UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                   FORM 10-QSB


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

                   For the quarterly period ended June 30, 2004


                         Commission file number 0-14465




                              SONEX RESEARCH, INC.



                      Incorporated in the State of Maryland
                                23 Hudson Street
                            Annapolis, Maryland 21401


                        Telephone Number: (410) 266-5556
                   IRS Employer Identification No. 52-1188993






Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.

                                            YES   [x]       NO   [ ]



There  were  26,932,669  shares  of the  Issuer's  $.01 par value  Common  Stock
outstanding at July 31, 2004.




                        SONEX RESEARCH, INC. FORM 10-QSB



                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS (Unaudited)


Balance sheets as of June 30, 2004 and December 31, 2003

Statements of  operations  and  accumulated  deficit for the three- and
six-month periods ended June 30, 2004 and 2003

Statements of paid-in capital for the period January 1, 2002 through June 30,
2004

Statements of cash flows for the six-month periods ended June 30, 2004 and 2003

Notes to financial statements




































                              SONEX RESEARCH, INC.
                                 BALANCE SHEETS
                                   (Unaudited)



                                                        June 30,   December 31,
                           ASSETS                         2004         2003
                                                     ------------  ------------
Current assets
 Cash and equivalents                                $     10,031  $      7,616
 Accounts receivable                                                    161,045
 Prepaid expenses                                          21,493        12,276
 Deferred charges                                          54,000
 Deferred financing costs                                  32,059
 Loans to officers and employees                           16,000        20,000
                                                     ------------  ------------
     Total current assets                                 133,583       200,937

Patents, net of accumulated amortization
 of $80,002 in 2004 and $77,140 in 2003                   185,448       202,518

Property and equipment, net of accumulated depreciation
 of $350,254 in 2004 and $465,246 in 2003                  96,194       103,005
                                                     ------------    ----------

        Total assets                                 $    415,225    $  506,460
                                                     ============    ==========

     LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

Current liabilities
 Accounts payable and other accrued liabilities      $     42,141    $   23,904
 Short-term lines of credit                                34,910        22,473
 Deferred revenue - billings in excess of costs
   and estimated profits on contracts in progress                        42,834
 Current portion of capital lease obligations              21,136        18,413
 Notes and interest payable to shareholders               108,572        67,751
 Accrued compensation and benefits                        669,386       657,494
                                                     ------------    ----------
     Total current liabilities                            876,145       832,869
                                                     ------------    ----------

Capital lease obligations                                  26,601        33,698
                                                     ------------    ----------

Deferred compensation                                     984,123       965,450
                                                     ------------    ----------

Stockholders' equity/(deficit)
 Preferred stock, $.01 par value - 2,000,000
   shares issued; 1,540,001 shares outstanding             15,400        15,400
 Common stock, $.01 par value, 48,000,000 shares
   authorized, shares issued and outstanding:
   26,932,669 in 2004 and 21,592,669 in 2003              269,327       215,927
 Additional paid-in capital                            22,270,784    21,511,436
 Accumulated deficit                                  (24,004,681)  (23,046,389)
 Notes receivable from officers and employees             (22,474)      (21,931)
                                                     ------------   -----------

     Total stockholders' equity/(deficit)              (1,471,644)   (1,325,557)

Commitments (Note 12)
                                                     ------------   -----------

  Total liabilities and stockholders' equity         $    415,225   $   506,460
                                                     ============   ===========

    The accompanying notes are an integral part of the financial statements.







                              SONEX RESEARCH, INC.
                 STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
                                   (Unaudited)



                                   Three months ended       Six months ended
                                        June 30,                June 30,
                                    2004        2003        2004        2003
                                 ----------  ----------  ----------  ----------

Revenue                          $   59,035  $  214,573  $  193,775  $  388,902
                                 ----------  ----------  ----------  ----------

Costs and expenses
 Cost of revenue                    103,186     162,718     286,437     271,144
 Research and development             9,831      44,089      23,283     119,135
 General and administrative         216,092      89,848     834,433     180,123
 Interest expense                     1,653       1,202       8,503       3,921
                                 ----------  ----------  ----------  ----------
                                    330,762     297,857   1,152,656     574,323
                                 ----------  ----------  ----------  ----------

Net loss from operations           (271,727)    (83,284)   (958,881)   (185,421)

Interest income                         302         363         589         762
                                 ----------  ----------  ----------  ----------

Net loss                           (271,425)    (82,921)   (958,292)   (184,659)

Accumulated deficit
 Beginning of period            (23,733,256)(22,742,649)(23,046,389)(22,640,911)
                                 ----------  ----------  ----------  ----------

 End of period                  (24,004,681)(22,825,570)(24,004,681)(22,825,570)
                                 ==========  ==========  ==========  ==========



Weighted average number of
 common shares outstanding       26,635,416  21,592,669  24,737,339  21,592,669
                                 ==========  ==========  ==========  ==========



Net loss per share (basic
 and diluted)                       $ (.010)    $ (.004)    $ (.039)    $ (.009)
                                 ==========  ==========  ==========  ==========


   The accompanying notes are an integral part of the financial statements.




                              SONEX RESEARCH, INC.
                          STATEMENTS OF PAID-IN CAPITAL
                                   (Unaudited)



                          Price  Preferred stock    Common stock     Additional
                           per  ($.01 par value)  ($.01 par value)     paid-in
                          share  Shares   Amount   Shares    Amount    capital
                          ----- --------- ------ ---------- ------- -----------

Balance, January 1, 2002        1,540,001$15,400 21,212,669$212,127 $21,334,577

March private placement    $.15                     360,000   3,600      50,400
May for services            .25                      12,000     120       2,880
July for services           .25                       8,000      80       1,920
Stock option compensation                                                30,965
                                --------- ------ ---------- -------  ----------

Balance, December 31, 2002      1,540,001 15,400 21,592,669 215,927  21,420,742

Stock option compensation                                                90,694
                                --------- ------ ---------- -------  ----------

Balance, December 31, 2003      1,540,001 15,400 21,592,669 215,927  21,511,436

February per employment
 agreement                  .01                     800,000   8,000
February equity-based
 compensation per
 employment agreement                                                    90,000
February for compensation
 to officers and employee   .10                     250,000   2,500      22,500
February for consulting
 services                   .10                   1,530,000  15,300     137,700
March in payment of
 accrued compensation       .12                     200,000   2,000      22,000
March in payment of
 accrued consulting fees    .12                     200,000   2,000      22,000
March in connection with
 issuance of note payable   .12                      10,000     100       1,100
March for legal fees        .12                   1,000,000  10,000     110,000
March for directors fees    .12                     200,000   2,000      22,000
April for consulting
 services                   .10                     420,000   4,200      37,800
April for consulting
 services                   .16                     210,000   2,100      31,500
April private placement     .25                     520,000   5,200     124,800
Stock option and warrant
 compensation                                                           137,948
                                --------- ------ ---------- ------- -----------

Balance, June 30, 2004          1,540,001$15,400 26,932,669$269,327 $22,270,784
                                ========= ====== ========== ======= ===========




    The accompanying notes are an integral part of the financial statements.




                              SONEX RESEARCH, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                           Six months ended
                                                               June 30,
                                                       ------------------------
                                                          2004           2003
                                                       ---------      ---------

Cash flows from operating activities
 Net loss                                             $  (958,292)  $  (184,659)
 Adjustments to reconcile net loss to net
  cash provided by (used in) operating activities
   Depreciation                                            14,750        13,600
   Amortization of patents                                 18,414        11,200
   Compensation from grant of stock options & warrants    137,948        51,673
   Charges paid in stock                                  488,800
   Current liabilities paid in stock                       48,000
   Accrued interest on loans to/notes from employees         (543)         (544)
   Accrued interest on notes to shareholder                 2,572         1,418
   (Increase) decrease in accounts receivable             161,045       (91,791)
   (Increase) decrease in prepaid expenses                 (9,217)       (4,158)
   (Increase) decrease in deferred charges                (54,000)
   Increase (decrease) in accrued liabilities              30,129        17,197
   Increase (decrease) in billings in excess of costs     (42,834)       45,088
   Increase (decrease) in deferred compensation            18,673        33,750
                                                      -----------    ----------

Net cash provided by (used in) operating activities      (144,555)     (107,226)
                                                      -----------    ----------


Cash flows from investing activities
   Decrease in loans to/notes from employees                4,000
   Acquisition of property and equipment                   (3,383)      (13,815)
   Additions to patents                                    (1,344)       (3,977)
                                                      -----------    ----------

Net cash provided by (used in) investing activities          (727)      (17,792)
                                                      -----------    ----------

Cash flows from financing activities
   Issuance of stock private placement                    130,000
   Issuance of stock to officer                             8,000
   (Increase) decrease in deferred financing costs        (32,059)
   Increase (decrease) in short-term lines of credit       12,437        18,357
   Issuance of notes payable to shareholders               50,000        50,000
   Payment of principal on notes to shareholders          (10,000)
   Payment of accrued interest on notes to shareholders    (1,751)       (1,327)
   Reduction of capital lease obligations                  (8,930)       (7,989)
                                                      -----------    ----------

Net cash provided by (used in) financing activities       147,697        59,041
                                                      -----------    ----------

Increase (decrease) in cash                                 2,415       (65,977)

Cash
   Beginning of period                                      7,616       105,998
                                                      -----------    ----------

   End of period                                      $    10,031   $    40,021
                                                      ===========   ===========


Non-cash transactions:
  Equipment acquired through capital
  lease obligations                                   $     4,556   $    43,002
                                                      ===========   ===========


    The accompanying notes are an integral part of the financial statements.







