-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PP06cINahUPkn/654VnWqOcppLoVbHglCNOlOqnE6lc09i4nfYe+fnMlln6nYQqZ Qt/EyMqLosIldCHksAHobg== 0001062993-07-003417.txt : 20070830 0001062993-07-003417.hdr.sgml : 20070830 20070830152521 ACCESSION NUMBER: 0001062993-07-003417 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070830 DATE AS OF CHANGE: 20070830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONIC TECHNOLOGY SOLUTIONS INC. CENTRAL INDEX KEY: 0001270778 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 000000000 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50734 FILM NUMBER: 071091153 BUSINESS ADDRESS: STREET 1: UNIT 7 STREET 2: 8765 ASH STREET CITY: VANCOUVER STATE: A1 ZIP: V6P 6T3 BUSINESS PHONE: 604-736-2552 MAIL ADDRESS: STREET 1: UNIT 7 STREET 2: 8765 ASH STREET CITY: VANCOUVER STATE: A1 ZIP: V6P 6T3 FORMER COMPANY: FORMER CONFORMED NAME: SONIC ENVIRONMENTAL SOLUTIONS INC/CAN DATE OF NAME CHANGE: 20031119 6-K 1 form6k.htm REPORT OF FOREIGN PRIVATE ISSUER Filed by Automated Filing Services Inc. (604) 609-0244 - Sonic Technology Solutions Inc. - Form 6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2007

Commission File Number: 000-50734

SONIC TECHNOLOGY SOLUTONS INC.
(Translation of registrant's name into English)

Unit 7 - 8765 Ash Street
Vancouver, BC V6P 6T3

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[ x ] Form 20-F   [           ] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [           ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [           ]

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [           ] No [ x ]

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _________


SUBMITTED HEREWITH

Exhibits

  99.1 Interim Financial Statements for the Period Ended June 30, 2007
     
  99.2 Management Discussion and Analysis for the Period Ended June 30, 2007
     
  99.3 Form 52-109F2 Certification of Interim Filings - CEO
     
  99.4 Form 52-109F2 Certification of Interim Filings - CFO

 


SIGNATURES

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

  Sonic Technology Solutions Inc.
  (Registrant)
     

Date: August 29, 2007

By: /s/ Lisa Sharp
    Lisa Sharp
     
  Title: Chief Financial Officer

 


EX-99.1 2 exhibit99-1.htm INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Sonic Technology Solutions Inc. - Exhibit 99.1

 

 

 

 

SONIC TECHNOLOGY SOLUTIONS INC.

“Formerly Sonic Environmental Solutions Inc.”

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

(Unaudited)



Sonic Technology Solutions Inc. Statement 1
“Formerly Sonic Environmental Solutions Inc.”  
(A Development Stage Company)  
Interim Consolidated Balance Sheets  
Canadian Funds  

    June 30,     December 31,  
    2007     2006  
ASSETS   (Unaudited)        
Current            
     Cash and cash equivalents $  3,072,771   $  1,751,908  
     Interest receivable   9,700     5,869  
     Refundable deposit   -     105,500  
     Accounts receivable   634,501     711,825  
     GST receivable   33,420     190,077  
     Work in progress   334,244     181,040  
     Inventory   355,708     260,855  
     Prepaid expenses   218,763     137,327  
    4,659,107     3,344,401  
Property, Plant and Equipment (Note 4)   3,196,167     3,470,938  
Deferred Development Costs (Note 5)   831,512     883,633  
Patents and Other Intangible Assets (Note 6)   2,931,871     3,075,633  
  $  11,618,657   $  10,774,605  
             
LIABILITIES            
Current            
     Accounts payable $  873,115   $  1,058,508  
     Accrued liabilities   570,492     1,183,217  
     Due to related parties (Notes 8 and 11)   20,108     259,468  
     Terra-Kleen acquisition payment (Notes 8 and 11)   -     35,000  
     Current portion of obligation under capital lease   16,806     -  
     Advances from PetroSonic (Note 15)   54,745     -  
    1,535,266     2,536,193  
             
Deferred Rent Inducement (Note 13b)   -     52,528  
Obligation under capital lease   29,298     -  
    29,298     52,528  
Going Concern (Note 1)            
Commitments (Note 13)            
             
SHAREHOLDERS’ EQUITY            
Share Capital Statement 2 (Notes 9 and 10)            
     Authorized:            
              Unlimited common shares without par value            
     Issued, allotted and fully paid:            
               41,324,068 (2006 – 31,260,068)   26,621,440     22,953,387  
Contributed Surplus Statement 2   4,049,416     3,419,708  
Deficit Accumulated During the Development Stage - Statement 2   (20,616,763 )   (18,187,211 )
    10,054,093     8,185,884  
  $  11,618,657   $  10,774,605  

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

ON BEHALF OF THE BOARD:

“Adam Sumel”

, Director
“Richard Ilich” 
, Director


Sonic Technology Solutions Inc. Statement 2
“Formerly Sonic Environmental Solutions Inc.”  
(A Development Stage Company)  
Interim Consolidated Statements of Shareholders’ Equity  
Canadian Funds  
(Unaudited)  

                     
Accumulated
             
 
Common Shares
       
Other
             
   
Contributed
Comprehensive
Accumulated
 
   
Number
Amount
Surplus
Income
Deficit
Total
 
Balance - December 31, 2005                                    
(Restatement – Note 14)   19,839,350    
$16,400,927
    $2,158,614     -     ($10,517,812 )   $8,041,729  
   Private placement   2,797,223     2,224,818     292,683     -     -     2,517,501  
   Private placement   6,670,000     2,919,897     415,103     -     -     3,335,000  
   Exercise of options – cash                                    
   component   20,000     10,000     -     -     -     10,000  
   Acquisition of subsidiary (Note                                    
   8)   600,161     558,150     -     -     -     558,150  
   Share issuance costs   -     (588,209 )   35,561     -     -     (552,648 )
   Stock-based compensation   -     -     571,110     -     -     571,110  
   Exercise of options – fair value   -     2,548     (2,548 )   -     -     -  
   Loss for the period                                    
   Statement 3   -     -     -     -     (7,299,328 )   (7,299,328 )
Issued and outstanding at                                    
December 31, 2006   29,926,734     $21,528,131     $3,470,523     $-     ($17,817,140 )   $7,181,514  
   Shares allotted for debenture                                    
   settlement   1,333,334     1,425,256     (50,815 )   -     (370,071 )   1,004,370  
Issued, outstanding and allotted                                    
at December 31, 2006   31,260,068     $22,953,387     $3,419,708     $-     ($18,187,211 )   $8,185,884  
   Private placement   10,064,000     4,201,476     327,324     -     -     4,528,800  
   Share issuance costs   -     (533,423 )   70,565     -     -     (462,858 )
   Stock-based compensation   -     -     231,819     -     -     231,819  
   Loss and comprehensive loss                                    
   for the period – Statement 3   -     -     -     -     (2,429,552 )   (2,429,552 )
Issued and outstanding at June                                    
30, 2007   41,324,068     $26,621,440     $4,049,416     $-     ($20,616,763 )   $10,054,093  

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



Sonic Technology Solutions Inc. Statement 3
“Formerly Sonic Environmental Solutions Inc.”  
(A Development Stage Company)  
Interim Consolidated Statements of Operations  
Canadian Funds  
(Unaudited)  

                      Three months  
          Six months ended           ended  
    Six months     June 30, 2006     Three months     June 30, 2006  
    ended     (Restatement –     ended     (Restatement –  
    June 30, 2007     Note 14 )   June 30, 2007     Note 14 )
                         
Revenue $  783,053   $  750,902   $  621,647   $  507,328  
                         
Direct operating costs   1,387,910     1,335,706     603,044     720,802  
    (604,857 )   (584,804 )   18,603     (213,474 )
Expenses                        
   Advertising   63,291     81,242     31,042     30,441  
   Amortization of deferred                        
       development and other                        
       intangible asset costs   219,488     229,504     109,744     114,555  
   Amortization of property and                        
       office equipment   54,589     66,140     24,493     26,307  
   Automobile   44,379     38,195     24,548     17,557  
   Bank charges   1,330     1,647     422     723  
   Insurance   62,683     80,511     35,466     35,098  
   Legal and accounting   241,278     166,668     173,533     88,011  
   Office, postage and printing   33,631     41,827     17,997     21,585  
   Rent   113,154     117,376     48,166     58,398  
   Research   17,235     28,196     7,356     17,087  
   Salaries and wages   612,346     792,578     285,608     403,658  
   Salaries and wages - Stock                        
       compensation(Note 10b)   175,405     247,021     83,878     116,220  
   Shareholder relations   25,965     34,885     23,141     32,501  
   Shareholder relations - Stock                        
       compensation (Note 10b)   56,414     39,630     28,207     19,815  
   Telephone and utilities   39,544     38,898     18,895     16,764  
   Trade shows   17,524     16,202     -     7,195  
   Transfer agent and regulatory                        
       fees   33,163     19,422     19,865     11,002  
   Travel and promotion   93,158     122,938     43,412     53,954  
    1,904,577     2,162,880     975,773     1,070,871  
Loss Before the Undernoted   (2,509,434 )   (2,747,684 )   (957,170 )   (1,284,345 )
   Interest income (expense)   28,765     (72,147 )   19,514     (29,683 )
   Miscellaneous income (Note                        
       13)   45,000     -     45,000     -  
   Provision for income tax   (970 )   5,890     32     5,890  
   Foreign exchange gain / (loss)   7,087     (8,761 )   7,882     (1,619 )
Loss and comprehensive loss                        
for the Period $  (2,429,552 ) $  (2,822,702 ) $  (884,742 ) $  (1,309,757 )
                         
