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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-QSB



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QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

Commission File Number: 000-23017



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SONTRA MEDICAL CORPORATION

(Exact
name of small business issuer as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Minnesota                                                      |  | 41-1649949                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



|                                         |  |           
|---------------------------------------- |  | ----------
|10 Forge Parkway, Franklin, MA           |  | 02038     
|(Address of principal executive offices) |  | (Zip Code)

(508) 553-8850

(Issuers telephone number, including area code)



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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  x    No ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

As of August 6, 2007, the
Registrant had 11,452,679 shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (Check
one):    Yes ̈No  x



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##### Table of Contents

FORM 10-QSB INDEX



|                               |  |                                                                                                             |  |           
|------------------------------ |  | ----------------------------------------------------------------------------------------------------------- |  | ----------
|                               |  |                                                                                                             |  | PageNumber
|Part I - Financial Information |  |                                                                                                            
|                               |  |                                                                                                            
|Item 1.                        |  | Consolidated Financial Statements                                                                           |  | 3         
|                               |  |                                                                                                            
|                               |  | Consolidated Balance Sheets as of June 30, 2007 (Unaudited) and December 31, 2006                           |  | 4         
|                               |  |                                                                                                            
|                               |  | Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006 (Unaudited) |  | 5         
|                               |  |                                                                                                            
|                               |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (Unaudited)           |  | 6         
|                               |  |                                                                                                            
|                               |  | Notes to Consolidated Financial Statements (Unaudited)                                                      |  | 7         
|                               |  |                                                                                                            
|Item 2.                        |  | Managements Discussion and Analysis or Plan of Operation                                                   |  | 15        
|                               |  |                                                                                                            
|Item 3.                        |  | Controls and Procedures                                                                                     |  | 25        
|                               | 
|Part II - Other Information    |  |                                                                                                            
|                               |  |                                                                                                            
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                 |  | 26        
|                               |  |                                                                                                            
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                         |  | 26        
|                               |  |                                                                                                            
|Item 6.                        |  | Exhibits                                                                                                    |  | 27        
|                               | 
|Signatures                     |  | 28                                                                                                         



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##### Table of Contents

PART I: FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

SPECIAL NOTE

All share numbers and share prices presented in this Quarterly Report on Form 10-QSB have been adjusted to reflect the 1-for-10
reverse stock split of Sontras common stock effected on August 11, 2006.



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##### Table of Contents

SONTRA MEDICAL CORPORATION

Consolidated Balance Sheets



|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                             |  | As of,        |            
|                                                                                                                                                                             |  | June 30, 2007 |             |   | December 31,2006 |  
|                                                                                                                                                                             |  | (Unaudited)   |             |   |                  |  
|Assets:                                                                                                                                                                      |  |               |             |   |                  |   |             |  
|Current Assets:                                                                                                                                                              |  |               |             |   |                  |   |             |  
|Cash and cash equivalents                                                                                                                                                    |  | $             | 1,258,187   |   |                  | $ | 559,017     |  
|Inventory, net of reserve for obsolescence                                                                                                                                   |  |               |            |   |                  |   | 1,556       |  
|Prepaid expenses and other current assets                                                                                                                                    |  |               | 69,106      |   |                  |   | 12,994      |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Total current assets                                                                                                                                                         |  |               | 1,327,293   |   |                  |   | 573,567     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Property and Equipment, at cost:                                                                                                                                             |  |               |             |   |                  |   |             |  
|Computer equipment                                                                                                                                                           |  |               | 245,694     |   |                  |   | 245,694     |  
|Office and laboratory equipment                                                                                                                                              |  |               | 590,926     |   |                  |   | 590,926     |  
|Furniture and fixtures                                                                                                                                                       |  |               | 14,288      |   |                  |   | 14,288      |  
|Manufacturing equipment                                                                                                                                                      |  |               | 197,888     |   |                  |   | 197,888     |  
|Leasehold improvements                                                                                                                                                       |  |               | 177,768     |   |                  |   | 177,768     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|                                                                                                                                                                             |  |               | 1,226,564   |   |                  |   | 1,226,564   |  
|Less-Accumulated depreciation and amortization                                                                                                                               |  |               | (1,077,350  | ) |                  |   | (1,017,051  | )
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Net property and equipment                                                                                                                                                   |  |               | 149,214     |   |                  |   | 209,513     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Other Assets:                                                                                                                                                                |  |               |             |   |                  |   |             |  
|Restricted cash                                                                                                                                                              |  |               | 10,250      |   |                  |   | 19,949      |  
|Deposits and other assets                                                                                                                                                    |  |               | 2,000       |   |                  |   | 2,000       |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Total other assets                                                                                                                                                           |  |               | 12,250      |   |                  |   | 21,949      |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Total assets                                                                                                                                                                 |  | $             | 1,488,757   |   |                  | $ | 805,029     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|                                                                                                                                                                             |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                         |  |               |             |   |                  |   |             |  
|Current Liabilities:                                                                                                                                                         |  |               |             |   |                  |   |             |  
|Accounts payable                                                                                                                                                             |  | $             | 131,858     |   |                  | $ | 45,817      |  
|Deferred revenue                                                                                                                                                             |  |               | 20,833      |   |                  |   | 45,833      |  
|Current portion of note payable                                                                                                                                              |  |               | 62,660      |   |                  |   | 89,808      |  
|Accrued expenses                                                                                                                                                             |  |               | 193,864     |   |                  |   | 103,365     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Total current liabilities                                                                                                                                                    |  |               | 409,215     |   |                  |   | 284,823     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Note Payable, net of current portion                                                                                                                                         |  |               | 22,369      |   |                  |   | 54,508      |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Commitments                                                                                                                                                                  |  |               |             |   |                  |   |             |  
|                                                                                                                                                                             |  |              
|Stockholders Equity                                                                                                                                                         |  |               |             |   |                  |   |             |  
|Series A Convertible Preferred Stock, $0.01 par value, authorized 7,000,000 shares, issued and no outstanding shares at June 30, 2007 and
73,334 shares at December 31, 2006 |  |               |            |   |                  |   | 76,291      |  
|Common stock, $0.01 par value, authorized 60,000,000 shares, issued and outstanding 10,859,429 shares at June 30, 2007 and 2,776,192
shares at December 31, 2006             |  |               | 108,594     |   |                  |   | 27,762      |  
|Additional paid-in capital                                                                                                                                                   |  |               | 37,010,435  |   |                  |   | 34,822,306  |  
|Accumulated deficit                                                                                                                                                          |  |               | (36,061,856 | ) |                  |   | (34,460,661 | )
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Total stockholders equity                                                                                                                                                   |  |               | 1,057,173   |   |                  |   | 465,698     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $             | 1,488,757   |   |                  | $ | 805,029     |  
|                                                                                                                                                                             |  |               |             |   |                  |   |             |  

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



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SONTRA MEDICAL CORPORATION

Consolidated Statements of Operations

(Unaudited)



|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------------ |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                             |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|                                                             |  | 2007                        |            |   | 2006                      |   |            | 2007 |  |   | 2006       |  
|Revenues                                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Product revenues                                             |  | $                           | 2,353      |   |                           | $ | 12,414     |      |  | $ | 12,120     |   |  | $ | 26,940     |  
|Licensing revenue                                            |  |                             | 12,500     |   |                           |   | 12,500     |      |  |   | 25,000     |   |  |   | 25,001     |  
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total revenue                                                |  |                             | 14,853     |   |                           |   | 24,914     |      |  |   | 37,120     |   |  |   | 51,941     |  
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating Expenses:                                          |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Cost of product revenue                                      |  |                             |           |   |                           |   | 21,777     |      |  |   | 1,556      |   |  |   | 52,290     |  
|Research and development                                     |  |                             | 340,488    |   |                           |   | 922,884    |      |  |   | 600,093    |   |  |   | 1,686,243  |  
|Selling, general and administrative                          |  |                             | 692,475    |   |                           |   | 725,955    |      |  |   | 1,044,415  |   |  |   | 1,221,015  |  
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                                     |  |                             | 1,032,963  |   |                           |   | 1,670,616  |      |  |   | 1,646,064  |   |  |   | 2,959,548  |  
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Loss from operations                                         |  |                             | (1,018,110 | ) |                           |   | (1,645,702 | )    |  |   | (1,608,944 | ) |  |   | (2,907,607 | )
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Other Income (Expense)                                       |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                              |  |                             | 7,580      |   |                           |   | 41,765     |      |  |   | 13,906     |   |  |   | 81,083     |  
|Interest expense                                             |  |                             | (3,699     | ) |                           |   | (4,816     | )    |  |   | (6,157     | ) |  |   | (9,970     | )
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Other income, net                                            |  |                             | 3,881      |   |                           |   | 36,949     |      |  |   | 7,749      |   |  |   | 71,113     |  
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss                                                     |  |                             | (1,014,229 | ) |                           |   | (1,608,753 | )    |  |   | (1,601,195 | ) |  |   | (2,836,494 | )
|Accretion of dividend on Series A Convertible                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Preferred Stock                                              |  |                             |           |   |                           |   | (1,463     | )    |  |   | (483       | ) |  |   | (2,910     | )
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss applicable to common shareholders                   |  | $                           | (1,014,229 | ) |                           | $ | (1,610,216 | )    |  | $ | (1,601,678 | ) |  | $ | (2,839,404 | )
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss per common share, basic and diluted                 |  | $                           | (0.11      | ) |                           | $ | (0.59      | )    |  | $ | (0.19      | ) |  | $ | (1.12      | )
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted weighted average common shares outstanding |  |                             | 9,638,869  |   |                           |   | 2,714,021  |      |  |   | 8,415,572  |   |  |   | 2,534,678  |  
|                                                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  

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

(Reflects 1-for-10 reverse stock split effective August 11, 2006)