                              SONEX RESEARCH, INC
                         NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1 - THE COMPANY

Sonex Research, Inc. has developed a proprietary technology,  known as the Sonex
Combustion  System  (SCS),  which  improves the  combustion  of fuel in internal
combustion  engines through  modification of the pistons in large engines or the
cylinder  heads  in small  engines.  The SCS  achieves  in-cylinder  control  of
ignition and  combustion  to increase fuel mileage of gasoline  engines,  reduce
emissions of diesel engines,  and permit small gasoline  engines to run on safer
diesel-type  fuels. The Company's  objective is to execute broad agreements with
engine and parts manufacturers for industrial production of SCS components under
license from Sonex. In 2004 the Company is  developing  and  implementing  an
updated  business  plan,  the  primary  goal of  which is to  transition  from a
research and development company into a technology and manufacturing enterprise.
A  key  goal  of  the  updated   business   plan  is  to  expand  the  Company's
environmentally  friendly  technology base into related fields such as noise and
vibration control.


NOTE 2 - PRESENTATION OF FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance
with accounting  principles  generally  accepted in the United States of America
for interim  financial  information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B.  Accordingly,  these financial  statements do not
include all of the  information  and  footnotes  required by generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.

Operating  results for the three- and six-month  periods ended June 30, 2004 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December 31,  2004.  For further  information,  reference is made to the
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 2003.


NOTE 3 - REVENUE RECOGNITION AND MAJOR CUSTOMERS

All of the  Company's  revenue is derived  from  development  and  demonstration
contracts  issued by a United  States  Government  or Department of Defense (the
"Government") agency or prime contractor. During the second quarter of 2004, the
Company had an active contract with only one such customer.

Revenue is recognized upon the Company's  completion of the milestones specified
in each contract. Revenue and costs for these contracts that require the Company
to provide stipulated  services for a fixed price have been recognized using the
percentage-of-completion   method  of  accounting  by  relating  contract  costs
incurred to date to total estimated contract costs at completion.  In connection
with  contracts in progress,  any excess of billings  over costs  incurred  plus
estimated profits is recorded as a current liability,  while any excess of costs
incurred  over  billings  is  recorded  as a  current  asset,  at the  financial
statement date.


NOTE 4 - LIQUIDITY

Management  recognizes that the Company's history of operating losses,  level of
available funds, and revenue from current and future  contracts,  in relation to
projected  expenditures,  raise substantial doubt as to the Company's ability to
commence generation of significant  revenues from the  commercialization  of the
SCS and ultimately achieve profitable operations.

Based upon  available  resources,  current and projected  spending  levels,  and
expected revenue from current and anticipated contracts, management believes the
Company will have  sufficient  capital to fund  operations  until  approximately
September 30, 2004. The Company's  prospects beyond that time are dependent upon
its  ability  to  enter  into  significant  funded  contracts  for  the  further
development  of its  SCS  technology,  establish  joint  ventures  or  strategic
partnerships with major industrial concerns, or secure a major capital infusion.
There is no assurance that the Company will be able to achieve these objectives;
therefore,  there  remains  substantial  doubt  about the  Company's  ability to
continue as a going concern.


NOTE 5 - RESTRUCTURING COSTS

During  the  first  quarter  of  2004,  the  Company  experienced  a  number  of
significant  changes.  In February 2004 the Board of Directors was reconstituted
and a new  president  was hired to fill the position  that had been vacant.  The
Company's new president is developing and implementing an updated business plan,
the primary goal of which is to transition Sonex from a research and development
company into a technology and manufacturing  enterprise. In connection with this
change in business strategy, in February and March 2004 the Company entered into
an employment agreement with its new president and executed other agreements for
consulting services and legal representation,  obtained a short-term loan from a
shareholder,  authorized additional  compensation to its officers and directors,
and satisfied  liabilities for accrued  compensation,  through the issuance of a
substantial number of shares of common stock.  Details of these transactions are
presented in Note 11.


NOTE 6 - DEFERRED CHARGES

Deferred charges of $54,000 at June 30, 2004 represent  compensation recorded in
connection  with the issuance of common stock under the terms of the  employment
agreement  executed  with  the  Company's  new  president  in  February  2004 as
described  in detail in Note 11. The amount  recorded  as a current  asset as of
June 30, 2004 is for  compensation  related to shares issued or to be issued but
not vested as of that date.  This  amount  will be  amortized  to expense on the
vesting dates of the remaining shares through February 2005.


NOTE 7 - DEBT

Short-term lines of credit

The Company has  obtained  business  credit  cards from  Capital One Bank with a
credit limit of $22,500 and Fleet  National Bank with a credit limit of $19,000.
Repayment  of  amounts  due has  been  personally  guaranteed  by the  Company's
Chairman. Balances in the Capital One account accrue interest at a fixed rate of
8.9% per annum, while the Fleet account has a promotional  interest rate of 1.9%
through September 2004, adjusting to prime rate + 6% thereafter.  As of June 30,
2004, the outstanding  balance on the account with Fleet was $18,051,  while the
balance on the account with Capital One Bank was $16,859.




Capital Lease Obligations

During 2003 the Company incurred new capital lease  obligations in the principal
amount of $50,753 in connection with the acquisition of equipment. The repayment
of two, four-year equipment lease obligations in the principal amount of $46,598
included in this total has been personally guaranteed by the Company's Chairman.
As of June 30, 2004, the aggregate  outstanding  principal  balance on these two
lease obligations was $32,718.


Notes Payable to Shareholder

In June 2003 the Company  issued a $50,000,  6% note to one of its  shareholders
payable  initially  on  December  31,  2003.  The due date of this note has been
extended to September 30, 2004. In March 2004 the Company  issued a $50,000,  6%
note to this same shareholder,  initially payable on June 30, 2004. The due date
of this note also has been extended to September 30, 2004. Payment of both notes
is secured by Company revenues.

In  connection  with a private  financing  in March 2002,  the Company  issued a
$6,000, 6% note to this shareholder, initially payable on June 30, 2002, that is
convertible to equity at the option of the holder.  The due date of the note has
been extended several times and is currently due on September 30, 2004.

Accrued  interest  on these  notes of $2,572 is  included  in the June 30,  2004
balance shown in the accompanying balance sheet.


NOTE 8 - ACCRUED COMPENSATION AND BENEFITS

Accrued  compensation  consists of the following  amounts:


                                                  June 30,         December 31,
                                                    2004              2003
                                                -----------       -----------

   Accrued wages and payroll taxes              $   305,490       $   299,635
   Accrued consulting fees                          154,216           150,181
   Accrued bonuses                                  151,076           154,068
   Accrued vacation pay                              58,604            53,610
                                                -----------       -----------

                                                $   669,386       $   657,494
                                                ===========       ===========


The Company  has  operated  under  severe cash flow  difficulties  for  extended
periods  since 2001,  prompting  its  officers to  voluntarily  and at their own
discretion  defer  receipt of payment of  significant  portions of their current
wages to reduce the Company's  monthly cash  requirements.  The total of accrued
wages and payroll taxes shown above consists  entirely of amounts payable to the
Company's officers.  The deferral of payment of such wages owed to the Company's
officers  cannot be expected to continue  indefinitely,  and the Company will be
required to pay amounts outstanding as soon as cash flow permits. Similarly, the
Company has  accumulated  significant  unpaid  consulting  fees, the majority of
which  amounts as of June 30,  2004 (a total of  $148,505)  are payable to three
individuals,  including the Company's Chairman who, as of January 2004, is being
compensated  as a  consultant  rather  than as an  employee.  In March  2004 the
Company  paid $24,000 of such  previously  accrued  consulting  fees through the
issuance of common stock.

