We recognize revenue in accordance with Statement of Position (‘‘SOP’’) 97-2, ‘‘Software Revenue Recognition,’’ as amended by SOP 98-4 and SOP 98-9, and in certain instances in accordance with SOP 81-1, ‘‘Accounting for Performance of Construction-Type and Certain Production-Type Contracts.’’ We license software under non-cancelable license agreements. License fee revenues are recognized when (a) a non-cancelable license agreement is in force, (b) the product has been delivered, (c) the license fee is fixed or determinable and (d) collection is reasonably assured. If the fee is not fixed or determinable, revenue is recognized as payments become due from the customer.

Residual Method Accounting.    In software arrangements that include multiple elements (e.g., license rights and technical support services), we allocate the total fees among each of the elements using the ‘‘residual’’ method of accounting. Under this method, revenue allocated to undelivered elements is based on vendor-specific objective evidence of fair value of such undelivered elements, and the residual revenue is allocated to the delivered elements. Vendor specific objective evidence of fair value for such undelivered elements is based upon the price we charge for such product or service when it is sold separately. We may modify our pricing practices in the future, which would result in changes to our vendor specific objective evidence. As a result, future revenue associated with multiple element arrangements could differ significantly from our historical results.

Percentage of Completion Accounting.    Fees from licenses sold together with consulting services are generally recognized upon shipment of the licenses, provided (i) the criteria described in subparagraphs (a) through (d) in the second paragraph under Revenue Recognition above are met; (ii) payment of the license fee is not dependent upon performance of the consulting services; and (iii) the consulting services are not essential to the functionality of the licensed software. If the services are essential to the functionality of the software, or performance of services is a condition to payment of license fees, both the software license and consulting fees are recognized under the ‘‘percentage of completion’’ method of contract accounting. Under this method, we are required to estimate the number of total hours needed to complete a project, and revenues and profits are recognized based on the percentage of total contract hours as they are completed. Due to the complexity involved in the estimating process, revenues and profits recognized under the percentage of completion method of accounting are subject to revision as contract phases are actually completed. Historically, these revisions have not been material.

Sublicense Revenues.    We recognize sublicense fees as reported by our licensees. License fees for certain application development and data access tools are recognized upon direct shipment by us to the end user or upon direct shipment to the reseller for resale to the end user. If collection is not reasonably assured in advance, revenue is recognized only when sublicense fees are actually collected.

Service Revenues.    Technical support revenues are recognized ratably over the term of the related support agreement, which in most cases is one year. Revenues from consulting services under time and materials contracts, and for education, are recognized as services are performed. Revenues from other contract services are generally recognized based on the proportional performance of the project, with performance measured based on hours of work performed.

Impairment of Goodwill and Other Intangible Assets

Goodwill and intangible assets have generally resulted from our business combinations accounted for as purchases. We are required to test amounts recorded as goodwill or recorded as intangible assets with indeterminate lives, at least annually for impairment. The review of goodwill and indeterminate lived intangibles for potential impairment is highly subjective and requires us to make numerous estimates to determine both the fair values and the carrying values of our reporting units to which goodwill is assigned. If the estimated fair value of an asset is determined to be less than its carrying value, we are required to perform an analysis similar to a purchase price allocation for an acquired business in order to determine the amount of goodwill impairment, if any. This analysis requires a valuation of certain other intangible assets including in-process research and development, and developed technology. Changes in our internal business structure, changes in our future revenue and expense forecasts, and certain other factors that directly impact valuation could result in a future impairment charge. For these purposes, recoverability of these assets is measured by comparing their

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carrying values to the future undiscounted cash flows the assets are expected to generate. This methodology requires us to estimate future cash flows associated with certain assets or groups of assets. Changes in these estimates could result in impairment losses associated with other intangible assets. As of March 31, 2006, all intangible assets have been written off.

Allowance for Doubtful Accounts

Whenever relevant, we maintain an allowance for doubtful accounts to reflect the expected non-collection of accounts receivable based on past collection history and specific risks identified in our portfolio of receivables. Additional allowances might be required if deteriorating economic conditions or other factors affect our customers’ ability to make timely payments.

