UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


_______________




FORM
10-Q


_______________




x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the quarterly period ended June 30, 2009




o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the transition period from
______to______.




SONASOFT
CORP.


(Exact
name of registrant as specified in Charter)




California
              
              333-150750
              
              51-0439372(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (Commission
      File No.)
              
              (IRS
      Employee Identification No.)





6489
Camden Avenue, Suite 105


San
Jose, CA  95120


(Address
of Principal Executive Offices)


_______________




(408)
927-6200


(Issuer
Telephone number)


_______________




(Former
Name or Former Address if Changed Since Last Report)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2)has been subject to such filing requirements for the past 90
days.


Yes x No o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o No o





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




Large
Accelerated Filer o    Accelerated
Filer o     Non-Accelerated
Filer o     Smaller
Reporting Company x





Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act.


Yes o No x





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of August 18, 2009:  36,438,211 shares of Common Stock.













SONASOFT
CORP.





FORM
10-Q


June
30, 2009


INDEX






PART
I-- FINANCIAL INFORMATION




Item
      1.
            Financial
      StatementsItem
      2.
            Management’s
      Discussion and Analysis of Financial ConditionItem
      3
            Quantitative
      and Qualitative Disclosures About Market RiskItem
      4T.
            Control
      and Procedures




PART
II-- OTHER INFORMATION




Item
      1
            Legal
      ProceedingsItem
      1A
            Risk
      FactorsItem
      2.
            Unregistered
      Sales of Equity Securities and Use of ProceedsItem
      3.
            Defaults
      Upon Senior SecuritiesItem
      4.
            Submission
      of Matters to a Vote of Security HoldersItem
      5.
            Other
      InformationItem
      6.
            Exhibits
      and Reports on Form 8-K




SIGNATURE













Item
1. Financial Information




SONASOFT, CORP.CONDENSED
      BALANCE SHEETSASSETSAs
      of June 30,
                                
                                
                                As
      of December 31,2009
                                
                                
                                2008(UNAUDITED)
                                
                                
                                (AUDITED)Current
      AssetsCash
                                
                                $
                                314,080
                                
                                
                                $
                                890,806Accounts
      receivable, net
                                
                                
                                78,324
                                
                                
                                
                                95,602Other
      current assets
                                
                                
                                25,819
                                
                                
                                
                                1,064Total
      Current Assets
                                
                                
                                418,223
                                
                                
                                
                                987,472Fixed
      assets, net
                                
                                
                                40,882
                                
                                
                                
                                35,233Deposit
                                
                                
                                -
                                
                                
                                
                                -Intangible
      assets, net
                                
                                
                                2,638
                                
                                
                                
                                2,638Total
      Other Assets
                                
                                
                                2,638
                                
                                
                                
                                2,638Total
      Assets
                                
                                $
                                461,743
                                
                                
                                $
                                1,025,343LIABILITIES AND STOCKHOLDERS'
      DEFICIENCYCurrent
      LiabilitiesAccounts payable
                                
                                $
                                143,599
                                
                                
                                $
                                115,326Accrued expenses - related party
                                
                                
                                917,295
                                
                                
                                
                                904,105Accrued expenses -non related party
                                
                                
                                492,175
                                
                                
                                
                                503,856Royalty payable
                                
                                
                                168,906
                                
                                
                                
                                150,498Notes payable - related party, net
                                
                                
                                122,130
                                
                                
                                
                                122,130Total
      Current Liabilities
                                
                                
                                1,844,105
                                
                                
                                
                                1,795,915Long
      Term LiabilitiesNotes payable - related party, net
                                
                                
                                106,710
                                
                                
                                
                                21,882Total
      Long Term Liabilities
                                
                                
                                106,710
                                
                                
                                
                                21,882Commitments
      and Contingencies
                                
                                
                                -
                                
                                
                                
                                -Stockholders'
      DeficiencyCommon
      stock, no par value; 100,000,000 shares authorized,36,387,877
      and 34,697,144 shares issued and outstanding, respectively
                                
                                
                                8,407,200
                                
                                
                                
                                8,370,808Stock
      Subscription Receivable
                                
                                
                                (111
                                )
                                
                                
                                (111
                                )Accumulated
      deficit
                                
                                
                                (9,896,161
                                )
                                
                                
                                (9,163,151
                                )Total
      Stockholders' Deficiency
                                
                                
                                (1,489,072
                                )
                                
                                
                                (792,454
                                )-
                                
                                
                                
                                -Total
      Liabilities and Stockholders' Deficiency
                                
                                $
                                461,743
                                
                                
                                $
                                1,025,343




See
accompanying notes to condensed unaudited finacial statements.
 -1-




SONASOFT,
      CORP.CONDENSED
      STATEMENT OF OPERATIONS(UNAUDITED)For
      the Three Months Ended
                                      
                                      
                                      For
      the Six Months EndedJune
      30,
                                      
                                      
                                      June
      30,2009
                                      
                                      
                                      2008
                                      
                                      
                                      2009
                                      
                                      
                                      2008Revenue
                                      
                                      $
                                      177,985
                                      
                                      
                                      $
                                      264,265
                                      
                                      
                                      $
                                      368,161
                                      
                                      
                                      $
                                      458,913Operating
      ExpensesOfficer's
      compensation
                                      
                                      
                                      39,000
                                      
                                      
                                      
                                      36,000
                                      
                                      
                                      
                                      66,000
                                      
                                      
                                      
                                      66,000Salaries
                                      
                                      
                                      178,988
                                      
                                      
                                      
                                      291,834
                                      
                                      
                                      
                                      412,925
                                      
                                      
                                      
                                      506,187Consulting
      fees
                                      
                                      
                                      225
                                      
                                      
                                      
                                      31,950
                                      
                                      
                                      
                                      11,055
                                      
                                      
                                      
                                      127,314Marketing
      and advertising
                                      
                                      
                                      16,363
                                      
                                      
                                      
                                      5,802
                                      
                                      
                                      
                                      50,333
                                      
                                      
                                      
                                      21,921Rent
                                      
                                      
                                      17,873
                                      
                                      
                                      
                                      38,823
                                      
                                      
                                      
                                      32,873
                                      
                                      
                                      
                                      76,886Payroll
      taxes
                                      
                                      
                                      20,790
                                      
                                      
                                      
                                      32,040
                                      
                                      
                                      
                                      49,658
                                      
                                      
                                      
                                      60,031General
      and administrative
                                      
                                      
                                      92,449
                                      
                                      
                                      
                                      268,708
                                      
                                      
                                      
                                      176,226
                                      
                                      
                                      
                                      460,867Research
      and development
                                      
                                      
                                      83,658
                                      
                                      
                                      
                                      102,885
                                      
                                      
                                      
                                      172,985
                                      
                                      
                                      
                                      199,837Total
      Operating Expenses
                                      
                                      
                                      449,346
                                      
                                      
                                      
