<PAGE>

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

                                    FORM 10-Q

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

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

                         Commission file number 0-23862

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

                               Delaware 22-2994719

          (State of Incorporation) (I.R.S. Employer Identification No.)

                     60 East South Temple Street, Suite 1225
                            Salt Lake City, UT 84111
                           --------------------------
          (Address of principal executive offices, including zip code)

                                 (801) 328-0161
                                 --------------
              (Registrant's telephone number, including area code)

           Indicate  by check mark  whether  the  registrant:  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X   or No
    ------     -------

           As of November 8, 2000,  180,270,639  shares of Class A voting common
stock, par value $.0001 per share, were issued and outstanding.


<PAGE>



                                FONIX CORPORATION
                                    FORM 10-Q

                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

Page

Item 1.   Financial Statements


Condensed Consolidated Balance Sheets (Unaudited) - As of September 30, 2000
     and December 31, 1999.....................................................3

Condensed Consolidated  Statements of Operations  (Unaudited) for the
     Three and Nine Months Ended  September 30, 2000 and 1999 and for
     the CumulativePeriod from October 1, 1993 (Date of Inception)
     through September 30, 2000................................................4


Condensed Consolidated Statements of Cash Flows (Unaudited) for the
     Nine Months Ended September 30, 2000 and 1999 and for the
     Cumulative Period from October 1, 1993 (Date of Inception)
     through September 30, 2000................................................5


Notes to Condensed Consolidated Financial Statements (Unaudited)...............7

Item 2.  Management's Discussion and Analysis or Plan of Operation............14


                          PART II - OTHER INFORMATION

Item 1.   Legal Proceedings...................................................19


Item 2.   Changes in Securities...............................................19


Item 4.   Submission of Matters to Vote of Security Holders...................19


Item 6.   Exhibits and Reports on Form 8-K....................................20




<PAGE>


                       Fonix Corporation and Subsidiaries
                          [A Development Stage Company]

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
ASSETS                                                                                   September 30,       December 31,
                                                                                             2000                1999
                                                                                        ---------------     ---------------
Current assets:
<S>                                                                                     <C>                 <C>
      Cash and cash equivalents                                                         $      637,736      $      232,152
      Accounts receivable, net of allowance for doubtful accounts of $20,000
          in 2000 and 1999                                                                      54,626             184,901
      Prepaid expenses                                                                         183,692              51,747
      Interest and other receivables                                                            15,674              10,539
      Inventory                                                                                      -               1,546
                                                                                        ---------------     ---------------

          Total current assets                                                                 891,728             480,885

Funds held in escrow                                                                         2,120,078           2,038,003

Property and equipment, net of accumulated depreciation of $2,433,827 and
     $1,938,494, respectively                                                                  886,803           1,148,802

Intangible assets, net of accumulated amortization of $6,236,129 and
     $4,392,457, respectively                                                               13,555,921          15,399,593

Other assets                                                                                   104,981             105,864
                                                                                        ---------------     ---------------

          Total assets                                                                  $   17,559,511      $   19,173,147
                                                                                        ===============     ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Advances                                                                          $            -      $    1,000,000
      Note payable                                                                           1,961,915                   -
      Notes payable - related parties                                                           77,625              77,625
      Accounts payable                                                                         822,672           1,359,040
      Accrued liabilities                                                                      735,101             857,033
      Accrued liabilities - related parties                                                  1,626,633           1,814,134
      Capital lease obligation, current portion                                                 44,135                   -
      Income taxes payable                                                                      22,394              50,000
      Deferred revenues                                                                        676,920             127,849
                                                                                        ---------------     ---------------

          Total current liabilities                                                          5,967,395           5,285,681

Capital lease obligation, net of current portion                                                19,727                   -
Series C 5% convertible debentures                                                                   -           3,971,107
                                                                                        ---------------     ---------------

          Total liabilities                                                                  5,987,122           9,256,788
                                                                                        ---------------     ---------------

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

Commitments and contingencies (Notes 11 and 12)

Stockholders' equity:
      Preferred stock, $.0001 par value; 50,000,000 shares authorized;
          Series A, convertible; 166,667 shares outstanding
              (aggregate liquidation preference of $6,055,012)                                 500,000             500,000
          Series D, 4% cumulative convertible; 164,500 and 381,723
               shares outstanding, respectively
              (aggregate liquidation preference of $3,568,188)                               4,022,214           9,095,910
          Series F, 6% cumulative convertible; 6,755 shares outstanding
              (aggregate liquidation preference of $140,550)                                   140,550                   -
      Common stock, $.0001 par value; 300,000,000 shares authorized;
          Class A voting,  174,519,655 and 123,535,325 shares
               outstanding, respectively                                                        17,452              12,353
          Class B non-voting, none outstanding                                                       -                   -
      Additional paid-in capital                                                           142,862,961         112,769,420
      Outstanding warrants                                                                   3,130,180           2,850,530
      Deferred consulting expense                                                                    -            (435,051)
      Deficit accumulated during the development stage                                    (139,100,968)       (116,706,803)
                                                                                        ---------------     ---------------

          Total stockholders' equity                                                        11,572,389           8,086,359
                                                                                        ---------------     ---------------

          Total liabilities and stockholders' equity                                    $   17,559,511      $   19,173,147
                                                                                        ===============     ===============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       3

<PAGE>

                       Fonix Corporation and Subsidiaries
                          [A Development Stage Company]

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                      October 1,
                                                                                                                        1993
                                                              Three Months Ended             Nine Months Ended       (Inception) to
                                                                September 30,                  September 30,          September 30,
                                                           ----------------------------   -------------------------
                                                                2000          1999          2000          1999             2000
                                                           -------------  ------------  --------------  ------------  --------------
<S>                                                        <C>            <C>           <C>             <C>           <C>
Revenues                                                   $   172,222    $    65,707   $    372,494    $    351,083  $   3,416,725
Cost of revenues                                                 6,856          7,919         13,455          21,159         73,827
                                                           -------------  ------------  --------------  ------------  -------------
    Gross margin                                               165,366         57,788        359,039         329,924      3,342,898
                                                           -------------  ------------  --------------  ------------  -------------
Expenses:
    Selling, general and administrative                      3,050,235      2,864,400      8,844,156       7,537,577     49,407,222
    Product development and research                         1,406,949      1,906,968      4,336,069       6,278,318     43,243,194
    Amortization of goodwill and purchased core technology     607,136        630,609      1,821,409       1,962,443      6,122,572
    Purchased in-process research and development                   -               -        474,000              -       9,789,000
                                                           -------------  ------------  --------------  ------------  -------------
       Total expenses                                        5,064,320      5,401,977     15,475,634      15,778,338    108,561,988
                                                           -------------  ------------  --------------  ------------  -------------