Capitalized Software

We capitalize certain software development costs after a product becomes technologically feasible and before its general release to customers. Significant judgment is required in determining when a product becomes ‘‘technologically feasible.’’ Capitalized development costs are then amortized over the product’s estimated life beginning upon general release of the product. Periodically, we compare a product’s unamortized capitalized cost to the product’s net realizable value. To the extent unamortized capitalized cost exceeds net realizable value based on the product’s estimated future gross revenues (reduced by the estimated future costs of completing and selling the product) the excess is written off. This analysis requires us to estimate future gross revenues associated with certain products and the future costs of completing and selling certain products. Changes in these estimates could result in write-offs of capitalized software costs. As of March 31, 2006, we did not have any software development projects where the product being developed meets the criteria for capitalization.

Income Taxes

We use the asset and liability approach to account for income taxes. This methodology recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. We then record a valuation allowance to reduce deferred tax assets to an amount that likely will be realized. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. If we determine during any period that we could realize a larger net deferred tax asset than the recorded amount, we would adjust the deferred tax asset and record a corresponding reduction to its income tax expense for the period. Conversely, if management determines that we would be unable to realize a portion of our recorded deferred tax asset, it would adjust the deferred tax asset and record a charge to income tax expense for the period. Significant judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences (e.g., the income we earn within the United States) could materially impact our financial position or results of operations.

Stock-Based Compensation

During the first quarter of fiscal 2006, we adopted the provisions of, and account for stock-based compensation in accordance with, the Financial Accounting Standards Board’s (‘‘FASB’’) Statement of Financial Accounting Standards No. 123 — revised 2004 (‘‘SFAS 123R’’), ‘‘Share-Based Payment’’ that replaced" Statement of Financial Accounting Standards No. 123 (‘‘SFAS 123’’), ‘‘Accounting for Stock-Based Compensation’’ and supersedes APB Opinion No. 25 (‘‘APB 25’’), ‘‘Accounting for Stock Issued to Employees.’’ Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. We elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the effective date will be recognized over the remaining service period using the compensation cost estimated for the SFAS 123 pro forma disclosures.

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The adoption of SFAS 123R had an expense impact of $87,657 to our consolidated income statement in the first quarter of 2006.

Derivatives

We follow the provisions of SFAS No. 133 ‘‘Accounting for Derivative Instruments and Hedging Activities’’ ("SFAS No. 133’’) along with related interpretations EITF No. 00-19 ‘‘Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock’’ (‘‘EITF 00-19’’) and EITF No. 05-2 ‘‘The Meaning of ‘Conventional Convertible Debt Instrument’ in Issue No. 00-19’’ (‘‘EITF 05-2’’). SFAS No. 133 requires every derivative instrument (including certain derivative instruments embedded in other contracts) to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in the derivative’s fair value recognized currently in earnings unless specific hedge accounting criteria are met. We value these derivative securities under the fair value method at the end of each reporting period (quarter), and their value is marked to market at the end of each reporting period with the gain or loss recognition recorded against earnings. We continue to revalue these instruments each quarter to reflect their current value in light of the current market price of our common stock. We utilize the Black-Scholes option-pricing model to determine fair value. Key assumptions of the Black-Scholes option-pricing model include applicable volatility rates, risk-free interest rates and the instruments expected remaining life. These assumptions require significant management judgment.

Results of Operations

Our business is in its early stages and consequently our financial results are difficult to compare from one period to the next. We expect such period-to-period differences to continue to be significant over the next several quarters, until we have a number of full years of operations.

Since December 2003, we have focused on two areas: (1) further developing and enhancing the SWP and developing an array of products for the financial services, entertainment and general corporate market that leverage the functionality of the SWP and (2) developing a sales strategy that contemplated building teams that would develop relationships with direct customers, software manufacturers, multi service operators and wireless carriers. Since we have limited capital, we lacked the resources to execute this strategy quickly. Once we began generating operating revenue — in late 2004 — and once we raised modest amounts of capital — in early 2005 — we were able to begin hiring the sales and marketing and administrative personnel necessary to execute on our strategy.

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Comparison of three months ended March 31, 2006 and 2005

For the three months ended March 31, 2006, we had a comprehensive loss of $2.6 million compared to a comprehensive loss of $733,000 for the three months ended March 31, 2005. Most of this increase is attributable to increased expenses for an expanded sales and marketing effort and additional legal and accounting expenses. The following table compares Sona Mobile’s consolidated statement of operations data for the three months ended March 31, 2006 and 2005.

