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

                                    FORM 10-Q
                                 Amendment No. 1


[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


                                EXPLANATORY NOTE

The purpose of this amendment to Fonix Corporation's Quarterly Report on Form
10-Q is to reflect the recognition of impairment losses relating to the
Company's speech software technology and its investment in Audium Corporation.
The unaudited Condensed Consolidated Financial Statements as of March 31, 2002,
have been restated as discussed in the notes to the accompanying unaudited
Condensed Consolidated Financial Statements.

This amendment does not reflect events occurring after the filing of
the Quarterly Report on May 10, 2002, the original filing date of the Quarterly
Report, or modify or update those disclosures as presented in the original Form
10-Q, except to reflect the restatement as described above, to clarify in Note 1
some of the Company's significant accounting policies,  and to describe
certain subsequents events in Note 8 to the unaudited Condensed Consolidated
Financial Statements.



                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

                                                                            Page

Item 1.    Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets - As of March 31, 2002
        and December 31, 2001                                                  2

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

Condensed Consolidated Statements of Cash Flows for the
        Three Months Ended 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


                                       1

<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                                                                              11,370              32,210
       Inventory                                                                                        41,373              37,154
       Prepaid expenses and other current assets                                                       237,308             145,389
                                                                                              -----------------   -----------------

            Total current assets                                                                     2,003,048           1,269,124

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 and
        $77,691, respectively                                                                        1,587,433           1,696,869

Intangible assets, net of accumulated amortization of $184, 636 and $145,522, respectively           1,306,406           1,345,520

Goodwill, net of accumulated amortization of $2,295,598 in 2002 and 2001                             2,631,304           2,631,304

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

            Total assets                                                                      $      9,779,774    $      8,599,028
                                                                                              =================   =================

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           1,085,711
       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           7,370,392
                                                                                              -----------------   -----------------

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; 800,000,000 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                                                                        (179,353,995)       (174,109,356)
                                                                                              -----------------   -----------------

            Total stockholders' equity                                                               3,165,013           1,228,636
                                                                                              -----------------   -----------------

            Total liabilities and stockholders' equity                                        $      9,779,774    $      8,599,028
                                                                                              =================   =================
</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                                                                            44,104               463,109
                                                                                 ------------------   -------------------

      Gross profit                                                                         254,681              (330,396)
                                                                                 ------------------   -------------------

Expenses:
      Selling, general and administrative                                                3,221,753             2,144,586
      Product development and research                                                   2,126,151             1,656,309
      Amortization of intangible assets                                                      7,650               152,683
                                                                                 ------------------   -------------------

           Total expenses                                                                5,355,554             3,953,578
                                                                                 ------------------   -------------------

Loss from operations                                                                    (5,100,873)           (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                             (5,130,686)           (4,248,617)

Equity in net loss of affiliate                                                           (113,954)                    -
                                                                                 ------------------   -------------------

Net loss                                                                                (5,244,640)           (4,248,617)

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

Comprehensive loss                                                               $      (5,245,512)   $       (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                                                                              $    (5,244,640)   $     (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                                                             127,137             711,691
          Equity in net loss of affiliate                                                           113,954                   -
          Changes in assets and liabilities:
             Accounts receivable                                                                     20,840             131,872
             Inventory                                                                               (4,219)                  -
             Prepaid expenses and other current assets                                              (91,919)            (92,365)
             Funds held in escrow                                                                         -             151,006
             Other assets                                                                                44             (84,025)
             Accounts payable                                                                      (331,119)           (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                                                  (4,810,053)         (3,394,395)
                                                                                            ----------------   -----------------

Cash flows from investing activities:
      Issuance of notes receivable                                                                 (655,000)           (200,000)
      Purchase of property and equipment                                                            (28,573)           (189,787)
      Proceeds from sale of Healthcare Solutions Group                                                    -           2,000,000
                                                                                            ----------------   -----------------

          Net cash used in investing activities                                                    (683,573)          1,610,213
                                                                                            ----------------   -----------------

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                                                (15,747)            (10,647)
                                                                                            ----------------   -----------------

          Net cash provided by financing activities                                               5,940,252           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>



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 (the "SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America 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.

Business Conditions - The Company's revenues increased from $132,713 for the
three months ended March 31, 2001 to $298,785 for the three months ended March
31, 2002. However, the Company has incurred significant losses since inception,
including a loss of $5,244,640 for the three months ended March 31, 2002. The
Company incurred negative cash flows from operating activities of $4,810,053
during the three months ended March 31, 2002. Sales of products and revenue from
licenses 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 $4,611,713 and an accumulated deficit of $179,353,995. 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. The accompanying condensed consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.

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.


