<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended June 30, 2000.

[ ]  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.)

                     60 East South Temple Street, Suite 1225

                            Salt Lake City, UT 84111
                            -------------------------
          (Address of principal executive offices, including zip code)

                                 (801) 328-0161

              (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 August  10,  2000,  165,528,685  shares of Class A voting  common
stock, par value $.0001 per share, were issued and outstanding.


<PAGE>

                       Fonix Corporation and Subsidiaries
                          (A Development Stage Company)

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
ASSETS
                                                                                               June 30,       December 31,
                                                                                                2000             1999
                                                                                            --------------   --------------
Current assets:
<S>                                                                                         <C>              <C>
      Cash and cash equivalents                                                             $     272,129    $     232,152
      Accounts receivable, net of allowance for doubtful accounts of $20,000 for 2000
           and 1999                                                                                 7,649          184,901
      Prepaid expenses                                                                            184,667           51,747
      Interest and other receivables                                                               14,243           10,539
      Inventory                                                                                     2,690            1,546
                                                                                            --------------   --------------

          Total current assets                                                                    481,378          480,885

Cash  held in escrow                                                                            2,090,072        2,038,003

Property and equipment, net of accumulated depreciation of $2,281,454 and
     $1,938,494, respectively                                                                     868,327        1,148,802

Intangible assets, net of accumulated amortization of $5,621,972 and
     $4,392,457, respectively                                                                  14,170,077       15,399,593

Other assets                                                                                      105,276          105,864
                                                                                            --------------   --------------

          Total assets                                                                      $  17,715,130    $  19,173,147
                                                                                            ==============   ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Convertible promissory note                                                           $   3,450,000    $           -
      Advances                                                                                          -        1,000,000
      Notes payable - related parties                                                              77,625           77,625
      Accounts payable                                                                            901,150        1,359,040
      Accrued liabilities                                                                         848,722          857,033
      Accrued liabilities - related parties                                                     1,689,133        1,814,134
      Income taxes payable                                                                         22,394           50,000
      Deferred revenues                                                                           672,365          127,849
                                                                                            --------------   --------------

          Total current liabilities                                                             7,661,389        5,285,681

Series C 5% convertible debentures                                                                      -        3,971,107
                                                                                            --------------   --------------

          Total liabilities                                                                     7,661,389        9,256,788
                                                                                            --------------   --------------

Common stock and related repricing rights subject to redemption; 1,801,802 shares and
      repricing rights outstanding in 1999 (aggregate redemption value of $2,500,000)                   -        1,830,000
                                                                                            --------------   --------------

Commitments and contingencies (Note 11)

Stockholders' equity:
      Preferred stock, $.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
          Series D, 4% cumulative convertible; 164,500 and 381,723 shares
               outstanding, respectively
              (aggregate liquidation preference of $3,534,557)                                  3,988,583        9,095,910
          Series F, 6% cumulative convertible; 10,755 shares outstanding
              (aggregate liquidation preference of $220,478)                                      220,478                -
      Common stock, $.0001 par value; 300,000,000 shares authorized;
          Class A voting, 165,506,685 and 123,535,325 shares outstanding, respectively             16,550           12,353
          Class B non-voting, none outstanding                                                          -                -
      Additional paid-in capital                                                              133,979,289      112,769,420
      Outstanding warrants                                                                      3,856,030        2,850,530
      Deferred interest expense                                                                (1,906,305)               -
      Deferred consulting expense                                                                 (27,590)        (435,051)
      Deficit accumulated during the development stage                                       (130,573,294)    (116,706,803)
                                                                                            --------------   --------------

          Total stockholders' equity                                                           10,053,741        8,086,359
                                                                                            --------------   --------------

          Total liabilities and stockholders' equity                                        $  17,715,130    $  19,173,147
                                                                                            ==============   ==============
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>


                                Fonix Corporation
                          (A Development Stage Company)

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                    October 1,
                                                                                                                       1993
                                                                Three Months Ended          Six Months Ended       (Inception) to
                                                                     June 30,                   June 30,             June 30,
                                                             ------------------------- ----------------------------
                                                                2000         1999          2000           1999          2000
                                                             ------------ ------------ -------------- ------------- --------------

<S>                                                          <C>          <C>          <C>            <C>           <C>
Revenues                                                     $   143,825  $   231,571  $     200,272  $    285,377  $   3,244,503
Cost of revenues                                                   3,651        7,949          6,599        13,240         66,971
                                                             ------------ ------------ -------------- ------------- --------------
     Gross margin                                                140,174      223,622        193,673       272,137      3,177,532
                                                             ------------ ------------ -------------- ------------- --------------
Expenses:
     Selling, general and administrative                       2,455,315    1,944,727      5,793,921     4,689,793     46,356,987
     Product development and research                          1,478,362    1,858,524      2,929,120     4,371,350     41,836,245
     Amortization of goodwill and purchased core technology      607,136      657,609      1,214,273     1,315,218      5,515,436
     Purchased in-process research and development                     -            -        474,000             -      9,789,000
                                                             ------------ ------------ -------------- ------------- --------------
        Total expenses                                         4,540,813    4,460,860     10,411,314    10,376,361    103,497,668
                                                             ------------ ------------ -------------- ------------- --------------
Loss from operations                                          (4,400,639)  (4,237,238)   (10,217,641)  (10,104,224)  (100,320,136)
                                                             ------------ ------------ -------------- ------------- --------------
Other income (expense):
     Interest income                                             70,773          911        101,092        22,957      3,863,203
     Interest expense                                          (448,293)    (511,002)      (480,740)   (2,737,396)    (9,440,439)
     Other expense                                                    -       (2,404)             -        (2,404)      (157,345)
     Cancellation of common stock reset provision                     -            -              -             -     (6,111,577)
                                                             ----------- ------------- -------------- ------------- -------------
        Total other income (expense), net                      (377,520)    (512,495)      (379,648)   (2,716,843)   (11,846,158)
                                                             ----------- ------------- -------------- ------------- -------------
Loss from continuing operations before income tax benefit     (4,778,159)  (4,749,733)   (10,597,289)  (12,821,067)  (112,166,294)

Income tax benefit                                                     -            -              -             -      3,331,895
                                                             ------------ ------------ -------------- ------------- --------------
Loss from continuing operations                               (4,778,159)  (4,749,733)   (10,597,289)  (12,821,067)  (108,834,399)

Discontinued operations:
     Operating loss of HealthCare Solutions Group                      -   (1,768,052)             -    (2,991,579)   (12,229,033)
     Gain on disposal of HealthCare Solutions Group, net of
          income taxes of $3,100,000                                   -            -              -             -      3,766,646
                                                             ------------ ------------ -------------- ------------- --------------
Loss before extraordinary items                               (4,778,159)  (6,517,785)   (10,597,289)  (15,812,646)  (117,296,786)

Extraordinary items:
     Loss on extinguishment of debt                                    -            -              -             -       (881,864)
     Gain on forgiveness of debt                                  46,887            -         78,864             -        583,269
                                                             ------------ ------------ -------------- ------------- --------------
Net loss                                                     $(4,731,272) $(6,517,785) $ (10,518,425) $(15,812,646) $(117,595,381)
                                                             ============ ============ ============== ============= ==============

Basic and diluted net loss per common share                  $    (0.03)     $ (0.10)       $ (0.09)      $ (0.26)
                                                             ============ ============ ============== =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3