				Three months ended March 31,
				2006				2005
Net Revenue					125,324				135,035
Operating expenses
Depreciation and amortization					7,837				200,292
General and administrative expenses					603,781				145,702
Professional fees					297,906				110,107
Development expenses					383,665				98,702
Selling and marketing expenses					1,300,984				334,194
Total operating expenses					2,594,173				888,997
Operating loss					(2,468,849	)			(753,962	)
Interest income					17,015				—
Interest expense					(953	)			(1,082	)
Other income and expense					(146,655	)			—
Net loss					(2,599,442	)			(755,044	)
Foreign currency translation adjustment					25,405				21,983
Comprehensive loss					(2,574,037	)			(733,061	)

Revenue

Revenue in the first quarter of 2006 was $125,324 compared to revenue of $135,035 for the first quarter of 2005, a decrease of 7%. 2006 revenue included $115,000 of licensing fees and $10,000 of maintenance fees. Approximately 32% of the revenue is attributable to continuing license subscriptions and the balance relates to new projects begun this quarter and recognition of deferred revenue for projects in progress. Our new version of Sona Wireless Platform, MobileMarkets™ Enterprise Edition is currently in trials in six major financial institutions. We believe continuing increases in wireless IT spending and our continuing sales and marketing efforts will help drive revenue through the remainder of 2006.

Operating expenses

Total operating expenses for the first quarter of 2006 were $2.6 million compared to $889,000 for the first quarter of 2005. The increased operating expenses are primarily attributable to the growth in sales, marketing and software development staff to support an expanded effort to market and sell the SWP and related products. The increased professional fees relate to the preparation and filing of required forms with the Security and Exchange Commission including our quarterly reports on Form 10-QSB and the recently filed prospectus, as well as general corporate governance related to being a public company.

Depreciation and amortization

Depreciation and amortization expenses for the first quarter of 2006 were $8,000 compared to $200,000 in the first quarter of 2005. In 2005, this expense related primarily to amortization of the development acquired in the acquisition of Sona Innovation in late 2003. The depreciation and amortization expense for the first quarter of 2006 was composed entirely of depreciation of fixed assets.

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General and Administrative expenses

General and administrative expenses for the first quarter of 2006 were $604,000 compared to $146,000 for the comparable quarter in 2005, a 314% increase. The increased expenses are attributable to the increased overhead structure required to support our sales and marketing and development efforts in 2006. We hired additional administrative, finance and accounting personnel, increasing our payroll related expenses to $165,000 in 2005 from $36,000 in 2005. We leased office space for a new corporate headquarters, sales and customer support office in New York, a sales office in London and a development facility in Boulder, Colorado, increasing our rent to $158,000 in the first quarter of 2006 from $9,000 in the first quarter of 2005. As a result of increased staff and office space, our expenses for office related costs, communication, insurance and other administrative expenses also increased. Our communication expenses increased to $42,000 in the first quarter of 2006 from $29,000 in the first quarter of 2005. Our stock compensation expense in this category for the first quarter of 2006 was $88,000 compared to zero in the first quarter of 2005 consisting of expenses related to the expensing of stock options under FAS 123R. These options were granted in October 2005.

Professional fees

Professional fees for the first quarter of 2006 were $298,000 compared to $110,000 for the comparable 2005 quarter, a 170% increase. Legal fees increased to $123,000 in 2006 from $98,000 in the first quarter of 2005. A large portion of the Q1 2006 legal expenses related to legal fees associated with the filing of the recently finalized prospectus, while in Q1 2005, legal fees were primarily related to costs incurred in advance of the reverse merger. Accounting fees increased to $30,000 in 2006 from $12,000 in 2005. Other professional fees of $24,000 were incurred in the first quarter of 2006 for stock transfer agent fees, directors’ fees, as well as specialist fees relating to an opinion on the valuation of options and warrants. Additionally, each new director elected in 2005 and 2006 was granted 40,000 shares of restricted stock. The fair market value of this stock was amortized over the period of vesting. Professional fees expense includes a charge of $107,000 relating to the charge for amortization of deferred stock based compensation for the first quarter of 2006.

Development expenses

Research and development expenses for the first quarter of 2006 were $384,000 compared to $99,000 for the 2005 quarter, a 288% increase. Payroll and related expenses comprise 91% of the total research and development expenses. The increase is predominantly due to the hiring of additional developers to support the increased sales and marketing effort, which has produced a substantial increase in development projects.