                                        6

<PAGE>



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>         <C>              <C>
Net loss                                       $   (5,244,640)              $  (4,248,617)

Preferred stock dividends                                  -                       (9,281)
                                               ----------------             --------------

Net loss attributable to common stockholders   $   (5,244,640)   $  (0.01)  $  (4,257,898)   $   (0.02)
                                               ================  =========  ==============   ==========

Weighted average common shares outstanding         390,617,578                 201,741,921
                                               ================             ==============
</TABLE>


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.
Effective January 1, 2002, the Company adopted the requirements of SFAS No. 142.
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 respective useful lives.

During 2002, the Company engaged Houlihan Valuation Advisors, an independent
valuation firm, to assess the Company's goodwill and intangible assets with
indefinite lives for impairment. The resulting appraisal indicated no impairment
and the application of the test for impairment required by SFAS No. 142 had no
effect on the Company's financial position or results of operations, except for
the change in amortization of goodwill and intangible assets with indefinite
lives described in the preceding paragraph.

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 Company's 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. See Note 2.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
Among other provisions,  this statement modifies the criteria for classification
of gains or losses on debt extinguishments such that they are not required to be
classified  as  extraordinary  items  if  they  do not  meet  the  criteria  for
classification as extraordinary items in APB Opinion No. 30,

                                        7

<PAGE>



"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." The Company will be required to apply the provisions
of this standard to transactions occurring after December 31, 2002. The adoption
of this standard in 2003 is not expected to have a material effect on the
Company's financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The statement requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. The Company will
be required to apply this statement prospectively for any exit or disposal
activities initiated after December 31, 2002. The adoption of this standard is
not expected to have a material effect on the Company's financial position or
results of operations.

Revenue Recognition - The Company recognizes revenues in accordance with the
provisions of Statement of Position No. 97-2, "Software Revenue Recognition" and
related interpretations. The Company generates revenues from licensing the
rights to its software products to end users and from royalties. It also
generates service revenues from the sale of consulting and development services.

Revenues of all types are recognized when contingencies such as conditions of
acceptance of functionality, rights of return and price protection are confirmed
or can be reasonably estimated, as appropriate. Revenues from development and
consulting services are recognized on a completed-contract basis when the
services are completed and accepted by the customer. The completed-contract
method is used because the contracts are either short-term in duration or the
Company is unable to make reasonably dependable estimates of the costs of the
contracts. Revenue for hardware units delivered is recognized when delivery is
verified and collection assured.

Revenue for products distributed through wholesale and retail channels and
resellers is recognized upon verification of final sell-through to end users,
after consideration of rights of return and price protection. Revenue for these
products is recognized when the right of return on such products has expired,
typically when the end user purchases the product from the retail outlet. Once
the end user opens the package, it is not returnable unless the medium is
defective. Price protection is offered to distributors in the event we reduce
the price on any specific product. Such price protection is generally offered
for a specific time period in which the distributor must make a claim. Resulting
revenue recognized reflects the reduced price. Slotting fees paid by the Company
for favorable placement in retail outlets are recorded as a reduction in gross
revenues.

When arrangements to license software products do not require significant
production, modification or customization of software, revenues from licenses
and royalties are recognized when persuasive evidence of a licensing arrangement
exists, delivery of the software has occurred, the fee is fixed or determinable
and collectibility is probable. Post-contract obligations, if any, generally
consist of one year of support including such services as customer calls, bug
fixes, and upgrades. Related revenue is recognized over the period covered by
the agreement. Revenues from maintenance and support contracts are also
recognized over the term of the related contracts.

Revenues applicable to multiple-element fee arrangements are bifurcated among
the elements such as license agreements and support and upgrade obligations
using vendor-specific objective evidence of fair value. Such evidence consists
primarily of pricing of multiple elements as if sold as separate products or
arrangements. These elements vary based upon factors such as the type of
license, volume of units licensed, and other related factors.

Deferred revenue at March 31, 2002, and December 31, 2001, consisted of the
following:


<TABLE>
<CAPTION>
                                                                                        March 31,             December 31,
Description                                   Criteria for Recognition                     2002                   2002
---------------------------         -----------------------------------           ----------------------  --------------------
<S>                                 <C>                                           <C>                     <C>
Deferred unit royalties             Delivery of units to end users or
and licence fees                    expiration of contract                        $            1,050,234  $            945,814
Engineering projects not            Completion of work and acceptance
completed                           of completed work by customer                                125,000                62,500
Deferred customer                   Expiration of period covered by
support                             support agreement                                             38,290                41,535
                                                                                  ----------------------  --------------------
Total deferred revenue                                                            $            1,213,524  $          1,049,849
                                                                                  ======================  ====================
</TABLE>


                                        8

<PAGE>






Cost of revenues from license, royalties and maintenance consists of costs to
distribute the product (including the cost of the media on which it is
delivered), installation and support personnel compensation, amortization of
capitalized speech software costs, licensed technology and other related costs.
Cost of service revenues consists of personnel compensation and other related
costs.