<PAGE>



                                Fonix Corporation
                          (A Development Stage Company)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                    October 1,
                                                                                                       1993
                                                                        Six Months Ended          (Inception) to
                                                                            June 30,                 June 30,
                                                                ------------------------------
                                                                     2000           1999               2000
                                                                --------------- --------------    ---------------
Cash flows from operating activities:
<S>                                                             <C>             <C>               <C>
     Net loss                                                   $  (10,518,425) $ (15,812,649)    $ (117,595,381)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
       Issuance of common stock for services                           312,500        100,000          5,958,654
       Issuance of common stock for patent                                   -              -            100,807
       Non-cash expense related to issuance of debentures,
         warrants, preferred and common stock                        1,967,433      2,169,556         14,457,696
       Non-cash compensation expense related to issuance
         of stock options                                              842,856        119,240          3,699,771
       Non-cash expense related to issuance of notes payable
          and accrued expense for services                                   -              -            857,000
       Non-cash exchange of notes receivable for services                    -              -            150,000
       Non-cash portion of purchased in-process research
          and development                                                    -              -         13,136,000
       Loss on disposal of property and equipment                            -              -            154,940
       Gain on sale of HealthCare Solutions Group                            -              -         (3,766,646)
       Write-off of assets received in acquisition                           -              -              1,281
       Depreciation and amortization                                 1,572,476      3,113,226         10,604,462
       Income tax provision                                                  -              -         (3,331,895)
       Extraordinary loss on extinguishment of debt                          -              -            881,864
       Extraordinary gain on forgiveness of debt                       (78,864)             -           (583,269)
       Changes in assets and liabilities, net of effects
               of acquisitions:
         Accounts receivable, net                                      177,252       (804,690)          (216,678)
         Employee advances                                                   -          7,245            (59,986)
         Interest and other receivables                                 (3,704)       (15,868)           (11,450)
         Inventory                                                      (1,144)       (44,582)           (28,526)
         Prepaid assets                                               (132,920)       (24,161)          (183,767)
         Cash held in escrow                                           (52,069)             -            (90,072)
         Other assets                                                      588         (4,460)          (118,313)
         Accounts payable                                             (379,026)       103,136          2,984,373
         Accrued liabilities                                           247,648        583,542          1,403,749
         Accrued liabilities - related party                          (125,001)        22,403          1,165,943
         Income taxes payable                                          (27,606)             -            (27,606)
         Deferred revenues                                             544,516        529,596          1,258,024
                                                                --------------- --------------    ---------------

       Net cash used in operating activities                        (5,653,490)    (9,958,466)       (69,199,025)
                                                                --------------- --------------    ---------------

Cash flows from investing activities, net of effects
          of acquisitions:
     Proceeds from sale of HealthCare Solutions Group                        -              -         21,805,982
     Acquisition of subsidiaries, net of cash acquired                       -              -        (15,323,173)
     Proceeds from sale of property and equipment                            -              -             50,000
     Purchase of property and equipment                                (62,485)       (67,677)        (3,498,045)
     Investment in intangible assets                                         -              -           (164,460)
     Issuance of notes receivable                                            -              -         (3,228,600)
     Payments received on notes receivable                                   -        245,000          2,128,600
                                                                --------------- --------------    ---------------

       Net cash provided by (used in) investing activities             (62,485)       177,323          1,770,304
                                                                --------------- --------------    ---------------

Cash flows from financing activities:
     Bank overdraft                                                          -       (138,034)                 -
     Convertible promissory note and advances                        3,450,000              -          4,450,000
     Net proceeds (payment) from revolving note payable                      -    (19,988,193)           (49,250)
     Net proceeds (payments) from revolving note payable -
          related parties                                                    -     (1,758,741)        (7,813,537)
     Proceeds from other notes payable                                       -      5,453,760          9,865,427
     Payments on other notes payable                                         -              -         (9,567,806)
     Principal payments on capital lease obligation                          -        (35,054)          (153,390)
     Proceeds from issuance of convertible debentures, net                   -      6,254,240          9,439,240
     Proceeds from sale of warrants                                          -        438,240          1,511,168
     Proceeds from sale of common stock, net                                 -              -         38,175,700
     Proceeds from exercise of warrants                                250,000              -            250,000
     Proceeds from exercise of stock options                           305,952              -            305,952
     Proceeds from sale of preferred stock, net                      1,750,000              -         19,457,346
     Proceeds from sale of common stock and related
          repricing rights subject to redemption, net                        -              -          1,830,000
                                                                --------------- --------------    ---------------

       Net cash provided by (used in) financing activities           5,755,952     (9,773,782)        67,700,850
                                                                --------------- --------------    ---------------

Net (decrease) increase in cash and cash equivalents                    39,977    (19,554,925)           272,129

Cash and cash equivalents at beginning of period                       232,152     20,045,539                  -
                                                                --------------- --------------    ---------------

Cash and cash equivalents at end of period                      $      272,129  $     490,614     $      272,129
                                                                =============== ==============    ===============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>


                       Fonix Corporation and Subsidiaries
                          (A Development Stage Company)

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)



<TABLE>
<CAPTION>
                                                                                October 1,
                                                                                   1993
                                                         Six Months Ended      (Inception) to
                                                             June 30,            June 30,
                                                     --------------------------
Supplemental disclosure of cash flow information:        2000         1999         2000
                                                     ------------- ----------- -------------

<S>                                                  <C>           <C>         <C>
      Cash paid during the period for interest       $          -  $  381,118  $  4,616,701
      Cash paid during the period for income taxes   $     27,606  $        -  $     27,606
</TABLE>

Supplemental Schedule of Non-cash Investing and Financing Activities:

      For the Six Months Ended June 30, 2000:

     Preferred stock dividends of $598,066 were accrued on Series D and Series F
     preferred stock.

     217,223  shares  of  Series D  preferred  stock and  related  dividends  of
     $255,600 were converted into 15,436,378 shares of Class A common stock.

     305,281  shares  of  Series F  preferred  stock and  related  dividends  of
     $2,780,842,  including  $2,750,000  related  to the  beneficial  conversion
     feature  recorded upon issuance,  were  converted into 8,181,950  shares of
     Class A common stock.

     The Company  issued  600,000  warrants  valued at $474,000 to an  executive
     officer  and  director of the  Company as  consideration  for the rights to
     certain pen and voice input technology.

     The Company  issued  228,364  shares of Class A common  stock to two former
     directors  of the Company  upon the  exercise  of 400,000  options as stock
     appreciation rights.

     A total of $3,971,107 in principal of Series C convertible  debentures  and
     related interest of $290,957 were converted into 10,385,364 shares of Class
     A common stock.

     The  Company  issued  4,568,569  shares  of Class A common  stock  upon the
     exercise of repricing  rights  associated  with the common stock subject to
     redemption.

     The Company  issued  250,000 shares of Class A common stock to an unrelated
     party for consulting fees valued at $312,500.

     The  Company  accrued  preferred  stock  dividends   amounting  to  $80,000
     resulting from liquidated damages on Series D preferred stock.

     The  Company  issued  612,069  shares  of Class A common  stock  valued  at
     $688,578 as payment for liquidated  damages amounting to $394,800 and a fee
     for  the  revision  of  certain  terms  of the  preferred  stock  agreement
     amounting to $213,778.

     The Company recorded   deferred  interest expense of $2,116,000  related to
     the beneficial  conversion feature on the equity line of credit. A total of
     $209,695 was recorded as interest expense.

     The Company converted $1,000,000 in advances into 50,000 shares of Series F
     preferred stock.

      For the Six Months Ended June 30, 1999:

     The Company  entered into capital  lease  obligations  for equipment in the
     amount of $57,332.

     Advances  to  employees  totaling  $59,986  were  applied as  payments on a
     related-party note payable.

     143,230  shares  previously  pledged  to a bank  by  certain  officers  and
     directors of the Company as  collateral  for Company  credit card debt were
     sold by the bank and the proceeds were used to pay the debt and the related
     accrued interest in full totaling $244,824.

     100,000 shares of Class A common stock previously  pledged to a law firm by
     certain  officers and directors of the Company as collateral for legal work
     were  sold by the law  firm and the  proceeds  were  used to pay for  legal
     services totaling $72,335.