                                      808,042
                                      
                                      
                                      
                                      972,055
                                      
                                      
                                      
                                      1,519,043Net
      loss from Operations
                                      
                                      
                                      (271,361
                                      )
                                      
                                      
                                      (543,777
                                      )
                                      
                                      
                                      (603,894
                                      )
                                      
                                      
                                      (1,060,130
                                      )Other
      Income (Expense)Interest
      income
                                      
                                      
                                      208
                                      
                                      
                                      
                                      4,938
                                      
                                      
                                      
                                      1,069
                                      
                                      
                                      
                                      13,349Interest
      expense
                                      
                                      
                                      (52,897
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (110,977
                                      )
                                      
                                      
                                      -Royalty
      expense
                                      
                                      
                                      (8,899
                                      )
                                      
                                      
                                      (14,270
                                      )
                                      
                                      
                                      (18,408
                                      )
                                      
                                      
                                      (24,002
                                      )Total
      Other Income (Expense)
                                      
                                      
                                      (61,588
                                      )
                                      
                                      
                                      (9,332
                                      )
                                      
                                      
                                      (128,316
                                      )
                                      
                                      
                                      (10,653
                                      )Loss
      from Operations before Provision for Income Taxes
                                      
                                      
                                      (332,949
                                      )
                                      
                                      
                                      (553,109
                                      )
                                      
                                      
                                      (732,210
                                      )
                                      
                                      
                                      (1,070,783
                                      )Provision
      for Income Taxes
                                      
                                      
                                      800
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      800
                                      
                                      
                                      
                                      -Net
      Loss
                                      
                                      $
                                      (333,749
                                      )
                                      
                                      $
                                      (553,109
                                      )
                                      
                                      $
                                      (733,010
                                      )
                                      
                                      $
                                      (1,070,783
                                      )Loss
      per Common Share - Basic and Diluted
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.02
                                      )
                                      
                                      $
                                      (0.02
                                      )
                                      
                                      $
                                      (0.03
                                      )Weighted
      average number of shares outstandingduring
      the period - Basic and Diluted
                                      
                                      
                                      36,362,750
                                      
                                      
                                      
                                      32,377,241
                                      
                                      
                                      
                                      36,362,750
                                      
                                      
                                      
                                      32,377,241


See
accompanying notes to condensed unaudited finacial statements.
 -2-


SONASOFT,
      CORP.CONDENSED
      STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCYFOR THE SIX MONTH'S ENDED JUNE 30,
      2009StockCommon
      Stock
                              
                              
                              Paid
      In
                              
                              
                              Subscription
                              
                              
                              AccumulatedShares
                              
                              
                              Par
                              
                              
                              Capital
                              
                              
                              Receivable
                              
                              
                              Deficit
                              
                              
                              TotalBalance,
      December 31, 2008
                              
                              
                              36,219,877
                              
                              
                              $
                              -
                              
                              
                              $
                              8,370,808
                              
                              
                              $
                              (111
                              )
                              
                              $
                              (9,163,151
                              )
                              
                              $
                              (792,454
                              )Stock
      issued for services
                              
                              
                              135,000
                              
                              
                              
                              
                              
                              
                              
                              29,242
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              29,242Stock
      issued for cash
                              
                              
                              33,000
                              
                              
                              
                              
                              
                              
                              
                              7,150
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              7,150Net
      loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (733,010
                              )
                              
                              
                              (733,010
                              )Balance,
      June 30, 2009 (UNAUDITED)
                              
                              
                              36,387,877
                              
                              
                              $
                              -
                              
                              
                              $
                              8,407,200
                              
                              
                              $
                              (111
                              )
                              
                              $
                              (9,896,161
                              )
                              
                              $
                              (1,489,072
                              )


See
accompanying notes to condensed unaudited finacial statements.
 -3-




SONASOFT, CORP.CONDENSED
      STATEMENT OF CASH FLOWS(UNAUDITED)For
      the Six Months EndedJune
      30,2009
                              
                              
                              2008Cash
      Flows From Operating Activities:Net
      Loss
                              
                              $
                              (733,010
                              )
                              
                              $
                              (1,070,783
                              )Adjustments
      to reconcile net loss to net cash used in operationsIssuances
      of shares for services rendered
                              
                              
                              29,242
                              
                              
                              
                              137,733Amortization
      of debt discount
                              
                              
                              84,828
                              
                              
                              
                              -Options
      issued to employee
                              
                              
                              -
                              
                              
                              
                              128,885Depreciation
                              
                              
                              3,260
                              
                              
                              
                              12,120Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              17,278
                              
                              
                              
                              (56,910
                              )Other
      current assets
                              
                              
                              (24,755
                              )
                              
                              
                              1,239Accrued
      expenses - non related party
                              
                              
                              (11,681
                              )
                              
                              
                              2,701Accrued
      expenses - related party
                              
                              
                              13,190
                              
                              
                              
                              9,000Royalty
      payable
                              
                              
                              18,408
                              
                              
                              
                              24,003Accounts
      payable
                              
                              
                              28,273
                              
                              
                              
                              29,200Net
      Cash Used In Operating Activities
                              
                              
                              (574,967
                              )
                              
                              
                              (782,812
                              )Cash
      Flows From Investing Activities:Purchase
      of Assets
                              
                              
                              (8,909
                              )
                              
                              
                              (3,303
                              )Net
      Cash Used In Investing Activities
                              
                              
                              (8,909
                              )
                              
                              
                              (3,303
                              )Cash
      Flows From Financing Activities:Proceeds
      from loans payable
                              
                              
                              -
                              
                              
                              
                              28,886Common
      Stock issued for cash
                              
                              
                              7,150
                              
                              
                              
                              595,657Net
      Cash Provided by Financing Activities
                              
                              
                              7,150
                              
                              
                              
                              624,543Net
      Decrease in Cash
                              
                              
                              (576,726
                              )
                              
                              
                              (161,572
                              )Cash
      at Beginning of Period
                              
                              
                              890,806
                              
                              
                              
                              938,934Cash
      at End of Period
                              
                              $
                              314,080
                              
                              
                              $
                              777,362Supplemental disclosure of cash flow
      information:Cash
      paid for interest
                              
                              $
                              50,000
                              
                              
                              $
                              -Cash
      paid for taxes
                              
                              $
                              -
                              
                              
                              $
                              -







See
accompanying notes to condensed unaudited finacial statements.
 -4-





SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)






NOTE
1     SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES AND ORGANIZATION





(A)
Organization




Sonasoft
Corp. (the "Company") was incorporated under the laws of the State of
California on December 18, 2002. The Company develops software that automates
the disk-to-disk backup and recovery process for Microsoft Exchange, SQL and
Windows Servers with integrated data protection, high availability and disaster
recovery solutions.




The
unaudited financial statements of the Company have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial
information.  Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United
States of America for annual financial statements.





