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

                                    FORM 10-Q


[X]      Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the quarterly period ended March 31, 2002

[  ]     Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from          to       .
                                                             ---------   -------

                         Commission file number 0-23862

                                Fonix Corporation
             (Exact name of registrant as specified in its charter)

                               Delaware 22-2994719
                              ---------------------
          (State of Incorporation) (I.R.S. Employer Identification No.)

                         180 W. Election Road, Suite 200
                                Draper, UT 84020
          (Address of principal executive offices, including zip code)

                                 (801) 553-6600
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X or No

         As of May 10, 2002, 475,268,639 shares of Class A voting common stock,
par value $0.0001 per share, were issued and outstanding.



<PAGE>



                                FONIX CORPORATION
                                    FORM 10-Q



                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>

                                                                                                               Page


Item 1.  Financial Statements (Unaudited)

<S>                                                                                                              <C>
         Condensed Consolidated Balance Sheets - As of March 31, 2002 and December 31, 2001                       2

         Condensed Consolidated Statements of Operations and Comprehensive Loss for the
             Three Months Ended March 31, 2002 and 2001                                                           3

         Condensed Consolidated Statements of Cash Flows for the Three Months Ended
             March 31, 2002 and 2001                                                                              4

         Notes to Condensed Consolidated Financial Statements                                                     6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations                   12


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                       17

Item 2.  Changes in Securities                                                                                   17

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                              17

Item 4.  Submission of Matters to a Vote of Security Holders                                                     18

Item 6.  Exhibits and Reports on Form 8-K                                                                        18
</TABLE>




<PAGE>
                                Fonix Corporation
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
ASSETS
                                                                                              March 31,        December 31,
                                                                                                2002               2001
                                                                                          -----------------  -----------------
Current assets:
<S>                                                                                       <C>                <C>
       Cash and cash equivalents                                                          $        648,027   $        201,401
       Common stock subscriptions receivable                                                     1,064,970            852,970
       Accounts receivable                                                                          37,330             58,170
       Inventory                                                                                    41,373             37,154
       Prepaid expenses and other current assets                                                   237,308             95,072
                                                                                          -----------------  -----------------

            Total current assets                                                                 2,029,008          1,244,767

Property and equipment, net of accumulated depreciation of $1,402,934
        and $1,314,960, respectively                                                               843,575            903,159

Convertible note receivable                                                                      1,285,000            630,000

Investment in and note receivable from affiliate, net of unamortized
        discount of $73,173                                                                      2,134,731          2,358,519

Intangible assets, net of accumulated amortization of $8,143,461 and
        $7,757,321, respectively                                                                 9,422,901          9,809,041

Other assets                                                                                       123,008            123,052
                                                                                          -----------------  -----------------

            Total assets                                                                  $     15,838,223   $     15,068,538
                                                                                          =================  =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Note payable to affiliate, net of unamortized discount of $31,054                  $        968,946   $      1,484,753
       Note payable, net of unamortized discount of $19,110                                        800,890          1,239,755
       Notes payable - related parties                                                              77,625             77,625
       Accounts payable                                                                            754,592          1,062,237
       Accrued liabilities                                                                       1,355,884            981,066
       Accrued liabilities - related parties                                                     1,443,300          1,451,633
       Deferred revenues                                                                         1,213,524          1,049,849
                                                                                          -----------------  -----------------

            Total current liabilities                                                            6,614,761          7,346,918
                                                                                          -----------------  -----------------

Commitments and contingencies (Notes 1, 3, and 5)

Stockholders' equity:
       Preferred stock, $0.0001 par value; 50,000,000 shares authorized; Series
            A, convertible; 166,667 shares outstanding
                 (aggregate liquidation preference of $6,055,012)                                  500,000            500,000
       Common stock, $0.0001 par value; 500,000,000 shares authorized;
            Class A voting, 463,280,512 and 350,195,641 shares outstanding, respectively            46,328             35,020
            Class B non-voting, none outstanding                                                         -                  -
       Additional paid-in capital                                                              179,248,199        171,985,508
       Outstanding warrants to purchase Class A common stock                                    2,736,400          2,832,400
       Deferred consulting expenses                                                                (13,888)           (17,777)
       Cumulative foreign currency translation adjustment                                            1,969              2,841
       Accumulated deficit                                                                    (173,295,546)      (167,616,372)
                                                                                          -----------------  -----------------

            Total stockholders' equity                                                           9,223,462          7,721,620
                                                                                          -----------------  -----------------

            Total liabilities and stockholders' equity                                    $     15,838,223   $     15,068,538
                                                                                          =================  =================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2

<PAGE>

                                Fonix Corporation
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                       Three Months Ended March 31,
                                                                                   -------------------------------------
                                                                                         2002               2001
                                                                                   -----------------  ------------------


<S>                                                                                <C>                <C>
Revenues                                                                           $        298,785   $         132,713
Cost of revenues                                                                             18,005               6,999
                                                                                   -----------------  ------------------

      Gross profit                                                                          280,780             125,714
                                                                                   -----------------  ------------------

Expenses:
      Selling, general and administrative                                                 3,191,381           2,144,586
      Product development and research                                                    2,124,315           1,650,945
      Amortization of intangible assets                                                     386,139             614,157
                                                                                   -----------------  ------------------

          Total expenses                                                                  5,701,835           4,409,688
                                                                                   -----------------  ------------------

Loss from operations                                                                     (5,421,055)         (4,283,974)
                                                                                   -----------------  ------------------

Other income (expense):
      Interest income                                                                        27,935              38,249
      Interest expense                                                                      (57,748)             (2,892)
                                                                                   -----------------  ------------------

          Total other income (expense), net                                                 (29,813)             35,357
                                                                                   -----------------  ------------------

Loss from operations before equity in net loss of affiliate                              (5,450,868)         (4,248,617)

Equity in net loss of affiliate                                                            (228,306)                  -
                                                                                   -----------------  ------------------

Net loss                                                                                 (5,679,174)         (4,248,617)

Other comprehensive loss - foreign currency translation                                        (872)                  -
                                                                                   -----------------  ------------------

Comprehensive loss                                                                 $     (5,680,046)  $      (4,248,617)
                                                                                   =================  ==================


Basic and diluted net loss per common share                                        $          (0.01)  $           (0.02)
                                                                                   =================  ==================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3

<PAGE>

                                Fonix Corporation
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

                Increase (Decrease) in Cash and Cash Equivalents


<TABLE>
<CAPTION>
                                                                                     Three Months Ended March 31,
                                                                                     ------------------------------
                                                                                         2002            2001
                                                                                     --------------  --------------
Cash flows from operating activities:
<S>                                                                                  <C>             <C>
      Net loss                                                                       $  (5,679,174)  $  (4,248,617)
      Adjustments to reconcile net loss to net cash
        used in operating activities:
        Non-cash compensation expense related to issuance of stock options                   3,889               -
        Accretion of discount on note receivable from affiliate                             (4,518)              -
        Accretion of discount on note payable to affiliate                                  34,193               -
        Accretion of discount on note payable                                               21,135               -
        Depreciation and amortization                                                      474,163         711,691
        Equity in net loss of affiliate                                                    228,306               -
        Changes in assets and liabilities:
           Accounts receivable                                                              20,840         131,872
           Inventory                                                                        (4,219)              -
           Prepaid expenses and other current assets                                      (142,236)        (92,365)
           Funds held in escrow                                                                  -       2,151,006
           Other assets                                                                         44         (84,025)
           Accounts payable                                                               (307,645)       (152,900)
           Accrued liabilities                                                             390,566           5,698
           Accrued liabilities - related party                                              (8,333)        (37,500)
           Deferred revenues                                                               163,675         220,745
           Cumulative foreign currency translation adjustment                                 (738)              -
                                                                                     --------------  --------------

        Net cash used in operating activities                                           (4,810,052)     (1,394,395)
                                                                                     --------------  --------------

Cash flows from investing activities:
      Issuance of notes receivable                                                        (655,000)       (200,000)
      Purchase of property and equipment                                                   (28,573)       (189,787)
                                                                                     --------------  --------------