     Preferred  stock  dividends  of  $997,146  were  recorded  related  to  the
     beneficial  conversion  features  of Series D and E  convertible  preferred
     stock.

     Preferred stock dividends of $432,084 were accrued on Series D and Series E
     convertible preferred stock.

     The Company  issued  200,000 shares of Class A common stock to an unrelated
     party for consulting fees valued at $100,000.

     36,000 shares of Series D convertible preferred stock and related dividends
     of $15,741 were converted into 1,288,479 shares of Class A common stock.

     91,572 shares of Series E convertible preferred stock and related dividends
     of $33,616 were converted into 3,246,183 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.  Certain information
and footnote  disclosures  normally included in financial statements prepared in
accordance with accounting  principles  generally  accepted in the United States
have been condensed or omitted pursuant to such rules and regulations,  although
the Company  believes  that the following  disclosures  are adequate to make the
information presented not misleading.

These  condensed  consolidated  financial  statements  reflect  all  adjustments
(consisting  only of normal  recurring  adjustments)  that,  in the  opinion  of
management,  are necessary to present fairly the financial  position and results
of operations of the Company for the periods  presented.  The Company's business
strategy  is not  without  risk,  and  readers of these  condensed  consolidated
financial  statements  should  carefully  consider the risks set forth under the
heading  "Certain  Significant Risk Factors" in the Company's 1999 Annual Report
on Form 10-K.

Operating  results for the three  months and six months  ended June 30, 2000 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending December 31, 2000. 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 Annual Report on Form
10-K for the year ended December 31, 1999, and its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000.

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.
At June 30, 2000 and 1999,  there were outstanding  common stock  equivalents to
purchase 23,893,822 and 108,565,042 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 and six months ended June
30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,

                                                          2000                            1999
                                                ------------------------------    --------------------------
                                                                    Per                             Per
                                                                   Share                           Share
                                                  Amount           Amount          Amount          Amount
                                                --------------   -------------    -------------   ----------
<S>                                             <C>                               <C>
Net loss from continuing operations             $  (4,778,159)                    $ (4,749,733)
Preferred stock dividends                            (520,574)                        (301,669)
                                                --------------                    -------------
Net loss from continuing operations
    attributable to common stockholders            (5,298,733)       $(0.03)        (5,051,402)   $   (0.08)
Discontinued operations, net of taxes                       --            --        (1,768,052)       (0.02)
Extraordinary items, net of taxes                       46,887            --                --           --
                                                --------------   -------------    -------------   ----------
Net loss attributable to common
    shareholders                                $  (5,251,846)   $    (0.03)      $ (6,819,454)   $   (0.10)
                                                ==============   =============    =============   ==========
Weighted average common shares
    outstanding                                   162,274,479                       67,067,853
                                                ==============                    =============
</TABLE>


<TABLE>
<CAPTION>
                                                              Six Months Ended June 30,

                                                          2000                            1999
                                                ------------------------------    --------------------------
                                                                    Per                             Per
                                                                   Share                           Share
                                                  Amount           Amount          Amount          Amount
                                                --------------   -------------    -------------   ----------
<S>                                             <C>                               <C>
Net loss from continuing operations             $ (10,597,289)                    $(12,821,067)
Preferred stock dividends                          (3,348,066)                      (1,429,230)
                                                --------------                    -------------
Net loss from continuing operations
    attributable to common stockholders           (13,945,355)       $(0.09)       (14,250,297)   $   (0.22)
Discontinued operations, net of taxes                      --            --         (2,991,579)       (0.04)
Extraordinary items, net of taxes                      78,864            --                 --           --
                                                --------------   -------------    -------------   ----------
Net loss attributable to common
     shareholders                               $ (13,866,491)   $    (0.09)      $(17,241,876)   $   (0.26)
                                                ==============   =============    =============   ==========
Weighted average common shares
     outstanding                                  153,123,348                       65,779,527
                                                ==============                    =============
</TABLE>



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

2.  DISCONTINUED OPERATIONS

                                        7


<PAGE>



On September 1, 1999,  the Company  completed the sale of the  operations  and a
significant  portion of the assets of its HealthCare  Solutions Group ("HSG") to
Lernout & Hauspie Speech Products N.V.  ("L&H"),  an unrelated third party. Upon
the closing of the sale,  the Company  discontinued  the  operations of HSG. The
results of  operations  of HSG have been  reported  separately  as  discontinued
operations in the accompanying 1999 and inception to date condensed consolidated
statements of operations.

3.  INTANGIBLE ASSETS

Intangible   assets  consist  of  purchased  core  technology  and  goodwill  in
connection with the acquisitions of AcuVoice,  Inc. ("AcuVoice") and the Papyrus
companies (collectively "Papyrus"),  and direct costs incurred by the Company in
applying for patents  covering its  technologies.  Amortization is computed on a
straight-line  basis over the estimated  useful lives ranging from five to eight
years. Total accumulated  amortization was $5,621,972 and $4,392,457 at June 30,
2000, and December 31, 1999, respectively.

The  carrying  values  of the  Company's  long-lived  assets  are  reviewed  for
impairment  whenever events or changes in  circumstances  indicate that they may
not be  recoverable.  In that event,  the Company would project cash flows to be
generated  from  the use of the  asset  and its  eventual  disposition  over the
remaining  life of the  asset.  If the  projections  indicated  that the cost in
excess of the net asset would not be recoverable,  the Company's  carrying value
of the asset  would be  reduced  by the  estimated  excess of the value over the
projected cash flows.  The Company assesses  impairment of long-lived  assets at
the  lowest  level  for  which  there  are  identifiable  cash  flows  that  are
independent of other groups of assets. As of June 30, 2000, the Company does not
believe  any of its  long-lived  assets  are  impaired.  However,  the amount of
goodwill and other long-lived assets  considered  realizable could be reduced in
the near term based on changing  conditions  and the  Company's  ability to fund
further marketing and development of its products and technologies.

4.  RELATED-PARTY NOTES PAYABLE

In connection with the acquisition of Papyrus in 1998, the Company issued demand
notes  payable  to  former  Papyrus  stockholders  in the  aggregate  amount  of
$1,710,000.  In April 1999, the Company entered into agreements with five former
Papyrus shareholders to reduce the aggregate amounts payable to them under these
notes from $1,632,375 to $1,111,284,  which amount was paid in September 1999. A
balance of $77,625  remains  outstanding  as of June 30, 2000.  The note holders
have made no demand for payment of such notes.

5.  EQUITY LINE OF CREDIT AND CONVERTIBLE PROMISSORY NOTE

On August 8, 2000, the Company entered into a Private Equity Line Agreement (the
"Equity Line  Agreement")  with a private  investor (the "Equity Line Investor")
that gives the Company the right to draw up to $20  million for  operations  and
other purposes. In connection with the Equity Line Agreement, up to $7.5 million
may be drawn by the Company  under the terms of a  convertible  promissory  note
dated June 20,  2000.  The note bears  interest  at six percent  (6%)  annually,
compounded monthly,  and is due June 30, 2001. Under the terms of the promissory
note, the Equity Line Investor has the right to convert,  at its option,  all or
any portion of the  outstanding  principal  and interest  into shares of Class A
common  stock at the lesser of (a) $0.75 or (b) 85 percent of the average of the
three  lowest  closing  bid  prices  of Class A common  stock in the  twenty-day
trading period prior to the date of the conversion.

The balance  available  under the Equity Line Agreement after  offsetting  draws
under the promissory  note described above is available to the Company through a
mechanism  of drawdowns  and puts of stock.  The Company is entitled to drawdown
funds and to put to the Equity Line  Investor  shares of Class A common stock in
lieu of repayment of the drawdown.  The number of shares issued is determined by
dividing  the dollar  amount of the drawdown 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 is required to fund the  amounts  requested  by the Company  within two
trading days after the seven trading-day period.