Loss from operations                                        (4,898,954)    (5,344,189)   (15,116,595)    (15,448,414)  (105,219,090)
                                                           -------------  ------------  --------------  ------------  -------------
Other income (expense):
    Interest income                                             35,134         26,198         98,371          46,752      3,860,482
    Interest expense                                        (3,617,249)    (1,577,413)    (4,097,989)     (4,314,809)   (13,057,688)
    Other                                                       29,631       (154,940)        67,486        (154,940)       (89,859)
    Cancellation of common stock reset provision                    -               -              -              -      (6,111,577)
                                                           -------------  ------------  --------------  ------------  -------------
       Total other income (expense), net                    (3,552,484)    (1,706,155)    (3,932,132)     (4,422,997)   (15,398,642)
                                                           -------------  ------------  --------------  ------------  -------------
Loss from continuing operations before income tax benefit   (8,451,438)    (7,050,344)   (19,048,727)    (19,871,411)  (120,617,732)
Income tax benefit                                                    -             -              -              -       3,331,895
                                                           -------------  ------------  --------------  ------------  -------------
Loss from continuing operations                             (8,451,438)    (7,050,344)   (19,048,727)    (19,871,411)  (117,285,837)
Discontinued operations:
    Operating loss of HealthCare Solutions Group                      -    (2,962,147)             -      (5,953,726)   (12,229,033)
    Gain on disposal of HealthCare Solutions Group,
          net of income taxes of $3,100,000                           -     6,616,646              -       6,616,646      3,766,646
                                                           -------------  ------------  --------------  ------------  -------------
Loss before extraordinary items                             (8,451,438)    (3,395,845)   (19,048,727)    (19,208,491)  (125,748,224)
Extraordinary items:
    Loss on extinguishment of debt                                    -             -              -              -        (881,864)
    Gain on forgiveness of debt                                               372,061         78,864         372,061        583,269
                                                           -------------  ------------  --------------  ------------  -------------
Net loss                                                   $(8,451,438)   $(3,023,784)  $(18,969,863)    (18,836,430  $(126,046,819)
                                                           =============  ============  ==============  ============  =============

Basic and diluted net loss per common share                $     (0.05)   $     (0.05)  $      (0.14)   $      (0.31)
                                                           =============  ============  ==============  ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       4

<PAGE>

                       Fonix Corporation and Subsidiaries
                          [A Development Stage Company]

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                                              October 1,
                                                                                                 1993
                                                                    Nine Months Ended        (Inception) to
                                                                      September 30,          September 30,
                                                             -----------------------------
                                                                 2000            1999            2000
                                                             -------------   -------------   --------------
Cash flows from operating activities:
<S>                                                          <C>             <C>             <C>
     Net loss                                                $(18,969,863)   $(18,836,430)   $(126,046,819)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
       Issuance of common stock for services                    1,328,100         100,000        6,974,254
       Issuance of common stock for patent                              -               -          100,807
       Non-cash expense related to issuance of debentures,
         warrants, preferred and common stock                   5,286,411       2,270,000       17,776,674
       Non-cash compensation expense related to issuance
         of stock options                                         842,856         119,240        3,699,771
       Non-cash expense related to issuance of notes payable
          and accrued expense for services                              -               -          857,000
       Non-cash exchange of notes receivable for services               -               -          150,000
       Non-cash portion of purchased in-process research and
          development                                                   -               -       13,136,000
       Loss on disposal of property and equipment                       -         154,940          154,940
       Gain on sale of HealthCare Solutions Group                       -      (6,616,646)      (3,766,646)
       Write-off of assets received in acquisition                      -               -            1,281
       Depreciation and amortization                            2,339,005       4,423,595       11,370,991
       Income tax provision                                             -               -       (3,331,895)
       Extraordinary loss on extinguishment of debt                     -               -          881,864
       Extraordinary gain on forgiveness of debt                  (78,864)       (372,061)        (583,269)
       Changes in assets and liabilities, net of effects
               of acquisitions:
         Accounts receivable                                      130,275        (391,982)        (263,655)
         Employee advances                                              -            (755)         (59,986)
         Interest and other receivables                            (5,135)         (4,436)         (12,881)
         Inventory                                                  1,546          (7,509)         (25,836)
         Prepaid assets                                          (131,945)         40,465         (182,792)
         Cash held in escrow                                      (82,075)              -         (120,078)
         Other assets                                                 883             270         (118,018)
         Accounts payable                                        (457,504)     (1,558,666)       2,905,895
         Accrued liabilities                                      181,609       1,632,083        1,337,710
         Accrued liabilities - related party                     (187,501)      1,249,271        1,103,443
         Income taxes payable                                     (27,606)              -          (27,606)
         Deferred revenues                                        549,071         568,115        1,262,579
                                                             -------------   -------------   --------------

       Net cash used in operating activities                   (9,280,737)    (17,230,506)     (72,826,272)
                                                             -------------   -------------   --------------

Cash flows from investing activities, net of effects
          of acquisitions:
     Proceeds from sale of HealthCare Solutions Group                   -      21,305,982       21,805,982
     Acquisition of subsidiaries, net of cash acquired                  -               -      (15,323,173)
     Proceeds from sale of property and equipment                       -          50,000           50,000
     Purchase of property and equipment                          (141,160)        (99,089)      (3,576,720)
     Investment in intangible assets                                    -               -         (164,460)
     Issuance of notes receivable                                       -               -       (3,228,600)
     Payments received on notes receivable                              -         245,000        2,128,600
                                                             -------------   -------------   --------------