However,
the information included in these interim financial statements reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for the fair presentation of the financial
position and the results of operations. Results shown for interim periods
are not necessarily indicative of the results to be obtained for a full
year.




(B) Use of
Estimates




In
preparing financial statements in conformity with generally accepted accounting
principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from those
estimates.





(C) Basis
Presentation





Certain
balances in the financial statements as of and for December 31, 2008 have been
reclassified to conform to the current period's presentation.  The
changes had no effect on the previously reported net income, total assets,
liabilities, or stockholders' equity.




(D) Cash and Cash
Equivalents




For
purposes of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents. The Company at times has cash in banks in
excess of FDIC insurance limits and places its temporary cash investments with
high credit quality financial institutions. At June 30, 2009, the Company had
approximately $254,258 in cash balances at financial institutions which were in
excess of the FDIC insured limits.




(E) Loss Per
Share





Basic and
diluted net loss per common share is computed based upon the weighted average
common shares outstanding as defined by Financial Accounting Standards No. 128,
“Earnings per Share.”  As of June 30, 2009 and 2008, there were
8,667,727 and 6,590,000 common share equivalents outstanding
respectively.  Common stocks equivalents have been excluded from the
diluted net loss per share as the amounts are anti-diluted.




(F) Research and Development
Costs




The
Company expenses all research and development costs as incurred for which there
is no alternative future use. These costs also include expensing of employee
compensation and employee stock based compensation.







-5-




SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)







(G) Income
Taxes




The
Company accounts for income taxes under the Statement of Financial Accounting
Standards Board Statement of Financial Accounting Standard NO. 109, “Accounting
for Income Taxes”(“Statement 109”).  Under Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.  Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.





(H) Revenue
Recognition




Revenue
is recognized when earned in accordance with applicable accounting standard,
including SOP 97-2, as amended. Revenue from software arrangements with end
users is recognized upon final delivery of the software, provided that
collection is probable and no significant obligations remain. Maintenance
arrangement revenue is deferred and recognized over the service
period.




(I) Property &
Equipment




We record
our property and equipment at cost and depreciate these assets on a
straight-line basis to their estimated residual values over their estimated
useful lives of 3 to 7 years.




(J) Stock-Based
Compensation




The
Company accounts for its stock-based compensation under the provisions of SFAS
No.123(R)“Accounting for
Stock Based Compensation.”  Under SFAS No. 123(R), the
Company is permitted to record expenses for stock options and other employee
compensation plans based on their fair value at the date of grant. Any such
compensation cost is charged to expense on a straight-line basis over the
periods the options vest. If the options had cashless exercise provisions, the
Company utilized variable accounting.




Common
stock, stock options and common stock warrants issued to other than employees or
directors are recorded on the basis of their fair value, as required by SFAS
No. 123(R), which is measured as of the date required by EITF
Issue 96-18,“Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services.” In accordance with
EITF 96-18, the stock options or common stock warrants are valued using the
Black-Scholes model on the basis of the market price of the underlying common
stock on the “valuation date,” which for options and warrants related to
contracts that have substantial disincentives to non-performance is the date of
the contract, and for all other contracts is the vesting date. Expense related
to the options and warrants is recognized on a straight-line basis over the
shorter of the period over which services are to be received or the vesting
period. Where expense must be recognized prior to a valuation date, the expense
is computed under the Black-Scholes model on the basis of the market price of
the underlying common stock at the end of the period, and any subsequent changes
in the market price of the underlying common stock up through the valuation date
is reflected in the expense recorded in the subsequent period in which that
change occurs.




(K) Fair Value of Financial
Instruments




The
carrying amounts of the Company’s financial instruments including accounts
receivable, accounts payable and accrued expenses approximate their fair value
due to the relatively short period to maturity for these
instruments.




(L) Business
Segments




The
Company operates in one segment and therefore segment information is not
presented.






-6-




SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)


(M) Advertising
Costs




Advertising
costs are expensed as incurred and include the costs of public relations
activities. These costs are included in selling, general and administrative
expenses and totaled $50,333 for the six months ended June 30, 2009




(N) Identifiable Intangible
Assets




As of
June 30, 2009, $2,638 of costs related to filing patent applications has been
capitalized. When patents are approved, the costs are amortized over the life of
the patent.  All costs for patents not approved will be expensed at
that time of denial.




(O) Long-Lived
Assets




Long-lived
assets and certain identifiable intangible assets related to those assets are
periodically reviewed for impairment whenever circumstances and situations
change such that there is an indication that the carrying amounts may not be
recoverable. If the non-discounted future cash flows of the enterprise are less
than their carrying amount, their carrying amounts are reduced to fair value and
an impairment loss is recognized. There was no impairment recorded in 2009 and
2008.




(P) Recent Accounting
Pronouncements




In May
2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. SFAS 165 sets forth (1) The period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) The circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) The disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. SFAS 165 is
effective for interim or annual financial periods ending after June 15, 2009.
The Company is evaluating the impact the adoption of SFAS 165 will have on its
financial statements.





In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. SFAS 166 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 166 will have on its
financial statements.





In June
2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”). SFAS 167 improves financial reporting by enterprises involved with
variable interest entities and to address (1) the effects on certain provisions
of FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities”, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS 166 and (2) constituent concerns about
the application of certain key provisions of Interpretation 46(R), including
those in which the accounting and disclosures under the Interpretation do not
always provide timely and useful information about an enterprise’s involvement
in a variable interest entity. SFAS 167 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period, and for
interim and annual reporting periods thereafter. The Company is evaluating the
impact the adoption of SFAS 167 will have on its financial
statements.







-7-




SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)




In June
2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162”. The FASB Accounting Standards Codification
(“Codification”) will be the single source of authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods
ending after September 15, 2009. All existing accounting standards are
superseded as described in SFAS 168. All other accounting literature not
included in the Codification is nonauthoritative. The Codification is not
expected to have a significant impact on the Company’s financial
statements.





NOTE
2     GOING
CONCERN




As
reflected in the accompanying financial statements, the Company has a net loss
of $733,010 for the six months ended June 30, 2009, and a working capital
deficiency of $1,425,882 and a stockholders’ deficiency of $1,489,072 as of June
30, 2009.  For the six months ended June 30, 2009, the Company used
cash of $574,967 in operations. This raises substantial doubt about its ability
to continue as a going concern.  The ability of the Company to
continue as a going concern is dependent on the Company’s ability to raise
additional capital and implement its business plan.  The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.




Management
believes that actions presently being taken to obtain additional funding and to
implement its strategic sales plan provide the opportunity for the Company to
continue as a going concern.