As of June 30,  2000,  the  Company  had  drawn  $3,450,000  on the  convertible
promissory note and recorded  $207,000 as interest  expense for the three months
and six months ended June 30, 2000. Subsequent to June 30,

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<PAGE>



2000, an additional  $1,014,516 has been drawn on the note. As of June 30, 2000,
the  Company  recorded  a  beneficial   conversion  feature  in  the  amount  of
$2,116,000, of which $209,695 was amortized into interest expense.

In connection with the Equity Line Agreement,  the Company granted  registration
rights  to the  Equity  Line  Investor.  Accordingly,  the  Company  has filed a
registration   statement  describing  the  Class  A  common  stock  issuable  in
connection  with draws on the Equity Line  Agreement  and is required to use its
best efforts to cause the  registration  statement  to be declared  effective by
October 15,  2000.  In the event that the  registration  statement  has not been
declared  effective by the  Securities  and Exchange  Commission  by October 15,
2000,  the Company is  obligated  to pay  liquidated  damages to the Equity Line
Investor  at the rate of two  percent  (2%) of the  outstanding  balance  of the
amounts drawn on the promissory  note,  beginning on the first day of the 30-day
period  following  that date and the first day of each 30-day period  thereafter
until the registration  statement is declared  effective.  Upon effectiveness of
the  registration  statement,  the Equity Line Investor  shall have the right to
convert the dollar amount  accrued as liquidated  damages into shares of Class A
common stock at the same conversion terms as the convertible promissory note.

6.  SERIES C CONVERTIBLE DEBENTURES

During the six months ended June 30,  2000,  holders of the  Company's  Series C
convertible  debentures converted $3,971,107 of principal together with interest
accrued thereon into 10,385,364 shares of Class A common stock.

7.  PREFERRED STOCK

Series D Preferred  Stock - During the six months ended June 30,  2000,  217,223
shares of Series D convertible  preferred  stock  together with related  accrued
dividends of $255,600 were  converted into  15,436,378  shares of Class A common
stock. As of June 30, 2000,  164,500 shares of Series D preferred stock remained
outstanding.

The  Class A  common  shares  underlying  the  original  issue  of the  Series D
preferred  stock were  covered in a  registration  statement  which was declared
effective on August 11, 1999. However, in the ensuing months, due to the accrual
of dividends and the decline in the price of the Company's Class A common stock,
the Class A common shares  converted and convertible from the Series D preferred
stock exceed the number of shares  available under the  registration  statement.
Under the terms of the  Series D  preferred  stock  agreement,  the  holders  of
approximately  2,700,000  unregistered shares are entitled to liquidated damages
in the amount of 2% of the  original  value of the Series D shares  every thirty
days while such  shares are not  registered  for  resale.  During the six months
ended June 30,  2000,  the Company  recorded a preferred  stock  dividend in the
amount of $80,000  related to such liquidated  damages.  On August 10, 2000, the
Company filed a registration  statement  covering these shares. The Company will
continue  to accrue a  preferred  stock  dividend of $25,000 per month until the
registration statement is declared effective.

Similarly,  the holder of the  remaining  164,500  shares of Series D  preferred
stock is entitled to liquidated  damages based upon the same  calculation  until
the underlying Class A common shares are registered for resale.  However,  under
the terms of a letter  agreement dated June 30, 2000, the holder of the Series D
shares waived the liquidated  damages and revised certain terms of conversion of
the Series D shares to provide a minimum conversion rate of $0.75 until December
31, 2000.  The Company  issued  612,069 shares of Class A common stock valued at
$688,578  on June 30,  2000,  in  consideration  for the waiver and  revision in
terms.  Of that amount,  $394,800  was recorded as a preferred  dividend and the
balance of $293,778 was recorded in other operating expense.  The Class A common
shares  issued to the  holder of the Series D  preferred  shares and the Class A
common shares  underlying the outstanding  Series D shares were also included in
the registration statement filed on August 8, 2000.

Series F Preferred Stock - Effective  February 1, 2000, the Company entered into
an agreement  with five  investors  whereby it sold a total of 290,000 shares of
its Series F  convertible  preferred  stock for  $2,750,000  in cash.  Dividends
accrued on the stated  value ($20 per share) of Series F  convertible  preferred
stock at a rate of six  percent  (6%) per year,  were  payable  annually or upon
conversion  in cash or  common  stock at the  option  of the  Company,  and were
convertible  into  shares  of Class A common  stock at any time at the  holders'
option.  The Series F  preferred  stock was  convertible  into shares of Class A
common  stock at a price of $0.75 per share  during the first 90 days  following
the close of the  transaction,  and thereafter at a price equal to 85 percent of
the average of the three lowest  closing bid prices in the 20-day trading period
prior to the conversion of the Series F preferred stock. Using

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<PAGE>



the  conversion  terms most  beneficial to the holders,  the Company  recorded a
preferred  stock dividend of $2,750,000 for the  beneficial  conversion  feature
related to these shares on the date the Series F preferred stock was issued.

On May 22,  2000,  the Series F investors  and the  Company  agreed to amend the
Series F Stock  Purchase  Agreement  adding a sixth  investor and increasing the
number of Series F preferred  shares  issued by 26,036  shares.  Other terms and
provisions of the Series F preferred stock remained the same.

During the six months ended June 30, 2000,  305,281 shares of Series F preferred
stock  together with  dividends  accrued  thereon were  converted into 8,181,950
shares of Class A common stock.  As of June 30, 2000,  10,755 shares of Series F
preferred stock remained outstanding.

8.  COMMON STOCK AND COMMON STOCK SUBJECT TO REDEMPTION

Class A Common  Stock - During the six months  ended June 30,  2000,  34,003,692
shares of Class A common stock were issued in  connection  with  conversions  of
debentures and preferred stock (see Notes 6 and 7). Also during the same period,
735,228  shares of Class A common  stock were issued as a result of the exercise
of stock options, stock appreciation rights and warrants.

On May 8,  2000,  the  Company  issued  250,000  shares of Class A common  stock
(having a market value of $312,500 at that date) to an unrelated  third party in
consideration for services rendered.

On June 30,  2000,  the Company  issued  612,069  shares of Class A common stock
(having a market  value of $688,578 on that date) to the holder of the shares of
Series D preferred stock in  consideration  for the waiver of certain rights and
amendment of certain  terms  relating to  conversion  of such Series D preferred
stock (see Note 7).

Common Stock Subject to Redemption - In  connection  with a private  offering of
Class A common stock  completed  in December  1998,  the  purchaser of 1,801,802
shares of Class A common stock received an equal number of repricing rights (the
"Repricing Rights"), which provided for the issuance of shares of Class A common
stock based upon fluctuations of the market price of the stock. Also included in
the private offering were certain  repurchase  rights (the "Repurchase  Rights")
which could, upon the occurrence of certain events, have required the Company to
repurchase  all or a portion of the holder's  Class A common shares or Repricing
Rights received in the private offering.

On February 14, 2000,  the holder of the Repricing  Rights  converted its rights
into  4,568,569  shares of Class A common  stock and  subsequently  sold all the
shares.  Simultaneously,  the initial  shares of Class A common stock subject to
the Repurchase Rights were sold.  Because the Company has no further  obligation
under  the  Repricing  Rights  or the  Repurchase  Rights  as a result  of these
transactions,  $1,830,000 recorded as "common stock and related repricing rights
subject to  redemption"  in the  Company's  December  31, 1999  balance has been
reclassified to Stockholders'  Equity as an increase to Class A common stock and
additional paid-in capital.