        Net cash used in investing activities                                             (683,573)       (389,787)
                                                                                     --------------  --------------

Cash flows from financing activities:
      Proceeds from sale of Class A common stock, net                                    6,113,029       2,919,700
      Receipt of common stock subscription receivable                                      852,970               -
      Payments on note payable to affiliate                                               (550,000)              -
      Payments on note payable                                                            (460,000)              -
      Principal payments on capital lease obligation                                       (15,748)        (10,647)
                                                                                     --------------  --------------

        Net cash provided by financing activities                                        5,940,251       2,909,053
                                                                                     --------------  --------------

Net increase in cash and cash equivalents                                                  446,626       1,124,871

Cash and cash equivalents at beginning of period                                           201,401       1,413,627
                                                                                     --------------  --------------

Cash and cash equivalents at end of period                                           $     648,027   $   2,538,498
                                                                                     ==============  ==============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>

                                Fonix Corporation
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)




<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                               March 31,
                                                                                      -----------------------------
Supplemental disclosure of cash flow information:                                         2002           2001
                                                                                      -------------- --------------

<S>                                                                                   <C>            <C>
      Cash paid during the period for interest                                        $      55,725  $       1,512
</TABLE>

Supplemental Schedule of Non-cash Investing and Financing Activities:

      For the Three Months Ended March 31, 2002:

       Issued 13,394,216 shares of Class A common stock for $1,064,970 in
subscriptions receivable.


      For the Three Months Ended March 31, 2001:

       Preferred stock dividends of $9,281 were accrued on Series D and Series F
preferred stock.

       Converted 164,500 shares of Series D preferred stock and related
dividends of $320,949 into 13,978,440 shares of Class A common stock.

       Converted 6,073 shares of Series F preferred stock and related dividends
of $6,853 into 519,067 shares of Class A common stock.


     See accompanying notes to condensed consolidated financial statements.

                                       5

<PAGE>



                               FONIX CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited condensed consolidated
financial statements of Fonix Corporation and subsidiaries (collectively, the
"Company" or "Fonix") have been prepared by the Company pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the following disclosures are adequate to make the
information presented not misleading.

These condensed consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) that, in the opinion of
management, are necessary to present fairly the financial position and results
of operations of the Company for the periods presented. The Company's business
strategy is not without risk, and readers of these condensed consolidated
financial statements should carefully consider the risks set forth under the
heading "Certain Significant Risk Factors" in the Company's 2001 Annual Report
on Form 10-K.

Operating results for the three months ended March 31, 2002, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002. The Company suggests that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's 2001 Annual Report on Form 10-K.

The Company has incurred significant losses since inception. The Company
incurred negative cash flows from operating activities of $4,810,052 during the
three months ended March 31, 2002. Sales of products based on the Company's
technologies have not been sufficient to finance ongoing operations. As of
March 31, 2002, the Company had negative working capital of $4,585,753 and an
accumulated deficit of $173,295,546. The Company has limited capital
available under its equity lines of credit. These matters raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
continued existence is dependent upon several factors, including the Company's
success in (1) increasing license, royalty and services revenues, (2) raising
sufficient additional funding and (3) minimizing operating costs.

Net Loss Per Common Share - Basic and diluted net loss per common share are
calculated by dividing net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the period.
As of March 31, 2002 and 2001, there were outstanding common stock equivalents
to purchase 32,302,576 and 24,931,367 shares of common stock, respectively, that
were not included in the computation of diluted net loss per common share as
their effect would have been anti-dilutive, thereby decreasing the net loss per
common share.

The following table is a reconciliation of the net loss numerator of basic and
diluted net loss per common share for the three months ended March 31, 2002 and
2001:

<TABLE>
<CAPTION>
                                                            2002                           2001
                                                           ------                         -----
                                                                  Per Share                         Per Share
                                                      Amount          Amount          Amount          Amount
<S>                                              <C>                             <C>
Net loss                                         $  (5,679,174)                  $  (4,248,617)
Preferred stock dividends                                    -                          (9,281)
                                               --------------------                  ----------
Net loss attributable to common stockholders     $  (5,679,174)      $ (0.01)     $ (4,257,898)     $ (0.02)
                                                   ============        ======      ============       ======
Weighted average common shares outstanding         390,617,578                     201,741,921
                                                   =============                   ============
</TABLE>

                                        6

<PAGE>



Imputed Interest Expense and Income- Interest is imputed on long-term debt
obligations and notes receivable where management has determined that the
contractual interest rates are below the market rate for instruments with
similar risk characteristics (see Notes 3 and 5).

Comprehensive Loss - Other comprehensive loss presented in the accompanying
condensed consolidated financial statements consists of cumulative foreign
currency translation adjustments. The Company had no items of comprehensive loss
prior to April 1, 2001.

Recently Enacted Accounting Standards - In July 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 eliminates the "pooling-of-interests" method of
accounting for acquisitions and requires separate accounting for certain
intangibles acquired in such transactions. The application of this standard did
not have an impact on the Company's financial position and results of
operations.

SFAS No. 142 changes the accounting for goodwill and intangible assets with
indefinite lives from an amortization method to an impairment-only approach.
Accordingly, effective January 1, 2002, amortization of goodwill and intangible
assets with indefinite lives was discontinued. Other intangible assets will
continue to be amortized over their useful lives.

Effective January 1, 2002, the Company adopted the requirements of SFAS No. 142.
However,  the Company has not yet assessed its  goodwill and  intangible  assets
with  indefinite  lives for  impairment.  The effect of the application of these
requirements has not been determined; however, the amount of impairment could be
material to the  Company's  financial  position and results of  operations.  The
Company  intends  to  complete  this  assessment  by June 30,  2002.  Impairment
adjustments, if any, will be reflected in the first quarter financial statements
as required by SFAS No. 142.  Any transitional  impairment loss will be
recognized as a cumulative effect of a change in accounting principle.

In August 2001, the FASB issued SFAS No. 143 , "Accounting for Asset Retirement
Obligations." This statement establishes financial accounting and reporting
standards for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The adoption of this statement
on January 1, 2002, did not have a material effect on the Company's financial
position or results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement establishes financial accounting
and reporting standards for the impairment or disposal of long-lived assets. The
adoption of this statement on January 1, 2002, did not have a material effect on
the Company's financial position or results of operations.

Reclassifications - Certain reclassifications have been made in the prior period
condensed consolidated financial statements to conform with the current period
presentation.

2. CONVERTIBLE NOTES RECEIVABLE

On December 1, 2001, the Company, as the lender, established and later amended a
revolving line of credit and convertible promissory note with an unrelated
entity (the "Borrower") that permits the Borrower to draw up to $2,000,000 for
operations and other purposes, including the amounts loaned under the initial
convertible promissory notes. The Borrower is a provider of
natural-language-understanding solutions for customer resource management (CRM)
applications. Fonix speech-enabling technology is a component of the Borrower's
solutions. Draws on the line of credit bear interest at an annual rate of seven
percent, which interest is payable quarterly beginning June 30, 2002, and are
secured by intellectual property and other assets of the Borrower. The unpaid
principal, together with interest accrued thereon, is due and payable on
December 31, 2002, and is convertible into common shares of the Borrower at the
Company's option. Based upon borrowings through March 31, 2002, such conversion
at that date would have represented approximately 10 percent of the ownership of
the Borrower.

                                       7

<PAGE>


During the three months ended March 31, 2002, the Borrower drew $655,000 on the
line of credit, bringing total draws on the line of credit to $1,285,000 as of
March 31, 2002. Subsequent to March 31, 2002, the Borrower drew an additional
$110,000.

3. INVESTMENT IN AFFILIATE

In February 2001, the Company entered into a collaboration agreement with Audium
Corporation ("Audium") to provide an integrated platform for generating Voice
XML solutions for Internet and telephony systems. Audium is a mobile application
service provider that builds and operates mobile applications that allow access
to Internet information and to complete online transactions using any telephone.
The collaboration includes integration of the Company's technologies with
Audium's mobile applications development capability.