   Deficit – beginning of period   (18,187,211 )   (10,517,812 )   (19,732,023 )   (12,030,757 )
                         
Deficit – End of Period   (20,616,763 )   (13,340,514 )   (20,616,765 )   (13,340,514 )
                         
Loss per Share – Basic and                        
   Diluted $  (0.07 ) $  (0.13 ) $  (0.02 ) $  (0.06 )

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



Sonic Technology Solutions Inc. Statement 4
“Formerly Sonic Environmental Solutions Inc.”  
(A Development Stage Company)  
Interim Consolidated Statements of Cash Flows  
Canadian Funds  
(Unaudited)  

                      Three months  
          Six months ended           ended  
          June 30, 2006     Three months     June 30, 2006  
    Six months ended     (Restatement – Note     ended     (Restatement –  
    June 30, 2007     14 )   June 30, 2007     Note 14 )
                         
Operating Activities                        
 Loss for the period   (2,429,552 )   (2,822,702 ) $  (884,742 ) $  (1,309,757 )
   Items not affecting cash:                        
           Amortization of deferred                        
               development and other                        
               intangible asset costs   219,488     229,504     109,744     113,619  
           Amortization of property, plant                        
               and equipment   295,395     313,891     144,568     158,777  
           Leasehold inducement   -     -     -     -  
           Deferred financing fees   -     20,524     -     10,317  
           Amortization of deferred costs   -     12,600     -     10,462  
           Stock-based compensation   231,819     286,651     112,085     136,035  
                         
    (1,682,850 )   (1,959,532 )   (518,345 )   (880,547 )
Net change in non-cash working                        
capital (Note 3)   (613,004 )   (44,302 )   (696,595 )   (284,397 )
                         
    (2,295,854 )   (2,003,834 )   (1,214,940 )   (1,164,944 )
Investing Activities                        
   Property, plant and equipment                        
        acquired   (415,421 )   (171,602 )   (251,996 )   (213,633 )
   Patents   (17,837 )   (15,307 )   (7,526 )   (5,661 )
                         
    (433,258 )   (186,909 )   (259,522 )   (219,294 )
Financing Activities                        
   Cash received for shares   4,528,800     2,527,500     4,528,800     -  
   Share issuance costs   (478,825 )   (142,060 )   (403,801 )   16,115  
   Short term loan         (58,150 )   -     (58,150 )
                         
    4,049,975     2,327,290     4,124,999     (42,035 )
Net Increase (Decrease) in Cash and                    
Cash Equivalents   1,320,863     136,547     2,650,537     (1,426,273 )
Cash and cash equivalents -                        
Beginning of period   1,751,908     1,952,988     422,234     3,515,808  
Cash and Cash Equivalents – End of                        
Period   3,072,771     2,089,535   $  3,072,771   $  2,089,535  
                         
                         
Supplemental Cash Flow                        
 Information                        
 Interest paid $  5,764   $     $  791   $    
 Taxes paid $  970   $  -   $  1,002   $  -  
                         
 Supplemental Investing and                        
     Financing Schedule of Non-                        
     Cash Transactions                        
 Property, plant and equipment                        
     included in accounts payable $  26,581   $  19,487   $  268,550   $  19,487  
 Patent costs included in                        
     accounts payable $  17,807   $  8,249   $  7,915   $  5,946  
 Share issuance costs included                        
     in accounts payable $  59,057   $  -   $  -   $  -  
 Warrants issued for private                        
     placement $  70,565   $  292,683   $  70,565   $  -  

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



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

1.

Nature of Business and Going Concern

   

The Company was incorporated February 4, 2000 in British Columbia, Canada and commenced trading on the TSX Venture Exchange on November 29, 2000.

   

The business of the Company is the commercialization of its patented sonic generator and related technologies in environmental process and other applications. The Company has focused primarily on commercial application of these technologies in the environmental sector to date and intends to apply the technology to other industry sectors reliant on process technologies.

   

The ability of the Company to realize the costs it has incurred to date on its technology is dependent on the Company being able to commercialize the technology and to operate its business without infringing on the proprietary rights of third parties or having third parties circumvent the Company’s rights.

   

As at June 30, 2007, the Company continues in the development stage. Although the Company has begun operations, significant revenues have not been generated. In addition, management continues to work on other development projects.

   

While these interim consolidated financial statements have been prepared on the assumption that the Company is a going concern and will be able to realize its assets and settle its obligations in the ordinary course of business, there are conditions that cast significant doubt on the validity of this assumption. As at June 30, 2007, the Company has working capital of $3,123,841. The Company has negative cash flows from operations, recorded a loss of $2,429,552 for the period ending June 30, 2007 and has an accumulated deficit of $20,616,763 as at June 30, 2007. The ability of the Company to continue as a going concern is dependent on the success of the Company’s Business Plan covering the periods of 2007 to 2010 and obtaining additional sources of capital as required. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary were the going concern assumption be inappropriate, and these adjustments could be material.

   
   
2.

Significant Accounting Policies

   

These unaudited interim consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual audited consolidated financial statements for the year ended December 31, 2006 with the exception of accounting for Financial Instruments and Comprehensive Income. On January 1, 2007, the Company adopted CICA Handbook Section 3855,

   

Financial Instruments – Recognition and Measurement, Section 3861, Financial Instruments – Disclosure and Presentation and Section 1530, Comprehensive Income.

   

Sections 3855 and 3861 establish standards for classification, recognition, measurement, presentation and disclosure of financial instruments, including financial and non-financial derivatives in the financial statements. The standards prescribe when to recognize a financial instrument in the balance sheet and at what amount; depending on their classification, a fair value or cost-based measure is used. Based on financial instrument classification, gains and losses on financial instruments are recognized in net income or other comprehensive income.




Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

2.

Significant Accounting Policies - continued

   

Section 1530 requires the presentation of comprehensive income and its components. Comprehensive income includes both net earnings and other comprehensive income. Other comprehensive income for the company may include holding gains and losses on investments designated as available for sale.

   

The Company’s financial instruments consist of cash and cash equivalents, interest receivable, refundable deposit, accounts receivable, GST receivable, accounts payable and accrued liabilities, due to related parties, Terra-Kleen acquisition payment and advances from PetroSonic. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments. As the carrying value of these financial instruments approximates their fair value due to their short-term maturity or capacity of prompt liquidation, the Company has determined the fair value of these instruments is represented by their carrying value.

   

The adoption of these standards does not have an impact on the financial statements.

   

Basis of Presentation

   

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries:


-

SESI Systems Inc. (“SESI”), incorporated January 9, 2001 under the Company Act of British Columbia, Canada. The Company acquired 100% of the shares of SESI on December 12, 2002 (Note 7a).

 

-

Contech PCB Containment Technology Inc. (“Contech”), incorporated September 13, 1994 under the Company Act of British Columbia, Canada. Contech is involved in the non- proprietary business of collection, recycling and safe disposal of PCB contaminated ballasts and related waste products. The Company acquired 100% of the shares of Contech effective August 1, 2003 (Note 7b).

 

-

Sonic Environmental Solutions Corp., (“Sonic Corp.”), incorporated September 15, 2005 in the State of California. The Company acquired 100% of the shares of Terra-Kleen Response Group, Inc. (“Terra-Kleen”) on December 21, 2005 and merged it with Sonic Corp. (Note 8).

 

-

SonoOil Inc., (“SonoOil”), incorporated June 2, 2006 under the Company Act of British Columbia, Canada. SonoOil was established to develop the Company’s core sonic generator technology in the oil sands industry.

   

 

 

Included in these consolidated financial statements are the results of operations of SESI, Contech and Terra-Kleen from their respective dates of acquisition, Sonic Corp. and SonoOil from date of incorporation. All intercompany transactions and balances have been eliminated on consolidation.

   

 



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

3.

Non-cash Working Capital Components

   

Details are as follows:


      For the six months     For the six     For the three     For the three  
  Net changes in non-cash   ended     months ended     months ended     months ended  
  working capital components:   June 30, 2007     June 30, 2006     June 30, 2007     June 30, 2006  
  GST and amounts receivable $  76,946   $  (137,285 ) $  (460,475 ) $  (405,912 )
  Refundable deposit   105,500     -     105,500     -  
  Inventory   (343,451 )   (22,214 )   (104,828 )   (34,850 )
  Prepaid expenses   (81,436 )   (55,032 )   (93,615 )   (108,757 )
  Accounts payable   115,719     106,994     (22,619 )   203,555  
  Accrued liabilities   (266,667 )   65,354     (187,126 )   75,930  
  Advances from PetroSonic   54,745     -     54,745     -  
  Due to related parties   (274,360 )   (2,119 )   11,823     (14,363 )
    $  (613,004 ) $  (44,302 ) $  696,595   $  (284,397 )

   
4.