Speech software technology development and production costs - All costs incurred
to establish the technological feasibility of speech software technology to be
sold, leased or otherwise marketed are charged to product development and
research expense. Technological feasibility is established when a product design
and a working model of the software product have been completed and confirmed by
testing. Costs to produce or purchase speech software technology incurred
subsequent to establishing technological feasibility are capitalized.
Capitalization of speech software costs ceases when the product is available for
general release to customers. Costs to perform consulting or development
services applications are charged to cost of revenues in the period in which the
corresponding revenues are recognized. Cost of maintenance and customer support
are charged to expense when related revenue is recognized or when these costs
are incurred, whichever occurs first.

Capitalized speech software technology costs are amortized on a
product-by-product basis. Amortization is recognized from the date the product
is available for general release to customers as the greater of (a) the ratio
that current gross revenue for a product bears to total current and anticipated
future gross revenues for that product or (b) the straight-line method over the
remaining estimated economic life of the products. Amortization is charged to
cost of revenues.

The Company assesses unamortized capitalized speech software costs for possible
write down on a quarterly basis based on net realizable value of each related
product. Net realizable value is determined based on the estimated future gross
revenues from a product reduced by the estimated future cost of completing and
disposing of the product, including the cost of performing maintenance and
customer support. The amount by which the unamortized capitalized costs of a
speech software product exceed the net realizable value of that asset are
written off.

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.

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 through May 10, 2002.

                                        9

<PAGE>




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. Interest on the
Fonix Note was imputed at 12 percent resulting in a present value of $2,370,348.
The resulting purchase price of the Audium Preferred Stock was $2,570,348.

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.

The investment in Audium does not provide the Company with rights to any
technology developed by Audium, but the Company must obtain a license should it
choose to do so. The Company does not own an interest sufficient to control
Audium, even if it were to convert the Audium Note to Audium Preferred Stock.
Accordingly, Fonix does not benefit directly from the research and development
being done by Audium. As a result, the Company has determined that it is
appropriate to account for its investment, which represents 26.7 percent of
Audium's voting stock, under the equity method and not as a research and
development arrangement.

The difference between the total purchase price of the Audium Preferred Stock
and the Company's portion of Audium's net stockholders' deficit at the time of
the purchase was $2,700,727, which was allocated to completed core technology.
The excess purchase price allocated to the completed core technology is being
amortized on a straight- line basis over a period of eight years.

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 $113,954,
consisting of $72,128 to reflect the Company's share of Audium's net loss for
the three months ended March 31, 2002, and $41,825 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.

The fair value of this investment is determined based on Audium's estimated
future net cash flows considering the status of Audium's product development.
The Company evaluates this investment for impairment annually

                                       10

<PAGE>



and more frequently if indications of decline in value exist. An impairment loss
that is other than temporary is recognized during the period it is determined to
exist. An impairment is determined to be other-than-temporary if estimated
future net cash flows are less than the carrying value of the investment. If
projections indicate that the carrying value of the investment will not be
recoverable, the carrying value is reduced by the estimated excess of the
carrying value over the estimated discounted cash flows. At December 31, 2001,
the Company evaluated the estimated future net cash flows, given the status of
Audium's product development. From this evaluation , the Company determined that
an impairment loss of $823,275 should be recorded. No subsequent impairment loss
has been recorded.

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.

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

The Company adopted the provisions of SFAS No. 142 in its entirety on January 1,
2002. Under the new standard, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized, but are subject to annual impairment
tests. Other intangible assets will continue to be amortized over their
estimated useful lives. The Company has performed the required impairment tests
of goodwill and indefinite-lived intangible assets. There was no impairment of
goodwill or intangible assets upon adoption of SFAS No. 142. Upon adoption of
SFAS No. 142, the Company also reassessed the estimated useful lives of
intangible assets subject to amortization.

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 internally
developed technologies. As of March 31, 2002 and December 31, 2001, amortized
intangible assets consisted of the following:


<TABLE>
<CAPTION>
                                                          March 31, 2002                             December 31, 2001
                                            ------------------------------------------  --------------------------------------------
                                                    Gross                                      Gross
                                                  Carrying            Accumulated             Carrying              Accumulated
                                                   Amount             Amortization             Amount              Amortization
                                            --------------------- --------------------  --------------------   ---------------------
<S>                                         <C>                   <C>                   <C>                    <C>
Speech software technologies                $             978,582 $           (26,099)  $            978,582   $                  -
Customer relationships                                    306,000              (7,530)               306,000                      -
Patents                                                   164,460            (151,007)               164,460               (145,522)
                                            --------------------- --------------------  --------------------   ---------------------
Total                                       $           1,449,042 $          (184,636)  $          1,449,042   $           (145,522)
                                            ===================== ====================  ====================   =====================
</TABLE>

In addition, the Company has trademarks not subject to amortization, recorded at
a carrying value of $42,000 at March 31, 2002 and December 31, 2001. This asset
is considered to have an indefinite useful life.

