is important to the FDA’s overall decision making process.

If the FDA’s evaluation of the PMA application is favorable, the FDA often issues an “approvable letter” requiring the applicant’s agreement to specific conditions (e.g., changes in labeling) or specific additional information (e.g., submission of final labeling) in order to secure final approval of the PMA application. Once the approvable letter is satisfied, the FDA will issue a PMA for the

approved indications, which can be more limited than those originally sought by the manufacturer. The PMA can include post approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can result in material adverse enforcement action, including the loss or withdrawal of the approval.

Even after approval of a PMA, a new PMA or PMA supplement is required in the event of a modification to the device, its labeling or its manufacturing process. Supplements to a PMA often require the submission of the same type of information required for an original PMA, except that the supplement is generally limited to that information needed to support the proposed change from the product covered by the original PMA. After a device is placed on the market, numerous post market regulatory requirements apply. These include: the QSR, labeling regulations, the FDA’s general prohibition against promoting products for unapproved or “off-label” uses, the Medical Device Reporting regulation (which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur), and the Reports of Corrections and Removals regulation (which requires manufacturers to report recalls and field actions to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDC Act).

The FDA enforces these requirements by inspection and market surveillance. If the FDA finds a violation, it can institute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions such as:

	•		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.

On March 1, 2000, the Company first received 510(k) clearance to market the F8 SuperStitch devices and subsequently received 510(k) clearance to market the F6, guide-wire F6 and F8, F12 and EL SuperStitch devices. The Company has made modifications to these devices, including the current devices, which the Company believes do not require new 510(k) clearance. There can be no assurance that the FDA would agree with any of our determinations not to seek such new clearance or that the FDA would not require us to submit a new 510(k) notice for any of the changes. If the FDA were to do so, we could be

prohibited from marketing the modified devices until the FDA grants 510(k) clearance for the modified devices. The Company is also subject to compliance with the regulatory requirements of foreign countries in which it desires to sell its SuperStitch devices. The Company has a CE mark permitting sale of the F8 & F6 products in Europe and has also met all of the registration requirements for selling the SuperStitch F8 & F6 devices in Australia. The regulatory requirements vary from country to country. Prior to commencing sales of the devices in countries other than the U.S. and Australia and in Europe, the Company must first ensure that the device complies with all regulatory requirements of the applicable country.

Product Liability and Insurance

The Company’s business involves the risk of product liability claims. Although the Company maintains product liability insurance, there can be no assurance that product liability claims will not exceed such insurance coverage limits or that such insurance or coverage limits will be available on commercially reasonable terms or at all, each of which could have a material adverse effect on the Company.

ITEM 1A. RISK FACTORS

Not Applicable

ITEM 1B. UNRESOLVED COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

We currently lease our headquarters located at 17080 Newhope Street in Fountain Valley, California. This facility consists of approximately 20,000 square feet of space and is a QSR (Food and Drug Administration — Quality Systems Regulations) and ISO (International Standards Organization) certified freestanding facility, with 2,000 square feet of cleanroom space and an additional 3,200 square feet convertible to cleanroom, if required. The term of the lease is for a period of ten years, commencing on August 1, 2004. The base rent is $27,118 per month and is subject to adjustment on an annual basis by the change, if any, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for CPIW (Urban Wage Earners and Clerical Workers) for Los Angeles, Riverside, Orange Counties). Additionally, the Company leases sales offices (with warehouse space) of approximately 1,000 square feet leased in each of Amsterdam, the Netherlands and La Gaude, France to support our sales and marketing efforts in Europe.

We believe that our facilities are adequate for our needs for the foreseeable future and, in the opinion of the Company’s management; the properties are adequately covered by insurance.

ITEM 3. LEGAL PROCEEDINGS

Pham v. Nobles, et al. This case was filed in the Orange County, California Superior Court, Case No. 07CC07644, on July 5, 2007. This case arises out of plaintiff Loni Pham’s investment in the Company. In July 2004, Plaintiff executed a Subscription Agreement, accepted by the Company, under which she purchased 9,805 shares of the Company’s common stock in exchange for $250,000. Plaintiff has asserted causes of action for breach of contract, fraud and negligent misrepresentation against the Company and its former Chief Executive Officer and former board member, Mr. Nobles. Plaintiff seeks damages in an amount no less than $250,000, plus interest, costs and punitive damages in an unspecified amount. Defendants filed an answer to Plaintiff’s complaint on October 31, 2007. The Parties then agreed that Plaintiff’s claims against Defendants are subject to a written arbitration agreement and have therefore agreed that the case be stayed and submitted to binding arbitration. On January 31, 2008, the court stayed this case pending binding arbitration. In early August 2008, the parties agreed to dismiss the entire action without prejudice and enter into a tolling agreement, tolling the running of any statute of limitations until January 30, 2009.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders of Sutura, Inc. during the fourth quarter of fiscal 2008.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASERS OF EQUITY SECURITIES

MARKET INFORMATION

Since August 19, 2005, our common stock has been traded over-the-counter and quoted on the OTC Electronic Bulletin Board under the symbol “SUTU.” Prior to August 19, 2005, our common stock was traded over-the-counter and quoted on the OTC Electronic Bulletin Board under the symbol “TVGR.” The symbol change resulted from the change of the Company’s name at the time of its merger with Prior Sutura. Our stock is traded on a limited and sporadic basis.

The reported high and low bid and asked prices for the common stock are shown below for the periods from January 1, 2007 through December 31, 2008. The prices presented are bid and ask prices, which represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commission to the broker-dealer. The prices may not necessarily reflect actual transactions.


	PERIOD	HIGH		LOW

Fiscal Year Ended December 31, 2007	First Quarter	$	0.10	$	0.05
	Second Quarter	$	0.10	$	0.065
	Third Quarter	$	0.094	$	0.05


	PERIOD	HIGH		LOW

	Fourth Quarter	$	0.09	$	0.04

Fiscal Year Ended December 31, 2008	First Quarter	$	0.08	$	0.05
	Second Quarter	$	0.08	$	0.051
	Third Quarter	$	0.08	$	0.06
	Fourth Quarter	$	0.06	$	0.001

As of December 31, 2008 there were approximately 403 stockholders of record of Sutura common stock.

The transfer agent for the Company is Continental Stock Transfer & Trust Company, 17 Battery Place, NY, NY 10004, Telephone, (212)509-4000

DIVIDENDS

Sutura has not paid any cash dividends on its common stock and does not expect to do so in the foreseeable future. We anticipate that any earnings generated from future operations will be used to finance our operations. No restrictions exist upon our ability to pay dividends.

RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEM 6. SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of Sutura’s results of operations and financial condition should be read together with the audited consolidated financial statements and notes thereto and the other financial information included elsewhere in this Form 10K report. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results anticipated in any forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” and elsewhere in this Information Statement.

General

Sutura is a medical device company that designs, develops, and manufactures a family of patented suture mediated stitching devices for vascular tissue approximation. Sutura’s operations, to date, have consisted mainly of raising capital, research, development, and clinical testing of its SuperStitch vascular suturing devices, obtaining regulatory clearances and approvals in the U.S., Asia and Europe and limited manufacturing and sales.

Sutura has not generated any pre-tax income to date and therefore has not paid any federal income taxes since inception. No provision or benefit for federal and state income taxes has been recorded for net operating losses incurred in any period since our inception.

Sutura meets the definition of a “Small Business Issuer” as such term is defined in Item 10(a) of Regulation S-B under the Securities Exchange Act of 1934, as amended. Sutura currently has 28 employees, and maintains its headquarters in Fountain Valley, California, in a 20,000 square foot facility. This facility is a QSR (Food and Drug Administration — Quality Systems Regulations) and ISO (International Standards Organization) certified freestanding facility with 2,000 square feet of cleanroom space and an additional 3,200 square feet convertible to cleanroom, if required. Sales offices (with warehouse space) of approximately 1,000 square feet each are leased in Amsterdam, the Netherlands and La Gaude, France to support sales and marketing efforts in Europe. “Sutura(R)” and “SuperStitch(R)” are registered trademarks.

Reduced Operations

financial markets, we believed that it was highly unlikely that we would be able to obtain additional financing on acceptable terms, if at all. Accordingly, we began evaluating possible reductions in our operations to conserve cash and other assets for the benefit of our shareholders and creditors.

Agreement to Sell Our Assets

At the closing of the asset sale, the parties have agreed that the $6.75 million purchase price will be paid by Nobles Medical to Whitebox Advisors, LLC for the benefit of certain affiliates of Whitebox Advisors, LLC in exchange for the release by such entities of their security interests in the Company’s assets being sold. Neither the Company nor any of the Company’s stockholders based on their equity holdings in the Company will receive any portion of the purchase price from the sale of the assets.

Mr. Nobles, a former officer and director and current shareholder of the Company, is a director, shareholder and the President and Chief Executive Officer of Nobles Medical.

Critical Accounting Policies and Estimates

Sutura’s audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and management is required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies which Sutura believes are the most critical to aid in fully understanding and evaluating its reported financial results include the following:

Principles of consolidation

The consolidated financial statements include the accounts of Sutura Inc. and its wholly owned subsidiaries Technology Visions, Inc., Sutura BV, Sutura SARL and Sutura GMBH. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and disclosures made in the accompanying notes. Actual results could differ from those estimates.

Foreign Currency Translation and Transactions

Foreign assets and liabilities are translated using the period-end exchange rates. Results of operations are translated using the average exchange rates throughout the year. Translation gains or losses are accumulated as a separate component of shareholders’ equity.

Revenue Recognition

We recognize revenue in accordance with generally accepted accounting principles as outlined in the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104), which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. We recognize revenue as products are shipped based on FOB shipping point terms when title passes to customers. The Company sells its products in the United States, Germany and France, directly to hospitals and clinics. In all international markets, the Company sells its products to international distributors which subsequently resell the products to hospitals and clinics. We negotiate credit terms on a customer-by-customer basis and products are shipped at an agreed upon price.

All product returns must be pre-approved and, if approved, will be credited at original price.

Segment reporting

Statement of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company allocates its resources and assesses the performance of its sales activities based upon geographic locations of its subsidiaries. The following is a breakdown of our sales for the three and twelve month periods ended December 31, 2008


	Three months ended				Three months ended				Year ended				Year ended
	Dec 31, 2008				Dec 31, 2007				Dec 31, 2008				Dec 31, 2007

Sales in USA	$	0	0	%	$	2,046	3	%	$	5,405	1	%	$	21,999	9	%
Sales in Europe		68,881	69	%		36,684	47	%		339,456	76	%		139,542	55	%
Sales Far East		31,000	31	%		39,500	50	%		104,050	23	%		90,500	36	%

Total sales	$	99,881	100	%	$	78,230	100	%	$	448,911	100	%	$	252,041	100	%


	Three months ended				Three months ended				Year ended				Year ended
	Dec 31, 2008				Dec 31, 2007				Dec 31, 2008				Dec 31, 2007

Sales major countries
France	$	10,626	11	%	$	16,272	21	%	$	101,139	23	%	$	67,319	27	%
Russia		58,255	58	%		—	0	%		211,797	47	%		—	0	%
Hong Kong	$	31,000	31	%	$	39,500	50	%	$	104,050	23	%	$	90,500	36	%

Major customer and concentration of credit risk.


	Three months ended				Three months ended				Year ended				Year ended
	Dec 31, 2008				Dec 31, 2007				Dec 31, 2008				Dec 31, 2007

Sales major customers
Customer 1	$	58,255	58	%	$	—	0	%	$	211,797	47	%	$	—	0	%
Customer 2		31,000	31	%		39,500	50	%		104,050	23	%		90,500	36	%
Customer 3		10,626	11	%		10,460	13	%		55,801	12	%		45,337	18	%
Customer 4		0	0	%		5,811	7	%		45,338	10	%		21,982	9	%

Valuation of Accounts Receivable

We maintain an allowance for uncollectible accounts receivable to estimate the risk of extending credit to customers and distributors. The allowance is estimated based on the customer or distributor’s compliance with our credit terms, the financial condition of the customer or distributor and collection history where applicable. Additional allowances could be required if the financial condition of our customers or distributors were to be impaired beyond our estimates.

Inventories

Inventories are valued at the lower of the actual cost or market (using “first-in, first-out” method). Cost includes materials, labor and production overhead. We periodically evaluate the carrying value of inventories and maintain an allowance for obsolescence to adjust the carrying value as necessary to the lower of cost or market.

Valuation of Long-Lived Assets

Property, plant and equipment, intangible and certain other long-lived assets are amortized over their useful lives. Useful lives are based on our estimate of the period that the assets will generate revenue or otherwise productively support our business goals. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future business operations. In our estimate, no provision for impairment is currently required on any of our long-lived assets.

Research and Development Costs

All research and development costs are charged to operations as incurred.

Stock-Based Compensation

Sutura accounts for equity instruments issued to non-employees in accordance with the provisions of Financial Accounting Standards No 123, accounting for Stock-Based Compensation, and as amended by SFAS 148, and Emerging Issues Task Force Issue No 96-18, accounting for Equity Instruments ,that are issued to Other than Employees for Acquiring, or in conjunction with Selling, Goods or Services.

Debt with Detachable Stock Purchase Warrants and Beneficial Conversion Features

The proceeds received from debt issued with detachable stock purchase warrants is allocated between the notes and the warrants, based upon the relative fair values of the two securities. The difference between the proceeds allocated to the notes and the face value of the notes is recognized as beneficial conversion feature and reflected as a discount from the convertible notes with a corresponding credit to additional paid-in capital. This beneficial conversion feature together with the value of the warrants is amortized to interest expense over the term of the debt instrument, using the effective interest method.

Reclassification of expenses

Certain prior period expenses have been reclassified to conform to current period presentation.

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

The Company has decided to focus its resources on the development of larger and multiple suture placement devices that address opportunities in the fast growing market of interventions with large catheter based devices in Cardiology and Radiology. In addition it is developing longer versions of its stitching devices that allow the placement of sutures inside the Vascular and cardio-vascular structures and allow physicians to address the fast growing market in PFO and other structural heart procedures. Sutura believes that in both markets its unique suture based approach will have major advantages over currently used techniques. Total headcount for the Company decreased to 29 per the end of December 2008 compared to 32 per the end of December 2007.

Net Sales

Net sales were $99,881 for the quarter ending December 31, 2008 compared to $78,230 for the same quarter ending December 31, 2007.

Net sales for the year ending December 31, 2008 were $448,911 compared to $252,041 for the year ended December 31, 2007. The increase in sales over last year was mainly the result of large shipments to our distributor in Russia with whom we started doing business in 2008 as well as new customers in France.