Property, Plant and Equipment

   

Details are as follows:


                  Net Book  
                  Value  
            Accumulated     June 30,  
      Cost     Amortization     2007  
  Computer equipment $  196,048   $  139,270   $  56,778  
  Furniture and office equipment   237,836     144,311     93,525  
  Leasehold improvements   9,457     442     9,015  
  Vehicles   173,396     167,729     5,667  
  Machinery and equipment   2,913,015     1,807,110     1,105,905  
  Leased equipment   45,903     1,530     44,373  
  Plant One   238,874     130,171     108,703  
  Plant Two   2,253,833     481,632     1,772,201  
    $  6,068,362   $  2,872,195   $  3,196,167  

                  Net Book  
                  Value  
            Accumulated     December 31,  
      Cost     Amortization     2006  
  Computer equipment $  196,049   $  129,250   $  66,799  
  Furniture and office equipment   237,836     133,687     104,149  
  Leasehold improvements   82,866     15,622     67,244  
  Vehicles   173,396     162,081     11,315  
  Machinery and equipment   2,885,669     1,681,720     1,203,949  
  Plant One   238,874     106,283     132,591  
  Plant Two   2,253,831     368,940     1,884,891  
    $  6,068,521   $  2,597,583   $  3,470,938  
                     
 

Property, plant and equipment are amortized when available for use.

                 

 



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

5.

Deferred Development Costs

   

Deferred development costs consist of product development costs and existing product enhancement costs.

   

Details are as follows:


      June 30,     December 31,  
      2007     2006  
  Balance – Beginning of period $  883,633   $  987,873  
          Less: Amortization   (52,121 )   (104,240 )
  Balance – End of period $  831,512   $  883,633  

   
6.

Patents and other intangible assets

   

Patents and other intangible assets consist primarily of amounts associated with the acquisitions of SESI, Contech and Terra-Kleen. The Company acquired patents for low frequency sonic energy generator technology and proprietary processes to remediate PCB contaminated soils.

   

Activities during the period are as follows:


      June 30,     December 31,  
      2007     2006  
  Balance – Beginning of period $  3,075,633   $  3,387,921  
       Current period costs:            
           Additions   23,605     45,980  
           Less: Amortization   (167,367 )   (358,268 )
  Balance – End of period $  2,931,871   $  3,075,633  
               



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

7.

Acquisitions

a) SESI Systems Inc.

Effective December 12, 2002, the Company acquired 100% of SESI by the issuance of 2,997,135 common shares of the Company valued at $998,302 (see note 14 for restatement). The shares were escrowed based on time over 6 years. The Company had a director in common with SESI at the time of the purchase. The primary reason for the purchase of SESI was to acquire the Sonic technology and Canadian and United States patents. The consideration has been allocated, based on fair value, as follows:

Cash $  (30 )
Accounts payable   (23,371 )
Deferred development costs   178,819  
Patents and other intangible assets   992,927  
Amounts advanced from Sonic   (150,043 )
  $  998,302  

b) Contech PCB Containment Technology Inc.

By agreement effective August 1, 2003, the Company acquired 100% of the issued and outstanding shares of Contech. The Company acquired Contech to utilize its licence for handling and disposal of the contaminated materials, facilities approved by the regulatory authorities, environmental risk insurance, knowledgeable staff and management, and its expertise in handling of hazardous waste. As consideration for Contech, the Company paid $67,375, $25,000 upon closing (paid) and 15 monthly payments of $3,000 (paid), having a present value of $42,375 using a 10% interest rate, and issued 100,000 escrow shares. The fair value of shares issued by the Company has been determined at $137,866, by taking the value of the shares ($1.55CDN) on the date of the agreement multiplied by the number of shares to be released over time, and discounted using a 10% interest rate, to take into account the time value of the consideration. The consideration has been allocated, based on fair value, as follows:

Current assets $ 79,159
Property, plant and equipment 34,065
Intangible assets 137,866
Current liabilities (45,848)
  $ 205,242

This is a related party transaction as a major Contech shareholder was also an officer of the Company.



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

8.

Acquisition of Terra-Kleen Response Group Inc.

     

On December 21, 2005, the Company acquired 100% of the shares of United States based Terra- Kleen which subsequently merged with Sonic Corp.

     

Terra-Kleen has proprietary and patented technologies for the remediation of contaminated soil through a solvent extraction process which removes and concentrates contaminants. Terra-Kleen also has an established operating history with the Environmental Protection Agency in the United States.

     

The total consideration for the purchase of Terra-Kleen, as outlined in the original agreement and amended March 23, 2007, is as follows:

     
i.

Upon the closing, December 21, 2005, US$500,000 was paid through the issuance of the Company’s common shares valued at CDN$2.50 per share which resulted in an issuance of 234,680 common shares. On this closing date, the Company’s share market price was $1.15, therefore the share issuance was valued at $269,882;

     
ii.

On June 21, 2006, US$500,000 was paid through the issuance of the Company common shares at a price equal to the 20-day average closing price of such shares preceding their issue date. The 20-day average closing price of such shares was $0.93. This resulted in an issuance of 600,161 common shares valued at $558,150;

     
iii.

On March 23, 2007, US$250,000 was paid to the controlling shareholder of Terra-Kleen. The amount related to a settlement for an earn out provision based on revenues in the original agreement. The amount earned to date according to the original agreement of was $35,000; this amount was recorded as part of the purchase and the balance of $256,785 was expensed in fiscal 2006 as a purchase settlement.

Therefore, total consideration given up is as follows:

  Share issuance upon closing $  269,882  
  Share issuance June 21, 2006   558,150  
  Due diligence and cash closing costs   217,271  
  Final payment   35,000  
    $  1,080,303  

The consideration has been allocated, based on fair value, as follows:

  Current assets $  168,924  
  Property, plant and equipment   315,660  
  Patents and other intangibles   2,565,655  
  Current liabilities   (462,489 )
  Long term liabilities   (865,446 )
  Due to Shareholder   (571,528 )
  Due to Sonic Environmental Solutions Inc.   (70,473 )
  Net identifiable assets and liabilities $  1,080,303  



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

8.

Acquisition of Terra-Kleen Response Group Inc. - Continued

         

Terra-Kleen has two contracts as follows:

         
a)

Mitsubishi Agreement

         

Per agreement dated January 1, 2001 and amended January 2, 2006, Terra-Kleen granted a license to Mitsubishi Heavy Industries, Ltd. (“MHI”) to use Terra-Kleen's soil remediation technology in Japan.

         

As consideration Terra-Kleen, before acquired by the Company, received US$500,000 and a royalty at 2.25% of Net Invoiced Value for “hydrocarbon and chlorinated organic contaminated soil” processed using the system. This royalty will be paid after MHI has had sales of approximately US$22,000,000. As of June 30, 2007, approximately US$9,800,000 has been completed by MHI.

         
b)

Veolia Agreement

         

Per agreement dated June 10, 2005 with Veolia Environmental Services (“Veolia”), formerly known as Collex Pty Ltd., Terra-Kleen granted a license to Veolia to use Terra-Kleen’s soil remediation technology.

         

The considerations are as follows:

         
i)

A lump sum initial license fee of US$100,000 (received by Terra-Kleen before the Company purchased Terra-Kleen).

         
ii)

A technology license fee of US$288,000 upon successful results of initial trial.

         
iii)

A trial fee of AUS$298,732 as follows:

         

AUS$150,000 on commencement date (received by Terra-Kleen before the Company purchased Terra-Kleen).

AUS$74,366 within 21 days of receiving certain demonstration equipment in Australia

AUS$74,366 on the date following the completion of initial test.

         
iv)

After nine months of successful trial, Veolia will either pay rent on the demonstrator equipment at US$32,000 per month or buy the system at US$488,000.

         
v)

To pay royalty of 50% of profit generated from using the technology.

         

During the period, the initial trial was substantially complete; however, the Company is in negotiations with Veolia to amend the contract.

     



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

9.

Share Capital

     
a)

Authorized: unlimited common shares without par value.

     
b)

On April 30, 2007, the Company closed a private placement issuing 10,064,000 units at a price of $0.45 per unit for gross proceeds of $4,528,800. Of this amount, $4,201,476 was attributable to common shares and $327,324 was attributable to common share purchase warrants. Each unit consists of one common share and one half of one share purchase warrant. Each share purchase warrant is exercisable into one common share at a price of $0.60 for 24 months.

     

The Company paid a cash commission equal to 7% of the gross proceeds of the financing ($317,016) and issued broker warrants to purchase 10% of the units sold under the offering, exercisable at a price of $0.45 per unit. The broker warrants were valued at $70,565 using the Black-Scholes option pricing model and have been recorded as share issuance costs.

     
c)

Options

     

i) The Company has established a share purchase option plan whereby the board of directors, may grant options to directors, officers, employees or consultants. Options granted must be exercised no later than five years from date of grant or such lesser period as determined by the Company’s board of directors. The exercise price of an option is not less than the closing price on the TSX-V on the last trading day preceding the grant date. The maximum aggregate number of Plan Shares that may be reserved for issuance under the Company’s Plan is 8,264,813 Common Shares.