Note Receivable - In connection with the collaboration agreement with Audium, in
February and May 2001 the Company advanced an aggregate of $400,000 to Audium as
a bridge loan (the "Audium Note"). The loan bears interest at a rate of five
percent per year and has a term of four years. The Audium Note is convertible
into shares of Audium Series A Convertible Preferred Stock ("Audium Preferred
Stock") and is secured by Audium's intellectual property.

Management determined that a 12 percent annual interest rate better reflects the
risk characteristics of the Audium Note. Accordingly, interest was imputed at 12
percent and the Audium Note was recorded at its original present value of
$302,909. For the three months ended March 31, 2002, the Company recorded
interest income of $9,519, including contractual and imputed interest. As of
March 31, 2002, the balance of the Audium Note was $326,827, net of the
unaccreted discount of $73,173.

Investment in Affiliate - On April 11, 2001, the Company entered into a stock
purchase agreement with Audium, wherein the Company agreed to purchase up to
$2,800,000 of Audium Preferred Stock at a price of $1.46 per share. At closing,
the Company paid $200,000 in cash and gave Audium a non-interest bearing note
(the "Fonix Note") for the remaining $2,600,000. Each share of Audium Preferred
Stock is convertible into one share of Audium's common stock.

At closing, Audium issued 14 share certificates to Fonix, each certificate for
136,986 shares of Audium Preferred Stock, and delivered one certificate in
exchange for the initial payment of $200,000. The remaining certificates are
held by Audium as collateral for the Fonix Note under the terms of a security
agreement. For each monthly payment of $200,000 or multiple payments that
aggregate $200,000, Audium will release to Fonix one certificate for 136,986
shares of Audium Preferred Stock.

At March 31, 2002, the Company's investment in Audium represented 26.7 percent
of Audium's voting stock. As a result, the Company accounts for its investment
in Audium using the equity method of accounting. Accordingly, for the three
months ended March 31, 2002, the Company recognized a loss of $228,306
consisting of $136,732 to reflect the Company's share of Audium's net loss for
the three months ended March 31, 2002, and $91,574 for the amortization of the
difference between the purchase price of the Audium Preferred Stock and the
Company's portion of Audium's net stockholders' deficit that is amortized on a
straight-line basis over a period of eight years.

Note Payable to Affiliate - The Fonix Note was originally payable in 13 monthly
installments of $200,000 beginning on June 1, 2001, and bears no interest unless
an event of default occurs, in which case it will bear interest at 12 percent
per year. No events of default have occurred to date.

Through September 30, 2001, three payments of $200,000 were made on the Fonix
Note. Effective October 1, 2001, the terms of the Fonix Note were modified to
reduce the monthly payments to the following amounts: $75,000 for September
2001, $100,000 for October 2001, $125,000 for November 2001 and $150,000 for
December 2001 and January 2002. Thereafter, monthly payments of $200,000 are
scheduled through August 2002. No other terms of the original Fonix Note were
affected by the modification. Through March 31, 2002, payments amounting to
$1,600,000 were made as required by the modified terms. The payment due April
10, 2002 had not been made as of May 8, 2002.


                                       8

<PAGE>

Management determined that a 12 percent annual interest rate reflects the risk
characteristics of the Fonix Note. Accordingly, interest has been imputed at 12
percent and the Company recorded a present value of $2,370,348 for the note
payable. For the three months ended March 31, 2002, the Company recorded
interest expense of $34,193 related to this note.

4. INTANGIBLE ASSETS

Intangible assets consist of purchased core technology, customer relationships,
trademarks, patents and goodwill arising from the purchase of assets from Force
Computers, Inc. and the acquisition of AcuVoice, Inc. Also included are direct
costs incurred by the Company in applying for patents covering its technologies.
Amortization is computed on a straight-line basis over the estimated useful
lives ranging from five to ten years. Total accumulated amortization was
$8,143,460 and $7,757,321 at March 31, 2002, and December 31, 2001,
respectively.

The carrying values of the Company's long-lived assets is reviewed for
impairment whenever events or changes in circumstances indicate that they may
not be recoverable. If such an event were to occur, the Company would project
undiscounted cash flows to be generated from the use of the asset and its
eventual disposition over the remaining life of the asset. If projections were
to indicate that the carrying value of the long-lived asset would not be
recoverable, the carrying value would be reduced by the estimated excess of the
carrying value over the projected discounted cash flows. As of March 31, 2002,
management of the Company did not consider any of the Company's long-lived
assets to be impaired. However, should the Company's marketing and sales plans
not materialize in the near term, the realization of the Company's intangible
assets could be severely and negatively impacted. The accompanying condensed
consolidated financial statements have been prepared based on management's
estimates of realizability, which estimates may change due to factors beyond the
control of the Company.  (See "Recently Enacted Acocunting Standrds" in Note 1)

5.  PROMISSORY NOTE

On December 14, 2001, the Company entered into an Asset Purchase Agreement with
Force Computers, Inc. ("Force"). As part of the purchase price Fonix issued a
non-interest bearing promissory note in the amount of $1,280,000 (the "Force
Note"). Installment payments are made on the Force Note over a 12 month period
following the date of purchase. Management determined that a seven percent
annual interest rate reflects the risk characteristics of the Force Note.
Accordingly, interest has been imputed at seven percent and the Company recorded
a discount of $40,245. For the three months ended March 31, 2002, the Company
recorded interest expense of $19,684 related to the Force Note.

As collateral for the Force Note, 7,000,000 shares of the Company's Class A
common stock were placed into escrow. To date, required payments have been made
when due. As of March 31, 2002, payments amounting to $820,000 remain
outstanding under the Force Note.

6. EQUITY LINES OF CREDIT

Equity Line of Credit - On August 8, 2000, the Company entered into a Private
Equity Line Agreement ("Equity Line") with a private investor ("Equity Line
Investor"), which gives the Company the right to draw up to $20,000,000 for
Company operations and other purposes through a mechanism of draws and puts of
stock. The Company is entitled to draw funds and to "put" to the Equity Line
Investor shares of Class A common stock in lieu of repayment of the draw. The
number of shares issued is determined by dividing the dollar amount of the draw
by 90 percent of the average of the two lowest closing bid prices of Class A
common stock over the seven trading-day period following the date the Company
tenders the put notice. The Equity Line Investor funds the amounts requested by
the Company within two trading days after the seven trading-day period.

During the three months ended March 31, 2002, draws amounting to $2,756,836 were
converted into 26,187,136 shares of Class A common stock, including amounts
recorded as subscriptions receivable (see below). Through March 31, 2002, draws
taken under the Equity Line amounted to $19,740,343 and were converted to
79,577,732 shares of Class A common stock. Subsequent to March 31, 2002, an

                                       9

<PAGE>

additional draw amounting to $259,657 was converted into 2,298,867 shares of
Class A common stock. On May 8, 2002, the Company and the Equity Line Investor
amended the Equity Line to increase the balance available under the Equity Line
from $20,000,000 to $22,000,000. Accordingly, as of May 8, 2002, $2,000,000 was
available to be drawn under the Equity Line.

Second Equity Line of Credit - On April 6, 2001, the Company entered into a
second equity line agreement (the "Second Equity Line") with the Equity Line
Investor. Under the Second Equity Line, the Company has the right to draw up to
$20,000,000 under terms substantially identical to the initial Equity Line.

During the three months ended March 31, 2002, draws amounting to $4,643,164 were
converted into 83,897,735 shares of Class A common stock. Through March 31,
2002, draws under the Second Equity Line amounted to $18,068,164 and were
converted to 201,910,740 shares of Class A common stock. Subsequent to March 31,
2002, an additional draw amounting to $1,085,682 was converted into 9,689,260
shares of Class A common stock. As of May 10, 2002, $846,154 remains unutilized
under the Second Equity Line; however, no registered shares remain available to
facilitate a draw of this amount. Therefore, this amount is unavailable to the
Company at this time.

Subscriptions Receivable - Proceeds from draws on the equity lines prior to
March 31, 2002 and December 31, 2001 had not been received by the Company as of
those dates. The cash proceeds in the amount of $1,064,970 and $852,970 were
subsequently received in April 2002 and January 2002, respectively.

