UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549
                                  
                                FORM 10-Q
                                  
[X]   Quarterly report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the quarterly period ended March 31, 1997
  
[ ]   Transition Report under 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 and 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 Section 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.  Yes [X]   
or No  [ ] 
 
As of May 13, 1997, 41,731,563 shares of the issuer's Common Stock, par value
$.0001 per share, were issued and outstanding.
<PAGE>

                      PART I - FINANCIAL INFORMATION
                                  
Item 1.  Financial Statements.
  
      The interim financial statements required by Rule 10-01 of Regulation
      S-X follow immediately.

<PAGE>
                               fonix corporation                                
                         [A Development Stage Company]
					
                     CONDENSED CONSOLIDATED BALANCE SHEET     

<TABLE>
<CAPTION>
                                                                                 (Unaudited)       (Audited) 
                                                                                  March 31,       December 31, 
                                                                                    1997              1996
                                                                               --------------    --------------
<S>                                                                            <C>               <C>
                                     ASSETS                   
Current assets:					
    Cash and cash equivalents                                                  $  21,243,947     $  22,805,786 
    Notes Receivable                                                               1,883,600         1,000,000 
    Interest receivable                                                               87,445           157,643 
    Prepaid Assets                                                                    39,792             4,172 
                                                                               --------------    --------------
         Total Current Assets                                                     23,254,784        23,967,601 
						
Equipment, net of accumulated depreciation of $146,645 and $80,232                 1,439,474         1,279,746  
						
Intangible assets, net of accumulated amortization of $3,936 and $3,107               53,243            53,011  
						
Other assets                                                                          39,647            30,912  
                                                                               --------------    --------------
                                                                               $  24,787,148     $  25,331,270  
                                                                               ==============    ==============
                      LIABILITITES AND STOCKHOLDERS' EQUITY                                     

Current liabilities:						
    Accounts payable                                                           $     235,406     $     307,931  
    Accounts payable - related party                                                  38,614           411,743  
    Accrued expenses                                                               1,580,110         1,464,049  
    Convertible debenture                                                            500,000           500,000  
    Notes payable                                                                 18,269,888        16,377,358 
                                                                               --------------    --------------
         Total Current Liabilities                                                20,624,018        19,061,081 
                                                                               --------------    --------------
Stockholders' equity:					
    Preferred stock                                                                     -                 -   
    Common stock                                                                       4,203             4,163 
    Additional paid-in capital                                                    26,864,197        26,107,833 
    Accumulated deficit                                                          (22,705,270)      (19,841,807)
                                                                               --------------    --------------
         Total stockholders' equity                                                4,163,130         6,270,189 
                                                                               --------------    --------------
                                                                               $  24,787,148     $  25,331,270 
                                                                               ==============    ==============

   See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                      3
<PAGE>
                               fonix corporation
                          [A Development Stage Company]
							
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 [Unaudited]
<TABLE>
<CAPTION>
                                                                                      October 1,
                                                        Three months ended               1993
                                                             March 31,               (inception) to
                                                 --------------------------------       March, 31
                                                      1997             1996               1997
                                                 --------------    --------------    --------------
<S>                                              <C>               <C>               <C>
Revenues                                         $        -        $        -        $        -   
                                                 --------------    --------------    --------------
Expenses:							
    General and administrative                       1,293,391           363,202        10,592,949 
    Research and development                         1,610,058           816,661        12,481,057 
                                                 --------------    --------------    --------------
        Total expenses                               2,903,449         1,179,863        23,074,006 
                                                 --------------    --------------    --------------
Loss from operations                                (2,903,449)       (1,179,863)      (23,074,006)
                                                 --------------    --------------    --------------
Other income (Expenses):							
    Interest income                                    305,549           126,614         1,698,006 
    Interest (expense)                                (265,563)         (103,938)       (1,359,818)
                                                 --------------    --------------    --------------
        Total Other Income (Expenses)                   39,986            22,676           338,188 
                                                 --------------    --------------    --------------
Loss before extraordinary item                      (2,863,463)       (1,157,187)      (22,735,818)
							