Cost of Sales

Cost of sales is comprised of all costs to manufacture our existing SuperStitch products, as well as start up costs for the newer versions, including materials, labor and related overhead costs including warranty and service costs. Cost of sales was $708,961 for the three months and $2,489,809 for the year ended December 31, 2008 compared to $671,863 and $2,256,331 for the same periods last year. For the year to date period the increase in spending was $233,478 and was mainly caused by $70,000 higher payroll expenses, $55,000 higher scrap and rework expenses and $162,000 higher general supplies and tooling expenses offset by a $40,000 reversal of obsolescence accruals.
Manufacturing headcount decreased to 11 per the end of December 2008 from 13 per the end of December 2007.

Research and Development

Research and development expenses consist of engineering personnel salaries and benefits, prototype supplies, contract services and consulting fees related to product development. Headcount in R&D was 9 at the end of December 31, 2008 compared to 7 per end of 2007. Research and development expenses increased 19% to $829,802 in the year ended December, 31 2008 from $696,448 in the year ended December 31, 2007. In 2008 the Company has focused its research on both the Super Stitch 12 Fr and the SuperStitch EL for which it incurred $355,000 in clinical trial expenses compared to only $20,000 in 2007. This was offset by a $227,000 reduction in payroll expenses as last year it decided to fully compensate staff and employees for not only all accrued back owed salaries but also award back owed interest to compensate for late payment of such salaries.

General and Administrative

General and administrative expenses consist of salaries and benefits of administrative personnel as well as insurance, professional and regulatory fees and provisions for doubtful accounts. General and administrative expenses decreased $310,406 or 6% to $4,834,327 in the year ended December 31, 2008 from $5,144,733 in the year ended December 31, 2007. In the year ended December 31, 2008 the Company incurred $ 979,944 in legal expenses compared with $1,688,314 in 2007, or a decrease in legal expenses of $708,370 or 42%.

This decrease is the result of the Company settling its patent infringement case with the Perclose division of Abbott Labs in December of 2007. The decrease in legal expenses was offset by an increase of $226,382 in travel expenses to $620,800 for the year ended December 2008, an increase of $98,800 in insurance expenses and an increase of $115,000 in taxes and licenses. In the year ended December 31, 2008 the Company incurred payroll expenses that were $2,094 higher than last year at $1,443,718. Included in this number is the settlement with our former CEO of $520,000. In the year ended December 31, 2007 the Company incurred payroll expenses that were $781,000 higher than the year before as it decided to fully compensate staff and employees for all accrued back owed salaries and award back owed interest for late payment of such salaries. Headcount in G&A decreased to 7 at the end of 2008 from 8 at the end of 2007.

Sales and Marketing

Sales and marketing expenses consist of salaries and benefits, commissions, and other costs related to our support staff, advertising costs and expenses related to trade shows, distributor support and seminars.

Headcount in Sales and Marketing decreased to 2 people at December 31, 2008 from 4 at the end of December 31, 2007. Sales and marketing expenses increased $203,544 or 32% to $830,688 in the year ended December 31, 2008 from $627,144 in the year ended December 31, 2007. The Company participated in the European cardiology meeting in Barcelona and the TCT in Washington as well as in a smaller meeting in Frankfurt, Germany and incurred $85,000 higher travel and entertainment as well as $113,000 higher exhibition expenses than last year.

Interest income/expense

Interest income for the year ended December 31, 2008 was $434,803 compared to $33,993 for the year ended December 31, 2007. Most of the cash received from the patent settlement in December 2007 has been invested in notes and Certificates of Deposits during the year 2008.

Interest expenses are paid on convertible notes that the Company has issued to finance its operations. Interest expenses for the year ended December 31, 2008 were $2,474,690 compared to $2,478,996 in the year ended December 31, 2007. On the one hand there was an increase as a consequence of higher interest rates on most of the Whitebox notes compared to last year as well as the expense of extending the term on most notes. On the other hand there was a decrease as a direct consequence of lower borrowing as year to date $4,560,000 of notes have been reimbursed and a further $5,012,752 notes at 12% interest have been converted into shares on April 2^nd 2008.

In addition to the direct interest expenses the Company amortizes the fair value of the warrants and the beneficial conversion feature of the notes over the term of the notes. In the year ended December 31, 2008 $454,687 was expensed compared to $2,269,377 in the same period last year.


	Twelve months		Twelve months
	2008		2007

Interest expenses.
Note payable related party in Euros	$	14,094	$	12,191
Note payable officer		100,052		74,112
Whitebox I		358,431		797,790
Whitebox I Consent fee amortization		98,252		49,126
Whitebox Ia Interest note		24,288		6,072
Whitebox II		370,800		365,400
Whitebox II Consent fee amortization		45,000		22,500
Whitebox IIa Interest note		11,124		2,781
Whitebox III		865,200		658,925
Whitebox III Consent fee amortization		105,000		52,500
Whitebox IIIa Interest note		19,516		4,879
Idylwood Partners L.P.		—		60,000
Whitebox V		60,000		120,000
Whitebox Va Interest note		1,800		900
Whitebox VI		60,000		98,333
Whitebox VIa Interest note		1,800		900
Synapse		29,333		18,667
Whitebox VII		204,000		107,267
Notes Officers		48,000		20,000
Whitebox VIII		58,000		22,000
Other		—		(15,350	)

	$	2,474,690	$	2,478,996


	Twelve months		Twelve months
	2008		2007

Beneficial conversion amortization
Whitebox I	$	—	$	582,754
Whitebox I BCF consent fee		81,680		40,840
Whitebox II		—		67,876
Whitebox II BCF consent fee		37,412		18,706
Whitebox III		—		1,079,365
Whitebox III BCF consent fee		87,292		43,646
Idylwood Partners L.P.		—		34,722
Whitebox V		248,302		401,468

Total conversion feature expense	$	454,687	$	2,269,377

Total interest expenses	$	2,929,376	$	4,748,373

Liquidity and Capital Resources

The Company ended the year with cash, cash equivalents, restricted cash equivalents and marketable securities available for sale of $3,733,575. During the year ended December 31, 2008 the Company used $10,837,430 of cash in operating activities. Most of this amount was to finance the operating loss but in addition there was an amount of $1,648,000 to pay back owed salaries accrued on the company books in prior periods. In

addition, at June 30, 2008 we used $3,160,000 to pay back on their due date two notes issued to Whitebox in 2006 and 2007. On September 21, 2008 the Company used a further $1,000,000 for reimbursement of another note to Whitebox and in December 2008, $400,000 for a note issued to Synapse capital.

For the years ended December 31, 2008 and 2007, we incurred a net loss of $,11,015,288 and a net profit of $10,500,479 respectively. The profit of 2007 was the result of a legal settlement of $23,000,000 received in December of 2007. Corrected for this one time income the Company would have incurred a loss of $12,499,521 in 2007. As of December 31, 2008, we had an accumulated deficit of $69,149,495.

Reduced Operations

At the end of October 2008 the Board of Directors and executive officers of the Company reviewed our operations and cash position and determined that it was highly likely that we would be unable to continue as a going concern beyond December 31, 2008. In particular, the Board determined that it was unlikely that available cash, less current liabilities, would be sufficient to sustain operations at current levels beyond December 31, 2008. Further, given the current financial markets, we believed that it was highly unlikely that we would be able to obtain additional financing on acceptable terms, if at all. Accordingly, we began evaluating possible reductions in our operations to conserve cash and other assets for the benefit of our shareholders and creditors.

Agreement to Sell Our Assets

and instruments, and the shares of capital stock or other interests that the Company holds in its subsidiaries.

ITEM 7A. QUANTITATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS

The Company’s audited financial statements are listed in the Index to Financial Statements and included elsewhere herein as a part of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A(T). CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. As of December 31, 2008, the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to

Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control Over Financial Reporting

The financial statements, financial analyses and all other information included in this Annual Report on Form 10-K were prepared by the Company’s management, which is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.

Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on management’s assessment using this framework, it believes that, as of December 31, 2008, the Company’s internal control over financial reporting is effective.

This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report on Form 10-K

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2008, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT; CODE OF ETHICS

The Directors and executive officers of the Company at December 31, 2008, their ages, their titles, their years of employment with the Company, and their principal occupation for the last five years are as follows:

Brian Abraham, 43, has served as the Company’s Chief Executive Officer and a member of our board since April 4, 2008. Mr. Abraham is employed at Whitebox Advisors, LLC, a Minneapolis-based SEC-registered investment adviser. Prior to joining Whitebox in 2008, Mr. Abraham was the President and Chief Executive Officer of Bluefin Robotics headquartered in Cambridge, Massachusetts from 2005-2008. Bluefin is an undersea robotics technology developer and manufacturer. From 2001-2008, Mr. Abraham served as the Director of Technology Development at Battelle Memorial Institute, a not-for-profit research institute. Also, from 2003-2008, Mr. Abraham was an Adjunct Professor at both Babson College in Wellesley, Massachusetts and The Ohio State University in Columbus, Ohio. Prior to 2001, Mr. Abraham served as part of the management team of, or as an advisor to, various technology related companies. Mr. Abraham holds a BA (1988) in Chemistry and Spanish from Skidmore College; a Ph.D. Chemistry and Post Doctoral Fellow (1993) from Tufts University Graduate School of Arts & Sciences; and an MBA (2002) from the F.W. Olin Graduate School of Business at Babson College.

Richard Bjorkman, 59, has served as the Chief Financial Officer, Vice President, Finance and member of our Board since September 21, 2006. Recently, on February 21, 2008, he was appointed interim Chief Executive Officer of the Company, in addition to his existing officer positions, and served as interim Chief Executive Officer until April 4, 2008. He is a member of the special committee that recommend to the board that it approve the asset purchase agreement and related transaction documents with Nobles Medical. Mr. Bjorkman was previously an independent contractor providing CFO services to venture backed start up companies and to companies in turn-around situations. Before that, Mr. Bjorkman served as CFO for Indicast.com from 2001 to 2002. Indicast was an internet voice portal company that was ultimately acquired by Oracle, Inc. Prior to Indicast, he served as CFO for SmithMicro Software, Inc. (Nasdaq: SMSI), a developer of eCommerce software, communication software and provider of professional consulting services. Mr. Bjorkman received his CPA certificate while working for KPMG in their Los Angeles office. He is a past president of Financial Executives International (FEI), Orange County, California chapter.

David Kernan, 52, was appointed to the board on October 29, 2008 to fill a vacancy. He is a member of the special committee that recommended to the board that it approve the asset purchase agreement and related transaction documents with Nobles Medical. Mr. Kernan was a founder and has been a partner of Catalina Capital Advisors since May 2004. Catalina Capital Advisors was previously engaged as a consultant by the Company in connection with investments in the Company by third parties, including the Whitebox Parties. Prior to May 2004, he was part of the founding executive team of Indicast Corp. which developed

and marketed voice application technology for corporate clients and wireless carriers, and which was acquired in 2001 by Oracle. Prior to Indicast, Mr. Kernan held various management positions with Ericsson, General Electric and Motorola.

John C. Kopchik, 50, has served as a member of our board since April 4, 2008. Mr. Kopchik is employed at Whitebox Advisors, LLC, a Minneapolis-based SEC-registered investment adviser, and is focused on special situation investments. Prior to joining Whitebox, he was a partner at Common Sense Investments, a hedge fund of funds based in Portland, Oregon, from 2005-2008. From 2001-2005, he was President and Founder of Providence Capital, an Excelsior, Minnesota based hedge fund focused on special situations and capital structure arbitrage investments. Before Providence Capital, he was a Managing Director at Churchill Companies in Minneapolis, Minnesota, where he was involved in private equity investments, including a medical device company. While at Churchill, he served as CEO of TSI, Inc., a public instrumentation company which Churchill took private. TSI had several products which it sold to the medical device market. Mr. Kopchik started his career at Bain and Company in Boston, Massachusetts. He holds a BA (1980) from Harvard College and a JD (1983) from Harvard Law School.

Anthony Nobles, 44, served as the Chief Science Officer of the Company from September 21, 2006 until January 12, 2009, as the President and as a director of the Company until January 12, 2009, and served as our Chairman of the Board until April 4, 2008. Prior to that Mr. Nobles served as the Chief Executive Officer, President and Chairman of the Board of the Company since the consummation of the merger of the Company with Technology Visions Group on August 19, 2005. Recently, on February 21, 2008, he was appointed to serve as President and Chief Operating Officer of the Company in addition to his existing officer positions. Mr. Nobles co-founded Prior Sutura in 1996 with Egbert Ratering and served as Prior Sutura’s Chairman of the Board from the inception of Prior Sutura until consummation of the merger. He also served as Prior Sutura’s President and Chief Executive Officer since the inception of Prior Sutura until consummation of the merger, except for a brief period from January 2000 to October 2001 during which time he held the title of Chief Technology Officer. Mr. Nobles resigned from all officer and director positions held by him in the Company, effective January 12, 2009. In addition, Mr. Nobles has founded other medical device companies with Mr. Ratering, for which he serves as an officer and director. He has been awarded various patents for medical devices for use in cardiovascular surgery, neurosurgery, obstetrics/gynecology, and vascular & general surgery. On January 12, 2009, Mr. Nobles resigned from the board and from his then positions as President and Chief Science Officer of the Company. He remains an employee of the Company under the terms of his existing employment agreement.

Mark M. Strefling, 40, has served as the Chairman of our board since April 4, 2008. Mr. Strefling is the General Counsel and Chief Legal Officer of Whitebox Advisors, LLC, a Minneapolis-based SEC-registered investment adviser. Mr. Strefling joined Whitebox in 2008. Prior to his position with Whitebox, Mr. Strefling was a Partner in the Investment Management Practice at the law firm of Faegre & Benson LLP in Minneapolis, Minnesota and was the head of the firm’s Hedge Fund Group. Mr. Strefling joined Faegre & Benson in 1999. Mr. Strefling

holds a BA (1991) in Finance and Accounting from the University of St. Thomas; a JD (1996) from Creighton University; and an MBA (1999) in Finance from the Carlson School of Management at the University of Minnesota.

Richard Vigilante, 52, has served as a member of our board since April 4, 2008. Mr. Vigilante is the Director of Communications of Whitebox Advisors, LLC, a Minneapolis-based SEC-registered investment adviser. Mr. Vigilante joined Whitebox in 2003. Prior to his position with Whitebox, Mr. Vigilante was a publisher with Gilder Publishing LLC. Mr. Vigilante holds a BA (1978) from Yale College.