       Net cash provided by (used in) investing activities       (141,160)     21,501,893        1,691,629
                                                             -------------   -------------   --------------

Cash flows from financing activities:
     Bank overdraft                                                     -        (138,034)               -
     Convertible promissory note and advances                   7,500,000               -        8,500,000
     Net payments on revolving note payable                             -     (20,038,193)         (49,250)
     Net payments on revolving note payable
          - related parties                                             -      (7,895,178)      (7,813,537)
     Proceeds from other notes payable                                  -       6,953,760        9,865,427
     Payments on other notes payable                                    -      (7,788,000)      (9,567,806)
     Principal payments on capital lease obligation               (28,312)        (55,504)        (181,702)
     Proceeds from issuance of convertible debentures, net              -       6,254,240        9,439,240
     Proceeds from sale of warrants                                     -         438,240        1,511,168
     Proceeds from sale of common stock, net                            -               -       38,175,700
     Proceeds from exercise of warrants                           278,000               -          278,000
     Proceeds from exercise of stock options                      327,793               -          327,793
     Proceeds from sale of preferred stock, net                 1,750,000               -       19,457,346
     Proceeds from sale of common stock and related
          repricing rights subject to redemption, net                   -               -        1,830,000
                                                             -------------   -------------   --------------

       Net cash provided by (used in) financing activities      9,827,481     (22,268,669)      71,772,379
                                                             -------------   -------------   --------------

Net (decrease) increase in cash and cash equivalents              405,584     (17,997,282)         637,736

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

Cash and cash equivalents at end of period                   $    637,736    $  2,048,257    $     637,736
                                                             =============   =============   ==============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       5

<PAGE>

                       Fonix Corporation and Subsidiaries
                          [A Development Stage Company]

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

<TABLE>
<CAPTION>
                                                                                 October 1,
                                                                                    1993
                                                        Nine Months Ended       (Inception) to
                                                          September 30,          September 30,
                                                    --------------------------
Supplemental disclosure of cash flow information:       2000         1999           2000
                                                    ------------- -----------   -------------
<S>                                                 <C>           <C>          <C>
      Cash paid during the period for interest      $     41,164  $ 1,068,882  $ 4,657,865
      Cash paid during the period for income taxes  $     27,606  $        -   $    27,606
</TABLE>

Supplemental Schedule of Non-cash Investing and Financing Activities:

      For the Nine Months Ended September 30, 2000:

          Preferred  stock  dividends  of $674,302  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.

          309,281  shares of Series F preferred  stock and related  dividends of
          $2,783,375,  including $2,750,000 related to the beneficial conversion
          feature  recorded upon issuance,  were converted into 8,307,782 shares
          of Class A common stock.

          Principal of $5,538,085 from a convertible promissory note and $87,582
          of interest  accrued  thereon were converted into 7,709,138  shares of
          Class A common stock.

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

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

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

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

          The  Company  issued  1,250,000  shares of common  stock to  unrelated
          parties for consulting fees valued at $1,328,100.

          The  Company  accrued  preferred  stock  dividends  totaling  $514,800
          resulting from liquidated damages on Series D preferred stock.

          The Company  issued  612,069  shares of Class A common stock valued at
          $688,578  as  payment  for  liquidated   damages  of  $394,800  and  a
          restructuring fee of $213,778 on the Series D preferred stock.

          The Company recorded interest expense of $3,546,083 resulting from the
          beneficial  conversion  feature on funds drawn on the promissory  note
          and the equity line of credit.

          The Company  entered into a capital lease  obligation for equipment in
          the amount of $92,174.

      For the Nine Months Ended September 30, 1999:

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

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

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

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

          970,586  shares of Class A common  stock  previously  held by  certain
          shareholders and originally  valued at $1,000,916 were returned to the
          Company in settlement of litigation.

          The Company issued  6,000,000 shares of Class A common stock valued at
          $3,278,893 to the guarantors of the Series C convertible debentures as
          indemnification  for the sale of their  shares by the  holders  of the
          Series  C  convertible   debentures   held  as  collateral  for  these
          debentures.  The proceeds of  $3,278,893  received by the holders were
          used  to pay  liquidated  damages  and  retire  Series  C  convertible
          debentures in the amounts of $750,000 and $2,528,893, respectively.

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

          Preferred  stock  dividends  of $635,160  were accrued on Series D and
          Series E convertible preferred stock.

          Preferred stock dividends  totaling  $828,212 were accrued relating to
          the  liquidated  damage  provisions of Series D and Series E preferred
          stock and Series C convertible debentures.

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

          131,667  shares of Series D  convertible  preferred  stock and related
          dividends of $96,193 were converted  into 8,468,129  shares of Class A
          common stock.

          135,072  shares of Series E  convertible  preferred  stock and related
          dividends of $66,015 were converted  into 5,729,156  shares of Class A
          common stock.

          In connection with the sale of HealthCare Solutions Group,  $2,500,000
          of the sales price was placed into an escrow account.

          A revolving note payable in the amount of $50,000 was paid by a former
          employee and is included as an account payable.

          Promissory notes held by certain shareholders were reduced by $414,991
          in settlement of litigation.


     See accompanying notes to condensed consolidated financial statements.


                                       5

<PAGE>

                       Fonix Corporation and Subsidiaries
                          [A Development Stage Company]

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)



1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Operating  results for the three months and nine months ended September 30, 2000
are not necessarily  indicative of the results that may be expected for the year
ending December 31, 2000. The Company suggests that these condensed consolidated
financial  statements be read in  conjunction  with the  consolidated  financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1999, and its Quarterly Report on Form 10-Q
for the quarters ended March 31, 2000 and June 30, 2000.

Net Loss Per Common  Share - Basic and  diluted  net loss per  common  share are
calculated  by dividing  net loss  attributable  to common  stockholders  by the
weighted average number of shares of common stock outstanding during the period.
At September 30, 2000 and 1999, there were outstanding  common stock equivalents
to purchase 30,530,110 and 90,535,319 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.

