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, 2001

[  ]     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 6, 2001, 241,236,041 shares of Class A voting common
stock, par value $0.0001 per share, were issued and outstanding.



<PAGE>



                                Fonix Corporation
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


<TABLE>
<CAPTION>

ASSETS                                                                                    June 30, 2001     December 31, 2000
                                                                                         -----------------  -----------------

Current assets:
<S>                                                                                      <C>                <C>
      Cash and cash equivalents                                                          $        915,970   $      1,413,627
      Funds held in escrow                                                                              -          2,151,006
      Accounts receivable, net of allowance for doubtful accounts
          of $0 in 2001 and $20,000 in 2000                                                       112,500            131,872
      Inventory                                                                                    24,467                  -
      Prepaid expenses and other current assets                                                   156,970             55,705
                                                                                         -----------------  -----------------

          Total current assets                                                                  1,209,907          3,752,210

Note receivable from affiliate, net of unamortized discount of $93,463                            306,537                  -

Property and equipment, net of accumulated depreciation of $1,647,698
     and $1,445,288, respectively                                                               1,023,543            718,711

Investment in affiliate                                                                         2,432,321                  -

Intangible assets, net of accumulated amortization of $8,078,119
     and $6,850,286, respectively                                                              11,713,931         12,941,764

Other assets                                                                                      123,383            104,688
                                                                                         -----------------  -----------------

          Total assets                                                                   $     16,809,622   $     17,517,373
                                                                                         =================  =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Note payable to afflilate, net of unamortized discount of $132,562                 $      2,267,438   $              -
      Notes payable - related parties                                                              77,625             77,625
      Accounts payable                                                                            947,249            655,352
      Accrued liabilities                                                                       1,068,502            553,448
      Accrued liabilities - related parties                                                     1,501,633          1,564,133
      Deferred revenues                                                                         1,099,172            677,071
      Capital lease obligation - current portion                                                   42,430             44,225
                                                                                         -----------------  -----------------

          Total current liabilities                                                             7,004,049          3,571,854

Capital lease obligation, less current portion                                                          -             19,767
                                                                                         -----------------  -----------------

          Total liabilities                                                                     7,004,049          3,591,621
                                                                                         -----------------  -----------------

Commitments and contingencies (Notes 8, 9, 10 and 11)

Stockholders' equity:
      Preferred stock, $0.0001 par value; 50,000,000 shares authorized - Series
          A, convertible; 166,667 shares outstanding
             (aggregate liquidation preference of $6,055,012 at June 30, 2001)                    500,000            500,000
          Series D, 4% cumulative convertible; 164,500 shares outstanding in 2000                       -          4,288,178
          Series F, 6% cumulative convertible; 6,073 shares outstanding in 2000                         -            112,438
      Common stock, $0.0001 par value; 300,000,000 shares authorized (Note 12)-
          Class A voting, 225,465,575 and 191,296,988 shares
               outstanding, respectively                                                           22,547             19,130
          Class B non-voting, none outstanding                                                          -                  -
      Additional paid-in capital                                                              160,133,371        148,904,860
      Outstanding warrants to purchase Class A common stock                                     2,993,650          3,141,430
      Cumulative translation adjustment                                                            (2,048)                 -
      Accumulated deficit                                                                    (153,841,947)      (143,040,284)
                                                                                         -----------------  -----------------

          Total stockholders' equity                                                            9,805,573         13,925,752
                                                                                         -----------------  -----------------

          Total liabilities and stockholders' equity                                     $     16,809,622   $     17,517,373
                                                                                         =================  =================
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       2

<PAGE>

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




<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,        Six Months Ended June 30,
                                                             -------------------------------  --------------------------------
                                                                 2001             2000             2001             2000
                                                             --------------  ---------------  ---------------  ---------------

<S>                                                          <C>             <C>              <C>              <C>
Revenues                                                     $     107,568   $      143,825   $      240,281   $      200,272
Cost of revenues                                                    12,522            3,651           19,521            6,599
                                                             --------------  ---------------  ---------------  ---------------

     Gross margin                                                   95,046          140,174          220,760          193,673
                                                             --------------  ---------------  ---------------  ---------------

Expenses:
     Selling, general and administrative                         3,306,801        2,455,315        5,453,702        5,793,921
     Product development and research                            2,483,627        1,478,362        4,139,276        2,929,120
     Amortization of intangible assets                             607,136          607,136        1,214,273        1,214,273
     Purchased in-process research and development                       -                -                -          474,000
                                                             --------------  ---------------  ---------------  ---------------

         Total expenses                                          6,397,564        4,540,813       10,807,251       10,411,314
                                                             --------------  ---------------  ---------------  ---------------

Loss from operations                                            (6,302,518)      (4,400,639)     (10,586,491)     (10,217,641)
                                                             --------------  ---------------  ---------------  ---------------

Other income (expense):
     Interest income                                                19,276           70,773           57,524          101,092
     Interest expense                                              (66,096)        (448,293)         (68,988)        (480,740)
                                                             --------------  ---------------  ---------------  ---------------

         Total other income (expense), net                         (46,820)        (377,520)         (11,464)        (379,648)
                                                             --------------  ---------------  ---------------  ---------------

Loss from continuing operations before equity in net loss of
     affiliate and extraordinary item                           (6,349,338)      (4,778,159)     (10,597,955)     (10,597,289)

Equity in net loss of affiliate                                   (194,427)               -         (194,427)               -
                                                             --------------  ---------------  ---------------  ---------------

Loss from continuing operations before extraordinary item       (6,543,765)      (4,778,159)     (10,792,382)     (10,597,289)

Extraordinary item - gain on forgiveness of debt                         -           46,887                -           78,864
                                                             --------------  ---------------  ---------------  ---------------

Net loss                                                        (6,543,765)      (4,731,272)     (10,792,382)     (10,518,425)

Other comprehensive loss - foreign currency translation             (2,048)               -           (2,048)               -
                                                             --------------  ---------------  ---------------  ---------------

Comprehensive loss                                           $  (6,545,813)  $   (4,731,272)  $  (10,794,430)  $  (10,518,425)
                                                             ==============  ===============  ===============  ===============



Basic and diluted net loss per common share                  $       (0.03)  $        (0.03)  $        (0.05)  $        (0.09)
                                                             ==============  ===============  ===============  ===============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       3