Options vest according to the length of service as follows:

Employees with service greater than six  
months, Directors and Officers Employment service less than six months
33.3% of options vest after six months 33.3% of options vest after twelve months
33.3% of options vest after twelve months 33.3% of options vest after eighteen months
33.3% of options vest after eighteen months 33.3% of options vest after twenty-four months



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

9.

Share Capital - Continued


  c)

Options - Continued


  ii)

A summary of the Company’s options at June 30, 2007 and the changes for the period are as follows:


  Outstanding              
  December       Outstanding      
Exercise 31,       June 30, Exercisable    
Price 2006 Granted Exercised Forfeited 2007 June 30, 2007   Expiry date
$0.50 402,000 - - - 402,000 402,000   December 12, 2007
$0.56 - 400,000 - - 400,000 -   May 10, 2012
$1.00 200,000 - - - 200,000 133,334   June 14, 2011
$1.00 855,000 - - - 855,000 273,326   July 4, 2011
$1.00 335,000 - - - 335,000 83,750   September 11, 2011
$1.10 200,000 - - - 200,000 200,000   February 3, 2008
$1.70 400,000 - - - 400,000 400,000   September 22, 2008
$2.30 50,000 - - - 50,000 50,000   January 16, 2009
$2.30 50,000 - - - 50,000 50,000   June 21, 2010
$2.37 85,000 - - (10,000) 75,000 75,000   February 14, 2010
$2.40 250,000 - - - 250,000 250,000   June 8, 2009
$2.50 35,000 - - - 35,000 35,000   November 10, 2008
$2.60 20,000 - - - 20,000 20,000   March 30, 2010
$2.75 115,000 - - - 115,000 115,000   October 8, 2009
$2.95 200,000 - - - 200,000 200,000   July 16, 2009
$3.15 145,000 - - - 145,000 145,000   July 6, 2009
  3,342,000 400,000 - (10,000) 3,732,000 2,432,410    

Weighted average          
exercise price $1.50 $0.56 $- $2.37 $1.40

    Weighted  
    Average  
  Number of Options Exercise Price Expiry
      December 12, 2007
Vested at June 30, 2007 2,432,410 $1.69 to September 11, 2011



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

9.

Share Capital - Continued


  d)

Warrants

     
 

Details are as follows:


  Outstanding       Outstanding    
Exercise December 31,     Expired or June 30,    
Price 2006 Issued Exercised Cancelled 2007   Expiry date
$0.60 - 6,038,400 - - 6,038,400   April 30, 2009
$0.70 7,170,250 - - - 7,170,250   November 9, 2008
$1.20 1,398,611 - - - 1,398,611   March 27, 2008
$2.20 500,000 - - - 500,000   December 21, 2007
$2.75 605,000 - - - 605,000   September 28, 2007
  9,673,861 6,038,400 - - 15,712,261    
               
Weighted average              
exercise price $0.98 $0.60 $- $- $0.82    

  e)

Escrow Shares

       
 

As at June 30, 2007, there are 899,139 common shares held in escrow. Escrow shares have the same voting rights and rights to receive income distributions as regular shares of the Company. However, in general terms, escrow shares cannot be sold, transferred, assigned or mortgaged. Details are as follows:

       
  i)

In 2002, 2,997,135 shares were issued for the acquisition of SESI and are held in escrow to be released every six months to 2008. As at June 30, 2007, a balance of 899,139 shares are held in escrow.

       
  ii)

There were 834,841 shares issued for the acquisition of Terra-Kleen and held in escrow. During the period, the Company entered into an agreement with the former controlling shareholder of Terra-Kleen which terminates this escrow agreement. During the period, the remaining shares pertaining to this agreement, 620,990, were released from escrow leaving a nil balance at June 30, 2007.

       



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

10.

Stock Based Compensation

     
a)

Stock compensation expense is determined using the fair value method. For any options that have alteration in their conditions, compensation expense is based on the fair value of the options on the alteration date less the fair value of the original options based on the shorter of the remaining expanded life of the old option or the expected life of the modified option.

     
b)

Stock compensation expense recognized on options granted during the period are calculated using the Black-Scholes option pricing model with the following assumptions on the date of grant:


Risk-free interest rate 4.01% - 4.53%
Expected dividend yield -
Expected stock price volatility 49.18 – 52.48%
Expected option life in years 5

 

Current period stock-based compensation expense was $231,819 (2006 - $286,651). Of this, $56,414 (2006 - $39,630) is included in shareholder relations expense, and $175,405 (2006 - $247,021) is included in salaries and wages expense, with the offsetting entry to contributed surplus. The value of unrecorded stock-based compensation related to non-vested options is $282,313. This amount will be expensed between July 1, 2007 and June 30, 2009.

     
  c)

Option pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of the stock. Changes in these assumptions can materially affect the fair value estimated.

     



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

11.

Related Party Transactions

     

Except as noted elsewhere in these financial statements, related party transactions are as follows:

     
a)

As at June 30, 2007 $20,108 (2006 - $259,468) was owing to directors, officers, and related entities. These amounts are non-interest bearing, have no specific terms of repayment and were incurred in the normal course of operations, except the portion relating to Notes 8(iii) and 11(b).

     
b)

As at June 30, 2007, nil (2006 - $35,000) was owing in relation to the acquisition of Terra-Kleen. This amount was owing to the former controlling shareholder of Terra-Kleen. (Note 8iii)

     
     
12.

Segmented Information

     
a)

The Company and its subsidiaries operate in the environmental sector in two reportable business segments. The soil remediation segment is attributable to the treatment of contaminated soil and the waste management segment is attributable to the collection, consolidation and disposal of PCB contaminated wastes from transformers, ballasts and capacitors. Total assets by business segment are as follows:


      June 30,     December 31,  
      2007     2006  
  Soil remediation $  11,559,240   $  10,654,954  
  Waste management   59,417     119,651  
    $  11,618,657   $  10,774,605  

Total revenues and direct costs for each business segment are as follows. The direct costs include labour, materials, chemicals, subcontractor costs and equipment amortization:

      Soil     Waste     Corporate Total,  
      Remediation     Management     June 30, 2007  
  Revenues $  696,695   $  86,358   $  783,053  
  Direct Costs   1,316,535     71,375     1,387,910  
    $  (619,840 ) $  14,983   $  (604,857 )

      Soil     Waste     Corporate Total,  
      Remediation     Management     June 30, 2006  
  Revenues $  316,641   $  434,262   $  750,902  
  Direct Costs   995,931     339,776     1,335,706  
    $  (679,290 ) $  94,486   $  (584,804 )

During the period, 41% (2006 – 44%) of consolidated revenue related to one customer. As at June 30, 2007 accounts receivable included $240,351 from this customer (2006 - nil).



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

12.

Segmented Information - Continued

     
b)

Geographic Information

     

All significant sales during the periods presented have been to customers domiciled in Canada. The tables below summarize property, plant and equipment by country and assets by country:


      June 30,     December 31,  
  Property Plant and Equipment   2007     2006  
  Canada $  3,056,980   $  3,297,922  
  United States   139,185     173,016  
    $  3,196,165   $  3,470,938  

      June 30,     December 31,  
  Assets   2007     2006  
  Canada $  11,428,273   $  10,581,744  
  United States   190,384     192,861  
    $  11,618,657   $  10,774,605  

   
13.

Commitments

     
a)

The Company has premises, vehicle and photocopier operating lease agreements. The leases expire between July 2007 and September 2013. The future lease obligations are as follows:


      Amount  
  2007 $  47,965  
  2008 $  147,931  
  2009 $  144,414  
  2010 $  129,062  
  2011 $  117,450  

  b)

During the year ended December 31, 2005, the Company received $87,547 for leasehold improvements to their office premises. In accordance with Canadian GAAP, this amount was amortized against rent expense over the term of the 5 year lease. During the period, the Company entered into an agreement to terminate the lease agreement. The Company received a one-time payment of $45,000 to vacate the premise. The unamortized balance of the leasehold improvements was recorded to rent expense.

     
  c)

During the period, the Company entered into a lease agreement for their corporate offices beginning October 1, 2007 for a term of six years.

     



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

14.

Prior Period Restatement

   

During the audit of the December 31, 2006 fiscal year, it was determined that an error had been made in the recording of the acquisitions of SESI and Contech (Note 7). These acquisitions were related party transactions that involved the issuance of shares, as either part of or as total consideration, for the purchase of these subsidiaries. The restatement is required after further consideration of EIC 62 as it has come to our attention that EIC 62 determines the share issuances to be monetary in nature, even though they were related party, and as such the transactions must be recorded at the exchange amount, equivalent to the value of the consideration given up (the shares at market value), at the time of the acquisitions.