There are no family relationships among our executive officers or directors.

Audit Committee Financial Expert

Our entire board of directors serves as our audit committee. Richard Bjorkman is the Company’s audit committee financial expert; however, Messr. Bjorkman is an executive officer of the Company and is not independent of management.

SECTION 16(a) — BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who beneficially own more than 10% of the Company’s stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10% beneficial owners are required by applicable regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon a review of the copies of the forms furnished to the Company and information involving securities transactions of which the Company is aware, the Company is aware of officers, directors and holders of more than 10% of the outstanding common stock of the Company who failed to timely file reports required by Section 16(a) of the Exchange Act during the year ended December 31, 2007. To the Company’s knowledge, to date, Anthony Nobles, Egbert Ratering, Richard Bjorkman, and David Kernan have not filed required Forms 3 or 5.

CODE OF ETHICS

We have adopted a code of ethics that applies to our board of directors and a code of ethics for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. These codes of ethics will be provided to any person without charge, upon request, by sending such request to us at our principal office. The Code of Ethics was most recently filed with the Company’s Annual Report filed on Form 10-KSB for the fiscal year ended December 31, 2003.

ITEM 11. EXECUTIVE COMPENSATION

Executive Employment Agreements

NOBLES EMPLOYMENT AGREEMENT

Mr. Nobles’ existing Employment Agreement with Sutura was assumed by the Company upon consummation of the merger of the Company with Prior Sutura. Mr. Nobles was employed by the Company as its President, Chief Science Officer and Chairman of the Board during fiscal year 2008. Mr. Nobles recently resigned from the positions of President, Chief Science Officer and Chairman of the Board on January 12, 2009, but continues to be employed under the remaining terms of his employment agreement. The term of Mr. Nobles’ employment agreement extends from January 1, 2003 until December 31, 2007, and thereafter extends for one (1) year terms unless terminated on ninety (90) days prior notice. Pursuant to his employment agreement, Mr. Nobles receives annual base salary of $250,000, subject to a minimum annual increase of no less than the increase in the average cost of living index. Mr. Nobles has founded, and for which he generally serves as an officer and director, various other medical device companies outside of the arterial vessel closure area. Mr. Nobles’ employment agreement requires that he devote at least 50% of his employable time, attention, skill and efforts to the faithful performance of his duties with the Company. Mr. Nobles’ employment agreement specifically prohibits him from participating in a business that competes with Sutura’s business during his employment.

RATERING EMPLOYMENT AGREEMENT

Mr. Ratering’s Employment Agreement with Sutura was assumed by the Company upon consummation of the merger of the Company with Prior Sutura. Mr. Ratering is currently employed by Sutura as its Executive Vice President European Operations. Mr. Ratering’s employment is at will and provides for an annual salary of Euro 120,000 approximately ($175,000 U.S. dollars) and an additional Euro 10,000 (approximately $15,000 U.S. dollars) in annual benefit allowance.

BJORKMAN EMPLOYMENT AGREEMENT

Mr. Bjorkman entered into his Employment Agreement with Sutura on September 21, 2006. The agreement with Mr. Bjorkman provides, among other things, that Mr. Bjorkman will receive an annual salary of $90,000 in exchange for serving as the Company’s Chief Financial Officer and Vice President, Finance for at least twenty (20) hours per week, and that he will be reimbursed for his COBRA expenses. Mr. Bjorkman is an at-will employee. On March 19, 2008, Mr. Bjorkman’s annual salary was increased to $150,000 in light of his increased duties.

TECKMAN EMPLOYMENT AGREEMENT

Mr. Teckman entered into his Employment Agreement with Sutura on September 21, 2006 The agreement with Mr. Teckman through 2006 provided that he would receive annual compensation of $1.00 in exchange for serving as the Company’s President and Chief Executive Officer. In January, 2007, the Board evaluated Mr. Teckman’s compensation package, and determined that his compensation for fiscal year 2007 should be revised to provide for an annual salary of $250,000, a monthly car allowance of $650, and that he be reimbursed for his COBRA expenses.

Mr. Teckman was an at-will employee. Mr. Teckman resigned his employment with the Company effective February 21, 2008.

COMPENSATION

The following table presents, for each of the last three fiscal years, the annual compensation earned by the chief executive officer and the most highly compensated executive officers of the Company for the three fiscal years ended December 31, 2007:

SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION


									OTHER ANNUAL
NAME AND PRINCIPAL POSITION	YEAR		SALARY			INTEREST			COMPENSATION
David Teckman		2008	$	250,000	(1)				$	307,261	(6)
Chief executive officer and President		2007	$	250,000	(1)				$	7,150	(6)
		2006	$	1	(1)				$	0	(6)

Richard Bjorkman		2008	$	145,500	(2)				$	37,500	(7)
Chief Financial Officer and Executive		2007	$	90,000	(2)					0
Vice President		2006	$	26,250	(2)				$	0

Anthony Nobles, PhD Chairman,Chief Scientific officer		2008	$	250,000	(3)	$	180,072	(8)	$	111,966	(9)
		2007	$	250,000	(3)	$	173,147	(8)	$	7,800	(9)
		2006	$	250,000	(3)				$	7,800	(9)

Egbert Ratering Executive Vice President		2008	$	172,044	(4)				$	37,398	(9)
		2007	$	151,706	(4)	$	128,052	(8)	$	11,540	(9)
		2006	$	137,983	(4)				$	10,618	(9)

Brian Abraham		2008	$	0	(5)	$	0		$	0


(1)		Mr. Teckman became an executive officer and employee of the Company on September 21, 2006. Mr. Teckman worked for the sum of one dollar for the remainder of 2006. His annual salary during 2007 was $250,000. Mr. Teckman resigned his employment with the Company effective February 21, 2008. On June 4, 2008, pursuant to the terms of the Separation Agreement between the Company and Dave Teckman, the Company paid to Mr. Teckman a lump sum payment of $520,699.24, less applicable withholdings, in exchange for a general release of all claims that Mr. Teckman has or may have against the Company. As part of the Separation Agreement, The Company also paid $40,000 of legal fees incurred by Mr. Teckman in connection with his separation from The Company.

(2)		Mr. Bjorkman became an executive officer and employee of the Company on September 21, 2006. Mr. Bjorkman devotes twenty hours


		per week to the Company on a part time basis. Mr. Bjorkman receives half of his annual salary of $300,000 for his time at Sutura. On February 21, 2008, he was appointed interim Chief Executive Officer of the Company, in addition to his existing officer positions, and served as interim Chief Executive Officer until April 4, 2008, at which time he resigned from such interim position and Mr. Abraham was appointed Chief Executive Officer.

(3)		Mr. Nobles became an executive officer and employee of the Company on August 19, 2005 as a result of the merger of the Company with Prior Sutura.

(4)		Mr. Ratering became an executive officer and employee of the Company on August 19, 2005 as a result of the merger of the Company with Prior Sutura.

(5)		Mr. Abraham became an executive officer and employee of the Company on April 4, 2008. Mr. Abraham worked for the sum of one dollar for the remainder of 2008.

(6)		These amounts represent automobile allowances for the full years 2008 and 2007 as well as an employment termination compensation of $300,000 in 2008.

(7)		These amounts represent a bonus payment equivalent to two months’ salary.

(8)		These amounts represent interest compensation at 8% on the amount of back owed salaries due such officer for prior year’s employment that had been accrued on company books per the end of 2007.

(9)		These amounts represent a bonus payment equivalent to two months’ salary in 2008 and automobile allowances for the years 2008, 2007 and 2006.

COMPENSATION OF DIRECTORS

In 2008, outside non-officer directors received $1000 for each director’s meeting physically attended, plus out-of-pocket expenses incurred in connection with attending these meetings and $500 for telephonic meetings attended.

The compensation of officers and directors is subject to review and adjustment from time to time by the Board of Directors. From time to time, the Company has granted options to its directors.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of April 15, 2009 certain information with respect to the beneficial ownership of our voting securities by (i) any person known by us to be the beneficial owner of more than 5% of our voting securities; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a group. In computing the number of shares beneficially owned by a person listed below and the percentage ownership of such person, shares of common stock underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of April 15, 2009 are deemed outstanding for purposes of computing such person’s percentage ownership, but are not deemed outstanding for computing the percentage ownership of any other person. Beneficial ownership including the number and percentage of shares owned is determined in accordance with Rule 13d-3 and 13d-5 under the Securities Exchange Act of 1934 (the “Exchange Act”) and is generally determined by voting power or investment power with respect to securities. The percentage of beneficial ownership is based on 337,816,037 shares of common stock outstanding as of April 15,2009. Except as otherwise noted below, and subject to applicable community property laws, the persons named have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Unless otherwise indicated, the address of the following stockholders is c/o Sutura, Inc., 17080 Newhope Street, Fountain Valley, California 92708.

337,816,037

COMMON STOCK BENEFICIAL OWNERSHIP TABLE


	NUMBER OF		PERCENTAGE OF
	SUTURA SHARES		SUTURA SHARES
NAME AND ADDRESS OF	BENEFICIALLY		BENEFICIALLY
BENEFICIAL OWNER	HELD		OWNED

5% STOCKHOLDERS:
Nobles, Anthony PhD(1)		103,558,836		29.12	%
Ratering, Egbert(2)		112,781,124		31.48	%
Grootkasteel, B.V.		69,461,329		20.56	%
Synapse Capital LLC (3)		24,859,459		7.36	%
Whitebox (4)		336,621,583		64.15	%

EXECUTIVE OFFICERS & DIRECTORS
Abraham, Brian (5)		0		*
Bjorkman,Richard (6)		450,000		*
Kernan,David (6)		0		*
Strefling,Mark M(5)		0		*
Kopchik,John C. (5)		0		*
Vigilante,Richard.(5)		0		*
All directors & officers as a group(7)		450,000		0.17	%


*		Indicates less than 1%


(1)		Includes 9,687,954 shares of the Company held by Anthony Nobles; 6,508,680 shares of the Company held by The Anthony Nobles Family Limited Partnership; 86,783 shares of the Company held by Rhonda Nobles; 69,461,329 shares of the Company held by GrootKasteel B.V.; and 17,814,090 shares of the Company issuable upon the exercise of options held by Anthony Nobles. Anthony Nobles is an officer and director of GrootKasteel B.V. and holds the power to vote all shares held by The Anthony Nobles Family Limited Partnership. Rhonda Nobles is the spouse of Mr. Nobles. Mr. Nobles resigned as President, Chief Science Officer and a director of the Company on January 12, 2009.

(2)		Includes 16,343,557 shares of the Company held by Egbert Ratering; 2,169,560 shares of the Company held by Franck Ratering; 2,169,560 shares of the Company held by Alex Ratering; 2,169,560 shares of the Company held by Harry Ratering; 69,461,329 shares of the Company held by GrootKasteel B.V.; 12,506,488 shares of the Company issuable upon conversion of convertible notes and 7,961,070 shares of the Company issuable upon conversion of options held by Egbert Ratering. Egbert Ratering is an officer and director of GrootKasteel B.V. Franck Ratering, Alex Ratering and Harry Ratering are members of Mr. Ratering’s immediate family.

(3)		Includes 10,264,866 shares of the Company issued to Synapse Fund I LLC and 14,606,335 shares of the Company issued to Synapse Fund II LLC. Synapse Capital, LLC is the Manager of each of Synapse Fund I and Synapse Fund II.

(4)		Includes 149,712,197 shares of the Company beneficially owned by Whitebox Advisors, LLC, as the managing member of each of Pandora Select Partners L.P., a British Virgin Islands limited partnership; Whitebox Hedged High Yield L.P., a British Virgin Islands limited partnership; Whitebox Convertible Arbitrage Partners L.P. a British Virgin Islands limited partnership, and by Gary S. Kohler and Scot W. Malloy, who are employed by Whitebox Advisors (collectively, the “Whitebox Parties”), and 186,909,386 shares of the Company issuable to the Whitebox Parties upon conversion of notes and warrants.

(5)		Each of Messrs. Abraham, Kopchik, Strefling and Vigilante are employed by, or employed by an entity affiliated with, Whitebox Advisors, LLC or one of the Whitebox Parties, but disclaim any beneficial ownership of any securities benefically owned by Whitebox Advisors, LLC.

(6)		Shares issuable upon exercise of options.

(7)		Includes 585,598 shares of the Company issuable upon exercise of options. Calculation includes all shares of the Company beneficially owned by Brian Abraham, Richard Bjorkman, David Kernan, John Kopchik, Mark Strefling and Richard Vigilante.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

On January 6, 2006, the entire Board of Directors of the Company unanimously approved the Sutura, Inc. 2006 Stock Option Plan. The number of shares of the Company’s common stock subject to the plan may not exceed 20,000,000. The plan may be administered by the board of directors or by a committee thereof and permits the issuance of non-qualified stock options to employees, officers, directors and consultants of the Company and incentive stock options only to employees of the Company. The plan has a term of 10 years and incentive stock options may not be issued under the plan. The board or a committee administering the plan has broad authority to determine the amount and vesting terms of any option grant. On May 8, 2007, the board authorized the issuance of 2,300,000 options to employees, directors and consultants. On July 2, 2007, the board authorized a further issuance of 100,000 options to employees, directors and consultants. These grants vest 25% following one year of service, and then in equal quarterly installments during the next three years of service. These grants vest 25% following one year of service, and then in equal quarterly installments during the next three years of service. The following table represents the number of shares issuable upon exercise and reserved for future issuance as of December 31, 2008.


			Number of
			Securities to be		Exercise		Securities
			issued upon		price of		available for
			exercise of		outstanding		future issuance
			outstanding		options,		under equity
			options, warrants		warrants and		compensation
Plan Category	Name of plan		and rights		rights		plans
			a		b		c
Equity compensation	Sutura 1999 option plan	1		33,020,708		0.076		0
plans not approved by	Sutura 2004 warrants	2		867,824		0.626		0
security holders	Sutura 2004 warrants	3		1,821,262		0.626		0
	Sutura 2004 warrants	4		2,321,129		0.626		0
Equity compensation	Sutura 2006 option plan	5		3,880,000		0.300		0
	Sutura 2006 option plan	6		1,950,000		0.070		0
	Sutura 2006 option plan	7		1,700,000		0.070		10,270,000


1:		Represents 41,210,806 option shares available under the option plans of Prior Sutura that were assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19, 2005. There are no additional shares available for issuance as those plans were frozen on the effective date of the merger.

2:		Represents warrants issued to management of Prior Sutura in 2004 that were assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19, 2005. The warrants are exercisable for a period of 5 years.