<PAGE>


                                Fonix Corporation
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


         Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                               Six Months Ended
                                                                                   June 30,
                                                                    ----------------------------------------
                                                                          2001                  2000
                                                                    -----------------     ------------------
Cash flows from operating activities:
<S>                                                                 <C>                   <C>
      Net loss                                                      $    (10,792,382)     $     (10,518,425)
      Adjustments to reconcile net loss to net cash
        used in operating activities:
         Issuance of common stock for services                                     -                312,500
         Non-cash expense related to issuance of debentures,
           warrants, preferred and common stock                               62,500              1,967,433
         Non-cash compensation expense related to issuance
           of stock options                                                        -                842,856
         Accretion of discount on note receivable from affiliate              (3,628)                     -
         Accretion of discount on note payable to affiliate                   40,690                      -
         Depreciation and amortization                                     1,430,243              1,572,476
         Equity in net loss of affiliate                                     194,427                      -
         Extraordinary gain on forgiveness of debt                                 -                (78,864)
         Changes in assets and liabilities:
           Accounts receivable                                                19,372                177,252
           Inventory                                                         (24,467)                (1,144)
           Prepaid expenses and other current assets                        (101,265)              (136,624)
           Funds held in escrow                                            2,151,006                (52,069)
           Other assets                                                      (18,695)                   588
           Accounts payable                                                  291,897               (379,026)
           Accrued liabilities                                               515,054                247,648
           Accrued liabilities - related parties                             (62,500)              (125,001)
           Income taxes payable                                                    -                (27,606)
           Deferred revenues                                                 422,101                544,516
           Cumulative foreign currency translation adjustment                 (2,048)                     -
                                                                    -----------------     ------------------

         Net cash used in operating activities                            (5,877,695)            (5,653,490)
                                                                    -----------------     ------------------

Cash flows from investing activities:
      Purchase of property and equipment                                    (507,242)               (62,485)
      Issuance of note receivable from affiliate                            (302,909)                     -
      Investment in affiliate                                               (200,000)                     -
                                                                    -----------------     ------------------

         Net cash used in investing activities                            (1,010,151)               (62,485)
                                                                    -----------------     ------------------

Cash flows from financing activities:
      Proceeds from sale of Class A common stock, net                      6,601,950                      -
      Proceeds from convertible promissory note and advances                       -              3,450,000
      Principal payments on note payable to affiliate                       (200,000)                     -
      Principal payments on capital lease obligation                         (21,562)                     -
      Proceeds from exercise of stock options                                  9,801                305,952
      Proceeds from exercise of warrants                                           -                250,000
      Proceeds from sale of preferred stock, net                                   -              1,750,000
                                                                    -----------------     ------------------

         Net cash provided by financing activities                         6,390,189              5,755,952
                                                                    -----------------     ------------------

Net increase (decrease) in cash and cash equivalents                        (497,657)                39,977

Cash and cash equivalents at beginning of the period                       1,413,627                232,152
                                                                    -----------------     ------------------

Cash and cash equivalents at end of the period                      $        915,970      $         272,129
                                                                    =================     ==================
</TABLE>





     See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>


                                Fonix Corporation
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                Six Months Ended June 30,
                                                                               -----------------------------
Supplemental disclosure of cash flow information:                                  2001           2000
                                                                               -------------- --------------

<S>                                                                            <C>            <C>
       Cash paid during the period for interest                                $      43,384  $           -
       Cash paid during the period for income taxes                            $           -  $      27,606
</TABLE>

Supplemental Schedule of Non-cash Investing and Financing Activities:

       For the Six Months Ended June 30, 2001:

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

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

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

          Warrants for the  purchase of 250,000  shares of Class A common  stock
               valued  at  $62,500  were  issued  in  payment  for a  perpetual,
               nonexclusive technology license.

          A    non-interest  bearing promissory note was issued in the amount of
               $2,600,000  to  purchase  1,780,818  shares of Series A preferred
               stock of Audium Corporation.

       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.

          Warrants for the purchase of 600,000  shares of Class A common  stock,
               valued at  $474,000,  were  issued to an  executive  officer  and
               director  of the  Company  as  consideration  for the  rights  to
               certain pen and voice input technology.

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

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

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

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

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

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

          Deferred interest  expense of $2,116,000  was recorded  related to the
               beneficial  conversion  feature on the equity line of credit.  An
               additional $209,695 was recorded as interest expense.

          $1,000,000 in advances were  converted  into 50,000 shares of Series F
               preferred 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 has significant 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 2000 Annual Report
on Form 10-K.

Operating results for the three months and six months ended June 30, 2001, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. 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 2000 Annual Report on
Form 10-K.

Net Loss Per Common Share - Basic and diluted net loss per common share are
calculated by dividing net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the period.
As of June 30, 2001 and 2000, there were outstanding common stock equivalents to
purchase 25,177,817 and 23,893,822 shares of common stock, respectively, that
were not included in the computation of diluted net loss per common share as
their effect would have been anti-dilutive, thereby decreasing the net loss per
common share.

The following table is a reconciliation of the net loss numerator of basic and
diluted net loss per common share for the three months and six months ended June
30, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                Three months ended June 30,
                                                                ---------------------------
                                                           2001                             2000
                                             --------------------------------    --------------------------------
                                                                  Per Share                       Per Share
                                                  Amount           Amount          Amount           Amount
                                             ------------------  ------------    --------------  ----------------
<S>                                          <C>                 <C>             <C>             <C>
Net loss                                     $     (6,543,765)                   $  (4,778,159)
Preferred stock dividends                               -                             (520,574)
                                             ------------------                  --------------
Net loss from operations attributable to
     common stockholders                           (6,543,765)   $     (0.03)       (5,298,733)  $      (0.03)
Extraordinary item, net of taxes                         -               -              46,887            -
                                             ------------------  ------------    --------------  ----------------
Net loss attributable to common
     stockholders                            $     (6,543,765)   $     (0.03)    $  (5,251,846)  $      (0.03)
                                             ==================  ============    ==============  ================
Weighted average common shares
    outstanding                                    213,416,041                     162,274,479
                                             ==================                  ==============
</TABLE>