7.  COMMON STOCK, STOCK OPTIONS AND WARRANTS

Class A Common Stock - During the three months ended March 31, 2002, 113,084,871
shares of Class A common stock were issued in connection with draws on the
equity lines (see Note 6). No shares of Class A common stock were issued as a
result of the exercise of stock options or warrants during the same period.

Stock Options - During the three months ended March 31, 2002, the Company
granted options to employees to purchase 5,092,000 shares of Class A common
stock and granted options to directors to purchase 1,000,000 shares of Class A
common stock. The options have exercise prices ranging from $0.05 to $0.11 per
share, which were the quoted fair market value of the stock on the dates of
grant. Of the options granted during this three-month period, 5,092,000 vest
over the three years following issuance and 1,000,000 vested immediately.
Options expire within ten years from the date of grant if not exercised. Using
the Black-Scholes pricing model, the weighted average fair value of the employee
and director options were $0.08 and $0.04 per share, respectively. As of March
31, 2002, the Company had a total of 29,460,909 options to purchase Class A
common shares outstanding.

The Company's option plans provide for stock appreciation rights that allow the
grantee to receive shares of the Company's Class A common stock equivalent in
value to the difference between the designated exercise price and the fair
market value of the Company's stock at the date of exercise. As of March 31,
2002, there are options to purchase 33,334 shares of Class A common stock
outstanding which provide for stock appreciation rights. These options have an
exercise price of $1.00 per share. If not exercised by September 2002, the
options with these rights will expire.

Warrants - As of May 10,  2002,  the Company had warrants to purchase a total of
2,675,000  shares of Class A common stock  outstanding  that expire  beginning i
2002 through 2010.



                                       10

<PAGE>



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

This quarterly report on Form 10-Q contains, in addition to historical
information, forward-looking statements that involve substantial risks and
uncertainties. Actual results could differ materially from the results the
Company anticipates and which are discussed in the forward-looking statements.
Factors that could cause or contribute to such differences are discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Overview

Since  inception,  Fonix  has  devoted  substantially  all of its  resources  to
research,  development  and  acquisition  of software  technologies  that enable
intuitive human  interaction  with computers,  consumer  electronics,  and other
intelligent   devices.   Through  March  31,  2002,  the  Company  has  incurred
significant  cumulative  losses,  and losses are expected to continue  until the
effects of recent marketing and sales efforts begin to take effect, if ever. The
Company  continues  to  emphasize  product  delivery  and sales while  achieving
technology upgrades to maintain its perceived competitive advantages.

In its current marketing efforts, the Company seeks to form relationships with
third parties who can incorporate speech-enabling technologies into new or
existing products. Such relationships may be structured in any of a variety of
ways including traditional technology licenses, collaboration or joint marketing
agreements, co-development relationships through joint ventures or otherwise,
and strategic alliances. The third parties with whom Fonix presently has such
relationships and with which it may have similar relationships in the future
include developers of application software, operating systems, computers,
microprocessor chips, consumer electronics, automobiles, telephony and other
products.

Significant Accounting Policies

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of sales and expenses during the reporting period. A complete discussion of
significant accounting policies and areas where substantial judgements are made
is included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.

Recently Enacted Accounting Standards - In July 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 eliminates the "pooling-of-interests" method of
accounting for acquisitions and requires separate accounting for certain
intangibles acquired in such transactions. The application of this standard did
not have an impact on the Company's financial position and results of
operations.

SFAS No. 142 changes the accounting for goodwill and intangible assets with
indefinite lives from an amortization method to an impairment-only approach.
Accordingly, effective January 1, 2002, amortization of goodwill and intangible
assets with indefinite lives was discontinued. Other intangible assets will
continue to be amortized over their useful lives.

Effective January 1, 2002, the Company adopted the requirements of SFAS No. 142.
However, the Company has not yet assessed its goodwill and intangible assets
with indefinite lives for impairment. The effect of the application of these
requirements has not been determined; however, the amount of impairment could be
material to the Company's financial position and results of operations. The
Company intends to complete this assessment by June 30, 2002. Impairment
adjustments, if any, will be reflected in the first quarter financial statements
as required by SFAS No. 142. Any transitional impairment loss will be recognized
as a cumulative effect of a change in accounting principle.


                                       11

<PAGE>



In August 2001, the FASB issued SFAS No. 143 , "Accounting for Asset Retirement
Obligations." This statement establishes financial accounting and reporting
standards for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The adoption of this statement
on January 1, 2002, did not have a material effect on the Company's financial
position or results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement establishes financial accounting
and reporting standards for the impairment or disposal of long-lived assets. The
adoption of this statement on January 1, 2002, did not have a material effect on
the Company's financial position or results of operations.

Results of Operations

Three months ended March 31, 2002, compared with three months ended March 31,
2001

During the three months ended March 31, 2002, the Company recorded revenues of
$298,785, reflecting an increase of $166,072 over the same period in the
previous year. Much of the increase is attributable to $165,389 in revenues
generated from new business resulting from the acquisition of assets from Force
Computers, Inc.

Selling, general and administrative expenses were $3,191,381 and $2,144,586 for
the three months ended March 31, 2002 and 2001, respectively. The increase of
$1,046,795 includes $304,892 in compensation-related expenses and $549,558 in
promotion and other operating expenses related to increased sales and marketing
activities, especially in the area of retail distribution and corporate
promotional activities. Consulting expenses increased by $133,755, also related
to increased sales and marketing efforts. Other increases of $24,340 in legal
and other professional fees, and $39,925 in occupancy expenses further reflect
growth and expansion in sales and marketing activities.

Product development and research expenses were $2,124,315 and $1,650,945 for the
three months ended March 31, 2002 and 2001, respectively. The increase of
$473,370 resulted primarily from increased compensation-related expenses of
$347,779 and consulting and outside service-related expenses of $178,005 related
to product application and development activities.

Amortization of intangible assets was $386,139 and $614,157, for the three
months ended March 31, 2002 and 2001, respectively. The decrease of $228,018 is
a result of the write down of certain intangible assets in 2001 and the change
in accounting for amortization of goodwill dictated by SFAS No. 142. Based on
the current intangible assets, the Company expects amortization expense to be
approximately $1,158,000 for the remainder of 2002 and $1,158,386 per year
thereafter.

Liquidity and Capital Resources

The Company must raise additional funds to be able to satisfy its cash
requirements during the next 12 months. Research and development, corporate
operations and marketing expenses will continue to require additional capital.
Because the Company presently has only limited revenue from operations, the
Company intends to continue to rely primarily on financing through the sale of
its equity and debt securities to satisfy future capital requirements until such
time as the Company is able to enter into additional third-party licensing,
collaboration or co-marketing arrangements such that it will be able to finance
ongoing operations from license, royalty and services revenues. There can be no
assurance that the Company will be able to enter into such agreements.
Furthermore, the issuance of equity or debt securities which are or may become
convertible into equity securities of the Company in connection with such
financing could result in substantial additional dilution to the stockholders of
the Company. The Company currently has $2,000,000 available to draw under its
equity lines of credit.

Net cash used in operating activities of $4,810,052 for the three months ended
March 31, 2002, resulted principally from the net loss incurred of $5,679,174
offset by non-cash expenses pertaining to depreciation and amortization of
$474,163 and equity in net loss of affiliate of $228,306. Net cash used in
investing activities of $683,573 for the three months ended March 31, 2002
consisted primarily of advances under a convertible note payable of $655,000.
Net cash used in operating and investing activities was offset by net cash
provided by financing activities of $5,940,251 consisting primarily of the
receipt of $6,965,999 in cash related to the sale of shares of Class A common

                                       12

<PAGE>



stock offset, in part, by $1,010,000 in payments on notes payable.

The Company had negative working capital of $4,585,753 at March 31, 2002,
compared to negative working capital of $6,102,151 at December 31, 2001. Current
assets increased by $784,241 to $2,029,008 from December 31, 2001, to March 31,
2002. Current liabilities decreased by $732,157 to $6,614,761 during the same
period. The change in working capital from December 31, 2001 to March 31, 2002,
was primarily attributable to the timing of payments on operating obligations
and receipts of funding under the Company's equity line of credit. Total assets
were $15,838,223 at March 31, 2002, compared to $15,068,538 at December 31,
2001.