      June 30, 2006     June 30, 2006  
      As previously     Restated  
      reported        
  Patents and other            
  intangible assets $  2,555,816   $  3,204,712  
  Deficit $  (12,853,241 ) $  (13,340,514 )
  Amortization of deferred            
  development and other            
  intangibles $  178,653   $  229,504  

   
15.

New Agreements

   

On May 24, 2007, the Company announced that it entered into an agreement with PetroSonic Energy Systems Inc. (“PetroSonic”) for the development of a crude heavy oil upgrading and processing system utilizing Sonic’s patented technologies. Under the terms of the agreement, PetroSonic will fund the initial development of a new heavy oil Sonoprocess for the upgrading and processing of heavy oil. This will be done with Sonic’s development facility including use of the Sonic generators. The first stage of the agreement is designed to confirm the development concept, after which Petrosonic will engineer and install a complete prototype plant to optimize the design variables of the system. Sonic will receive a 40% interest in PetroSonic and will work together with PetroSonic on a prototype installation directly in the field. PetroSonic has an obligation to fund the creation of the prototype plant. Sonic retains the right to maintain its 40% interest in PetroSonic by participating in PetroSonic financing. During the period, the Company received US$50,000 as an advance against consulting and related expenses that Sonic will provide to PetroSonic. Should the Pilot test be successful, PetroSonic will have the right to enter into a Global License arrangement with Sonic for use of the Sonic Technology.

   



Sonic Technology Solutions Inc.
“Formerly Sonic Environmental Solutions Inc.”
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2007
Canadian Funds
(Unaudited)
 
 

16.

Subsequent Events

   

On August 15th , 2007, the Company announced its wholly-owned subsidiary SonoOil had entered into an agreement with Shell Canada Energy (“Shell”), under which Shell and SonoOil will work together to develop oil sand process innovations.

   


EX-99.2 3 exhibit99-2.htm MANAGEMENT DISCUSSION AND ANALYSIS FOR THE PERIOD ENDED JUNE 30, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Sonic Technology Solutions Inc. - Exhibit 99.2

Form 51-102F1

MANAGEMENT DISCUSSION AND ANALYSIS

SONIC TECHNOLOGY SOLUTIONS INC.

“Formerly Sonic Environmental Solutions Inc.’

August 23, 2007

The Management Discussion and Analysis should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 and the unaudited interim consolidated financial statements for the six month period ended June 30, 2007.

The significant accounting policies are outlined in Note 2 to the Financial Statements of the Company for the year ended December 31, 2006. These accounting policies have been applied consistently for the six months ended June 30, 2007. On January 1, 2007, the Company adopted CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement, Section 3861, Financial Instruments – Disclosure and Presentation and Section 1530, Comprehensive Income. All amounts are recorded in Canadian dollars unless otherwise noted.

Company Overview

Sonic Technology Solutions Inc. (“Sonic” or the “Company”) is a technology company listed on the TSX Venture Exchange (SNV-TSXV). The business of the Company is the commercialization of applications of its patented sonic generator and related technologies in environmental and industrial processes. Sonic’s business strategy is to develop and commercialize processes that benefit or rely on the low frequency sonic energy generated by Sonic’s industrial scale sonic generators, hereinafter referred to as a “Sonoprocess” (a chemical, biological or physical process enhanced or enabled by sonic energy). With this competitive advantage the Company also takes advantage of commercial synergies of related technologies and operations.

Environmental Operations

To date the Company has focused primarily on the commercialization of its Polychlorinated Biphenyl (“PCB”) de-chlorination Sonoprocess in the environmental remediation sector and has established operations in Canada. Sonic developed and patented the PCB de-chlorination Sonoprocess and has taken it to full scale operation for the treatment of contaminated soils and wastes. This de-chlorination Sonoprocess renders the PCB non-toxic. In conjunction with its PCB Sonoprocess the Company also operates the Terra-Kleen solvent extraction technology which removes the PCB from the soil and leaves it in a concentrate feed for the PCB Sonoprocess. These extraction and de-chlorination processes can be operated separately or as an integrated system (the “Sonic Treatment System”) and the Company undertakes site remediation projects with operations in Western Canada and Ontario, and business development activities across Canada and the United States.

-

Regulatory Approval. In Canada, the Company is approved to deploy the Sonic Treatment System in British Columbia, and in Ontario is approved for extraction with de-chlorination approval in progress. The extraction part of the Sonic Treatment System is exempted from

1



requiring regulatory approval by the EPA in the USA, and is approved for use and commercially available in Japan through a licencee, Mitsubishi Heavy Industries Inc. (“Mitsubishi”), and in Australia through a licencee, Veolia Environmental Services (“Veolia”).

   

 

-

Contaminated Site Projects. The Company’s first site remediation project with Juker Holdings was to demonstrate the remediation and removal of up to 3000 tonnes of PCB contaminated soil which had been contained on the site. The project enabled the Sonic Treatment System to be demonstrated, and improvements and adaptations led to the fully complete system design now in wider use. Treatment at the site was completed early in 2007. The site has been returned to the owner and a final site closure report filed with the Ministry of Environment. The Company also undertook a project in Sault Ste. Marie, Ontario for over 625 tonnes; this project was completed on schedule earlier in 2007. The Company is currently continuing operations at a site in the Greater Toronto Area (GTA) where in excess of 1700 tonnes of contaminated soil have been treated.

   

 

-

Remediation Facilities. The Company operates one complete Sonic Treatment System which can also be deployed for dechlorination only or extraction only. The sonic generator, for a second dechlorination system, is expected to be deployed in a second system in Ontario. The extraction system is suitable for one large site or it can be deployed on two smaller sites. Expansion of extraction facilities will be accommodated to meet demand. The Company also has a small demonstration extraction system deployed by Veolia in Australia and this is expected to be incorporated into the licencees first full system.

   

 

-

International Operations. The Company established an office in San Diego, USA through the 2005 acquisition of Terra-Kleen, which has a 13 year track record of operations with EPA recognition, including a regulatory exemption from the EPA treatment technology regulatory approval process. In the USA, the Company is exploring projects in regions where there are regulatory and other pressures which make the Sonic Treatment System the most attractive and intends to operate such projects directly. The extraction stage of the Sonic Treatment System has been licensed to Mitsubishi in Japan and to Veolia in Australia. Sonic is in discussions with operating partners in other major target markets such as Europe and South America. In Canada, the Company is working more directly on opportunities with logistics partners.

The Company is seeking to build environmental operations by establishing joint ventures and licensees for the Sonic Treatment System with established environmental remediation companies. Where possible, this accelerates market access and reduces operational costs.

Oil Sands and Heavy Oil Sonoprocess Development

The Company’s Technology Advisory Board has identified several areas that the Company has now prioritized for the development and commercialization of further Sonoprocess applications based on the size of market opportunities and the added value, and in particular where “market pull” can be identified.

The Company’s strategy for development of these opportunities is to partner with companies with the ability to direct and co-fund the development and take the Sonoprocess to market effectively. Through such joint ventures Sonic can afford to develop more opportunities with the greatest chance of success.

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The Company entered into a licencing joint venture with PetroSonic Energy Systems Inc. (“PetroSonic”) to develop and market heavy oil upgrading and processing systems utilizing a system based on a Sonoprocess technology. The first phase of test work for this venture commenced in August, 2007. Pursuant to the licensing arrangement, PetroSonic’s initial shareholders will fund the development testing to a proof of concept stage. If proof of concept is successful, Sonic will receive a 40 percent interest in PetroSonic. PetroSonic will then be obligated to proceed to fund, engineer and install a prototype plant, with Sonic entitled to contribute to the funding in order to maintain its pro rata ownership share of PetroSonic. If the prototype plant is successful, PetroSonic will be entitled to an exclusive licence for the use of Sonic’s relevant proprietary Sonoprocess technology for the purposes of heavy oil upgrading, subject to paying a royalty to Sonic.

Subsequent to the end of the period, the Company announced that its wholly-owned licenced subsidiary SonoOil Inc. (“SonoOil”) had entered into an agreement with Shell Canada Energy (“Shell”), for the application of sonic energy to improve oil sands processing. Under the Agreement, Shell and SonoOil will jointly develop process improvements stemming from the use of Sonic’s core technology. Shell and Sonic will jointly build upon preliminary work carried out by Sonic in a phased work program to develop a process and pilot plant concept. Subsequently, if successful, Shell will be primarily responsible for the pilot plant process design and construction while Sonic will be responsible for applying its sonic generator technology. Successful pilot plant operations could then lead to implementation. Albian Sands Energy Inc. is also a signatory to the agreement and is the operator under the Athabasca Oil Sands Project, a joint venture between Shell, Western Oil Sands Inc. and Chevron Canada Limited. Shell and Sonic will collaborate and benefit in the commercial application of successful development and testing. This is SonoOil’s first collaboration project.

Management

Sonic’s Board of Directors monitors the performance of management against the following criteria:

  - Growth of the Company’s environmental operations.
     
  - Development of further Sonoprocess business opportunities.
     
  - Prudent management of corporate resources

Sonic’s management team is focused and committed to executing the vision for the Company and its shareholders. The Company will continue to build and strengthen its human resource capital by:

  - Key experienced additions to meet the operational growth objectives of the Company.
     