                                        6

<PAGE>




<TABLE>
<CAPTION>
                                                                 Six months ended June 30,
                                                                 -------------------------
                                                           2001                             2000
                                             --------------------------------    --------------------------------
                                                                  Per Share                        Per Share
                                                  Amount           Amount           Amount           Amount
                                             ------------------  ------------    --------------  ----------------
<S>                                          <C>                 <C>             <C>             <C>
Net loss                                     $    (10,792,382)                   $  (10,597,289)
Preferred stock dividends                              (9,281)                       (3,348,066)
                                             ------------------                  --------------
Net loss from operations attributable to
     common stockholders                          (10,801,663)   $     (0.05)       (13,945,355) $       (0.09)
Extraordinary item, net of taxes                          -              -               78,864           -
                                             ------------------  ------------    --------------  ----------------
Net loss attributable to common
     stockholders                               $ (10,801,663)   $     (0.05)    $  (13,866,491) $       (0.09)
                                             ==================  ============    ==============  ================
Weighted average common shares
     outstanding                                   207,611,230                      153,123,348
                                             ==================                  ==============
</TABLE>

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

Inventory - Inventory, consisting primarily of retail products, is stated at the
lower of cost (first-in, first -out method) or market value.

Foreign Currency Translation - The functional currency of the Company's Korean
subsidiary is the South Korean won. Consequently, assets and liabilities of the
Korean operations are translated into United States dollars using current
exchange rates at the end of the period. All revenue is invoiced in South Korean
won and revenues and expenses are translated into United States dollars using
weighted average exchange rates for the period.

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

Recently Enacted Accounting Standards - In July 2001, the Financial Accounting
Standards Board issued Statement of Financial  Accounting Standards ("SFAS") No.
141,  "Business  Combinations" and SFAS No. 142,  "Goodwill and Other Intangible
Assets".  SFAS No. 142 changes the accounting for goodwill and intangible assets
with  indefinite  lives  from  an  amortization  method  to  an  impairment-only
approach.  Accordingly,  effective January 1, 2002, amortization of goodwill and
intangible  assets with  indefinite  lives will  discontinue.  Other  intangible
assets will  continue  to be  amortized  over their  useful  lives.  The Company
amortized  $257,386 and $514,773 of goodwill for the three months and six months
ended June 30, 2001, respectively.

Effective January 1, 2002, the Company will apply the requirements of SFAS No.
142 and management will perform an impairment test of goodwill and intangible
assets with indefinite lives. The effect of the application of those
requirements on the Company's financial position and results of operations has
not been determined.

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

2. FUNDS IN ESCROW

On March 29, 2001, $2,000,000 plus interest of $176,092 accrued since September
1, 1999, was released from the escrow established in connection with the sale of
the Company's HealthCare Solutions Group to Lernout & Hauspie Speech Products
N.V.





                                        7

<PAGE>

3. INVESTMENT IN AFFILIATE

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

Note receivable from affiliate - In connection with the collaboration agreement,
in February 2001,  Fonix advanced  $200,000 to Audium as a bridge loan. The loan
bore  interest at a rate of 12 percent per year,  was due on or before  February
28,  2003,  and was  convertible  into  shares  of Audium  Series A  Convertible
Preferred Stock ("Audium Preferred Stock"). Effective April 11, 2001, the bridge
loan,  accrued interest of $2,400 and an additional  advance of $197,600,  which
was disbursed to Audium on May 1, 2001, were aggregated into a new note. The new
note in the principal  amount of $400,000 (the "Audium  Note") bears interest at
five  percent  per  annum  and has a term  of four  years.  The  Audium  Note is
convertible  into shares of Audium Preferred Stock at a price of $1.46 per share
in the event of (i) Audium raising an additional  $2,000,000 prior to October 6,
2002, (ii) Audium's merger or  consolidation,  (iii) a qualified public offering
of Audium common stock, (iv) an event of default under a note payable from Fonix
(see Fonix Note below), or (v) Audium's  aggregate gross revenues for the months
of July,  August and September 2002 exceed $750,000.  The Audium Note is secured
by Audium's intellectual property.  Further, at closing,  Audium granted Fonix a
fully-paid,  world-wide,  non-exclusive  license to  Audium's  software to make,
manufacture,  and use the software and any derivative  works if Audium  declares
bankruptcy or ceases to do business.

Management determined  that a 12 percent annual  interest rate better reflects
the risk  characteristics  of the Audium  Note.  Accordingly,  interest has been
imputed at 12 percent and the Audium Note has been recorded at its present value
of  approximately  $302,909.  For the three months and six months ended June 30,
2001, the Company recorded interest income of $8,067,  including contractual and
imputed interest.

Note payable to affiliate - On April 11, 2001, the Company closed a stock
purchase agreement with Audium, wherein Fonix agreed to purchase up to
$2,800,000 of Audium Preferred Stock at a price of $1.46 per share. At closing,
Fonix paid $200,000 in cash, and gave Audium a note (the "Fonix Note") for the
remaining $2,600,000, payable in 13 monthly installments of $200,000 beginning
on June 1, 2001. The Fonix Note bears no interest unless an event of default
occurs, in which case the Fonix Note will bear interest at 12 percent per year.

Management determined that a 12 percent annual interest rate reflects the risk
characteristics of the Fonix Note.  Accordingly, interest has been imputed at 12
percent and the Company recorded a present value of $2,426,748 for the note
payable. For the three months and six months ended June 30, 2001, the Company
recorded interest expense of $63,364 related to this note.

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

Subsequent to June 30, 2001, two monthly payments of $200,000 were made on the
Fonix Note and Audium released two certificates for 136,986 shares of Audium
Preferred Stock to Fonix.

Investment in affiliate - Each share of Audium Preferred Stock is convertible
into one share of Audium's common stock. Holders of Audium Preferred Stock are
entitled to eight percent cumulative dividends, a liquidation preference equal
to two times the original purchase price plus any declared but unpaid dividends,
anti-dilution rights, and voting rights equal to the corresponding number of
common shares. The stock purchase agreement between Audium and Fonix also
entitles Fonix to elect one member of Audium's board of directors. The Company
also entered into a registration rights agreement with Audium which allows
Fonix, after waiting 180 days after the closing of a qualified public offering
by Audium, to request that Audium register the resale of the shares of common
stock underlying the Audium Preferred Stock held by Fonix. Audium agreed to pay
the expenses related to preparing and filing the registration statement.
However, Fonix will be responsible for any brokers' commissions or other
sales-related fees for any shares of common stock Fonix sells.