The amount and timing of payments for unpaid compensation owing to the Company's
officers  and  its  consultants  will be  determined  at the  discretion  of the
Company's  officers;  however,  all such  unpaid  compensation  is payable  upon
demand,  as these amounts are not subject to the terms of the Company's  written
agreement  with  current and former  personnel  to defer  payment of portions of
their compensation as described in Note 9.

In  December  of each year,  the  Company  awards  bonuses to its  officers  and
employees  with the  stipulation  that payment of such bonuses is to be deferred
until the Board of Directors  determines  that the Company's  cash resources are
sufficient  to enable such  payments.  In March 2004 the Company paid $24,000 of
such previously accrued bonuses through the issuance of common stock. The amount
of accrued  bonuses  included  in the table above that was payable to two of the
Company's officers at June 30, 2004 is $98,500.  Payment of such accrued bonuses
is not subject to the terms of the Company's  written agreement with current and
former personnel to defer payment of portions of their compensation as described
in Note 9.

In February  2004 in connection  with the execution of an employment  agreement,
the Company  awarded a bonus of $33,000 to its new  president,  with  payment of
$25,000 of this amount being deferred until February 2006 under the terms of the
employment  agreement.  The deferred portion is included with accrued bonuses in
the table above.

The Company's only liability to employees for future compensated absences is for
accrued but unused  vacation pay. The amount of vacation pay earned by employees
is determined by job classification and length of service. The amount of accrued
vacation included in the table above that was payable to the Company's  officers
at June 30, 2004 was  $52,017.  Accrued  vacation  compensation  is payable upon
termination of employment, and such payments are not subject to the terms of the
Company's  written  agreement with current and former personnel to defer payment
of portions of their compensation as described in Note 9.


NOTE 9 - DEFERRED COMPENSATION

In order to help  conserve  the  Company's  limited cash  resources,  all of the
Company's  current  and  former  officers  and  certain of the  Company's  other
employees  for  several  years  voluntarily   deferred  receipt  of  payment  of
significant  portions of their authorized  annual salaries at the request of the
Board of  Directors.  A written  agreement  between  these  individuals  and the
Company  was first  executed  in 1992 in  connection  with an  indispensable  $2
million  private  investment made by a venture capital group in exchange for the
issuance of a new class of convertible  preferred stock as described in Note 11.
The individuals who are parties to this agreement have consented to the deferral
of payment of amounts so  accumulated  until the Company has received  licensing
revenue of at least $2 million or at such earlier date as the Board of Directors
determines that the Company's cash flow is sufficient to allow such payment.

Under the terms of an  employment  agreement  executed  in  February  2004,  the
Company's new  president is deferring  annually  $68,000 of his $140,000  salary
until March 2006 or until such earlier date as the Board of Directors determines
that the Company's cash flow is sufficient to allow payment.

Deferred compensation outstanding is payable to the following classifications of
personnel:


                                                  June 30,         December 31,
                                                    2004              2003
                                                -----------       -----------

  Current officers                              $   662,672       $   641,749
  Current employees                                  12,504            12,504
  Former officers, employees and consultants        308,947           311,197
                                                -----------       -----------

                                                $   984,123       $   965,450
                                                ===========       ===========


The conditions that would require repayment of such deferred amounts have yet to
occur,  and it is  unlikely  that such  conditions  will occur prior to June 30,
2005.  Accordingly,  such deferred  compensation  is reported  separately in the
accompanying balance sheet as a non-current liability.

At the  conclusion  of a legal  challenge by two former  officers of the Company
initiated  in  1993  demanding  full  payment  of  deferred  salaries  upon  the
termination of their  employment,  in 1996 the Maryland Court of Special Appeals
rejected this demand and ruled that the written agreement to defer  compensation
was a valid and enforceable contract.

The amount  reported  for current  officers  as of June 30,  2004 also  includes
$20,923 owed to the Company's new president in accordance  with the terms of his
employment  agreement  executed in February 2004. The agreement requires the new
president to defer annually  $68,000 of his $140,000 salary until the expiration
of the agreement in March 2006 or at such earlier date as the Board of Directors
determines that the Company's cash flow is sufficient to allow payment.


NOTE 10 - INCOME TAXES

The  Company  has not  incurred  any  federal or state  income  taxes  since its
inception  due to operating  losses.  At December 31, 2003,  the Company had net
operating loss carryforwards of approximately  $11.2 million available to offset
future taxable income. If certain substantial changes in the Company's ownership
should  occur,  there  would  be an  annual  limitation  on  the  amount  of the
carryforwards which can be utilized. Since 1995 net operating loss carryforwards
aggregating  approximately  $7.9 million have expired unused. Net operating loss
carryforwards of  approximately  $1.2 million are scheduled to expire at the end
of 2004.


NOTE 11 - CAPITAL STOCK

Authorized capital stock

The Company is presently authorized to issue 48 million shares of $.01 par value
common stock and 2 million shares of $.01 par value convertible preferred stock.
All of the  authorized  shares of preferred  stock were issued for $2 million in
February  1992  (the  "Preferred  Stock   Investment")  to  a  small  number  of
individuals  who  qualified as  "accredited  investors"  pursuant to Rule 501 of
Regulation  D of the  Securities  Act  of  1933  (the  "Act")  and to  Proactive
Partners,  L.P.  and  certain of its  affiliates  ("Proactive"),  who became the
largest  beneficial  owner  of the  Company's  common  stock  by  virtue  of the
acquisition  of the  convertible  preferred  stock  and  common  stock  purchase
warrants.

The preferred  stock has priority in liquidation  over the common stock,  but it
carries no stated  dividend.  The holders of the  preferred  stock,  voting as a
separate class,  have the right to elect that number of directors of the Company
which  represents a majority of the total  number of  directors.  The  preferred
stock is  convertible  at any time at the option of the holder into common stock
at the rate of $.35 per share of common  stock.  As of June 30,  2004 a total of
459,999 shares of preferred  stock had been  converted into 1,314,278  shares of
common stock.


Private placement of common equity

In a private  financing  transaction  in late April  2004,  the  Company  raised
$130,000  through the issuance of 520,000  shares of the Company's  common stock
and  warrants  to  purchase  an  additional   520,000  shares  of  common  stock
exercisable  at $.25 per share through May 31, 2006. The offer and sale of these
shares of common stock and warrants to purchase shares of common stock satisfied
the conditions of Rule 506 of Regulation D of the Act and, as such,  were exempt
from the  registration  requirements of Section 5 of the Act as transactions not
involving any public offering within the meaning of Section 4(2) of the Act.


Stock options and other equity-based compensation

The Company  maintains a  non-qualified  stock  option plan created in 1987 (the
"Plan") which has made  available for issuance a total of 7.5 million  shares of
common stock. All directors,  full-time employees and consultants to the Company
are eligible for  participation.  Option awards are determined at the discretion
of the  Board of  Directors.  Upon a  change  in  control  of the  Company,  all
outstanding  options  granted to  employees  and  directors  become  vested with
respect to those  options  which have not already  vested.  Options  outstanding
expire at various dates through April 2014.

From  January 1, 2004  through  June 30,  2004,  the Company  had the  following
activity in options to purchase shares of common stock under the Plan:


                                            Weighted                Weighted
                                             average      # of       average
                                     # of   exercise      shares    exercise
                                    shares    price    exercisable    price
                                    ------    -----    -----------    -----

Unexercised at January 1, 2004     4,683,907   $.41     4,360,407      $.42

  Granted                            150,000    .25       125,000       .25
  Becoming exercisable                                     30,000       .25
  Exercised
  Lapsed                            (100,000)   .25       (25,000)      .25
                                   ---------            ---------


Unexercised at June 30, 2004        4,738,907  $.41     4,490,407      $.41
                                   =========   ====     =========      ====


The Company accounts for stock options and other stock-based  compensation under
the fair value based method in accordance with Statement of Financial Accounting
Standards  (SFAS) No.  123 -  "Accounting  for  Stock-based  Compensation".  For
purposes of calculating  charges to expense for stock option  compensation under
SFAS No. 123, the Company has estimated the grant date fair value of each option
using the  Black-Scholes  option pricing model which takes into account weighted
average assumptions for stock price volatility,  average risk-free interest rate
of return,  expected  dividend  yield,  and average  expected  term. For the six
months ended June 30, 2004 and 2003,  in connection  with options  granted under
the Plan,  the Company  recorded  stock option  compensation  under SFAS No. 123
totaling $25,948 and $30,965,  respectively.  The amount of compensation expense
is also credited to additional paid-in capital.

Under the terms of an  employment  agreement  executed  in  February  2004,  the
Company's new president  was granted a ten-year  option,  not under the Plan, to
purchase  500,000 shares of common stock,  which will vest and be exercisable in
accordance with the schedule  presented below. For the six months ended June 30,
2004, the Company recorded  compensation  under SFAS No. 123 totaling $44,500 in
connection with this option grant.