Common Stock Options - On January 31, 2000,  the board of directors  approved an
increase of 10,000,000  shares to be available under the Company's 1998 Employee
Incentive and Stock Option Plan. A  registration  statement on Form S-8 covering
these  additional  shares was filed with the Securities and Exchange  Commission
and declared  effective  on February 14, 2000.  During the six months ended June
30, 2000, the Company  granted  2,562,400  options to purchase shares of Class A
common stock at exercise prices ranging from $0.28 to $1.50 per share.  The term
of all options  granted  during this period is ten years from the date of grant.
Of the stock options granted,  options to purchase 2,339,000 shares vested March
31, 2000, and the balance vest over the three years following  issuance.  Of the
total granted, 197,000 were issued to consultants for services performed for the
Company and were recorded as consulting expense in the amount of $53,190,  based
upon the fair market value  determined  using the  Black-Scholes  option pricing
model. The remainder of the options were granted to employees and had a weighted
average  fair  market  value of $0.30 per share using the  Black-Scholes  option
pricing  model.  Had  compensation  expense for these  options been  recorded in
accordance  with  the  method  prescribed  by  SFAS  No.  123,  "Accounting  for
Stock-Based Compensation", the Company's net loss would have been $14,559,508 or
$0.10 per share for the six months ended June 30, 2000. As of June 30, 2000, the
Company  had  options to purchase a total of  16,309,834  Class A common  shares
outstanding.

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<PAGE>



Warrants - On January 19, 2000, the Company issued  warrants for the purchase of
300,000  shares of Class A common  stock for services  previously  rendered by a
professional services firm. The warrants have a three year life, exercise prices
ranging from $0.28 to $1.25 per share and vest as follows: 100,000 in March 2000
and 200,000 in September  2000.  The warrants  were valued at $45,000  using the
Black-Scholes  option  pricing  model  and were  issued  in  satisfaction  of an
obligation that was recorded in December 1999.

In February  2000,  the Company  entered  into an  agreement  with an  executive
officer and director of the Company to purchase, all of his rights and interests
in certain  methods and apparatus for integrated  voice and pen input for use in
computer systems. In consideration for this technology,  the Company granted the
executive  officer  warrants to purchase 600,000 shares of the Company's Class A
common  stock at an  exercise  price of  $1.00  per  share.  The  warrants  were
immediately  exercisable  and expire February 10, 2010. The warrants were valued
at $0.79  per share and were  recorded  as  purchased  in-process  research  and
development.  The Company granted the executive  officer the right to repurchase
the technology from the Company at fair market value if the Company subsequently
determines not to commercialize the related technologies or products.

On May 3, 2000,  warrants for the  purchase of 200,000  shares of Class A common
stock were  exercised at a price of $1.25 per share,  resulting in cash proceeds
of $250,000.

9.  RELATED-PARTY  TRANSACTIONS

The Company rents office space from Studdert Companies Corporation ("SCC") under
a sublease  that is  guaranteed by two officers and directors of the Company who
are also officers,  owners and directors of SCC. The sublease  monthly  payments
are  $10,368.  The Company  believes  the terms of the  sublease are at least as
favorable as the terms that could have been obtained from an unaffiliated  third
party in a similar transaction.

10.  PRODUCT DEVELOPMENT AND RESEARCH AGREEMENTS

Synergetics  - Prior  to March  1997,  the  Company's  scientific  research  and
development  activities  were  conducted  solely by a third party,  Synergetics,
Inc.,  pursuant to product development and assignment  contracts  (collectively,
the  "Synergetics  Agreement").  Under that  arrangement,  Synergetics  provided
personnel and facilities to conduct research and product development activities.
The Company financed the Synergetics  research and development  activities on an
as-required  basis and the Company was obligated to pay to Synergetics a royalty
of  10  percent  (the   "Royalty")  of  net  revenues  from  sales  of  products
incorporating   Synergetics'   "VoiceBox"   technology  as  well  as  technology
derivative   thereof.   Synergetics   compensated   its  developers  and  others
contributing to the development effort, in part, by granting "Project Shares" to
share in a portion of the Royalty received by Synergetics. On April 6, 1998, the
Company and Synergetics  entered into a Royalty  Modification  Agreement whereby
the Company agreed to offer an aggregate of 4,800,000  non-transferable  Class A
common  stock  purchase  warrants  to the  holders  of  the  Project  Shares  in
consideration for which Synergetics  agreed to cancel any further  obligation on
the part of the Company to pay the Royalty.  The exercise  price of the warrants
was to be $10 per share and the  warrants  would  not be  exercisable  until the
first to occur of (1) the date that the per share closing bid price of the Class
A common  stock was equal to or greater than $37.50 per share for a period of 15
consecutive  trading days, or (2) September 30, 2000.  Effective March 31, 2000,
the  Company  and  Synergetics  entered  into a  Restated  Royalty  Modification
Agreement   whereby  the  Company  agreed  to  pay   Synergetics   $28,000  (the
"Cancellation  Amount")  to cancel  the  obligation  of the  Company  to pay the
Royalty or issue the 4,800,000  warrants.  The Company has paid the Cancellation
Amount  to  Synergetics  and the  Royalty  and  warrant  obligations  have  been
canceled. The Company has no further obligations to Synergetics.

IMC2 - In March 1998, the Company entered into a professional services agreement
with IMC2 Corporation  ("IMC2") a research and development  entity, to assist in
the   continuing   development   of  specific   automated   speech   recognition
technologies.  The president of IMC2 is also the president of  Synergetics.  The
professional  services  agreement  is for a term of 36 months and  requires  the
Company to make monthly  payments of $22,000.  Under the terms of the agreement,
the Company expended a total of $66,000 in each of the three-month periods ended
June 30, 2000 and 1999, and $132,000 in each of the six-month periods ended June
30, 2000 and 1999.

11.  COMMITMENTS AND CONTINGENCIES

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<PAGE>



Executive Employment  Agreements - On November 1, 1996, the Company entered into
employment  contracts  with three  executive  officers (one of whom,  Stephen M.
Studdert,  is no  longer an  executive  officer)  which  originally  expired  on
December  31,  2001,  but were amended  effective  January 31,  2000,  to expire
December 31, 2005. As amended, the annual base salary for each executive officer
is $309,400 and may be adjusted upward in future years as deemed  appropriate by
the board of  directors.  As bonus  compensation  for extending the term of each
agreement at a compensation level less than provided in the original  agreement,
each  executive was granted  1,400,000  options,  effective July 19, 2000, at an
exercise price of $1.05. In January 1999, Mr. Studdert resigned as the Company's
chief  executive  officer and entered  into a separation  agreement  pursuant to
which Mr.  Studdert will be paid $250,000 per year through  January 31, 2001 and
$100,000 for the 12 months ending January 31, 2002. His employment  contract was
canceled.

In January 1998,  the Company  entered into an employment  contract with another
executive  officer  which  expires in January  2001.  The minimum  annual salary
required by this agreement was $225,000, but was reduced 30% by mutual agreement
effective  February 1999, in connection  with cost  reductions  initiated by the
Company.  In the event that,  during the contract term, both a change of control
occurs and, within six months after such change in control occurs, the executive
officer's  services  are  terminated  by the Company  for any reason  other than
cause,  death or retirement,  the executive officer shall be entitled to receive
an amount in cash equal to all base salary then and thereafter payable within 30
days of termination.

Employment  Agreement - In January 1998, the Company  entered into an employment
contract with an employee which expires in January 2001. The annual salary under
this agreement was $180,000,  but was reduced 30% by mutual agreement  effective
February 1999, in connection with cost reductions initiated by the Company. This
level of compensation continued through June 30, 2000. By mutual agreement,  the
employee's contract was terminated  effective June 30, 2000, in return for which
the employee received options to purchase 50,000 shares of the Company's Class A
common stock at a price of $1.125 per share, the market price on that date.