                                        8

<PAGE>




Beginning April 11, 2001, Fonix accounted for its investment in Audium using the
equity method of accounting. Accordingly, the Company recognized a loss of
$194,427 in its 2001 condensed consolidated statements of operations related to
Audium's net loss for the period from April 11, 2001 through June 30, 2001 and
the difference between the purchase price of the Audium Preferred Stock and the
Company's portion of Audium's net stockholders' deficit amortized on a
straight-line basis over a period of eight years.

4. INTANGIBLE ASSETS

Intangible assets consist of purchased core technology and goodwill arising from
the acquisition of the Papyrus companies (collectively "Papyrus") and AcuVoice,
Inc., 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 $8,078,119 and $6,850,286 at June 30, 2001 and December 31,
2000, respectively.

The carrying values of the Company's long-lived assets is reviewed for
impairment whenever events or changes in circumstances indicate that they may
not be recoverable. If such an event occurred, the Company would project
undiscounted cash flows to be generated from the use of the asset and its
eventual disposition over the remaining life of the asset. If projections
indicate that the carrying value of the long-lived asset would not be
recoverable, the carrying value would be reduced by the estimated excess of the
carrying value over the projected discounted cash flows. As of June 30, 2001,
management of the Company does not consider any of the Company's long-lived
assets to be impaired. However, should the Company's marketing and sales plan
not materialize in the near term, the realization of the Company's intangible
assets could be severely and negatively impacted. The accompanying condensed
consolidated financial statements have been prepared based on management's
estimates of realizability, which estimates may change due to factors beyond the
control of the Company.

5.  RELATED-PARTY NOTES PAYABLE

The Company had unsecured demand notes payable to former Papyrus stockholders in
the aggregate amount of $77,625 outstanding as of June 30, 2001. During 2000,
certain holders of these notes made demand for payment. The Company is
attempting to negotiate a reduced payoff of these notes.

6.  PREFERRED STOCK

Series D Preferred Stock -During the six months ended June 30, 2001, the
remaining 164,500 shares of Series D Preferred Stock and related dividends were
converted into 13,978,440 shares of Class A common stock.

Series F Preferred Stock - During the six months ended June 30, 2001, the
remaining 6,073 shares of Series F Preferred Stock and related dividends were
converted into 519,067 shares of Class A common stock.

7. EQUITY LINES OF CREDIT

Equity Line of Credit - On August 8, 2000, the Company entered into a Private
Equity Line Agreement ("Equity Line") with a private investor ("Equity Line
Investor"), which gives the Company the right to draw up to $12,500,000 for
operations and other purposes, through a mechanism of draws and puts of stock.
The Company is entitled to draw funds and to "put" to the Equity Line Investor
shares of Class A common stock in lieu of repayment of the draw. The number of
shares issued is determined by dividing the dollar amount of the draw by 90
percent of the average of the two lowest closing bid prices of Class A common
stock over the seven trading-day period following the date the Company tenders
the put notice. The Equity Line Investor funds the amounts requested by the
Company within two trading days after the seven trading-day period.

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<PAGE>




During the year ended December 31, 2000, draws under the Equity Line amounted to
$3,973,508 and were converted to 12,492,680 shares of Class A common stock.
During the six months ended June 30, 2001, draws under the Equity Line amounted
to $4,010,000 and were converted into 9,932,780 shares of Class A common stock.
As of August 6, 2001, $4,516,492 remains available to be drawn on the Equity
Line.

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

From the inception of the Second Equity Line through June 30, 2001, draws under
the Second Equity Line amounted to $2,925,000 and were converted to 9,703,300
shares of Class A common stock. Subsequent to June 30, 2001, additional draws
amounting to $3,050,000 were converted into 15,770,466 shares of Class A common
stock. As of August 6, 2001, $14,025,000 remains available to be drawn on the
Second Equity Line.

8.  COMMON STOCK AND STOCK OPTIONS

Class A Common Stock - During the six months ended June 30, 2001, 34,133,587
shares of Class A common stock were issued in connection with conversions of
preferred stock (see Note 6) and draws on the equity lines (see Note 7). Also
during the six months ended June 30, 2001, 35,000 shares of Class A common stock
were issued through exercise of stock options at an exercise price of $0.28 per
share. No shares were issued as a result of exercise of stock appreciation
rights or warrants during the same period.

Stock Options - During the six months ended June 30, 2001, the Company granted
options to purchase 2,206,450 shares of Class A common stock at exercise prices
ranging from $0.29 to $0.73 per share. Of the options granted during this
six-month period, 225,000 vest immediately, and the balance of 1,981,450 vest
over the three years following issuance. If not exercised, all options expire
within ten years from the date of grant. As of June 30, 2001, the Company had
options to purchase 21,891,150 shares of Class A common stock outstanding.

The Company's option plans provide for stock appreciation rights that allow the
grantee to receive shares of the Company's Class A common stock equivalent in
value to the difference between the designated exercise price and the fair
market value of the Company's stock at the date of exercise. As of June 30,
2001, there are options to purchase 516,339 shares of Class A common stock
outstanding which provide for stock appreciation rights. Of these options,
126,669 have an exercise price of $6.50 per share, 13,000 have an exercise price
of $3.66 per share and 376,671 have an exercise price of $1.00 per share.

9.  TECHNOLOGY LICENSE

In July 1997, the Company entered into an arrangement with Advocast, Inc.
("Advocast"), an Internet research and development entity, whereby Advocast
assisted the Company in development of technologies to create and locate
searchable databases on the Internet through the use of interactive video and
voice technologies. Under the terms of the arrangement, the Company paid
$816,750 in 1998 and $705,005 in 1997 for Advocast research and development
efforts.

On November 25, 1998, Advocast issued 60,200 shares of Advocast Series A 6%
convertible preferred stock ("Advocast Preferred Stock") to the Company. The
Advocast Preferred Stock, if converted to Advocast common stock, represented
less than 20 percent of the total outstanding shares of Advocast voting common
stock. Advocast is a development stage company with minimal operations and no
market for its stock. As a result, there was substantial uncertainty as to the
value of the Advocast Preferred Stock and the Company did not record a value for
the Advocast shares in its consolidated financial statements. At the time, the
chief executive officer of the Company became a director of Advocast.