NOTE
3      ACCOUNTS
RECEIVABLE




Accounts
receivable at June 30, 2009 and December 31, 2008 consisted of the
following:




2009
                        
                        
                        
                        2008Trade
      and other receivables
                        
                        $
                        78,324
                        
                        
                        $
                        95,602Less:
      Allowance for doubtful accounts
                        
                        
                        -
                        
                        
                        
                        -$
                        78,324
                        
                        
                        $
                        95,602





The bad
debt expense in each of 2009 and December 31, 2008 was $0 and $0,
respectively.





NOTE
4     PROPERTY AND
EQUIPMENT




Property
and equipment at June 30, 2009 and 2008 consisted of the following:




2009
                          
                          
                          
                          2008Office
      equipment
                          
                          $
                          22,724
                          
                          
                          $
                          13,815Office
      furniture
                          
                          
                          -
                          
                          
                          
                          -Leasehold
      improvements
                          
                          
                          -
                          
                          
                          
                          -Computer
      equipment
                          
                          
                          101,875
                          
                          
                          
                          101,875Less:
      Accumulated depreciation
                          
                          
                          83,717
                          
                          
                          
                          80,457$
                          40,882
                          
                          
                          $
                          35,233




Depreciation
expense for the six months ended June 30, 2009 and 2008 was $3,260 and $12,120,
respectively.






-8-


SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)






NOTE
5     STOCKHOLDERS’
EQUITY




(A) Common Stock Issued for
Cash




During
the six months ended June 30, 2009, the Company issued 33,000 shares of common
stock for cash of $7,150.





(B) Common Stock Issued for
Services





During
the six months ended June 30, 2009, the Company issued 135,000 shares of common
stock for services provided by consultants; these shares were valued at a recent
cash offering price of $29,242.





NOTE
6     STOCK OPTION
PLAN




Effective
January 1, 2006, transactions under the Company’s 2003 Plan (as defined below)
were accounted for in accordance with the recognition and measurement provisions
of SFAS no. 123 (revised), “Share-Based Payment”, which replaces SFAS No. 123,
“Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees”, and related
interpretations.  SFAS No. 123(R) requires compensation costs related
to share-based payment transactions, including employee stock options, to be
recognized in the financial statements.  In addition, the Company
adheres to the guidance set forth within SEC Staff Accounting Bulletin No. 107,
which provides the views of the staff of the SEC regarding the interaction
between SFAS No. 123(R) and certain SEC rules and regulations and provides
interpretations with respect to the valuation of share-based payments for public
companies.




In
adopting SFAS No. 123(R), the Company applied the modified prospective approach
to transition.  Under the modified prospective approach, the
provisions of SFAS No. 123(R) are applied to new awards and to awards modified,
repurchased, or cancelled after the effective date.  Additionally,
compensation costs for the portion of awards for which the requisite service has
not been rendered that are outstanding as of the effective date are recognized
as the requisite services are rendered on or after such date.  The
compensation costs for that portion of awards are based on the grant-date fair
value of those awards as calculated for either recognition of pro-forma
disclosures under SFAS No. 123.




As a
result of the adoption of SFAS No. 123(R), the Company’s results for the six
months ended June 30, 2009 and 2008 includes share-based compensation expense
totaling $0 and $128,885, which has been included in salaries
expense.  No income tax benefit has been recognized in the income
statements for share-based compensation arrangements as the Company has provided
a 100% valuation allowance on its net deferred tax asset.




Stock
option compensation expense for the six months ending June 30, 2009 and 2008, is
the estimated fair value of options granted, amortized on a straight line basis
over the requisite service period for the entire portion of the
award.




Black-Scholes
Valuation




The fair
value of options at the date of grant is estimated using the Black Scholes
option pricing model.  The assumptions made in calculating the fair
values of options are as follows:




For
      the period ended
                      June
      30, 2009
                    For
      the year ended
                      June
      30, 2008Expected
      term (in years)
                    N/A
                    3Expected
      volatility
                    N/A
                    25%
      to 78%Rick-free
      interest rate
                    N/A
                    1.79%
      to 3.05%






-9-






SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)




There
were Nil and 785,000 stock option awards granted during the six months ended
June 30, 2009 and 2008, respectively.




Plan
Information




In
February 2003, the 2003 Incentive and Non-Statutory Stock Option Plan was
approved and adopted by the Board of Directors.  The 2003 Plan became
effective upon the approval of the holders of the Company’s stock at the
Company’s annual stockholders meeting held on September 4,
2003.  Under the 2003 Plan, the Company may grant stock options to its
employees, officers, and other key persons employed or retained by the Company
and any non-employee director, consultant, vendor or other individual having a
business relationship with the Company.  Options are granted at
various times and usually vest over a thirty-six (36) month period and also in
the event of filing with SEC all the unvested options will become fully
vested. As of June 30, 2009 and 2008 the Company had total options pursuant
to the 2003 Plan of 6,395,000 and 6,590,000 outstanding,
respectively.




A summary
of the status of Company’s fixed stock option plan as of June 30, 2009
(unaudited), and the changes during the years then ended is presented
below:




Fixed
options




Qty
                                
                                
                                Weighted
                                  Average
                                  Exercise
      PriceOutstanding
      at December 31, 2008
                                
                                
                                6,395,000
                                
                                
                                $
                                0.17Issued
                                
                                
                                -
                                
                                
                                $
                                0.00Exercised
                                
                                
                                -
                                
                                
                                $
                                (0.00
                                )Cancelled
                                
                                
                                -
                                
                                
                                $
                                (0.00
                                )Outstanding
      at June 30, 2009
                                
                                
                                6,395,000
                                
                                
                                $
                                0.17Exercisable
      at June 30, 2009
                                
                                
                                6,395,000







Exercise
      Price
                                  
                                  
                                  Number
                                    Outstanding
                                    June
      30, 2008
                                  
                                  
                                  Weighted
                                    Average
                                    remaining
                                    Contractual
      Life
                                  
                                  
                                  Weighted
                                    Average
                                    Exercise Price
                                  
                                  
                                  Number
                                    Exercisable at June 30,
    2008
                                  
                                  
                                  Weighted
                                    Average
                                    Exercise
      Price.01-.10
                                  
                                  
                                  
                                  3,115,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0.07
                                  
                                  
                                  
                                  3,115,000
                                  
                                  
                                  
                                  0.07.11-.20
                                  
                                  
                                  
                                  845,000
                                  
                                  
                                  
                                  .81
                                  
                                  
                                  
                                  0.20
                                  
                                  
                                  
                                  786,521
                                  
                                  
                                  
                                  0.20.21-.30
                                  
                                  
                                  
                                  2,630,000
                                  
                                  
                                  
                                  1.74
                                  
                                  
                                  
                                  0.30
                                  
                                  
                                  
                                  1,116,794
                                  
                                  
                                  
                                  0.306,590,000
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  5,018,315




Exercise
      Price
                            
                            
                            Number
                              Outstanding
                              June
      30, 2009
                            
                            
                            Weighted
                              Average
                              remaining
                              Contractual
      Life
                            