Convertible Note Receivable and Line of Credit

On December 1, 2001, the Company, as the lender, established and later amended a
revolving line of credit and convertible promissory note with an unrelated
entity (the "Borrower") that permits the Borrower to draw up to $2,000,000 for
operations and other purposes, including the amounts loaned under the initial
convertible promissory notes. The Borrower is a provider of
natural-language-understanding solutions for CRM applications. Fonix
speech-enabling technology is a component of the Borrower's solutions. Draws on
the line of credit bear interest at an annual rate of 7 percent, which interest
is payable quarterly beginning June 30, 2002, and are secured by intellectual
property and other assets of the Borrower. The unpaid principal, together with
interest accrued thereon, is due and payable on December 31, 2002, and is
convertible into common shares of the Borrower at the Company's option. Based
upon borrowings through March 31, 2002, such conversion at that date would have
represented approximately 10 percent of the ownership of the Borrower.

During the three months ended March 31, 2002, the Borrower drew $655,000 on the
line of credit, bringing total draws on the line of credit to $1,285,000 as of
March 31, 2002. Subsequent to March 31, 2002, the Borrower drew an additional
$110,000.

Investment in Affiliate

In February 2001, the Company entered into a collaboration agreement with Audium
Corporation ("Audium") to provide an integrated platform for generating Voice
XML solutions for Internet and telephony systems. Audium is a mobile application
service provider that builds and operates mobile applications that allow access
to Internet information and to complete online transactions using any telephone.
The collaboration includes integration of the Company's technologies with
Audium's mobile applications development capability.

Note Receivable - In connection with the collaboration agreement with Audium, in
February and May 2001,  the Company  advanced an aggregate of $400,000 to Audium
as a bridge loan (the  "Audium  Note").  The loan bears  interest at a rate of 5
percent  per year,  has a term of four years and is  convertible  into shares of
Audium Series A Convertible  Preferred Stock ("Audium  Preferred  Stock") and is
secured by Audium's intellectual property.

Management determined that a 12 percent annual interest rate better reflects the
risk characteristics of the Audium Note. Accordingly, interest was imputed at 12
percent and the Audium Note was recorded at its original present value of
$302,909. For the three months ended March 31, 2002, the Company recorded
interest income of $9,519, including contractual and imputed interest. As of
March 31, 2002, the balance of the Audium Note was $326,827, net of the
unaccreted discount of $73,173.

Investment in Affiliate - On April 11, 2001, the Company entered into a stock
purchase agreement with Audium, wherein the Company agreed to purchase up to
$2,800,000 of Audium Preferred Stock at a price of $1.46 per share. At closing,
the Company paid $200,000 in cash and gave Audium a non-interest bearing note
(the "Fonix Note") for the remaining $2,600,000. Each share of Audium Preferred
Stock is convertible into one share of Audium's common stock.

At closing, Audium issued 14 share certificates to Fonix, each certificate for
136,986 shares of Audium Preferred Stock, and delivered one certificate in
exchange for the initial payment of $200,000. The remaining certificates are
held by Audium as collateral for the Fonix Note under the terms of a security
agreement. For each monthly payment of $200,000 or multiple payments that
aggregate $200,000, Audium will release to Fonix one certificate for 136,986

                                       13

<PAGE>

shares of Audium Preferred Stock.

At March 31, 2002, the Company's investment in Audium represented 26.7 percent
of Audium's voting stock. As a result, the Company accounts for its investment
in Audium using the equity method of accounting. Accordingly, for the three
months ended March 31, 2002, the Company recognized a loss of $228,306
consisting of $136,732 to reflect the Company's share of Audium's net loss for
the three months ended March 31, 2002 and $91,574 for the amortization of the
difference between the purchase price of the Audium Preferred Stock and the
Company's portion of Audium's net stockholders' deficit that is amortized on a
straight-line basis over a period of eight years.

Note Payable to Affiliate - The Fonix Note is payable in 13 monthly installments
of $200,000 beginning on June 1, 2001, and bears no interest unless an event of
default occurs, in which case it will bear interest at 12 percent per year. No
events of default have occurred to date.

Through September 30, 2001, three payments of $200,000 were made on the Fonix
Note. Effective October 1, 2001, the terms of the Fonix Note were modified to
reduce the monthly payments to the following amounts: $75,000 for September
2001, $100,000 for October 2001, $125,000 for November 2001 and $150,000 for
December 2001 and January 2002. Thereafter, monthly payments of $200,000 are
scheduled through August 2002. No other terms of the original Fonix Note were
affected by the modification. Through March 31, 2002, payments amounting to
$550,000 were made as required by the modified terms.

Management determined that a 12 percent annual interest rate reflects the risk
characteristics of the Fonix Note. Accordingly, interest has been imputed at 12
percent and the Company recorded a present value of $2,370,348 for the note
payable. For the three months ended March 31, 2002, the Company recorded
interest expense of $34,193 related to this note.

Promissory Note

On December 14, 2001, the Company entered into an Asset Purchase Agreement with
Force Computers, Inc. ("Force"). As part of the purchase price, Fonix issued a
non-interest bearing promissory note in the amount of $1,280,000 (the "Force
Note"). Installment payments are due over the twelve-month period following the
date of purchase. Management determined that a seven percent annual interest
rate reflects the risk characteristics of the Force Note. Accordingly, interest
has been imputed at seven percent and the Company recorded a discount of
$40,245. For the three months ended March 31, 2002, the Company recorded
interest expense of $19,684 related to the Force Note.

As collateral  for the Force Note,  7,000,000  shares of the  Company's  Class A
common stock were placed  intoescrow.  To date, the required  payments have been
made when due. As of March 31, 2002,  payments in the amount of $820,000  remain
outstanding under the Force Note.

Equity Lines of Credit

During the three months ended March 31, 2002, draws against the initial equity
line of credit (see Note 6 of the Condensed Consolidated Financial Statements)
in the amount of $2,756,836 were converted into 29,187,136 shares of Class A
common stock. Subsequent to March 31, 2002, an additional draw of $259,657 was
converted into 2,298,867 shares of Class A common stock. On May 8, 2002, the
Company and the Equity Line Investor amended the equity line agreement to
increase the balance available under the Equity Line from $20,000,000 to
$22,000,000. Accordingly, as of May 8, 2002, $2,000,000 was available to be
drawn under the equity line.

During the three months ended March 31, 2002, draws against the second equity
line of credit (see Note 6 of the Condensed Consolidated Financial Statements)
in the amount of $4,643,164 were converted into 83,897,735 shares of Class A
common stock. Subsequent to March 31, 2002, an additional draw of $1,085,682 was
converted into 9,689,260 shares of Class A common stock. As of May 10, 2002,
$846,154 remains unutilized under the second equity line. However, no registered
shares remain to be put to the Equity Line Investor to facilitate a draw of this
amount. Therefore, this amount is not available to the Company at this time.

                                       14

<PAGE>


Stock Options and Warrants

During the three months ended March 31, 2002, the Company granted options to
employees to purchase 5,092,000 shares of Class A common stock and granted
options to directors to purchase 1,000,000 shares of Class A common stock. The
options have exercise prices ranging from $0.05 to $0.11 per share, which were
the quoted fair market value of the stock on the dates of grant. Of the options
granted during this three-month period, 5,092,000 vest over the three years
following issuance and 1,000,000 vested immediately. Options expire within ten
years from the date of grant if not exercised. Using the Black-Scholes pricing
model, the weighted average fair value of the employee and director options were
$0.08 and $0.04 per share, respectively. As of March 31, 2002, the Company had a
total of 29,460,909 options to purchase Class A common shares outstanding.

The Company's option plans provide for stock appreciation rights that allow the
grantee to receive shares of the Company's Class A common stock equivalent in
value to the difference between the designated exercise price and the fair
market value of the Company's stock at the date of exercise. As of March 31,
2002, there are options to purchase 33,334 shares of Class A common stock
outstanding which provide for stock appreciation rights. These options have an
exercise price of $1.00 per share. If not exercised by September 2002, the
options with these rights will expire.