Extraordinary item-							
    Forgiveness of debt                                   -                 -               30,548 
                                                 --------------    --------------    --------------
Net Loss                                         $  (2,863,463)    $  (1,157,187)    $ (22,705,270)
                                                 ==============    ==============    ==============
Loss per common share:							
    Loss before extraordinary items              $       (0.07)    $       (0.04)    $       (0.93)
    Extraordinary item                                    Nil               Nil               Nil 
                                                 --------------    --------------    --------------
Loss per common share                            $       (0.07)    $       (0.04)    $       (0.93)
                                                 ==============    ==============    ==============
Weighted average shares                             41,834,372        31,118,026        24,403,470 
                                                 ==============    ==============    ==============

  See accompanying notes to condensed consolidated financial statements
</TABLE>
                                       4
<PAGE>
                              fonix corporation
                         [A Development Stage Company]
								
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
								
               Increase (Decrease) in Cash and Cash Equivalents
                                  [Unaudited]
<TABLE>
<CAPTION>
                                                                                      October 1,
                                                                                 Three months ended               1993
                                                                                      March 31,               (inception) to
                                                                          --------------------------------       March, 31
                                                                               1997             1996               1997
                                                                          --------------    --------------    --------------
<S>                                                                       <C>               <C>               <C>
Cash flows from development activities:
    Net loss                                                              $  (2,863,463)    $  (1,157,187)    $ (22,705,270)
    Adjustments to reconcile net loss to net cash                                            
      used in development activities:                                                
        Common stock issued for services                                        331,406              -            1,655,676 
        Additional compensation expense recorded in                                      
          accordance with APB Opinion No. 25                                       -                 -            2,282,900 
        Write-off of assets received in acquisition                                -                 -                1,281 
        Depreciation and amortization                                            66,178             4,999           150,578 
        Non cash gain on forgiveness of debt                                       -                 -              (30,548)
        Changes in assets and liabilities:                                       
            (Increase)  decrease in interest receivable                          70,198           (28,152)          (87,445)
            (Increase) in prepaid assets                                        (35,620)             -              (39,792)
            (Increase) in other assets                                           (8,735)                            (39,647)
            Increase (decrease) in accounts payable                             (72,525)          (97,212)        1,870,675 
            Increase (decrease) in accounts payable - related party            (373,129)                             38,614 
            Increase  (decrease) in accrued expenses                            116,061           (13,530)        1,672,028 
                                                                          --------------    --------------    --------------
        Net cash used in operating activities                                (2,769,629)       (1,291,082)      (15,230,950)
                                                                          --------------    --------------    --------------
Cash flows from investing activities:								
    Purchase of equipment                                                      (226,140)          (74,393)       (1,586,118)
    Investment in intangible assets                                                -               (9,598)          (57,179)
    Investment in notes receivable                                             (883,600)         (800,000)       (1,883,600)
    Payment of notes receivable                                                    -                 -                 -   
                                                                          --------------    --------------    --------------
        Net cash used in investing activities                                (1,109,740)         (883,991)       (3,526,897)
                                                                          --------------    --------------    --------------
Cash flows from financing activities:								
    Net increase in revolving note payable                                    1,892,530         2,782,753        18,269,888 
    Proceeds  from notes payable                                                   -                 -            2,351,667 
    Payment of notes payable                                                       -                 -           (1,779,806)
    Proceeds from issuance of convertible debenture                                -                 -              500,000 
    Proceeds from issuance of common stock                                      425,000         2,593,763        20,660,045 
                                                                          --------------    --------------    --------------
        Net cash provided by financing activities                             2,317,530         5,376,516        40,001,794 
                                                                          --------------    --------------    --------------
Net increase (decrease) in cash and cash equivalents                         (1,561,839)        3,201,443        21,243,947 
								
Cash and cash equivalents at beginning of period                             22,805,786         7,849,610              -   
                                                                          --------------    --------------    --------------
Cash and cash equivalents at end of period                                $  21,243,947     $  11,051,053     $  21,243,947 
                                                                          ==============    ==============    ==============

</TABLE>
                                  [Continued]
                                      5
<PAGE>

                              fonix corporation
                         [A Development Stage Company]
								
