Edgar Filing: UNITY WIRELESS CORP

UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[X]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

[ ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to __________

Commission file number 0-30620

UNITY WIRELESS CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE	91-1940650
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification Number

7438 Fraser Park Drive, Burnaby, British Columbia, Canada, V5J 5B9
(Address of principal executive offices)

(800) 337-6642
(Issuer's Telephone Number)

not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Yes [X] No [ ]

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

Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

168,180,964 common shares outstanding as of August 20, 2007

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Financial Statements

(Expressed in United States dollars)

UNITY WIRELESS CORPORATION

(Prepared in accordance with United States
generally accepted accounting principles

Three and six months ended June 30, 2007 and 2006 (unaudited)

UNITY WIRELESS CORPORATION

Consolidated Balance Sheets

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

		June 30, 2007 (unaudited)	December 31, 2006
Assets
Current assets:
	Cash and cash equivalents	$ 282,269	$ 1,217,792
	Restricted cash	571,000	497,000
	Accounts receivable (less allowance for doubtful accounts of $464,319 (2006 - $139,160))	4,071,679	3,824,447
	Inventory (note 4)	884,035	1,657,138
	Prepaid expenses and deposits	462,196	150,673
		6,271,179	7,347,050
Long-term deposits		26,000	104,000
Amounts funded for employees' right upon retirement (note 10)		295,000	676,000
Equipment, net		980,541	1,314,291
Goodwill (note 3)		7,608,243	7,608,243
Intangibles, net (note 3(d))		6,233,576	7,711,396
		$ 21,414,539	$ 24,760,980
Liabilities and Stockholders' Equity
Current liabilities:
	Bank Loan (note 5)	$ 2,506,000	$ 1,458,000
	Accounts payable and accrued liabilities (note 6)	9,282,697	9,601,918
	Obligations under capital leases (note 7)	91,397	215,710
	Loans payable (note 8)	460,000	1,500,000
	Convertible debentures (note 9)	1,980,193	1,947,552
	Product warranty (note 14 (c))	235,931	314,904
		14,556,218	15,038,084
Obligations under capital lease (note 7)		123	39,921
Convertible debentures (note 9)		4,716,878	5,248,108
Employees' rights upon retirement (note 10)		304,000	672,000
		19,577,219	20,998,113
Stockholders' equity:
	Common stock, $0.001 par value 400,000,000 authorized, 167,423,090 (2006 – 107,159,019) issued and outstanding	167,423	107,159
Series A convertible non-redeemable preferred shares, $0.001 par value		-	20
Series B convertible non-redeemable preferred shares, $0.001 par value		90	90
	Additional paid-in capital	49,678,755	45,831,809
	Accumulated deficit	(47,940,124)	(42,107,387)
	Accumulated other comprehensive income:
	Cumulative translation adjustments	(68,824)	(68,824)
		1,837,320	3,762,867
		$ 21,414,539	$ 24,760,980

Future operations (note 1)

Commitments (note13)

Contingent liabilities (note 14)

Subsequent event (note 17)

See accompanying notes to consolidated financial statements.

UNITY WIRELESS CORPORATION

Consolidated Statements of Operations and Comprehensive Loss

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

	Three	months ended	Six	months ended
	June 30, 2007 (unaudited)	June 30, 2006 (unaudited)	June 30, 2007 (unaudited)	June 30, 2006 (unaudited)

Sales	$ 2,621,630	$ 1,998,397	$ 4,793,425	$ 3,140,027
Cost of goods sold	2,087,647	1,597,679	3,619,886	2,478,975
	533,983	400,718	1,173,539	661,052
Expenses:
Research and development	1,338,001	495,749	2,081,726	891,633
Royalty payments for government grant (note 14 (b))	218,061	29,089	284,693	46,213
Sales and marketing	249,797	296,769	769,553	455,067
Depreciation and amortization	847,014	89,986	1,715,700	153,601
Foreign exchange loss	28,467	34,052	32,182	49,526
Interest expense, excluding accretion of interest and loss on debt settlement	190,545	115,853	427,443	201,113
General and administrative	785,639	406,689	1,318,431	890,208
Share compensation expenses (note 3 (c))	112,500	-	225,000	-
	3,770,024	1,468,187	6,854,728	2,687,361

Operating loss for the period	(3,236,041)	(1,067,469)	(5,681,189)	(2,026,039)
Gain on disposal	33,536	-	37,470	-
Accretion of interest and loss on debt settlement (note 9)	(74,925)	(99,935)	(189,018)	(1,715,900)

Loss for the period	(3,277,430)	(1,167,404)	(5,832,737)	(3,742,209)

Deficit, beginning of period	(44,662,694)	(29,847,291)	(42,107,387)	(27,272,486)

Deficit, end of period	$ (47,940,124)	$ (31,014,695)	$ (47,940,124)	$ (31,014,695)

Basic and diluted loss per common share (note 11(b))	$ (0.02)	$ (0.01)	$ (0.04)	$ (0.04)

See accompanying notes to consolidated financial statements.

UNITY WIRELESS CORPORATION

Consolidated Statements of Cash Flows

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

	Three	months ended	Six	months ended
	June 30, 2007 (unaudited)	June 30, 2006 (audited)	June 30, 2007 (unaudited)	June 30, 2006 (unaudited)

Operations:
Loss for the period	$ (3,277,430)	$ (1,167,404)	$ (5,832,737)	$ (3,742,209)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of interest and loss on debt settlement	74,925	99,935	189,018	1,715,900
Change in employees’ liability upon retirement	2,000	(2,000)	13,000	(2,000)
Change in allowance for doubtful debts	325,159	-	325,159	-
Inventory write-down (note 4)	188,000	-	188,000	-
Gain on disposal	(33,536)	-	(37,470)	-
Depreciation and amortization	847,014	89,986	1,715,700	153,601
Stock-based compensation	138,351	88,522	298,569	248,852
Changes in non-cash working capital relating to operations:
Accounts receivables	(926,834)	(692,938)	(332,937)	(1,174,442)
Inventory	399,868	179,187	640,886	220,682
Prepaid expenses and deposits	(225,722)	(52,689)	(269,832)	(74,039)
Accounts payable and accrued liabilities	739,646	704,954	(201,850)	654,432
	(1,748,559)	(752,447)	(3,304,494)	(1,999,223)
Investments:
Cash assumed on acquisition less acquisition costs (note 3)	-	448,165	-	448,165
Change in deposit	1,000	994	78,000	994
Restricted cash	(3,000)	-	(74,000)	-
Disposition of equipment	6,482	-	34,482	-
Acquisition of equipment	(4,000)	(3,086)	(8,000)	(3,086)
	482	446,073	30,482	446,073
Financing:
Bank loan	884,000	-	1,048,000	-
Short term loan	(140,000)	-	(1,040,000)	-
Capital lease obligation	(65,012)	(79,414)	(164,111)	(162,926)
Convertible debentures (note 9)	-	-	-	2,200,000
Cash proceeds on issuance of common shares	150,000	-	2,505,560	106,222
Share issue costs	-	-	(141,334)	(218,861)
	828,988	(79,414)	2,208,115	1,924,435
Effect of foreign exchange rate changes on cash and cash equivalents	128,939	26,919	130,374	30,619
Increase (decrease) in cash and cash equivalents	(790,150)	(358,869)	(935,523)	401,904

Cash and cash equivalents, beginning of period	1,072,419	917,819	1,217,792	157,046

Cash and cash equivalents, end of period	$ 282,269	$ 558,950	$ 282,269	$ 558,950

Supplementary information (note 15)

See accompanying notes to consolidated financial statements.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

Basis of presentation:

The accompanying interim unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by the United States generally accepted accounting principles for a complete set of annual consolidated financial statements. In the opinion of management, all adjustments (consisting solely of normally recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007 or for any other period.