Selling and marketing expenses

Sales and marketing expenses for the first quarter of 2006 were $1,301,000 compared to $334,000 for 2005, a 289% increase. The increased expenses are attributable to the significant effort undertaken in 2006 to raise awareness of the SWP and related products in the two large vertical markets, (a) media, entertainment and gaming and (b) financial services and enterprise software, which we believe hold the greatest opportunities. We hired additional sales personnel, sales consultants and customer support personnel increasing our payroll and related expenses to $599,000 in the first quarter of 2006 from $23,000 in 2005. Our travel and entertainment expenses related to sales and marketing increased proportionately to $199,000 in 2006, from $35,000 in 2005. Consulting and independent contractor expenses rose to $389,000 in 2006 from $183,000 in 2005. We also increased our marketing and advertising efforts including development of marketing literature, participation in trade shows, attendance at trade conferences, and advertising targeted to specific industries within the market segments where we focus. Our marketing and advertising expenses increased to $79,000 in 2006 from $69,000 in the first quarter of 2005.

Other income and expense

The other expense in 2006 consists of $146,655 relating to the March 31, 2006 revaluation of warrants carried as a liability on the balance sheet in accordance with EITF-0019.

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Interest income

Because we had limited capital, we had nominal interest income in 2005. Interest income of $17,000 in 2006 reflects the fact that, in the Merger, Sona Mobile acquired PerfectData’s net cash assets, which were in excess of $1 million, and subsequently raised in excess of $5 million through the sale of Series B Preferred Stock at the end of the second quarter. Interest income is derived from investing these funds in short-term liquid investments.

Interest expense

The small amounts of interest expense in the first quarters of both 2006 and 2005 relates primarily to bank charges and wire fees.

Foreign currency translation adjustment

The balance sheet of Innovations, a Canadian subsidiary of Sona Mobile, is translated into U.S. dollars on the date thereof using the official exchange rate on that date. Transactions that take place during the period are translated into U.S. dollars on the date of the transaction based on the official exchange rate on that date. The resulting difference in period income is treated as gain or loss during the period due to currency translation. The fact that there were gains in both the 2006 and the 2005 periods reflects the strengthening of the U.S. dollar relative to the Canadian dollar during the period. Balances payable from Sona Innovations to Sona Mobile Holdings Corp. are denominated in U.S. dollars and account for the majority of the translation gain in 2006.

Liquidity and Capital Resources

Because of our limited capital, we depend on external sources of financing to support our working capital and capital expenditure requirements. We have relied upon the proceeds of private securities transactions to satisfy our financing needs. Through March 31, 2006, we had accumulated losses of approximately $10 million, which were financed primarily through sales of equity securities. At the Merger Date, we had a net book value of approximately $1.146 million — mostly cash and cash equivalents. Through the period ended March 31, 2006, we consummated the following financing transactions:

	•	In March 2005, (i) the holder of a $100,000 convertible promissory note issued by us in June 2004 converted that note into 1,162,655 shares of our Common Stock. Those shares were converted into shares of our Series A Preferred Stock in the Merger and (ii) we sold 250,000 shares of our Common Stock for $475,000, which shares were subsequently converted into 25,000 shares of our Series A Preferred Stock in the Merger.

	•	In June 2005, we sold 3,848.7 shares of our Series B Preferred Stock and warrants to purchase 962,175 shares of our Common Stock (the ‘‘Warrants’’). The gross proceeds from the sale of the Series B Preferred Stock and the warrants were approximately $5.05 million.

	•	In January 2006, we sold 2,307,693 shares of our Common Stock and issued a warrant to purchase 1,200,000 shares of our Common Stock to Shuffle Master for $3.0 million. This warrant has an exercise price of $2.025 per share and expires on July 12, 2007. The sale of these shares and the issuance of the warrant were in connection with a strategic alliance distribution and licensing agreement between us and Shuffle Master.