Amortization of intangible assets is computed on a straight-line basis over
their estimated useful lives, which range from one to ten years. As of January
1, 2002, the weighted-average amortization periods were as follows: total - 9.7
years, speech software technologies - 9.7 years, customer relationships - 9.7
years, and patents - 0.6 years.

                                       11

<PAGE>



Intangible assets subject to amortization will not have any significant residual
value at the end of their estimated useful lives. Estimated future amortization
expense for intangible assets subject to amortization is as follows:


For the Year Ended December 31,                            Amount
--------------------------------                           ------
                     2002                              $  117,339
                     2003                                 134,996
                     2004                                 134,996
                     2005                                 134,996
                     2006                                 124,100

Accumulated amortization of goodwill was $2,295,598 at both March 31, 2002 and
December 31, 2001. In accordance with the provisions of SFAS No. 142, the
Company no longer amortizes goodwill.

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.

During 2002, the Company engaged Houlihan Valuation Advisors, an independent
valuation firm, to assess its goodwill and intangible assets with indefinite
lives for impairment. The resulting appraisal indicated no impairment, and
therefore management of the Company did not consider goodwill or other
intangible 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
goodwill and other 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. Upon initial application of SFAS
No. 142, the Company reassessed the useful lives of its intangible assets and
determined that no changes to estimated useful lives were necessary as of June
30, 2002.

Goodwill amortization expense was $152,683 during the three months ended March
31, 2001 and $604,105 each for the years ended December 31, 2001, 2000 and 1999,
respectively. The effects on loss before extraordinary item, net loss and basic
and diluted loss per share of excluding such goodwill amortization from the
three months ended March 31, 2002 and 2001 and from the years ended December 31,
2001, 2000 and 1999 are as follows:


<TABLE>
<CAPTION>
                                            For the Three Months Ended                 For the Years Ended December 31,
                                       ------------------------------------  -----------------------------------------------------
                                           March 31,          March 31,            2001               2000              1999
                                             2002               2001
                                       -----------------  -----------------  ------------------------------------- ---------------
<S>                                    <C>                <C>                <C>                <C>                <C>
Loss before extraordinary item, as
  reported                             $     (5,244,640)  $     (4,248,617)  $    (31,059,791)  $    (22,810,677)  $  (22,136,276)
Loss before extraordinary item,
  excluding goodwill amortization      $     (5,244,640)  $     (4,248,617)  $    (30,455,686)  $    (22,206,572)  $  (21,532,171)
                                       =================  =================  =================  =================  ===============
Net loss, as reported                  $     (5,244,640)  $     (4,248,617)  $    (31,059,791)  $    (22,761,229)  $  (21,662,419)
Add back goodwill amortization                           -          152,683            604,105            604,105          604,105
                                       -----------------  -----------------  -----------------  -----------------  ---------------
Net loss, excluding goodwill
  amortization                         $     (5,244,640)  $     (4,095,934)  $    (30,455,686)  $    (22,157,124)  $  (21,058,314)
                                       =================  =================  =================  =================  ===============
Basic and diluted loss per share:

   Loss before extraordinary item,
     as reported                       $          (0.01)  $          (0.02)  $          (0.13)  $          (0.16)  $        (0.32)
   Loss before extraordinary item,
     excluding goodwill amortization   $          (0.01)  $          (0.02)  $          (0.13)  $          (0.16)  $        (0.31)
                                       =================  =================  =================  =================  ===============
   Net loss, as reported               $          (0.01)  $          (0.02)  $          (0.13)  $          (0.16)  $        (0.31)

   Net loss, excluding goodwill        $          (0.01)  $          (0.02)  $          (0.13)  $          (0.16)  $        (0.30)
     amortization
                                       =================  =================  =================  =================  ===============
</TABLE>



                                       12

<PAGE>





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
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 8, 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

                                       13

<PAGE>



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 in
2002 through 2010.

8. SUBSEQUENT EVENTS

Convertible Notes Receivable - During 2002, the Company has advanced $920,000 to
Unveil under the line of credit. Also during 2002, the Company impaired the full
value of the convertible note receivable and interest accrued thereon.

Note Payable to Affiliate - The Company made payments of $562,500 on the note
payable to Audium Corporation during 2002.

Notes Payable - Related Parties - Two executive officers of the Company (the
"Lenders") sold shares of the Company's Class A common stock owned by them and
advanced the resulting proceeds amounting to $333,308 to the Company under the
terms of a revolving line of credit and related promissory note. The funds were
advanced for use in Company operations. The advances bear interest at 10 percent
per annum, and are payable on a semi-annual basis. The entire principal, along
with unpaid accrued interest and any other unpaid charges or related fees, is
due and payable on June 10, 2003. Any time after December 11, 2002, all or part
of the outstanding balance and unpaid interest may be converted at the option of
the Lenders into shares of Class A common stock of the Company. The conversion
price is the average closing bid price of the shares at the time of the
advances. If converted, the conversion amount is divided by the conversion price
to determine the number of shares to be issued to the Lenders. To the extent the
market price of the Company's shares is below the conversion price at the time
of conversion, the Lenders are entitled to receive additional shares equal to
the gross dollar value received from the original sale of the shares. A
beneficial conversion feature of $14,917 was recorded as interest expense in
connection with this transaction. The Lenders may also receive additional
compensation as determined appropriate by the Board of Directors. In October
2002, the Lenders pledged 1,234,622 shares of the Company's Class A common stock
to the Equity Line Investor in connection with an advance of $182,676 to the
Company under the Third Equity Line (see Note 7 below). The Equity Line Investor
subsequently sold the pledged shares and applied the proceeds in reduction of
the advance. The value of the pledged shares of $74,077 was treated as an
additional advance from the Lenders.