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
								
               Increase (Decrease) in Cash and Cash Equivalents
                                  [Unaudited]
<TABLE>
<CAPTION>
                                                                                      October 1,
                                                                                 Three months ended               1993
                                                                                      March 31,               (inception) to
                                                                          --------------------------------       March, 31
                                                                               1997             1996               1997
                                                                          --------------    --------------    --------------
<S>                                                                       <C>               <C>               <C>
Supplemental disclosure of cash flow information:
    Cash paid during the year for:                                                           
										
        Interest paid                                                     $     247,785     $     117,468     $   1,136,251 
										
        Income taxes paid                                                 $        -        $        -        $        -   

Supplemental Schedule of Non-cash Investing and Financing Activities:										
										
    For the three months ended March 31, 1997:                                                             
                                                                       
    The Company issued 155,000 shares of common stock to unrelated parties for consulting fees
    valued at $331,406.
										
    For the three months ended March 31, 1996:                                                             
										
    The Company issued 220,000 shares of common stock to unrelated parties for finders fees
    valued at $304,000.








     See accompanying notes to consolidated financial statements

</TABLE>

                                       6
<PAGE>
                           fonix (TM) corporation
                       [A Development Stage Company]
                Notes to Consolidated Financial Statements
                               [Unaudited]

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
      Basis of Presentation - The accompanying financial statements have been
      prepared by the Company without audit in accordance with generally
      accepted accounting principles for interim information and pursuant to
      Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of
      the information and footnotes required by generally accepted accounting
      principles for complete financial statements.   In the opinion of
      management, all adjustments (which included only normal recurring
      adjustments) necessary to present fairly the financial position, results
      of operations and cash flows for all periods presented, have been made.
  
      Certain information and footnote disclosures normally included in
      financial statements prepared in accordance with generally accepted
      accounting principles have been condensed or omitted in the accompanying
      interim financial statements.  It is suggested that these condensed
      consolidated financial statements be read in conjunction with the
      financial statements and notes thereto included in the Company's December
      31, 1996 audited financial statements.  The results of operations for the
      three months ended March 31, 1997 and 1996 are not necessarily indicative
      of the operating results for the full year.
  
      Research and Development - All payments for research and development are
      charged to research and development expense as incurred.  None of these
      costs are capitalized since the Company does not have a product that
      meets applicable capitalization requirements.  
  
      Recently Enacted Accounting Standards - In February 1997, SFAS Nos. 128,
      "Earnings Per Share" and 129, "Disclosures of Information about Capital
      Structure" were issued.  SFAS No. 128 changes the computation,
      presentation, and disclosure requirements of earnings per share (EPS) for
      entities with publicly held common stock.  SFAS No. 129 addresses
      standards for disclosing information about an entity's capital structure. 
      Although such statements are not effective until December 31, 1997, had
      such statements been adopted for the three months ended March 31, 1997,
      the effect would not be significant.
  
2.  CASH MANAGEMENT PROGRAM - NOTE RECEIVABLE
  
      At March  31, 1997 the Company had an unsecured note receivable from an
      unrelated third party in the amount of $1,000,000 which bears interest
      at 12% per annum and is due and payable thirty days after written notice
      from the Company.  Subsequent to March 31, 1997, the Company received a
      $500,000 payment, reducing the balance of the note receivable to
      $500,000.
  
      At March  31, 1997 the Company had a secured note receivable from an
      unrelated third party in the amount of $700,000 which bears interest at
      12% per annum and is due and payable on June 29, 1997.

      At March  31, 1997 the Company had a secured note receivable from an
      unrelated third party in the amount of $183,600 which bears interest at
      12% per annum.  The balance was paid in full when due on  May 14, 1997.
  
3.   EQUIPMENT
  
      Equipment consists of the following at March 31, 1997:
  
       Furniture and fixtures                             $     617,279
       Computer equipment                                       899,469
       Leasehold improvements                                    69,370
                                                         ---------------
       Total                                                  1,586,118
       Less accumulated depreciation and amortization          (146,644)
                                                         ---------------
       Total                                              $   1,439,474 
                                                          ==============
4.    CONVERTIBLE DEBENTURE

        During October 1995, the Company issued a Series A Subordinated
        Convertible Debenture in the amount of $500,000 to a private investment
        entity. The debenture is due October 23, 1997, has an annual interest
        rate of 5% and may be converted to Series A Preferred Stock or into
        common stock (see Note 6).