At March 31, 2006, we had total cash and cash equivalents of $2.2 million held in current and short-term deposit accounts. We believe that based on our current level of spending, this cash will only last 60-90 days. In addition, to our efforts to raise additional capital, we have centralized expense control by directing the Chief Financial Officer to approve all travel expenses and all other expenses in excess of $5,000. We have also made significant reductions in our work force and continually review other operating expenses such as telecommunications and rent. At the same time, we continue to aggressively market our products and services, particularly to existing and former customers. We cannot assure you that we will be able to successfully implement our plans to raise additional capital,

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increase our revenue and reduce our expenses. We may not be able to obtain the required additional capital or obtain additional project work on a timely basis, on favorable terms, or at all. If we cannot successfully implement our plans, our liquidity, financial condition and business prospects will be materially and adversely affected and we may have to cease operations.

Our working capital at March 31, 2006 was approximately $1.3 million, compared to our negative working capital of $356,000 at March 31, 2005. Our current ratio at March 31, 2006 was 2.0 to 1 compared to our current ratio of 0.65 to 1 at March 31, 2005. The current ratio is derived by dividing current assets by current liabilities and is a measure used by lending sources to assess our ability to repay short-term liabilities.

Overall, for the quarter ended March 31, 2006, we had a net cash increase of $932,000 attributable primarily to net cash provided by investing and financing activities of $3.0 million offset by net cash used in operating activities of $2.1 million. The primary components of our operating cash flows are net loss adjusted for non-cash expenses, such as depreciation and amortization, and the changes in accounts receivable, and accounts payable. The largest component of cash flow provided by financing activities was the proceeds from the Shuffle Master option exercise with accompanying warrants, which generated $3 million in gross proceeds.

There were no capital expenditures for the quarter ended March 31, 2006.

At March 31, 2006, we had no indebtedness, other than accrued salaries from 2004 in the amount of $56,000 owing to our chief executive officer.

At March 31, 2006, we had commitments relating to office leases in New York City and Boulder, Colorado in the United States and Toronto, Canada, as well as some small amounts for office equipment leases. The current Toronto lease expires in April 2007. In New York, we have an office lease which runs through December 2007 and in London, a short-term lease, which ran to March 2006 and now continues on a month to month basis.

Commitment and Contingencies

At March 31, we had offices in Toronto, Ontario, New York, New York, Boulder, Colorado and London, United Kingdom. The London office is leased on a month-to-month basis. We also have equipment leases. These leases have been classified as operating leases. Future lease commitments by year are as follows (2006 amounts are for nine months):

				Future Lease Commitments by Year
				(US$)
				2006				2007				2008				2009				2010
Office Space Leases:
United States				$	372,997			$	500,915			$	67,938			$	74,732			$	62,059
Canada					61,049				27,133				—				—				—
Total Office Space					434,046				528,048				67,938				74,732				62,059
Office Equipment					39,104				52,139				51,804				11,050				589
Total Lease Commitments				$	473,150			$	535,720			$	75,159			$	80,174			$	62,650

Office lease payments for the first quarters of 2006 and 2005 were approximately $158,000 and $99,000 respectively. Office equipment lease expenses for the first quarters of 2006 and 2005 were approximately $5,000 and $1,000 respectively.

In January 2006, while a selling security holding registration statement was pending review by the Securities and Exchange Commission, we entered into a strategic alliance licensing and distribution agreement with Shuffle Master under which we agreed to develop certain wireless gaming technology for Shuffle Master. In connection with that agreement, we sold 2,307,693 shares of our Common Stock and warrants to purchase up to an additional 1,200,000 shares of our Common Stock to Shuffle Master for $3.0 million. The proceeds from the sale of those securities were intended to provide us with the

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working capital we would need to fulfill our obligations under the agreement. Since we agreed to register the purchased shares and the shares underlying the warrants, we included them in the pending registration statement. We were subsequently informed by the staff of the Commission that, because we included those securities in a pending registration statement, they were questioning the availability of the exemption from registration that we were claiming. The availability of the exemption requires that the transaction have a conclusion. Including the Shuffle Master securities in the pending registration statement raises the question whether the transaction with Shuffle Master ever concluded. The Commission suggested that we remove the Shuffle Master securities from the pending resale registration statement, which we did and the registration statement became effective April 24, 2006.