On February 26, 2001, Fonix agreed to provide to Advocast an additional $100,000
of financing under the terms of a six percent convertible debenture. Fonix
advanced $57,498 under the debenture. The debenture was due February 26, 2002
and was secured by the intellectual property and other assets of Advocast. The
debenture was convertible into shares of Advocast common stock at a rate of
$8.62 per share at the option of Fonix. Furthermore, Fonix had

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the right to convert its Advocast Preferred Stock into additional principal
under the debenture at a rate of $25 per share of Advocast Preferred Stock. If
converted, the resulting balance due under the debenture was subject to the same
terms of conversion into Advocast common stock or became due and payable six
months following the original due date of the convertible debenture. Advocast
and Fonix also entered into an agreement whereby Advocast provided consulting
services to Fonix for development of Internet applications of the Company's
technologies. The term of the agreement was three months and could be renewed at
the Company's option for an additional three months. Fonix paid $30,000 to
Advocast pursuant to the consulting agreement.

On June 18,  2001,  Fonix  canceled the  debenture,  terminated  the  consulting
agreement,  agreed that Advocast could redeem the Advocast Preferred Stock owned
by Fonix and issued  warrants to Advocast for the purchase of 250,000  shares of
Class A common  stock at an  exercise  price of $0.33 per share in return  for a
perpetual,  fully paid-up,  nonexclusive license to certain technology developed
by Advocast  for  Internet  speech  applications.  The  warrants  were valued at
$62,500  using the  Black-Scholes  option  valuation  model and were recorded as
product  development costs at the date of the transaction.  Fonix has no further
obligation to provide funding,  management consultation and development services
or technology to Advocast.

10.  PRODUCT DEVELOPMENT AND RESEARCH

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 professional services agreement was for a term of 36 months
and required the Company to make monthly payments of $22,000. The original term
of the agreement expired in February 2001, but has been extended on a
month-to-month basis. Under the terms of the agreement, the Company expended a
total of $169,000 in the six-month period ended June 30, 2001 and $132,000 in
the six-month period ended June 30, 2000.

11. LITIGATION

On August 28, 1998, John R. Clarke and Perpetual Growth Fund, a company
affiliated with Clarke, commenced an action against Fonix in the Federal
District Court for the Southern District of New York. Clarke and Perpetual
Growth asserted claims for breach of contract relating to certain financing
received by the Company during 1998 and thereafter. Fonix filed a motion to
dismiss based upon the court's lack of personal jurisdiction over Fonix. The
court granted Fonix's motion to dismiss. Clarke and Perpetual Growth thereafter
appealed the decision of the New York court to the United States Court of
Appeals for the Second Circuit. The Court of Appeals affirmed the decision of
the trial court. In the interim, Fonix filed a suit against Clarke and Perpetual
Growth in the Federal District Court for the Central District of Utah seeking a
declaratory judgment that it did not owe any money to Clarke and Perpetual
Growth. The case was tried in the Utah federal district court in March 2001,
after which the court ruled in favor of Fonix and determined that Clarke and
Perpetual Growth had no claims for "trailing fees" with regard to the financings
which were the subject of the suit. Clarke and Perpetual Growth have appealed
the decision of the Utah federal district court to the United States Court of
Appeals for the Tenth Circuit. The Company believes that the claims of Clarke
and Perpetual Growth are without merit and will continue to vigorously oppose
those claims.

12. KOREAN OPERATIONS

In April 2001, Fonix began doing business in South Korea through a wholly-owned
subsidiary known as Fonix Korea, Sales Group, Ltd. ("Fonix Korea"). Fonix Korea
sells and markets Fonix products and solutions in the embedded and server-based
markets to Korean manufacturers of microprocessor chips and consumer
electronics, and through value-added resellers for retail distribution. The
operations of Fonix Korea since inception are included in the accompanying
condensed consolidated financial statements.

13. SUBSEQUENT EVENT

On July 18, 2001, the shareholders of the Company approved an amendment to the
Company's Certificate of Incorporation to increase the authorized capital stock
of the Company from 300,000,000 to 500,000,000 shares of common stock.

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

This quarterly report on Form 10-Q contains, in addition to historical
information, forward-looking statements that involve substantial risks and
uncertainties. Actual results could differ materially from the results the
Company anticipates and which are discussed in the forward-looking statements.
Factors that could cause or contribute to such differences are discussed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.

Overview

Since inception, the Company has devoted substantially all of its resources to
research, development and acquisition of software technologies that enable
intuitive human interaction with computers, consumer electronics, and other
intelligent devices. In 2001, the Company continued a transition of its
strategic focus from technology research, development and acquisition into
marketing, sales, and product delivery. The transition continues while the
Company works to upgrade its technology to maintain distinct competitive
advantages.

As markets for natural-user interface ("NUI") technologies expand, the demand
for rapid development of quality solutions and applications increases. The
Company has responded to these increasing demands through release and
development of Fonix Accelerated Application Solutions Technologies ("FAAST"), a
proprietary development framework. FAAST provides developers with a speech
application framework that facilitates rapid development of NUI applications
that can be integrated quickly and efficiently into products. FAAST has been
released in versions for both server-based and embedded markets. The FAAST
development framework is recognized by the Company's customers as a key
ingredient to the successful launch of speech solutions.

Fonix will focus marketing and product delivery efforts through a partner
program that will be introduced in the third quarter of 2001. The "Powered by
Fonix" partner program is designed to assist the Company's channel partners in
adopting and integrating FAAST and Fonix NUI technologies. This program will
offer distinct advantages to Fonix developer, reseller and corporate partners.

Fonix marketing and sales efforts are also focused toward delivering products
and applications in specific industry market segments that present opportunities
for highlighting unique advantages in both server-based and embedded
applications. Server-based markets present immediate opportunities for
text-to-speech ("TTS") technology in interactive voice response and website
reader applications and future opportunities for automated speech recognition
("ASR") and TTS technologies in Internet voice portals and network system
command and control applications. Embedded markets present opportunities for
ASR, TTS and handwriting recognition in personal digital assistants, consumer
electronics, cellular phones and automotive telematics. FAAST enables chip
manufacturers, operating system developers, software developers and resellers
and product manufacturers to rapidly integrate the needed NUI technology from
whatever source they desire. The Company has also developed consumer
applications of NUI technologies for retail sale through websites and resellers.