12. LITIGATION

Oregon Graduate  Institute - On July 28, 1999, Oregon Graduate Institute ("OGI")
filed a notice of default,  demand for mediation and demand for arbitration with
the American  Arbitration  Association.  In its demand,  OGI  asserted  that the
Company was in default under three separate  agreements  between the Company and
OGI in the total  amount  of  $175,000.  On  September  23,  1999,  the  Company
responded to OGI's demand and denied the  existence of a default under the three
agreements  identified by OGI.  Moreover,  the Company  asserted a  counterclaim
before the American  Arbitration  Association  against OGI in an amount not less
than  $250,000.  Neither  OGI nor the Company  have  undertaken  any  discovery.
However,  a hearing has been set for September 19-21, 2000. The Company believes
the OGI arbitration claim is without merit, and management intends to vigorously
pursue its counterclaim against OGI.

The  Company is involved in other  lawsuits,  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 or results of operations
of the Company.

                                       12


<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.  The Company's  actual results could differ  materially  from the
results  anticipated  by  the  Company  and  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, 1999.

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
electronic  devices.  Through June 30, 2000, the Company has incurred cumulative
losses amounting to $108,834,399,  excluding cumulative losses from discontinued
operations of $8,462,387 and net  extraordinary  losses of $298,595.  Losses are
expected to continue  until the effects of marketing  and sales efforts begin to
take effect, if ever.

Beginning in 1999 and continuing  through 2000, Fonix management is transforming
its strategic focus from technology  research,  development and acquisition into
sales and  marketing  and product  delivery.  For the six months  ended June 30,
2000, the Company  expended  $1,019,947 in sales and marketing  activities.  The
Company  is making  this  transition  while  continuing  to  achieve  technology
upgrades in order to maintain distinct competitive technological advantages.

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

In February 1999, in connection  with this  transition in strategic  focus,  the
Company  undertook an aggressive  program of cost  reduction  emphasized in four
areas of operations:

          1.   Salaries, wages and related costs - Salaries greater than $50,000
               per year were reduced 20 to 30 percent;

          2.   Third-party consultants - Reliance on third-party consultants was
               reduced in the areas of research and  development,  marketing and
               public relations;

          3.   Occupancy costs - Office space was reduced to accommodate current
               operating needs; and

          4.   Asset  acquisition  -  Acquisition  of new  operating  assets was
               significantly restricted.

Implementation  of these measures reduced the monthly deficit in cash flows from
operating activities from approximately $3 million in early 1999 to less than $1
million in December  1999.  For the six months ended June 30, 2000,  the average
monthly deficit in cash flows from operating activities was $942,000 as compared
to $1,660,000 for the same period in 1999.

On May 19,  1999,  Fonix  signed  an  agreement  to sell  the  operations  and a
significant  portion of the assets of its  HealthCare  Solutions  Group ("HSG"),
which  consisted  primarily  of  the  operations  of  Articulate  Systems,  Inc.
("Articulate"),  to Lernout & Hauspie Speech Products N.V. ("L&H"), an unrelated
third party.  The sale closed September 1, 1999. The proceeds from the sale were
used to reduce certain of the Company's liabilities and provided working capital
to allow Fonix to focus on marketing and developing technologies and products.

                                       13


<PAGE>



Results of Operations

The results of operations discussed below give effect to the sale of the HSG and
the  classification  of its net assets and operating  activities as discontinued
operations

Three months ended June 30, 2000, compared with three months ended June 30, 1999

During the three months ended June 30, 2000,  the Company  recorded  revenues of
$143,825,  reflecting a decrease of $87,746 from the same period in the previous
year.  Revenues in 1999  included a payment of $200,000  from one  customer  for
license fees.  There were no large,  single  payments in 2000, but revenues from
ongoing  sales and  licensing  activities  have  increased  in 2000  from  1999.
Revenues in 2000 and 1999 were  generated  through  sales and  licensing  of the
Company's products and technologies.

Selling,  general and administrative expenses were $2,455,315 and $1,944,726 for
the three months ended June 30, 2000 and 1999, respectively. The net increase of
$510,589  is a  primarily a result of  non-cash  consulting  and other  expenses
related to financing arrangements amounting to $606,278.  Excluding these costs,
selling, general and administrative expenses actually decreased by approximately
$96,000 for the three months ended June 30, 2000, as compared to the same period
for 1999. This net decrease includes  reductions in legal and accounting fees of
$202,000,  occupancy  costs of $95,000,  other  consulting  fees of $139,000 and
other  operating  expenses of $246,000,  all resulting  from the  cost-reduction
measures initiated in 1999. However,  offsetting these reductions were increases
in  compensation-related  expenses of $518,000  and  travel-related  expenses of
$84,000,  reflecting  increased  emphasis and activity in  marketing,  sales and
business development efforts.

The Company  incurred  product  development and research  expenses of $1,478,362
during the three months  ended June 30,  2000,  a decrease of $380,163  from the
same  period  in the  previous  year.  This  decrease  is due  primarily  to the
transition in strategic focus and the resulting cost reduction program initiated
in February 1999.  Decreases of $207,000 in  compensation  related  expenses and
$180,000 in consulting, occupancy and travel-related expenses are reflections of
successful efforts in these cost reduction measures.

The Company incurred losses from operations of $4,400,639 and $4,237,238  during
the three months  ended June 30, 2000 and 1999,  respectively.  While  operating
losses for the three months ended June 30, 2000  actually  increased  from those
incurred in the three  months  ended June 30,  1999, a reduction in the negative
cash flows of the Company resulted from the disposal of the HealthCare Solutions
Group,  as well as decreases in cash outlays for  operating  expenses  described
above.

Six months ended June 30, 2000, compared with six months ended June 30, 1999

During the six months  ended June 30,  2000,  the Company  recorded  revenues of
$200,272,  reflecting a decrease of $85,105 from the same period in the previous
year.  Revenues in 1999  included a payment of $200,000  from one  customer  for
license fees.  There were no large,  single  payments in 2000, but revenues from
ongoing sales and licensing activities has increased in 2000 from 1999. Revenues
in 2000 and 1999 were  generated  through  sales and  licensing of the Company's
products and technologies.

Selling,  general and administrative expenses were $5,793,921 and $4,689,793 for
the six months  ended June 30,  2000 and 1999,  respectively.  Included in these
expenses  for the six months  ended June 30,  2000,  are  compensation-  related
charges  in the  amount  of  $816,667  resulting  from  the  exercise  of  stock
appreciation  rights and  revaluation  of options  previously  granted for which
terms were  revised.  Also  included are charges  related to warrants and shares
issued to consultants and advisors  assisting in the planning and development of
the  Company's  strategic  focus  and  other  finance-related  matters  totaling
$1,572,934.   Excluding  these  charges,  selling,  general  and  administrative
expenses incurred in ongoing operations  actually decreased by $1,285,473.  This
net  decrease  is a  reflection  of ongoing  cost  reduction  efforts  that have
resulted in decreases in legal and  accounting  expenses of $487,000,  occupancy
expenses of  $213,000,  consulting  expenses of  $232,000,  and other  operating
expenses of $377,000.

The Company  incurred  product  development and research  expenses of $2,929,120
during the six months  ended June 30, 2000,  a decrease of  $1,442,230  from the
same  period in the  previous  year.  This  decrease  was due  primarily  to the
transition in strategic focus and the resulting cost reduction program initiated
in February 1999. Decreases of

                                       14


<PAGE>



$980,000 in  compensation-related  expenses,  $158,000 in occupancy  costs,  and
$285,000 in consulting  expenses are reflections of successful  efforts in these
cost reduction measures.

The Company incurred purchased  in-process  research and development  expense of
$474,000 resulting from the purchase of the rights to certain technology from an
executive  officer and director of the Company.  The executive  officer received
warrants to purchase 600,000 shares of Class A common stock at an exercise price
of $1.00 per share.