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Sontra Medical Corporation

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                            |  |                           |            |   |      |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                            |  | Six Months Ended June 30, |           
|                                                                            |  | 2007                      |            |   | 2006 |  
|Cash Flows From Operating Activities:                                       |  |                           |            |   |      |   |            |  
|Net loss                                                                    |  | $                         | (1,601,195 | ) |      | $ | (2,836,494 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                           |            |   |      |   |            |  
|Depreciation and amortization                                               |  |                           | 60,299     |   |      |   | 86,689     |  
|Share-based compensation                                                    |  |                           | 510,848    |   |      |   | 118,347    |  
|Provision for excess or obsolete inventory                                  |  |                           |           |   |      |   | 37,000     |  
|Changes in assets and liabilities:                                          |  |                           |            |   |      |   |            |  
|Accounts receivable                                                         |  |                           |           |   |      |   | 1,129      |  
|Inventory                                                                   |  |                           | 1,556      |   |      |   | (50,259    | )
|Prepaid expenses and other current assets                                   |  |                           | (56,112    | ) |      |   | (6,372     | )
|Accounts payable                                                            |  |                           | 86,041     |   |      |   | 15,249     |  
|Deferred revenue                                                            |  |                           | (25,000    | ) |      |   | (25,001    | )
|Accrued expenses                                                            |  |                           | 90,499     |   |      |   | 146,866    |  
|                                                                            |  |                           |            |   |      |   |            |  
|Net cash used in operating activities                                       |  |                           | (933,064   | ) |      |   | (2,512,846 | )
|                                                                            |  |                           |            |   |      |   |            |  
|Cash Flows from Investing Activities:                                       |  |                           |            |   |      |   |            |  
|Purchase of property and equipment                                          |  |                           |           |   |      |   | (99,748    | )
|Decrease in restricted cash                                                 |  |                           | 9,699      |   |      |   | 9,299      |  
|Sales of short term investments                                             |  |                           |           |   |      |   | 700,000    |  
|                                                                            |  |                           |            |   |      |   |            |  
|Net cash provided by investing activities                                   |  |                           | 9,699      |   |      |   | 609,551    |  
|                                                                            |  |                           |            |   |      |   |            |  
|Cash Flows From Financing Activities                                        |  |                           |            |   |      |   |            |  
|Repurchase of Series A Preferred Stock                                      |  |                           | (73,334    | ) |      |   |           |  
|Proceeds from the sale of common stock, net of expenses                     |  |                           | 1,724,969  |   |      |   | 1,624,166  |  
|Proceeds from exercise of warrants                                          |  |                           | 30,187     |   |      |   |           |  
|Payments on note payable                                                    |  |                           | (59,287    | ) |      |   | (26,132    | )
|                                                                            |  |                           |            |   |      |   |            |  
|Net cash provided by financing activities                                   |  |                           | 1,622,535  |   |      |   | 1,598,034  |  
|                                                                            |  |                           |            |   |      |   |            |  
|Net Increase (Decrease) in Cash and Cash Equivalents                        |  |                           | 699,170    |   |      |   | (305,261   | )
|Cash and Cash Equivalents, beginning of period                              |  |                           | 559,017    |   |      |   | 1,016,792  |  
|                                                                            |  |                           |            |   |      |   |            |  
|Cash and Cash Equivalents, end of period                                    |  | $                         | 1,258,187  |   |      | $ | 711,531    |  
|                                                                            |  |                           |            |   |      |   |            |  
|Supplemental Disclosure of Non Cash Financing Transactions:                 |  |                           |            |   |      |   |            |  
|Accretion of dividend on Series A Convertible Preferred Stock               |  | $                         | 483        |   |      | $ | 2,910      |  
|                                                                            |  |                           |            |   |      |   |            |  
|Common stock issued for dividends on Series A Convertible Preferred Stock   |  | $                         | 3,440      |   |      | $ |           |  
|                                                                            |  |                           |            |   |      |   |            |  
|Fair Value of common stock issued for accrued 401(k) plan contributions     |  | $                         |           |   |      | $ | 241,803    |  
|                                                                            |  |                           |            |   |      |   |            |  
|Fair Value of common stock and warrants issued for financing costs          |  | $                         | 103,572    |   |      | $ |           |  
|                                                                            |  |                           |            |   |      |   |            |  
|Deposits reclassified to property and equipment                             |  | $                         |           |   |      | $ | 205,012    |  
|                                                                            |  |                           |            |   |      |   |            |  

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



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##### Table of Contents

SONTRA MEDICAL CORPORATION

Notes to Consolidated Financial Statements

June 30, 2007

(Unaudited)

(1) ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Organization and Basis of Presentation

Sontra Medical Corporation
(the Company) is a medical company engaged in the development of transdermal diagnostic and drug delivery products using skin permeation technologies, including its SonoPrep®
ultrasonic skin permeation system. On an historical basis, since its inception the Company has devoted substantially all of its efforts toward product research and development, conducting clinical studies, raising capital and marketing products
under development. The Company has incurred significant losses from operations since its inception and has primarily funded these losses through issuances of equity and convertible promissory notes.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical, Inc.
(SMI). All significant inter-company balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the Companys audited financial statements and related
footnotes for the fiscal year ended December 31, 2006, which are included in the Companys Annual Report on Form 10-KSB filed with the SEC on March 29, 2007. In the opinion of the Companys management, the unaudited condensed
consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Companys
financial position as of June 30, 2007 and the results of operations and cash flows for the three and six months ended June 30, 2007 and 2006. Certain information and footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the relevant SEC rules and regulations. However, the Company believes that its disclosures are adequate to ensure that the information
presented is not misleading. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year or any other interim period.

On July 24, 2006, the Companys board of directors approved a 1-for-10 reverse stock split . The reverse stock split was effective
August 11, 2006. All share and per share information has been retroactively restated to reflect the reverse stock split.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2007, the Company had cash and cash equivalents of approximately $1,258,000 and an accumulated deficit of $36,062,000. Through June 30, 2007, the
Company has not been able to generate sufficient revenues from its operations to cover its costs and operating expenses. Although the Company has been able to issue its common and preferred stock through private placements to raise capital in order
to fund its operations, it is not known whether the Company will be able to continue this practice, or be able to obtain other types of financing or if its sales will increase significantly to be able to meet its cash operating expenses. This, in
turn, raises substantial doubt about the Companys ability to continue as a going concern. Management believes that an equity financing will enable the Company to continue its operations. However, no assurances can be given as to the success of
these plans. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

(2) SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the following accounting policies:

(a) Use of Estimates

The preparation of
financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses recorded during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly
susceptible to significant changes in the near term relate to the valuation of, the recoverability of long-lived assets, the realizability of deferred tax assets and the fair value of share-based payments issued.



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(b) Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of ninety days or less to be cash equivalents. Cash equivalents consist of money market funds as of June 30, 2007 and December 31, 2006.
The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. Restricted cash represents a security deposit on the Companys leased offices.

(c) Accounts Receivable

The Company provides credit terms
to customers in connection with sales of the Companys products. Credit terms for approved customers, are generally on a net 30-day basis. Management periodically reviews customer account activity in order to assess the adequacy of the
allowances provided for potential losses. Factors considered include economic conditions and each customers payment history and credit worthiness. Adjustments, if any, are made to reserve balances following the completion of these reviews to
reflect managements best estimate of potential losses. As the Company had no accounts receivable, no allowance for doubtful accounts was considered necessary at June 30, 2007 and December 31, 2006.

(d) Inventory

Inventories are stated at the lower of cost (first in, first out) or market. Work-in-process and finished goods consist of material, labor and overhead. Finished goods consist of completed SonoPrep® units and procedure trays. Demo inventory consists of SonoPrep® units owned by the Company in use by customers as well as units used for demonstration
purposes. The cost of SonoPrep® demo units is amortized to cost of sales over a one year period. The reserve for obsolescence represents inventory that may become obsolete as a result of
possible design changes and product enhancements as well as inventory that the Company may use in prototype manufacturing as well as anticipated design changes and product enhancements that will make certain inventory obsolete.

(e) Share-Based Payments

The Company applies the provisions
of SFAS No. 123(R), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock Based Compensation. Under SFAS No. 123(R), the Company recognizes compensation costs resulting from the issuance of stock-based awards
to employees, directors and consultants as an expense in the statement of operations over the requisite service period based on a measurement of fair value for each stock award as measured on the measurement date which generally corresponds with the
grant date. For consultant options with vesting terms, the Company remeasures the fair value of the options each period until a measurement date has been established. The Companys policy is to grant employee, director and consultant stock
options with an exercise price equal to the fair value of the Companys common stock at the date of grant, which equals the closing price of the Companys stock on the date of grant.

(f) Net Loss per Common Share

Basic and diluted net loss
per share of the Companys common stock is presented in conformity with SFAS No. 128, Earnings per Share. For the periods presented, options, warrants and convertible securities were anti-dilutive and excluded from diluted loss per
share calculations. Accordingly, basic and diluted net loss per share of common stock has been computed by dividing the net loss applicable to common stockholders in each period by the weighted average number of shares of common stock outstanding
during such period.

On July 24, 2006, the Companys Board of Directors approved a 1-for-10 reverse stock split of the
Companys Common Stock. The reverse stock split was effective on August 11, 2006. All share and per share information including the net loss per common share has been retroactively restated to reflect the reverse stock split.

(g) Research and Development Expenses

The Company
charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside consulting services. Other research and development expenses include
the costs of materials and inventory supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs.

(h) Income Taxes

Effective January 1, 2007, the
Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109.The
implementation of FIN 48 had no impact on the Companys financial statements as the Company has no unrecognized tax benefits.



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The Company is primarily subject to U.S. federal and Massachusetts state income tax. Tax years subsequent
to 2002 remain open to examination by U.S. federal and state tax authorities.

The Companys policy is to recognize interest and
penalties related to income tax matters in income tax expense. As of January 1 and June 30, 2007, the Company had no accruals for interest or penalties related to income tax matters.

(i) Deferred Revenue

In November 2006, HortResearch paid
$50,000 to renew for a one year license and collaboration agreement related to the Companys ultrasonic skin permeation technology. This additional license payment will be recognized as revenue ratably over the one year service period through
November 2007.

(j) Revenue Recognition

Product revenue is recognized when persuasive evidence of an arrangement exists in the form of a signed non-cancelable purchase order, the product is shipped, the selling price is fixed and determinable, and collection is reasonably
assured. Licensing revenue is recognized over the term of the licensing agreement as the Company meets its contractual obligations. The Company defers licensing revenue if a performance obligation exists.