3:		Represents warrants issued to consultants having provided investor relations , legal, marketing and administrative services for us during 2004 that were assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19, 2005. The warrants are exercisable for a period of 5 years.

4:		Represents warrants issued to investors as part of private placements during 2004 that were assumed by the Company in connection with the merger of the Company and Prior Sutura on August 19, 2005. The warrants are exercisable for a period of 5 years.

5:		Represents 1,450,000 options issued to consultants and 2,930,000 options issued to key employees. The options vest in 4 years and are exercisable for a period of 10 years.

6:		Represents 1,750,000 options issued to members of the board of directors and members of the clinical advisory board and 1,200,000 options issued to key employees under the 2006 plan.

7:		Represents 2,400,000 options issued to members of the board of directors and clinical advisory board. The options vest in 4 years and are exercisable for a period of 10 years.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On November 21, 2007, the Company entered into a Common Stock Purchase Agreement with GrootKasteel, B.V., a Dutch company, pursuant to which GrootKasteel purchased 1,420,455 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $.0704 per share. Gauss N.V. holds 100% of the ownership interests of GrootKasteel. Mr. Anthony Nobles and Egbert Ratering, each an officer and director of the Company, jointly own Gauss N.V. The transaction was approved by a disinterested majority of the Company’s Board of Directors.

are in substantially the same form as the promissory notes issued to certain affiliates of Whitebox Advisors on July 2, 2007. Issuance of the Affiliate Notes was approved by a disinterested majority of the Company’s Board of Directors. The Affiliate Notes bear interest from the date issuance at the rate of twelve percent (12%) per annum. All accrued interest and principal is due and payable in a balloon payment upon the sixtieth (60th) month anniversary of the Affiliate Notes. The Company may prepay the Notes, in whole or in part, upon five (5) days prior written notice to the payee at a cost equal to accrued interest plus the present value of the Affiliate Notes discounted at a rate equal to (x) the then U.S. Treasury rate for 5-year Notes as reported by Bloomberg on the date of such prepayment notice, plus (y) 100 basis points.

The Company, as successor to Prior Sutura, currently owes Mr. Ratering, an officer and prior director of The Company, the principal amounts of $516,091 and $410,317 pursuant to two promissory notes. In 2007, each of the notes bore simple interest at 8% and were to be due and payable on December 31, 2007. The accrued interest on such notes as of December 31, 2007 was $41,287 and $32,825 respectively. On January, 17, each of the notes were amended to extend the maturity date of each of the notes to July 1, 2009, to increase the interest rate to 10% (effective as of January 1, 2008), and to provide that each of the notes are to be convertible at the election of Mr. Ratering into 11,580,090 shares of the Company’s Common Stock at a conversion rate of $0.08 per share. The extension of the notes was approved by a disinterested majority of the Company’s Board of Directors

Prior Sutura previously leased its facilities in Fountain Valley, California (Newhope Street Property), from Mr. Nobles. On August 2, 2004, Mr. Nobles sold the Newhope Street Property to NV Properties LLC, a Nevada limited liability company. At the same time, NV Properties entered into a new lease with Prior Sutura on substantially the same economic terms as the prior lease between Prior Sutura and Mr. Nobles. The term is for a period of ten years, commencing on August 1, 2004. The base rent is $27,118 per month and is subject to adjustment on an annual basis by the change, if any, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for CPIW (Urban Wage Earners and Clerical Workers) for Los Angeles, Riverside, Orange Counties). Mr. Nobles serves as one of three managers of NV Properties. The provisions of the NV Properties’ Operating Agreement provide that actions are taken by majority vote of the managers and that no manager may vote on actions in which he has a direct or indirect financial interest other than as a member or manager of NV Properties. The Operating Agreement specifically prohibits Mr. Nobles from voting on any matter pertaining to the lease of the building by NV Properties to Prior Sutura. Mr. Nobles was a prior officer and director of Sutura. Mr. Nobles holds a 20.1051% interest in NV Properties.

In September 1999, Prior Sutura entered into a Patent License Agreement with Sterilis, Inc., a California corporation. Sterilis is a medical device company focused on developing business in the obstetrical and gynecological fields and markets. Both Mr. Nobles and Mr. Ratering are officers, directors, and stockholders of Sterilis. Pursuant to the Patent License Agreement, Prior Sutura granted Sterilis an exclusive, worldwide license to manufacture and sell certain suturing devices

within the obstetrical, gynecological and urological fields of use, specifically reserving the patent rights for developing products in the cardiological field of use. In exchange for this license, Sterilis paid Prior Sutura a one-time fee of $250,000. The license agreement specifies that, unless terminated sooner under an event of default as defined in the Agreement, the license granted would terminate on the expiration date of the last of the licensed patents. The Patent License Agreement was assumed by the Company pursuant to the Merger Transaction.

On October 1, 2000, Prior Sutura and Sucor, Inc., a California corporation, entered into a License Agreement. Sucor is a medical device company focused on developing business for suturing devices solely used for venous occlusion, including varicose vein closure. Both Mr. Nobles and Mr. Ratering are officers, directors, and shareholders of Sucor. Pursuant to the License Agreement, Prior Sutura granted Sucor an exclusive, worldwide license to manufacture and sell certain suturing devices that would be used solely in the venous occlusion, and vein closure fields of use, specifically reserving the patent rights for developing products in the cardiological field of use. In exchange for this license, Sucor paid to Prior Sutura a non-refundable license fee of $100,000, and issued to Sutura 117,647 shares of its common stock; which stock is now held by the Company as successor to Sutura. The license agreement will expire on the expiration date of the last of the licensed patents. The License Agreement has been assumed by the Company pursuant to the Merger Transaction.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

Principal Accountant Fees and Services

The following is a summary of the fees billed to the Company by Kabani & Company (“Kabani”) for professional services rendered for the fiscal years ended December 31, 2008 and 2007, respectively:


Fee Category	Fiscal 2008 Fees		Fiscal 2007 Fees
Audit Fees	$	37,500	$	47,500
Audit-related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0

Total Fees	$	37,500	$	47,500

Audit Fees. These consist of fees billed by our auditors for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports.

Audit-related Fees. These consist of fees billed by our auditors for professional services rendered for the review of SEC comment letters.

Tax Fees. These consist of fees billed by our auditors for professional services for tax compliance, tax advice and tax planning.

All Other Fees. There consist of fees billed by our auditors for professional services rendered for the review of private placement memorandums and registration statement filings on Form S-1 and Form S-8.

Preapproval Policies

The policy of our board, acting as our audit committee, is to review and pre approve both audit and non-audit services to be provided by the independent auditors (other than with de minimum exceptions permitted by the Sarbanes-Oxley Act of 2002. 100 percent of the fees paid to Kabani were pre-approved as aforesaid.

No services in connection with appraisal or valuation services, fairness opinions or contribution-in-kind reports were rendered by Kabani. Furthermore, no work of Kabani with respect to its services rendered to the Company was performed by anyone other than Kabani.

ITEM 15. EXHIBITS

2.1		Asset Purchase Agreement, dated December 12, 2008, by and between Sutura, Inc. and Nobles Medical Technologies, Inc.¹⁸

2.2		First Amendment to Asset Purchase Agreement, dated February 4, 2008, by and between Nobles Medical technologies, Inc. and Sutura, Inc.

3.1		Certificate of Incorporation¹

3.2		Certificate of Amendment to Certificate of Incorporation²

3.3		Certificate of Amendment to Certificate of Incorporation⁷

3.4		Certificate of Merger⁷

3.5		Bylaws⁷

4.1		Form of Common Stock Certificate¹

10.1		Sutura Inc. 2001 Stock Option Plan⁷

10.2		Sutura Inc. 1999 Stock Option Plan⁷

10.3		Employment Agreement with Egbert Ratering⁷

10.4		Employment Agreement with Anthony Nobles⁷

10.5		Sutura Inc. 2006 Stock Option Plan⁷

10.6		Lease for Fountain Valley Location⁷

10.7		Sucor License Agreement⁷

10.8		Sterilis License Agreement⁷

10.9		Option and Distribution Agreement with Getz Bros. & Co., Inc., dated September 20, 2002⁷

10.10		Convertible Promissory Note in Favor of Getz Bros. & Co., Inc., dated September 20, 2002⁷

10.11		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 Sutura, 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, 2002.⁷

10.27		Distribution Agreement with The Lifemed Group, Inc. dated January 16, 2006.⁷

10.28		Form of Secured Convertible Promissory Note, dated March 5, 2007.⁸

10.29		Form of Promissory Note, dated May 18, 2007.⁹

10.30		Form of Promissory Note, dated July 2, 2007.¹⁰

10.31		Form of Promissory Note, dated July 16, 2007.¹¹

10.32		Amendment to Secured Promissory Notes, effective as of July 1, 2007.¹²

10.33		Form of Convertible Promissory Note, dated September 21, 2007.¹³

10.34		Common Stock Purchase Agreement between Sutura and Grootkasteel, B.V., dated November 21, 2007.¹⁴

10.35		Settlement, License and Release Agreement between Sutura, Abbott Laboratories and Abbott Vascular, Inc., effective December 3, 2007.¹⁵

10.36		Convertible Promissory Note, dated December 12, 2007.¹⁶

10.37		Confidential Separation Agreement Between Sutura, Inc. and david Teckman.17

14.1		Code of ethics for the Board of Directors.⁶

14.2		Code of ethics for Executive Officers.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.

32.2		Certification of the Chief Financial Officer of Sutura, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


¹		Previously filed as part of the Form 10-KSB filed in May 1995 and amendments thereto which are hereby incorporated by reference.

²		Previously filed as part of the Form 10-KSB for the period ending December 31, 2001.

³		Previously filed as an exhibit to Form 8-K, filed on September 13, 2005.

⁴		Previously filed as an exhibit to Form 8-K filed on March 31, 2006.

⁵		Previously filed as an exhibit to Form 8-K filed on December 1, 2004.

⁶		Previously filed as part of the Form 10-KSB for the period ending December 31, 2003.

⁷		Previously filed as part of the Form 10-KSB for the period ending December 31, 2005.

⁸		Previously filed as an Exhibit to Form 8-K filed on March 7, 2007.

⁹		Previously filed as an Exhibit to Form 8-K filed on May 24, 2007.

¹⁰		Previously filed as an Exhibit to Form 8-K filed on July 6, 2007.

¹¹		Previously filed as an Exhibit to Form 8-K filed on July 19, 2007.

¹²		Previously filed as an Exhibit to Form 8-K filed on September 18, 2007.

¹³		Previously filed as an Exhibit to Form 8-K filed on September 25, 2007.

¹⁴		Previously filed as an Exhibit to Form 8-K filed on November 26, 2007.

¹⁵		Previously filed as an Exhibit to Form 8-K filed on December 4, 2007.

¹⁶		Previously filed as an Exhibit to Form 8-K on December 17, 2007.

¹⁷		Previously filed as an Exhibit to Form 8-K on June 9, 2008.

¹⁸		Previously filed as an Exhibit to Form 8-K on December 18, 2008.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


SUTURA INC

By:		/s/ BRIAN ABRAHAM Brian Abraham, Chief Executive Officer and Director

Date:		April 15, 2009

By:		/s/ RICHARD BJORKMAN

		Richard Bjorkman, Chief Financial Officer, Vice President Finance and Director

Date:		April 15, 2009

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.


By:		/s/ MARK STREFLING Mark Strefling, Chairman of the Board, Director

Date:		April 15, 2009

By:		/s/ David Kernan, Director


Date:		April 15, 2009

By:		/s/ JOHN KOPCHIK

		John Kopchik, Director

Date:		April 15, 2009

By:		/s/ RICHARD VIGILANTE

		Richard Vigilante, Director

Date:		April 15, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Sutura Inc. and subsidiaries

We have audited the accompanying consolidated balance sheets of Sutura Inc. and subsidiaries as of December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sutura Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of its consolidated operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated deficit of $69,149,495 at December 31, 2008 including a net loss of $11,015,288 during the year ended December 31, 2008. On December 12, 2008, the Company entered into a material definitive agreement to sell substantially all of the assets of the Company as described in Note 2 to the financial statements. These factors, among others, as discussed in Note 2 to the consolidated financial statements, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in note 3, the financial statements for the year ended December 31, 2007 were restated.

/s/ KABANI & COMPANY, INC.

CERTIFIED PUBLIC ACCOUNTANTS
Los Angeles, California
March 25, 2009

F-2

SUTURA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


	At December			At December
	31,			31,
	2008			2007
				(Restated)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents	$	1,150,554		$	7,767,196
Marketable securities & Certificates of deposits		83,021			8,917,690
Current assets held for sale		3,413,254			3,116,028

Total current assets		4,646,829			19,800,914
LONG TERM ASSETS:
Non-current assets held for sale		825,331			833,369

Total assets	$	5,472,160		$	20,634,283


LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable and accrued expenses		2,221,666			3,358,047
Loan payable — officers		116,985			119,858
Customer deposits		894,466			1,006,311
Notes payable — related party		166,548			161,823
Convertible notes payable- officers		1,000,519			926,408
Convertible notes payable- net of beneficial conversion		12,264,153			3,811,698

Total current liabilities		16,664,337			9,484,145

LONG TERM LIABILITIES:
Convertible notes payable- net of beneficial conversion		—			17,028,603
Notes payables		1,700,000			1,700,000
Notes payables officers		400,000			400,000


Total liabilities		18,764,337			28,612,747

COMMITMENTS AND CONTINGENCIES		—			—

STOCKHOLDERS’ DEFICIT
Series A convertible preferred stock, $0.001 par value; 2,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value; 500,000,000 shares authorized; issued and outstanding 337,816,037 shares as at December 31, 2008 and 272,650,262 shares at December 31, 2007		337,816			272,650
Additional paid in capital		56,551,159			50,941,329

Accumulated deficit		(69,149,495	)		(58,134,208	)

Other comprehensive loss		(1,031,657	)		(1,058,236	)


Total stockholders’ deficit		(13,292,177	)		(7,978,465	)


Total Liabilities and Stockholders’Defict	$	5,472,160		$	20,634,283

The accompanying notes are an integral part of these consolidated audited financial statements.