  - Strengthening and expanding the technical and business advisory boards of the Company.
     
  - Additions to the Board of Directors that directly assist in meeting growth and operational objectives.

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Second Quarter Highlights

During the second quarter of 2007, the Company completed decommissioning at its first demonstration project (Juker Holdings in Delta, B.C.) and returned the site to the owners. Subsequent to the end of the quarter, the Company filed its site closure report with the BC Ministry of Environment. Operations continued at a site in the Greater Toronto Area (“GTA”) and subsequent to the end of the quarter the Company had caught up the backlog caused after a short winter site closure. Further details are given below:

Operations at the Company’s first project at the Juker Holdings site in Delta, B.C. were completed, all treated soil and dechlorinated concentrate has been removed from the site, the site paved and returned to the owner. Subsequent to the end of the quarter, the Company also completed a third party closure report for the project in accordance with its permit from the BC Ministry of Environment.

   

At the Company’s PCB remediation project site in the GTA, the Company continued operations of a full extraction stage of the Sonic Treatment System and has now eliminated the treatment backlog caused by a brief winter site closure. The project is a brownfield industrial site with varying levels of PCB contamination up to 20,000 ppm. Sonic has successfully treated the PCB contaminated soil to target levels as required by the province of Ontario’s Ministry of the Environment and has now optimized the treatment to a capability of 1000 tonnes per month if the current system is fully utilized. The Company is treating additional soil through an extension of the original contract.

   

The Company was notified that it had been approved to receive funding from Sustainable Technology Development Canada for demonstration of its fully integrated Sonic Treatment System at a site for the Toronto Waterfront redevelopment. The project is contingent upon conclusion of a commercial contract for PCB extraction.

   

The company’s Australian licencee, Veolia, successfully concluded demonstrated treatment of PCB contaminated soil at its first site remediation project in Melbourne, Australia. Veolia has licensed Sonic’s Terra-Kleen extraction process for use at site remediation projects throughout Australia. Sonic provided Veolia with on-site training and support and Veolia is ramping up sales efforts to secure follow-on projects.

   

The Company has held discussions with possible licencees in Mexico, Europe and North America to advance the Company’s long-term strategy of developing a global network of operating licencees.

   

The Company has also held discussions with potential regional licencees in Canada and has set forth conditions under which it may enter into one or more such licences. In conjunction with this the Company has discussed terms under which it may access an existing facility.

   

During the quarter, the Company completed a Licence Agreement with PetroSonic relating to the development and commercialization of a Sonoprocess for the upgrading and processing of heavy oil.

   

At the Company’s Annual General Meeting shareholders approved a change in the name of the Company to Sonic Technology Solutions Inc. The Company has established a new

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wholly-owned subsidiary to operate under the name Sonic Environmental Solutions Inc., which will assume environmental remediation operations of the Company in Canada. At the meeting, shareholders also approved the re-election of all Directors except Mr. Doug Forster who declined to be re-nominated due to other commitments.

   

During the quarter, the Company’s new corporate offices were being readied together with its new Sonoprocess Development Centre which will enable all of the Company’s testing and development facilities to be co-located at a new location in Vancouver. Combining these facilities will improve efficiencies and reduce the Company’s rent expense.

   

On April 30, 2007, the Company closed a private placement issuing 10,064,000 units of the Company at a price of $0.45 per unit for gross proceeds of $4,528,800. Each unit consisted of one common share and one half of one share purchase warrant, with a full share purchase warrant exercisable into one common share at a price of $0.60 for 24 months. As part of the private placement, the Company paid a cash commission of $317,016, equal to 7% of the gross proceeds of the financing, together with a broker warrant exercisable to acquire 1,006,400 of the units sold under the offering, exercisable at a price of $0.45 per unit, equal to 10% of the units sold under the offering.

Outstanding Share Data

Set out below is the outstanding share data of the Company as at August 23, 2007. For additional detail, see Note 9 to the unaudited interim consolidated financial statements for the period ended June 30, 2007.

At August 23, 2007 Number
  Outstanding
Common shares 41,324,068
Options to Purchase Common Shares 3,732,000
Warrants to Purchase Common Shares 15,712,261

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Results of Operations

  Six months ended Three months ended




Jun 30, 2007
(Unaudited)
Jun 30, 2006
(Unaudited)
“Restated”
Jun 30, 2007
(Unaudited)
Jun 30, 2006
(Unaudited)
“Restated”
REVENUE $783,053 $750,902 $621,647 $507,328
OPERATING COSTS $1,387,910 $1,335,706 $603,044 $720,802
EXPENSES        
Advertising $63,291 $81,242 $31,042 $30,441
Amortization of deferred development and intangible asset costs $219,488 $229,504 $109,744 $114,555
Amortization of property and office equipment $54,589 $66,140 $24,493 $26,307
Automobile $44,379 $38,195 $24,548 $17,557
Bank charges $1,330 $1,647 $422 $723
Insurance $62,683 $80,511 $35,466 $35,098
Legal and accounting $241,278 $166,668 $173,533 $88,011
Office, postage and printing $33,631 $41,827 $17,997 $21,585
Rent $113,154 $117,376 $48,166 $58,398
Research and development $17,235 $28,196 $7,356 $17,087
Salaries and wages $612,346 $792,578 $285,608 $403,658
Salaries and wages - stock compensation $175,405 $247,021 $83,878 $116,220
Shareholder relations $25,965 $34,885 $23,141 $32,501
Shareholder relations - stock compensation $56,414 $39,630 $28,207 $19,815
Telephone and utilities $39,544 $38,898 $18,895 $16,764
Trade shows $17,524 $16,202 $- $7,195
Transfer agent, regulatory fees $33,163 $19,422 $19,865 $11,002
Travel and promotion $93,158 $122,938 $43,412 $53,954
TOTAL EXPENSES $1,904,577 $2,162,880 $975,773 $1,070,871
Interest Income (net of expense) $28,765 ($72,147) $19,514 ($29,683)
Miscellaneous Income $45,000 $- $45,000 $-
Provision for income tax ($970) $5,890 $32 $5,890
Foreign exchange gain/(loss) ($7,087) ($8,761) $7,882 ($1,619)
LOSS FOR THE PERIOD $2,429,552 $2,822,702 $884,742 $1,309,757

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Revenues and Operating Costs

Sonic’s revenues include revenues that are attributable to the operations of both Sonic and Contech PCB Containment Technology Inc. (“Contech”). Contech’s core business revenues are attributable to the collection, consolidation and disposal of PCB contaminated wastes from transformers, ballasts and capacitors. Sonic’s revenues are attributable to its first three commercial contracts.

Total revenue for the six months ended June 30, 2007 was $783,053, as compared to $750,902 for the same period in 2006. Total revenue for the three months ended June 30, 2007 was $621,647 as compared to $507,328 for the same period in 2006. Revenues from PCB collection and disposal for the six months ended June 30, 2007 was $86,358 (2006 - $434,262) and $20,753 (2006 - $347,697) for the three months ended June 30, 2007. Revenue from the soil remediation process for the six months ended June 30, 2007 was $696,695 (2006 – $316,641) and $600,894 (2006 - $159,631) for the three months ended June 30, 2007. The consolidated financial statements recognize the full estimated loss, if applicable, for the project to completion as required by Canadian GAAP.

Operating costs for the six months ended June 30, 2007 were $1,387,910 as compared to $1,335,706 for the same period in 2006. Operating costs for the three months ended June 30, 2007 were $603,044 as compared to $720,802 for the same period in 2006. The Company has also included amortization of machinery and equipment in the operating costs.

General Expenses

The general overhead expenses for the six months ended June 30, 2007 were $1,904,577 as compared to $2,162,880 for the same period in 2006. The general overhead expenses for the three months ended June 30, 2007 were $975,773 as compared to $1,070,871 for the same period in 2006. Management continues to reduce general operating costs with only a few items showing increases.

The specific components of Sonic’s other operating expenses are disclosed below.

Advertising

Advertising expenses include the production of marketing materials for presentations and the preparation of business plans and packages for investors. In addition, Sonic engages the services of the investor relations firm Cavalcanti Hume Funfer Inc. (“CHF”). The monthly fee paid by Sonic to CHF is $7,500 per month.

Sonic has directed its advertising expenses towards the investment community as part of its ongoing liaison to maintain access to capital as and when required, and also to increase its profile in key market sectors and selectively choosing environmental publications for advertising. Although, the Company has reduced their overall expenditures in 2007 as compared to 2006 in investor presentations and printed material. During the second quarter, the Company engaged the services of a public relations firm in Ontario.

Amortization

Sonic’s amortization expenses are attributable to amortization of its computer equipment, furniture and office equipment, leasehold improvements, vehicles, deferred development costs,

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patents and other intangible assets. Property and office equipment are amortized using the declining balance method. There have been no significant purchases and therefore this amount is expected to continue to be lower than the same period in 2006. The deferred development and intangible assets costs are being amortized over a ten year period.

Automobile

Sonic’s automobile expenses include expenses associated with vehicles leased by the company and related automobile expenses. In 2007, the Company had a greater number of employees traveling between project sites and research and development facilities resulting in an increase over 2006.