(3) COMMITMENTS

The Company leases 12,999 square
feet of office, laboratory and manufacturing space in Franklin, Massachusetts under a lease expiring March 31, 2008. Future minimum rental payments under this operating lease are approximately as follows:



|                                 |  |        |        
|-------------------------------- |  | ------ | -------
|                                 |  | Amount
|For the years ended December 31, |  |        |        
|2007 (July  December 2007)      |  | $      | 81,500 
|2008 (January  March 2008)      |  |        | 40,000 
|                                 |  |        |        
|Total                            |  | $      | 121,500
|                                 |  |        |        

(4) NOTE PAYABLE

In May 2005, the Company entered into a note payable agreement with a third-party lender for financing equipment purchases in the amount of $237,541. The note is repayable over a four year term and the Company is
obligated to make monthly interest and principal payments of $6,017. Interest accrues at an annual rate of 10.39% and the note is secured by certain property and equipment of the Company. Interest expense related to this note was $2,458 and $6,157
for the three and six months ended June 30, 2007, respectively, compared to $4,816 and $9,970 for the comparable periods of fiscal 2006. As a result of the Companys announced intention to cease operations in December 2006, the Company
entered into a Modification and Forbearance Agreement with the lender as of February 28, 2007, that required the Company to make a payment to the lender in the amount of $18,051, which represents three monthly principal and interest payments of
$6,017 under the note, plus a payment of $4,435 for attorney fees, costs and expenses. In addition, the Company agreed to and made a payment to the lender on June 29, 2007 in the amount of $18,051, which represents three additional monthly
principal and interest payments of $6,017 under the note. The Company also granted the lender a security interest in all assets of the Company.

(5)
SERIES A CONVERTIBLE PREFERRED STOCK

The Company is authorized in its Articles of Incorporation, as amended, to issue up to 10,000,000
shares of preferred stock with the rights, preferences and privileges to be fixed by the board of directors. The board of directors has authorized and designated the issuance of up to 7,000,000 shares of Series A Convertible Preferred Stock.

On January 30, 2007, the Company repurchased all of the then outstanding shares of Series A Convertible Preferred Stock for $73,334
of cash. At the time of the repurchase, the Company issued to the holders a common stock dividend in the aggregate amount of 10,487 shares valued at $3,440, representing the amount of the accrued dividend for the period July 1, 2006 through
January 30, 2007.



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(6) COMMON STOCK

January 2007 Private Placement: In January 2007, the Company issued and sold in a private placement (the January Financing) (i) an aggregate of 6,600,000 shares (the Shares)
of its common stock at a purchase price per share of $0.10, for an aggregate purchase price of $660,000 (and net proceeds of $584,570), and (ii) warrants (the Warrants) to purchase an aggregate of 1,650,000 shares of Sontras
common stock for an exercise price of $0.21 per share. The Shares and Warrants were issued pursuant to a Common Stock and Warrant Purchase Agreement (the 2007 Purchase Agreement), dated as of January 2, 2007, by and among Sontra,
Sherbrooke Partners, LLC and additional accredited investors identified in the 2007 Purchase Agreement (together with Sherbrooke, the Purchasers).

The Warrants expire two years from the date of the closing of the January Financing and contain customary provisions for adjustment to the exercise price in the event of stock splits, combinations and dividends. The
Warrants also contain weighted average anti-dilution provisions that provide for an adjustment to the then effective exercise price (and number of shares of common stock issuable upon exercise) upon certain dilutive issuances by Sontra of equity
securities. In addition, if the per share market value (as defined in the Warrants) of Sontras common stock for any twenty (20) consecutive trading days equals or exceeds $0.63 per share, then Sontra may, with the prior written consent of
the Warrant holders, redeem the unexercised portion of the Warrants in cash at a price equal to the number of shares of common stock that remain subject to the Warrant multiplied by $0.001.

Certain members of Sontras Board of Directors and management team invested a total of $120,000 in the January Financing transaction, as required by
Sherbrooke.

June/July 2007 Private Placement:

June 2007 Closings: On June 15, 2007, the Company completed a first closing of an equity financing (the June Financing) that provided the Company with gross proceeds of $1.0 million (and
net proceeds from the first closing were approximately $906,849). Under the terms of the first closing, investors purchased 1,000,000 shares of the Companys Common Stock in a private placement at a per share purchase price of $1.00. In the
first closing, the investors also received warrants to purchase an amount of shares of Common Stock that equals 30% of the number of shares of Common Stock purchased by such investor, for an aggregate of 300,000 shares of Common Stock (together with
the warrants issued to the Placement Agent as described below, the Warrants). On June 29, 2007, the Company completed a second closing of the June Financing that provided the Company with gross proceeds of $250,000 (net proceeds
from the second closing were approximately $233,550). Under the terms of the second closing, investors purchased 250,000 shares of the Companys Common Stock in a private placement at a per share purchase price of $1.00. In the second closing,
the investors also received warrants to purchase an amount of shares of Common Stock that equals 30% of the number of shares of Common Stock purchased by such investor in the Financing, for an aggregate of 75,000 shares of Common Stock. In
connection with the June Financing, the Warrants are exercisable at a per share price of $1.40 and will expire on the fifth anniversary of the issue date. In addition, the Company shall have the right to terminate the Warrants, upon thirty days
notice, in the event (i) the closing bid price of the Companys Common Stock for twenty-two consecutive trading days is equal or greater than $3.00 per share and (ii) the Company has registered for resale the shares underlying the
Warrants. The Warrants contain customary provisions for adjustment to the exercise price in the event of stock splits, combinations and dividends. The Warrants also contain weighted average anti-dilution provisions that provide for an adjustment to
the then effective exercise price if the Company issues equity securities without consideration or for consideration per share less than $1.00.

June Financing (July 2007 Closing - Subsequent Event): On July 16, 2007, the Company completed its third and final closing of the June Financing that provided the Company with gross proceeds of $565,000 and net proceeds
from the third closing were approximately $525,450 (see Note 9).

In connection with the issuance of warrants and shares of Common Stock
issued to service providers in connection with the June Financing, the total fair value of these instruments of $103,572 was recorded, net of the par value of the common stock, as both a debit and credit to additional paid-in capital.

The Company intends to use the net proceeds of the January and June Financings for product development, funding of clinical trials, possible acquisitions
or licensing of technologies or businesses, working capital and general corporate purposes.

Placement Agent Agreement: In
connection with the June Financing, the Company retained Legend Merchant Group, Inc. (the Placement Agent) as placement agent. The Company agreed to pay to the Placement Agent for its services



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(a) a cash fee equal to 7% of the aggregate capital raised by the Company in the Financing from investors introduced to the Company by the Placement
Agent, excluding the proceeds from any Warrant exercises, (b) shares of unregistered Common Stock of the Company equal to 5% of the number of shares issued to investors introduced to the Company by Placement Agent and (c) warrants to
acquire a number of shares of Common Stock of the Company equal to 5% of the number of shares issued to investors introduced to the Company by the Placement Agent at a per share exercise price equal to $1.40. The Placement Agent received fees and
compensation only on funds raised by the Placement Agent from new investors in the Company (i.e., only those parties, and affiliates, who have not previously participated in a financing transaction with the Company and who were not introduced by
Sherbrooke Partners (and its affiliates), management or members of the Board of Directors of the Company). The Company also agreed to pay the reasonable counsel fees of the Placement Agent in the June Financing in an amount not to exceed $15,000.

In consideration for its work as placement agent in the June Financing, the Placement Agent was paid $76,650 ($37,100 in the quarter ended
June 30, 2007) in a cash fee, 54,750 shares (26,500 shares in the quarter ended June 30, 2007) of Common Stock of the Company and warrants for the purchase of 54,750 shares (26,500 shares in the quarter ended June 30, 2007) of Common
Stock in the Company with an exercise price of $1.40 and an expiration date of no later than July 16, 2012.

The offer, sale and
issuance to the investors of the shares of Common Stock, the Warrants and the shares of Common Stock issuable upon the exercise of the Warrants have been made in reliance on the statutory exemption from registration in Section 4(2) of the
Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder, have not been and will not be registered under the Securities Act of 1933, as amended, and, unless so registered, may not be offered or sold in the United
States, except pursuant to an applicable exemption from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities laws. The Company is not required to register for resale under the Securities Act the
shares of Common Stock issued to the investors or the Placement Agent and the shares issuable upon the exercise of the Warrants, however, the Company did agree with the Placement Agent that it would provide piggyback registration rights to the
investors and the Placement Agent with respect to the securities purchased in the Financing, subject to customary exceptions.

Legend
Merchant Group  Advisory Agreement  On April 4, 2007, the Company entered into an Advisory Agreement with Legend Merchant Group, Inc., pursuant to which the Company issued 75,000 shares of common stock with a fair value of
$116,250 to Legend Merchants. The Company recorded the fair value of these shares as expense in selling, general and administrative in the quarter ended June 30, 2007 (see Note 7). The offer, sale and issuance to the investors of the shares of
Common Stock was made in reliance on the statutory exemption from registration in Section 4(2) of the Securities Act of 1933, as amended.

Warrant Exercises: During the second quarter of fiscal 2007, warrants to purchase a total of 143,750 shares of the Companys common stock were exercised providing gross proceeds to the Company of $30,187. The offer, sale
and issuance to the investors of the shares of Common Stock was made in reliance on the statutory exemption from registration in Section 4(2) of the Securities Act of 1933, as amended.

(7) STOCK OPTION PLANS

In 1997, the Company adopted
the 1997 Long-Term Incentive and Stock Option Plan (the 1997 Plan). Pursuant to the 1997 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board) may grant incentive and nonqualified stock options to
the Companys employees, officers, directors, consultants and advisors. The Company has reserved an aggregate of 150,000 shares of common stock for issuance upon exercise of options granted under the 1997 Plan. As of June 30, 2007, there
were options to purchase an aggregate of 35,000 shares of common stock outstanding under the 1997 Plan and 106,546 shares available for future option grants thereunder.

In connection with the Merger, the Company assumed all outstanding options under the 1999 Sontra Medical, Inc. Stock Option and Incentive Plan (the 1999 Plan). The Company may not grant any additional
options under the 1999 Plan. The Company assumed options to purchase an aggregate of 86,567 shares of common stock under the 1999 Plan. As of June 30, 2007, there were options to purchase an aggregate of 5,780 shares of common stock outstanding
under the 1999 Plan and none available for future grants.

In March 2003, the stockholders approved the 2003 Stock Option and Incentive
Plan (the 2003 Plan). Pursuant to the 2003 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board) may grant incentive and nonqualified stock options, restricted stock and other stock-based awards to
the Companys employees, officers, directors, consultants and advisors. As of May 22, 2007, the shareholders of the Company increased the number of authorized shares



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for issuance under the Plan by 1,000,000 shares. As of June 30, 2007, the maximum aggregate number of shares that may be authorized for issuance under
the 2003 Plan for all periods is 1,600,000. As of June 30, 2007, there were shares of restricted stock and options to purchase an aggregate of 703,991 shares of common stock outstanding under the 2003 Plan and 888,009 shares available for
future grants thereunder.