                                        7


<PAGE>



  The following table is a reconciliation of the net loss numerator of basic and
  diluted  net loss per  common  share  for the  three  and  nine  months  ended
  September 30, 2000 and 1999:

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

                                                               2000                            1999
                                               -----------------------------     -----------------------------
                                                                   Per Share                         Per Share
                                                     Amount          Amount           Amount          Amount
                                               ----------------    ---------     ---------------     ---------
<S>                                            <C>                 <C>           <C>                 <C>
Net loss from continuing operations            $   (8,451,438)                   $  (7,050,344)
Preferred stock dividends                             (76,236)                      (1,031,288)
                                               ----------------                  ---------------
Net loss from continuing operations
attributable to common stockholders                (8,527,674)     $  (0.05)        (8,081,632)      $ (0.11)

Discontinued operations, net of income taxes               --            --          3,654,499          0.05
Extraordinary items, net of income taxes                   --            --            372,061          0.01
                                               ----------------    ---------     ---------------     ---------

Net loss attributable to common
stockholders                                   $   (8,527,674)     $  (0.05)     $  (4,055,072)      $ (0.05)
                                               ================    =========     ===============     =========
Weighted average common shares
outstanding                                       165,210,595                       76,479,555
                                               ================                  ===============
</TABLE>


<TABLE>
<CAPTION>
                                                               Nine Months Ended September 30,

                                                               2000                            1999
                                               -----------------------------     -----------------------------
                                                                   Per Share                         Per Share
                                                     Amount          Amount           Amount          Amount
                                               ----------------    ---------     ---------------     ---------
<S>                                            <C>                 <C>           <C>                 <C>
Net loss from continuing operations            $  (19,048,727)                   $ (19,871,411)
Preferred stock dividends                          (3,424,302)                      (2,460,518)
                                               ----------------                  ---------------
Net loss from continuing operations
attributable to common stockholders               (22,473,029)     $  (0.14)       (22,331,929)      $ (0.33)

Discontinued operations, net of income taxes               --          --              662,920          0.01
Extraordinary items, net of income taxes               78,864          --              372,061          0.01
                                               ----------------    ---------     ---------------     ---------
Net loss attributable to
common stockholders                            $  (22,394,165)     $  (0.14)     $ (21,296,948)      $ (0.31)
                                               ================    =========     ===============     =========
Weighted average common shares
outstanding                                       157,181,840                       68,678,645
                                               ================                  ===============
</TABLE>


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

                                        8


<PAGE>


2.  DISCONTINUED OPERATIONS

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

3.  INTANGIBLE ASSETS

Intangible   assets  consist  of  purchased  core  technology  and  goodwill  in
connection with the acquisitions of AcuVoice,  Inc. ("AcuVoice") and the Papyrus
companies (collectively "Papyrus"),  and direct costs incurred by the Company in
applying for patents  covering its  technologies.  Amortization is computed on a
straight-line  basis over the estimated  useful lives ranging from five to eight
years. Total accumulated amortization was $6,236,129 and $4,392,457 at September
30, 2000, and December 31, 1999, respectively.

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

4.  RELATED-PARTY NOTES PAYABLE

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

5.  EQUITY LINE OF CREDIT AND CONVERTIBLE PROMISSORY NOTE

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

The balance  available  under the Equity Line Agreement after  offsetting  draws
under the promissory  note described above is available to the Company through a
mechanism  of drawdowns  and puts of stock.  The Company is entitled to drawdown
funds and to put to the Equity Line  Investor  shares of Class A common stock in
lieu of repayment of the drawdown.  The number of shares issued is determined by
dividing  the dollar  amount of the drawdown by 90 percent of the average of the
two lowest closing bid prices of Class A common stock over the seven trading-day

                                        9


<PAGE>



period  following the date the Company  tenders the put notice.  The Equity Line
Investor is required to fund the  amounts  requested  by the Company  within two
trading days after the seven trading-day period.

As of September 30, 2000,  the Company had drawn  $7,500,000 on the  convertible
promissory  note and recorded  $279,586  and $516,937 as interest and  financing
expense for the three and nine months ended  September  30, 2000,  respectively.
Principal  of  $5,538,085  and  interest of $87,582  accrued  thereon  have been
converted  into 7,709,138  shares of Class A common stock.  During the three and
nine  months  ended  September  30,  2000,  the  Company  recorded a  beneficial
conversion  feature in the amount of  $3,336,388  and  $3,546,083,  respectively
related to borrowings under the convertible promissory note.

Subsequent  to September 30, 2000,  the  remaining  balance of $1,961,915 on the
promissory  note and accrued  interest of $3,288 were  converted  into 3,835,637
shares of Class A common  stock.  Also  subsequent  to September  30,  2000,  an
additional  $800,000 was drawn on the equity line which resulted in the issuance
of 1,751,505 shares of Class A common stock.

A  registration  statement  describing  the  Class A common  stock  issuable  in
connection  with draws on the Equity Line  Agreement  was declared  effective on
September 5, 2000, by the Securities and Exchange Commission (the "SEC").

6.  SERIES C CONVERTIBLE DEBENTURES

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

7.  PREFERRED STOCK

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

The  Class A  common  shares  underlying  the  original  issue  of the  Series D
preferred  stock were  covered in a  registration  statement  which was declared
effective on August 11, 1999. However, in the ensuing months, due to the accrual
of dividends and the decline in the price of the Company's Class A common stock,
the Class A common shares  converted and convertible from the Series D preferred
stock exceeded the number of shares available under the registration  statement.
Under the terms of the  Series D  preferred  stock  agreement,  the  holders  of
approximately  2,700,000 unregistered shares were entitled to liquidated damages
in the amount of two percent of the original  value of the Series D shares every
30 days while such shares were not registered for resale. During the nine months
ended September 30, 2000, the Company recorded a preferred stock dividend in the
amount of $80,000  related to such liquidated  damages.  On September 5, 2000, a
registration  statement  describing  these shares was declared  effective by the
SEC.