The aggregate advances of $407,385 are secured by the Company's intellectual
property rights and other assets.

Series D Convertible Debentures - On October 11, 2002, the Company entered into
a Securities Purchase Agreement with Breckenridge Fund, LLC ("Breckenridge"), an
unaffiliated third party, for the issuance of the Company's Series D 12%
Convertible Debentures (the "Debentures") in the aggregate principal amount of
$1,500,000. The outstanding principal amount of the Debentures is convertible at
any time at the option of the

                                       14

<PAGE>



holder into shares of the Company common stock at a conversion price equal to
the average of the two lowest closing bid prices of the Company's Class A common
stock for the twenty trading days immediately preceding the conversion date
multiplied by 90%. The Debentures are due April 9, 2003. On the earlier of
December 20, 2002, or 45 days after the effective date of this registration
statement and prospectus (the "Initial Payment Date") and each 30-day
anniversary of the Initial Payment Date, the Company is required to make
principal payments of $250,000, plus accrued interest.

In connection with the sale of the Debentures, the Company issued, as collateral
to secure its performance under the Debenture, 83,333,333 shares of Class A
common stock (the "Collateral Shares"), which were placed into an escrow
pursuant to an escrow agreement. Under the escrow agreement, the Collateral
Shares will not be released to Breckenridge unless the Company is delinquent
with respect to payments under the Debenture. Additionally, as further
consideration for the sale of the Debentures, the Company issued 7,777,778
shares to Breckenridge (the "Additional Shares") which were were valued at
$0.052 per share, the market value of the stock on the date of the transaction.
In connection with this transaction, in the fourth quarter of 2002, the Company
recorded a discount of $404,444 on the Debentures from the allocation of a
portion of the proceeds to the Additional Shares and recorded an additional
discount of $571,111 from the beneficial conversion option associated with the
Debentures, both of which will be amortized as interest expense over the life of
the Debentures.

In connection with the sale of the Debentures, the Company agreed to register
the resale of shares of the Class A common stock underlying the Debentures, the
Collateral Shares, and the Additional Shares.

Common Stock - During 2002, the Company has issued 134,279,915 shares of Class A
common stock in connection with draws on its equity lines of credit.

Stock Options - During the nine months ended September 30, 2002, the Company
granted options to employees to purchase 5,239,000 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 price of the stock on the dates of
grant. Of the options granted during this nine-month period, 5,239,000 vest over
the three years following issuance and 1,000,000 vested immediately. These
options expire within ten years from the date of grant if not exercised.

                                       15

<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.

To date the Company has earned only limited revenue from operations and intends
to continue to rely primarily on financing through the sale of its equity and
debt securities to satisfy future capital requirements.

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's revenues increased from $132,713 for the three months ended March
31, 2001 to $298,785 for the three months ended March 31, 2002. However, the
Company incurred negative cash flows from operating activities of $4,810,053
during the three months ended March 31, 2002. Sales and licensing 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
$4,611,713 and an accumulated deficit of $179,353,995. 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.
Until sufficient revenues are generated from operating activities, the Company
expects to continue to fund its operations through the sale of its equity and
debt securities.

The Company has experienced slower development of markets for speech
applications than had been anticipated due to several factors. First, the
limited resources with which the Company has been operating (due to the delay in
accessing funds from the third equity line) have hampered the Company's ability
to aggressively support marketing and sales as originally anticipated.
Additionally, time and resources required to develop certain applications have
been greater than originally anticipated, and, with limited resources available,
the Company has not been able to expedite such development. Further, the ongoing
U.S. economic slowdown has slowed customer acceptance in target markets,
especially in the telecommunications sector where previously expected recovery
has yet to materialize, but has deteriorated further. Each of these factors had
a significant impact on the Company's ability to achieve significant growth in
the markets it has chosen to develop. The occurence of these conditions has
caused the Company to (i) reduce its emphasis on consumer applications because
of the significant resources required to develop retail markets, (ii) reduce its
development and marketing efforts in the computer telephony and server-based
markets, and (iii) increase its emphasis and focus on mobile and wireless
applications, automotive speech interface solutions and assistive markets, where
management believes the Company enjoys the greatest technological and market
advantage.