                                          Number         Exercise price
    Date becoming exercisable            of shares          per share
    -------------------------            ---------          ---------

    February 23, 2004                      100,000            $0.25
    August 23, 2004                        100,000            $0.50
    February 23, 2005                      100,000            $1.00
    August 23, 2005                        100,000            $1.50
    February 23, 2006                      100,000            $2.00


Under the terms of a  consulting  agreement  effective  in  February  2004,  the
Company issued ten-year,  immediately  exercisable  warrants to purchase 750,000
shares of common stock at the following prices:  250,000 shares at $.35, 250,000
shares at $.55,  and 250,000  shares at $.75.  During the first quarter of 2004,
the  Company  recorded  compensation  under  SFAS No.  123  totaling  $67,500 in
connection with this issuance of warrants.

Compensation  expense  associated  with the grant of  options  and  warrants  is
summarized as follows:

                                                       Six months ended
                                                           June 30,
                                                -----------------------------
                                                    2004              2003
                                                -----------       -----------

        Option grants under Plan                $    25,948       $    30,965
        Other option grants                          44,500
        Issuance of warrants                         67,500
                                                -----------       -----------

                                                $   137,948       $    30,965
                                                ===========       ===========


The  Black-Scholes  valuation model was developed for use in estimating the fair
value of  traded  options  which  have no  vesting  restrictions  and are  fully
transferable,  as opposed  to the type of  compensatory  options  granted by the
Company.  It also requires the input of highly subjective  assumptions,  such as
the expected stock price volatility,  changes in which can materially affect the
fair  value   estimate.   Because  the  options  granted  by  the  Company  have
characteristics  significantly  different  from  those of  traded  options,  the
amounts  calculated  using the Black  Scholes  option  valuation  model,  in the
opinion of management,  do not necessarily  provide a reliable single measure of
the fair value of options granted by the Company.

Also under the terms of the February 2004 employment  agreement mentioned above,
the  Company  will issue to its new  president  a total of  1,000,000  shares of
common  stock  for cash of $.01 per  share.  Of this  total,  the new  president
currently  purchased  800,000  shares,  with 200,000 of these shares having been
transferred to the new president upon execution of agreement,  and the remaining
shares  being held in escrow  pending  vesting  of  200,000  shares at a time in
three,  six and  nine  months.  The  Company  is  obligated  to issue to its new
president an additional  200,000  shares of common stock for cash of $.01 per in
February  2005.  With  respect to this total of 1 million  shares,  the $.09 per
share  discount  between the purchase price and the market price of the stock of
$.10 per share on the effective  date of the  employment  agreement is accounted
for as  compensation  for a total amount of $90,000.  As of June 30,  2004,  the
Company has  charged to expense  compensation  of $36,000  for the shares  which
vested  immediately,  and has recorded  $54,000 in deferred charges as a current
asset and will  amortize  such  charges to expense on the  vesting  dates of the
remaining shares.

Also in connection with the consulting  agreement  mentioned  above, in February
2004 the Company issued 1,530,000 shares and in April 2004 issued 420,000 shares
of common  stock.  With  respect to this total of 1,950,000  shares,  during the
first quarter of 2004 the Company  charged to expense  compensation  of $195,000
based on the market price of the stock of $.10 per share on the  effective  date
of the consulting agreement.

Also during the six months ended June 30, 2004, the Company recorded  additional
compensation through the issuance of shares of common stock as set forth below.

                                            Price/
             Description                    share   # of shares     Expense
       --------------------------           -----   -----------   ----------

  Compensation to officers and employees    $.10        250,000   $   25,000
  Consulting fees					   .16	  210,000	    33,600
  Upon execution of agreement with new
    legal counsel                            .12      1,000,000      120,000
  Compensation to independent director       .12        200,000       24,000
                                                    -----------   ----------

  Total                                               1,660,000   $  182,600
                                                    ===========   ==========


In March 2004 the Company  satisfied  liabilities for accrued  compensation  and
consulting  fees  through the  issuance  of shares of common  stock as set forth
below.

                                            Price/
             Description                    share   # of shares     Amount
       --------------------------           -----   -----------   ----------

  Accrued bonus compensation payable
    to officer                               $.12       200,000   $   24,000
  Accrued consulting fees                     .12       200,000       24,000
                                                    -----------   ----------

  Total                                                 400,000   $   48,000
                                                    ===========   ==========


The issuance of the shares of common  stock and  warrants to purchase  shares of
common stock described above were exempt from the  registration  requirements of
Section 5 of the Act as  transactions  not involving any public  offering within
the meaning of Section 4(2) of the Act.  Certain of the  shareholders  have been
granted registration rights with respect to their shares.


Common stock reserved for future issuance

At June 30, 2004, a total of 13,486,832  shares of common stock were reserved by
the Company for issuance for the following purposes:


                         Purpose                                    # of shares
      ----------------------------------------------                -----------

  Currently exercisable warrants expiring in
     December 2005, exercisable at $.50 per share                       387,500
     March 2006, exercisable at $.50 per share                          250,000
     April 2006, exercisable at $.50 per share                          175,000
     May 2006, exercisable at $.25 per share                            520,000
     March 2007, exercisable at $.25 per share                          180,000
     February 2014, exercisable at $.35 per share                       250,000
     February 2014, exercisable at $.55 per share                       250,000
     February 2014, exercisable at $.75 per share                       250,000
                                                                    -----------
                                                                      2,262,500

  Currently exercisable options under Plan                            4,490,407
  Granted options becoming exercisable in the future under Plan         243,500
  Options available for future grants under Plan                      1,330,425
  Currently exercisable options outside of Plan                         100,000
  Granted options becoming exercisable in the future outside of Plan    400,000
  Reserved for issuance to president in February 2005                   200,000
  Conversion of note payable                                             60,000
  Conversion of preferred stock                                       4,400,000
                                                                    -----------

     Total shares reserved                                           13,486,832
                                                                    ===========


NOTE 12 - COMMITMENTS

Employment agreement

In February 2004 the Company  entered into an employment  agreement with its new
president  which  expires in March 2006.  The  agreement  provides for an annual
salary  of  $140,000,  of which  $68,000  must be  deferred  annually  until the
expiration  of the  agreement  or at such earlier date as the Board of Directors
determines that the Company's cash flow is sufficient to allow payment.


Facility lease

The Company  occupies  its office and  laboratory  facility on a  month-to-month
basis  under the terms of an  operating  lease  agreement  pursuant to which the
property owner is required to provide thirty days notice if he wants the Company
to vacate the premises.  The lease currently provides for monthly rent of $4,000
and requires the Company to pay all property related expenses.  The Company will
seek to  negotiate  a new  long-term  lease for its  facility  or search  for an
alternative  location in the event that a long-term  agreement cannot be reached
for the  existing  premises.  Management  believes  that the  resolution  of the
uncertainty  with  respect  to the  facility  will not  result in a  significant
interruption in the operations of the Company.


Legal fee dispute

On March 25, 2004, the Company executed an engagement  letter with a law firm in
Orlando,  Florida  (referred to as the "Florida firm"),  for services related to
securities  and  corporate   matters,   including   acquisitions,   mergers  and
financings.  The engagement  letter required the Company to issue to the Florida
firm one  million  shares of common  stock,  which  shares  were  deemed  earned
immediately  upon  execution of the  engagement  letter to insure the  immediate
availability  of the Florida firm to perform legal  services.  In addition,  the
engagement  letter  required  the Company by June 30, 2004 to pay to the Florida
firm all fees,  costs and expenses  incurred  through that date, and to remit to
the Florida firm a cash retainer of $50,000 to insure the future availability of
the Florida firm to perform  legal  services and the payment of fees,  costs and
expenses.

In May 2004 the Florida firm  invoiced the Company  $50,000 for fees,  costs and
expenses  incurred through April 30, 2004. The Company did not remit the $50,000
cash retainer  required by the engagement  letter. In July 2004 the Florida firm
invoiced  the Company an  additional  $52,000 for the period May 1, 2004 through
June 30, 2004,  notified the Company that it was in default of the provisions of
the  engagement  letter,  and reserved  the right to take all lawful  actions to
preserve,  protect,  defend,  and prosecute its rights and remedies  against the
Company.

The Company  disputed the Florida firm's  entitlement to the fees claimed and is
presently represented by another attorney on a pro bono basis in connection with
this matter.  The Company  requested an explanation  of, and the billing support
for,  the amounts  invoiced by the Florida firm in order to evaluate the charges
by services requested and performed.  The Florida firm then informed the Company
by letter dated August 9, 2004, that it will not provide further legal services.