The Company  incurred  losses from  operations of  $10,217,641  and  $10,104,224
during  the six  months  ended  June 30,  2000  and  1999,  respectively.  While
operating losses for the six months ended June 30, 2000, actually increased from
those  incurred  in the six  months  ended June 30,  1999,  a  reduction  in the
negative cash flows of the Company  resulted from the disposal of the HealthCare
Solutions  Group,  as well as decreases in cash outlays for  operating  expenses
described above.

Net other  expense  was  $379,648  for the six  months  ended June 30,  2000,  a
decrease of  $2,337,195  from the six months ended June 30, 1999.  This decrease
was due primarily to $1,942,000 in interest and finance charges  incurred in the
six months ended June 30, 1999, relative to the issuance of Series C convertible
debentures in January and March,  1999, and interest  accrued on the outstanding
balance  thereafter.   Charges  incurred  in  2000  include  fees  paid  on  the
convertible  promissory  note and equity line and the  amortization  of deferred
interest expense resulting from the related beneficial conversion feature.

Liquidity and Capital Resources

From its inception,  the Company's  principal source of capital has been private
and other exempt sales of its debt and equity securities.  The Company continues
to  raise  additional  funds  in like  manner  to  satisfy  its  cash  operating
requirements  for the  foreseeable  future.  Because the Company  presently  has
limited revenue from operations, it will rely primarily on financing through the
sale of its equity and debt  securities to satisfy future  capital  requirements
until such time as sufficient revenue is generated through third-party licensing
or co-development  arrangements to satisfy its ongoing  operating  requirements.
There can be no  assurance  that the Company will be able to secure this funding
or  that  the  terms  of  such  financing  will  be  favorable  to the  Company.
Furthermore,  the issuance of equity or debt securities  which are or may become
convertible  into equity  securities  of the  Company may result in  substantial
dilution to the stockholders of the Company.

Total  assets were  $17,715,130  at June 30, 2000  compared  to  $19,173,147  at
December 31,  1999.  Current  assets  increased by less than $500 to $481,378 at
June 30, 2000 from $480,885 at December 31, 1999. Current liabilities  increased
by  $2,374,708 to  $7,661,389  during the same period.  The Company had negative
working capital of $7,180,011 as of June 30, 2000,  compared to negative working
capital of $4,804,796 at December 31, 1999.  The change in working  capital from
December 31, 1999,  to June 30, 2000,  reflects  $3,450,000  received  under the
terms of the convertible promissory note.

Equity Line of Credit

On August 8, 2000, the Company entered into a Private Equity Line Agreement (the
"Equity Line  Agreement")  with a private  investor (the "Equity Line Investor")
that gives the Company the right to draw up to $20  million for  operations  and
other purposes. In connection with the Equity Line Agreement, up to $7.5 million
may be drawn by the Company  under the terms of a  convertible  promissory  note
dated June 20,  2000.  The note bears  interest  at six percent  (6%)  annually,
compounded monthly,  and is due June 30, 2001. Under the terms of the promissory
note, the Equity Line Investor has the right to convert,  at its option,  all or
any portion of the  outstanding  principal  and interest  into shares of Class A
common  stock at the lesser of (a) $0.75 or (b) 85 percent of the average of the
three  lowest  closing  bid  prices  of Class A common  stock in the  twenty-day
trading period prior to the date of the conversion.

The balance  available  under the Equity Line Agreement after  offsetting  draws
under the promissory  note described above is available to the Company through a
mechanism  of drawdowns  and puts of stock.  The Company is entitled to drawdown
funds and to put to the Equity Line  Investor  shares of Class A common stock in
lieu of repayment of the drawdown.  The number of shares issued is determined by
dividing the dollar amount of the drawdown by 90

                                       15


<PAGE>



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  is  required  to fund the  amounts
requested  by the Company  within two trading  days after the seven  trading-day
period.

As of June 30,  2000,  the  Company  had  drawn  $3,450,000  on the  convertible
promissory note and recorded  $207,000 as interest  expense for the three months
and six months ended June 30, 2000.  Subsequent  to June 30, 2000, an additional
$1,014,516 has been drawn on the note. As of June 30, 2000, the Company recorded
a beneficial  conversion feature in the amount of $2,116,000,  of which $209,695
was amortized into interest expense.

In connection with the Equity Line Agreement,  the Company granted  registration
rights  to the  Equity  Line  Investor.  Accordingly,  the  Company  has filed a
registration   statement  describing  the  Class  A  common  stock  issuable  in
connection with draws under the Equity Line Agreement and is required to use its
best efforts to cause the  registration  statement  to be declared  effective by
October 15,  2000.  In the event that the  registration  statement  has not been
declared  effective by the  Securities  and Exchange  Commission  by October 15,
2000,  the Company is  obligated  to pay  liquidated  damages to the Equity Line
Investor  at the rate of two  percent  (2%) of the  outstanding  balance  of the
amounts drawn on the promissory  note,  beginning on the first day of the 30-day
period  following  that date and the first day of each 30-day period  thereafter
until the registration  statement is declared  effective.  Upon effectiveness of
the  registration  statement,  the Equity Line Investor  shall have the right to
convert the dollar amount  accrued as liquidated  damages into shares of Class A
common stock at the same conversion terms as the convertible promissory note.

Preferred Stock

During  the six  months  ended  June  30,  2000,  217,223  shares  of  Series  D
convertible  preferred stock together with related accrued dividends of $255,600
were converted into  15,436,378  shares of Class A common stock.  As of June 30,
2000, 164,500 shares of Series D preferred stock remained outstanding.

The  Class A  common  shares  underlying  the  original  issue  of the  Series D
preferred  stock were  covered in a  registration  statement  which was declared
effective on August 11, 1999. However, in the ensuing months, due to the accrual
of dividends and the decline in the price of the Company's Class A common stock,
the Class A common shares  converted and convertible from the Series D preferred
stock exceed the number of shares  available under the  registration  statement.
Under the terms of the  Series D  preferred  stock  agreement,  the  holders  of
approximately  2,700,000  unregistered shares are entitled to liquidated damages
in the amount of 2% of the  original  value of the Series D shares  every thirty
days while such  shares are not  registered  for  resale.  During the six months
ended June 30,  2000,  the Company  recorded a preferred  stock  dividend in the
amount of $80,000  related to such liquidated  damages.  On August 10, 2000, the
Company filed a registration  statement  covering these shares. The Company will
continue  to accrue a  preferred  stock  dividend of $25,000 per month until the
registration statement is declared effective.

Similarly,  the  remaining  holder of the remaining  164,500  shares of Series D
preferred  stock  is  entitled  to  liquidated   damages  based  upon  the  same
calculation  until the  underlying  Class A common  shares  are  registered  for
resale.  However, under the terms of a letter agreement dated June 30, 2000, the
holder of the Series D shares waived the liquidated  damages and revised certain
terms of conversion of the Series D shares to provide a minimum  conversion rate
of $0.75 until  December 31, 2000.  The Company issued 612,069 shares of Class A
common  stock  valued at $688,578 on June 30,  2000,  in  consideration  for the
waiver and  revision  in terms.  Of that  amount,  $394,800  was  recorded  as a
preferred  dividend and the balance of $293,778 was recorded in other  operating
expense.  The  Class A  common  shares  issued  to the  holder  of the  Series D
preferred shares and the Class A common shares underlying the outstanding Series
D shares were also  included in the  registration  statement  filed on August 8,
2000.