Results of Operations

Three months ended June 30, 2001, compared with three months ended June 30, 2000

During the three months ended June 30, 2001, the Company recorded revenues of
$107,568, reflecting a decrease of $36,257 from the same period in the previous
year. Revenues in 2001 and 2000 were generated through sales and licensing of
Fonix products and technologies and engineering fees.

Selling, general and administrative expenses were $3,306,801 and $2,455,315 for
the three months ended June 30, 2001 and 2000, respectively. The increase of
$851,486 is primarily the result of $863,512 in compensation-related expenses
related to strengthening the Company's sales and marketing efforts with senior
personnel in the United States and a new sales group in Korea, and $135,748 in
travel-related expense and $102,050 in promotion and advertising expenses, both
related to increased sales and marketing efforts in the United States and Korea.
Further increases of $117,911 were incurred in legal and other professional fees
in connection with corporate expansion

                                       12

<PAGE>



activities, securities registration filings and litigation.  These
increases were offset by decreases of $312,500 in consulting expenses and
$44,436 in other operating expenses.

Product development and research expenses were $2,483,627 and $1,478,362 for the
three months ended June 30, 2001 and 2000, respectively. The increase of
$1,005,265 resulted primarily from an increase of $661,529 in
compensation-related expenses related to product application and development
activities and $275,768 in consulting and outside service expenses incurred in
development of product applications and solutions using the Company's NUI
technologies.

Net other expenses were $46,820 and $377,520 for the three months ended June 30,
2001 and 2000, respectively. The decrease results primarily from interest
expense incurred in connection with capital financing activities in 2000 that
were not incurred in 2001.

The Company recognized equity in loss of affiliate of $194,427 resulting from
its investment in Audium Corporation which is accounted for using the equity
method.

Six months ended June 30, 2001, compared with six months ended June 30, 2000

During the six months ended June 30, 2001, the Company recorded revenues of
$240,281, reflecting an increase of $40,009 over the same period in the previous
year. Revenues in 2001 and 2000 were generated through sales and licensing of
Fonix products and technologies and engineering fees.

Selling, general and administrative expenses were $5,453,702 and $5,793,921 for
the six months ended June 30, 2001 and 2000, respectively. The decrease of
$340,219 results primarily from certain non-cash expenses incurred in 2000 that
were not repeated in 2001, including compensation-related expenses of $816,667
related to the exercise of stock appreciation rights and revaluation of options
previously granted, consulting expenses of $1,279,156 related to the issuance of
warrants to consultants and advisors and $293,778 in other operating expenses
incurred in activities related to equity financing transactions. Exclusive of
these non-recurring, non-cash charges, selling, general and administrative
expenses actually increased by $2,049,382 over 2000. This increase resulted
primarily from increases of $1,279,853 in compensation-related expenses related
to strengthening the Company's sales and marketing efforts with senior personnel
in the United States and a new sales group in Korea, and $336,200 in travel-
related expense and $137,413 in promotion and advertising expenses, both related
to increased strategic development and sales and marketing efforts in the United
States and Korea. Further increases of $230,540 were incurred in legal and other
professional fees in connection with corporate expansion activities, securities
registration filings and litigation.

Product development and research expenses were $4,139,276 and $2,929,120 for the
six months ended June 30, 2001 and 2000, respectively. The increase of
$1,210,156 resulted primarily from an increase of $1,048,282 in
compensation-related expenses related to product application and development
activities and $115,223 in consulting and outside service expenses incurred in
development of product applications and solutions using the Company's NUI
technologies.

Net other expenses were $11,464 and $379,648 for the six months ended June 30,
2001 and 2000, respectively. The decrease results primarily from interest
expense incurred in connection with capital financing activities in 2000 that
were not incurred in 2001.

The Company recognized equity in loss of affiliate of $194,427 resulting from
its investment in Audium Corporation which is accounted for using the equity
method.

Liquidity and Capital Resources

From inception, the Company's principal source of capital has been private and
other exempt sales of its debt and equity securities. The Company will continue
to raise additional funds in like manner to satisfy cash operating requirements
for the foreseeable future because of insufficient revenue from operations.
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

                                       13

<PAGE>



Company. Furthermore, the issuance of equity or debt securities which are or may
become   convertible  into  the  Company's  equity   securities  may  result  in
substantial dilution to its stockholders.

The Company had negative working capital of $5,794,142 at June 30, 2001,
compared to positive working capital of $180,356 at December 31, 2000. Current
assets decreased by $2,542,303 to $1,209,407 from December 31, 2000, to June 30,
2001. Current liabilities increased by $3,432,195 to $7,004,049 during the same
period. The decrease in working capital from December 31, 2000 to June 30, 2001,
was primarily attributable to two significant events: issuance of a note payable
in connection with the purchase of Audium Preferred Stock and release of funds
held in escrow. The funds released from escrow were subsequently used in
operations during the six months ended June 30, 2001. The timing of payments on
operating obligations and receipts of funding under the Company's equity line of
credit also contributed to the decline in working capital. Total assets were
$16,809,622 at June 30, 2001, compared to $17,517,373 at December 31, 2000.

Note Receivable from Affiliate

In connection with a collaboration agreement with Audium Corporation ("Audium"),
in February 2001,  Fonix advanced  $200,000 to Audium as a bridge loan. The loan
bore  interest at a rate of 12 percent per year,  was due on or before  February
28,  2003,  and was  convertible  into  shares  of Audium  Series A  Convertible
Preferred Stock ("Audium Preferred Stock"). Effective April 11, 2001, the bridge
loan,  accrued interest of $2,400 and an additional  advance of $197,600,  which
was disbursed to Audium on May 1, 2001, were aggregated into a new note. The new
note in the principal  amount of $400,000 (the "Audium  Note") bears interest at
five  percent  per  annum  and has a term  of four  years.  The  Audium  Note is
convertible  into shares of Audium Preferred Stock at a price of $1.46 per share
in the event of (i) Audium raising an additional  $2,000,000 prior to October 6,
2002, (ii) Audium's merger or  consolidation,  (iii) a qualified public offering
of Audium common stock, (iv) an event of default under a note payable from Fonix
(see Fonix Note below), or (v) Audium's  aggregate gross revenues for the months
of July,  August and September 2002 exceed $750,000.  The Audium Note is secured
by Audium's intellectual property. Further, at the closing, Audium granted Fonix
a fully-paid,  world-wide,  non-exclusive  license to Audium's software to make,
manufacture,  and use the software and any derivative  works if Audium  declares
bankruptcy or ceases to do business.