The Company  believes  that the amounts  invoiced by the Florida firm are far in
excess of what is  reasonable  based on the limited  services  requested  by the
Company and the limited work product  provided by the Florida firm.  The Company
has  demanded  the  immediate  return of the one million  shares of common stock
issued to the Florida firm in connection  with the  engagement  letter,  and has
reserved its rights,  including the right to pursue  affirmative  claims for the
damage the Florida firm has caused and continues to cause.

As of the  filing of this Form  10-QSB,  the  Company  has  received  no further
communication  from the  Florida  firm.  While the  outcome  of this  dispute is
uncertain and may have an adverse effect on the Company's  financial  condition,
management believes that the Company has a defensible position.  Accordingly, no
liability  for any  amounts  related to this  dispute  has been  recorded in the
accompanying financial statements as of June 30, 2004.


NOTE 13 - SUBSEQUENT EVENTS

In July 2004 the  Company  received a $192,932  follow-on  task from the Defense
Advanced  Research  Projects  Agency  (DARPA)  to  continue   development  of  a
multi-cylinder  heavy fuel engine combustion process for potential Department of
Defense  applications such as unmanned aerial vehicles (UAVs). The first payment
under this task of $56,132 was received in August 2004.

In  connection  with a private  financing  initiated in April 2004,  the Company
raised  $45,000 in August  2004  through the  issuance of 180,000  shares of the
Company's common stock and warrants to purchase an additional  180,000 shares of
common stock  exercisable  at $.25 per share through May 31, 2006. The offer and
sale of these shares of common  stock and warrants to purchase  shares of common
stock  satisfied  the  conditions of Rule 506 of Regulation D of the Act and, as
such, were exempt from the registration  requirements of Section 5 of the Act as
transactions  not  involving any public  offering  within the meaning of Section
4(2) of the Act.



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


Caution regarding forward-looking statements

Sections of this document,  as well as all publicly  disseminated material about
Sonex Research, Inc. ("Sonex" or the "Company"), contain expressions of beliefs,
expectations, or intentions, in the form of "forward-looking" statements as that
term is defined under  applicable  federal  securities laws. Such statements are
based  on  current  expectations,  estimates,  projections  and  assumptions  by
management with respect to, among other things,  trends  affecting the Company's
financial  condition  or results of  operations  and the impact of  competition.
Words  such  as  "expects",  "anticipates",  "plans",  "believes",  "estimates",
variations of such words, and similar  expressions are intended to identify such
statements  that  include,  but are not limited  to,  projections  of  revenues,
earnings,  cash flows and contract awards. Such  forward-looking  statements are
not guarantees of future performance and involve risks and uncertainties, all of
which are  difficult  to predict and many of which are beyond the control of the
Company.

Forward-looking  statements  contained  herein speak only as of the date of this
report.  The Company  disclaims any  obligation to update these  statements  and
cautions readers not to place undue reliance on such statements.


Company Overview

Sonex,  incorporated  in  Maryland  in  1980,  is an  engineering  research  and
development  firm that is  seeking to  commercialize  its  patented  proprietary
technology  (the  "Sonex  Combustion  System",  "SCS"  or  "Ultra  Clean  BurnTM
technology")  for  in-cylinder  control of ignition and combustion in engines of
various types.  The Company was  co-founded in 1980 by Dr. Andrew A. Pouring,  a
former  Professor of Aerospace  Engineering  and Chairman of the  Department  of
Aerospace Engineering at the U.S. Naval Academy. At Sonex, Dr. Pouring conducted
basic  research  into the  principle  of  in-cylinder  control of  ignition  and
combustion,  concentrating  on the piston.  By the late 1980's and early 1990's,
the  development  of the SCS had moved in the  direction  of  chemical/turbulent
enhancement of combustion  through  investigation of the effects of changing the
chemical  characteristics  and  fuel  disbursement  characteristics  within  the
combustion chamber.

The Company seeks to commercialize  its SCS technologies for a variety of engine
applications  for  commercial  and military  use. To date,  Sonex has engaged in
development and demonstration programs with the engine industry and has received
funding  from  the  federal  government  for  further  development  of  the  SCS
technologies.  The Company's  primary  objective is to execute broad  agreements
with engine and parts manufacturers for industrial  production of SCS components
under license from Sonex.

The SCS  technology  for  in-cylinder  control of  ignition  and  combustion  is
designed to

  |X| reduce emissions of diesel engines
  |X| increase fuel mileage of a new  generation of gasoline  engines
  |X| permit gasoline engines to run on safer, kerosene-based "heavy" fuels

The SCS improves the combustion of fuels in engines through design  modification
of the pistons in  four-stroke,  direct  injected (DI),  engines or the cylinder
heads  in  two-stroke,   spark-ignited   (SI),   gasoline   engines  to  achieve
chemical/turbulent  enhancement of combustion. The SCS process for both two- and
four-stroke  engines  achieves  in-cylinder  control of ignition and  combustion
through the chemical/turbulent  enhancement of combustion via combustion chamber
modifications  that change the chemical  characteristics  and fuel  disbursement
characteristics within the combustion chamber.

SCS  reductions  of soot in DI diesel truck  engines  have been  confirmed by an
independent  international  engine  consulting firm.  Evidence to date indicates
that the SCS is a significant new engine design  variable,  and that the synergy
of the SCS in combination with exhaust gas recirculation can help reduce exhaust
aftertreatment  requirements to meet future  regulatory  standards.  The Company
believes that SCS diesel engine designs  should  provide  reductions in the cost
and complexity of future exhaust aftertreatment systems.

Sonex also is seeking to show the  technical  feasibility  of achieving  reduced
fuel consumption while lowering emissions in a new class of DI gasoline engines,
yet overcoming the safety concern that vehicles would need to be reduced in size
and weight to improve  fuel  mileage.  A new branch of the SCS  focusing  on the
control of ignition may, with further  development,  enable DI gasoline  engined
automobiles,  currently  manufactured  and sold only in markets outside the U.S.
due to emissions considerations, to become emissions compliant in the U.S. while
providing  fuel  consumption  benefits.  In  addition,  the  evolution of hybrid
gasoline  and  electric  powered  vehicles  could be  accelerated  since a major
improvement in engine fuel mileage would provide  opportunities  for tradeoff of
vehicle weight versus power.

An SCS process for the  conversion  of reliable,  lightweight,  SI,  two-stroke,
gasoline engines to start and operate on  kerosene-based  "heavy" fuels has been
applied  successfully  in a variety  of  applications  such as  small,  remotely
controlled  military unmanned aerial vehicles (UAVs).  The military now requires
such  engines  to  operate  on less  volatile  heavy  fuels to reduce the hazard
associated  with  gasoline,  making heavy fuel engines  (HFEs) more suitable for
applications   where  gasoline  storage  and  use  are  undesirable.   Potential
applications of the SCS heavy fuel conversion process can be expanded to a range
of military  and  commercial  uses.  Sonex is also  developing a process for the
heavy  fuel  conversion  of SI  four-stroke  gasoline  engines  by using  direct
injection  and  patented  Sonex  designs.  In addition,  Sonex is examining  the
potential,   through   cooperation   with  one  or  more  companies  which  have
complementary  technologies and production capabilities,  of becoming a supplier
of HFEs to military and commercial markets.

As of June 30, 2004, the Company has five full-time  employees and two part-time
employees,  and engages the part-time services of several technical and business
consultants  as  needed.  The  Company  has never  experienced  a strike or work
stoppage, and believes its relations with its employees are good.


Strategic Planning

Present  Sonex  technology  development  is being  supported by U.S.  Government
funding, and the Company is also seeking committed business partners for further
technical  development  and  marketing  of the various SCS engine  applications.
Sonex believes that having one or more such partners experienced in dealing with
the  engine  and  automotive   industries  on   state-of-the-art   technological
developments  may  accelerate  commercial  acceptance  of  the  SCS  technology.
Development  efforts taking place currently under government  contracts to Sonex
could  facilitate  participation  by the engine and  automotive  industries  and
thereby  accelerate  commercialization  potential of the patented SCS technology
for in-cylinder control of ignition and combustion.

In 2003 the Company  began  taking  steps to focus on  business  re-positioning,
strengthening its internal  capabilities,  and planning for growth.  The Company
engaged  consultants to assess the SCS technologies and business model,  suggest
approaches for strategic  alliances,  and provide federal marketing,  government
procurement assistance, and commercialization services.  Management identified a
need   to   secure   strong   strategic   alliances   for  the   marketing   and
commercialization  of the  SCS  engine  applications  by  leveraging  technology
development  currently  supported by U.S.  Government funding as well as seeking
relationships  with companies which have technologies  complementary to the SCS.
One of the  first  objectives  on this  path  was to  strengthen  the  Company's
management team.