Similarly,  the holder of the  remaining  164,500  shares of Series D  preferred
stock was entitled to liquidated  damages based upon the same calculation  until
the underlying Class A common shares were registered for resale.  However, under
the terms of a letter  agreement dated June 30, 2000, the holder of the Series D
shares waived the liquidated  damages and revised certain terms of conversion of
the Series D shares to provide a minimum conversion rate of $0.75 until December
31, 2000.  The Company  issued  612,069 shares of Class A common stock valued at
$688,578  on June 30,  2000,  in  consideration  for the waiver and  revision in
terms.  Of that amount,  $394,800  was recorded as a preferred  dividend and the
balance of $293,778 was recorded in other operating expense.  The Class A common
shares  issued to the  holder of the Series D  preferred  shares and the Class A
common shares  underlying the outstanding  Series D shares were also included in
the registration  statement that was declared  effective on September 5, 2000 by
the SEC.

Series F Preferred Stock - Effective  February 1, 2000, the Company entered into
an agreement  with five  investors  whereby it sold a total of 290,000 shares of
its Series F convertible preferred stock for $2,750,000 in cash.

                                       10


<PAGE>



Dividends  accrued on the stated  value ($20 per share) of Series F  convertible
preferred stock at a rate of six percent (6%) per year, were payable annually or
upon  conversion in cash or common stock at the option of the Company,  and were
convertible  into  shares  of Class A common  stock at any time at the  holders'
option.  The Series F  preferred  stock was  convertible  into shares of Class A
common  stock at a price of $0.75 per share  during the first 90 days  following
the close of the  transaction,  and thereafter at a price equal to 85 percent of
the average of the three lowest  closing bid prices in the 20-day trading period
prior to the  conversion of the Series F preferred  stock.  Using the conversion
terms most  beneficial to the holders,  the Company  recorded a preferred  stock
dividend of $2,750,000 for the beneficial  conversion  feature  related to these
shares on the date the Series F preferred stock was issued.

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

During the nine months  ended  September  30, 2000,  309,281  shares of Series F
preferred  stock  together with  dividends  accrued  thereon were converted into
8,307,782 shares of Class A common stock. As of September 30, 2000, 6,755 shares
of Series F preferred stock remained outstanding.

8.  COMMON STOCK AND COMMON STOCK SUBJECT TO REDEMPTION

Class A Common  Stock -  During  the  nine  months  ended  September  30,  2000,
47,019,300  shares  of Class A common  stock  were  issued  in  connection  with
conversions of debentures  and preferred  stock (see Notes 6 and 7). Also during
the same period,  913,228 shares of Class A common stock were issued as a result
of the exercise of stock options, stock appreciation rights and warrants.

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

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

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

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

Common Stock Options - On January 31, 2000,  the board of directors  approved an
increase of 10,000,000  shares to be available under the Company's 1998 Employee
Incentive and Stock Option Plan (the "1998 Plan").  A registration  statement on
Form S-8 covering  these  additional  shares was filed with the SEC and declared
effective on February 14, 2000. During the nine months ended September 30, 2000,
the Company granted  5,867,067 options under the 1998 Plan to purchase shares of
Class A common stock at exercise  prices  ranging from $0.28 to $1.50 per share.
The term of all options granted during this period is ten years from the date of
grant. Of the stock options granted, options to purchase 2,339,000 shares vested
March 31, 2000, and the balance vest over the three years following issuance. Of
the total granted, 197,000 were issued to consultants for services performed for
the

                                       11


<PAGE>



Company and were recorded as consulting expense in the amount of $53,190,  based
upon the fair market value  determined  using the  Black-Scholes  option pricing
model. The remainder of the options were granted to employees and had a weighted
average  fair  market  value of $0.30 per share using the  Black-Scholes  option
pricing  model.  Had  compensation  expense for these  options been  recorded in
accordance  with  the  method  prescribed  by  SFAS  No.  123,  "Accounting  for
Stock-Based  Compensation",  the Company's net loss would have been $25,951,981,
or $0.17  per  share,  for the nine  months  ended  September  30,  2000.  As of
September  30, 2000,  the Company had options to purchase a total of  19,140,834
shares of Class A common stock outstanding.

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

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

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

As of  September  30,  2000,  the  Company  had  warrants to purchase a total of
3,425,000 shares of Class A common stock outstanding.

9.  RELATED-PARTY  TRANSACTIONS

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

10.  PRODUCT DEVELOPMENT AND RESEARCH AGREEMENTS

Synergetics  - Prior  to March  1997,  the  Company's  scientific  research  and
development  activities  were  conducted  solely by a third party,  Synergetics,
Inc.,  pursuant to product development and assignment  contracts  (collectively,
the  "Synergetics  Agreement").  Under that  arrangement,  Synergetics  provided
personnel and facilities to conduct research and product development activities.
The Company financed the Synergetics  research and development  activities on an
as-required  basis and the Company was obligated to pay to Synergetics a royalty
of  10  percent  (the   "Royalty")  of  net  revenues  from  sales  of  products
incorporating  Synergetics'  "VoiceBox" technology as well as technology derived
therefrom. Synergetics compensated its developers and others contributing to the
development  effort, in part, by granting "Project Shares" to share in a portion
of the  Royalty  received  by  Synergetics.  On April 6, 1998,  the  Company and
Synergetics  entered into a Royalty  Modification  Agreement whereby the Company
agreed to offer an aggregate of 4,800,000  non-transferable Class A common stock
purchase  warrants  to the holders of the Project  Shares in  consideration  for
which  Synergetics  agreed to cancel any further  obligation  on the part of the
Company to pay the Royalty. The exercise price of the warrants was to be $10 per
share and the warrants would not be exercisable  until the first to occur of (1)
the date that the per share  closing  bid price of the Class A common  stock was
equal to or greater than $37.50 per share for a period of 15 consecutive trading
days,  or (2)  September  30, 2000.  Effective  March 31, 2000,  the Company and
Synergetics entered into a Restated Royalty  Modification  Agreement whereby the
Company agreed to pay Synergetics $28,000 (the "Cancellation  Amount") to cancel
the  obligation  of the  Company  to pay the  Royalty  or  issue  the  4,800,000
warrants. The Company has paid the

                                       12


<PAGE>



Cancellation  Amount to Synergetics and the Royalty and warrant obligations have
been canceled. The Company has no further obligations to Synergetics.