For further information, refer to the consolidated financial statements and footnotes thereto included in Unity Wireless Corporation’s (the “Corporation”) annual report on Form 10-KSB for the year ended December 31, 2006. Except as indicated in note 2(c), the accounting policies applied in the preparation of these interims consolidated financial statements are consistent with those applied in the consolidated financial statements filed with the Corporation’s annual report.

These financial statements have been prepared on the going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. Operations to date have been significantly financed by short-term and long-term debt and equity transactions. At June 30, 2007, the Corporation requires additional financing to continue to operate at current levels throughout the year. Accordingly, the Corporation’s future operations are dependent upon the identification and successful completion of additional long-term or permanent debt and equity financing, the continued support of creditors and stockholders, and, ultimately, the achievement of profitable operations. There can be no assurances that the Corporation will be successful. If it is not, the Corporation will be required to reduce operations or liquidate assets. The Corporation will continue to evaluate its projected expenditures relative to its available cash and to seek additional means of financing in order to satisfy its working capital and other cash requirements. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Corporation be unable to continue as a going concern.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

Significant accounting policies:

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America using the same accounting policies and methods of application as those disclosed in the Corporation’s financial statements for the year ended December 31, 2006.

(a) Use of estimates:

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, particularly the recoverability of inventory, equipment, intangible assets and goodwill, and liabilities (particularly product warranty) and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

(b) Comparative figures:

Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.

(c)

Recent accounting pronouncement:

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48 (FIN 48) entitled “Accounting for Uncertainty in Income Taxes – An interpretation of FASB Statement No. 109”. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company evaluated all the tax positions in accordance with FIN 48 and determined that there is no impact to our financial statements. The Corporation’s policy is to recognize interest and penalties expense as a component of interest expense in the statement of operations. As of the date of adoption of FIN 48, the Corporation did not have any penalties or tax-related interest, and there was no tax-related interest or penalties recognized during the six months ended June 30, 2007.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

(c)

Recent accounting pronouncement (continued):

As a result of the implementation of FIN 48, the Corporation performed a review of its uncertain tax positions in accordance with recognition standards established by FIN 48. Based on its review, the Corporation concluded that there are no significant unrecognized tax positions requiring recognition in the Corporation’s financial statements. The Corporation does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

We conduct business globally and, as a result, file one or more income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, Israel and the United States. The open tax years for these jurisdictions include 2002 to 2006. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Corporation does not believe that the resolution of any such issue would have a material effect on the Corporation’s financial position. The resolution of any matter would be recognized as an adjustment to its provision for income taxes in the period of resolution.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FAS 115” ("SFAS No. 159"). SFAS No. 159 allows companies to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 and will be applied prospectively. The Corporation is currently evaluating the impact of adopting SFAS No. 159 on its consolidated balance sheet, result of operations and cash flows.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

3. Business combination:

a) On June 8, 2006, the Corporation through its wholly owned subsidiary, Unity Wireless Microwave Systems Ltd. (“UW Microwave”) acquired Avantry Ltd. (“Avantry”). Avantry specializes in offering a comprehensive transmission product line of integrated microwave radio and optical transport systems for carrying flexible combinations of voice and data traffic.

Under the terms of the Merger Agreement, the Corporation acquired the net assets of Avantry in exchange for $1,750,000 of convertible promissory notes that are convertible into common stock at $0.25 per share and warrants to purchase an aggregate of 600,000 shares of common stock at an exercise price of $0.40. The convertible promissory notes and related warrants have been valued at their fair value of $1,755,147.

The transaction has been accounted for as a business combination by the purchase method, with Unity Wireless Corporation identified as the acquirer. The Corporation’s consolidated statements of operations and comprehensive loss include the operating results of Avantry Ltd. from June 8, 2006, the date of acquisition.

The following table summarizes the allocation of the purchase price and related acquisition costs to the fair value of the assets acquired and liabilities assumed at the date of acquisition.

Cash	$ 496,896
Working capital (other than cash)	(2,519,099)
Fixed assets	508,000
Goodwill	1,557,090
Intangibles	1,791,297
Other assets	514,744
Other liabilities	(500,000)

Total net assets acquired	$ 1,848,928

Consideration:
Convertible promissory notes and warrants (note 9(e))	$ 1,755,147
Acquisition costs	93,781
	$ 1,848,928

The goodwill allocated on the acquisition will not be deductible for tax purposes.

The Company finalized the purchase price allocation in the second quarter of 2007 resulting in no change from the preliminary allocation.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

3. Business combination (continued):

b) On July 3, 2006, the Corporation through its wholly owned subsidiary, Unity Wireless Acquisition Corporation (“UW Acquisition”) acquired Celerica Inc. (“Celerica”). Celerica specializes in extending RF coverage and optimizing network capacity distribution of mobile communications in urban, suburban and rural areas, using optical wireless, fiber optics and microwave technology.

Under the terms of the merger agreement, the Corporation acquired the net assets of Celerica in exchange for 20,000 shares of Series A convertible non-redeemable preferred shares. The preferred shares have been valued at a fair value of $2,000,000 based on multiplying the Corporation’s common shares market price as of the closing date of the acquisition by the number of common stock issuable upon conversion. On April 25, 2007, the Series A convertible non-redeemable preferred shares were converted into 20,000,000 common shares.

The transaction has been accounted for as a business combination by the purchase method, with Unity Wireless Corporation identified as the acquirer. The Corporation’s consolidated statements of operations and comprehensive loss include the operating results of Celerica Inc. from July 3, 2006, the date of acquisition.

The following table summarizes the preliminary allocation of the purchase price and related acquisition costs to the fair value of the assets acquired and liabilities assumed at the date of acquisition.

Cash	$ 222,000
Working capital (other than cash)	(665,000)
Fixed assets	327,000
Goodwill	1,209,272
Intangibles	887,211
Other assets	110,000
Other liabilities	(72,000)

Total net assets acquired	$ 2,018,483

Consideration:
Fair value of preferred shares issued	$ 2,000,000
Acquisition costs	18,483
	$ 2,018,483

The goodwill allocated on the acquisition will not be deductible for tax purposes.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

3. Business combination (continued):

c) On August 17, 2006, the Corporation acquired Celletra Ltd. (“Celletra”). Celletra specializes in technology that provides wireless operators with solutions to achieve optimal coverage and to improve coverage and capacity of existing cells

Under the terms of the purchase agreement, the Corporation acquired the net assets of Celletra in exchange for 70,000 shares of Series B convertible non-redeemable preferred shares and contingent consideration of 20,000 shares of Series B convertible non-redeemable preferred shares and warrants to purchase 40,000,000 shares of common stock at a prices between $0.20 and $0.30 expiring August 17, 2009 (or 40,000 shares of Series B Convertible Shares should there not be sufficient authorized shares of common stock). The contingency was met in 2006 and the contingent consideration was issued in 2006.

The 90,000 preferred shares have been valued at a fair value of $9,000,000 based on multiplying the Corporation’s common share market price as of the closing date of the acquisition by the number of common stock into which the preferred stock is convertible. The warrants have been valued at a fair value of $2,026,533 calculated using the Black-Scholes option-pricing model with the following weighted-average assumptions: no dividend yield; volatility of 108%; a risk-free interest rate of 4.01% and expected term of 3 years.

The transaction has been accounted for as a business combination by the purchase method, with Unity Wireless Corporation identified as the acquirer. The Corporation’s consolidated statements of operations and comprehensive loss include the operating results of Celletra Ltd. from August 17, 2006, the date of acquisition.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

3. Business combination (continued):


Cash	$ 489,000
Working capital (other than cash)	(114,000)
Fixed assets	305,000
Goodwill	4,100,285
Intangibles	6,277,978
Other assets	762,000
Other liabilities	(765,001)

Total net assets acquired	$ 11,055,262

Consideration:
Fair value of preferred shares issued	$ 9,000,000
Fair value of warrants issued	2,026,533
Acquisition costs	28,729
	$ 11,055,262

The goodwill allocated on the acquisition will not be deductible for tax purposes.