Through its current marketing efforts, the Company seeks to form relationships
with third parties who can incorporate the Company's 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 the Company 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.

The Company is currently in negotiation with customers and potential customers
to enter into additional third-party

                                       16

<PAGE>



licensing, collaboration, co-marketing and distribution arrangements.

In order to assess future gross revenues, the Company has evaluated the life
cycle of its products and the periods in which it will receive revenues from
them. Widespread deployment of speech applications, solutions and interface
products is growing, especially for the speech solutions the Company develops
and markets. However, certain speech products, specifically those which are
useful in the tele-communciations segment, have been severely impacted by
declining market conditions over the past 18 to 24 months. Nevertheless, speech
applications and interface solutions useful in devices such as smart-phones,
PDAs, cell phones, assistive devices for the sight-impaired, and other mobile
and wireless devices are beginning to enjoy user acceptance and market demand.
The Company's experience has indicated that original equipment manufacturers
("OEMs"), value added resellers ("VARs"), software developers and other users
typically integrate a new application or interface product such as speech
initially into only one or two products. Then, as market and user acceptance of
the technology increases, as applications are proven reliable, and as cost of
production and delivery decreases on a per-unit basis, the applications
typically are expanded into broader product lines. As a result, initial sales
volumes in early OEM integration periods are expected to be low, but will grow
at a stubstantial pace in subsequent periods as (i) OEM customers expand product
offerings and (ii) the customers of OEMs commit to and release speech
applications in their products. The Company expects growth to continue for four
to six years, but expects the rate of growth to slow as the market matures
toward the end of that period.

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 by
management 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.
During 2002, the Company engaged Houlihan Valuation Advisors, an independent
valuation firm, to assess the Company's goodwill and intangible assets with
indefinite lives for impairment. The resulting appraisal indicated no impairment
and the application of the test for impairment required by SFAS No. 142 had no
effect on the Company's financial position or results of operations, except for
the change in amortization of goodwill and intangible assets with indefinite
lives described in the preceding paragraph.

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 Company's 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

                                       17

<PAGE>



long-lived assets. The Company's 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 April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
Among other provisions, this statement modifies the criteria for classification
of gains or losses on debt extinguishments such that they are not required to
classified as extraordinary items if they do not meet the criteria for
classification as extraordinary items in APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company will be required to apply the provisions of this
standard to transactions occurring after December 31, 2002. The Company's
adoption of this standard in 2003 is not expected to have a material effect on
the Company's financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The statement requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. The Company will
be required to apply this statement prospectively for any exit or disposal
activities initiated after December 31, 2002. The Company's adoption of this
standard is not expected to have a material effect on the Company's financial
position or results of operations.

Revenue Recognition - The Company recognizes revenues in accordance with the
provisions of Statement of Position No. 97-2, "Software Revenue Recognition" and
related interpretations. The Company generates revenues from licensing the
rights to its software products to end users and from royalties. It also
generates service revenues from the sale of consulting and development services.

Revenues of all types are recognized when contingencies such as conditions of
acceptance of functionality, rights of return and price protection are confirmed
or can be reasonably estimated, as appropriate. Revenues from development and
consulting services are recognized on a completed-contract basis when the
services are completed and accepted by the customer. The completed-contract
method is used because the contracts are either short-term in duration or the
Company is unable to make reasonably dependable estimates of the costs of the
contracts. Revenue for hardware units delivered is recognized when delivery is
verified and collection assured.

Revenue for products distributed through wholesale and retail channels and
resellers is recognized upon verification of final sell-through to end users,
after consideration of rights of return and price protection. Revenue for these
products is recognized when the right of return on such products has expired,
typically when the end user purchases the product from the retail outlet. Once
the end user opens the package, it is not returnable unless the medium is
defective. Price protection is offered to distributors in the event we reduce
the price on any specific product. Such price protection is generally offered
for a specific time period in which the distributor must make a claim. Resulting
revenue recognized reflects the reduced price. Slotting fees paid by the Company
for favorable placement in retail outlets are recorded as a reduction in gross
revenues.

When arrangements to license software products do not require significant
production, modification or customization of software, reveneus from licenses
and royalties are recognized when persuasive evidence of a licensing arrangement
exists, delivery of the software has occurred, the fee is fixed or determinable
and collectibility is probable. Post-contract obligations, if any, generally
consist of one year of support including such services as customer calls, bug
fixes, and upgrades. Related revenue is recognized over the period covered by
the agreement. Revenues from maintenance and support contracts are also
recognized over the term of the related contracts.

Revenues applicable to multiple-element fee arrangements are bifurcated among
the elements such as license agreements and support and upgrade obligations
using vendor-specific objective evidence of fair value. Such evidence consists
primarily of pricing of multiple elements as if sold as separate products or
arrangements. These elements vary based upon factors such as the type of
license, volume of units licensed, and other related factors.