F-3

SUTURA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007


	2008			2007
				(Restated)

Net revenue	$	—		$	—

Other income (expense)
Interest expense(1)		(2,929,377	)		(4,748,374	)
Litigation settlement		—			23,000,000

Total other income (expense)		(2,929,377	)		18,251,626


Income (loss) from continued operations		(2,929,377	)		18,251,626

Discontinued operations:
Loss from discontinued operations		(8,085,911	)		(7,751,147	)


NET INCOME (LOSS)		(11,015,288	)		10,500,479


OTHER COMPREHENSIVE GAIN (LOSS)
Unrealized gain (loss) securities		(17,646	)		—
Translation adjustment		5,068			(121,072	)

TOTAL COMPREHENSIVE GAIN (LOSS)		(12,578	)		(121,072	)

COMPREHENSIVE (LOSS)	$	(11,027,866	)	$	10,379,407


BASIC AND DILUTED NET INCOME (LOSS) FROM CONTINUED OPERATIONS	$	(0.01	)	$	0.07


BASIC AND DILUTED NET LOSS FROM DISCONTINUED OPERATIONS	$	(0.02	)	$	(0.03	)


BASIC AND DILUTED NET INCOME (LOSS) PER SHARE	$	(0.03	)	$	0.04


BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING*		321,435,569			265,214,687



* Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of dilutive securities is anti-dilutive.

(1) Includes amortization of beneficial conversion feature and warrants issued of:	$	454,687		$	2,269,377

The accompanying notes are an integral part of these consolidated financial statements.

F-4

SUTURA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2007 (RESTATED) AND 2008


					ADDITIONAL		OTHER						TOTAL
	COMMON STOCK				PAID-IN		COMPREHENSIVE			ACCUMULATED			STOCKHOLDERS
	SHARES		AMOUNT		CAPITAL		LOSS			DEFICIT			DEFICIT
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		—			—		$	100,000
Interest expenses converted into shares		12,061,699		12,061		947,606							$	959,667
Beneficial conversion feature notes commitment fee		—		—		412,767		—			—		$	412,767
Compensation expenses options employees						330,528							$	330,528
Compensation expenses options non-employees						167,273							$	167,273
Unrealized loss on marketable securities								(44,271	)				$	(44,271	)
Foreign translation adjustment								(76,801	)				$	(76,801	)
Net loss											10,500,479		$	10,500,479

BALANCE, DECEMBER 31, 2007 (Restated)		272,650,262	$	272,650	$	50,941,329	$	(1,058,236	)	$	(58,134,208	)	$	(7,978,465	)
Conversion of convertible notes payables		62,659,400		62,660		4,950,093		—			—		$	5,012,753
Interest expenses converted into shares		2,506,375		2,506		198,003							$	200,509
Beneficial conversion feature notes commitment fee		—		—		—		—			—		$	—
Compensation expenses options employees						294,543							$	294,543
Compensation expenses options non-employees						167,194							$	167,194
Unrealized loss on marketable securities								21,511					$	21,511
Foreign translation adjustment								5,068					$	5,068
Net loss											(11,015,288	)	$	(11,015,288	)

BALANCE, DECEMBER 31, 2008		337,816,037	$	337,816	$	56,551,159	$	(1,031,657	)	$	(69,149,495	)	$	(13,292,177	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

SUTURA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007


	2008			2007
				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(11,015,288	)	$	10,500,479
Adjustments to reconcile net loss to net cash used in operating activities
Beneficial conversion feature		454,687			2,269,377
Stock based compensation expenses- employees		294,543			330,528
Stock based compensation expenses- non employees		167,194			167,274
Interest expenses converted into shares		200,510			1,477,387

Total Adjustments		1,116,934			4,244,566
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities		852,641			(621,522	)
Accrued payroll		(1,648,021	)		7,851
Customer deposits		(111,845	)		(133,664	)

Net cash provided by (used in) continued operations		(10,805,579	)		13,997,710
Net cash provided by (used in) discontinued operations		(31,852	)		492,234
Net cash provided by (used in) operating activities		(10,837,430	)		14,489,945

CASH FLOWS INVESTING ACTIVITIES:
Net cash provided by (used in) discontinued operations		8,764,888			(12,023,659	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placements		—			100,000
Proceeds from (payments to) notes payable		(4,560,000	)		3,950,000

Net cash provided by (used in) continued operations		(4,560,000	)		4,050,000
Net cash provided by (used in) discontinued operations		—			—

Net cash provided by (used in) financing activities		(4,560,000	)		4,050,000

Effect of rate changes on cash and cash equivalents		15,900			12,754

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS		(6,616,642	)		6,529,040

CASH & CASH EQUIVALENTS, BEGINNING BALANCE		7,767,196			1,238,154

CASH & CASH EQUIVALENTS, ENDING BALANCE	$	1,150,554		$	7,767,196


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	1,524,518		$	—
Income taxes	$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-6

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 DESCRIPTION OF BUSINESS AND RECENT DEVELOPMENTS

Sutura(R), Inc. (“the Company” or “us” or “we” or “Our”)is a medical device company that has developed a line of innovative, minimally invasive vascular suturing devices to suture vascular structures during open surgery and catheter-based procedures. The Company meets the definition of a “smaller reporting company” as such term is defined in Rule 12(b)2 of the Securities Exchange Act of 1934, as amended. Sutura currently has 28 employees, and maintains its headquarters in Fountain Valley, California, in a 20,000 square foot facility. This facility is a QSR (Food and Drug Administration — Quality Systems Regulations) and ISO (International Standards Organization) certified freestanding facility with 2,000 square feet of cleanroom space and an additional 3,200 square feet convertible to cleanroom, if required. Sales offices (with warehouse space) of approximately 1,000 square feet each are leased in Amsterdam, the Netherlands and La Gaude, France to support sales and marketing efforts in Europe. “Sutura(R)” and “SuperStitch(R)” are registered trademarks.

On August 19, 2005, Prior Sutura merged with and into Technology Visions Group, Inc. pursuant to the terms of that certain Agreement and Plan of Merger, dated November 22, 2004, by and between Prior Sutura and Technology Visions Group, Inc. (the “Merger Transaction”). Technology Visions Group, Inc. was incorporated in Delaware in 1985 under the name Orbit Technologies, Inc and changed its name to Technology Visions Group, Inc. on December 22, 2000. Pursuant to the Merger Transaction, the separate existence of Prior Sutura ceased and Technology Visions Group, Inc. continued as the surviving corporation under Delaware law. As part of the Merger Transaction, the name of the Company was changed to Sutura, Inc. Further, pursuant to the Merger Transaction, the Company issued 174,948,338 shares of common stock in the aggregate to the former stockholders of Prior Sutura and, as a result, the stockholders of Prior Sutura own approximately 95% of the Company. Accordingly, the merger has been accounted for as a recapitalization of Prior Sutura.

NOTE 2 RECENT DEVELOPMENTS AND DISCONTINUED OPERATIONS

At the end of October 2008 the Board of Directors and executive officers of the Company reviewed its operations and cash position and determined that it did not believe that the Company would be able to continue as a going concern beyond December 31, 2008. The Board determined that it was unlikely that available cash, less current liabilities, would be sufficient to sustain operations at current levels beyond December 31, 2008. Given the current financial markets, the Company believed that it was highly unlikely that it would be able to obtain additional financing on acceptable terms, if at all. Accordingly, the Company began evaluating possible reductions in our operations to conserve cash and other assets for the benefit of our shareholders and creditors.

On December 12, 2008, the Company entered into an Asset Purchase Agreement with Nobles Medical Technologies, Inc. which contemplates the sale of substantially all of the Company’s assets to Nobles Medical. Since the entry by the Company and Nobles Medical, a related party by a common

F-7

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

officer, into a letter of intent related to the asset sale on November 3, 2008, Nobles Medical has been managing the operation and day-to-day business of the Company, subject to such general oversight by the Company’s board of directors as is required for the board to exercise its fiduciary duties. During the period between the signing of the asset purchase agreement and the closing of the asset sale, or the earlier termination of the asset purchase agreement, Nobles Medical will continue to manage the operation and day-to-day business of the Company, subject to such oversight by the Board. The asset purchase agreement provides that, in exchange for $6.75 million and the assumption by Nobles Medical of certain liabilities of the Company, the Company will sell and transfer to Nobles Medical $3.0 million in cash and cash equivalents (less the amount of certain expenses of the Company incurred between November 3, 2008 and the closing date to the extent that such expenses exceed $1.5 million) and all of the non-cash assets of the Company (except for certain excluded assets), free and clear of all liens and encumbrances.

At the closing of the asset sale, the $6.75 million purchase price will be paid from Nobles Medical to Whitebox Advisors, LLC for the benefit of certain affiliates of Whitebox Advisors, LLC in exchange for the release by such entities of their security interests in the Company’s assets being sold. Neither the Company nor any of the Company’s stockholders based on their equity holdings in the Company will receive any portion of the purchase price from the sale of the assets.

Assets held for disposal as at December 31, 2008 comprised of the following:


	December 31, 2008		December 31, 2007
Current assets held for sale
Marketable securities and short-term Certificate of deposit		2,500,000		2,619,298
Accounts Receivable, Net		16,387		31,603
Inventory, net		212,995		410,569
Prepaid expenses		683,872		54,558

Total current assets held for sale		3,413,254		3,116,028

F-8

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2008		December 31, 2007
Long term assets held for sale
Property & equipment, net		607,557		251,404
Certificates of deposit — Long term		—		380,702
Deposits		217,773		201,263

Total long term assets held for sale		825,331		833,369

NOTE 3. BASIS OF PRESENTATION

PRINCIPALS OF CONSOLIDATION

The consolidated financial statements include the accounts of Sutura Inc. and its wholly owned subsidiaries Technology Visions Inc, HeartStitch, Inc., Sutura BV, Sutura SARL and Sutura GMBH. All significant intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures made in the accompanying notes. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. The Company maintains its cash in bank deposit accounts that may exceed federally insured limits. The company has not experienced any losses in such accounts.

MARKETABLE SECURITIES

The Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.

Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold.

FAIR VALUE MEASUREMENTS

SFAS No. 157, which the Company adopted in the first quarter of 2008, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 Inputs Quoted prices (unadjusted) in active markets for identical assets or liabilities.

F-9

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	•		Level 2 Inputs Inputs other than quoted prices in active markets that are observable either directly or indirectly; and

	•		Level 3 Inputs Unobservable inputs in which there is little or no market data, which require us to develop our own assumptions.

This hierarchy requires the use of observable market data when available and to minimize the use of unobservable inputs when determining fair value. The Company’s cash equivalent and short-term investment instruments are classified using Level 1 or Level 2 inputs within the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Investment instruments valued using Level 1 inputs include money market securities and U.S. government agency securities. Investment instruments valued using Level 2 inputs include investment-grade corporate debts, such as bonds and commercial paper.

PROPERTY & EQUIPMENT

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using various methods over the estimated useful lives of the assets, ranging from three to seven years. Depreciation is computed using accelerated methods based on the estimated useful lives of the assets, generally as follows:


Computer software		3 years
Office furniture and fixtures		5-7 years
Equipment		5 years

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

Assets and liabilities of foreign subsidiaries have been translated at year- end exchange rates, while revenues and expenses have been translated at average exchange rates in effect during the year. Resulting cumulative translation adjustments have been recorded as other comprehensive income (loss) as a separate component of stockholders’ equity.

During the year ended December 31, 2008 and 2007, comprehensive income included a net translation gain of $5,068 and a net translation loss of $121,072 respectively. Other comprehensive loss, as presented on the accompanying consolidated balance sheets in the stockholders’ equity section amounted to $1,031,657 and $1,058,236 as of December 31, 2008 and 2007.

REVENUE RECOGNITION

F-10

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. We recognize revenue as products are shipped based on FOB shipping point terms when title passes to customers. The Company sells its products in the United States, Germany and France, directly to hospitals and clinics. In all international markets, the Company sells its products to international distributors which subsequently resell the products to hospitals and clinics. We negotiate credit terms on a customer-by-customer basis and products are shipped at an agreed upon price.

All product returns must be pre-approved and, if approved, will be credited at original price.

SHIPPING AND HANDLING COSTS

In accordance with the Emerging Issues Task Force (EITF) issue 00-10, “Accounting for Shipping and Handling Fees and Costs,” the Company includes shipping and handling revenues in net sales and shipping and handling costs in cost of sales.

ACCOUNTS RECEIVABLE

The company maintains an allowance for uncollectible accounts receivable to estimate the risk of extending credit to customers and distributors. The allowance is estimated based on the customer or distributor’s compliance with our credit terms, the financial condition of the customer or distributor and collection history where applicable. Additional allowances could be required if the financial condition of our customers or distributors were to be impaired beyond our estimates.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF:

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.

F-11

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 (SFAS 109). Under SFAS 109, deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

RESEARCH AND DEVELOPMENT COSTS

All research and development costs are charged to operations as incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.

EARNINGS PER SHARE

Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), “Earnings per share”. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Weighted average number of shares used to compute basic and diluted loss per share is the same in these financial statements since the effect of dilutive securities is anti-dilutive.

STOCK-BASED COMPENSATION

Effective January 1, 2006, the Company adopted Statement No. 123R, Share-Based Payment (SFAS 123R), which requires companies to measure and recognize compensation expense for all stock-based payments at fair value. SFAS 123R is being applied on the modified prospective basis. Prior to the adoption of SFAS 123R, the Company accounted for its stock-based compensation plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and accordingly, recognized no compensation expense related to the stock-based plans. Under the modified prospective approach, SFAS 123R applies to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled.

F-12

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ISSUANCE OF SHARES FOR SERVICE

The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.

DEBT WITH DETACHABLE STOCK PURCHASE WARRANTS AND BENEFICIAL CONVERSION FEATURES

SEGMENT REPORTING

CURRENT ACCOUNTING PRONOUNCEMENTS:

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for the Company beginning in the first quarter of 2008. In February 2008, the FASB released a FASB Staff Position (FSP FAS 157-2—Effective Date of FASB Statement No. 157) which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. Adoption of SFAS No. 157 did not affect Sutura’s consolidated financial condition, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement

F-13

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements”. This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. Management is currently evaluating the effect of this pronouncement on financial statements.

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. Management is currently evaluating the effect of this pronouncement on financial statements.

In May of 2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting Principles. The pronouncement mandates the GAAP hierarchy reside in the accounting literature as opposed to the audit literature. This has the practical impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP hierarchy. This pronouncement will become effective 60 days following SEC approval. The company does not believe this pronouncement will impact its financial statements.

In May of 2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60. The scope of the statement is limited to financial guarantee insurance (and reinsurance) contracts. The pronouncement is effective for fiscal years

F-14

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

beginning after December 31, 2008. The company does not believe this pronouncement will impact its financial statements.