At the request of the Celletra shareholders 5% of the total preferred share consideration, or 4,500 Preferred Shares, were issued to a trust controlled by the selling shareholders of Celletra which is instructed to issue the shares to current and former employees of Celletra, if at any time within one year after the closing date, the price per share of Unity common stock is equal to or exceeds $0.20 for a period of seven consecutive days. If the target share price is met, the shares would be distributed. If this milestone is not achieved the shares will be returned back to the selling shareholders of Celletra. These employees were not shareholders of Celletra. As a result of the shares issued to the Celletra selling shareholders, those selling shareholders became significant (ie: holding greater than 10%) shareholders of Unity. In accordance with FAS 123(R), the Corporation has calculated the fair value of compensation relating to these shares that may be issued to current and former employees, to be $450,000 and has amortized the amount on a straight line basis over one year. The amortization for the six months ended June 30, 2007 was $225,000.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

3. Business combination (continued):

d) For all of the acquisitions described in note 3(a) to note 3(c), the Corporation has recorded $8,956,486 as identifiable intangible assets. Intangibles amortization for the period ended June 30, 2007, has been recognized at a rate of 33.3% per annum.


Intangible assets acquired	$ 8,956,486

Amortization to December 31, 2006	1,245,090


Balance, December 31, 2006	$ 7,711,396

Amortization to June 30, 2007	1,477,820

Balance, June 30, 2007	$ 6,233,576

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

4. Inventory:

	June 30, 2007	December 31, 2006


Raw materials	$ 847,643	$ 1,560,681
Finished goods	36,392	96,457

	$ 884,035	$ 1,657,138

During the six-month period ended June 30, 2007, the Corporation recorded $188,000 (2006 – nil), as a write-down of raw materials, due to obsolete inventory, as a charge to research and development.

5. Bank loan:

As part of the acquisition of Avantry Ltd., the Corporation assumed a bank loan which bears interest at LIBOR + 2% (June 30, 2007 – 7.5%). The balance of $755,000 as at June 30, 2007 is due by April 30, 2008. A floating lien has been placed on all assets, monies, property and rights of UW Microwave to secure liabilities to the bank.

As part of the acquisition of Celletra Ltd., the Corporation assumed a revolving line of credit, of a maximum of $2,000,000, which bears interest at LIBOR + 2.5% (June 30, 2007 – 8%) and is secured by a general floating lien on all of Celletra’s assets. As at June 30, 2007, the outstanding balance of the line of credit was $1,751,000.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

6. Accounts payable and accrued liabilities:

	June 30, 2007	December 31, 2006

Trade accounts payable	$ 4,304,932	$ 5,302,979
Accrued liabilities	4,977,765	4,298,939

	$ 9,282,697	$ 9,601,918

Included in trade accounts payable is a loan of $269,000, bearing interest at 8% and due July 3, 2007, payable to former shareholders of Celerica Ltd. The loan was not repaid on July 3, 2007 and the Company is currently negotiating new terms with the loan holders.

Obligations under capital leases:

The Corporation leases research and development and production equipment under capital leases expiring at various dates to 2008. As at June 30, 2007, future minimum lease payments under capital leases are as follows:


2007	$ 76,886
2008	16,222
	$ 93,108

Amount representing interest	(1,588)
	$ 91,520

Current portion	91,397

	$ 123

Interest rates on the capital leases average approximately 5.55%. Interest expenses for the six-month period ended June 30, 2007 and 2006 were $7,658, and $35,617, respectively.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

Loan Payable:

In October 2006, the Corporation issued an 8% interest bearing promissory note for $1,500,000, secured by all the assets of the Corporation, plus 3,000,000 share purchase warrants effected pursuant to Regulation D under the Securities Act of 1933. The note was initially due on December 22, 2006, however, the holders have not demanded repayment of the note and the note remains outstanding. In accordance with the terms of the note, the rate of interest will increase to 22% after the initial due date unless waived by the holders.

During the six-month period ended June 30, 2007, the Corporation repaid $1,040,000 of the promissory note. As at June 30, 2007, the outstanding principal of the promissory notes was $460,000.

Convertible debentures:

The following table discloses the terms and principal values of the convertible debentures outstanding:

				As at June 30, 2007	As at December 31, 2006
Issue Date	Interest	Conversion Price	Maturity Date	Face Value	Face Value
August 2004(a)	8%	$ 0.16	February 28, 2009	$ 700,000	$ 700,000
August 2004(a)	8%	$ 0.09	February 28, 2009	-	250,000
February 2005(b)	8%	$ 0.16	February 28, 2009	400,000	400,000
February 2005(b)	8%	$ 0.09	December 13, 2009	700,000	950,000
March 2005(c)	8%	$ 0.20	March 24, 2007	228,594	266,964
February 2006(d)	8%	$ 0.09	December 13, 2009	2,200,000	2,200,000
June 2006(e)	-	$ 0.25	June 12, 2007	1,750,000	1,750,000
December 2006(f)	8%	$ 0.09	December 13, 2009	1,306,857	1,350,000
September 2004(g)	8%	$ 0.18	September 28, 2006	1,600	44,600
			Total	$ 7,287,051	$ 7,911,564
			Less: debt discounts	(589,980)	(715,904)
				6,697,071	7,195,660
			Current portion	(1,980,193)	(1,947,552)
			Long-term	$ 4,716,878	$ 5,248,108

The debentures are secured by all the assets of the Corporation.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

Convertible debentures (continued):

(a) Issue date: August 31, 2004

During the six-month period ended June 30, 2007, $26,942 amortization of premium has been recorded as a reduction to accretion of interest in the statement of operations. During the six-month period ended June 30, 2007, $250,000 debentures were converted to common shares.

(b) Issue date: February 11, 2005

During the six-month period ended June 30, 2007, $40,317 amortization of premium has been recorded as a reduction to accretion of interest in the statement of operations. The remaining premium of $62,061 will be amortized over the term to maturity of the convertible note. During the six-month period ended June 30, 2007, $250,000 debentures were converted to common shares.

During the six-month period ended June 30, 2007, accretion of $86,237 (2006 - $44,098) has been recorded as a charge to accretion of interest in the statement of operations, and an increase in the carrying value of the liability. During the six-month period ended June 30, 2007, $38,370 of the debentures were converted into common shares at a conversion ratio of $0.09 per common share instead of the contractual rate of $0.20 per share. The fair value of the additional shares issued on conversion of these debentures, amounting to $31,483, has been included in the statement of operations as a debt conversion inducement classified as accretion of interest and loss on debt settlement.

The notes came due on March 24, 2007. As per the terms of the agreement, the interest rate will increase to 20% per annum, unless waived by the holders. The Company is currently negotiating new terms with the note holders.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

Convertible debentures (continued):

(d)

Issue date: February 28, 2006

During the six-month period ended June 30, 2007, $42,036 amortization of premium has been recorded as a reduction to accretion of interest in the statement of operations. The remaining premium of $195,048 will be amortized over the term to maturity of the convertible note. During the six-month period ended June 30, 2007, no debentures were converted.

(e)

Issued date: June 12, 2006

During the six-month period ended June 30, 2007, accretion of $27,774 has been recorded as a charge to accretion of interest in the statement of operations, and an increase in the carrying value of the liability. There were no promissory notes converted during the six-month period ended June 30, 2007. The note was initially due on June 12, 2007, however, the holders have not demanded repayment of the note and the note remains outstanding. The Company is currently negotiating new terms with the note holders.

(f)

Issue date: December 13, 2006

During the six-month period ended June 30, 2007, accretion of $121,208 has been recorded as a charge to accretion of interest in the statement of operations, and an increase in the carrying value of the liability. During the six-month period ended June 30, 2007, $43,143 debentures were converted to common shares.