Management determined  that a 12 percent annual  interest rate better reflects
the risk  characteristics  of the Audium  Note.  Accordingly,  interest has been
imputed at 12 percent and the Audium Note has been recorded at its present value
of  approximately  $302,909.  For the three months and six months ended June 30,
2001, the Company recorded interest income of $8,067,  including contractual and
imputed interest.

Note Payable to Affiliate

On April 11, 2001, the Company closed a stock purchase agreement with Audium,
wherein Fonix agreed to purchase up to $2,800,000 of Audium Preferred Stock at a
price of $1.46 per share. At closing, Fonix paid $200,000 in cash, and gave
Audium a note (the "Fonix Note") for the remaining $2,600,000, payable in 13
monthly installments of $200,000 beginning on June 1, 2001. The Fonix Note bears
no interest unless an event of default occurs, in which case the Fonix Note will
bear interest at 12 percent per year.

Management determined that a 12 percent annual interest rate reflects the risk
characteristics of the Fonix Note.  Accordingly, interest has been imputed at 12
percent and the Company recorded a present value of $2,426,748 for the note
payable. For the three months and six months ended June 30, 2001, the Company
recorded interest expense of $63,364 related to this note.

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

Subsequent to June 30, 2001, two monthly payments of $200,000 were made on the
Fonix Note and Audium released two certificates for 136,986 shares of Audium
Preferred Stock to Fonix.


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<PAGE>



Investment in Affiliate

Each share of Audium Preferred Stock is convertible into one share of Audium's
common stock. Holders of Audium Preferred Stock are entitled to eight percent
cumulative dividends, a liquidation preference equal to two times the original
purchase price plus any declared but unpaid dividends, anti-dilution rights, and
voting rights equal to the corresponding number of common shares. The stock
purchase agreement between Audium and Fonix also entitles Fonix to elect one
member of Audium's board of directors. The Company also entered into a
registration rights agreement with Audium which allows Fonix, after waiting 180
days after the closing of a qualified public offering by Audium, to request that
Audium register the resale of the shares of common stock underlying the Audium
Preferred Stock held by Fonix. Audium agreed to pay the expenses related to
preparing and filing the registration statement. However, Fonix will be
responsible for any brokers' commissions or other sales-related fees for any
shares of common stock Fonix sells.

Beginning April 11, 2001, Fonix accounted for its investment in Audium using the
equity method of accounting. Accordingly, the Company recognized a loss of
$194,427 in its 2001 condensed consolidated statements of operations related to
Audium's net loss for the period from April 11, 2001 through June 30, 2001 and
the difference between the purchase price of the Audium Preferred Stock and the
Company's portion of Audium's net stockholders' deficit amortized on a
straight-line basis over a period of eight years.

Preferred Stock

During the six months ended June 30, 2001, 164,500 shares of Series D
convertible preferred stock and related accrued dividends were converted into
13,978,440 shares of Class A common stock. As of June 30, 2001, there are no
shares of Series D preferred stock outstanding.

During the six months ended June 30, 2001, 6,073 shares of Series F convertible
preferred stock and related accrued dividends were converted into 519,067 shares
of Class A common stock. As of June 30, 2001, there are no shares of Series F
preferred stock outstanding.

Equity Lines of Credit

During the six months ended June 30, 2001, draws against the initial equity line
of credit in the amount of $4,010,000 were converted into 9,932,780 shares of
Class A common stock. As of August 6, 2001, $4,516,492 remains available to be
drawn on the Equity Line.

On April 6, 2001, the Company entered into a second equity line agreement (the
"Second Equity Line") with the same investor as the initial equity line ("Equity
Line Investor"). Under the Second Equity Line, the Company has the right to draw
against an equity line of credit up to $20 million under terms that are
substantially identical to the terms of the initial Equity Line.

From the inception of the Second Equity Line through June 30, 2001, draws taken
under the Second Equity Line amounted to $2,925,000 and were converted to
9,703,300 shares of Class A common stock. Subsequent to June 30, 2001,
additional draws amounting to $3,050,000 were converted into 15,770,466 shares
of Class A common stock. As of August 6, 2001, $14,025,000 remains available to
be drawn on the Second Equity Line.

Stock Options

During the six months ended June 30, 2001, the Company granted options to
purchase 2,206,450 shares of Class A common stock at exercise prices ranging
from $0.29 to $0.73 per share. Of the options granted during this six- month
period, 225,000 vest immediately, and the balance of 1,981,450 vest over the
three years following issuance. If not exercised, all options expire within ten
years from the date of grant. As of June 30, 2001, the Company had options to
purchase 21,891,150 shares of Class A common stock outstanding.

The Company's option plans provide for stock appreciation rights that allow the
grantee to receive shares of the Company's Class A common stock equivalent in
value to the difference between the designated exercise price and the fair
market value of the Company's stock at the date of exercise. As of June 30,
2001, there are options to

                                       15

<PAGE>



purchase 516,339 shares of Class A common stock outstanding which provide for
stock appreciation rights. Of these options, 126,669 have an exercise price of
$6.50 per share, 13,000 have an exercise price of $3.66 per share and 376,671
have an exercise price of $1.00 per share.

Other

In April 2001, the Company began doing business in Korea, through a wholly-owned
subsidiary known as Fonix Korea, Sales Group, Ltd. ("Fonix Korea"). Fonix Korea
will sell and market Fonix products and solutions in the embedded and
server-based markets to Korean manufacturers of microprocessor chips and
consumer electronics, and through value-added resellers.

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

                                     Outlook

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

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

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

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

As the Company proceeds to implement its strategy and to reach its objectives,
the Company 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 the Company has adopted has significant risk and stockholders and
others interested in Fonix and the Company's Class A common stock should
carefully consider the risks set forth under the heading "Certain Significant
Risk Factors" in the Company's 2000 Annual Report on Form 10-K, Item 1, Part I.