IMC2 - In March 1998, the Company entered into a professional services agreement
with IMC2 Corporation  ("IMC2"), a research and development entity, to assist in
the   continuing   development   of  specific   automated   speech   recognition
technologies.  The president of IMC2 is also the president of  Synergetics.  The
professional  services  agreement  is for a term of 36 months and  requires  the
Company to make monthly  payments of $22,000.  Under the terms of the agreement,
the Company expended a total of $66,000 in each of the three-month periods ended
September  30, 2000 and 1999,  and  $198,000 in each of the  nine-month  periods
ended September 30, 2000 and 1999.

11.  COMMITMENTS AND CONTINGENCIES

Executive Employment  Agreements - On November 1, 1996, the Company entered into
employment  contracts  with two executive  officers which  contracts  would have
expired on December 31, 2001, but which were amended effective January 31, 2000,
to extend the expiration date to December 31, 2005. As amended,  the annual base
salary for each  executive  officer is $309,400  and may be  adjusted  upward in
future  years  as  deemed  appropriate  by the  board  of  directors.  As  bonus
compensation  for extending the term of each agreement at a  compensation  level
less than  provided  in the  original  agreement,  each  executive  was  granted
1,400,000  options under the 1998 Plan,  effective July 19, 2000, at an exercise
price of $1.05.

On November 1, 1996,  the  Company  entered  into an  employment  contract  with
another executive  officer.  In January 1999, that executive officer resigned as
the Company's  chief executive  officer and entered into a separation  agreement
pursuant to which the former  executive  officer will be paid  $250,000 per year
through January 31, 2001 and $100,000 for the 12 months ending January 31, 2002,
and his employment contract was canceled.

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

12. LITIGATION

Oregon Graduate  Institute - On July 28, 1999, Oregon Graduate Institute ("OGI")
filed a notice of default,  demand for mediation and demand for arbitration with
the American  Arbitration  Association.  In its demand,  OGI  asserted  that the
Company was in default under three separate  agreements  between the Company and
OGI in the total  amount  of  $175,000.  On  September  23,  1999,  the  Company
responded to OGI's demand and denied the  existence of a default under the three
agreements  identified by OGI.  Moreover,  the Company  asserted a  counterclaim
before the American  Arbitration  Association  against OGI in an amount not less
than  $250,000.  The  Company  and OGI have  tentatively  agreed to  settle  the
arbitration  proceeding  on terms  favorable  to the  Company.  There  can be no
assurance  that the  arbitration  proceeding  will be settled until a definitive
settlement and release agreement is signed by the parties.

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

                                       13


<PAGE>



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

This  quarterly  report  on  Form  10-Q  contains,  in  addition  to  historical
information,  forward-looking  statements  that  involve  substantial  risks and
uncertainties.  The Company's  actual results could differ  materially  from the
results  anticipated  by  the  Company  and  discussed  in  the  forward-looking
statements.  Factors  that could cause or  contribute  to such  differences  are
discussed  in the  Company's  Annual  Report  on Form  10-K for the  year  ended
December 31, 1999.

Overview

Since  inception,  Fonix  has  devoted  substantially  all of its  resources  to
research,  development  and  acquisition  of software  technologies  that enable
intuitive human  interaction  with computers,  consumer  electronics,  and other
electronic  devices.  Through  September  30,  2000,  the Company  has  incurred
cumulative  losses amounting to $117,285,837,  excluding  cumulative losses from
discontinued  operations of $8,462,387 and net extraordinary losses of $298,595.
Losses are expected to continue until the effects of marketing and sales efforts
begin to take effect, if ever.

Beginning in 1999 and continuing through 2000, Fonix management  transformed the
Company's strategic focus from technology research,  development and acquisition
to sales and marketing and product delivery. For the nine months ended September
30, 2000, the Company expended $1,506,546 in sales and marketing activities. The
Company  is making  this  transition  while  continuing  to  achieve  technology
upgrades in order to maintain distinct competitive technological advantages.

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

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

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

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

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

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

Implementation  of these measures reduced the monthly deficit in cash flows from
operating activities from approximately $3 million in early 1999 to less than $1
million in December  1999.  For the nine months ended  September  30, 2000,  the
average monthly  deficit in cash flows from operating  activities was $1,031,000
as compared to $1,615,000 for the same period in 1999.

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

                                       14


<PAGE>



Results of Operations

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

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

During the three months ended September 30, 2000, the Company recorded  revenues
of  $172,222,  reflecting  a increase  of  $106,515  from the same period in the
previous  year.  Ongoing sales and licensing  activities  have increased in 2000
from  1999.  Revenues  in 2000 and 1999 have been  generated  through  sales and
licensing of the Company's products and technologies.

Selling,  general and administrative expenses were $3,050,235 and $2,864,400 for
the three  months  ended  September  30,  2000 and 1999,  respectively.  The net
increase of $185,835 was primarily a result of non-cash consulting  arrangements
amounting  to  $1,015,600.   Excluding   these  costs,   selling,   general  and
administrative  expenses  actually  decreased by approximately  $830,000 for the
three months ended  September 30, 2000, as compared to the same period for 1999.
The   decrease   resulted   primarily   from   a   charge   of   $1,296,000   to
compensation-related  expenses in 1999 related to the indemnification of certain
officers for expenses they incurred on behalf of the Company which expenses were
not repeated in 2000. This decrease from 1999 to 2000 was offset by increases of
$403,970 in recurring compensation related expenses, $45,874 in travel expenses,
and $95,562 in  promotions  and  advertising  expense,  all related to increased
activity in sales, marketing and strategic development. Increases of $145,131 in
other operating  expenses  related to the annual  shareholders'  meeting held in
September,  2000,  and a  decrease  of  $163,489  in legal and  accounting  fees
accounted for the balance of the difference from 1999 to 2000.

The Company  incurred  product  development and research  expenses of $1,406,949
during the three months ended  September  30, 2000, a decrease of $500,019  from
the same period in the previous year.  This decrease is due to the transition in
strategic focus and the resulting cost reduction  program  initiated in February
1999. A decrease of $279,000 in  compensation  related  expenses  reflects  cost
reduction  measures.  Also,  decreases  amounting to $241,654 in other operating
expenses resulted from one-time software license fees incurred in 1999.