(g) Issue date: September 30, 2004

During the six-month period ended June 30, 2007, $43,000 of the debentures were converted to common shares at a conversion ratio of $0.09 per common share instead of the contractual rate of $0.18 per share. The fair value of the additional shares issued on conversion of these debentures, amounting to $31,611, has been included in the statement of operations as a debt conversion inducement classified as accretion of interest and loss on debt settlement.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

10. Employee’s rights upon retirement:

Under Israeli law and labor agreements, the Corporation’s Israel subsidiaries are required to pay severance benefits to its dismissed employees and employees leaving its employment under certain circumstances. The liability for severance benefits is covered mainly by deposits with insurance companies in the name of the employee and / or by purchase of insurance policies. The liability is calculated on the basis of the latest salary of the employee multiplied by the number of years of employment as of the balance sheet date. The provision for employee severance benefits included in the balance sheet represents the total liabilities for such severance benefits, while the amounts funded for severance benefits included as an asset in the balance sheet represents the Corporation’s Israeli subsidiaries contributions to severance pay funds and to insurance policies.

Severance expense for the six-month period ended June 30, 2007 was $13,000 (2006 - $2,000).

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

11.

Common stock:

(a)

Issued and outstanding

During the six-month period ended June 30, 2007, the Corporation issued 5,485,479 common shares in settlement of $556,787 of accounts payable.

During the six-month period ended June 30, 2007, the Corporation completed the sale of 27,839,558 units at a price of $0.09 per unit for gross proceeds of $2,505,560. Each unit consists of one share of common stock and one and a half common stock share purchase warrants, each whole warrants being exercisable for a period of 5 years from closing to acquire an additional share of common stock at an exercise price $0.10 per share. The Corporation is required to register the securities issuable related to the shares and warrants. If an initial registration statement is not effective by June 30, 2007, the Corporation may be subject to a penalty of the aggregate purchase price paid by such subscriber pursuant to this Subscription Agreement for any Shares then held by such subscriber, which could amount to $25,055 per month until such time of effectiveness. As at June 30, 2007, the registration statement is not effective and the Corporation does not believe it is likely that it will be required to make any payments under the registration rights agreement.

In connection with the equity financing, the Corporation also issued, as investment banking fees, warrants to purchase 1,413,330 shares of common stock at an exercise price of $0.10 per share, valued at $125,877, and paid cash fees of $141,334. In accordance with terms of the Warrant Agreement, the Corporation is required to register the shares issuable upon exercise of warrants.

During the six-month period ended June 30, 2007, the Corporation issued 6,939,034 common shares for the conversion related to $624,513 of the convertible notes.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

11.

Common stock (continued):

During the six-month period ended June 30, 2007, the Corporation issued 20,000,000 common shares for the conversion of $2,000,000 Series A preferred shares.

(b)

Loss per share:

The following table sets forth the computation of basic and diluted loss per share:

	Three	months ended	Six	months ended
	June 30, 2007	June 30, 2006	June 30, 2007	June 30, 2006
	(unaudited)	(unaudited)	(unaudited)	(unaudited)

Loss for the period	$ (3,277,430)	$ (1,167,404)	$ (5,832,737)	$ (3,742,209)

Weighted average number of
common shares outstanding	152,370,486	92,803,441	136,349,695	92,240,969

Basic and diluted loss per common share	$ (0.02)	$ (0.01)	$ (0.04)	$ (0.04)

For the six-month period ended June 30, 2007 and 2006, all of the Corporation’s common shares issuable upon the exercise of outstanding stock options and warrants were excluded from the determination of dilutive loss per share as their effect would be anti-dilutive.

(c)

Stock option plan:

The fair value of stock options is determined using the Black-Scholes option-pricing model. The Corporation has recorded $298,569 and $248,852 of stock-based compensation expense during the six-month period ended June 30, 2007 and 2006, respectively.

The Corporation grants options to employees and non-employees. There were no options granted to employees during the six-month period ended June 30, 2007. The fair value of employee and non-employee grants in the six-month period ended June 30, 2006 was calculated using the Black-Scholes option-pricing model with the following weighted-average assumptions: no dividend yield; volatility of 143% based on daily stock price; risk-free interest rate of 3.25% and expected lives between 1 to 5 years.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

11.

Common stock (continued):

Stock option transactions for the respective period and the number of stock options outstanding are summarized as follows:

		Outstanding	Options
	Shares available to be granted under option	Number of common shares issuable	Weighted average exercise price

Balance, December 31, 2006	14,632,637	6,799,167	$ 0.24

Options granted	-	-	-
Options expired	410,834	(410,834)	0.23
Options exercised	-	-	-
Increase in reserved for issuance	12,052,814	-

Balance, June 30, 2007	27,096,285	6,388,333	$ 0.24

The intrinsic value of a stock option is calculated as the quoted market price of the stock at the balance sheet date less the amount an employee must pay to acquire the stock. As at June 30, 2007, the intrinsic value of total outstanding options and exercisable options was $14,200. The aggregate intrinsic value of stock options exercised during the six-month period ended June 30, 2007 was nil.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

11.

Common stock (continued):

(c)

Stock option plan (continued):

The weighted-average grant-date fair value of stock options granted during the three month ended June 30, 2007 and 2006 was nil, and the six month ended June 30, 2007 and 2006 was nil and $0.13 respectively.

As of June 30, 2007, total unrecognized compensation cost related to unvested stock options was $51,857 and is expected to be recognized over a weighted-average period of 1.37 years.

The following table summarizes information about stock options under the plan outstanding at June 30, 2007:

		Options Outstanding		Options Exercisable
Range of exercise prices	Number outstanding at June 30, 2007	Weighted average remaining contractual life (yrs)	Weighted average exercise price	Number outstanding at June 30, 2007	Weighted average exercise price

$0.11 - 0.20	3,348,333	2.34	$ 0.15	2,457,083	$ 0.15
$0.23 - 0.29	1,940,000	2.64	$ 0.27	1,477,500	$ 0.27
$0.30 - 0.35	700,000	1.81	$ 0.34	700,000	$ 0.34
$0.70	400,000	2.00	$ -	400,000	$ 0.70

	6,388,333	2.35	$ 0.24	5,034,583	$ 0.26

Stock options become exercisable at dates determined by the Board of Directors at the time of granting the option.

Stock options have initial terms of five years.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

11.

Common stock (continued):

(d)

Warrants:

The following transferable share purchase warrants were outstanding as at June 30, 2007.

Expiry date	Exercise price per share	Number of shares
September 30, 2007	$ 0.50	525,700
September 30, 2007	$ 0.25	1,553,433
October 01, 2007	$ 0.20	100,000
January 30, 2008	$ 0.25	100,000
January 30, 2008	$ 0.35	100,000
February 13, 2008	$ 0.20	555,555
March 31, 2008	$ 0.50	2,059,492
October 01, 2008	$ 0.25	150,000
June 08, 2009	$ 0.40	600,000
August 17, 2009	$ 0.20	648,386
August 17, 2009	$ 0.22	648,386
August 17, 2009	$ 0.27	648,387
August 17, 2009	$ 0.30	648,387
August 31, 2009	$ 0.10	500,000
August 31, 2009	$ 0.16	1,250,000
October 13, 2009	$ 0.20	150,000
February 11, 2010	$ 0.10	2,500,000
February 11, 2010	$ 0.16	2,000,000
March 24, 2010	$ 0.20	625,000
July 01, 2010	$ 0.40	75,000
July 01, 2010	$ 0.50	75,000
February 28, 2011	$ 0.10	6,875,000
February 28, 2011	$ 0.16	1,375,000
October 31, 2011	$ 0.10	1,500,000
October 31, 2011	$ 0.15	1,500,000
December 13, 2011	$ 0.10	46,087,030
December 21, 2011	$ 0.10	17,007,598
January 05, 2012	$ 0.10	9,496,667
February 28, 2012	$ 0.10	19,089,336
March 05, 2012	$ 0.10	12,086,669
May 26, 2012	$ 0.10	1,666,667
June 07, 2012	$ 0.10	833,334

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

11.