RESTATEMENT PRIOR YEAR RESULTS

In the three month period ended September, 30, 2008, the management of the Company determined that the July 1st, 2007 extension and changes in the terms of Whitebox notes I, II and III should have, as per FASB EITF 96-19, been accounted for as new notes rather than extensions of existing notes. The difference is the immediate amortization of the $634,996 beneficial conversion feature on our books per July 1st, 2007 rather than amortization per our original schedule. The effect of these corrections on the year ending December 31^st of 2007 was an increase in interest expenses from $ 4,275,905 to $4,748,374. The net income from operations decreased from $10,972,948 to $10,500,479. In the balance sheet at the end of December 31, 2007 accumulated deficit was increased by $ 472,467 from $57,661,739 to $58,134,208.

SUTURA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATION


	Reported			Restated
	At December 31,			At December 31,
	2007			2007
Interest Expense		(4,275,905	)		(4,748,374	)

NET INCOME		10,972,948			10,500,479

SUTURA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET


	Reported			Restated
	At December 31,			At December 31,
	2007			2007
Convertible notes payable -net of beneficial conversion	$	16,556,134		$	17,028,603
Accumulated deficit	$	(57,661,739	)	$	(58,134,208	)

RECLASSIFICATION

Certain 2007 amounts have been reclassified to conform to the 2008 presentation.

NOTE 4 MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT

F-15

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the specific security sold. As at December 31, 2008 and 2007 the marketable securities amounted to $83,021 and $8,917,690 respectively.

NOTE 5. CUSTOMER DEPOSITS

In 2002, the Company entered into an option and distribution agreement with a distributor. Under the agreement, the Company received $1,250,000 as an advance payment which will be applied against distributor’s future purchases of products. To date, we have shipped only nominal amounts of product to the distributor as an offset to the advance payments. If the Distributor Agreement is subsequently terminated or expires pursuant to their terms, all advance payments that have not been offset by shipped product must be repaid at termination.


Ending balance per December 31st, 2007	$	1,006,311	$	1,139,975

Applied against shipments		111,845		133,664

Ending balance per December 31, 2008	$	894,466	$	1,006,311

NOTE 6. ACCOUNTS PAYABLE & ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at,


	December 31		December 31
	2008		2007
Accounts payable	$	193,007	$	281,275
Accrued expenses		332,399		155,110
Accrued compensation		454,759		2,080,446
Accrued interest payable		1,241,500		841,215

	$	2,221,666	$	3,358,046

Effective December 31, 2007, we wrote-off, and booked as income, $687,485 of unsecured trade payables that are no longer collectible due to the fact that they are beyond the statutory collection period during which a creditor may collect such amounts. All of the liabilities were in excess of six years old. Of such amount, approximately $395,600 is subject to the four-year statute of limitations period in the State of California. The remaining $291,885 of the written-off liabilities is subject to California law but, due to lack of sufficient documentation, we are not able to confirm that fact with certainty. Of such amount, even assuming application of the law of the resident state of the creditor, $168,355 would be beyond the applicable state’s statute of limitations period which rang from 3-6 years in such states. As to the remaining $123,580 of written-off liabilities, although the resident state of the creditors have statute of limitations periods ranging from 10-15 years, we have never been approached for collection of any such amounts within the last five years and consider that the California statute of limitation law applies in each such instance.

F-16

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 LOANS PAYABLE – OFFICER

The Company has borrowed monies from two of its officers. The loans are payable on demand, interest free and are unsecured. The Company owes the officers the following amounts at:


	December 31		December 31
	2008		2007
Loans payable to officers on demand, interest free and unsecured	$	58,526	$	58,526
Loans payable to officers on demand, interest free and unsecured		58,460		61,333

	$	116,985	$	119,858

NOTE 8. NOTES PAYABLE RELATED PARTY

The Company has one note payable to Gauss N.V. for the principal amount of €80,000 pursuant to a promissory note bearing simple interest at 8% and becoming due and payable on December 31, 2009. Gauss N.V. is jointly owned by Mr. Ratering and Mr. Nobles, each of whom is an officer and former director of Sutura. On January 1^st 2008 and 2007 respectively €8,840 and €8,188 outstanding but unpaid interest was added to the principal sum of the note


	December 31		December 31
	2008		2007
Notes payable with interest at 8% due and demandable on December 31, 2008	$	166,548	$	161,823

Interest expense for the year ended December 31, 2008 and 2007 amounted to $14,094 and $12,191 respectively.

NOTE 9. CONVERTIBLE NOTES PAYABLE-OFFICERS

The Company, as successor to Prior Sutura, currently owes Mr. Ratering, an officer and director of Company, the principal amounts of $557,378 and $443,141 pursuant to two promissory notes. In 2007, each of the notes bore simple interest at 8% and was to be due and payable on December 31, 2007. The accrued interest on such notes as of December 31, 2007 was $41,287 and $32,825 respectively. On January, 17, 2008 each of the notes were amended to extend the maturity date of each of the notes to July 1, 2009, to increase the interest rate to 10% (effective as of January 1, 2008), to provide that each of the notes were to be convertible at the election of Mr. Ratering into shares of the Company’s Common Stock at a conversion rate of $0.08 per share and the outstanding accrued interest as of December 31, 2007 was added to the principal balance of such notes. If the notes are converted the company will currently issue 12,506,488 shares in the aggregate at a conversion rate of $0.08.

F-17

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total amount of the notes is as follows as of:


	December 31		December 31
	2008		2007
Convertible notes payable to officer bearing interest rate of 10%, unsecured	$	1,000,519	$	926,408

Interest expense for the year ended December 31, 2008 and 2007 amounted to $100,052 and $74,112 respectively.

NOTE 10. CONVERTIBLE NOTES PAYABLE

WHITEBOX I

On September 17, 2004, the Company arranged a debt financing of $6,550,000 from Whitebox Advisors and affiliated parties in exchange for the issuance of eighteen-month 12% convertible promissory notes and warrants (“Whitebox I”). The performance of the notes is secured by all of the assets of the company.

The notes had conversion rights based on a company valuation of $100 million and if all converted would increase the number of outstanding shares by 14,464,644. The number of shares issuable upon exercise of the Whitebox I warrant and the warrant exercise price were based on a Company valuation of $100 million divided by the number of fully diluted shares of Common Stock outstanding on February 28, 2005. The Whitebox I warrant has a term of 5 years which expires on September 17, 2009. The total numbers of shares issuable upon exercise of the Whitebox I warrant were 14,423,512 at an exercise price of $ 0.4541. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 89%, term of five years and a discount of 3.52% was determined to be $ 2,928,362. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The beneficial conversion feature of the notes was determined to be $ 3,621,636 and together with the value of the warrants recorded as a debt discount, a reduction of the carrying amount of the debt.

Using the effective interest method the total debt discount of the Whitebox I notes has been amortized over the term of the notes and charged to interest expense. In the years ending December 31, 2008 and 2007 $0 and $582,755 respectively was expensed.

On June 30, 2006, the Company and the Whitebox affiliated parties entered into an agreement amending the notes issued in connection with Whitebox I by extending the maturity dates until July 1, 2007.

On August 25, 2006, the Company and the Whitebox affiliated parties entered into a further agreement amending the notes issued in connection with Whitebox I by lowering the conversion rate to $ 0.15 per share. If all of the Whitebox I notes are converted the company would have issued to the Whitebox affiliates 43,666,667 shares in the aggregate at a conversion rate of $ 0.15.

On July 1, 2007, the Company and the Whitebox affiliated parties entered into a further agreement amending the notes issued in connection with Whitebox I by extending the maturity dates until July 1, 2009 in exchange for a 3% consent fee to be added to the note and a new conversion rate of $0.08 per share. The amount of the consent fee of $196,500 will be charged to interest expenses over the 2 year term of the note. In the years ending

F-18

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007 $98,252 and $49,126 respectively was expensed. and charged to interest. The fair value of the conversion rights of the consent fee using the Black Scholes method assuming a volatility of the stock of 184%, term of two years and a discount of 4.80% was determined to be $163,361 and will be charged to interest expenses over the term of the loan. In the years ending December 31, 2008 and 2007 $81,680 and $40,840 respectively was amortized and charged to interest.

On April 2, 2008, Whitebox affiliated partners converted $5,012,752 of the note and $200,510 of the interest due on it into 65,165,775 shares of common stock at $0.08 per share leaving the balance of the note at $1,733,748. If also the remaining Whitebox I notes are converted the company will currently issue to the Whitebox affiliates 21,671,844 shares in the aggregate at a conversion rate of $0.08.

Interest expense for Whitebox I for the year ended December 31, 2008 and 2007 amounted to $358,431 and $846,916 respectively.

WHITEBOX Ia

As part of the July 1, 2007 agreement the interest expenses payable at the end of each quarter may be converted in a new note at the same terms of the original note. The company elected to issue a new note (Whitebox Ia) of $202,395 per September 30, 2007 with 12% interest and convertible at $0.08 per share. If all of the Whitebox Ia notes are converted the company will currently issue to the Whitebox affiliates 2,529,938 shares in the aggregate at a conversion rate of $0.08.

Interest expense for Whitebox Ia for the year ended December 31, 2008 and 2007 amounted to $24,288 and $6,072 respectively.

WHITEBOX II

On March 24, 2005, the Company arranged a debt financing of $3,000,000 from Whitebox and affiliated parties in exchange for the issuance of eighteen-month 8% secured convertible promissory notes and 1,666,667 warrants at an exercise price of $ 0.88. (“Whitebox II”). The performance of the notes is secured by all of the assets of the company.

The notes, or any portion thereof, were convertible at the election of Whitebox based upon a conversion rate that is equal to the greater of (i) $150,000,000 divided by the total number of outstanding shares of the Company (on a fully diluted, as converted basis, but excluding any shares issuable pursuant to the Whitebox II notes or warrants) or (ii) the average closing bid price for the Company’s common stock for the 20 trading days preceding the conversion notice.

The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 89%, term of five years and a discount of 3.52% was determined to be $ 325,479 which was recorded as debt discount, a reduction of the carrying amount of the debt. There was no beneficial conversion feature on the notes. Using the effective interest method the fair value of the warrants will be amortized over the term of the note and charged to interest expense. In the years ending December 31, 2008 and 2007 $0 and $67,876 respectively was expensed. The Company further incurred financial

F-19

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

consulting fees of $ 240,000 which is also recorded as a debt discount, a reduction of the carrying amount of the debt and which will be amortized over the terms of the loan. In the years ending December 31, 2008 and 2007 $0 and $40,000 respectively was expensed as a general expense.

On June 30, 2006, the Company and the Whitebox affiliated parties entered into an agreement amending the Whitebox II notes and warrants by extending the maturity dates until July 1, 2007 and increasing the interest to 12% as per September 18, 2006. The exercise price of the warrants was reduced to $0.45.

The fair value of the change in the exercise price of the warrant is $ 41,362 using the Black Scholes method assuming a volatility of the stock of 95%, remaining term of four years and a discount rate of 4.1%. This amount has been expensed and charged to interest expenses.

On August 25, 2006, the Company and Whitebox entered into a further amendment by lowering the conversion rate of the note to $ 0.15 per share. If all of the Whitebox II notes are converted the company would currently issue to the Whitebox affiliates 20,000,000 shares. Before the amendment the Whitebox I notes were convertible into an aggregate of 5,425,433 shares based on a conversion rate of $0.553.

On July 1, 2007, the Company and the Whitebox affiliated parties entered into a further agreement amending the notes issued in connection with Whitebox II by extending the maturity dates until July 1, 2009 in exchange for a 3% consent fee to be added to the note and a new conversion rate of $0.08 per share. The amount of the consent fee of $90,000 will be charged to interest expenses over the 2 year term of the note. In the years ending December 31, 2008 and 2007 $45,000 and $22,500 respectively was amortized and charged to interest. The fair value of the conversion rights of the consent fee using the Black Scholes method assuming a volatility of the stock of 184%, term of two years and a discount of 4.80% was determined to be $74,822 and will be charged to interest expenses over the term of the loan. In the years ending December 31, 2008 and 2007 $37,412 and $18,706 respectively was amortized and charged to interest. If all of the Whitebox II notes are converted the company would currently issue to the Whitebox affiliates 38,625,000 shares in the aggregate at a conversion rate of $0.08.

Interest expense for the year ended December 31, 2008 and 2007 amounted to $370,800 and $387,900 respectively.

WHITEBOX IIa

As part of the July 1, 2007 agreement the interest expenses payable at the end of each quarter may be converted in a new note at the same terms of the original note. The company elected to issue a new note (Whitebox IIa) of $92,700 per September 30, 2007 with 12% interest and convertible at $0.08 per share. If all of the Whitebox IIa notes are converted the company would currently issue to the Whitebox affiliates 1,158,750 shares in the aggregate at a conversion rate of $0.08. Interest expense for Whitebox IIa for the year ended December 31, 2008 and 2007 were $11,124 and $2,781, respectively.

F-20

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WHITEBOX III

On September 7, 2005, the Company arranged a debt financing of $7,000,000 from Whitebox and affiliated parties in exchange for the issuance of 36 month secured convertible promissory notes and warrants. (“Whitebox III”). The notes are secured by all of the assets of the Company, bear interest at an annual rate of 8% and require interest payments to be made on a quarterly basis. Beginning on April 30, 2007, and on the last day of each month thereafter, through and including August 2008, the Company is required to make aggregate principal payments of $250,000 on the Whitebox III notes.

The notes were convertible into common stock determined by a company valuation of $250,000,000 divided by the total number of fully diluted shares outstanding on the conversion date. On September 30, 2006, based on the then outstanding shares of the Company, the Whitebox III notes were convertible into an aggregate of 7,595,606 shares resulting in a conversion rate of $0.8848. The total numbers of warrants issued with a term of 5 years are 1,609,197 at an exercise price of $ .87. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 85%, term of five years and a discount of 3.89% was determined to be $ 891,404 and was recorded as debt discount, a reduction of the carrying amount of the debt. The beneficial conversion feature of the notes was determined to be $ 839,234 and also recorded as a debt discount. Using the effective interest method the beneficial conversion feature and the value of the warrants will be amortized over the 36 months term of the note and charged to interest expense. In the years ending December 31, 2008 and 2007 $0 and $1,079,365 respectively was expensed. The Company further incurred financial consulting fees of $ 560,000 which is also recorded as a debt discount, a reduction of the carrying amount of the debt and which will be amortized over the terms of the loan. In the years ending December 31, 2008 and 2007 $123,664 and $186,668 respectively was expensed as a general expense.