Share-Based Compensation

For options and restricted stock issued and outstanding during the six months ended June 30, 2007 and 2006 the Company recorded additional paid-in capital and non-cash compensation expense of $510,848 and
$118,347, respectively, each net of estimated forfeitures.

The fair value of each option award is estimated on the date of grant using the
Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Companys stock using historical periods consistent with the expected term of the
options. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercise and employee termination within the valuation model. As a result of the Companys
announced intention to cease operations in December 2006 and the termination of all employees, substantially all options and restricted stock were forfeited or expected to be forfeited. This is reflected in the 2007 expected forfeiture rate below.
The expected term of options granted, all of which qualify as plain vanilla, is based on the average of the contractual term (generally 10 years) and the vesting period (generally 42 months) as permitted under SEC Staff Accounting
Bulletin No. 107. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. Restricted stock grants are valued based on the closing market price for the Companys stock on the grant date.

The assumptions used principally for options granted in the six month periods ended June 30, 2007 and 2006 were as follows:



|                                                 |  |            |   |  |            |  
|------------------------------------------------ |  | ---------- | - |  | ---------- | -
|                                                 |  | 2007       |   |  | 2006       |  
|Risk-free interest rate                          |  | 4.72       | % |  | 5.00       | %
|Expected dividend yield                          |  |           |   |  |           |  
|Expected term (employee grants)                  |  | 6.75 years |   |  | 6.75 years |  
|Forfeiture rate (excluding fully vested options) |  | 38         | % |  | 6          | %
|Expected volatility                              |  | 118%-163   | % |  | 108        | %

A summary of option activity under the plans as of June 30, 2007 and changes during the six
months then ended is presented below:



|                               |  |          |   |  |                               |       |                                          |            |                         |   |        
|------------------------------ |  | -------- | - |  | ----------------------------- | ----- | ---------------------------------------- | ---------- | ----------------------- | - | -------
|Options                        |  | Shares   |   |  | Weighted-AverageExercisePrice |       | Weighted-AverageRemainingContractualTerm |            | AggregateIntrinsicValue
|Outstanding at January 1, 2007 |  | 275,974  |   |  | $                             | 16.02 |                                          |            |                         |   |        
|Granted                        |  | 612,500  |   |  |                               | 0.94  |                                          |            |                         |   |        
|Exercised                      |  |         |   |  |                               |      |                                          |            |                         |   |        
|Forfeited or expired           |  | (173,703 | ) |  |                               | 15.00 |                                          |            |                         |   |        
|                               |  |          |   |  |                               |       |                                          |            |                         |   |        
|Outstanding at June 30, 2007   |  | 714,771  |   |  | $                             | 3.34  |                                          | 9.25 years |                         | $ | 733,975
|                               |  |          |   |  |                               |       |                                          |            |                         |   |        
|Exercisable at June 30, 2007   |  | 510,397  |   |  | $                             | 4.32  |                                          | 8.91 years |                         | $ | 470,469
|                               |  |          |   |  |                               |       |                                          |            |                         |   |        

The weighted-average grant-date fair value of options granted during the six months ended
June 30, 2007 was $0.97 Share-based compensation recognized in the six months ended June 30, 2007 related to options granted in the six months ended June 30, 2007 was $391,821.



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A summary of the status of the Companys nonvested restricted stock grants as of June 30, 2007,
and changes during the six months ended June 30, 2007, is presented below:



|                             |  |         |   |  |                                       |     
|---------------------------- |  | ------- | - |  | ------------------------------------- | ----
|Nonvested Shares             |  | Shares  |   |  | Weighted-AverageGrant-Date Fair Value
|Nonvested at January 1, 2007 |  | 52,500  |   |  | $                                     | 1.77
|Granted                      |  | 101,500 |   |  |                                       | 1.67
|Vested                       |  |        |   |  |                                       |    
|Forfeited                    |  | (22,500 | ) |  |                                       | 1.77
|                             |  |         |   |  |                                       |     
|Nonvested at June 30, 2007   |  | 131,500 |   |  | $                                     | 1.69
|                             |  |         |   |  |                                       |     

For restricted stock grants issued in the six months ended June 30, 2007, the Company
estimated a forfeiture rate of 0 %. Share-based compensation recognized in the six months ended June 30, 2007 related to restricted stock grants was $119,027 ($116,250 for restricted grants issued during the three months ended June 30,
2007).

As of June 30, 2007, there was approximately $191,400 of total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted under the plans. This includes certain non-employee options for which the fair value is remeasured each period until a measurement date is established. That cost is expected to be recognized ratably over a period of
no more than 3.25 years.



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(8) BAYER LICENSE AGREEMENT

On July 28, 2003, the Company and Bayer Diagnostics Division of Bayer Healthcare LLC
(Bayer) executed a definitive license agreement pursuant to which the Company granted to Bayer an exclusive worldwide right and license of the Companys intellectual property rights to make, have made, use, import and sell the
continuous transdermal glucose monitoring system utilizing ultrasonic techniques. In consideration of the license and the Companys delivery of all information, materials and know-how related to the licensed technology in 2003, Bayer paid the
Company a one-time, non-refundable license fee of $1.5 million in January 2004. On December 14, 2005, the parties amended the license agreement, pursuant to which the Company reacquired the co-exclusive rights to make, have made, use, import
and sell the continuous transdermal glucose monitoring system utilizing ultrasonic techniques in the worldwide hospital intensive care unit (ICU) market, and the Company granted Bayer a right of first refusal to market any hospital ICU product(s)
that we may develop. If Bayer does not market Sontras hospital ICU product(s), then Sontra shall pay Bayer a royalty equal to 1% of Sontras net product sales. In addition, upon Bayers completion of the first phase of its
development of the continuous glucose monitoring system, Bayer shall pay a $2.0 million milestone payment to Sontra. Such milestone payment shall be paid no later than December 31, 2007, otherwise Bayers exclusive license rights under the
amended license agreement shall become co-exclusive and Bayers marketing rights to Sontras hospital ICU product(s) shall terminate. The parties are no longer obligated under the amended license agreement to enter into one or more joint
development agreements related to the continuous transdermal glucose monitoring system; however, in the second phase of Bayers product development process, the parties will agree upon reasonable royalty rates to be paid to Sontra for product
sales by Bayer and the parties may also negotiate a commercially reasonable manufacturing agreement pursuant to which Sontra would supply Bayer with the SonoPrep® ultrasonic skin permeation
component of the continuous glucose monitoring system.

(9) SUBSEQUENT EVENT

Equity Financing

On July 16, 2007, the Company completed its third and final closing of the
June Financing that provided the Company with gross proceeds of $565,000 and net proceeds from the third closing were approximately $525,450 (see Note 6). In the third and final closing of the June Financing, investors purchased 565,000 shares of
the Companys Common Stock in a private placement at a per share purchase price of $1.00. In the third and final closing, the investors also received warrants to purchase an amount of shares of Common Stock that equals 30% of the number of
shares of Common Stock purchased by such investor in the Financing, for an aggregate of 169,500 shares of Common Stock (together with the warrants issued to the Placement Agent as described below, the Warrants). The Warrants are
exercisable at a per share price of $1.40 and will expire on the fifth anniversary of the issue date. In addition, the Company shall have the right to terminate the Warrants, upon thirty days notice, in the event (i) the closing bid price of
the Companys Common Stock for twenty-two consecutive trading days is equal or greater than $3.00 per share and (ii) the Company has registered for resale the shares underlying the Warrants. The Warrants contain customary provisions for
adjustment to the exercise price in the event of stock splits, combinations and dividends. The Warrants also contain weighted average anti-dilution provisions that provide for an adjustment to the then effective exercise price if the Company issues
equity securities without consideration or for consideration per share less than $1.00.

In consideration of its work as a placement agent
in the third and final closing of the June Financing, the Placement Agent was paid a cash fee, shares of Common Stock and Warrants for the purchase of Common Stock (see Note 6). The fair value of the Common Stock and Warrants was recorded, net of
the par value of the Common Stock, as a debit and credit to additional paid-in capital.



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|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

Forward-Looking Statements



|ITEM 6. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|------- | ---------------------------------------------------------

The following discussion of our consolidated financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto
included elsewhere in this Form 10-QSB. The matters discussed herein contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as
amended, which involve risks and uncertainties. All statements other than statements of historical information provided herein may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes,
anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from those reflected in the forward-looking
statements include, but are not limited to, those discussed in Risk Factors and elsewhere in this report and the risks discussed in our other filings with the SEC. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect managements analysis, judgment, belief or expectation only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that
arise after the date hereof.

Overview

On June 20, 2002, the Company (previously operating under the name ChoiceTel Communications, Inc.) consummated a merger with Sontra Medical, Inc. (SMI), pursuant to which SMI merged with and into a wholly owned subsidiary
of the Company (the Merger). Subsequent to the consummation of the Merger, the Company changed its name to Sontra Medical Corporation and began operating in SMIs line of business.

Sontra Medical Corporation (the Company) is a technology leader in transdermal science, utilizing its platform technologies for transdermal
diagnostics and drug delivery. Our strategy is to combine our skin permeation technology (ultrasound and other permeation technology under development) together with synergistic biosensor and transdermal drug delivery technologies to develop a
diversified product pipeline with opportunities for strategic partnerships. Our vision is for painless and continuous transdermal diagnosis and drug delivery that will improve patient outcomes, while reducing health care costs. We believe these
benefits will be realized with improved patient compliance to treatment, continuous diagnosis and data collection, and new opportunities for continuous drug delivery.

The Company has developed SonoPrep®, a
non-invasive ultrasonic skin permeation technology for medical and therapeutic applications including transdermal diagnostics and the enhanced delivery of drugs through the skin. Our proprietary ultrasound mediated skin permeation technology is a
non-invasive and painless method of enhancing the flow of fluids and molecules across the protective membrane of the stratum corneum, the outer layer of the skin. The SonoPrep® System is
approved by the Food and Drug Administration for use with topical lidocaine to achieve rapid (within five minutes) skin anesthesia, and for electrophysiology applications.

As a result of our strong patent portfolio position and technology development experience, we expect to pursue opportunities for collaborative
partnerships for inclusion of such technology into potential third-party products. This activity will require substantial expenditures, including for feasibility studies, pre-clinical studies, prototype development and clinical testing, and
accordingly, the Company will pursue partnership opportunities through co-development arrangements.