Common stock (continued):

On February 19, 2007, certain holders of a warrant with an expiry date of December 13, 2011 and an exercise price of $0.10 agreed to set aside their right to exercise 27,961,185 warrants until such time that the Corporation has obtained approval from its stockholders to increase the authorized share capital to at least 500,000,000. 7,010,495 of these warrants are held by a Corporation with representation on the Board of Directors

In considering the accounting for these warrants, the Corporation determined that the warrants should continue to be classified as equity under EITF 00-19 as the warrants will either be exercised into common shares under the warrant agreement (if the Corporation obtains an increase in the number of authorized shares to at least 500,000,000) or they will ultimately expire unexercised. There is no remedy available to the holder of a warrant, if they are not able to exercise the warrants under the agreement because the warrant holders agreed to waive their rights to exercise such warrants during the waiver period. As the warrants can only be exercised into common shares of the Company and there are no other settlement provisions, the Company concluded that the warrants should be treated as equity. If the Corporation is unable to obtain approval from its stockholders to increase the number of authorized shares to at least 500,000,000, the warrant holders are entitled rights to cashless exercise their warrants subsequent to June 30, 2007 as long as sufficient authorized share capital is available. As of June 30, 2007, the Corporation had not yet obtained approval from its stockholders to increase the number of authorized shares to at least 500,000,000 (see note 17)

In connection with equity financings during the six months ended June 30, 2007 for $1,955,560, the Company issued warrants to purchase 33,676,006 shares of common stock at an exercise price of $0.10 per share. In considering the accounting for these warrants, the Corporation determined that the warrants should continue to be classified as equity under EITF 00-19 as the warrants will either be exercised into common shares under the warrant agreement or they will ultimately expire unexercised. There is no remedy available to the holder of a warrant, if they are not able to exercise the warrants under the agreement. Pursuant to the terms of the agreement, the Corporation is not required to set aside sufficient share capital to issue common stocks upon exercise of warrants until sufficient authorized share capital to issue the shares is obtained and the registration statement is declared effective. As of June 30, 2007, the Corporation had not yet obtained approval from its stockholders to increase the number of authorized shares. As the warrants can only be exercised into common shares of the Corporation and there are no other settlement provisions, the Corporation concluded that the warrants should be treated as equity.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

12. Segmented information:

(a)

Segment information:

During the six-month period ended June 30, 2007 and 2006, the Corporation was operating only in the RF power amplifier segment and coverage enhancement solutions.

(b)

Geographic information

For the six-month period ended June 30, 2007, ten percent and ninety percent of our

assets are located in British Columbia, Canada and Israel, respectively. A summary of

sales by region of customer location is as follows ($000):

	Three	months ended	Six	months ended
	June 30, 2007	June 30, 2006	June 30, 2007	June 30, 2006
China	$ 47	$ 892	$ 47	$ 977
United States	185	22	596	374
Israel	363	1	363	36
Canada	-	288	188	508
Hungary	83	750	321	1,200
India	1,617	-	2,180	-
Cameroon	-	-	73	-
Germany	-	40	-	40
Turkey	10	-	164	-
Russia	-	-	51	-
Vietnam	68	-	483	-
South Africa	110	-	110	-
Other	138	5	217	5
Total sales	2,621	1,998	4,793	3,140

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

12. Segmented information (continued):

(c)

Major customers:

Sales to customers representing greater than 10% of total sales are as follows ($000):

	Six months ended June 30 , 2007	Six months ended June 30, 2006

Customer A	$ 1,443	$ -
Customer B	483	-
Customer C	321	1,200
Customer D	110	495
Customer E	-	924

(d) Accounts receivable representing greater than 10% of total outstanding accounts receivables were shown as follow ($000):

	Six months ended June 30 , 2007	Six months ended June 30, 2006


Customer A	$ 1,986	$ -
Customer B	437	-

13.

Commitments:

The Corporation has the following future minimum lease commitments for premises:


2007	$ 178,691
2008	232,383
2009	129,691

	$ 540,765

For the six-month period ended June 30, 2007, rent expense was $91,437 (2006 - $84,795)

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

14.

Contingent liabilities:

(a)

The Corporation is currently a party to three actions in the Supreme Court of British Columbia, Vancouver Registry, brought by three different suppliers of the Corporation for approximately $620,000 in total.

The Corporation provides for costs related to contingencies when a loss is probable and the amount is reasonably determinable. It is the opinion of management, based in part on advice of legal counsel, that the ultimate resolution of these contingencies, to the extent not previously provided for, will not have a material adverse effect on the financial condition of the Corporation.

(b)

Contingent liability on sale of products:

(i)

Under a license agreement, the Corporation is committed to make royalty payments based on the sales of products using certain technologies. Royalties are calculated based on 5% to 6% of sales of licensed products sold integrating the XNN Technology into various products to a minimum of $150,000 within twelve months subsequent to the first commercial sales of the integrated product. No such sales have occurred to June 30, 2007.

(ii)

Under an agreement with the Government’s National Research Council Canada IRAP (“IRAP”) program, the Corporation received conditionally repayable government assistance amounting to $454,665 (CDN$483,491) to support the development of a multi-carrier linear power amplifier. Under the terms of the agreement, an amount up to a maximum of $681,997 (CDN$725,236) is to be repaid at a rate of 1.5% of quarterly gross revenue commencing on September 1, 2003, on a quarterly basis. For the six-month period ended June 30, 2007, the Corporation recorded $17,256 (CDN$19,371) as royalties expense and $46,213 (CDN$52,469) in 2006.

(iii)

Under an agreement with the Canada Israel Industrial Research & Development Foundation, the Corporation is eligible to receive conditionally repayable government assistance amounting to $329,133 (CDN$350,000) to support the development of a multi-carrier linear power amplifier. To date, the Corporation claimed gross proceeds of $109,711 (CDN$ 116,667) in 2005, which have been recorded as government grant income as a reduction of expenses incurred. Under the terms of the agreement, commencing with the first commercial transaction, the assistance is repayable to the extent of 2.5% of yearly gross sales until 100% of the grant has been repaid. As of June 30, 2007, the Corporation has not yet commenced the commercialization of such product, and thus no repayment is required.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

14.

Contingent liabilities (continued):

(b)

Contingent liability on sale of products (continued):

(iv)

The Corporate Israeli’s subsidiaries were granted by Canada Israel Industrial Research & Development Foundation (“CIIRDF”) and by the Office of the Chief Scientist of the Israeli Ministry of Industry and Trade (the “OCS”) approval for CIIRDF grants and OCS participation in the cost of several research programs. In return the Corporate Israeli’s subsidiaries are committed to pay royalties at a rate of 3% to 5% of the sales of the approved products, up to 100% of the amount of the grants received, with the addition of interest at LIBOR. Under certain conditions, the Corporate Israeli’s subsidiaries’ commitment to pay royalties at the rates mentioned above and the total obligation for royalties shall increase. The Corporate Israeli’s subsidiaries are committed to pay increased royalties for income derived from the above mentioned sale of rights.

The grants are deducted from research and development expenses. The Corporate Israeli’s subsidiaries are entitled to the grants only upon incurring research and development expenditures. The Corporate Israeli’s subsidiaries are not obliged to repay any amount received from the OCS if the research effort is unsuccessful or if no products are sold. However, under certain limited circumstances, the OCS may withdraw its approval of a research program or amend the terms of its approval. Upon withdrawal of approval, the Corporate Israeli’s subsidiaries may be required to refund the grants, in whole or in part, with or without interest, as the OCS determines.

The maximum amount that could be repaid under this program for royalties, based on royalty-bearing government participation, totaled approximately $17,300,000 as of June 30, 2007. For the six-month period ended June 30, 2007, the Corporation recorded $206,000 (2006 – nil) as royalty expense in its statement of operations.