Notwithstanding that removal, if a court of competent jurisdiction were to ultimately determine that an exemption was not available, we may have to offer Shuffle Master rescission rights. In addition, we, and possibly some of our officers, may also be subject to penalties. However, we believe the sale of securities to Shuffle Master was exempt from the registration requirements of the Securities Act as a valid private placement transaction under Sections 4(2) and 4(6) of the Securities Act and will vigorously contend any claim to that contrary. Our belief is based on a variety of factors, including the following:

	•	Shuffle Master is a sophisticated accredited investor that paid for and took possession of legended securities;

	•	the negotiation of the strategic alliance agreement, including the sale of shares of our Common Stock to Shuffle Master, began before the registration statement was filed;

	•	the sale of the shares and the issuance of the warrant were effected in connection with the strategic alliance agreement and the proceeds of the sale were intended to assist us in our development of the technology we agreed to develop for Shuffle Master in accordance with that agreement;

	•	although we agreed to register the shares sold to Shuffle Master and the shares underlying the warrant we issued to Shuffle Master, we did not specifically agree to include those securities in the pending registration statement;

	•	we have not been soliciting or marketing any of the securities covered by the registration statement;

	•	the shares sold to Shuffle Master and those underlying the warrant were removed from the registration statement.

Item 3.    Controls And Procedures

Evaluation of Disclosure Controls and Procedures.    The Company's management, with the participation of the chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of the Company's ‘‘disclosure controls and procedures’’ (as defined in the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this quarterly report (the ‘‘Evaluation Date’’). Based upon that evaluation, the chief executive officer and the chief financial officer that the Company's disclosure controls and procedures were effective, as of the Evaluation Date to ensure that (i) information required to be disclosed in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time limits specified in the Commission's rules and forms, and (ii) information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's chief executive officer and the chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.    There were no changes in the Company's internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II
OTHER INFORMATION

Item 1.    Legal Proceedings.

We are not currently a party to any legal proceeding that we deem material.

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

Recent Sales of Unregistered Securities

In connection with the Merger, we issued a total of 568,140 shares of our Series A Convertible Preferred Stock, par value $.01 per share (the ‘‘Series A Stock’’); 539,733 shares were issued to the former shareholders of Sona Mobile and 28,407 were issued to Sona Mobile’s financial advisor in connection with the Merger (the ‘‘Advisor’’). These shares are convertible into 27,334,165 shares of our Common Stock. In issuing the shares of the Series A Stock, we relied on Section 4(2) of the Securities Act. We believe that Section 4(2) was available because the issuance did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale.

In April 2005 we agreed to issue 150,000 shares of Common Stock to Wachtel & Masyr LLP, our former counsel, in full payment for legal services. The shares were actually issued in June 2005. In issuing these shares of the Series A Stock, we relied on Section 4(2) of the Securities Act. We believe that Section 4(2) was available because the issuance did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale.

Between June 21, 2005 and July 8, 2005 we sold $5.05 million worth of our Series B Preferred Stock and the Warrants to 10 accredited investors (each an ‘‘Investor’’). The Investors purchased an aggregate of 3,848.7 shares of the Series B Preferred Stock, convertible into 3,848,700 shares of our Common Stock, and Warrants to purchase an aggregate of 962,175 shares of our Common Stock at an exercise price of $1.968 per share at any time up until June 20, 2009. The sale of the Series B Preferred Stock and the Warrants were made pursuant to an exemption from securities registration afforded by the provisions of Section 4(2) and Rule 506 of Regulation D as promulgated by the Commission under the Securities Act of 1933, as amended.

In January 2006, we sold 2,307,693 shares of our Common Stock to Shuffle Master for $3.0 million and issued an 18-month warrant to purchase 1,200,000 shares of our Common Stock to Shuffle Master. This warrant has an exercise price of $2.025 per share and expires on July 12, 2007. The sale of these shares and the issuance of this warrant were in connection with a strategic alliance distribution and licensing agreement between us and Shuffle Master. As part of our agreement with Shuffle Master, we agreed to register the shares of our Common Stock sold to Shuffle Master and the shares underlying the warrant.

Item 3.    Defaults Upon Senior Securities.

None.

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

None.

Item 5.    Other Information.

None.

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Item 6.    Exhibits.

a.	Exhibits:

Exhibit No.				Description
31.1				Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2				Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1				Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

				Sona Mobile Holdings Corp. (Registrant)
Date:    May 12, 2006				/s/ Shawn Kreloff Chief Executive Officer
Date:    May 12, 2006				/s/ John C. Rudy Chief Financial Officer (Principal Financial Officer)

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