5.     NOTE PAYABLE

        At March 31, 1997, the Company had a revolving note payable to a bank in
        the amount of $18,269,888 which bears interest at the rate of 5.8%.
        This note payable was due April 30, 1997, and is secured by a
        certificate of deposit in the amount of $20,000,000.  Subsequently,
        similar terms were negotiated to extend the maturity date of the note
        for approximately 90 days.

6.     STOCKHOLDERS' EQUITY

        Issuance of Stock - During the three months ended March 31, 1997, the
        Company issued 405,000 shares of common stock.  150,000 of such shares
        were issued to an unrelated private investor, 250,000 of such
        shares were issued upon the exercise of previously granted warrants,
        and 5,000 of such shares were issued to an unaffiliated individual for
        services rendered.

        Preferred Stock - In 1994, the Company amended its articles of
        incorporation to authorize the issuance of Series A Preferred stock.  As
        of March  31, 1997 the Company's board of directors and shareholders had
        not yet authorized the issuance of preferred stock or determined the
        dividend rate, liquidation preferences, participation rights, or
        redemption requirements of the stock.

        Funding Agreement - In October 1995, the Company entered into a funding
        arrangement with a private investment entity. Under the terms of the
        agreement, the investor agreed to invest $6,050,000 ("Funding
        Commitment") over an 11 month period in return for which the Company
        agreed to issue a total of 11,562,500 shares of the Company's common
        stock, and a $500,000 debenture which is convertible into 166,667 Series
        A Preferred Stock or 166,667 shares of common stock.  The Company
        received $3,945,000 (which included the $500,000 convertible debenture)
        and $2,105,000 of the Funding Commitment in 1996 and 1995, respectively.

        Stock Options and Warrants - On March 10, 1997, the Company's board of
        directors approved a stock option plan for directors, employees and
        other persons acting on behalf of the Company, under which the
        aggregate number of shares available for issuance is 7,500,000.  The
        term of options granted under the plan is ten years from the date of
        grant.  On March 13, 1997, 300,000 shares were granted to certain
        directors and officers of the Company with an exercise price of $7.13,
        which is the closing market price of the stock on the date the options
        were granted.  None of these options have been exercised.

        During 1996, employees were granted an aggregate of 71,000 stock options
        as signing incentives. The exercise price of such options is the closing
        market price of the stock on the date the options were granted.  These
        options are exercisable at any time beginning six months after the date
        of grant and expire July 30, 2006.

        In April 1996, the directors approved a directors' stock option plan,
        under which the aggregate number of shares available for issuance is
        5,400,000.  The shareholders of the Company approved the plan at their
        annual meeting in July 1996. The plan is administered by a committee
        consisting of two or more directors of the Company.  The plan provides
        that each director shall receive options to purchase 200,000 shares of
        common stock for services rendered as a director during each entire
        calendar year or portion of a calendar year in excess of six months.
        The exercise price of such options is the closing market price of the
        stock on the date the options are granted.  The option term is ten years
        from the date of grant.

        In April 1996, the directors approved an employee stock option plan 
        under which the aggregate number of shares available for issuance is 
        900,000 shares. The exercise price of such options is the closing market
        price of the stock on the date the options are granted.  The term of the
        plan is 10 years and options are subject to a three year vesting 
        schedule, pursuant to which one-third of the total number of options 
        granted may be exercised each year.

        In April 1996, the Company granted 100,000 warrants to an unrelated
        individual to purchase 100,000 shares of the Company's common stock. 
        These warrants were granted in lieu of cash for services rendered the
        Company in connection with the Funding Commitment.

        In April 1995 three unrelated individuals were offered and purchased
        120,000 warrants for common stock in connection with a stock purchase
        agreement.  The warrants are exercisable anytime prior to April 1998.

        In April 1995, the disinterested directors of the Company approved the
        issuance of warrants to purchase 3,700,000 shares of common stock to an
        entity owned and controlled by three individuals who were then and are
        now directors, executive officers and greater than 10% beneficial owners
        of the Company, in lieu of payment of $1,417,100 in management fees for
        services previously rendered, due from the Company to the entity
        controlled by those individuals.