Such amount excludes potential increase resulting from the above mentioned sale of rights.

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

14.

Contingent liabilities (continued):

(b)

Contingent liability on sale of products (continued):

(v) Avantry received government grants from the Fund for the Encouragement of Marketing Activities Abroad (“The Fund”) as participation in the funding of an approved marketing plan for 2002. Avantry is committed to pay royalties to the Israeli Government at a rate of 4% of the increase in sales per year up to 100% of the amount of the grants received, with the addition of interest at LIBOR, computed on the increase in export sales beginning with the end of the first year after the year of the approved plan. These payments will continue until the grants are fully repaid.

Under certain limited circumstances, the Fund may withdraw its approval of the marketing plan. Upon withdrawal of approval, Avantry may be required to refund the grants, in whole or in part, with or without interest, as the Fund determines.

The aggregate potential liability in respect of the said grants on June 30, 2007 amounts to $72,000.

(c)

Product warranties:

The Corporation provides for estimated warranty costs at the time of product sale. Warranty expense accruals are based on best estimate with reference to historical claims experience. Since warranty estimates are based on forecasts, actual claim costs may differ from amounts provided. An analysis of changes in liability for product warranties follows:

Balance, December 31, 2006	$ 314,904
Provision decrease, net	(54,276)
Expenditures	(24,697)
Balance, June 30, 2007	$ 235,931

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

15.

Supplementary information:

(a) Cash flow information:

	Three	months ended	Six	months ended
	June 30, 2007	June 30, 2006	June 30, 2007	June 30, 2006


Cash paid for:
Interest	$ 33,872	$ 20,429	$ 67,759	$ 39,343
Non-cash financing and investing activities:
Issuance of warrants in settlement of investment banking fees	-	-	125,877	211,234
Issuance of convertible debentures for acquisition	-	1,755,147	-	1,755,147
Issuance of common shares in settlement of accounts payable	432,115	93,823	556,787	218,336
Issuance of common shares on conversion of convertible debentures	624,513	-	624,513	-
Issuance of common shares on conversion of preferred shares	2,000,000	-	2,000,000	-

(b)

Allowance for doubtful accounts:


Balance, December 31, 2006	$ 139,160
Provision for doubtful accounts	325,159

Balance, June 30, 2007	$ 464,319

UNITY WIRELESS CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

(Prepared in accordance with United States generally accepted accounting principles)

Three and six months ended June 30, 2007 and 2006 (unaudited)

16.

Restructuring:

In the fourth quarter of 2006, the Corporation initiated an operational restructuring which resulted in the termination of 40 employees, a re-alignment of research and development activities in the Corporation and a reduction of facilities occupied.

A summary of the activity affecting the Corporation’s accrued restructuring liability, included in accounts payable and accrued liabilities, for the period ended June 30, 2007 is as follows:

	Workforce reduction	Facilities restructuring	Total
Balance at December 31, 2006	$ 364,000	$ 140,000	$ 504,000

Amount paid	(364,000)	(140,000)	(504,000)

Balance at June 30, 2007	-	-	-

17. Subsequent events:

Subsequent to June 30, 2007, the Corporation obtained the written consent of shareholders holding the requisite majority of the voting rights to the increase in the authorized common stock of the Corporation to 520,000,000. The Corporation expects the increase to be effective on or about August 31, 2007.

Item 2. Management's Discussion and Analysis or Plan of Operation

The following discussion of the financial condition, changes in financial condition, and results of operations of Unity Wireless Corporation should be read in conjunction with our most recent financial statements and notes appearing: (1) in this Form 10-QSB; and (2) the Form 10-KSB for the year ended December 31, 2006 filed on April 17, 2007.

The financial statements have been prepared on the going concern basis under which an entity is assumed to be able to realize its assets and satisfy its liabilities in the ordinary course of business. Operations to date have been primarily financed by borrowing and equity transactions. Our future operations are dependent upon the identification and successful completion of additional long-term or permanent equity financing, the continued support of creditors and stockholders, and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful. If we are not, we will be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements. The auditors' report on the audited consolidated financial statements for the fiscal year ended December 31, 2006 contained in the 10-KSB filed on April 17, 2007, includes an explanatory paragraph that states that as we have suffered recurring losses from operations, substantial doubt exists about our ability to continue as a going concern. The audited consolidated financial statements or the interim quarterly unaudited consolidated financial statements included with this quarterly report do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

Forward-Looking Statements

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "CDN$" refer to Canadian dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our", and "Unity" mean Unity Wireless Corporation, unless otherwise indicated.

Results of Operations

Three-month period ended June 30, 2007 and 2006:

Sales and Cost of Goods Sold

Sales for the three-month period ended June 30, 2007 were $2,621,630, an increase of 31.19% or $623,233, from $1,998,397 for the three-month period ended June 30, 2006. In both our historical product lines and new product lines obtained through acquisitions we have seen a greater diversification in our customer base and geographical areas where the company is now selling its expanded product offerings.

Cost of goods sold during the three-month period ended June 30, 2007 was $2,087,647 resulting in a gross margin of $533,983 or 20.37% of sales, compared to $1,597,679 for the three-month period ended June 30, 2006 resulting in a gross margin of $400,718 or 20.05% of sales.

The increase in gross margin is largely attributed to:

Increase in sales, resulting in increased component requirements and the company has been able to negotiate better pricing from its outsourced manufacturer due to the higher purchased volume;

Efficiencies and cost savings have been obtained by centralizing our manufacturing and procurement largely with one outsourced manufacturer;

Efficiencies and cost savings have been obtained by centralizing our final testing of products in our China facility where the company has also been able to benefit from lower payroll costs.

Operating Expenses

Research and Development

Research and development expenses for the three-month period ended June 30, 2007 were $1,338,001, an increase of $842,252 or 169.89%, from $495,749 for the three-month period ended June 30, 2006. This increase was primarily the result of the additional research and development expenses from the three acquired companies (Avantry, Celerica, & Celletra) which were not part of the group as of the last period, and incurring additional R&D expenses in order to develop and fulfill requirements for specific equipment orders in both India and Russia. It is anticipated that there will be an ongoing order stream from these new, large, key accounts, including Motorola, Nokia and Ericsson. The Corporation also recorded $188,000 as a write-down of raw materials due to obsolete inventory during the three-month period ended June 30, 2007.

Sales and Marketing

Sales and marketing expenses for the three-month period ended June 30, 2007 were $249,797, a decrease of $46,972, or 15.83%, from $296,769 for the three-month period ended June 30, 2006. This decrease was primarily the result of the completion of restructuring in 2006 which reduced the number of employees in sales and marketing department.

Royalty payments for government grants

Royalty payments for government grants for the three-month period ended June 30, 2007 were $218,061, an increase of $188,972, from $29,089 for the three-month period ended June 30, 2006. This increase was primarily the result of the additional royalty payments relating to the acquired companies in 2006.

Depreciation and Amortization

Depreciation and amortization expenses for the three-month period ended June 30, 2007 were $847,014, an increase of $757,028, from $89,986 for the three-month period ended June 30, 2006. This increase was primarily the result of the amortization of the intangible assets recorded relating to the acquired companies in 2006. During the three-month period ended June 30, 2007, the Corporation recorded $738,910 as the amortization of the intangibles.

Exchange Loss

Exchange loss for the three-month period ended June 30, 2007 was $28,467, a decrease of $5,585, from $34,052 for the three-month period ended June 30, 2006 due to fluctuations in the currency exchange rate between the U.S. and Canada.

Interest Expense

Interest expense for the three-month period ended June 30, 2007 increased by $74,692 to $190,545 from $115,853 for the three-month period ended June 30, 2006. This increase was primarily the result of the increase in interest expense from the issuance of convertible debentures in February and December of 2006.