During  the  first  quarter  of  2004,  the  Company  experienced  a  number  of
significant  changes.  In February 2004 the Board of Directors was reconstituted
and a new  president  was hired to fill the position  that had been vacant.  The
Company's new president is developing and implementing an updated business plan,
the primary goal of which is to transition Sonex from a research and development
company  into a  technology  and  manufacturing  enterprise.  A key  goal of the
updated  business  plan is to  expand  the  Company's  environmentally  friendly
technology base into related fields such as noise and vibration  control.  There
is no  assurance,  however,  that the Company  will be able to raise  sufficient
capital to complete and implement this updated business plan.


Risk factors

In order to obtain the benefits of the "safe harbor" provisions under applicable
federal  securities  laws  for  any  "forward-looking"  statements  of the  type
described  previously  under  the  heading  "Caution  Regarding  Forward-Looking
Statements",  the  Company  cautions  shareholders,  investors  and  prospective
investors  about  significant  factors which,  among other things,  have in some
cases  affected the  Company's  actual  results and are in the future  likely to
affect the Company's  actual  results and cause them to differ  materially  from
those expressed in any such forward-looking statements.

Factors  that could  cause  actual  results  to differ  materially  include  the
specific risks listed below. These risks and uncertainties are not the only ones
faced by the Company or that may adversely  affect its  business.  If any of the
following  risks  or  uncertainties  actually  occur,  the  Company's  business,
financial  condition  or results of  operations  could be  materially  adversely
affected.


   o  ability  to  generate  cash flow from  revenue  or to secure  financing
      necessary  to fund future  operations
   o  ability to  complete  technology development and demonstration programs,
      demonstrate commercial viability of SCS technology and execute licensing
      agreements that produce significant  revenue
   o  ability to maintain and protect the Company's patents  and  proprietary
      information
   o  ability to attract and retain skilled  personnel
   o  ability to secure a long-term lease for the Company's existing facility
      or to secure an alternative location
   o  changes in general economic conditions
   o  competition from companies which have  substantially  greater financial,
      technical and marketing resources than does the Company


Furthermore,  since its inception in 1980, the Company has generated  cumulative
net losses of approximately  $24 million,  and anticipates  incurring  operating
losses  for  the   foreseeable   future.   Operating   results  have  fluctuated
significantly  in the past on an annual and quarterly basis, and are expected to
continue to fluctuate  significantly from quarter to quarter for the foreseeable
future. The business historically has not generated sufficient cash flow to fund
operations  without  resorting to external sources of capital.  The Company does
not have any bank  financing  arrangements.  Operating  funds  have been  raised
primarily  through  the sale of equity  securities  in both  public and  private
offerings,  although revenues have provided most of the necessary operating cash
for the last two years.

In the event that funding from  internal and external  sources is  insufficient,
the Company would have to cut back  significantly  its level of spending,  which
could  substantially  curtail the Company's  operations.  These reductions could
have an adverse effect on the Company's  relations with its potential  customers
and government funding sponsors.

The Company's success also depends in significant part on the continued services
of its key technical  and senior  management  personnel.  Losing one or more key
employees,  including for reasons of poor health,  disability,  or death,  could
have a material adverse effect on the Company's business, results of operations,
and  financial  condition.  Due to the expense  involved,  the Company  does not
maintain life  insurance  policies for any of its  employees.  Additionally,  in
order  to avoid  long-term  financial  commitments,  the  Company  does not have
employment  agreements  with any of its personnel  with the exception of the new
president hired in February 2004.

Further,  the market  price of the  Company's  Common  Stock  could be  affected
adversely by the substantial  number of shares that are reserved for, and may be
issued in, the future.  As of June 30,  2004,  there were  26,932,669  shares of
Common  Stock  issued and  outstanding,  with an  additional  13,486,832  shares
reserved for future  issuance,  primarily upon the conversion of preferred stock
and the exercise of options and warrants.


Competition

The  Company  faces   significant   competition  from  the  extensive   research
departments  of the  world's  major  vehicle  and  engine  manufacturers.  These
companies  exercise a bias toward in-house  technologies over those developed by
independent  suppliers.  Competition also comes from several  independent engine
testing  and  consulting  firms  around the world  which are in the  business of
developing engine  technologies.  The Company's  competitors have  substantially
greater  financial,  technical  and marketing  resources  than does the Company.
Accordingly,  the  Company  cannot be sure that it will  have the  resources  or
expertise to compete successfully in the future.

Although the experience and financial  resources of its  competitors  far exceed
those of the Company,  management  believes that the SCS can provide significant
advantages over the competition in terms of low cost, improved performance,  and
simplicity.


Secrecy and non-disclosure

Due to the  highly  competitive  nature  of the  world's  automotive  and  truck
industries,  in connection with its contracts and/or demonstration programs with
such  manufacturers,  Sonex is required to execute joint secrecy and  disclosure
agreements that, in most cases,  expressly prohibit the public disclosure of the
names and other  significant  information about the participants and the current
or  proposed  programs.  Failure  by  Sonex to  maintain  this  strict  level of
confidentiality would jeopardize its relationship with these organizations.

The same is true  with  respect  to the  Company's  relationships  with the U.S.
Department of Defense  (DoD) and its prime  contractors.  In many  instances the
Company is  contractually  prohibited  from  disclosing the name of the military
customer  and/or  specific   details  about  the  work  being  performed  unless
permission has been obtained from the customer in advance.


Financial position and liquidity

The Company  has  operated  under  severe cash flow  difficulties  for  extended
periods  since 2001,  prompting  its  officers to  voluntarily  and at their own
discretion  defer  receipt of payment of  significant  portions of their current
wages to reduce the Company's monthly cash requirements.  Similarly, the Company
has accumulated  significant unpaid bonus and vacation compensation,  as well as
consulting fees. As of June 30, 2004, total such unpaid amounts,  as detailed in
Note 8 to the accompanying financial statements, aggregated $669,386.

The deferral of payment of current  compensation owed to the Company's  officers
and  consultants  cannot be expected to continue  indefinitely,  and the Company
will be required to pay amounts  outstanding  as soon as cash flow permits.  The
amount and timing of payments  for unpaid  compensation  owing to the  Company's
officers  and  its  consultants  will be  determined  at the  discretion  of the
Company's  officers;  however,  all such  unpaid  compensation  is payable  upon
demand,  as these amounts are not subject to the terms of the Company's  written
agreement  with  current and former  personnel  to defer  payment of portions of
their  compensation  as  described  in  Note  9 to  the  accompanying  financial
statements.

As of June 30, 2004, the Company had available cash and  equivalents of $10,031.
In July 2004 the  Company  received a $192,932  follow-on  task from the Defense
Advanced  Research  Projects  Agency  (DARPA)  to  continue   development  of  a
multi-cylinder  heavy fuel engine combustion process for potential Department of
Defense  applications such as unmanned aerial vehicles (UAVs). The first payment
under this task of $56,132 was received in August  2004.  In  connection  with a
private financing  initiated in April 2004, the Company raised $45,000 in August
2004 through the issuance of 180,000  shares of the  Company's  common stock and
warrants to purchase an  additional  180,000  shares of common stock at $.25 per
share.

Management  recognizes that the Company's history of operating losses,  level of
available funds, and revenue from current and future  contracts,  in relation to
projected  expenditures,  raise substantial doubt as to the Company's ability to
commence generation of significant  revenues from the  commercialization  of the
SCS  and  ultimately  achieve  profitable   operations.   Based  upon  available
resources,  current and projected  spending  levels,  and expected  revenue from
current and  anticipated  contracts,  management  believes the Company will have
sufficient  capital to fund operations until  approximately  September 30, 2004.
The Company's prospects beyond that time are dependent upon its ability to enter
into  significant  funded  contracts  for  the  further  development  of its SCS
technology,  establish  joint  ventures  or  strategic  partnerships  with major
industrial concerns,  or secure a major capital infusion.  There is no assurance
that the Company  will be able to achieve  these  objectives;  therefore,  there
remains  substantial  doubt about the  Company's  ability to continue as a going
concern.

In the event  sufficient  funding is not  available  through the  generation  of
revenues  or from  external  sources,  the Company  would have to  substantially
reduce  the level of its  operations.  Such a  reduction  could  have a material
adverse effect on the Company's  relationships  with government funding sources,
strategic partners and potential customers.