As of May 10, 2002, the Company had warrants to purchase a total of 2,675,000
shares of Class A common stock outstanding that expire beginning in 2002 through
2010.

Other

The Company presently has no plans to purchase new research and development or
office facilities.



                                       15

<PAGE>



                                     Outlook

Corporate Objectives and Technology Vision

The Company delivers speech solutions that empower people to interact
conversationally with information systems and computing devices using natural
language. The Company's speech-enabling technologies, which include text-to-
speech ("TTS"), and neural network-based automated speech recognition ("ASR"),
are integrated into products for commercial, industrial and consumer
applications. ASR and TTS technologies are sometimes collectively referred to in
this report as "Core Technologies".

The Company's objective is that its Core Technologies become the platform for
the next generation of speech- enabling applications and products. Most speech
recognition products offered by other companies are based on technologies that
are largely in the public domain and represent nothing particularly "new" or
creative. The Fonix Core Technologies are based on proprietary technology that
is protected by various patents and trade secrets. Management believes the
Company's speech-enabling technologies provide a superior competitive advantage
compared to other technologies available in the marketplace. In order to
accomplish this objective, the Company intends to proceed as follows:

         Substantially Increase Marketing and Sales Activities. The Company
         intends to hire additional sales and marketing personnel, both
         domestically and internationally, who will focus on the automotive
         embedded and wireless mobile markets, computer telephony and server
         solution markets and personal software for consumer applications. To
         address global opportunities, the Company will continue to develop or
         acquire additional speech-enabling products and technologies for
         foreign languages and dialects. Fonix will also make a significant
         investment in the "Powered by Fonix" Partner Program in order to build
         sales and marketing opportunities with software developers, resellers
         and corporate partners.

         Expand Strategic Relationships. The Company has a number of strategic
         collaboration and marketing arrangements with developers and VARs. The
         Company intends to expand such relationships and add additional similar
         relationships, specifically in the mobile communications, PDA, IVR and
         Internet portal markets. As s.Manager becomes increasingly recognized
         as a dynamic development platform, Fonix expects s.Manager to be the
         product around which many of these relationships are structured.
         Further, when the Company is able to identify "first mover"
         speech-enabling applications in which it can integrate its Core
         Technologies, the Company intends to investigate investment
         opportunities in order that the Company can obtain preferred or
         priority collaboration rights.

         Continue to Develop and Enhance the Core Technologies. The Company
         plans to continue to invest significant resources in the development
         and acquisition of speech-enabling technologies, developer tools and
         development frameworks to maintain the competitive advantages found in
         its Core Technologies.

As the Company proceeds to implement its strategy and to reach its objectives,
it anticipates further development of complementary technologies, added product
and applications development expertise, access to market channels and additional
opportunities for strategic alliances in other industry segments. The strategy
adopted by the Company has significant risk and shareholders and others
interested in the Company and its Class A common stock should carefully consider
the risks set forth under the heading "Certain Significant Risk Factors" in the
Company's 2001 Annual Report on Form 10-K, Item 1, Part I.



                                       16

<PAGE>



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         In November 1998, Fonix filed a suit against John R. Clarke and
Perpetual Growth Fund, a company affiliated with Clarke, in Federal District
Court for the Central District of Utah seeking a declaratory judgment that it
did not owe any money to Clarke and Perpetual Growth relating to certain
financing received by the Company during 1998 and thereafter. The case was tried
in March 2001, after which the court ruled in favor of Fonix and determined that
Clarke and Perpetual Growth had no claims for "trailing fees" with regard to the
financings which were the subject of the suit. Clarke and Perpetual Growth have
appealed the decision of the Utah federal district court to the United States
Court of Appeals for the Tenth Circuit, but the appellate court has not yet
rendered a decision. The Company believes that the claims of Clarke and
Perpetual Growth are without merit and will continue to vigorously oppose those
claims.

         The Company is involved in other claims and actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these matters will not
materially affect the consolidated financial position, liquidity or results of
operations of the Company.

Item 2.  Changes in Securities

c.       Unregistered sales of equity securities during the quarter (other than
         in reliance on Regulation S).

Recent Sales of Unregistered Securities. During the three months ended March 31,
2002, the Company issued equity securities that were not registered under the
Securities Act of 1933, as amended (the "1933 Act"), other than unregistered
sales in reliance on Regulation S under the Act, as follows:

         For the three months ended March 31, 2002, the Company received
         $2,756,836 in funds drawn under the Equity Line (see Note 6 of the
         Condensed Consolidated Financial Statements), less commissions and fees
         of $82,705, and issued 29,187,136 shares of Class A common stock to the
         Equity Line investor. Subsequent to March 31, 2002, the Company
         received $259,657 in funds drawn under the Equity Line, less
         commissions and fees of $7,790, and issued 2,298,867 shares of Class A
         common stock to the Equity Line investor. The shares were issued
         without registration under the 1933 Act in reliance on Section 4(2) of
         the Securities Act of 1933, as amended (the "1933 Act"), and the rules
         and regulations promulgated thereunder. The resales of the shares were
         subsequently registered under registration statements on Form S-2.

         For the three months ended March 31, 2002, the Company received
         $4,643,164 in funds drawn under the Second Equity Line (see Note 6 of
         the Condensed Consolidated Financial Statements), less commissions and
         fees of $139,295, and issued 83,897,735 shares of Class A common stock
         to the Equity Line investor. Subsequent to March 31, 2002, the Company
         received $1,085,682 in funds drawn under the Second Equity Line, less
         commissions and fees of $32,570, and issued 9,689,260 shares of Class A
         common stock to the Equity Line investor. The shares were issued
         without registration under the 1933 Act in reliance on Section 4(2) of
         the 1933 Act and the rules and regulations promulgated thereunder. The
         resales of the shares were subsequently registered under registration
         statements on Form S-2.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

To date, all of the Company's revenues have been denominated in United States
dollars and received primarily from customers in the United States. The
Company's exposure to foreign currency exchange rate changes has been
insignificant. The Company expects, however, that future product license and
services revenue may also be derived from international markets and may be
denominated in the currency of the applicable market. As a result, operating
results may become subject to significant fluctuations based upon changes in the
exchange rate of certain currencies in relation to the U.S. dollar. Furthermore,
to the extent that the Company engages in international sales denominated in
U.S. dollars, an increase in the value of the U.S. dollar relative to foreign
currencies could make the Company's products less competitive in international
markets. Although the Company will continue to monitor its exposure to currency
fluctuations, it cannot assure that exchange rate fluctuations will not
adversely affect financial

                                       17

<PAGE>



results in the future.

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

No matters were submitted to a vote of security holders during the three months
ended March 31, 2002.

Item 6.  Exhibits and Reports on Form 8-K

a.       Exhibits: The following Exhibits are filed with this Form 10-Q pursuant
         to Item 601(a) of Regulation S-K:

         Exhibit No.       Description of Exhibit

         (2)(i)            Agreement and Plan of Reorganization among the
                           Company, Fonix Acquisition Corporation and AcuVoice
                           dated as of January 13,  1998,  incorporated  by
                           reference  from the Company's Current Report on Form
                           8-K, filed March 20, 1998

         (2)(ii)           Agreement and Plan of Merger among Fonix, Articulate
                           Acquisition Corporation, and Articulate, dated as of
                           July 31, 1998, incorporated by reference from the
                           Company's Current Report on Form 8-K, filed September
                           17, 1998

         (2)(iii)          Agreement and Plan of Merger among Fonix, Papyrus
                           Acquisition Corporation, and Papyrus Associates,
                           Inc., dated as of September 10, 1998, incorporated by
                           reference from the Company's Current Report on Form
                           8-K, filed November 13, 1998

         (3)(i)            Articles of Incorporation of the Company which are
                           incorporated by reference from the Company's
                           Registration Statement on Form S-18 dated as of
                           September 12, 1989

         (3)(ii)           Certificate of Amendment of Certificate of
                           Incorporation dated as of March 21, 1994, which is
                           incorporated by reference from the Company's Annual
                           Report for the Fiscal Year Ended December 31, 1994 on
                           Form 10-KSB