        In November 1994, the Company granted warrants for the purchase of an
        aggregate of 155,000 shares of common stock to certain individuals,
        including warrants for 30,000 shares to three directors. In October
        1995, certain of these individuals were granted the right to purchase
        warrants to purchase an additional 185,000 shares of restricted common
        stock. In order to preserve the Company's limited cash, warrants were
        granted in lieu of cash for services rendered to the Company.  The
        warrants, as well as the right to purchase the warrants, expire between
        April 1998 and October 1998.

        In October 1994 the Company granted 150,000 warrants to purchase common
        stock to an employee.  Due to the limited cash funds of the Company,
        these warrants were granted in lieu of cash for previous and future
        services.

        As part of a September 1994 restated stock purchase agreement, the
        Company granted a shareholder the right to purchase 500,000 warrants at
        $.10 for the purchase of common stock pursuant to Regulation S.  In
        December 1995 the 500,000 warrants were purchased for $50,000. At the
        time of the purchase of said warrants, the rights were assigned to two
        foreign entities which purchased the 500,000 shares for $500,000.

        A summary of the status of the options granted under the Company's stock
        option plan and employment agreements for the three months ended March
        31, 1997 is as follows:
<TABLE>
<CAPTION>
        
                                                                              Weighted
                                                                               Average
                                                             Stock            Exercise
                                                            Options             Price
                                                         --------------    --------------
        <S>                                              <C>               <C>
        Outstanding at beginning of period                  4,626,000        $     4.06   
        Granted                                               300,000              7.13

        Exercised                                                -                 -       
        Forfeited                                                -                 -       
        Canceled                                             ( 25,000)             5.00   
                                                         --------------    --------------
        Outstanding at end of period                        4,901,000        $     4.26  
                                                         ==============    ==============
        Exercisable at end of period                        3,246,000        $     4.06  
                                                         ==============    ==============
        Weighted average fair value of options
          granted during the period                                          $      .46  
                                                                           ==============
</TABLE>
        
        A summary of the status of the options outstanding under the Company's
        stock option plans and employment agreements at March 31, 1997 is
        presented below:
<TABLE>
<CAPTION>
        
                             Options Outstanding                           Options Exercisable
        -------------------------------------------------------       -----------------------------
                                        Weighted                                                           
                                         Average       Weighted                          Weighted
            Range of                    Remaining       Average                          Average
           Exercise         Number     Contractual     Exercise         Number           Exercise
            Prices       Outstanding      Life           Price        Exercisable          Price
        <S>              <C>           <C>           <C>              <C>              <C>
        $2.97 - 3.66       155,000      9.3 years    $   3.55            36,000        $     3.18  
         4.06            4,400,000      9.1 years        4.06         3,200,000              4.06  
         5.00 - 5.06        26,000      9.6 years        5.00                                          
         7.13 - 9.31       320,000      9.9 years        7.24            10,000                      
        -------------    -----------   -----------   ----------      -------------     ------------
        $2.97 - 9.31     4,901,000      9.20 years   $   4.26         3,246,000        $     4.06  
        =============    ===========   ===========   ==========      =============     ============
</TABLE>
        
        A summary of the status of the warrants granted by the Company during
        the three months ended March 31, 1997 is presented below:
        
                                                                
                                                        March 31, 1997
                                                  --------------------------
                                                                    Weighted
                                                                     Average
                                                                    Exercise
                                                     Shares           Price
                                                  ------------   -----------
         Outstanding at beginning of period          600,000       $   1.63
         Granted                                        -              -       
         Exercised                                  (250,000)          1.40  
         Forfeited                                      -              -       
         Canceled                                       -              -       
                                                  ------------   -----------
          Outstanding at end of period               350,000       $   1.80  
                                                  ============   ===========

        A summary of the status of the warrants outstanding from the Company at
        March 31, 1997 is presented below:

<TABLE>
<CAPTION>
        
                         Warrants Outstanding                                Exercisable
        -------------------------------------------------------       -----------------------------
                                        Weighted                                                           
                                         Average       Weighted                          Weighted
            Range of                    Remaining       Average                          Average
           Exercise         Number     Contractual     Exercise         Number           Exercise
            Prices       Outstanding      Life           Price        Exercisable          Price
        <S>              <C>           <C>           <C>              <C>              <C>
         $  .5             130,000      1.2 years    $    0.50         130,000          $    0.50  
           2.00            120,000      1.0 years         2.00         120,000               2.00 
           3.24            100,000      2.0 years         3.24         100,000               3.24 
        ------------     -----------   -----------   ----------       -----------       ----------
         $.50 - 3.24       350,000      1.4 years    $    1.80         350,000          $    1.80  
        ============     ===========   ===========   ==========       ===========       ==========
</TABLE>
        