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings


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On August 28, 1998, John R. Clarke and Perpetual Growth Fund, a company
affiliated with Clarke, commenced an action against Fonix in the Federal
District Court for the Southern District of New York. Clarke and Perpetual
Growth asserted claims for breach of contract relating to certain financing
received by the Company during 1998 and thereafter. Fonix filed a motion to
dismiss based upon the court's lack of personal jurisdiction over Fonix. The
court granted Fonix's motion to dismiss. Clarke and Perpetual Growth thereafter
appealed the decision of the New York court to the United States Court of
Appeals for the Second Circuit. The Court of Appeals affirmed the decision of
the trial court. In the interim, Fonix filed a suit against Clarke and Perpetual
Growth in the Federal District Court for the Central District of Utah seeking a
declaratory judgment that it did not owe any money to Clarke and Perpetual
Growth. The case was tried in the Utah federal district court in March 2001,
after which the court ruled in favor of Fonix and determined that Clarke and
Perpetual Growth had no claims for "trailing fees" with regard to the financings
which were the subject of the suit. Clarke and Perpetual Growth have appealed
the decision of the Utah federal district court to the United States Court of
Appeals for the Tenth Circuit. The Company believes that the claims of Clarke
and Perpetual Growth are without merit and will continue to vigorously oppose
those claims.

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,
2001, 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:

         Between April 1, 2001 and June 30, 2001, in connection with the Equity
         Line Agreement, the Company received $1,000,000 in funds drawn under
         the Equity Line Agreement and issued 3,161,835 shares of Class A common
         stock to the Equity Line Investor. The shares were issued without
         registration under the 1933 Act in reliance on Section 4(2) of the 1933
         Act and the rules and regulations promulgated thereunder. The resales
         of the shares were registered under a registration statement on Form
         S-2 which was declared effective September 5, 2000 and amended and
         declared effective April 25, 2001.

         Between April 1, 2001 and June 30, 2001, in connection with the Second
         Equity Line Agreement, the Company received $2,925,000 in funds drawn
         under the Equity Line Agreement and issued 9,703,300 shares of Class A
         common stock to the Equity Line Investor. The shares were issued
         without registration under the 1933 Act in reliance on Section 4(2) of
         the 1933 Act and the rules and regulations promulgated thereunder. The
         resales of the shares were subsequently registered under a registration
         statement on Form S-2 which was declared effective May 22, 2001.

         Subsequent to June 30, 2001, in connection with the Second Equity Line
         Agreement, the Company received $3,050,000 in funds drawn under the
         Equity Line Agreement and issued 15,770,466 shares of Class A common
         stock to the Equity Line Investor. The shares were issued without
         registration under the 1933 Act in reliance on Section 4(2) of the 1933
         Act and the rules and regulations promulgated thereunder. The resales
         of the shares were subsequently registered under a registration
         statement on Form S-2 which was declared effective May 22, 2001.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

                                       17

<PAGE>




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

On July 18, 2001, the Company held its Annual Meeting of Shareholders in Salt
Lake City, Utah. The record date for the meeting was June 14, 2001, on which
date there were 219,569,513 shares of the Company's Class A common stock
outstanding.

The first matter voted upon at the meeting was the election of directors. The
following directors were elected:


                                           SHARES                     SHARES
DIRECTOR                              VOTED IN FAVOR               VOTED AGAINST
--------                              --------------               -------------
Thomas A. Murdock                       166,729,551                  2,643,424
Roger D. Dudley                         166,683,380                  2,689,595
John A. Oberteuffer, Ph.D               167,239,336                  2,133,639
William A. Maasberg, Jr.                167,229,061                  2,143,914
Mark S. Tanner                          166,899,913                  2,473,062

The second matter voted upon at the meeting was the approval of Arthur Andersen
LLP as independent auditors for the Company. The results of the voting were
168,253,560 shares in favor, 835,205 shares against, and 284,210 shares withheld
or abstaining.

The third matter voted upon at the meeting was the approval of a proposed
amendment to the Company's Certificate of Incorporation to increase the
authorized capital stock of the Company to include 500,000,000 shares of Class A
Common Stock. The results of the voting were 162,266,907 shares in favor,
6,663,363 shares against, and 442,705 shares withheld or abstaining.

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:

<TABLE>
<CAPTION>
         Exhibit No.       Description of Exhibit

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

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

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

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

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

         (3)(iii)          Certificate of Amendment of Certificate of Incorporation dated as of May 13, 1994,

                                       18

<PAGE>



                           which is incorporated by reference from the Company's
                           Annual Report for the Fiscal Year Ended December 31,
                           1994 on Form 10-KSB

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

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

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

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

         (4)(iii)          Certificate of Designation of Rights and Preferences
                           of Series B Convertible Preferred Stock, filed with
                           the Secretary of State of Delaware on October 27,
                           1997, which is incorporated by reference from the
                           Company's Quarterly Report on Form 10-Q for the
                           period ended September 30, 1997

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

         (4)(v)            Certificate of Designation of Rights and Preferences
                           of Series D 4% Convertible Preferred Stock, filed
                           with the secretary of State of Delaware on August 27,
                           1998, which 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

                                       19

<PAGE>



                           year ended December 31, 1996

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

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

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

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

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

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

         (10)(v)           Employment Agreement by and between the Company and Thomas A. Murdock, which
                           is 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

                                       20

<PAGE>



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

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

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

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

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

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

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

         (10)(xviii)       Series E Convertible Preferred Stock Exchange and
                           Purchase Agreement among Fonix 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))


                                       21

<PAGE>



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

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

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

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

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

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

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

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

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

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

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

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

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

         (10)(xxxvi)       Certificate of Designation of Audium Series A Preferred Stock, filed with the

                                       22

<PAGE>



                           Commission on April 17, 2001.

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

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

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

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

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

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

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

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


(B) Reports filed on Form 8-K during the three-month period ended June 30, 2001:

On April 17, 2001, the Company filed a Current Report on Form 8-K to announce
the purchase of Audium Preferred Stock, effective April 11, 2001, and the
execution of the Second Equity Line Agreement, effective April 6, 2001.




                                       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 7, 2001          /s/ Roger D. Dudley
     -------------------------       ------------------------------------------
                                     Roger D. Dudley, Executive Vice President,
                                     Chief Financial Officer


                                       24