The accompanying unaudited financial statements have been prepared assuming that
the Company will continue as a going concern,  which contemplates  continuity of
operations,  realization  of  assets  and  satisfaction  of  liabilities  in the
ordinary course of business.  The propriety of use of the going concern basis is
dependent upon, among other things, the Company's ability to generate sufficient
revenue and ultimately achieve profitable operations.  These uncertainties raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The accompanying financial statements do not include any adjustments relating to
the  recoverability  of the carrying amounts of recorded assets or the amount of
liabilities that might result from the outcome of these uncertainties.


Results of operations

A net loss of  $958,292  was  recorded  for the  first six  months  of 2004,  as
compared  to  $184,659  for the  corresponding  period in 2003,  an  increase of
$771,708.  Lower revenue and substantially  higher total expenses, a significant
portion of which expenses relate to the restructuring undertaken by the Company,
accounted for the much larger net loss in the current period.



       Revenue and cost of revenue:

                                                      Six months ended
                                                           June 30,
                                                -----------------------------
                                                    2004              2003
                                                ------------     ------------


       Revenue                                  $    193,775     $     388,902
                                                ============     =============

       Cost of revenue                          $    286,437     $     271,144
                                                ============     =============


Revenue decreased by $195,127,  or 50%, from the first six months of 2003 to the
first six months of 2004, as work wound down in 2004 on two major  projects from
branches of the U.S.  government  and DoD and/or their prime  contractors  which
were  awarded to the Company  during the second half of 2002.  Combined  revenue
from these two  projects  decreased  from  $333,202 in the first half of 2003 to
$122,849 in the  current  period.  In July 2004 the Company  received a $192,932
follow-on task from the Defense  Advanced  Research  Projects  Agency (DARPA) to
continue  development of a multi-cylinder  heavy fuel engine combustion  process
for  potential  Department  of  Defense  applications  such as  unmanned  aerial
vehicles  (UAVs).  With respect to the second  project,  a  subcontract  for the
Company's diesel emission  reduction  technology from Compact Membrane  Systems,
Inc.  (CMS) under its prime  contract from the U.S.  Department of Energy (DOE),
the Company has  received an  indication  from the DOE that funding to Sonex for
this project will not be continued.

Cost of revenue  primarily  consists of direct  labor  charges and other  direct
expenditures, including those for technical consulting services, attributable to
funded programs, as well as allocated fringe benefits,  payroll taxes, and labor
overhead charges. While cost of revenue during the first half of 2003 was 70% of
revenue, in the first six months of 2004 cost of revenue substantially  exceeded
revenue, primarily due to significant, unanticipated project cost overruns.


       Research and development (R&D) expenses:

                                                       Six months ended
                                                           June 30,
                                                ------------------------------
                                                    2004             2003
                                                ------------     -------------

  Employee compensation, taxes & benefits       $    139,423     $     231,310
  Consulting fees                                     60,437            60,415
  Other expenses                                     109,860            98,554
                                                ------------     -------------

  Total expenses                                     309,720           390,279
  Less amounts classified as cost of revenue        (286,437)         (271,144)
                                                -------------    -------------

  Net R&D expenses                              $     23,283     $     119,135
                                                ============     =============

The following  analysis is based on a comparison of total R&D expenses as listed
above before deduction of amounts classified as cost of revenue.

Total  expenses for the first six months of the year  decreased  by $80,559,  or
21%, from 2003 to 2004, as a reduction in overall employee compensation was only
partially  offset  by an  increase  in  other  expenses.  Employee  compensation
decreased by $91,887,  or 40%, as slight increases  resulting from higher salary
rates in 2004 were more than  offset by  significant  decreases  relating to the
termination in the second half of 2003 of the employment of one engineer and the
change in status as of January 2004 of the  Company's  chief  scientist  and CEO
from salaried employee to consultant.  Without this change in status, consulting
fees would have  decreased  from 2003 to 2004 with the  reduced  level of funded
work.

The increase in other  expenses of $11,306,  or 11%,  from 2003 to 2004 reflects
charges  incurred  in the  first  quarter  of 2004  for  outside  machining  and
fabrication  services  for  components  for  ongoing  funded  projects  and  the
write-off of unamortized patent costs on certain older foreign patents abandoned
by the Company.



       General and administrative (G&A) expenses:


                                                       Six months ended
                                                           June 30,
                                                ------------------------------
                                                    2004             2003
                                                ------------     -------------

  Employee compensation, taxes & benefits       $    252,394     $      83,393
  Consulting fees                                    366,537            60,098
  Professional fees                                  151,325            13,463
  Other expenses                                      64,177            23,169
                                                ------------     -------------

  Total G&A expenses                            $    834,433     $     180,123
                                                ============     =============

Total G&A  expenses  for the first six  months of the year more than  quadrupled
from the comparable period in the prior year, largely due to substantial charges
incurred  with the hiring of a new  president in February 2004 who is developing
and  implementing  an updated  business  plan,  the primary  goal of which is to
transition  Sonex from a research and development  company into a technology and
manufacturing enterprise.

Employee  compensation  increased by $169,001  from 2003 to 2004, as charges for
the  compensation of the new president  totaled  $156,577.  This figure includes
amounts  related  to stock and stock  option  compensation,  the award of a cash
bonus for which payment is being deferred until 2006, and salary.  The Company's
new president is deferring  payment of nearly 50% of his annual salary.  Charges
in 2004 also include bonus  compensation  valued at $10,000 paid in stock to the
Company's chief financial officer.

Consulting  fees  increased  by  $306,439  from 2003 to 2004.  Charges  for 2004
include $262,500  associated with a consulting  agreement  effective in February
2004 for services to assist in the  transition  of the Company into a technology
and  manufacturing  enterprise  under the updated business plan being developed.
Such  charges  consist of $195,000  for the value of common  stock  issuable and
$67,500 for the estimated fair value of warrants to purchase common stock.

The  increase  in  professional  fees of  $137,862  from  2003 to 2004 is almost
entirely  due to a charge  in the  first  quarter  of 2004 for a  non-refundable
retainer to the Company's new securities  legal counsel  payable in stock valued
at $120,000.

The increase in other expenses of $41,008 from 2003 to 2004 is related primarily
to charges for stock-based compensation in the first quarter of 2004 for outside
directors, as well as higher travel expenditures.



ITEM 3.       CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's chief executive officer and chief financial officer have evaluated
the effectiveness of the Company's  disclosure  controls and procedures (as such
term is defined in Rules 13a-14(c) and 15d-14(c)  under the Securities  Exchange
Act of 1934) as of the end of the period  covered by this report.  Based on such
evaluation  they have concluded  that, as of the evaluation  date, the Company's
disclosure  controls and  procedures  are  effective to ensure that  information
required to be disclosed in reports that the Company  files or submits under the
Exchange  Act,  is  recorded,  processed,  summarized  and  reported in a timely
manner.



Internal Control over Financial Reporting

It is the  responsibility of the Company's  management to establish and maintain
adequate  internal control over financial  reporting.  Due to its small size and
limited financial  resources,  however, the Company's chief financial officer, a
member of  management,  has been the only employee  involved in  accounting  and
financial  reporting.  The Board of Directors has  recognized  that as a result,
there is no segregation of duties within the  accounting  function,  leaving all
aspects of financial  reporting and physical  control of cash and equivalents in
the hands of the same  employee.  Usually,  this lack of  segregation  of duties
represents a material  weakness in a company's  internal  control over financial
reporting;  however,  based on the demonstrated integrity and trustworthiness of
the Company's chief financial officer, the Board of Directors has had confidence
that there have been no irregularities in the Company's  financial  reporting or
in the  protection  of its  assets  as a  result  of this  potentially  material
weakness in the Company's internal control over financial  reporting,  and that,
under the circumstances,  internal control over financial  reporting has been as
effective as is possible.

As of April 2004,  the Board of Directors has  implemented  additional  internal
controls by  assigning  certain  responsibilities  for the  handling of incoming
receipts to the new  president of the Company.  There have been no other changes
in the Company's  internal control over financial  reporting since June 30, 2004
that have materially  affected,  or are reasonably likely to materially  affect,
the  Company's  internal  control  over  financial  reporting.  As  soon  as  is
practical,  the Board of  Directors  will  consider the  assignment  of specific
duties for various other aspects of internal control over financial reporting to
its chief  executive  officer  and its  president.  Once  sufficient  capital is
secured,  it is the  Company's  intention  to increase  staffing to mitigate the
current lack of  segregation  of duties  within the  accounting  function and to
improve internal controls.


                           PART II - OTHER INFORMATION



ITEM 2.  CHANGES IN SECURITIES

In the second  quarter of 2004,  the Company  issued an  aggregate  of 1,150,000
shares of common stock and  warrants to purchase an aggregate of 520,000  shares
of common stock,  without  registration  under the  Securities  Act of 1933 (the
"Securities Act"), as follows:


      In April  2004  under the terms of a  consulting  agreement  effective  in
      February  2004,  the Company  issued  420,000  shares of common  stock for
      services valued at $.10 per share.