Insurance

Sonic’s insurance costs include general office insurance, equipment insurance, environmental liability insurance and director and officer liability insurance. The Company’s U.S. subsidiary’s policy has been combined with the corporate policy. The policy has been renewed in the second quarter. There was an increase due to the addition of Sonic Corp’s U.S. coverage; however the total insurance coverage will be less than the two separate policies and a decrease is expected over 2007.

Legal and Accounting Costs

Legal and accounting costs include legal and accounting professional fees incurred in connection with Sonic’s status as a publicly traded company. Sonic is a reporting issuer under the Securities Exchange Act of 1934 and is required to prepare its annual financial statements and Form 20-F with U.S. GAAP reconciliation on an ongoing basis. As a result, Sonic’s legal and accounting costs reflect the complexity of Sonic’s financial statements resulting from the consolidation of subsidiaries and U.S. GAAP reconciliation. Legal fees attributable to regulatory approval services and general patent costs are also included.

Office, Postage and Printing

Sonic’s office, postage and printing costs generally include office, postage and printing costs associated with Sonic’s leased premises, training seminars and recruiting. The office costs include general office supplies, computer maintenance and supplies, stationery and printing.

Rent

Sonic’s rent includes rent payable in connection with its head office in Vancouver, British Columbia, Contech’s facility in Richmond, British Columbia and the US Subsidiary’s facility in San Diego, California.

During the second quarter, the Company relocated its corporate offices to a new facility in Vancouver. The Company entered into a six year lease agreement beginning October 1, 2007. During the second quarter, the unamortized leasehold improvements were expensed to rent. In addition, the Company received $45,000 to terminate their lease at the former corporate offices.

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Research and Development

Sonic’s research and development expenses include rent at Sonic’s research facility at the BC Research Complex, University of British Columbia, Vancouver, British Columbia and the demonstration facility in Richmond, British Columbia. R&D expenses also include the associated supplies at these facilities and development of future projects. R&D activities relate to proof of concept of new Sonoprocess applications and treatability studies for the PCB Sonoprocess.

Salaries and Wages

Sonic’s salaries and wages expenses include salaries, wages and benefits payable to the employees of Sonic and its operating subsidiaries, Contech and Sonic Corp.

Sonic recognizes a stock compensation expense in respect to directors, officers and employees as a result of options granted as part of an incentive program. Stock compensation expense associated with salaries and wages is attributable to stock options granted to both employees and non-employees using the fair value method.

The 2007 salaries and wages expenses is less than 2006 with the departure of two senior management positions. The Company has filled these roles with current staff and expects to maintain these levels.

Shareholder Relations

Shareholder relation expenses include costs of communications with Sonic’s shareholders.

Sonic’s shareholder relations expenses include the annual report and annual general meeting. Sonic recognizes a stock compensation expense in respect to shareholders relations activities as a result of options granted for shareholders relations and advertising activities.

The Company incurred savings in 2007 as compared to 2006 with reduced costs associated with the Annual General Meeting and associated filings.

Telephone and Utilities

Sonic’s telephone and utility expenses include telephone and utility expenses associated with Sonic’s office premises and telecommunication costs for cellular phones and Blackberry devices used by Sonic’s personnel.

Trade Shows

Sonic’s trade show expenses include expenses associated with trade shows attended by Sonic for the purpose of increasing public awareness of its Sonoprocess technology.

Transfer Agent, Regulatory Fees

Sonic’s transfer agent and regulatory fees include fees payable to Sonic’s transfer agent and fees payable to securities regulatory authorities as a result of Sonic being a public company in Canada. During the second quarter of 2007, the Company had increased activity with both the trust agent

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and the securities regulatory authorities. This activity includes semi-annual release of shares from escrow and the change to the Company’s stock option plan at the Annual General Meeting.

Travel and Promotion

Travel and promotion expenses include business travel and travel related to Sonic’s pursuit of marketing of its Sonoprocess technology. These expenses included both domestic and international travel for the review of potential business opportunities and investor relations. The Company is continuing to reduce spending on travel.

Interest Expense

Sonic’s interest expense is attributable to interest expenses less the interest earned on Sonic’s liquid investments, including cash and cash equivalents.

Over 2007, the Company will see a significant decrease in interest expense due to the conversion of the debentures at the end of December 31, 2006.

Net Loss

Sonic’s net loss has increased in each period as Sonic’s expenses have increased in each period. The increase in costs is directly related to the Company proceeding to commercialization and deployment of its technology.

DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported on a timely basis to senior management, so that appropriate decisions can be made regarding public disclosure. As at the end of the period covered by this management’s discussion and analysis, management evaluated the effectiveness of the Company’s disclosure controls and procedures as required by Canadian securities laws.

Based on that evaluation, management has concluded that, as of the end of the period covered by this management’s discussion and analysis, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings and interim filings (as such terms are defined under Multilateral Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings) and other reports filed or submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those laws, and that material information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

INTERNAL CONTROLS OVER FINANCIAL REPORTING

There were no changes in the Company’s internal controls over financial reporting during the second quarter of 2007 that have affected, or which are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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RELATED PARTY TRANSACTIONS

As at June 30, 2007 $20,108 (2006 - $259,468) was owing to directors, officers and related entities. This amount is non-interest bearing, has no specific terms of repayment and was incurred in the normal course of operations.

Quarterly Information

The following financial information is for each of the eight most recently completed quarters of the Company.

    Total     Loss for the     Loss per  
    revenues     period     share -  
    (including           basic and  
    interest)           diluted  
June 30, 2007   $641,161     $884,742     $0.02  
March 31, 2007   $170,885     $1,544,812     $0.05  
December 31, 2006   $489,752     $2,579,004     $0.11  
September 30, 2006   $425,052     $1,947,537     $0.09  
June 30, 2006   $507,328     $1,284,800     $0.06  
March 31, 2006   $243,574     $1,487,987     $0.09  
December 31, 2005   $222,167     $2,636,353     $0.17  
September 30, 2005   $299,827     $1,446,146     $0.08  

Since the Company completed its acquisition of SESI Systems Inc. in December 2002 it has been focusing its efforts on commercializing its patented low frequency sonic generator technology.

Liquidity and Capital Resources Working Capital

Sonic had a working capital of $3,123,841 at June 30, 2007, compared with a working capital balance of $808,208 at December 31, 2006.

Cash and Cash Equivalents

Sonic had cash of $3,072,771 at June 30, 2007 compared to cash of $1,751,908 at December 31, 2006. The liquid portion of the working capital consists of cash. The management of this cash is conducted in-house based on investment guidelines approved by the Board, which generally specify that investments be made in conservative money market instruments that bear and carry a low degree of risk. Some examples of instruments approved by Sonic are treasury bills, money market funds, bank guaranteed investment certificates and bankers' acceptance notes. The objective of these investments is to preserve funds for commercialization of Sonic's technology.

Cash Used in Operating Activities

During the second quarter, cash used in Sonic’s operating activities increased to $2,295,854 for the six months ending June 30, 2007 compared to $2,003,834 during the same period in 2006. For

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the three months ending June 30, 2007, cash used in Sonic’s operating activities was $1,214,940 as compared to $1,164,944 during the same period in 2006.

Cash Used in Investing Activities

For the six months ending June 30, 2007, Sonic used $433,258 of cash in investing activities compared to $186,909 for the same period in 2006. For the three months ending June 30, 2007, Sonic used $259,522 of cash in investing activities as compared to $219,294 for the same period in 2006. Cash used in investing activities included $415,421 for property, plant and equipment, and $17,837 of patent maintenance costs.

Cash Generated by Financing Activities

During the six months ending June 30, 2007, Sonic generated $4,049,975 in financing activities as compared to $2,327,290 for the six months ending June 30, 2006. For the three months ending June 30, 2007, Sonic generated funds from financing activities of $4,124,999 as compared to ($42,035) in the same quarter in 2006. This amount in the second quarter of 2006 related to the settlement of a long term loan. During the first quarter of 2007, the Company incurred share issuance costs of $75,024 which were amounts payable at the end of 2006 in relation to a private placement in 2006.

Requirement of Additional Equity Financing

Sonic has relied on equity financings for all funds raised to date for its operations. Sonic is presently working on commercializing its patented low frequency Sonic generator technology and related applications, with initial emphasis on commercializing its technology to remediate contaminated soils.

The ability of Sonic to recover the costs it has incurred to date on its technology is dependent on Sonic being able to successfully commercialize the technology and to operate its business. Sonic presently does not generate positive cash flow from operations to fund its activities and has therefore relied principally upon the issuance of securities for financing. Sonic intends to continue relying upon the issuance of securities to finance its operations if required to the extent such instruments are issuable under terms acceptable to Sonic until Sonic attains profitable production.

At the end of June 30, 2007, Sonic had 3,732,000 stock options and 15,712,261 share purchase warrants outstanding. The outstanding stock options have a weighted average exercise price of $1.40 per share. The outstanding warrants have a weighted average exercise price of $0.82 per share. Accordingly, as at June 30, 2007, the outstanding options and warrants represented a total of 19,444,261 shares issuable for a maximum of $18,158,588 if these options and warrants were exercised in full. The exercise of these options and warrants is completely at the discretion of the holders. There is no assurance that any of these options or warrants will be exercised.