                                       18

<PAGE>



Deferred revenue at March 31, 2002, and December 31, 2001, consisted of the
following:


<TABLE>
<CAPTION>
                                                                                        March 31,             December 31,
Description                                   Criteria for Recognition                     2002                   2002
---------------------------         -----------------------------------           ----------------------  --------------------
<S>                                 <C>                                           <C>                     <C>
Deferred unit royalties             Delivery of units to end users or
and licence fees                    expiration of contract                        $            1,050,234  $            945,814
Engineering projects not            Completion of work and acceptance
completed                           of completed work by customer                                125,000                62,500
Deferred customer                   Expiration of period covered by
support                             support agreement                                             38,290                41,535
                                                                                  ----------------------  --------------------
Total deferred revenue                                                            $            1,213,524  $          1,049,849
                                                                                  ======================  ====================
</TABLE>




Cost of revenues from license, royalties and maintenance consists of costs to
distribute the product (including the cost of the media on which it is
delivered), installation and support personnel compensation, amortization of
capitalized speech software costs, licensed technology and other related costs.
Cost of service revenues consists of personnel compensation, licensed technology
and other related costs.

Speech software technology development and production costs - All costs incurred
to establish the technological feasibility of speech software technology to be
sold, leased or otherwise marketed are charged to product development and
research expense. Technological feasibility is established when a product design
and a working model of the software product have been completed and confirmed by
testing. Costs to produce or purchase speech software technology incurred
subsequent to establishing technological feasibility are capitalized.
Capitalization of speech software costs ceases when the product is available for
general release to customers. Costs to perform consulting or development
services applications are charged to cost of revenues in the period in which the
corresponding revenues are recognized. Cost of maintenance and customer support
are charged to expense when related revenue is recognized or when these costs
are incurred, whichever occurs first.

Capitalized speech software technology costs are amortized on a
product-by-product basis. Amortization is recognized from the date the product
is available for general release to customers as the greater of (a) the ratio
that current gross revenue for a product bears to total current and anticipated
future gross revenues for that product or (b) the straight-line method over the
remaining estimated economic life of the products. Amortization is charged to
cost of revenues.

The Company assesses unamortized capitalized speech software costs for possible
write down on a quarterly basis based on net realizable value of each related
product. Net realizable value is determined based on the estimated future gross
revenues from a product reduced by the estimated future cost of completing and
disposing of the product, including the cost of performing maintenance and
customer support. The amount by which the unamortized capitalized costs of a
speech software product exceed the net realizable value of that asset are
written off.

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.

Cost of revenues were $44,104 for the three months ended September 30, 2002, a
decrease of $419,005, from the corresponding period in 2001. The writedown of
the Company's capitalized software costs in 2001 resulted in a $430,001 decrease
in amortization in 2002. The decrease was offset by nominal increases in other
costs of revenues including the cost of delivering royalties and licenses and
the cost of hardware sales. Hardware sales represents the

                                       19

<PAGE>



the largest portion of the increase because such sales were new to the Company
in 2002, as noted above.

Selling, general and administrative expenses were $3,221,753 and $2,144,586 for
the three months ended March 31, 2002 and 2001, respectively. The increase of
$1,077,167 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 $2,126,151 and $1,656,309 for the
three months ended March 31, 2002 and 2001, respectively. The increase of
$469,842 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, excluding the portion classified as cost of
revenues, was $7,650 and $152,683 for the three months ended March 31, 2002 and
2001, respectively. The decrease of $145,033 is a result of the change in
accounting for amortization of goodwill dictated by SFAS No. 142. Based on the
value of current intangible assets, the Company expects amortization of speech
software technology to be approximately $102,000, including $78,000 to be
charged to cost of revenues, for the remainder of 2002 and $136,000 per year
thereafter, including $104,000 to be charged to cost of revenues, until the
underlying assets have been completely amortized.

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. At March 31, 2002, the Company had $2,000,000 available to draw
under its equity lines of credit.

Net cash used in operating activities of $4,810,053 for the three months ended
March 31, 2002, resulted principally from the net loss incurred of $5,244,640
offset by non-cash expenses pertaining to depreciation and amortization of
$127,137 and equity in net loss of affiliate of $113,954. 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 $5,940,252 consisting primarily of the
receipt of $6,965,999 in cash related to the sale of shares of Class A common
stock offset, in part, by $1,010,000 in payments on notes payable.

The Company had negative working capital of $4,611,713 at March 31, 2002,
compared to negative working capital of $6,101,268 at December 31, 2001. Current
assets increased by $733,924 to $2,003,048 from December 31, 2001, to March 31,
2002. Current liabilities decreased by $755,631 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 $9,779,774 at March 31, 2002, compared to $8,599,028 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

                                       20

<PAGE>



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, through May 10, 2002.

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. Interest on the
Fonix Note was imputed at 12 percent resulting in a present value of $2,370,348.
The resulting purchase price of the Audium Preferred Stock was $2,570,348.

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.