The Company is developing a non-invasive, continuous transdermal glucose monitor (CTGM) for principal use in diabetes and in the intensive care markets. In July 2006, Sontra completed the first clinical
study using a wireless, continuous glucose biosensor with the second generation SonoPrep® on 10 patients with diabetes at an independent lab. Newly improved, single-use glucose sensors were
placed over the SonoPrep® treated skin sites. The sensor was coupled with a miniature analyzer which sent digitized data wirelessly to a monitor for data processing and display. The results
showed that the sensor could accurately predict blood glucose readings every minute for up to 12 hours with a single point calibration after a one hour warm-up period. In December 2006, Sontra completed its initial 24-hour clinical study at the
Surgical Critical Care Unit in New England Medical Center (NEMC), using our latest wireless transdermal glucose monitor with the second generation SonoPrep® on patients during
and post cardiovascular surgery. There were two phases to the study, where the initial phase provided technical adjustments working with NEMC physicians. In the second phase of the study, the results showed that the sensor accurately predicted blood
glucose readings every minute for up to 24 hours, during and post operation.

A significant portion of the Companys research and
development expenses includes salaries paid to personnel and outside consultants, as well as for the cost of materials used in research and development, clinical studies, prototype manufacturing and related information technology and the allocation
of facilities costs.



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General and administrative expenses consist primarily of non-research personnel salaries and related
expenses, facilities costs and outside professional fees related principally to public company compliance and reporting.

During 2007, the
Company has raised $2,505,187 in gross proceeds from the January and June Financings (which includes the July 2007 closing) and from the exercise of common stock purchase warrants issued in January 2007. Proceeds from these financings are being used
for product development, funding of clinical trials, possible acquisitions or licensing of technologies or businesses, working capital and general corporate purposes.

Results of Operations

As of December 22, 2006, the Company terminated all employees and
restructured its business operations. As of June 30, 2007, the Company has five (5) employees and has independent contractor arrangements with nine (9) consultants. Of this group of employees and consultants, three (3) are
involved with finance and administration and 11 are involved with research & development, clinical and regulatory matters. As a result of the Companys recommencement of its business in January 2007, the comparison of revenues and
expenses for the three and six months ended June 30, 2007 may not be comparable with those in the same periods in 2006.

Comparison of the three
months ended June 30, 2007 and 2006

Licensing Revenue

Licensing Revenue for the three months ended June 30, 2007 and 2006 amounted to $12,500, through an agreement with The Horticulture and Food Research Institute of New Zealand Limited (HortResearch).
In November 2005, HortResearch paid the Company $50,000 for a one year option to license the use of the Companys ultrasonic skin permeation technology. Under the agreement, the Company was obligated to perform certain training and consulting
services over the one year period. In November 2006, HortResearch paid $50,000 to renew an additional one year license option for a continued collaboration. This additional license option is recognized as revenue ratably over the one year service
period through November 2007.

Product Revenue and Cost of Product Revenue

The Company recorded product revenue of $2,353 with a cost of product revenue of $0 for the three
months ended June 30, 2007 versus $12,414 of revenue with a cost of product revenue of $21,777 for the same period in 2006. The decrease in product revenue was attributable to a decline in demand for the Companys SonoPrep® System in 2007 as a result of the Companys decision to cease active marketing for SonoPrep. During December 2006, the Company wrote off the majority of its remaining SonoPrep® product inventory to cost of product revenue to reflect the anticipated net realizable value of such product due to the Companys decision to stop active marketing of the product. The
product sold during the three months ended June 2007 was from Companys fully reserved inventory stock.

Research and Development Expenses

Research and development expenses decreased by $582,396 to $340,488 for the three months ended June 30, 2007 from $922,884 for the
three months ended June 30, 2006. Research and development expenses decreased primarily as a result of the Companys restructuring of its business operations in December 2006 that has allowed for improved focus of development and clinical
projects. The Companys research and development during the three months ended June 30, 2007 was concentrated on prototype development and internal testing of its continuous transdermal glucose monitor and, the expansion of its skin
permeation technology and patent portfolio. Also, the Company has commenced planning with a Boston medical center for further clinical studies in Critical Care and Surgical ICU arenas.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased
by $33,480 to $692,475 for the three months ended June 30, 2007 from $725,955 for the three months ended June 30, 2006. The decrease for the three months ended June 30, 2007 was primarily the result of the Companys restructuring
of its business operations in December 2006, resulting in reduced administrative salaries (reduction of approximately $404,000) and related costs. This reduction in salaries was offset with an increase in share-based compensation expense (increase
of approximately $310,000), a non-cash charge relating to the fair value assigned to the issuance of common stock, options and warrants to purchase the Companys common stock to employees, independent contractors and outside service providers.

Other Income (Expense)

Interest
income was $7,580 for the three months ended June 30, 2007 compared to interest income of $41,765 for the three months ended June 30, 2006. The decrease in interest income for the three months ended June 30, 2007 was primarily
attributable to the Company having a lower average amount of cash equivalents and no short term investments on hand during 2007 compared to 2006.



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Interest expense of $3,699 and $4,816 for three months ended June 30, 2007 and 2006, respectively
was related to the note payable on equipment financing secured in 2005. The decrease is attributable to the lower principal balance of the loan in 2007.

Comparison of the six months ended June 30, 2007 and 2006

Licensing Revenue

Licensing Revenue for the six months ended June 30, 2007 and 2006 amounted to approximately $25,000, through an agreement with HortResearch. In
November 2005, HortResearch paid the Company $50,000 for a one year option to license the use of the Companys ultrasonic skin permeation technology. Under the agreement, the Company was obligated to perform certain training and consulting
services over the one year period. In November 2006, HortResearch paid $50,000 to renew an additional one year license option for a continued collaboration. This additional license option is recognized as revenue ratably over the one year service
period through November 2007.

Product Revenue and Cost of Product Revenue

The Company recorded product revenue of $12,120 with a cost of product revenue of $1,556 for six
months ended June 30, 2007 versus $26,940 of revenue with a cost of product revenue of $52,290 for the same period in 2006. The decrease in product revenue was attributable to a decline in demand for the Companys SonoPrep® System in 2007 as a result of the Companys decision to cease active marketing for SonoPrep. During December 2006, the Company wrote off the majority of its remaining SonoPrep® product inventory to cost of product revenue to reflect the anticipated net realizable value of such product due to the Companys decision to stop active marketing of the product. The
product sold during the six months ended June 2007 was from Company inventory stock, with minimal value assigned for accounting purposes.

Research and
Development Expenses

Research and development expenses decreased by $1,086,150 to $600,093 for the six months ended June 30, 2007
from $1,686,243 for the six months ended June 30, 2006. Research and development expenses decreased primarily as a result of the Companys restructuring of its business operations in December 2006 that has allowed for improved focus of
development and clinical projects. The Companys research and development during the six months ended June 30, 2007 was concentrated on prototype development and internal testing of its continuous transdermal glucose monitor and, the
expansion of its skin permeation technology and patent portfolio. Also, the company has commenced planning with a Boston medical center for further clinical studies in Critical Care and Surgical ICU arenas.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $176,600 to $1,044,415 for the six months ended June 30, 2007 from $1,221,015 for the six months ended June 30, 2006. The decrease for the six months ended June 30,
2007 was primarily the result of the Companys restructuring of its business operations in December 2006, resulting in reduced administrative salaries, (reduction of approximately $866,000), employee health insurance costs (reduction of
approximately $63,000), sponsored research programs (reduction of approximately $80,000), NASDAQ fees (reduction of approximately $61,000) and, 401(k) stock bonuses (reduction of approximately $72,000). These reductions in expenses were offset by
and increase in share-based compensation expense to employees, consultants and service providers (increase of approximately $393,000) and an increase in consulting fees (increase of approximately $101,000).

Other Income (Expense)

Interest income was $13,906
for the six months ended June 30, 2007 compared to interest income of $81,083 for the six months ended June 30, 2006. The decrease in interest income for the six months ended June 30, 2007 was primarily attributable to the Company
having a lower average amount of cash equivalents and no short term investments on hand during 2007 compared to 2006.



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Interest expense of $6,157 and $9,970 for six months ended June 30, 2007 and 2006, respectively was related to the
note payable on equipment financing secured in 2005. The decrease is attributable to the lower principal balance of the loan in 2007.

Liquidity and
Capital Resources

The Company has financed its operations since inception primarily through private sales of its common and preferred
stock, the issuance of convertible promissory notes, and the cash it received in connection with exercises of warrants and amounts received from the Merger in 2002. During the period January through June 2007, the Company raised $1,940,188
($2,505,187 through July 18, 2007), in gross proceeds from the January and June Financings and from the exercise of common stock purchase warrants issued in January 2007. As of June 30, 2007, the Company had approximately $1,258,000 of
cash and cash equivalents.

Net cash used in operating activities was $933,064 for the six months ended June 30, 2007. The use of cash
was primarily attributable to the net loss of $1,601,195 for the six months ended June 30, 2007, offset by non-cash expenses of $60,299 for depreciation and amortization and $510,848 for share-based compensation. Accounts payable and accrued
expenses increased during the six months ended June 30, 2007 due principally to consulting, legal and professional fees in January and June 2007.

Net cash provided by investing activities was $9,699 for the six months ended June 30, 2007 as a result principally of the release of a restricted security deposit related to the Companys facilities. There
were no fixed asset purchases or short term investments during the six months ended June 30, 2007.

Net cash provided by financing
activities was $1,622,535 for the six months ended June 30, 2007, and related to the issuance of common stock and warrants with net proceeds of $1,755,156, offset by the payment of $73,334 to retire the Series A Preferred Stock and the
principal payment on the notes payable of $59,287.

As of August 6, 2007, the Company has a cash and cash equivalents balance $1,543,000.

As a result of the employment terminations and other actions taken since December 2006, the Company has significantly reduced its monthly
cash burn rate. We will continue to aggressively manage our costs and increase operating efficiencies while continuing research & development and clinical efforts in continuous transdermal glucose monitoring and skin permeation technology
advancement. We also plan to aggressively pursue partnership opportunities and new business financing options. Although the Company is planning to raise additional cash in 2007, should the Company not be successful, we believe that the existing cash
will enable the Company to continue its operations through December 31, 2007.