General and Administrative

Due to the 2006 acquisition of three new companies, general and administrative expenses for the three-month period ended June 30, 2007 rose 93.18% to $785,639, an increase of $378,950, from $406,689 for the three-month period ended June 30, 2006. The increase was primarily the result of the additional expenses relating to the acquired business, and the increase in the investors relations activities during the three-month period ended June 30, 2007.

General and administrative expenses include stock-based compensation expense of $14,545 for the three-month period ended June 30, 2007 versus $66,009 for the three-month period ended June 30, 2006.

Share compensation expense

Celletra’s share compensation expenses were $112,500 for the three-month period ended June 30, 2007. At the request of the Celletra shareholders 5% of the total consideration, or 4,500 Preferred Shares, were issued to a trust controlled by the selling shareholders of Celletra which is instructed to issue the shares to current and former employees of Celletra, if at any time within one year after the closing date, the price per share of the Company’s common stock is equal to or exceeds $0.20 for a period of seven consecutive days. If this target share price is met, the shares are to be distributed. If this milestone is not achieved the shares will be returned back to the selling shareholders of Celletra. These employees were not shareholders of Celletra. As a result of the shares issued to the Celletra selling shareholders, those selling shareholders became significant (ie: holding greater than 10%) shareholders of the Company. In accordance with FAS 123(R), the Company has calculated the fair value of compensation relating to these shares that may be issued to current and former employees, to be $450,000 and has amortized the amount on a straight line basis over one year.

Other Expenses

Accretion of Interest and Loss on Debt Settlement

Accretion of interest and loss on debt settlement for the three-month period ended June 30, 2007 was $74,925, a decrease of $25,010, compared to $99,935 for the three-month period ended June 30, 2006. This decrease was primarily the result of the debt modifications of the convertible notes issued in August 2004, February 2005 and February 2006 which resulted in losses on debt settlements recorded in 2006. The Corporation recorded an amortization of the premium on the convertible notes for $76,716 against the accretion of interest in the three-month period ended June 30, 2007.

During the three-month period ended June 30, 2007, the Corporation also recorded $63,094 as debt conversion inducements related to $81,370 of the debentures converted to common shares at a conversion ratio of $0.09 per common share instead of the contractual rates.

Gain on Disposal

Gain on Disposal for the three-month period ended June 30, 2007 was $33,536. During the three-month period ended June 30, 2007, the Corporation disposed of some equipment which was no longer usable in our future operations. There was no disposal on fixed assets during the three-month period ended June 30, 2006.

Loss for the Quarter Ended June 30, 2007

Loss for the three-month period ended June 30, 2007 increased by 180.75%, or $2,110,026, to $3,277,430, from $1,167,404 for the three-month period ended June 30, 2006. This increase was primarily the result of the increase in amortization of intangible assets and the additional research and development expenses relating to the acquired companies.

Six-month period ended June 30, 2007 and 2006:

Sales and Cost of Goods Sold

Sales for the six-month period ended June 30, 2007 were $4,793,425, an increase of 52.66% or $1,653,398, from $3,140,027 for the six-month period ended June 30, 2006. In both our historical product lines and new product lines obtained through acquisitions we have seen a greater diversification in our customer base and geographical areas where the company is now selling its expanded product offerings.

Cost of goods sold during the six-month period ended June 30, 2007 was $3,619,886 resulting in a gross margin of $1,173,539 or 24.48% of sales, compared to $2,478,975 for the six-month period ended June 30, 2006 resulting in a gross margin of $661,052 or 21.05% of sales.

The increase in gross margin is largely attributed to:

Increase in sales, resulting in increased component requirements and the company has been able to negotiate better pricing from its outsourced manufacturer due to the higher purchased volumes;

Efficiencies and cost savings have been obtained by centralizing our manufacturing and procurement largely with one outsourced manufacturer;

Efficiencies and cost savings have been obtained by centralizing our final testing of products in our China facility where the company has also been able to benefit from lower payroll costs.

Operating Expenses

Research and Development

Research and development expenses for the six-month period ended June 30, 2007 were $2,081,726, an increase of $1,190,093 or 133.47%, from $891,633 for the six-month period ended June 30, 2006. This increase was primarily the result of the additional research and development expenses from the three acquired companies (Avantry, Celerica, & Celletra) which were not part of the group as of the last period, and incurring additional R&D expenses in order to develop and fulfill requirements for specific equipment orders in both India and Russia. It is anticipated that there will be an ongoing order stream from these new, large, key accounts, including Motorola, Nokia and Ericsson. The Corporation also recorded $188,000 as a write-down of raw materials due to obsolete inventory during the six-month period ended June 30, 2007.

Sales and Marketing

With the additional two new major product lines, and entering into new major markets such as India, Russia, and South East Asia, through the 2006 acquisition processes, our sales and marketing expenses for the six-month period ended June 30, 2007 were $769,553, an increase of $314,486, or 69.11%, from $455,067 for the six-month period ended June 30, 2006. This increase was primarily the result of the additional sales initiatives that include additional sales personnel on staff, and additional expenses relating to the acquired businesses also caused the increase in sales and marketing expenses.

Royalty payments for government grants

Royalty payments for government grants for the six-month period ended June 30, 2007 were $284,693, an increase of $238,480, from $46,213 for the six-month period ended June 30, 2007. This increase was primarily the result of the additional royalty payments relating to the acquired companies in 2006.

Depreciation and Amortization

Depreciation and amortization expenses for the six-month period ended June 30, 2007 were $1,715,700, an increase of $1,562,099, from $153,601 for the six-month period ended June 30, 2006. This increase was primarily the result of the amortization of the intangible assets recorded relating to the acquired companies in 2006. During the six-month period ended June 30, 2007, the Corporation recorded $1,477,820 as the amortization of the intangibles.

Exchange Loss

Exchange loss for the six-month period ended June 30, 2007 was $32,182, a decrease of $17,344, from $49,526 for the six-month period ended June 30, 2006 due to fluctuations in the currency exchange rate between the U.S. and Canada.

Interest Expense

Interest expense for the six-month period ended June 30, 2007 increased by $226,330 to $427,443 from $201,113 for the six-month period ended June 30, 2006. This increase was primarily the result of the increase in interest expense from the issuance of the convertible debentures in February of 2006 and December of 2006.

General and Administrative

Due to the 2006 acquisition of three new companies, general and administrative expenses for the six-month period ended June 30, 2007 rose 48.10% to $1,318,431, an increase of $428,223, from $890,208 for the six-month period ended June 30, 2006. The increase was primarily the result of the additional expenses relating to the acquired business, and the increase in the investors relations activities during the six-month period ended June 30, 2007.

General and administrative expenses include stock-based compensation expense of $41,759 for the six-month period ended June 30, 2007 versus $168,587 for the six-month period ended June 30, 2006.

Share compensation expense

Celletra’s share compensation expenses were $225,000 for the six-month period ended of June 30, 2007. At the request of the Celletra shareholders 5% of the total consideration, or 4,500 Preferred Shares, were issued to a trust controlled by the selling shareholders of Celletra which is instructed to issue the shares to current and former employees of Celletra, if at any time within one year after the closing date, the price per share of the Company’s common stock is equal to or exceeds $0.20 for a period of seven consecutive days. If this target share price is met, the shares are to be distributed. If this milestone is not achieved the shares will be returned back to the selling shareholders of Celletra. These employees were not shareholders of Celletra. As a result of the shares issued to the Celletra selling shareholders, those selling shareholders became significant (ie: holding greater than 10%) shareholders of the Company. In accordance with FAS 123(R), the Company has calculated the fair value of compensation relating to these shares that may be issued to current and former employees, to be $450,000 and have amortized the amount on a straight line basis over one year.