Effective  February 1, 2000,  the Company  entered into an  agreement  with five
investors  whereby it sold a total of 290,000  shares of its Series F  preferred
stock for $2,750,000 in cash.  Dividends  which accrued on the stated value ($20
per share) of Series F preferred  stock at a rate of six percent  (6%) per year,
were payable  annually or upon  conversion in cash or common stock at the option
of the Company,  and were convertible into shares of Class A common stock at any
time at the holders'  option.  The Series F preferred stock was convertible into
shares of Class A common stock at a price of $0.75 per share during the first 90
days following the close of the transaction,  and thereafter at a price equal to
85 percent of the average of the three  lowest  closing bid prices in the 20-day
trading

                                       16


<PAGE>



period prior to the  conversion  of the Series F  convertible  preferred  stock.
Using the conversion terms most beneficial to the holders,  the Company recorded
a preferred stock dividend of $2,750,000 for the beneficial  conversion  feature
related to these shares on the date the Series F preferred stock was issued.

On May 22,  2000,  the Series F investors  and the  Company  agreed to amend the
Series F Stock  Purchase  Agreement  adding a sixth  investor and increasing the
number of Series F preferred  shares  issued by 26,036  shares.  Other terms and
provisions of the Series F preferred stock remained the same.

During the six months ended June 30, 2000,  305,281 shares of Series F preferred
stock along with dividends  accrued thereon were converted into 8,181,950 shares
of  Class A common  stock.  As of June  30,  2000,  10,755  shares  of  Series F
preferred stock remained outstanding.

Stock Options

During the six months  ended  June 30,  2000,  the  Company  granted  options to
purchase  2,562,400  shares of Class A common stock at exercise  prices  ranging
from $0.28 to $1.50 per share.  The term of all options  granted during this six
month period is ten years from the date of grant.  Of the stock options  issued,
options to purchase 2,339,000 shares vested March 31, 2000, and the balance vest
over the three years following issuance.  As of June 30, 2000, the Company had a
total of 16,549,834 options to purchase Class A common shares outstanding.

Also during the six months  ended June 30,  2000,  options to  purchase  306,864
shares of Class A common  stock were  exercised  resulting  in cash  proceeds of
$305,952.  During the same period,  228,364  shares of Class A common stock were
issued as a result of the exercise of stock appreciation rights.

Warrants

On January 19,  2000,  the Company  issued  warrants for the purchase of 300,000
shares of Class A common stock for services rendered by a professional  services
firm. The warrants have a three year life, exercise prices ranging from $0.28 to
$1.25  per share and vest as  follows:  100,000  in March  2000 and  200,000  in
September  2000.  The warrants  were valued at $45,000  using the  Black-Scholes
pricing model and were issued in satisfaction of an obligation that was recorded
in December 1999.

In February  2000,  the Company  entered into an  agreement to purchase  from an
executive  officer and director of the Company,  all of his rights and interests
in certain  methods and apparatus for integrated  voice and pen input for use in
computer systems. In consideration for this technology,  the Company granted the
executive  officer  warrants to purchase 600,000 shares of the Company's Class A
common  stock  at an  exercise  price of  $1.00  per  share.  The  warrants  are
immediately  exercisable  and expire February 10, 2010. The warrants were valued
at $0.79  per share and were  recorded  as  purchased  in-process  research  and
development.  The Company granted the executive  officer the right to repurchase
the technology from the Company at fair market value if the Company subsequently
determines not to commercialize the pen/voice technologies or products.

During the six months ended June 30, 2000,  warrants for the purchase of 200,000
shares of Class A common  stock were  exercised  resulting  in cash  proceeds of
$250,000.  As of June 30, 2000,  warrants for the purchase of 3,725,000 share of
Class A common stock remain outstanding.

Other

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

Outlook

The  Company  believes  that its core  technologies,  namely,  automated  speech
recognition,    text-to-speech   and   handwriting    recognition   (the   "Core
Technologies"), will be the platform for the next generation of automated

                                       17


<PAGE>



speech  technologies 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  Company's  Core
Technologies  are based on proprietary,  patented  technology.  The Company will
continue  to  seek  patent  protection  of the  Core  Technologies  as  well  as
technologies  and  inventions  derived  from the know  how,  assets  and  rights
acquired  from  past  acquisitions.   Management   believes  the  Company's  HUI
technologies  provide a  competitive  advantage  compared to other  technologies
available in the marketplace.

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
described above is not without risk, and shareholders  and others  interested in
the Company and its common stock should  carefully  consider the risks set forth
under the heading  "Certain  Significant  Risk  Factors" in the  Company's  1999
Annual Report on Form 10-K, Item 1, Part I.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Oregon Graduate  Institute - On July 28, 1999, Oregon Graduate Institute ("OGI")
filed a notice of default,  demand for mediation and demand for arbitration with
the American  Arbitration  Association.  In its demand,  OGI  asserted  that the
Company was in default under three separate  agreements  between the Company and
OGI in the total  amount  of  $175,000.  On  September  23,  1999,  the  Company
responded to OGI's demand and denied the  existence of a default under the three
agreements  identified by OGI.  Moreover,  the Company  asserted a  counterclaim
before the American  Arbitration  Association  against OGI in an amount not less
than  $250,000.  Neither  OGI nor the Company  have  undertaken  any  discovery.
However,  a hearing has been set for September 19-21, 2000. The Company believes
the OGI arbitration claim is without merit, and management intends to vigorously
pursue its counterclaim against OGI.

The  Company is involved in other  lawsuits,  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 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 June 30,
2000, 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:

         On May 8, 2000, the Company issued 250,000 shares of its Class A common
         stock to  consultants  for services  rendered.  The Company issued such
         shares without  registration  under the 1933 Act in reliance on section
         4(2)  of the  1933  Act  and  the  rules  and  regulations  promulgated
         thereunder.  The  shares  of  Class  A  common  stock  were  issued  as
         restricted securities and the certificates representing the shares were
         stamped  with a  restrictive  legend  to  prevent  any  resale  without
         registration under the 1933 Act or pursuant to an exemption.

         On June 30,  2000,  the Company  issued  612,069  shares of its Class A
         common   stock  to  holders  of  its  Series  D   preferred   stock  in
         consideration  for the waiver of  liquidated  damages  and  revision of
         certain terms of the Series D preferred  stock  agreement.  The Company
         issued such shares without  registration under the 1933 Act in reliance
         on  section  4(2)  of the  1933  Act  and  the  rules  and  regulations
         promulgated thereunder.  The shares of Class A common stock were issued
         as restricted  securities and the certificates  representing the shares
         were stamped with a  restrictive  legend to prevent any resale  without
         registration under the 1933 Act or pursuant to an exemption.

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<PAGE>



Item 6.  Exhibits and Reports on Form 8-K

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

        Exhibit No.       Description of Exhibit

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

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

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

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

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

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

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

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

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

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

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

                                       19


<PAGE>



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

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

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

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

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

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

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

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

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

         (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

                                       20


<PAGE>




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

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

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

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

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

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

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

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

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

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

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

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


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<PAGE>



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

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

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

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

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

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

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

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

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

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

         (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

                                       22


<PAGE>



                    incorporated by reference from the Company's  Current Report
                    on Form 8-K, filed with the Commission on September 16, 1999
                    (therein designated as Exhibit 10(j))

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

         (10)(xxxii)Series  F  Convertible   Preferred   Stock   Purchase
                    Agreement, Among Fonix Corporation,  Sovereign Partners, LP,
                    Dominion Capital Fund, LTD.,  Dominion Investment Fund, LLC,
                    Canadian  Advantage,  L.P.,  and  Queen  LLC,  dated  as  of
                    February 1, 2000,  which is  incorporated  by reference from
                    the Company's  Annual Report on Form 10-K for the year ended
                    December 31, 1999.

         (27)              Financial Data Schedule

(B)      Reports filed on Form 8-K during the three-month period ended June
         30, 2000: NONE




                                       23


<PAGE>


                                   SIGNATURES

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

                                     Fonix Corporation

Date:          August 14, 2000       /s/ Roger D. Dudley
     ------------------------------  -----------------------------
                                     Roger D. Dudley, Executive Vice President,
                                     Chief Financial Officer


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