                            
                            Weighted
                              Average
                              exercise Price
                            
                            
                            Number
                              Exercisable
      at
                              June
      30, 2009
                            
                            
                            Weighted
                              Average
                              Exercise
      Price.01-.10
                            
                            
                            
                            3,115,000
                            
                            
                            
                            -
                            
                            
                            
                            0.07
                            
                            
                            
                            3,115,000
                            
                            
                            
                            0.07.11-.20
                            
                            
                            
                            845,000
                            
                            
                            
                            .81
                            
                            
                            
                            0.20
                            
                            
                            
                            845,000
                            
                            
                            
                            0.20.21-.30
                            
                            
                            
                            2,435,000
                            
                            
                            
                            1.74
                            
                            
                            
                            0.30
                            
                            
                            
                            2,435,000
                            
                            
                            
                            0.306,395,000
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            6,395,000






-10-




SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)






NOTE
7     COMMITMENTS AND
CONTINGENCIES




(A) Employment
Agreement




The
company has entered into an employment agreement with its Chief Executive
Officer through the year 2013 at an annual minimum salary of $150,000 per year,
with additional fringe benefits as determined by the Board of
Directors.  In the event of termination of the agreement by the
company, the company is required to pay a severance payment equivalent to 60
months of salary at the rate, and with the benefits, in effect at the date of
termination.




The
company has also entered into similar agreements each extending through the year
2011 with three other employees/managers at an average annual salary of
$120,000.  In the event of termination of the agreement by the
company, the company is required to pay a severance payment equivalent to 12
months of salary at the rate, and with the benefits, in effect at the date of
termination.  The total commitment as of June 30, 2009 under the
employment agreements are summarized below:




2009
                      
                      $
                      240,0002010
                      
                      
                      480,0002011
                      
                      
                      480,0002012
                      
                      
                      150,0002013
                      
                      
                      150,000Total
                      
                      $
                      1,500,000




(B) Product
Development/Royalty Agreement




In
November 2007, the Company entered into a product development agreement with a
software development company (developer).  Under the terms of the
agreement, the developer will be entitled to a royalty based on 10% of net sales
of the product developed until such time as two hundred percent (200%) of the
actual project cost has been cumulatively received by the
developer.  After such time, the developer would receive 5% of net
sales of the product developed until such time as an additional three hundred
percent (300%) of the actual project cost has been cumulatively received by the
developer, resulting in a total payment to the developer of five hundred percent
(500%) of the actual project cost.  At a point in time in the future
that five hundred percent (500%) of the actual project cost has been received by
the developer, no further royalties shall be owed.  As of June 30,
2009, the total estimated royalty liability only upon sales of the new product
is up to $1,744,465.





(C) Royalty
Agreement




During
the year 2003, the Company entered into royalty agreements with
investors.  The maximum liability under the agreement will be
$1,500,000.  The maximum amount due to investors in each year will be
5% of revenue up to a total of $1,500,000.  Such premium is payable
only if management of the Company reasonably determines that the company has the
cash available to pay.  In accordance with the signed royalty
agreements, the Company is accruing the royalty premium at 5% of
revenue.  As of June 30, 2009 and 2008, $168,906 and $135,991,
respectively have been accrued.





-11-





SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)





(D) Lease
Agreement




The
company has entered into a lease agreement for an office building with a related
party for a term of 3 years ending on April 30, 2010.  The annual rent
payable under the lease is $61,800 plus annual increases of a minimum of 3% and
expenses related to the common areas. The following summarizes obligations
under the existing lease as of June 30, 2009:




2009
                  
                  $
                  30,9002010
                  
                  
                  20,600Total
                  
                  $
                  51,500





The
company has entered into three lease agreements for computer equipment with an
unrelated third party for a term of 3 years ending in April, May, and September
of 2011. The company has entered into one lease agreement for office equipment
with an unrelated third party for a term of 5 years ending December 2013.
The annual lease amounts payable under the leases are $349, $1,101, $3,507
and $2,463 respectively.  The following summarizes obligations under the
existing leases as of June 30, 2009:




2009
                    
                    $
                    3,7102010
                    
                    
                    7,4202011
                    
                    
                    5,3472012
                    
                    
                    2,4632013
                    
                    
                    2,463Total
                    
                    $
                    21,403




(E) Employment Related
Lawsuit




In 2006,
an ex-employee filed a lawsuit against the Company for wrongful
termination.  The Company has accrued a tentative settlement with the
ex-employee for the payment of $152,500 as of June 30, 2009.  As of
August 06, 2009, the tentative settlement with ex-employee was not finalized or
agreed upon by both parties.




NOTE
8     RELATED PARTY
TRANSACTIONS




On
January 4, 2007, the company entered into an addendum to the lease agreement for
their office space with the owner who is a Director of the
Company.  In consideration for the unpaid amounts of rent and
leasehold improvements, the Company issued a convertible note
payable.  On April 3, 2008, the Company entered into an addendum to
the lease agreement for their office with the owner who is a Director which
stated that all amounts of unpaid rent and leasehold improvements could only be
made in cash. (See Note 9).





NOTE
9    NOTE
PAYABLE – RELATED PARTY




In 2007,
the Company entered into a convertible note agreement with its landlord who is
also a director.  The note is convertible into common stock at $0.30
per share at the election of the note holder.  The value of the
conversion option is equal to recent cash offering prices and no beneficial
conversion was recognized in accordance with EITF 98-5 and EITF
00-19.  On April 3, 2008, the Company entered into an addendum to the
lease agreement for their office with the owner who is a Director which stated
that all amounts of unpaid rent and leasehold improvements could only made in
cash. (See Note 8).






-12-




SONASOFT
CORP.
 JUNE
30, 2009
 NOTES TO CONDENSED FINANCIAL
STATEMENTS
 (UNAUDITED)






On
December 19, 2008, the company has issued a note to one of their directors for
cash received of $500,000 on terms of 10% per interest per year and payable 36
months after issuance. The first interest payment of $50,000 was due sixty (60)
days after the issuance of the note.  Thereafter, interest accrued
will be paid quarterly, in arrears, at the end of each full calendar quarter
following the one year anniversary of the date of the note set out
above.  In conjunction with the issuance of the note payable, the
Company also granted warrants for 2,272,727 shares of common stock at an
exercise price of $0.22 each.  These warrants were valued at $478,118
using the Black-Scholes valuation method subject to the same assumptions made in
calculating a fair value of the Company's stock options. The fair value of the
warrants was treated as a discount on the note payable and will be amortized
over the life of the note. (See Note 6)  The note is secured by all of
the assets of the company.





Notes
      Payable, Related Party – Face Value
                        
                        $
                        622,130Notes
      Payable, Related Party - Discount
                        
                        
                        393,290228,840Notes
      Payable, Related Party - Current
                        
                        
                        122,130Notes
      Payable, Related Party – Long Term
                        
                        $
                        106,710




NOTE
10   SUBSEQUENT
EVENTS




The
company granted 1,680,00 options to employees and advisors.