The Company incurred losses from operations of $4,898,954 and $5,344,189  during
the  three  months  ended  September  30,  2000 and  1999,  respectively.  While
operating  losses for the three months ended  September  30, 2000,  decreased by
$445,235  from those  incurred in the three months ended  September 30, 1999, an
even  greater  reduction  in the cash flow  deficit  resulted  from reduced cash
expenditures.

Nine months ended September 30, 2000,  compared with nine months ended September
30, 1999

During the nine months ended September 30, 2000, the Company  recorded  revenues
of  $372,494,  reflecting  an  increase  of $21,411  from the same period in the
previous  year.  Revenues  in 2000 and 1999  were  generated  through  sales and
licensing of the Company's products and technologies.

Selling,  general and administrative expenses were $8,844,156 and $7,537,577 for
the nine months ended  September  30, 2000 and 1999,  respectively.  Included in
these   expenses  for  the  nine  months   ended   September   30,  2000,   were
compensation-related  charges  in the  amount  of  $816,667  resulting  from the
exercise of stock  appreciation  rights and  revaluation  of options  previously
granted for which terms were  revised.  Also  included  were charges  related to
warrants and shares issued to consultants and advisors assisting in the planning
and  development of the Company's  strategic focus and  finance-related  matters
totaling   $2,588,534.   Excluding   these   charges,   selling,   general   and
administrative  expenses incurred in ongoing  operations  actually  decreased by
$1,281,955. This net decrease reflected ongoing cost reduction efforts that have
resulted in decreases in  compensation-related  expenses of $104,425,  legal and
accounting  expenses of $650,927,  occupancy  expenses of  $214,967,  consulting
expenses of $220,661, and other operating expenses of $250,159.  These decreases
were  partially  offset by an increase of  $116,402 in travel  related  expenses
attributable  to increased  sales and  marketing  activities  and an increase of
$145,131 in other operating expenses related to the annual  shareholder  meeting
held in September, 2000.

                                       15


<PAGE>



The Company  incurred  product  development and research  expenses of $4,336,069
during the nine months ended  September 30, 2000, a decrease of $1,942,249  from
the same period in the previous  year.  This  decrease was due  primarily to the
transition in strategic focus and the resulting cost reduction program initiated
in February  1999.  Decreases of  $1,256,638 in  compensation-related  expenses,
$121,086 in occupancy  costs,  $251,872 in  consulting  expenses and $208,024 in
other operating expenses reflect cost reduction measures.

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

The Company  incurred  losses from  operations of  $15,116,595  and  $15,448,414
during the nine months ended  September 30, 2000 and 1999,  respectively.  While
operating  losses for the nine months ended  September 30, 2000,  decreased from
those incurred in the nine months ended  September 30, 1999, a more  significant
reduction  was realized in the negative  cash flow of the Company as a result of
the disposal of the HSG and  decreases in cash  outlays for  operating  expenses
described above.

Net other expense was $3,932,132 for the nine months ended September 30, 2000, a
decrease of  $490,865  from the nine  months  ended  September  30,  1999.  This
decrease was due primarily to lower interest and finance charges incurred in the
nine  months  ended   September  30,  2000,   than  were  incurred   during  the
corresponding period of 1999.

Liquidity and Capital Resources

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

Total assets were $17,559,511 at September 30, 2000,  compared to $19,173,147 at
December 31, 1999. Current assets increased by $410,843 to $891,728 at September
30, 2000, from $480,885 at December 31, 1999. Current  liabilities  increased by
$681,714 to $5,967,395 during the same period.  The Company had negative working
capital of  $5,075,667 as of September  30, 2000,  compared to negative  working
capital of $4,804,796 at December 31, 1999.  The change in working  capital from
December 31, 1999, to September 30, 2000,  reflects  $7,500,000 received and the
$5,538,085  subsequently  converted into equity under the terms of a convertible
promissory note.

Equity Line of Credit

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

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

                                       16


<PAGE>



percent of the  average of the two lowest  closing  bid prices of Class A common
stock over the seven  trading-day  period following the date the Company tenders
the put  notice.  The Equity  Line  Investor  is  required  to fund the  amounts
requested  by the Company  within two trading  days after the seven  trading-day
period.

As of September 30, 2000,  the Company had drawn  $7,500,000 on the  convertible
promissory  note and recorded  $279,586  and $516,937 as interest and  financing
expense  for the  three  months  and  nine  months  ended  September  30,  2000,
respectively.  Principal of $5,538,085 and interest of $87,582  accrued  thereon
have been converted into  7,709,138  shares of Class A common stock.  During the
three  and nine  months  ended  September  30,  2000,  the  Company  recorded  a
beneficial conversion feature in the amount of $3,336,388 and $3,546,083 related
to borrowings under this promissory note.

Subsequent  to September 30, 2000,  the  remaining  balance of $1,961,915 on the
promissory  note and accrued  interest of $3,288 were  converted  into 3,835,637
shares of Class A common  stock.  Also  subsequent  to September  30,  2000,  an
additional  $800,000 was drawn on the equity line which resulted in the issuance
of 1,751,505 shares of Class A common stock.

A  registration  statement  describing  the  Class A common  stock  issuable  in
connection  with draws on the Equity Line  Agreement  was declared  effective on
September 5, 2000, by the Securities and Exchange Commission (the "SEC").

Preferred Stock

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

The  Class A  common  shares  underlying  the  original  issue  of the  Series D
preferred  stock were  covered in a  registration  statement  which was declared
effective on August 11, 1999. However, in the ensuing months, due to the accrual
of dividends and the decline in the price of the Company's Class A common stock,
the Class A common shares  converted and convertible from the Series D preferred
stock exceeded the number of shares available under the registration  statement.
Under the terms of the  Series D  preferred  stock  agreement,  the  holders  of
approximately  2,700,000 unregistered shares were entitled to liquidated damages
in the amount of 2% of the  original  value of the Series D shares every 30 days
while such shares were not registered  for resale.  During the nine months ended
September  30,  2000,  the Company  recorded a preferred  stock  dividend in the
amount of $80,000  related to such liquidated  damages.  On September 5, 2000, a
registration  statement  describing  these shares was declared  effective by the
SEC.