In conjunction with the January 2007 financing, the
Company issued warrants to purchase an aggregate of 1,650,000 shares of Sontras common stock at an exercise price of $0.21 per share (the Warrants). If the per share market value (as defined in the Warrants) of Sontras common
stock for any twenty (20) consecutive trading days equals or exceeds $0.63 per share, then Sontra may, with the prior written consent of the warrant holders, redeem the unexercised portion of the Warrants in cash at a price equal to the number
of shares of common stock that remain subject to the Warrant multiplied by $0.001. During the three months ended June 30, 2007, the Companys common stock had traded 20 consecutive trading days above $0.63. Should the warrant holders
exercise the Warrants, the Company would receive gross proceeds of $346,500 for working capital purposes. As of June 30, 2007, warrants to purchase 143,750 shares of the Companys common stock were exercised voluntarily, providing gross
proceeds of $30,187 through June 30, 2007.

During June and July 2007, the Company raised gross proceeds of $1,815,000 (net proceeds
of approximately $1,725,000) through a series of three closings of private equity financings. The Company issued 1,815,000 units in the financing at a purchase price of $1.00 per unit. Each unit is comprised of (i) one share of the
Companys common stock, and (ii) a warrant to purchase 0.3 shares of the Companys common stock at an exercise price of $1.40. In addition, the Company shall have the right to terminate the Warrants, upon thirty days notice, in the
event (i) the closing bid price of the Companys Common Stock for twenty-two consecutive trading days is equal or greater than $3.00 per share and (ii) the Company has registered for resale the shares underlying the Warrants. The
Warrants contain customary provisions for adjustment to the exercise price in the event of stock splits, combinations and dividends. The Warrants also contain weighted average anti-dilution provisions that provide for an adjustment to the then
effective exercise price if the Company issues equity securities without consideration or for consideration per share less than $1.00.

The
Company intends to use the net proceeds of the January and June Financings for product development, funding of clinical trials, possible acquisitions or licensing of technologies or businesses, working capital and general corporate purposes.



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Even if the Company receives the proceeds from the exercise of the Warrants from the January 2007 and the
June/July 2007 financings and, is successful in raising additional equity capital during the remainder of 2007, the Company will still be required to raise an additional substantial amount of capital in the future to fund further research and
development initiatives and to achieve profitability. The Companys ability to fund its future operating requirements will depend on many factors, including the following:



| |  |  | its ability to obtain funding from third parties, including any future collaborative partners;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | its progress on research and development programs and pre-clinical and clinical trials;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the time and costs required to gain regulatory approvals;
| | - |  | ---------------------------------------------------------



| |  |  | the costs of manufacturing, marketing and distributing its products, if successfully developed and approved;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | the costs of filing, prosecuting and enforcing patents, patent applications, patent claims and trademarks;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | the status of competing products; and
| | - |  | -------------------------------------



| |  |  | the market acceptance and third-party reimbursement of its products, if successfully developed and approved.
| | - |  | ------------------------------------------------------------------------------------------------------------

Risk Factors

We operate in a rapidly changing
environment that involves a number of risks, some of which are beyond our control. Forward-looking statements in this document and those made from time to time by us through our senior management are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements concerning the expected future revenues or earnings or concerning projected plans, performance, or development of products and services, as well as other estimates
related to future operations are necessarily only estimates of future results and there can be no assurance that actual results will not materially differ from expectations. Forward-looking statements represent managements current expectations
and are inherently uncertain. We do not undertake any obligation to update forward-looking statements. Factors that could cause actual results to differ materially from results anticipated in forward-looking statements include, but are not limited
to, the following:

If we fail to raise additional capital, we will be unable to continue our business.

Our development efforts to date have consumed and will continue to require substantial amounts of
capital in connection with our skin permeation technologies (including SonoPrep® and other alternative technologies), transdermal diagnostics and drug delivery. Our product development
programs require substantial capital outlays in order to reach product commercialization. As we enter into more advanced product development of our skin permeation technology and our continuous transdermal glucose monitoring system, we will need
significant funding to complete product development and to pursue product commercialization. Additionally, our auditors have expressed substantial doubt about our ability to continue as a going concern. Our ability to continue our business and our
research, development and testing activities and commercialize our products in development is highly dependent on our ability to obtain additional sources of financing, including by entering into and maintaining collaborative arrangements with third
parties who have the resources to fund such activities. Any future equity financing, if available, may result in substantial dilution to existing shareholders, and future debt financing, if available, may include restrictive covenants or may require
us to grant a lender a security interest in our assets. To the extent that we attempt to raise additional funds through third party collaborations and/or licensing arrangements, we may be required to relinquish some rights to our technologies or
products currently in various stages of development, or grant licenses or other rights on terms that are not favorable to us. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations, including
planned product development initiatives, clinical studies and commercialization efforts, will have material adverse consequences on our business operations and as a result, on our consolidated financial condition, results of operations and cash
flows.

We have a history of operating losses, and we expect our operating losses to continue for the foreseeable future and we may not continue as a
going concern.

We have generated limited revenue and have had operating losses
since our inception. Since inception, our accumulated deficit was approximately $36,062,000 as of June 30, 2007. The audit report from Wolf & Company, P.C., our independent registered public accounting firm, relating to our 2006
financial statements contains Wolfs opinion that our recurring losses from operations, significant accumulated deficit and our failure to raise sufficient capital to fund our operations raise substantial doubt about our ability to continue as
a going concern. It is possible that we will never generate sufficient revenue to achieve and sustain profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability. We expect our operating losses to
continue for the foreseeable future as we continue to expend substantial resources to conduct research and development, feasibility and clinical studies, obtain regulatory approvals for specific additional use applications of our skin permeation
technologies (including SonoPrep® and other alternative technologies), obtain regulatory approval for our CTGM system, identify and secure collaborative partnerships, and manage and execute
our obligations in possible strategic collaborations.



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Our products are based on new technologies and are in early stages of development, and may not be successfully
developed or achieve market acceptance.

Most of our products under development
have a high risk of failure because they are based on new technologies and are in the early stages of development. To date, we have tested the feasibility of our SonoPrep® technology for
various applications, including glucose monitoring, transdermal drug delivery and certain anesthetic applications. We have received 510(k) marketing clearance from the FDA for our SonoPrep®
device for the transdermal delivery of over-the-counter 4% topical lidocaine and in electrophysiology applications. However, to develop additional products or additional uses, substantial expenditures will be required, including for feasibility
studies, pre-clinical studies, prototype development and clinical testing. Projected costs for such development are difficult to estimate and they may change and increase frequently.

Our success is dependent on further developing new and existing products and obtaining favorable
results from pre-clinical studies and clinical trials and satisfying regulatory standards and approvals required for the market introduction of such products, including skin permeation methods and our continuous transdermal glucose monitoring
system. There can be no assurance that we will not encounter unforeseen problems in the development of our skin permeation technologies (including SonoPrep® and other alternative
technologies), or that we will be able to successfully address the problems that do arise. The skin permeation technologies may not prove effective in connection with diagnostics, glucose monitoring and/or transdermal drug delivery. There can be no
assurance that any of our potential products will be successfully developed, proven safe and efficacious in clinical trials, meet applicable regulatory standards, be capable of being produced in commercial quantities at acceptable costs, or be
eligible for third-party reimbursement from governmental or private insurers. Even if we successfully develop new products, there can be no assurance that such products will be successfully marketed or achieve market acceptance, or that expected
markets will develop for such products. If any of our development programs are not successfully completed, required regulatory approvals or clearances are not obtained, or potential products for which approvals or clearances are obtained are not
commercially successful, our business, financial condition and results of operations would be materially adversely affected.

In addition,
because our products are based on new technologies, they are subject to lengthy sales cycles and may take substantial time and effort to achieve market acceptance, especially at hospitals, which typically have a lengthy and rigorous approval process
for adopting new technologies.

Our future success may be dependent upon successful development of our continuous glucose monitor for the hospital
intensive care unit market.

We amended our license agreement in 2005 with the
Diabetes Care Division of Bayer Healthcare LLC (Bayer) and reacquired the worldwide co-exclusive rights to develop and market our continuous transdermal glucose monitoring system utilizing the SonoPrep® ultrasonic skin permeation technology for the hospital intensive care unit (ICU) market. We have completed the first prototypes and have completed a human clinical study in 2006 at a leading Boston-area hospital,
with a member of our Clinical Advisory Board serving as principal investigator. Although we believe the clinical rationale exists for our continuous transdermal glucose monitoring system for the ICU market, there can be no assurance that such a
market will be established, or that we will be able to successfully develop a product that will prove effective for the ICU market or gain market acceptance should such a market develop. The product development process may take several years and
will require substantial capital outlays. If the ICU market does not develop as we expect, or if we are unable to successfully develop a product for such market on a timely basis and within cost constraints, then our business and financial results
will be materially adversely affected. In addition, under the terms of our license agreement, Bayer has rights to our technology and has retained co-exclusive rights to the hospital ICU market and may compete with us in such market. If Bayer
determines to compete with us in the ICU market, our financial results may be adversely affected.

Our future success is dependent upon successful
collaborations with strategic partners.

Our future success is dependent upon our ability to selectively enter into and maintain
collaborative arrangements with third parties for technology research and development, clinical testing, product development and sales and marketing. If we are unable to enter into any additional development agreements or collaborative arrangements
with strategic partners, we will be required to internally fund all of our product development activities, significantly increasing business risk and capital requirements in the development, clinical testing, manufacturing, marketing and
commercialization of new products. We could also encounter significant delays in introducing products into markets or find that the development, manufacture or sale of proposed products in such markets is adversely affected by the absence of
those collaborative arrangements.

The process of establishing collaborative partners is difficult, time-consuming and involves significant
uncertainty. Discussions with potential collaborators may not lead to the establishment of new collaborative relationships on favorable terms, if at all. If successful in establishing a collaborative agreement, such agreement may never result
in the successful development of products or the generation of significant revenue. Any such agreements could limit our flexibility in pursuing alternatives for the development or commercialization of our products. Even if we were to enter into
additional collaborative arrangements with third parties, there can be no assurance that our financial condition or results of operations will significantly improve.



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The risks involved with collaborating with strategic partners include, but are not limited to, the
following:



| |  |  | such strategic partners are likely to be larger, better capitalized companies and therefore have significant leverage in negotiating terms of such collaborative
arrangements;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | such collaborative arrangements could terminate upon the expiration of certain notice periods;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | collaboration partners may insist on and obtain significant interests in our intellectual property rights, for example, Bayer received an exclusive worldwide right
and license of our intellectual property rights to make, have made, use, import and sell a continuous transdermal glucose monitoring system utilizing ultrasonic techniques;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | funding by collaborative partners may be dependent upon the satisfaction of certain goals or milestones by certain specified dates, the realization or
satisfaction of which may be outside of our control, for example, our receipt of future milestone payments from Bayer is dependent on Bayers successful product development efforts, which may not occur on a timely basis, if at all;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | collaborative partners may retain a significant degree of discretion regarding the timing of these activities and the amount and quality of financial, personnel and
other resources that they devote to these activities;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | disputes may arise between us and any future collaborative partner regarding their respective rights and obligations under the collaborative arrangements, which may
be costly; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any future collaborative partner may not be able to satisfy its obligations under its arrangement with us or may intentionally or unintentionally breach its
obligations under the arrangement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The failure to obtain necessary regulatory clearances or approvals will prevent us from
commercializing our products under development.