In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through August 18, 2009,
the date the financial statements were available to be issued.









-13-




ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





Forward-Looking
Statements




The
following discussion may contain certain forward-looking statements. Such
statements are not covered by the safe harbor provisions. These statements
include the plans and objectives of management for future growth of the Company,
including plans and objectives related to the consummation of acquisitions and
future private and public issuances of the Company's equity and debt securities.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.




The words
“we,” “us” and “our” refer to the Company. The words or phrases “would be,”
“will allow,” “intends to,” “will likely result,” “are expected to,” “will
continue,” “is anticipated,” “estimate,” “project,” or similar expressions are
intended to identify “forward-looking statements.” Actual results could differ
materially from those projected in the forward looking statements as a result of
a number of risks and uncertainties, including but not limited to: (a) limited
amount of resources devoted to achieving our business plan; (b) our failure to
implement our business plan within the time period we originally planned to
accomplish; (c) our strategies for dealing with negative cash flow; and (d)
other risks that are discussed in this report or included in our previous
filings with the Securities and Exchange Commission.




Results of
Operations




Three Months ended June
30,2009 (unaudited) Compared to Three Months ended June 30,2008
(Unaudited)


The
following tables set forth key components of our results of operations for the
periods indicated for Sonasoft Corp.
  June
      30
                                          
                                          
                                          June
      302009
                                          
                                          
                                          2008(unaudited)
                                          
                                          
                                          (unaudited)Revenue
                                          
                                          $
                                          177,985
                                          
                                          
                                          $
                                          264,265Selling
      Expenses
                                          
                                          
                                          (213,989
                                          )
                                          
                                          
                                          (375,613
                                          )General
      and administrative
                                          
                                          
                                          (151,699
                                          )
                                          
                                          
                                          (328,660
                                          )Research
      and development
                                          
                                          
                                          (83,658
                                          )
                                          
                                          
                                          (102,969
                                          )Total
      operating expenses
                                          
                                          
                                          (449,346
                                          )
                                          
                                          
                                          (807,242
                                          )Net Loss
      from Operations
                                          
                                          
                                          (271,361
                                          )
                                          
                                          
                                          (542,977
                                          )Interest
      income
                                          
                                          
                                          208
                                          
                                          
                                          
                                          4,938Interest/Debt
      discount expenses
                                          
                                          
                                          (52,897
                                          )
                                          
                                          
                                          -Other
      Expense
                                          
                                          
                                          (8,899
                                          )
                                          
                                          
                                          (14,270
                                          )Loss
      from Operations before Provision for income
taxes
                                          
                                          
                                          (332,949
                                          )
                                          
                                          
                                          (552,309
                                          )Provision
      for Income taxes
                                          
                                          
                                          (800
                                          )
                                          
                                          
                                          (800
                                          )Net
      Loss
                                          
                                          $
                                          (333,749
                                          )
                                          
                                          $
                                          (553,109
                                          )Earnings
      per share – Basic and Diluted
                                          
                                          $
                                          (0.01
                                          )
                                          
                                          $
                                          (0.02
                                          )Weighted
      average shares outstanding – Basic and Diluted
                                          
                                          
                                          36,362,750
                                          
                                          
                                          
                                          32,377,241
 
 -14-
  Net
Revenue:
  Net
revenue decreased $86,280 or 33%, from $264,265, in the three months ended June
30, 2008 to $177,985 in the three months ended June 30 , 2009. The reduction in
sales was mainly due to slow down in economy in general.
  Selling
Expenses:
  Selling
expenses decreased $161,624 or 43% from $375,613 in the three months ended June
30, 2008 to $213,989 in the three months ended June 30, 2009, primarily due to
reduction in sales and marketing staff inline with slow down of business
activities on account of  tough economic environment. For purposes of
the comparisons of the three months ended June 30, 2009 and 2008, certain
expenses that were previously classified as selling were reclassified to general
and administrative in nature.
  General
and Administrative Expenses:
  General
and administrative expenses decreased $176,961 or 51% from $328,660 in the three
months ended June 30, 2008 to $151,699 in the three months ended June
30, 2009. The decrease of these expenses was primarily reduction in rent,
consulting fees and stock options related charges.
  Research
and Development:
  Research
and development decreased $19,311 or 19% from $102,969 in the three months ended
June 30, 2008 to $83,658 in the threee months ended June 30, 2009, and consist
primarily of salaries and related expenses of personnel engaged in research and
development activities. The decrease was mainly due to shifting of product
development activity to India.
  Income from
Operations:
  Operating
loss decreased $271,616 or 50% from $542,977 in the three months ended June 30,
2008 to $271,361 in the three months ended June 30, 2009, primarily due to
decrease in salary, rent, consulting fees and stock option charges.
  Other Income
(Expenses):
  Other
expenses increased by $52,256 from $9,332 in the three months ended June 30,
2008 to $61,588 in the three months ended June 30, 2009. This was mainly due to
a increase in interest expenses and the amortization of debt
discount.
  Income
Taxes:
  In lieu
of the losses in the past and current years, there is no tax
liability.
  Net
Loss:
  Net loss
was $333,749, in the three months ended June 30, 2009, compared to $553,109 in
the three months ended June 30, 2008, decrease of $219,360, or 40%, mainly due
to decrease in expenses during the three months period.
  LIQUIDITY
AND CAPITAL RESOURCES
  Net cash
used in operating activities was $285,589 for the three months ended June 30,
2009, compared to $386,932 for the three months ended June 30, 2008, decrease of
$101,343 or 26%. This was mainly due to the:
  Decrease
in cash operating loss by $136,830 for the three  months ended June
30, 2009 as compared to three months ended June 30, 2008
  -15-
  Increase
of current assets by $5,210 for the three months ended June 30, 2009 as compared
to decrease of current assets by $12,876 for the three months ended June 30,
2008.
  An
increase of accounts payable and accruals by $1,471 for the three months ended
June 30, 2009 as compared to decrease in accounts payables and accruals by
$55,044 for the three months ended June 30, 2008.
  Net cash
used in investing activities was $Nil for the three months ended June 30, 2009,
compared to $3,303 for the three months ended June 30, 2008. This was due to the
purchase of equipment.
  Net cash
provided by financing activities was $nil in the three months ended June 30,
2009, compared to $174,823 in the three  months ended June 30, 2008.
$nil and $160,000 were raised from issue of shares during the threee months
ended June 30, 2009 and 2008 respectively.
  As
reflected in Note 2 of the accompanying financial statements, the Company has a
net loss of $733,010, a working capital deficiency of $1,425,882 and a
stockholders’ deficiency of $1,489,072 at June 30, 2009.  For
the six months ended June 30, 2009, the Company used cash of $574,967
in operations. This raises substantial doubt about its ability to continue as a
going concern.  The ability of the Company to continue as a going
concern is dependent on the Company’s ability to raise additional capital and
implement its business plan.  The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.
  Management
believes that actions presently being taken to obtain additional funding and to
implement its strategic sales plan provide the opportunity for the Company to
continue as a going concern
 