Similarly,  the holder of the  remaining  164,500  shares of Series D  preferred
stock was entitled to liquidated  damages based upon the same calculation  until
the underlying Class A common shares were registered for resale.  However, under
the terms of a letter  agreement dated June 30, 2000, the holder of the Series D
shares waived the liquidated  damages and revised certain terms of conversion of
the Series D shares to provide a minimum conversion rate of $0.75 until December
31, 2000.  The Company  issued  612,069 shares of Class A common stock valued at
$688,578  on June 30,  2000,  in  consideration  for the waiver and  revision in
terms.  Of that amount,  $394,800  was recorded as a preferred  dividend and the
balance of $293,778 was recorded in other operating expense.  The Class A common
shares  issued to the  holder of the Series D  preferred  shares and the Class A
common shares  underlying the outstanding  Series D shares were also included in
the registration  statement that was declared  effective on September 5, 2000 by
the SEC.

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

                                       17


<PAGE>



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

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

During the nine months  ended  September  30, 2000,  309,281  shares of Series F
preferred  stock  together with  dividends  accrued  thereon were converted into
8,307,782 shares of Class A common stock. As of September 30, 2000, 6,755 shares
of Series F preferred stock remained outstanding.

Stock Options

During the nine months ended  September 30, 2000,  the Company  granted  options
under  the 1998 Plan to  purchase  5,867,067  shares of Class A common  stock at
exercise  prices ranging from $0.28 to $1.50 per share.  The term of all options
granted  during this nine month  period is ten years from the date of grant.  Of
the stock options issued,  options to purchase 2,339,000 shares vested March 31,
2000,  and the  balance  vest over the three  years  following  issuance.  As of
September 30, 2000,  the Company had a total of  19,140,834  options to purchase
Class A common shares outstanding.

Also  during the nine  months  ended  September  30,  2000,  options to purchase
384,864 shares of Class A common stock were exercised resulting in cash proceeds
of $327,793. During the same period, 228,364 shares of Class A common stock were
issued as a result of the exercise of stock appreciation rights.

Warrants

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

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

During the nine months ended  September  30, 2000,  warrants for the purchase of
200,000 shares of Class A common stock were exercised resulting in cash proceeds
of $250,000.  As of September  30, 2000,  warrants for the purchase of 3,425,000
shares of Class A common stock remain outstanding.

Other

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

Outlook

The  Company  believes  that its core  technologies,  namely,  automatic  speech
recognition,    text-to-speech   and   handwriting    recognition   (the   "Core
Technologies"), will be the platform for the next generation of automatic speech
technologies  and products.  Most speech  recognition  products offered by other
companies are based on technologies

                                       18


<PAGE>



that are largely in the public domain and represent nothing  particularly  "new"
or creative. The Company's Core Technologies are based on proprietary,  patented
technology.  The Company  will  continue to seek patent  protection  of the Core
Technologies as well as technologies  and inventions  derived from the know how,
assets and rights  acquired  from past  acquisitions.  Management  believes  the
Company's HUI  technologies  provide a competitive  advantage  compared to other
technologies available in the marketplace.

As the Company  proceeds to implement its strategy and to reach its  objectives,
it anticipates further development of complementary technologies,  added product
and applications development expertise, access to market channels and additional
opportunities for strategic  alliances in other industry segments.  The strategy
described above is not without risk, and stockholders  and others  interested in
the Company and its common stock should  carefully  consider the risks set forth
under the heading  "Certain  Significant  Risk  Factors" in the  Company's  1999
Annual Report on Form 10-K, Item 1, Part I.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Oregon Graduate  Institute - On July 28, 1999, Oregon Graduate Institute ("OGI")
filed a notice of default,  demand for mediation and demand for arbitration with
the American  Arbitration  Association.  In its demand,  OGI  asserted  that the
Company was in default under three separate  agreements  between the Company and
OGI in the total  amount  of  $175,000.  On  September  23,  1999,  the  Company
responded to OGI's demand and denied the  existence of a default under the three
agreements  identified by OGI.  Moreover,  the Company  asserted a  counterclaim
before the American  Arbitration  Association  against OGI in an amount not less
than  $250,000.  The  Company  and OGI have  tentatively  agreed to  settle  the
arbitration  proceeding  on terms  favorable  to the  Company.  There  can be no
assurance  that the  arbitration  proceeding  will be settled until a definitive
settlement and release agreement is signed by the parties.

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

Item 2.  Changes in Securities

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

Recent Sales of Unregistered Securities. During the three months ended September
30, 2000, the Company issued no equity securities that were not registered under
the Securities Act of 1933, as amended.

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

On September 28, 2000,  the Company held its Annual Meeting of  Shareholders  in
San Jose, California. The following directors were elected at the meeting:

                                    SHARES                           SHARES

DIRECTOR                           VOTED FOR                      VOTED AGAINST
--------                           ---------                      -------------
Thomas A. Murdock                 129,445,118                        726,163
Roger D. Dudley                   129,319,052                        852,229
John A. Oberteuffer, Ph.D         129,492,751                        678,530
William A. Maasberg, Jr.          129,625,436                        545,581
Mark S. Tanner                    129,656,436                        514,845

The only other  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 129,784,384 shares for, 315,764 shares against,  and 51,133 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:

                                       19

<PAGE>


           Exhibit No.         Description of Exhibit

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

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

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

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

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

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

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

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

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

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

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

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

           (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


                                       20
<PAGE>

                    incorporated  by  reference  from  the  Company's  Quarterly
                    Report on Form 10-Q for the period ended September 30, 1998

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

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

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

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

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

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

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

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

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

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

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



                                       21
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

           (10)(xvii)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,


                                       22
<PAGE>

                    1998, incorporated by reference from the Company's Quarterly
                    Report on Form 10-Q for the period ended September 30, 1998

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

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

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

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

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

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

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

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

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

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

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

           (10)(xxx)First  Amendment to Loan  Agreement,  dated as of August 12,
                    1999,  which is incorporated 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))

                                       23
<PAGE>

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

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

           (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)

           (27)     Financial Data Schedule

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


                                       24
<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: November 14, 2000                  /s/ Roger D. Dudley
     ---------------------------      --------------------------------
                                      Roger D. Dudley, Executive Vice President,
                                      Chief Financial Officer



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