Other Expenses

Accretion of Interest and Loss on Debt Settlement

Accretion of interest and loss on debt settlement for the six-month period ended June 30, 2007 was $189,018, a decrease of $1,526,882, compared to $1,715,900 for the six-month period ended June 30, 2006. During the three month period ended March 31, 2006, the Corporation entered to an agreement of the modification of the terms of the debentures which were issued in August 2004 and February 2005 which resulted in a total loss on debt settlement of $1,452,722. No modification of debentures or warrants was made for the six-month period ended June 30, 2007.

During the six-month period ended June 30, 2007, the Corporation also recorded $63,094 as debt conversion inducements related $81,370 debentures converted to common shares at a conversion ratio of $0.09 per common share instead of the contractual rate.

Gain on Disposal

Gain on Disposal for the six-month period ended June 30, 2007 was $37,470. During the three-month period ended June 30, 2007, the Corporation disposed of some equipment which was no longer usable in our future operations. There was no disposal on fixed assets during the six-month period ended June 30, 2006.

Loss for the first half year ended June 30, 2007

Loss for the six-month period ended June 30, 2007 increased by 55.86%, or $2,090,528, to $5,832,737, from $3,742,209 for the six-month period ended June 30, 2006. This increase was primarily the result of the increase in amortization of intangible assets and the additional research and development expenses relating to the acquired companies.

Liquidity and Capital Resources

Since our inception, we have been dependent on investment capital and debt financing as our primary sources of liquidity. We had an accumulated deficit at June 30, 2007 of $47,940,124. During the six-month period ended June 30, 2007, we incurred a net loss, after stock-based compensation, of $5,832,737.

During the six-month period ended June 30, 2007, our cash position was decreased to $282,269. This decrease was primarily due to the repayment made to the trade payables and the short-term loan.

During the six-month period ended June 30, 2007, the Corporation issued the common shares as follows:

Issue of 5,485,479 common shares on settlement of $556,787 of accounts payable.

ii.

Issue of 27,839,558 units of common shares at a price of $0.09 per unit, for gross proceeds of $2,505,560.

iii.

Issue of 6,939,034 common shares on conversion of $624,513 convertible notes.

iv.

Issue of 20,000,000 common shares on conversion of $2,000,000 Series A preferred shares.

During the six-month period ended June 30, 2007, we purchased $8,000 in equipment and disposed $34,482 equipment.

Other than leases for premises, leased vehicles and equipment commitments for an aggregate of $633,873 through 2009, we have no material commitments outstanding at June 30, 2007.

During the six months ended June 30, 2007 convertible notes amounting to $1,978,594 came due and subsequent to June 30, 2007 promissory notes amounting to $250,000 came due. The notes have not been repaid and the Company is currently negotiating new terms with the note holders. The Company is also negotiating new terms with the note holders of promissory notes, amounting to $460,000, which came due in December 2006. None of the note or debenture holders have demanded repayment at this time.

Our capital requirements may increase in light of our current strategy to expand our customer base and to develop new products and technologies. Our operations to date have been primarily financed by sales of our equity securities and debt financing, and, the company’s assets are pledged to secure convertible notes that we issued in August 2004, February 2005, March 2005, February 2006 and December 2006. For any additional financing that may be required in the near term, we may be required to obtain the consent of certain of our investors prior to the issuance of our common stock or common stock equivalents and prior to entering into an agreement to assume certain liabilities.

While convertible notes and warrant purchase Agreements dated August 31, 2004, February 11, 2005, March 24, 2005, February 28, 2006 and December 13, 2006 are outstanding, we cannot declare dividends on our commons shares. As of June 30, 2007, we had working capital deficit of $8,285,039, our operations presently have net cash outflow of $3,304,494 for the six-month period ended June 30, 2007. Our ability to continue as a going concern may be dependent upon one or more factors, that may include: our ability obtaining further financing; an increased rate of market acceptance of our current products and any new product offerings that we may introduce; the continuing successful development of our products and related technologies; and achieving a profitable level of operations Moving forward, although the issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders, obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitment.

Our Auditors’ report on our 2006 consolidated financial statements includes an additional explanatory paragraph that states that our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Inflation

We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.

Item 3. Controls and Procedures

An evaluation has been carried out under the supervision and with the participation of our management, including our Chief Executive Officer, of the effectiveness of the design and the operation of our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2007 (“Evaluation Date”). Based on such evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the Evaluation Date, the disclosure controls and procedures are reasonably designed and effective to ensure that (i) information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We have identified conditions as of June 30, 2007 that we believe are material weaknesses in internal controls due to a lack of segregation of duties in accounting and financial reporting activities as a result of the limited number of Company employees engaged in the authorization, recording, processing and reporting of transactions. Due to these deficiencies, the Chief Executive Officer performs frequent reviews of financial information to ensure that transactions are properly recorded. In addition, the Corporation has recently added additional accounting staff to ensure that segregation of duties can be properly administered. There was no change in the Company's internal control over financial reporting during the period ended June 30, 2007, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Items 3, 4, & 5 are not applicable and have been omitted.

Item 1. Legal Proceedings

Other than as set forth below, we know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

We have been sued in the Supreme Court of British Columbia, Canada, by Getec North America and Getec Industrial Limited (“Getec). The lawsuit was commenced on March 30, 2006. Getec alleges that services provided to Unity Wireless Systems Inc. have not been paid and claim in total $106,420. We dispute the allegations and are defending the claim and filed a counterclaim. No trial date has been set. The matter is at a very preliminary stage. We do not expect the proceeding to have any material adverse effect on us.

We have been sued in the Supreme Court of British Columbia, Canada, by TRS-Rentelco (“TRS”). The lawsuit was commenced on October 27 2006. TRS alleges that equipment rentals provided to Unity Wireless Systems Inc. have not been paid and claim in total approximately $450,000. We dispute the allegations and are defending the claim and are planning to file a counterclaim. No trial date has been set. The matter is at a very preliminary stage. We do not expect the proceeding to have any material adverse effect on us.

We have been sued in the Supreme Court of British Columbia, Canada, by Hency Transportation (Canada) Limited (“Hency”). The lawsuit was commenced on June 15, 2007. Hency alleges that services provided to Unity Wireless Systems Inc. have not been paid and claim in total approximately $70,000. We dispute the allegations and are defending the claim and filed a counterclaim. No trial date has been set. The matter is at a very preliminary stage. We do not expect the proceeding to have any material adverse effect on us.

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

During the six-month ended June 30, 2007, the Corporation issued the common shares to the following parties in settlement the services provided to the Corporation:

200,000 common shares to John Douglas Shields in settlement of $20,000 services provided.

106,893 common shares to RCM Limited in settlement of $11,651 services provided.

556,784 common shares to Moderrn Engineering Corporation in settlement of $55,678 services provided.

During the six-month period ended June, 2007, the Corporation issued 27,839,558 common shares to the private investors, in the aggregate principal amount of $2,505,560, and warrants to purchase 41,759,337 shares of common stock at $0.10 per share.

In connection with the financing, the Company also issued, as investment banking fees, to Meitav Underwriting Ltd., warrants purchasing 1,413,336 shares of common stock at an exercise price of $0.10 per share and in the form of the Warrants.

The securities were offered and sold pursuant to the provisions of Regulation S under the U.S. Securities Act of 1933.

Item 6. Exhibits

(a) Exhibits Required by Item 601 of Regulation S-B

Exhibit Number

Description

31.1

Certification of Ilan Kenig pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32.1

Certification of Ilan Kenig pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Signatures

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

UNITY WIRELESS CORPORATION

/s/ Ilan Kenig

By: Ilan Kenig, President, Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)
August 20, 2007

Exhibit 31.1

CERTIFICATION

I, Ilan Kenig, certify that:

I have reviewed this quarterly report on Form 10-QSB of Unity Wireless Corporation;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 20, 2007

/s/ Ilan Kenig

Ilan Kenig
Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Unity Wireless Corporation (the “Company”) on Form 10-QSB for the quarter ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ilan Kenig, Chief Executive Officer, of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ilan Kenig

By: Ilan Kenig, President, Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)
August 20, 2007