 To
support our growth and to further narrow down the use of cash, the company is
looking for additional funds, but their inability  to raise additional
capital will adversely affect the company’s ability to continue to operate, for
the next twelve months
  We do not
currently have any commitments for capital expenditures.  Currently,
without raising additional capital , we do not expect our operating
cash to last through the end of 2009.  The company is in immediate need of
cash to meet operating cost and support growth. In view of this, the
company is actively working on raising capital. The company is hopeful to
raise capital, but their inability to raise capital will adversely affect
the company’s ability to continue to operate.
  Six Months ended June
30,2009 (unaudited) Compared to Six Months ended June 30,2008
(Unaudited)
  The
following tables set forth key components of our results of operations for the
periods indicated for Sonasoft Corp.
  June
      30
                                        
                                        
                                        June
      302009
                                        
                                        
                                        2008(unaudited)
                                        
                                        
                                        (unaudited)Revenue
                                        
                                        $
                                        368,161
                                        
                                        
                                        $
                                        458,913Selling
      Expenses
                                        
                                        
                                        (480,276
                                        )
                                        
                                        
                                        (668,754
                                        )General
      and administrative
                                        
                                        
                                        (318,794
                                        )
                                        
                                        
                                        (650,452
                                        )Research
      and development
                                        
                                        
                                        (172,985
                                        )
                                        
                                        
                                        (199,837
                                        )Total
      operating expenses
                                        
                                        
                                        (972,055
                                        )
                                        
                                        
                                        (1,519,043
                                        )Net Loss
      from Operations
                                        
                                        
                                        (603,894
                                        )
                                        
                                        
                                        (1,060,130
                                        )Interest
      income
                                        
                                        
                                        1,069
                                        
                                        
                                        
                                        13,349Interest/Debt
      discount expenses
                                        
                                        
                                        (110,977
                                        )
                                        
                                        
                                        -Other
      Expense
                                        
                                        
                                        (18,408
                                        )
                                        
                                        
                                        (24,002)Loss
      from Operations before Provision for income
taxes
                                        
                                        
                                        (732,210
                                        )
                                        
                                        
                                        (1,070,783
                                        )Provision
      for Income taxes
                                        
                                        
                                        (800)
                                        
                                        
                                        
                                        -Net
      Loss
                                        
                                        $
                                        (733,010
                                        )
                                        
                                        $
                                        (1,070,783
                                        )Earnings
      per share – Basic and Diluted
                                        
                                        $
                                        (0.02
                                        )
                                        
                                        $
                                        (0.03
                                        )Weighted
      average shares outstanding – Basic and Diluted
                                        
                                        
                                        36,362,750
                                        
                                        
                                        
                                        32,377,241
 
 -16-
  Net
Revenue:
  Net
revenue decreased $90,752 or 20%, from $458,913, in the Six months ended June
30, 2008 to $368,161 in the Six months ended June 30 , 2009. The reduction in
sales was mainly due to slow down in economy in general.
  Selling
Expenses:
  Selling
expenses decreased $188,478 or 28% from $688,754 in the Six months ended June
30, 2008 to $480,276 in the Six months ended June 30, 2009, primarily due to
reduction in sales and marketing staff inline with slow down of business
activities on account of  tough economic environment. For purposes of
the comparisons of the Six months ended June 30, 2009 and 2008, certain expenses
that were previously classified as selling were reclassified to general and
administrative in nature.
  General
and Administrative Expenses:
  General
and administrative expenses decreased $331,658 or 51% from $650,452 in the Six
months ended June 30, 2008 to $318,794 in the Six months ended June
30, 2009. The decrease of these expenses was primarily reduction in rent,
consulting fees and stock options related charges.
  Research
and Development:
  Research
and development decreased $26,852 or 13% from $199,837 in the Six months ended
June 30, 2008 to $172,985 in the Sixe months ended June 30, 2009, and consist
primarily of salaries and related expenses of personnel engaged in research and
development activities. The decrease was mainly due to shifting of product
development activity to India.
  Income from
Operations:
  Operating
loss decreased $456,236 or 43% from $1,060,130 in the Six months ended June 30,
2008 to $603,894 in the Six months ended June 30, 2009, primarily due to
decrease in rent, consulting fees and stock option charges.
  Other Income
(Expenses):
  Other
expenses increased by $117,663 from $10,653 in the Six months ended June 30,
2008 to $128,316 in the Six months ended June 30, 2009. This was mainly due to a
increase in interest expenses and the amortization of debt
discount.
  Income
Taxes:
  In lieu
of the losses in the past and current years, there is no tax
liability.
  Net
Loss:
  Net loss
was $733,010, in the Six months ended June 30, 2009, compared to $1,070,783 in
the Six months ended June 30, 2008, decrease of $337,773, or 32%, mainly due to
decrease in expenses during the Six months period.
  LIQUIDITY
AND CAPITAL RESOURCES
  Net cash
used in operating activities was $574,967 for the Six months ended June 30,
2009, compared to $782,812 for the Six months ended June 30, 2008, decrease of
$207,845 or 27%. This was mainly due to the:
  Decrease
in cash operating loss by $176,365 for the Six  months ended June 30,
2009 as compared to Six months ended June 30, 2008
  Decrease
of current assets by $7,477 for the Six months ended June 30, 2009 as compared
to decrease of current assets by $55,671 for the Six months ended June 30,
2008.
  An
increase of accounts payable and accruals by $48,190 for the Six months ended
June 30, 2009 as compared to decrease in accounts payables and accruals by
$64,904 for the Six months ended June 30, 2008.
  Net cash
used in investing activities was $8,909 for the Six months ended June 30, 2009,
compared to $3,303 for the Six months ended June 30, 2008. This was due to the
purchase of equipment.
  Net cash
provided by financing activities was $7,150 in the Six months ended June 30,
2009, compared to $624,543 in the Six  months ended June 30, 2008.
$7,150 and $595,657 were raised from issue of shares during the Sixe months
ended June 30, 2009 and 2008 respectively.
  -17-
  As
reflected in Note 2 of the accompanying financial statements, the Company has a
net loss of $733,010, a working capital deficiency of $1,425,882 and a
stockholders’ deficiency of $1,489,072 at June 30, 2009.  For
the six months ended June 30, 2009, the Company used cash of $574,967
in operations. This raises substantial doubt about its ability to continue as a
going concern.  The ability of the Company to continue as a going
concern is dependent on the Company’s ability to raise additional capital and
implement its business plan.  The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.
  Management
believes that actions presently being taken to obtain additional funding and to
implement its strategic sales plan provide the opportunity for the Company to
continue as a going concern
 
 To
support our growth and to further narrow down the use of cash, the company is
looking for additional funds, but their inability  to raise additional
capital will adversely affect the company’s ability to continue to operate, for
the next twelve months
  We do not
currently have any commitments for capital expenditures.  Currently,
without raising additional capital , we do not expect our operating
cash to last through the end of 2009.  The company is in immediate need of
cash to meet operating cost and support growth. In view of this, the
company is actively working on raising capital. The company is hopeful to
raise capital, but their inability to raise capital will adversely affect
the company’s ability to continue to operate.
 SUBSEQUENT
EVENT




The
company granted 1,680,000 options to employees and advisors.
   