      In April 2004 the Company  issued an aggregate of 210,000 shares of common
      stock for services rendered by five consultants valued at $.16 per share.

      In April 2004, the Company raised $130,000 through the issuance of 520,000
      shares of common  stock and  warrants to purchase  an  additional  520,000
      shares of common stock exercisable at $.25 per share through May 31, 2006.


The Company views these issuances as transactions by an issuer not involving any
public  offering and therefore as exempt from  registration  under Sections 4(2)
and/or 4(6) of the Securities Act. The certificates representing such shares are
endorsed  with a standard  restrictive  legend  stating that the shares have not
been registered under the Securities Act or in any state or other  jurisdiction,
and  that no  disposition  of the  shares  may be  made  unless  pursuant  to an
effective  registration  statement  or upon the  issuance  of an  opinion of the
Company's  legal  counsel that the  disposition  may be made pursuant to a valid
exemption from any registration requirements.



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a)   Exhibits.

          3    Articles of Incorporation  and Bylaws (as amended) - Incorporated
               by reference to the  Company's  Annual  Report on Form 10-KSB for
               the year ended December 31, 1992.
          4    Instruments defining the rights of security holders (contained
               in Exhibit 3 hereof).
       10.1    1987 Non-Qualified  Stock Option Plan, as amended - Incorporated
               by reference to the Company's  Registration Statement No.
               33-34520 on Form S-8.
       10.2    Employment Agreement dated February 23, 2004 with Roger D. Posey,
               president -  Incorporated  by reference to the  Company's  Annual
               Report on Form 10-KSB for the year ended December 31, 2003.
       10.3    Stock  Option  Agreement  dated  February  23, 2004 with Roger D.
               Posey,  president - Incorporated  by reference to the  Company's
               Annual  Report on Form  10-KSB  for the year ended  December  31,
               2003.
         21    Subsidiaries  of the  Registrant:  Sonex  International,  B.V. -
               The  Netherlands;  Sonex  Engines,  Inc. -
               Delaware (both are inactive subsidiaries).
         24    Power of Attorney - Incorporated  by reference to the Company's
               Annual Report on Form 10-KSB for the year ended December 31,
               2003.
       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    Certification  of Form  10-QSB  for the quarter ended June
               30,  2004  pursuant  to  Section  906 of the Sarbanes-Oxley Act
               of 2002.


(b)   Reports on Form 8-K.

During the second quarter of 2004, the Company filed the following Current
Reports on Form 8-K:

             On April 16, 2004, to provide an update to  shareholders  following
             the filing of the  Company's  Annual  Report on Form 10-KSB for the
             year ended December 31, 2003.




                                   SIGNATURES

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


                                  SONEX RESEARCH, INC.
                                     (Registrant)



August 19, 2004          By:               /s/ Andrew A. Pouring
                                --------------------------------------------
                                Andrew A. Pouring
                                Principal Executive Officer



August 19, 2004          By:               /s/ George E. Ponticas
                                ---------------------------------------------
                                George E. Ponticas
                                Principal Financial and Accounting Officer









                                                                Exhibit 31.1


                    Certification of Chief Executive Officer Pursuant to
               Securities Exchange Act Rules 13a-14(a) or 15d-14(a) as Adopted
                  Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002


I, Andrew A. Pouring, Chief Executive Officer, certify that:

1.      I have reviewed this Quarterly  Report on Form 10-QSB of Sonex Research,
        Inc. (the  "Company"),  a small  business  issuer,  for the three months
        ending June 30, 2004.
2.      Based on my knowledge, this 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 report;
3.      Based on my knowledge,  the financial  statements,  and other  financial
        information  included in this  report,  fairly  present in all  material
        respects the financial  condition,  results of operations and cash flows
        of the Company as of, and for, the periods presented in this report;
4.      The  Company'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))  and internal
        control  over  financial  reporting  (as defined in  Exchange  Act Rules
        13a-15(f) and 15d-15(f)) for the Company and have:

        a)   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
             Company, including its consolidated subsidiaries,  is made known to
             us by others within those entities,  particularly during the period
             in which this report is being prepared;
        b)   Designed such internal control over financial reporting,  or caused
             such internal control over financial reporting to be designed under
             our  supervision,  to provide  reasonable  assurance  regarding the
             reliability of financial reporting and the preparation of financial
             statements  for  external  purposes in  accordance  with  generally
             accepted financial principles;
        c)   Evaluated the  effectiveness of the Company 's disclosure  controls
             and procedures and presented in this 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
        d)   Disclosed  in this  report  any  change in the  Company's  internal
             control over financial reporting that occurred during the Company's
             most recent  fiscal  quarter that has  materially  affected,  or is
             reasonably  likely to materially  affect,  the  Company's  internal
             control over financial reporting;
5.      The Company's other  certifying  officer and I have disclosed,  based on
        our most recent evaluation of internal control over financial reporting,
        to the Company 's auditors  and the audit  committee of Company 's board
        of directors (or persons performing the equivalent functions):

        a)   All significant deficiencies in the design or operation of internal
             control over financial  reporting  which are  reasonably  likely to
             adversely  affect  the  Company  's  ability  to  record,  process,
             summarize and report financial information; and
        b)   Any fraud,  whether or not material,  that  involves  management or
             other  employees  who  have a  significant  role  in the  Company's
             internal control over financial reporting.

Dated: August 19, 2004

        /s/ Andrew A. Pouring
        ---------------------
        Andrew A. Pouring
        Chief Executive Officer


                                                                  Exhibit 31.2


              Certification of Chief Financial Officer Pursuant to
         Securities Exchange Act Rules 13a-14(a) or 15d-14(a) as Adopted
            Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002


I, George E. Ponticas, Chief Financial Officer, certify that:

1.      I have reviewed this Quarterly  Report on Form 10-QSB of Sonex Research,
        Inc. (the  "Company"),  a small  business  issuer,  for the three months
        ending June 30, 2004.
2.      Based on my knowledge, this 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 annual report;
3.      Based on my knowledge,  the financial  statements,  and other  financial
        information  included in this  report,  fairly  present in all  material
        respects the financial  condition,  results of operations and cash flows
        of the Company as of, and for, the periods presented in this report;
4.      The  Company'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))  and internal
        control  over  financial  reporting  (as defined in  Exchange  Act Rules
        13a-15(f) and 15d-15(f)) for the Company and have:

        a)   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
             Company, including its consolidated subsidiaries,  is made known to
             us by others within those entities,  particularly during the period
             in which this report is being prepared;
        b)   Designed such internal control over financial reporting,  or caused
             such internal control over financial reporting to be designed under
             our  supervision,  to provide  reasonable  assurance  regarding the
             reliability of financial reporting and the preparation of financial
             statements  for  external  purposes in  accordance  with  generally
             accepted financial principles;
        c)   Evaluated the  effectiveness of the Company 's disclosure  controls
             and procedures and presented in this 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
        d)   Disclosed  in this  report  any  change in the  Company's  internal
             control over financial reporting that occurred during the Company's
             most recent  fiscal  quarter that has  materially  affected,  or is
             reasonably  likely to materially  affect,  the  Company's  internal
             control over financial reporting;
5.      The Company's other  certifying  officer and I have disclosed,  based on
        our most recent evaluation of internal control over financial reporting,
        to the Company 's auditors  and the audit  committee of Company 's board
        of directors (or persons performing the equivalent functions):

        a)   All significant deficiencies in the design or operation of internal
             control over financial  reporting  which are  reasonably  likely to
             adversely  affect  the  Company  's  ability  to  record,  process,
             summarize and report financial information; and
        b)   Any fraud,  whether or not material,  that  involves  management or
             other  employees  who  have a  significant  role  in the  Company's
             internal control over financial reporting.

Dated: August 19, 2004

        /s/ George E. Ponticas
        -----------------------
        George E. Ponticas
        Chief Financial Officer




                                                           Exhibit 32


                                   CERTIFICATION PURSUANT TO
                        18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                         SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly  Report of Sonex  Research,  Inc. (the
"Company")  on Form 10-QSB for the quarter  ending June 30, 2004,  as filed with
the  Securities  and  Exchange  Commission  on the date hereof  (the  "Report"),
pursuant to and for the purposes of 18 U.S.C.  Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:


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

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




                                SONEX RESEARCH, INC.




         /s/ Andrew A. Pouring               /s/ George E. Ponticas
         ---------------------               ----------------------
         Andrew A. Pouring                   George E. Ponticas
         Chief Executive Officer             Chief Financial Officer



August 19, 2004