On June 30, 2006, the Company and the Whitebox affiliated parties entered into an agreement amending the notes and warrants issued in connection with Whitebox III by extending the commencement date of payments of principal due under the Whitebox III notes from April 30, 2007 until July 1, 2007 and by increasing the interest rate under this note to twelve percent (12%) as of September 7, 2007. The per share exercise price of the warrants was reduced to $ 0.45. The fair value of the change in the exercise price of the warrant is $ 92,520 using the Black Scholes method assuming a volatility of the stock of 95%, remaining term of 4.5 years and a discount rate of 4.1%. This amount has been expensed and charged to interest expenses in 2007.

On August 25, 2006, the Company and Whitebox entered into a further amendment by lowering the conversion rate of the note to $ 0.15 per share. If all of the Whitebox III notes are converted the company would currently issue to the Whitebox affiliates 46,666,667 shares. Before the amendment the Whitebox III notes were convertible into an aggregate of 7,595,606 shares based on a conversion rate of $0.8848.

On July 1, 2007, the Company and the Whitebox affiliated parties entered into a further agreement amending the notes issued in connection with Whitebox III by extending the maturity dates until July 1, 2009 in exchange for a 3% consent fee to be added to the note and a new conversion rate of $0.08 per share. The amount of the consent fee of $210,000 will be charged

F-21

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to interest expenses over the 2 year term of the note. In the years ending December 31, 2008 and 2007 $105,000 and $52,500 respectively was amortized and charged to interest. The fair value of the conversion rights of the consent fee using the Black Scholes method assuming a volatility of the stock of 184%, term of two years and a discount of 4.80% was determined to be $174,584 and will be charged to interest expenses over the term of the loan. In the years ending December 31, 2008 and 2007 $87,292 and $43,646 respectively was amortized and charged to interest. If all of the Whitebox III notes are converted the company would currently issue to the Whitebox affiliates 90,125,000 shares in the aggregate at a conversion rate of $0.08.

Interest expense for the year ended December 31, 2008 and 2007 amounted to $865,200 and $711,425 respectively.

WHITEBOX IIIa

As part of the July 1, 2007 agreement the interest expenses payable at the end of each quarter may be converted in a new note at the same terms of the original note. The company elected to issue a new note (Whitebox IIIa) of $162,625 per September 30, 2007 with 12% interest and convertible at $0.08 per share. If all of the Whitebox IIIa notes are converted the company would currently issue to the Whitebox affiliates 2,032,813 shares in the aggregate at a conversion rate of $0.08. Interest expense for the year ended December 31, 2008 and 2007 amounted to $19,516 and $4,879 respectively.

WHITEBOX V

On December 13, 2006, the Company arranged a debt financing of $1,500,000 from Whitebox and affiliated parties in exchange for the issuance of 18 month secured convertible promissory notes. (“Whitebox V”). The notes are secured by all of the assets of the Company, bear interest at an annual rate of 8% and require interest payments to be made on a quarterly basis.

The notes are convertible, at the option of Whitebox, into common stock, par value $0.001, at a conversion rate of $0.045 per share. If all of the Whitebox V notes are converted the company would currently issue to the Whitebox affiliates 33,333,333 shares.

The company and Whitebox further agreed that Whitebox has the right to invest a further $1,500,000 on or before March 31, 2007 (collectively, the “New Loan”) at the same terms as the current loan. The relative fair value of this option, using the Black Scholes method assuming a volatility of the stock of 226%, term of 3.5 months and a discount of 4.1% was $ 414,548. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The fair value of the beneficial conversion feature of the notes was determined to be $ 247,882 using the Black Scholes method assuming a volatility of the stock of 226%, term of 18 months and a discount of 4.1%. The beneficial conversion feature and the value of the option are recorded as a debt discount, a reduction of the carrying amount of the debt. Using the effective interest method this debt discount will be amortized over the 18 months term of the note and charged to interest expense. In the years ending December 31, 2008 and 2007 $248,302 and $ 401,468 respectively was amortized and charged to interest expenses. The Company further incurred financial consulting fees of $ 90,000 which it also recorded as a debt discount, a reduction of the carrying amount of the

F-22

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

debt and which will also be amortized over the term of the loan. In the years ending December 31, 2008 and 2007 $27,500 and $60,000 respectively was expensed as a general expense. Interest expense for the year ended December 31, 2008 and 2007 amounted to $60,000 and $120,000 respectively. At June 30, 2008 the WHITEBOX V notes were reimbursed by the company.

WHITEBOX Va

On July 1, 2007, the Company and the Whitebox affiliated parties entered into a further agreement amending the notes issued in connection with Whitebox V. As part of the July 1, 2007 agreement the interest expenses payable at the end of each quarter may be converted in a new note at the same terms of the original note. The company elected to issue a new note (Whitebox Va) of $30,000 per September 30, 2007 with 8% interest and convertible at $0.045 per share. If all of the Whitebox Va notes are converted the company will currently issue to the Whitebox affiliates 666,666 shares in the aggregate at a conversion rate of $0.045. Interest expense for the year ended December 31, 2008 and 2007 amounted to $1,800 and $900 respectively.

At June 30, 2008 the WHITEBOX Va notes were reimbursed by the company.

WHITEBOX VI

On March 5, 2007, Whitebox exercised the above mentioned option and the Company arranged a debt financing of $1,500,000 from Whitebox affiliated parties in exchange for the issuance of 18 month secured convertible promissory notes. (“Whitebox VI”). The notes are secured by all of the assets of the Company, bear interest at an annual rate of 8% and require interest payments to be made on a quarterly basis. The notes are convertible, at the option of Whitebox, into common stock, par value $0.001, at a conversion rate of $0.045 per share. If all of the Whitebox VI notes are converted the company would currently issue to the Whitebox affiliates 33,333,333 shares.

The Company incurred financial consulting fees of $ 90,000 which it recorded as a debt discount, a reduction of the carrying amount of the debt and which will also be amortized over the term of the loan. In the years ending December 31, 2008 and 2007 $42,500 and $47,500 respectively was expensed as a general expense. Interest expense for the year ended December 31, 2008 and 2007 amounted to $60,000 and $98,333 respectively.

At June 30, 2008 the WHITEBOX VI notes were reimbursed by the company.

WHITEBOX VIa

On July 1, 2007, the Company and the Whitebox affiliated parties entered into a further agreement amending the notes issued in connection with Whitebox VI. As part of the July 1, 2007 agreement the interest expenses payable at the end of each quarter may be converted in a new note at the same terms of the original note. The company elected to issue a new note of $30,000 (Whitebox VIa) per September 30, 2007 at 8% interest and convertible at $0.045 per share. If all of the Whitebox VIa notes are converted the company would currently issue to the Whitebox affiliates 666,666 shares. Interest expense for the year ended December 31, 2008 and 2007 amounted to $1,800 and $900 respectively.

F-23

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2008 the WHITEBOX VIa notes were reimbursed by the company.

SYNAPSE SETTLEMENT NOTE

In connection with the settlement of certain shareholder litigation proceedings, effective as of June 1, 2007, the Company issued and delivered to Synapse Capital, LLC, for itself and as agent for the benefit of certain other parties to the settlement, a convertible secured promissory note in the principal amount of $400,000. The convertible secured promissory note bears interest at 8% per annum. The interest is payable quarterly in arrears, and may be paid in capital stock at an interest conversion rate of $0.08 per share. The principal amount of the note, together with any accrued but unpaid interest will be due and payable in eighteen (18) months or may be converted pursuant to the terms of the note at the rate of $0.15 per share, subject to certain adjustments. Interest expense for the year ended December 31, 2008 and 2007 amounted to $29,333 and $18,667 respectively.

At December 5, 2008 the Synapse notes were reimbursed by the company.

WHITEBOX VIII

On September 21, 2007, the Company arranged a debt financing of $1,000,000 from Whitebox affiliated parties in exchange for the issuance of 12-month secured convertible promissory notes. (“Whitebox VIII”). The notes are secured by all of the assets of the Company, bear interest at an annual rate of 8% and require interest payments to be made on a quarterly basis. The notes are convertible, at the option of Whitebox, into common stock, par value $0.001, at a conversion rate of $0.07 per share. If all of the Whitebox VIII notes are converted the company would currently issue to the Whitebox affiliates 14,258,714 shares. Interest only is payable in cash or in the form of a newly issued convertible promissory note, at the same terms and conditions as the original note, quarterly in arrears on the last day of each calendar quarter, beginning December 31, 2007.

Interest expense for the year ended December 31, 2008 and 2007 amounted to $58,000 and $22,000 respectively. At September 21, 2008 the WHITEBOX VIII notes were reimbursed by the company.

F-24

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the convertible notes is as follows at:


	December 31			December 31
	2008			2007
Whitebox I	$	1,733,747		$	6,746,500
Whitebox Ia		202,395			202,395
Whitebox II		3,090,000			3,090,000
Whitebox IIa		92,700			92,700
Whitebox III		7,210,000			7,210,000
Whitebox IIIa		162,625			162,625
Whitebox V		—			1,500,000
Whitebox Va		—			30,000
Whitebox VI		—			1,500,000
Whitebox VIa		—			30,000
Synapse settlement note		—			400,000
Whitebox VIII		—			1,000,000

	$	12,491,467		$	21,964,220
Debt issue costs		—			(193,664	)
Loan consent fees		(124,122	)		(372,374	)
Beneficial conversion feature		(103,191	)		(1,030,350	)

	$	12,264,153		$	20,367,833

Classified as current liability	$	12,264,153			3,811,698
Classified as long term liabilty	$	(0	)	$	16,556,134

Summary of convertible notes conversion rights:


	Conversion				Intrinsic		Conversion		Intrinsic
	shares per		Conversion		value per		shares per		value per
	Dec 31 2007		price		Dec 31 2007		Dec 31 2008		Dec 31 2008
Officer		—	$	0.0800	$	—		12,506,488	$	—
Whitebox I		84,331,250		0.0800		—		21,671,844		—
Whitebox Ia		2,529,938		0.0800		—		2,529,938		—
Whitebox II		38,625,000		0.0800		—		38,625,000		—
Whitebox IIa		1,158,750		0.0800		—		1,158,750		—
Whitebox III		90,125,000		0.0800		—		90,125,000		—
Whitebox IIIa		2,032,813		0.0800		—		2,032,813		—
Whitebox V		33,333,333		0.0450		500,000		—		—
Whitebox Va		666,667		0.0450		10,000		—		—
Whitebox VI		33,333,333		0.0450		500,000		—		—
Whitebox VIa		666,667		0.0450		10,000		—		—
Synapse settlement note		2,666,667		0.1500		—		2,666,667		—
Whitebox VIII		14,285,714		0.0700		—		—		—

		303,755,131			$	1,020,000		171,316,498	$	0

F-25

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


			Weigted		Aggregate
	Conversion		conversion		Intrinsic
	shares		price		Value
OUTSTANDING, DECEMBER 31, 2007		303,755,131	$	0.0726	$	1,020,000


Issued		12,506,488		0.0800
Cancelled or paid back		82,285,714		0.0493
Exercised and converted		62,659,406		0.0800


OUTSTANDING, DECEMBER 31, 2008		171,316,498	$	0.0812	$	0

NOTE 11. NOTES PAYABLES LONG TERM

WHITEBOX VII

On May 18, 2007, and on June 13, 2007, the Company borrowed an aggregate principal amount of $350,000 and $200,000, respectively, evidenced by unsecured promissory notes (“Whitebox VII”) issued to certain affiliates of Whitebox. On July 2, 2007, the Company borrowed an further aggregate principal amount of $1,150,000 evidenced by unsecured promissory notes (“Whitebox VIII”) delivered to certain affiliates of Whitebox Advisors, LLC bringing the total amount to $1,700,000.

The Whitebox VII notes bear interest from the date issued at the rate of twelve percent (12%) per annum. All accrued interest and principal is due and payable in a balloon payment upon the sixtieth (60th) anniversary of the applicable Whitebox VII notes. The Company may prepay the Whitebox VII notes, in whole or in part, upon five (5) days prior written notice to the payee at a cost equal to accrued interest plus the present value of the notes discounted at a rate equal to (x) the then U.S. Treasury rate for 5-year notes as reported by Bloomberg on the date of such prepayment notice, plus (y) 100 basis points.

If the Company or its controlling stockholders enter into a definitive agreement relating to the sale or transfer of all or substantially all of the Company’s business or assets, the Company must give the note payees at least fifteen (15) days prior written notice of the proposed date for consummation of the transaction and, the entire principal balance of the notes, and all accrued but unpaid interest, shall be due and payable immediately prior to (and as a condition of) the closing on the transaction. In addition to the payment of outstanding principal and any accrued but unpaid interest, the Company must also pay to the payees a prepayment penalty amount equal to the present value of the remaining unpaid coupons that would otherwise by paid through maturity but for the transaction, and discounted at a rate equal to (x) the then U.S. Treasury rate for 5-year Notes as reported by Bloomberg on the date of such prepayment notice, plus (y) 100 basis points.

F-26

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the long term notes is as follows at:


	December 31		December 31
	2008		2007
Whitebox VII	$	1,700,000	$	1,700,000

Interest expense for the year ended December 31, 2008 and 2007 amounted to $204,000 and $107,267 respectively.

NOTE 12. NOTES PAYABLES OFFICERS

The Company borrowed an aggregate principal amount of $400,000 evidenced by Promissory Notes (the “ Affiliate Notes”), dated July 16, 2007 and issued to certain officers and directors of the Company, or their affiliates. The Notes were issued to GrootKasteel, B.V. ($200,000 principal amount), the Lynne D. Teckman Trust ($100,000 principal amount), and The Bjorkman Family Trust, dated November 2, 2000 ($100,000 principal amount). The Affiliate Notes are unsecured and are in substantially the same form as the promissory notes issued to certain affiliates of Whitebox Advisors on July 2, 2007. Issuance of the Affiliate Notes was approved by a disinterested majority of the Company’s Board of Directors. The Affiliate Notes bear interest from the date issuance at the rate of twelve percent (12%) per annum. All accrued interest and principal is due and payable in a balloon payment upon the sixtieth (60th) month anniversary of the Affiliate Notes. The Company may prepay the Notes, in whole or in part, upon five (5) days prior written notice to the payee at a cost equal to accrued interest plus the present value of the Affiliate Notes discounted at a rate equal to (x) the then U.S. Treasury rate for 5-year Notes as reported by Bloomberg on the date of such prepayment notice, plus (y) 100 basis points.