 In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through August 13, 2009,
the date the financial statements were available to be
issued.




Critical Accounting
Policies




Our
significant accounting policies are summarized in Note 1 of our Consolidated
Financial Statements attached hereto as Exhibit F-1. Policies determined to be
significant are those policies that have greatest impact on our financials
statements and require management to use a greater degree of judgment and
estimates. Actual result may differ from those estimates. Our management
believes that given current facts and circumstances, it is unlikely that
applying any other reasonable judgments or estimate methodologies would cause
effect on our consolidated results of operations, financial position or
liquidity for the periods presented in the report.





Revenue
Recognition




Revenue
is recognized when earned in accordance with applicable accounting standard,
including SOP 97-2, as amended. Revenue from software arrangements with end
users is recognized upon final delivery of the software, provided that
collection is probable and no significant obligations remain. Maintenance
arrangement revenue is deferred and recognized over the service
period




Stock-Based
Compensation




The
Company accounts for its stock-based compensation under the provisions of SFAS
No.123(R)“Accounting for Stock Based
Compensation.”  Under SFAS No. 123(R), the Company is
permitted to record expenses for stock options and other employee compensation
plans based on their fair value at the date of grant. Any such compensation cost
is charged to expense on a straight-line basis over the periods the options
vest. If the options had cashless exercise provisions, the Company utilized
variable accounting.




-18-




Common
stock, stock options and common stock warrants issued to other than employees or
directors are recorded on the basis of their fair value, as required by SFAS
No. 123(R), which is measured as of the date required by EITF
Issue 96-18,“Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.” In accordance with
EITF 96-18, the stock options or common stock warrants are valued using the
Black-Scholes model on the basis of the market price of the underlying common
stock on the “valuation date,” which for options and warrants related to
contracts that have substantial disincentives to non-performance is the date of
the contract, and for all other contracts is the vesting date. Expense related
to the options and warrants is recognized on a straight-line basis over the
shorter of the period over which services are to be received or the vesting
period. Where expense must be recognized prior to a valuation date, the expense
is computed under the Black-Scholes model on the basis of the market price of
the underlying common stock at the end of the period, and any subsequent changes
in the market price of the underlying common stock up through the valuation date
is reflected in the expense recorded in the subsequent period in which that
change occurs.





Recent Accounting
Pronouncements




In May
2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. SFAS 165 sets forth (1) The period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) The circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) The disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. SFAS 165 is
effective for interim or annual financial periods ending after June 15, 2009.
The Company is evaluating the impact the adoption of SFAS 165 will have on its
financial statements.




In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. SFAS 166 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 166 will have on its
financial statements.




In June
2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”). SFAS 167 improves financial reporting by enterprises involved with
variable interest entities and to address (1) the effects on certain provisions
of FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities”, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS 166 and (2) constituent concerns about
the application of certain key provisions of Interpretation 46(R), including
those in which the accounting and disclosures under the Interpretation do not
always provide timely and useful information about an enterprise’s involvement
in a variable interest entity. SFAS 167 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period, and for
interim and annual reporting periods thereafter. The Company is evaluating the
impact the adoption of SFAS 167 will have on its financial
statements.




In June
2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162”. The FASB Accounting Standards Codification
(“Codification”) will be the single source of authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods
ending after September 15, 2009. All existing accounting standards are
superseded as described in SFAS 168. All other accounting literature not
included in the Codification is nonauthoritative. The Codification is not
expected to have a significant impact on the Company’s financial
statements.





Off-Balance Sheet
Arrangements




We do not
have any off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).




Item
3. Quantitative and Qualitative Disclosures About Market Risk





Not
required for Smaller Reporting Companies.




Item
4T.  Controls and Procedures





a)  
Evaluation of Disclosure
Controls. Our Chief Executive Officer and Chief Accounting Officer
evaluated the effectiveness of our disclosure controls and procedures as of the
end of our second fiscal quarter 2009 pursuant to Rule 13a-15(b) of the
Securities and Exchange Act.  Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our
management, as appropriate to allow timely decisions regarding required
disclosure. Based on his evaluation, our Chief Executive Officer and Chief
Accounting Officer concluded that our disclosure controls and procedures were
effective as of June 30, 2009.
 
 It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system are met. In addition, the design of any control system is based in part
upon certain assumptions about the likelihood of future events. Because of these
and other inherent limitations of control systems, there can be no assurance
that any design will succeed in achieving its stated goals under all
potential future conditions.
 
 (b)
  Changes in internal
control over financial reporting. There have been no changes in our
internal control over financial reporting that occurred during the last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. Our management team will
continue to evaluate our internal control over financial reporting in 2009 as we
implement our Sarbanes Oxley Act testing.




-19-






PART
II - OTHER INFORMATION




Item
1. Legal Proceedings.




We are
currently not involved in any litigation that we believe could have a material
adverse effect on our financial condition or results of operations. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our companies or our subsidiaries’ officers or
directors in their capacities as such, in which an adverse decision could have a
material adverse effect.




Item
1A. Risk Factors.




None.





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




During
the six months ended June 30, 2009, the Company issued 33,000 shares of common
stock for cash of $7,150.




During
the six months ended June 30, 2009, the Company issued 135,000 shares of common
stock for services provided by consultants; these shares were valued at a recent
cash offering price of $29,242.




Such
shares were issued in reliance on an exemption from registration under Section
4(2) of the Securities Act of 1933.





Item
3. Defaults Upon Senior Securities.




None.




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




None.




Item
5. Other Information.




None




Item
6. Exhibits and Reports of Form 8-K.




(a)         Exhibits




31.1 Certifications pursuant to Section 302 of Sarbanes Oxley Act of
2002




32.1 Certifications pursuant to Section 906 of Sarbanes Oxley Act of
2002




(b)         Reports
of Form 8-K




None.






-20-









SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




SONASOFT
      CORP.Date:
      August 19, 2009
              By:
              /s/
      Nand (Andy) KhannaNand
      (Andy) Khanna
                President
      and Chief Executive OfficerBy:
              /s/
      Paresh MehtaParesh
      Mehta
                Chief
      Financial Officer
                and
      Principal Accounting Officer















-21-