The design, manufacturing,
labeling, distribution, marketing, sales and usage of our products will be subject to extensive and rigorous government regulation in the United States and certain other countries. The process of obtaining and maintaining required regulatory
clearances and approvals in the United States is lengthy, expensive and uncertain. In order for us to market our potential products in the United States, we must obtain clearance by means of a 510(k) pre-market notification, or approval by means of
a pre-market approval (PMA) application, or a new drug application (NDA), from the United States Food and Drug Administration (FDA). In February 2004, we received 510(k) marketing clearance from the FDA for our
SonoPrep® device for use in electrophysiology applications. In August 2004, we received 510(k) marketing clearance from the FDA for the SonoPrep® device and procedure tray for use with topical lidocaine. We will need to obtain additional marketing clearances or approvals from the FDA in order to market new products and new uses of existing products. In order
to obtain marketing approval for our continuous transdermal glucose monitoring system, we will be required to file a PMA application that demonstrates the safety and effectiveness of the product. If the SonoPrep® device is used for the transdermal delivery of a drug for an indication for which the drug has not already been approved, an NDA would be required to be filed and approved by the FDA for such drug before marketing.
The PMA and the NDA processes are more rigorous and more comprehensive than the 510(k) clearance process and can take several years from initial filing and require the submission of extensive supporting data and clinical information.

Even if we receive 510(k) clearance or PMA or NDA approval for new products, there can be no assurance that the FDA will not impose strict labeling or
other requirements as a condition of our clearance or approval, any of which could limit our ability to market our products under development. Further, if we wish to modify a product after FDA clearance or approval, including changes in indications
or other modifications that could affect safety and efficacy, additional clearances or approvals could be required from the FDA. No assurance can be given that such clearances or approvals will be granted by the FDA on a timely basis, or at all.
Further, we may be required to submit extensive pre-clinical and clinical data depending on the nature of the changes. Any request by the FDA for additional data or any requirement by the FDA that we conduct additional clinical studies could
significantly delay the commercialization of our products and require us to make substantial additional research, development and other expenditures. Similarly, any labeling or other conditions or restrictions imposed by the FDA on the marketing of
our potential products could hinder our ability to effectively market these products.

From time to time, legislation is drafted and
introduced in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of drug products and medical devices. In addition, FDA regulations and guidance are often revised or reinterpreted by
the FDA in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if
any, may be.



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We must maintain our regulatory clearances and approvals in order to continue marketing our products.

Regulatory authorities subject a marketed product, its manufacturer and the manufacturing facilities to continual review and periodic inspections. We
will be subject to ongoing FDA requirements, including required submissions of safety and other post-market information and reports, registration requirements, Quality Systems regulations, and recordkeeping requirements. The Quality Systems
regulations include requirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Our distributors, depending on their activities, are also subject to certain requirements
under the Federal Food, Drug, and Cosmetic Act and the regulations promulgated thereunder, and state laws and registration requirements covering the distribution of our products. Regulatory agencies may change existing requirements or adopt new
requirements or policies that could affect our regulatory responsibilities or the regulatory responsibilities of our distributors. We may not be able to adapt to these changes or new requirements on a timely basis, or at all.

Later discovery of previously unknown problems with our products, manufacturing processes, or our failure to comply with applicable regulatory
requirements may result in enforcement actions by the FDA including, but not limited to: warning letters; patient or physician notification; restrictions on our products or manufacturing processes; product recalls or seizures; refusal to approve
pending applications or supplements to approved applications that we submit; suspension or withdrawal of marketing approvals or clearances; and civil and criminal injunctions, fines and penalties.

We may need to obtain further regulatory approval in connection with the usage of 4% topical lidocaine with our
SonoPrep® Topical Anesthetic System.

In August 2004, we received 510(k) marketing clearance from the FDA to market our SonoPrep® device and procedure tray for use with over-the-counter (OTC) 4%
topical lidocaine for dermal anesthesia prior to the insertion of needles or intravenous catheters. In September 2004, we launched our SonoPrep® Topical Anesthetic System, which consists of
the SonoPrep® device and a topical anesthetic procedure tray for usage with OTC 4% topical lidocaine. However, OTC 4% topical lidocaine has not yet been approved by the FDA for the
indications covered by our 510(k) marketing clearance, namely needle sticks or venipuncture. The FDA may require an NDA in order for Sontra to continue to market OTC 4% topical lidocaine for dermal anesthesia prior to the insertion of needles or
intravenous catheters.

Although we have determined not to market the SonoPrep® Topical Anesthetic System pursuant to its 510(k) marketing clearance, the FDA may determine that approval of the NDA is required, the FDA may determine to limit, restrict or delay our ability
to market the system in the future, or may rescind our 510(k) marketing clearance. If the FDA determines that an NDA is required, it is likely that our 510(k) marketing clearance would be rescinded, which would have a material adverse effect on our
business and results of operations should we decide to market the system.

The trading price of our common stock entails additional regulatory
requirements, which may negatively affect such trading price.

Our common stock is currently listed on the OTC Bulletin Board, an
over-the-counter electronic quotation service, which stock currently trades below $5.00 per share. We anticipate the trading price of our common stock will continue to be below $5.00 per share. As a result of this price level, trading in our common
stock would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). These rules require additional disclosure by broker-dealers in connection with any trades
generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the
penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these
types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchasers written consent to the transaction before sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in our common stock. As a consequence, the market liquidity of our common stock could be severely affected or limited by these regulatory requirements.

Our potential markets are highly competitive and most participants are larger, better capitalized, and more experienced than Sontra.

The markets in which our products are and may be marketed and sold are intensely competitive,
subject to rapid change and significantly affected by new product introductions. Our continuous transdermal glucose monitoring system will compete directly with glucose monitoring products from Roche Diagnostics, LifeScan, Inc., a division of
Johnson & Johnson, Bayer Corporation, MediSense, a division of Abbott Laboratories, Medtronic, Inc., Dexcom, SpectRx and TheraSense, Inc. Our SonoPrep® device will also compete
with numerous companies developing drug delivery products such as Nektar Therapeutics, Alkermes, Inc., Bioject, Inc., PowderJect Pharmaceuticals PLC, Antares Pharma, Inc., Becton Dickinson &



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Co., Aerogen, Inc., ALZA Corporation, a division of Johnson & Johnson, Norwood Abbey Limited, Vyteris, Iomed and 3M Company. In the topical
lidocaine market, we compete with the existing topical lidocaine products manufactured by Astra and others, and also compete with Norwood Abbey, which has received clearance from the FDA to market a laser poration device and Vyteris, which has
received FDA approval to market an iontophoretic device.

Most of these companies
are already producing and marketing glucose monitoring or drug delivery products, are either publicly traded or a division of a publicly traded company, and enjoy several competitive advantages over us. In addition, several of our competitors have
products in various stages of development and commercialization similar to our SonoPrep® device and our continuous transdermal glucose monitoring system. At any time, these companies and
others may develop products that compete directly with our proposed product concepts. In addition, Bayer has retained co-exclusive rights to the hospital ICU market and may compete with us in such market. Many of our competitors have resources
allowing them to spend significantly greater funds for the research, development, marketing and sale of new or existing products, thereby allowing them to respond more quickly to new or emerging technologies and changes in customer requirements. For
all of the foregoing reasons, we may not be able to compete successfully against our current and future competitors. If any of our competitors succeeds in developing a commercially viable product and obtaining government approval, our competitive
position may be materially adversely affected.

Our original intellectual property is owned by the Massachusetts Institute of Technology.

We have an exclusive worldwide license from the Massachusetts Institute of Technology (MIT) under certain licensed patents to practice
our ultrasound-mediated skin permeation technology. These licensed patents include six (6) granted and issued U.S. patents, three (3) granted and issued foreign patents, one (1) U.S. application and one (1) PCT W/O patent
application. Under the license agreement, we have the right to advise and cooperate with MIT in the prosecution and maintenance of the foregoing patents. However, MIT controls the prosecution of these patents. If MIT does not adequately protect our
patent rights, our ability to manufacture and market our products would be adversely affected.

We will need to protect our current intellectual
property.

In addition to the exclusive license from MIT, as of June 30,
2007 we owned six (6) granted and issued U.S. patents, four (4) granted and issued foreign patents, 11 pending U.S. and 26 pending foreign patent applications (including PCT W/O applications). In addition to strengthening our SonoPrep® skin permeation technology, our intellectual property will serve to protect our rights to commercialize our continuous transdermal glucose monitoring technology. However, we can provide no
assurance that patents will be issued from the patent applications, or, if issued, that they will be issued in a form that will be advantageous to us.

There can be no assurance that one or more of the patents owned or licensed by us will not be challenged, invalidated or circumvented or that we will otherwise be able to rely on such patents for any reason. If any of
our patents or any patents licensed from MIT are successfully challenged or our right or ability to manufacture our products or future products (if successfully developed and commercialized) were to be limited, our ability to manufacture and market
these products could be adversely affected, which would have a material adverse effect upon our business, financial condition and results of operations.

In addition to patent protection, we rely on a combination of copyright, trade secret and trademark laws, and nondisclosure, confidentiality agreements and other contractual restrictions to protect our proprietary
technology. However, these legal means afford only limited protection and may not adequately protect our rights or competitive advantage. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade
secrets by our employees. Nondisclosure and confidentiality agreements with third parties may be breached, and there is no assurance that we would have adequate remedies for any such breach.

If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas and compete directly against us. There can be no
assurance that competitors, many of whom have substantial resources and have made substantial investments in competing technologies, will not seek to apply for and obtain patents that limit our ability to make, use and sell our products either in
the United States or in foreign markets. Furthermore, if our intellectual property is not adequately protected, our competitors may be able to use our intellectual property to enhance their products and compete more directly with us, which could
prevent us from entering our products into the market or result in a decrease in our eventual market share.