A summary of the convertible notes is as follows at:

A summary of the long term notes to officers is as follows at:

Interest expense for the year ended December 31, 2008 and 2007 amounted to $48,000 and $20,000 respectively.

NOTE 13. TAXES ON INCOME

Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

At December 31, 2008 the Company had available federal and state net operating loss carry-forwards amounting to approximately $36,538,431 that are available to offset future federal and state taxable income and that expire in various periods through 2028 for federal tax purposes and 2014 for state tax purposes. At December 31, 2008, the Company has foreign tax loss carry forwards of approximately $3,921,000 that do not expire. No benefit has been recorded for any loss or credit carry-forwards, and utilization in future years may be limited under Sections 382 and 383 of

F-27

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Internal Revenue Code if significant ownership changes have occurred or from future tax legislation changes.

INCOME TAX


	December 31			December 31
	2008			2007
Net deferred tax asset	$	(17,130,498	)		(14,444,134	)
Inventory Reserve		105,400			119,000
Less valuation allowance		(17,025,098	)		(14,325,134	)

Net deferred tax asset	$	—			—

The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Consolidated Statements of Operations:


	December 31			December 31
	2008			2007
Tax expense (credit) at statutory rate federal		(34	)%		(34	)%
State tax expense net of federal tax		(6	)		(6	)
Permanent differences		1			1
Valuation allowance		39			39


Tax expense at actual rate		—			—

NOTE 14. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

SFAS 130 requires unrealized gains and losses on the Company’s available for sale securities, currency translation adjustments, and minimum pension liability, which prior to adoption were reported separately in stockholders’ equity, to be included in other comprehensive income. Comprehensive loss included net translation losses of $5,068 for the year ended December 31, 2008 and $76,801 for the year ended December 31, 2007 respectively.

As of December 31, 2008, other comprehensive loss, as presented on the accompanying consolidated balance sheet in the stockholders’ equity section consists of accumulative foreign currency translation loss of $1,014,011 and unrealized loss on marketable securities of $17,646.

NOTE 15. COMMITMENTS

The company previously leased its facilities in Fountain Valley, California (Newhope Street Property), from its president Anthony Nobles. On August 2, 2004, Mr. Nobles sold the Newhope Street Property to NV Properties LLC, a Nevada limited liability company. At the same time, NV Properties entered into a new lease with the Company on substantially the same economic terms as the prior lease between the Company and Mr Nobles. The term is for a period of ten years, commencing on August 1, 2004. The base rent is $28,117 per month.

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SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The future minimum monthly lease payments under the facility operating lease, whose terms are in excess of one year follows:


Year Ending
December 31,
2009	$	337,409
2010		337,409
2011		337,409
2012		337,409
2013		337,409

Total	$	1,687,405

The company arranged several debt financings from Whitebox Advisors and related parties in exchange for the issuance of convertible promissory notes and warrants. The performance of these notes is secured by all of the assets of the company.

NOTE 16. RELATED PARTY TRANSACTIONS

On November 21, 2007, the Company entered into a Common Stock Purchase Agreement with GrootKasteel, B.V., a Dutch company, pursuant to which GrootKasteel purchased 1,420,455_shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $.0704 per share. Gauss N.V. holds 100% of the ownership interests of GrootKasteel. Dr. Anthony Nobles and Egbert Ratering, each an officer and director of the Company, jointly own Gauss N.V.

The Company, as successor to Prior Sutura, currently owes Mr. Ratering, an officer and director of Registrant, the principal amounts of $516,091 and $410,317 pursuant to two promissory notes. In 2007, each of the notes bore simple interest at 8% and were to be due and payable on December 31, 2007. The accrued interest on such notes as of December 31, 2007 was $41,287 and $32,825 respectively. On January, 17, 2008 each of the notes were amended to extend the maturity date of each of the notes to July 1, 2009, to increase the interest rate to 10% (effective as of January 1, 2008), and to provide that each of the notes were to be convertible at the election of Mr. Ratering into 11,580,090 shares of the Company’s Common Stock at a conversion rate of $0.08 per share.

The company leased its facilities in Fountain Valley, California (Newhope Street Property) from Dr. A Nobles, an officer of the Company. On August 2, 2004, the officer sold a majority interest in the Newhope Street Property to NV Properties LLC, a Nevada limited liability company. At the same time, NV Properties entered into a new lease with the Company on substantially the same economic terms as the prior lease between the Company and the officer of the Company. During the fiscal year 2007, Dr. Nobles, CEO of the Company, was a member with a 20.1051% interest in NV Properties and served as one of its three managers.

On December 12, 2008, the Company entered into an Asset Purchase Agreement with Nobles Medical Technologies, Inc. which contemplates the sale of

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SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

substantially all of the Company’s assets to Nobles Medical. Since the entry by the Company and Nobles Medical into a letter of intent related to the asset sale on November 3, 2008, Nobles Medical has been managing the operation and day-to-day business of the Company, subject to such general oversight by the Company’s board of directors as is required for the board to exercise its fiduciary duties. During the period between the signing of the asset purchase agreement and the closing of the asset sale, or the earlier termination of the asset purchase agreement, Nobles Medical will continue to manage the operation and day-to-day business of the Company, subject to such oversight by the Board. The asset purchase agreement provides that, in exchange for $6.75 million and the assumption by Nobles Medical of certain liabilities of the Company, the Company will sell and transfer to Nobles Medical $3.0 million in cash and cash equivalents (less the amount of certain expenses of the Company incurred between November 3, 2008 and the closing date to the extent that such expenses exceed $1.5 million) and all of the non-cash assets of the Company (except for certain excluded assets), free and clear of all liens and encumbrances.

At the closing of the asset sale, the $6.75 million purchase price will be paid from Nobles Medical to Whitebox Advisors[???], LLC for the benefit of certain affiliates of Whitebox Advisors, LLC in exchange for the release by such entities of their security interests in the Company’s assets being sold. Neither the Company nor any of the Company’s stockholders based on their equity holdings in the Company will receive any portion of the purchase price from the sale of the assets.

NOTE 17. LEGAL PROCEEDINGS

On February 16, 2005, Millenium Holding Group, Inc. filed a complaint against Prior Sutura in the United States District Court, District of Nevada, Case No. CV-S 05-0356-JCM-LRL, alleging, among other things, that Prior Sutura conspired with Fusion Capital, to breach the implied covenant of good faith and fair dealing in connection with its termination of a merger agreement with Millenium. In March, 2007, the Company was successful in its motion for Summary Judgement in this action. All that remains is resolution of the Company’s counterclaims against Millenium for payment of $60,000 due under a Promissory Note in favor of the Company. The Company expects to resolve its counterclaims in this matter in the near term.

On June 30, 2005, certain stockholders of Prior Sutura filed two separate, but related, complaints in the Superior Court of the State of California, County of Orange-Central Justice Center. The Company and the primary plaintiffs in the two actions (Synapse Fund I, Synapse Fund II and Go Industries, Inc.) held settlement discussions to resolve the disputes raised in these two complaints, and reached an agreement in principal to settle the litigation between the parties. The settlement agreement was approved by the Superior Court on June 1, 2007. Among other terms, as part

F-30

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the settlement agreement the Company delivered to Synapse Fund I, LLC, for the benefit of all plaintiffs, a convertible secured promissory note in the principal amount of $400,000. The settlement agreement also contained certain covenants of Messrs. Nobles and Ratering and mutual releases between the parties. The convertible secured promissory note bears interest at 8% per annum, payable quarterly in arrears, and may be paid in capital stock at a conversion rate of $0.08 per share. The principal amount of the note, together with any accrued but unpaid interest will be due and payable in eighteen (18) months or may be converted pursuant to the terms of the note at the rate of $0.15 per share. Lastly, in connection with the settlement agreement, the Company has agreed to provide the plaintiffs with rights to have the shares issuable upon conversion of principal or interest due under the note to be registered for resale pursuant to the Securities Act of 1933 if at any time any Whitebox affiliate exercises its rights to require shares of the Company to be registered.

Pham v. Nobles, et al. was filed in the Orange County, California Superior Court, Case No. 07CC07644, on July 5, 2007. This case arises out of plaintiff Loni Pham’s investment in the Company. In July 2004, Plaintiff executed a Subscription Agreement, accepted by the Company, under which she purchased 9,805 shares of the Company’s common stock in exchange for $250,000. Plaintiff has asserted causes of action for breach of contract, fraud and negligent misrepresentation against the Company and its former Chief Executive Officer and former board member, Mr. Nobles. Plaintiff seeks damages in an amount no less than $250,000, plus interest, costs and punitive damages in an unspecified amount. Defendants filed an answer to Plaintiff’s complaint on October 31, 2007. The Parties then agreed that Plaintiff’s claims against Defendants are subject to a written arbitration agreement and have therefore agreed that the case be stayed and submitted to binding arbitration. On January 31, 2008, the court stayed this case pending binding arbitration. In early August 2008, the parties agreed to dismiss the entire action without prejudice and enter into a tolling agreement, tolling the running of any statute of limitations until January 30, 2009.

NOTE 18. STOCKHOLDER’S DEFICIT

COMMON STOCK

Conversions of Debt-to-Equity by Whitebox Affiliates

Effective April 2, 2008, the following affiliates of Whitebox Advisors, LLC converted $5,213,262 of convertible debt held by each such entity into an aggregate of 65,165,775 shares of the Company’s Common Stock, par value $0.001 per share, as indicated below:


Whitebox Convertible Arbitrage Partners, L.P. –			25,859,437
Whitebox Hedged High yield Partners, L.P. –			20,687,550
Whitebox Intermarket Partners, L.P. –			8,275,012
Pandora Select Partners, L.P. –			10,343,775

NOTE 19. STOCK BASED COMPENSATION

In February 1999, the Company adopted the 1999 Stock Option Plan (1999 Plan) and in 2001 the 2001 Stock Option Plan (2001 Plan). Under the terms

F-31

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of these plans, incentive stock and non-statutory stock Options to purchase 48,815,000 shares of the Company’s common stock are available for grant to directors, employees, consultants and advisors. Vesting of the options in both plans commences on the grant date and options generally vest at a rate of 25% per year and expire within 10 years of date of grant for the 1999 plan and within 5 years for the 2001 plan.

On May 8, 2007 the entire Board of Directors also unanimously approved the issuance of non-qualified options to employees, directors and consultants of the Company to purchase 2,300,000 shares of the Company’s common stock pursuant to the plan. All of these options have an exercise price of $0.07 ,are subject to a four year vesting period whereby 25% of the granted options vest at the end of the first year following the grant date, and the remaining option amounts vest in equal quarterly installments over the next following three years.

On July 2, 2007 the entire Board of Directors unanimously approved a further issuance of non-qualified options to employees, directors and consultants of the Company to purchase 100,000 shares of the Company’s common stock pursuant to the 2006 Stock Option Plan. All of these options have an exercise price of $0.07, are subject to a four year vesting period whereby 25% of the granted options vest at the end of the first year following the grant date, and the remaining option amounts vest in equal quarterly installments over the next following three years.

Under the modified prospective approach, compensation cost recognized for the fiscal year 2008 includes compensation cost for all share-based payments granted prior to, but not yet vested on, January 1, 2006 that have vested subsequent to January 1, 2006, and compensation cost for all shared-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Prior periods were not restated to reflect the impact of adopting the new standard.

The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards. The fair value of the options issued on May 8, 2007 and July 2, 2007 used the Black Scholes method assuming a volatility of the stock of 184%, life of 10 years and a discount rate of 4.8%.

In the year ending December 31, 2008 an amount of $294,543 was expensed as employee option expenses and $167,194 as non employee option expense compared to $330,528 and $167,273 respectively in the year ending December 31, 2007.

F-32

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of the plan is presented below:


						Weighted
						average
						remaining		Aggegrate
				Weighted		contractual		Intrinsic
	Total			price		term(years)		Value
OUTSTANDING, DECEMBER, 2007		45,017,899		$	0.101		2.9	$	691,890

Granted in 2008		—
Cancelled in 2008		(4,467,191	)	$	0.143				—
Exercised in 2008		—

OUTSTANDING, DECEMBER, 2008		40,550,708		$	0.097		1.7	$	0


Exercisable at December,2008		37,660,916		$	0.093		1.3	$	0

NOTE 20. WARRANTS

During the year ended December 31, 2006, new warrants were granted to Whitebox IV while Warrants of Whitebox II and III were reduced to $0.45


				Weigted		Remaining		Aggegrate
				Average		Life in		Intrinsic
	Total			Price		years		Value
OUTSTANDING, DECEMBER 2007		35,631,891		$	0.3780		2.4	$	—
Granted in 2008		—			—		—
Cancelled in 2008		(1,301,736	)		0.6259		—
Exercised in 2008		—			—		—


OUTSTANDING, DECEMBER 2008		34,330,155		$	0.3686		1.6	$	—

NOTE 21. GOING CONCERN

The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company’s has accumulated deficit of $69,149,495 at December 31, 2008 including a net loss of $11,015,288 during the year ended December 31, 2008. In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that

F-33

SUTURA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

might be necessary should the Company be unable to continue as a going concern.

On December 12, 2008, the Company entered into a material definitive agreement to sell substantially all of the assets of the Company as described in Note 2 to the financial statements. These factors, among others, as discussed in Note 2 to the consolidated financial statements, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 22. SUBSEQUENT EVENTS

On January 12, 2009, Mr. Nobles resigned from the Board of Directors and from his positions as President and Chief Science Officer of the Company. He remains an employee of the Company under the terms of his existing employment agreement.

F-34


PART I

Item 1. Business	3

Item 1A. Risk Factors	12

Item 1B Unresolved Staff Comments	12

Item 2. Properties	12

Item 3. Legal Proceedings	12

Item 4. Submission of Matters to a Vote of Security Holders	13

PART II

Item 5. Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities	13

Item 6 Selected Financial Data	14

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation	15

Item 7A Quantitative and Qualitative Disclosure About Market Risk	25

Item 8. Financial Statements and Supplementary Data	25

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	25

Item 9A(T). Controls and Procedures	25

Item 9b. Other Information	26

PART III

Item 10. Directors, Executive Officers and Corporate Governance	27

Item 11. Executive Compensation	29

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32

Item 13. Certain Relationships and Related Transactions and Director Independence	36

Item 14. Principal Accounting Fees and Services	38

Item 15. Exhibits, Financial Statement Schedules	39
EX-2.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2


Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets			F-3
Consolidated Statements of Operations			F-4
Consolidated Statements of Stockholders’ Equity			F-5
Consolidated Statements of Cash Flows			F-6
Notes to the Consolidated Financial Statements			F-7