The investment in Audium does not provide the Company with rights to any
technology developed by Audium, but the Company must obtain a license should it
choose to do so. The Company does not own an interest sufficient to control
Audium, even if it were to convert the Audium Note to Audium Preferred Stock.
Accordingly, Fonix does not benefit directly from the research and development
being done by Audium. As a result, the Company has determined that it is
appropriate to account for its investment, which represents 26.7 percent of
Audium's voting stock, under the equity method and not as a research and
development arrangement.

The difference between the total purchase price of the Audium Preferred Stock
and the Company's portion of Audium's net stockholders' deficit at the time of
the purchase was $2,700,727, which was allocated to completed core technology.
The excess purchase price allocated to the completed core technology is being
amortized on a straight- line basis over a period of eight years.

                                       21

<PAGE>



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 $113,954,
consisting of $72,128 to reflect the Company's share of Audium's net loss for
the three months ended March 31, 2002, and $41,825 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.

The fair value of this investment is determined based on Audium's estimated
future net cash flows considering the status of Audium's product development.
The Company evaluates this investment for impairment annually and more
frequently if indications of decline in value exist. An impairment loss that is
other than temporary is recognized during the period it is determined to exist.
An impairment is determined to be other-than-temporary if estimated future net
cash flows are less than the carrying value of the investment. If projections
indicate that the carrying value of the investment will not be recoverable, the
carrying value is reduced by the estimated excess of the carrying value over the
estimated discounted cash flows. At December 31, 2001, the Company evaluated the
estimated future net cash flows, given the status of Audium's product
development. From this evaluation , the Company determined that an impairment
loss of $823,275 should be recorded. No subsequent impairment loss has been
recorded.

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.

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 into escrow. 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

                                       22

<PAGE>



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, $1,382,676
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 8, 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.

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.



                                       23

<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.


                                       24

<PAGE>



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 results in the future.

Item 4.  Evaluation of Disclosure Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company's chief
executive officer and chief financial officer, after evaluating the
effectiveness of the Company's "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934, Rules 13a-14(c) and 15-d-14(c)) as of a
date (the "Evaluation Date") within 90 days before the filing date of this
quarterly report, have concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and designed to ensure that
material information relating to the Company and its consolidated subsidiaries
would be made known to them by others within those entities. (b) Changes in
Internal Controls. There were no significant changes in the Company's internal
controls, or, to the Company's knowledge, in other factors that could
significantly affect these controls subsequent to the Evaluation Date.


                           PART II - OTHER INFORMATION


                                       25

<PAGE>



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. Defaults Upon Senior Securities

None

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:


                                       26

<PAGE>


<TABLE>
<CAPTION>

           Exhibit No.         Description of Exhibit

<S>        <C>                 <C>
           (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
                               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

                                                                  27

<PAGE>



                               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

           (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

                                                                  28

<PAGE>



                               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
                               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

                                                                  29

<PAGE>



                               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))

           (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

                                                                  30

<PAGE>



                               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
                               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.

           10(xlv)             Amendment to Equity Line Agreement between Fonix Corporation and Queen LLC,

                                                                  31

<PAGE>



                               dated May 8, 2002.

           99.1                Certification of President and Chief Financial Officer
           99.2                Certification of President and Chief Financial Officer Pursuant to Section 906 of the
                               Sarbanes-Oxley Act of 2002.
</TABLE>


(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.




                                       32

<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: December 13, 2002            /s/ Roger D. Dudley
                                   --------------------------------------------
                                   Roger D. Dudley, Executive Vice President,
                                   Chief Financial Officer
                                   (Principal financial officer)



                                       33

<PAGE>



                                  CERTIFICATION
I, Thomas A. Murdock certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Fonix Corporation;

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

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

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officers and I have disclosed,  base on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of registrant's board of directors:

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: December 13, 2002

/s/ Thomas A. Murdock
-------------------------------------
Thomas A. Murdock
Chairman and Chief Executive Officer



                                       34

<PAGE>



                                  CERTIFICATION

I, Roger D. Dudley, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Fonix Corporation;

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

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

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officers and I have disclosed,  base on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of registrant's board of directors:

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses. Date: December 13, 2002


/s/ Roger D. Dudley
-------------------------------------
Roger D. Dudley
Executive Vice President and Chief Financial Officer




                                       35

<PAGE>



                                  EXHIBIT 99.2

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

           In connection with the Quarterly Report of Fonix Corporation on Form
10-Q for the period ending March 31, 2002, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), Thomas A. Murdock, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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




                                /s/ Thomas A. Murdock
                                ------------------------------------------
                                Thomas A. Murdock
                                Chief Executive Officer



                                       36

<PAGE>


                                  EXHIBIT 99.2

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

           In connection with the Quarterly Report of Fonix Corporation on Form
10-Q for the period ending March 31, 2002, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), Roger D. Dudley, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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


                                /s/ Roger D. Dudley
                              ------------------------------------------
                              Roger D. Dudley
                              Chief Financial Officer


                                       37