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We may be subject to litigation or other proceedings relating to our intellectual property rights.

The medical device industry has experienced extensive litigation regarding patents and other intellectual property rights. Third parties could assert
infringement or misappropriation claims against us with respect to our products. Any litigation or interference proceedings may require us to incur substantial legal and other fees and expenses. Such proceedings would also be time consuming and can
be a significant distraction for employees and management, resulting in slower product development and delays in commercialization. In addition, an adverse determination in litigation or interference proceedings could subject us to significant
liabilities to third parties, require us to obtain licenses from third parties or prevent us from selling our products in certain markets, or at all, which would have a material adverse effect on our reputation, business, financial condition and
results of operations.

We operate in an industry with significant product liability risk.

Our business will expose us to potential product liability claims that are inherent in the testing, production, marketing, sale and usage of human
diagnostic and ultrasonic transdermal drug delivery products. Claims may be made by patients, healthcare providers or distributors of our products. Although we have product liability insurance that we believe is appropriate, this insurance is
subject to deductibles and coverage limitations and may not be adequate to protect us against all product liability claims. If we are unable to maintain insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise
protect against potential product liability claims, we will be exposed to significant liabilities, which may harm our business. A product liability claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of
insured liabilities could result in significant costs and significant harm to our business. A product liability claim in excess of our product liability insurance would have to be paid out of our cash reserves, if any, and would harm our reputation
in the industry and adversely affect our ability to raise additional capital. In addition, defending a suit, regardless of merit, could be costly, could divert management attention and might result in adverse publicity, which would adversely affect
our business and financial condition.

Our stock price has been volatile and may fluctuate in the future.

The trading price of our common stock may fluctuate significantly. This price may be influenced by many factors, including:



| |  |  | our financial condition, performance and prospects;
| | - |  | ---------------------------------------------------



| |  |  | the depth and liquidity of the market for our common stock;
| | - |  | -----------------------------------------------------------



| |  |  | our ability to enter into successful collaborative arrangements with strategic partners for research and development, clinical testing, and sales and marketing;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | sales by selling shareholders of shares issued and issuable in connection with our private placements in 2003, 2004, 2006 and 2007;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | investor perception of us and the industry in which we operate;
| | - |  | ---------------------------------------------------------------



| |  |  | general financial and other market conditions; and
| | - |  | --------------------------------------------------



| |  |  | domestic and international economic conditions.
| | - |  | -----------------------------------------------

Public stock markets have experienced extreme price and trading volume volatility, particularly in the technology and life sciences sectors of the market. This volatility has significantly affected the market prices
of securities of many technology companies for reasons frequently unrelated to or disproportionately impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common stock.
In addition, fluctuations in our stock price may have made our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction particularly when
viewed on a quarterly basis.

Securities we issue to fund our operations could dilute or otherwise adversely affect our shareholders.

We need to raise additional funds through public or private debt or equity financings to fund our operations. If we raise funds by issuing equity
securities, the percentage ownership of current shareholders will be significantly reduced and the new equity securities may have rights senior to those of the shares of our common stock. If we raise funds by issuing debt securities, we may be
required to agree to covenants that substantially restrict our ability to operate our business. We may not obtain sufficient financing on terms that are favorable to investors or us. We may delay, limit or eliminate some or all of our proposed
operations if adequate funds are not available.



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The availability of preferred stock for issuance may adversely affect our shareholders.

Our Articles of Incorporation, as amended, authorize our Board of Directors to fix the rights, preferences and privileges of, and issue up to 10,000,000
shares of, preferred stock with voting, conversion, dividend and other rights and preferences that could adversely affect the voting power or other rights of our shareholders. An aggregate of 7,000,000 shares of Series A Preferred Stock were
authorized and designated for issuance by our Board of Directors in our private placement in 2003. As of December 31, 2006, 73,334 shares of Series A Convertible Preferred Stock were outstanding. On January 30, 2007, in connection with the
$660,000 equity financing, the Company repurchased all Series A Convertible Preferred Stock, as was required by our Articles of Incorporation, as amended. The issuance of additional preferred stock or rights to purchase preferred stock may have the
effect of delaying or preventing a change in control of the Company. In addition, the possible issuance of additional preferred stock could discourage a proxy contest, make more difficult the acquisition of a substantial block of our common stock or
limit the price that investors might be willing to pay for shares of our common stock.

Anti-takeover effects of Minnesota law could discourage delay or
prevent a change in control.

As a publicly traded company, we are prohibited by the Minnesota Business Corporation Act, except under
certain specified circumstances, from engaging in any merger, significant sale of stock or assets or business combination with any shareholder or group of shareholders who own at least 10% of our common stock.



|Item 3. | Controls and Procedures
|------- | -----------------------

Disclosure Controls
and Procedures. Our management, with the participation of our Interim Chief Executive Officer, Chief Financial Officer and Treasurer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Interim Chief Executive Officer, Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures as of the end of the period
covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms and that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Interim Chief Executive Officer, Chief Financial
Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial
Reporting. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to which this report relates that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.



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PART II: OTHER INFORMATION



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Warrant Exercises:

On June 15, 2007, Cipher 06 LLC exercised a warrant for the purchase of 118,750 shares of the Companys common stock,
and paid an exercise price of $0.21 per share in cash in connection therewith for an aggregate principal amount of $24,937.50. This transaction did not involve any underwriters, underwriting discounts or commissions and we believe
that this transaction was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2) thereof and Regulation D promulgated thereunder. The Company plans to use the proceeds from the warrant exercise for
general corporate and working capital purposes.

On June 21, 2007, Jasper G. Adelman UTMA-NY, Cass G. Adelman Custodian exercised a warrant for the
purchase of 12,500 shares of the Companys common stock, and paid an exercise price of $0.21 per share in cash in connection therewith for an aggregate principal amount of $2,625. This transaction did not involve any underwriters,
underwriting discounts or commissions and we believe that this transaction was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2) thereof and Regulation D promulgated thereunder. The Company
plans to use the proceeds from the warrant exercise for general corporate and working capital purposes.

On June 21, 2007, Philippa G. Adelman
UTMA-NY, Cass G. Adelman Custodian exercised a warrant for the purchase of 12,500 shares of the Companys common stock, and paid an exercise price of $0.21 per share in cash in connection therewith for an aggregate principal amount of $2,625.
This transaction did not involve any underwriters, underwriting discounts or commissions and we believe that this transaction was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2) thereof
and Regulation D promulgated thereunder. The Company plans to use the proceeds from the warrant exercise for general corporate and working capital purposes.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

At our 2007 Annual Meeting of Shareholders (the Annual Meeting) on May 22, 2007, the following matters were acted upon by our shareholders:



|1. | The election of six directors for the ensuing year;
|-- | ---------------------------------------------------



|2. | To amend the Companys 2003 Stock Option and Incentive Plan to (i) increase the number of shares of Common Stock available for issuance thereunder by 1,000,000 shares, and
(ii) increase the annual per participant limit on awards granted thereunder to 250,000 shares; and
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | The ratification of the appointment of Wolf & Company, P.C. as the Companys independent registered public accounting firm for the current fiscal year ending
December 31, 2007.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The number of shares of Common Stock issued, outstanding and eligible to vote as of the record date of March 29,
2007 was 9,379,179. The results of the voting on each of the matters presented to shareholders at the Annual Meeting are set forth below:



|                                                                      |  |           |  |                |  |               |  |             |  |                 
|--------------------------------------------------------------------- |  | --------- |  | -------------- |  | ------------- |  | ----------- |  | ----------------
|                                                                      |  | VOTES FOR |  | VOTES WITHHELD |  | VOTES AGAINST |  | ABSTENTIONS |  | BROKER NON-VOTES
|1.      Election of six directors:                                    |  |           |  |                |  |               |  |             |  |                 
|                                                                      |  |           |  |                | 
|Michael R. Wigley                                                     |  | 5,515,002 |  | 229,504        |  | NA            |  | NA          |  | NA              
|Joseph F. Amaral                                                      |  | 5,515,121 |  | 229,385        |  | NA            |  | NA          |  | NA              
|Robert S. Langer                                                      |  | 5,515,382 |  | 229,124        |  | NA            |  | NA          |  | NA              
|Gerard E. Puorro                                                      |  | 5,515,321 |  | 229,185        |  | NA            |  | NA          |  | NA              
|Brian F. Sullivan                                                     |  | 5,364,641 |  | 379,864        |  | NA            |  | NA          |  | NA              
|Walter W. Witoshkin                                                   |  | 5,515,493 |  | 229,013        |  | NA            |  | NA          |  | NA              
|                                                                      |  |           |  |                | 
|2.      Approval of Amendment to 2003 Stock Option and Incentive Plan |  | 4,116,581 |  | NA             |  | 186,718       |  | 58,157      |  | 1,383,050       
|                                                                      |  |           |  |                | 
|3.      Ratification of Wolf & Company, P.C.                          |  | 5,732,311 |  | NA             |  | 10,770        |  | 1,425       |  | NA              



|Item 6. | Exhibits
|------- | --------

The Exhibits listed in the Exhibit Index
immediately preceding such Exhibits are filed with or incorporated by reference in this report.



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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |  |  |                            |  |                                                                                        
|--------------------- |  |  |  | -------------------------- |  | ---------------------------------------------------------------------------------------
|                      |  |  |  | SONTRA MEDICAL CORPORATION
|                      |  |  | 
|Date: August 13, 2007 |  |  |  | By:                        |  | /s/ HARRY G. MITCHELL                                                                  
|                      |  |  |  |                            |  | Harry G. Mitchell Interim Chief Executive
Officer,Chief Financial Officer and Treasurer



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EXHIBIT INDEX



|     |  |                                                                                                                                                                                                      
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | 2003 Stock Option and Incentive Plan, as amended, is incorporated herein by reference to Appendix I of the Registrants Definitive Schedule 14A filed on April 17, 2007 (File No.
000-23017).        
|     | 
|10.2 |  | Form of Warrant to Purchase Shares of Common Stock is incorporated herein by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K dated June 15, 2007 (File No.
000-23017).      
|     | 
|10.3 |  | Form of Warrant to Purchase Shares of Common Stock is incorporated herein by reference to Exhibit 10.2 of the Registrants Current Report on Form 8-K dated June 15, 2007 (File No.
000-23017).      
|     | 
|31   |  | Certification of the Interim Chief Executive Officer, Chief Financial Officer and Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|32   |  | Certification of the Interim Chief Executive Officer, Chief Financial Officer and Treasurer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.



29