Commitments

Sonic has signed premises, vehicle and photocopier operating lease agreements. The leases expire between July 2007 and September 2013. During the period, the Company entered into an agreement to terminate their lease agreement for their corporate offices and entered into a lease for its new offices commencing on October 1, 2007 for a term of six years. The future lease obligations are as follows:

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Amount
 
2007 $  47,965  
2008 $  147,931  
2009 $  144,414  
2010 $  129,062  
2011 $  117,450  

No other material commitments have been made to date.

Outlook

The Company has successfully proven the viability of its core sonic generator technology, and has responded to interest from potential partners for other Sonoprocess applications, particularly in the oil and oil sands industry sector. In 2007, the Company is allocating resources to potential applications that the Company has identified, and will prioritize these efforts according to the ability of the Company to attract an industry development partner. Work in the oil and gas sector and potential collaboration arrangements are being advanced.

The Company is expanding environmental operations in Ontario to meet demand for the Sonic Treatment System in eastern Canada. Future projects are likely to require additional treatment capacity and the Company is exploring opportunities to access a fixed base operating remediation facility in Canada as a base for on-site remediation projects and as a receiving facility for smaller sites which cannot support on-site treatment.

The Company will continue to expand efforts to license the Sonic Treatment System both globally and within North America. The Company regards the synergies with established environmental remediation companies regarding the ancillary site work to make this the preferred business model.

Sonic will continue to focus on:

  - Growth of environmental operations through operating partnerships and licences.
     
  - Development of new Sonoprocess opportunities in other process industries.

Business Risks

The risks associated with Sonic's business include:

Market Risk

Sonic's business plan contemplates that it enter into agreements to remediate PCB contaminated soil using its proprietary technologies. To date, the Company has secured three soil remediation contracts in Canada and operates licensing arrangements in Japan and Australia for the Terra-Kleen process. In order to generate revenue and be commercially successful as an enterprise, it is important that Sonic obtain additional soil remediation contracts. There is no assurance that the

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Company will be able to secure any additional contracts or otherwise generate revenues from soil remediation operations.

Technical Risk

Sonic has not operated long enough on a commercial scale to be certain about the scope of all costs of operation and about the variability of commercial site conditions that may affect the Company’s performance and operating costs. This uncertainty is particularly relevant in light of the recent integration of the Terra-Kleen process into our Sonoprocess operations with the objective of improving our overall PCB remediation capabilities. While the integrated operations at the Juker site have not resulted in any new substantive technical issues to date, there can be no assurance that the integration will ultimately be successful or that Sonic will otherwise avoid further technical difficulties that inhibit the efficient operation of Sonic's remediation operations. Factors that could increase costs of operation or decrease performance beyond that currently anticipated include higher than predicted rates of maintenance, unanticipated inefficiencies in operations and any breakdowns and malfunctions in plant equipment. In addition, all sites and conditions of contamination are different and treatability studies may not reveal all issues associated with successful remediation which could result in operating costs being higher than anticipated and processing rates of contaminated soils being lower than anticipated. Co-contaminants present in the soil may also limit the application of Sonic's process for remediation. The occurrence of any of these events could decrease the operational time, increase the cost of operation or prevent Sonic from completing its remediation projects.

Financial Risk

Since operations commenced in 2000 the Company has operated on a start-up basis. Like most start-up companies, Sonic has consistently incurred losses. The Company is attempting to transition its business from a start-up model to one that is based substantially on revenue growth and potential profitability, but has not achieved that goal at this point. Sonic cannot guarantee that it will achieve profitability in the future, and a failure to do so will negatively impact the Company's share value.

Development Risk

A key business objective is for Sonic to further develop Sonoprocess applications for a wide range of value-added industrial and environmental processes. Nevertheless, while the sonic generator itself has met or exceeded expectations to date, each Sonoprocess development carries with it a technical risk. The technical risk extends from proof of concept, through pilot plant, and finally commercial scale-up. Accordingly, there is no assurance that the Company will be able to commercialize or achieve profitability for any commercial applications of a Sonoprocess or realize additional revenues from other Sonoprocess technologies.

Insurance and Environmental Risk

Sonic's operations are governed by numerous laws and regulations at various levels of government. These laws and regulations regulate the operation and maintenance of facilities, the discharge of materials into the environment and other environmental protection issues. Sonic must obtain and comply with a number of permits and meet several environmental regulatory obligations in connection with PCB remediation operations. Under these laws and regulations, the Company could be liable for personal injury, clean-up costs and other environmental and property damages, as well as administrative, civil and criminal penalties. This includes liability in the

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event that employees are exposed to contaminated material. The Company maintains a comprehensive Environmental Health and Safety policy and has secured extensive insurance coverage to mitigate against such risks. Nevertheless, even if the loss from an environmental incident were covered by insurance, such an incident would likely have a negative impact on the financial condition of the Company. Furthermore, the costs of complying with environmental laws and regulations in the future may harm the Company's business, particularly if there are future changes in environmental laws and regulations that result in stricter standards and enforcement, larger fines and liability or increased capital expenditures and operating costs.

Regulatory Risk

Sonic has obtained regulatory approval of its Sonoprocess for treatment of PCB contaminated waste in British Columbia; however, this does not guarantee that regulatory approval will be received in other parts of Canada, or anywhere else. The Terra-Kleen PCB extraction process has been approved for use in Ontario and is recognized in U.S. Environmental Protection Agency regulations as not requiring further approval as a treatment process. The Company expects that this will also be the case in other regulatory jurisdictions that differentiate between treatment and extraction of a contaminant. In most places, regulatory approval is required before the Company will be able to use its treatment technologies commercially. If regulatory approval is not obtained, Sonic will not be able to use its PCB Sonoprocess to complete soil remediation contracts outside of British Columbia.

Management Risk

Sonic’s directors and officers may serve as directors or officers, or may be associated with other reporting companies or have significant shareholdings in other public companies. To the extent that such other companies may participate in business or asset acquisitions, dispositions, or ventures in which Sonic may participate, the directors and officers of Sonic may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. If a conflict of interest arises, Sonic will follow the provisions of its governing corporate legislation dealing with conflicts of interest. These provisions state that where a director has such a conflict, that director must, at a meeting of Sonic’s directors, disclose his interest and refrain from voting for or against the approval of such a participation or such terms unless otherwise permitted. In accordance with the laws of the Province of British Columbia, the directors and officers of Sonic are required to act honestly, in good faith and in the best interests of Sonic.

FORWARD LOOKING STATEMENTS

Certain statements made herein, other than statements of historical fact relating to the Sonic, are forward-looking statements. These include, but are not limited to, statements respecting anticipated business activities, planned expenditures, corporate strategies, participation in projects and financing, the outcome of development activities in the heavy oil and oil sands sector the expected timing and success for receipt of licensing for use of the Sonoprocess in Ontario and other jurisdictions, the timing and scope of future soil remediation contracts, the potential for joint ventures, licensing or other arrangements involving the soil remediation business and other Sonoprocess applications and other statements that are not historical facts. When used in this MD&A, the words such as , “could”, “plan”, “estimate”, “expect", “intend”, “may”, “potential”, “should” and similar expressions, are forward-looking statements. Although the Company believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Forward-looking

15


statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading “Risk Factors” elsewhere in this MD&A and in the Company’s Annual Report on Form 20-F. The reader is cautioned not to place undue reliance on forward-looking statements.

16


EX-99.3 4 exhibit99-3.htm FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS - CEO Filed by Automated Filing Services Inc. (604) 609-0244 - Sonic Technology Solutions Inc. - Exhibit 99.3

Form 52-109F2 Certification of Interim Filings

I, Adam Sumel, Chief Executive Officer of Sonic Technology Solutions Inc. certify that:

1.

I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Sonic Technology Solutions Inc., (the issuer) for the interim period ending June 30, 2007;

   
2.

Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;

   
3.

Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings;

   
4.

The issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the issuer, and we have:


  (a)

designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and

     
  (b)

designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP; and


5.

I have caused the issuer to disclose in the interim MD&A any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.

Date: August 29, 2007

“Adam Sumel”

Chief Executive Officer


EX-99.4 5 exhibit99-4.htm FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS - CFO Filed by Automated Filing Services Inc. (604) 609-0244 - Sonic Technology Solutions Inc. - Exhibit 99.4

Form 52-109F2 Certification of Interim Filings

I, Lisa Sharp, Chief Financial Officer of Sonic Technology Solutions Inc. certify that:

1.

I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Sonic Technology Solutions Inc., (the issuer) for the interim period ending June 30, 2007;

   
2.

Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;

   
3.

Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings;

   
4.

The issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the issuer, and we have:


  (a)

designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and

     
  (b)

designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP; and


5.

I have caused the issuer to disclose in the interim MD&A any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.

Date: August 29, 2007

“Lisa Sharp”

Chief Financial Officer


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