         (3)(iii)          Certificate of Amendment of Certificate of
                           Incorporation dated as of May 13, 1994, which is
                           incorporated by reference from the Company's Annual
                           Report for the Fiscal Year Ended December 31, 1994
                           on Form 10-KSB

         (3)(iv)           Certificate of Amendment of Certificate of
                           Incorporation dated as of September 24, 1997,
                           which is incorporated by reference from the Company's
                           Quarterly Report on Form 10-Q for the period ended
                           September 30, 1997

         (3)(v)            The Company's Bylaws, as amended, which are
                           incorporated by reference from the Company's Annual
                           Report for the Fiscal Year Ended December 31, 1994 on
                           Form 10-KSB

         (4)(i)            Description of the Company's common stock and other
                           securities and specimen certificates representing
                           such securities which are incorporated by reference
                           from the Company's Registration Statement on Form
                           S-18 dated as of September 12, 1989, as amended

         (4)(ii)           Certificate of Designation of Rights and Preferences
                           of Series A Preferred Stock, filed with the Secretary
                           of State of Delaware on September 24, 1997, which is
                           incorporated by reference from the Company's
                           Quarterly Report on Form 10-Q for the period ended
                           September 30, 1997

         (4)(iii)          Certificate of Designation of Rights and Preferences
                           of Series B Convertible Preferred Stock, filed with
                           the Secretary of State of Delaware on October 27,
                           1997, which is

                                       18

<PAGE>



                           incorporated by reference from the Company's
                           Quarterly Report on Form 10-Q for the period ended
                           September 30, 1997

         (4)(iv)           Certificate of Designation of Rights and Preferences
                           of 5% Series C Convertible Preferred Stock, filed
                           with the Secretary of State of Delaware on October
                           24, 1997, which is incorporated by reference from the
                           Company's Quarterly Report on Form 10-Q for the
                           period ended September 30, 1997

         (4)(v)            Certificate of Designation of Rights and Preferences
                           of Series D 4% Convertible Preferred Stock, filed
                           with the secretary of State of Delaware on August 27,
                           1998, which is incorporated by reference from the
                           Company's Quarterly Report on Form 10-Q for the
                           period ended September 30, 1998

         (4)(vi)           Certificate of Designation of Rights and Preferences
                           of Series E 4% Convertible Preferred Stock, filed
                           with the secretary of State of Delaware on October
                           15, 1998, which is incorporated by reference from the
                           Company's Quarterly Report on Form 10-Q for the
                           period ended September 30, 1998

         (9)(i)            Voting Trust Agreement dated as of December 10, 1993
                           by and among Phonic Technologies, Inc., Stephen M.
                           Studdert, Thomas A. Murdock and Roger D. Dudley,
                           which is incorporated by reference from the Company's
                           Current Report on Form 8-K dated as of June 17, 1994

         (9)(ii)           Amendment of Voting Trust Agreement by and among the
                           Company, Stephen M. Studdert, Thomas A. Murdock,
                           Roger D. Dudley, Beesmark Investments, L.C., Studdert
                           Companies Corporation, and Thomas A. Murdock as
                           Trustee, dated as of October 23, 1995, incorporated
                           by reference from the Company's Current Report on
                           Form 8-K dated as of October 23, 1995

         (9)(iii)          Second Amendment of Voting Trust Agreement by and
                           among the Company, Stephen M. Studdert, Thomas A.
                           Murdock, Roger D. Dudley, Beesmark Investments, L.C.,
                           Studdert Companies Corporation, and Thomas A. Murdock
                           as Trustee, dated as of July 2, 1996, incorporated by
                           reference from the Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996

         (9)(iv)           Third Amendment of Voting Trust Agreement by and
                           among the Company, Stephen M. Studdert, Thomas A.
                           Murdock, Roger D. Dudley, Beesmark Investments, L.C.,
                           Studdert Companies Corporation, and Thomas A. Murdock
                           as Trustee, dated as of September 20, 1996,
                           incorporated by reference from the Annual Report on
                           Form 10-KSB for the fiscal year ended December 31,
                           1996

         (9)(v)            Fourth Amendment of Voting Trust Agreement by and
                           among the Company, Stephen M. Studdert, Thomas A.
                           Murdock, Roger D. Dudley, Beesmark Investments, L.C.,
                           Studdert Companies Corporation, and Thomas A. Murdock
                           as Trustee, dated as of September 20, 1996,
                           incorporated by reference from the Annual Report on
                           Form 10-KSB for the fiscal year ended December 31,
                           1996

         (10)(i)           Product Development and Assignment Agreement dated as
                           of October 16, 1993 between Phonic Technologies, Inc.
                           and Synergetics, Inc., which is incorporated by
                           reference from the Company's Current Report on Form
                           8-K dated as of June 17, 1994

         (10)(ii)          Re-Stated Product Development and Assignment
                           Agreement dated as of March 30, 1995, between Fonix
                           Corporation and Synergetics, Inc., which is
                           incorporated by reference from the Company's Annual
                           Report for the Fiscal Year Ended December 31, 1994 on
                           Form 10-KSB

                                       19

<PAGE>




         (10)(iii)         Memorandum of Understanding dated as of March 13,
                           1997, by and among the Company, Synergetics, Inc. and
                           C. Hal Hansen, which is incorporated by reference
                           from the Company's Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996

         (10)(iv)          Employment Agreement by and between the Company and
                           Stephen M. Studdert, which is incorporated by
                           reference from the Company's Annual Report on Form
                           10-KSB for the fiscal year ended December 31, 1996

         (10)(v)           Employment Agreement by and between the Company and
                           Thomas A. Murdock, which is incorporated by reference
                           from the Company's Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996

         (10)(vi)          Employment Agreement by and between the Company and
                           Roger D. Dudley, which is incorporated by reference
                           from the Company's Annual Report on Form 10-KSB for
                           the fiscal year ended December 31, 1996

         (10)(vii)         Restated Master Agreement for Joint Collaboration
                           between the Company and Siemens, dated November 14,
                           1997, as revised, which is incorporated by reference
                           from the Company's Annual Report on Form 10-K for the
                           year ended December 31, 1997

         (10)(viii)        Restated First Statement of Work and License
                           Agreement between the Company and Siemens, dated
                           February 11, 1998, as revised, which is incorporated
                           by reference from the Company's Annual Report on Form
                           10-K for the year ended December 31, 1997

         (10)(ix)          Master Technology Collaboration Agreement between the
                           Company and OGI, dated October 14, 1997, which is
                           incorporated by reference from the Company's Annual
                           Report on Form 10-K for the year ended December 31,
                           1997

         (10)(x)           Common stock Purchase Agreement among the Company and
                           JNC Opportunity Fund Ltd. and Diversified Strategies
                           Fund, LP, dated as of March 9, 1998, which is
                           incorporated by reference from the Company's Annual
                           Report on Form 10-K for the year ended December 31,
                           1997

         (10)(xi)          Common stock Purchase Agreement between the Company
                           and Thomson Kernaghan & Co., dated as of March 9,
                           1998, which is incorporated by reference from the
                           Company's Annual Report on Form 10-K for the year
                           ended December 31, 1997

         (10)(xii)         Royalty Modification Agreement among the Company and
                           Synergetics, dated as of April 6, 1998, which is
                           incorporated by reference from the Company's Annual
                           Report on Form 10-K for the year ended December 31,
                           1997

         (10)(xiii)        Purchase Agreement with John Oberteuffer and the
                           Company dated April 9, 1998, which is incorporated by
                           reference from the Company's Annual Report on Form
                           10-K for the year ended December 31, 1997

         (10)(xiv)         Employment Agreement by and between the Company and
                           John A. Oberteuffer, which is incorporated by
                           reference from the Company's Annual Report on Form
                           10-K for the year ended December 31, 1997

         (10)(xv)          First Amendment to Master Agreement for Joint
                           Collaboration between the Company and Siemens, dated
                           February 13, 1998, which is incorporated by reference
                           from the Company's Annual Report on Form 10-K for the
                           year ended December 31, 1997

         (10)(xvi)         Second Amendment to Master Agreement for Joint
                           Collaboration between the Company

                                       20

<PAGE>



                           and Siemens, dated March 13, 1998, which is
                           incorporated by reference from the Company's Annual
                           Report on Form 10-K for the year ended December 31,
                           1997

         (10)(vii)         Series D Convertible Preferred Stock Purchase
                           Agreement Among Fonix corporation, JNC Opportunity
                           Fund, Ltd., Diversified Strategies Fund, L.P.,
                           Dominion Capital Fund, Ltd., Sovereign Partners, LP,
                           Canadian Advantage Limited Partnership and  Thomson
                           Kernaghan & Co. (as agent) dated as of August 31,
                           1998, incorporated by reference from the Company's
                           Quarterly Report on Form 10-Q for the period ended
                           September 30, 1998

         (10)(xviii)       Series E Convertible Preferred Stock Exchange and
                           Purchase Agreement among Fonix corporation, Sovereign
                           Partners, LP and Dominion Capital Fund, Ltd., dated
                           as of September 30, 1998, incorporated by reference
                           from the Company's Quarterly Report on Form 10-Q for
                           the period ended September 30, 1998

         (10)(xix)         Securities Purchase Agreement among Fonix Corporation
                           and JNC Strategic Fund, dated December 21, 1998 for
                           1,801,802 shares of common stock and Repricing
                           Rights, incorporated by reference from Amendment No.
                           1 to Registration Statement on Form S-3 (File No.
                           333-67573)

         (10)(xx)          Securities Purchase Agreement among Fonix Corporation
                           and the investors identified therein dated January
                           29, 1999, as supplemented on March 3, 1999,
                           concerning sales of $6,500,000 principal amount of
                           Series C 5% Convertible Debentures, incorporated by
                           reference from Amendment No. 1 to Registration
                           Statement on Form S-3 (File No. 333-67573)

         (10)(xxi)         Asset Purchase Agreement - Acquisition of Certain
                           Assets of Fonix Corporation and Fonix/ASI Corporation
                           by Lernout & Hauspie Speech Products N.V., dated as
                           of May 19, 1999, which is incorporated by reference
                           from the Company's Current Report on Form 8- K, filed
                           with the Commission on September 16, 1999 (therein
                           designated as Exhibit 10(a))

         (10)(xxii)        Escrow Agreement, dated as of September 1, 1999,
                           which is incorporated by reference from the Company's
                           Current Report on Form 8-K, filed with the Commission
                           on September 16, 1999 (therein designated as Exhibit
                           10(b))

         (10)(xxiii)       Technology Option Agreement, dated as of May 19,
                           1999, which is incorporated by reference from the
                           Company's Current Report on Form 8-K, filed with the
                           Commission on September 16, 1999 (therein designated
                           as Exhibit 10(c))

         (10)(xxiv)        Assignment and Assumption Agreement, dated as of
                           September 1, 1999, which is incorporated by reference
                           from the Company's Current Report on Form 8-K, filed
                           with the Commission on September 16, 1999 (therein
                           designated as Exhibit 10(d))

         (10)(xxv)         License Agreement by and between Fonix/ASI
                           Corporation and Lernout & Hauspie Speech Products
                           N.V., dated as of May 19, 1999, which is incorporated
                           by reference from the Company's Current Report on
                           Form 8-K, filed with the Commission on September 16,
                           1999 (therein designated as Exhibit 10(e))

         (10)(xxvi)        Loan Agreement, dated as of April 22, 1999, which is
                           incorporated by reference from the Company's Current
                           Report on Form 8-K, filed with the Commission on
                           September 16, 1999 (therein designated as Exhibit
                           10(f))

         (10)(xxvii)       Amendment to Loan Agreement, dated as of May 12,
                           1999, which is incorporated by reference from the
                           Company's Current Report on Form 8-K, filed with the
                           Commission on September 16, 1999 (therein designated
                           as Exhibit 10(g))

                                       21

<PAGE>



         (10)(xxviii)      Second Amendment to Loan Agreement, dated as of May
                           19, 1999, which is incorporated by reference from the
                           Company's Current Report on Form 8-K, filed with the
                           Commission on September 16, 1999 (therein designated
                           as Exhibit 10(h))

         (10)(xxix)        Loan Agreement, dated as of May 19, 1999, which is
                           incorporated by reference from the Company's Current
                           Report on Form 8-K, filed with the Commission on
                           September 16, 1999 (therein designated as Exhibit
                           10(i))

         (10)(xxx)         First Amendment to Loan Agreement, dated as of August
                           12, 1999, which is incorporated by reference from the
                           Company's Current Report on Form 8-K, filed with the
                           Commission on September 16, 1999 (therein designated
                           as Exhibit 10(j))

         (10)(xxxi)        Agreement, dated as of July 31, 1999, which is
                           incorporated by reference from the Company's Current
                           Report on Form 8-K, filed with the Commission on
                           September 16, 1999 (therein designated as Exhibit
                           10(k))

         (10)(xxxii)       Series F Convertible Preferred Stock Purchase
                           Agreement, Among Fonix Corporation, Sovereign
                           Partners, LP, Dominion Capital Fund, LTD., Dominion
                           Investment Fund, LLC, Canadian Advantage, L.P., and
                           Queen LLC, dated as of February 1, 2000

         (10)              (xxxiii) Amended and Restated Series F Convertible
                           Preferred Stock Purchase Agreement among Fonix
                           Corporation and the investors identified therein
                           dated May 22, 2000, which is incorporated by
                           reference from the Company's Rule 424(b) Registration
                           Statement on Form S-2, filed with the Commission on
                           June 16, 2000 (therein designated as Exhibit 99.3)

         (10)              (xxxiv) Equity Line Agreement between Fonix
                           Corporation and Queen LLC, dated August 8, 2000,
                           which is incorporated by reference from the Company's
                           Registration Statement on Form S-2, filed with the
                           Commission on August 10, 2000 (therein designated as
                           Exhibit 99.4)

         10(xxxv)          Audium Stock Purchase Agreement between Fonix
                           Corporation and Audium Corporation, dated as of April
                           5, 2001, filed with the Commission on April 17, 2001

         10(xxxvi)         Certificate of Designation of Audium Series A
                           Preferred Stock, filed with the Commission on April
                           17, 2001.

         10(xxxvii)        Form of Promissory Note from Fonix Corporation to
                           Audium Corporation for $2,600,000, dated as of April
                           5, 2001, filed with the Commission on April 17, 2001.

         10(xxxviii)       Security Agreement between Fonix Corporation as the
                           Debtor and Audium Corporation as the Secured Party,
                           dated as of April 5, 2001, filed with the Commission
                           on April 17, 2001.

         10(xxxix)         Registration Rights Agreement between Fonix
                           Corporation and Audium Corporation, dated as of April
                           5, 2001, filed with the Commission on April 17, 2001.

         10(xl)            Security Agreement between Audium Corporation as the
                           Debtor and Fonix Corporation as the Secured Party,
                           dated as of April 5, 2001, filed with the Commission
                           on April 17, 2001.

         10(xli)           Form of Promissory Note from Audium Corporation to
                           Fonix Corporation for $400,000, filed with the
                           Commission on April 17, 2001.

         10(xlii)          License Agreement between Fonix Corporation and
                           Audium Corporation, dated as of

                                       22

<PAGE>



                           April 5, 2001, filed with the Commission on April 17,
                           2001.

         10(xliii)         Second Private Equity Line Agreement between Fonix
                           Corporation and Queen LLC, dated April 6, 2001, filed
                           with the Commission on April 17, 2001.

         10(xliv)          Registration Rights Agreement between Fonix
                           Corporation and Queen LLC, dated April 6, 2001, filed
                           with the Commission on April 17, 2001.


(B) Reports filed on Form 8-K during the three-month period ended March 31,
2002:

No reports on Form 8-K were filed during the three-month period ended March 31,
2002.




                                       23

<PAGE>


                                   SIGNATURES

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

                                      Fonix Corporation



Date:     May  9, 2002                   /s/ Roger D. Dudley
     --------------------------       ------------------------------------------
                                      Roger D. Dudley, Executive Vice President,
                                      Chief Financial Officer
                                      (Principal financial officer)



                                       24