7.     RELATED PARTY TRANSACTIONS
        
        Related party transactions with a company owned by the majority
        shareholders not otherwise disclosed for the three months ended
        March 31, 1997 were as follows:
        
        
                                                              1997
                                                          ------------
        Expenses:
           Management fees expense                              None    
           Interest expense                                     None    
           Rent expense                                        19,300  
                                                                       
         Payables:                                                      
           Accounts payable                                    38,614  
           Accrued expenses                                 1,350,000  
                                                                       
        
        The Company rents office space from a company owned by three individuals
        who each are executive officers, directors and 10% beneficial owners
        under a month-to-month lease.  The lease to the company owned by these
        individuals is guaranteed by them.

        During 1996, the disinterested members of the Company's Board of
        Directors authorized the Company to reimburse certain officers for any
        taxes payable by the officers in conjunction with the exercise of
        3,700,000 warrants in 1995 by a company owned by the officers. 
        Subsequent to March 31, 1997, the Company paid these officers $2,058,536
        for such tax reimbursements.

8.     RESEARCH AND DEVELOPMENT

        In October 1993, the Company entered into an agreement (the "Synergetics
        Agreement") with a research and development entity, Synergetics, Inc.
        ("Synergetics"), whereby Synergetics was to develop certain technologies
        related to the Company's automated speech recognition technology
        ("ASRT"). The president of the Company is one of seven members of the
        board of directors of Synergetics, and the majority shareholders of the
        Company own less than five percent of the common stock of Synergetics.
        The Synergetics Agreement was subsequently modified (the Synergetics
        Agreement, together with any modifications thereto are referred to
        herein as the "Synergetics Agreements").  Under the terms of the
        Synergetics Agreements, the Company acquired intellectual property
        rights, and technologies and technology rights that were developed by
        Synergetics. The Company agreed to provide all funding assets necessary
        for Synergetics to develop commercially viable technologies. There was
        no minimum requirement or limit with respect to the amount of the
        funding to be provided by the Company.  However, under the terms of the
        Synergetics Agreements the Company was obligated to use its best efforts
        in raising the necessary funding for the engineering, development,
        manufacturing and marketing of the ASRT.  As part of the Synergetics
        Agreements, the Company agreed to pay Synergetics a royalty of 10% of
        gross revenues from sales of its ASRT.  The R&D Agreement was restated
        in March of 1995.  The R&D Agreement and the Restated Agreement are
        referred to collectively as the "Synergetics Agreements."  The Company
        has not yet licensed its technologies, and consequently, Synergetics has
        not recorded any revenues from royalty payments.  Under the terms of the
        Synergetics Agreement, the Company paid to Synergetics $1,361,977 and
        $816,661 for the three months ended March 31, 1997 and 1996,
        respectively, for research and development efforts.  The Company
        incurred total research and development costs of $1,610,058 and $816,661
        for the three months ended March 31, 1997 and 1996 respectively.

        On March 13, 1997, the Company and Synergetics reached an agreement in
        principle represented by a Memorandum of Understanding (the
        "Memorandum") to modify the Synergetics Agreements with regard to the
        development and assignment of the Company's ASRT.  Until March 1997,
        Synergetics had compensated engineers, employees, members of its
        development team, and other financial backers, in part, with the
        issuance of "Project Shares" granting the holders of such shares the
        right, up to defined limits, to share pro rata in future royalty
        payments.  In addition to issuance of Project Shares, Synergetics had
        made loans and advances to some members of its project team
        (collectively, the "Advances") on a non-recourse basis.  Repayment of
        the Advances was secured by future disbursements under the Project
        Shares.

        The Memorandum modifies the Synergetics Agreements as follows:

        *    The rights and obligations of Synergetics under the R&D Agreement,
             including the royalty, will be assigned to a newly created wholly-
             owned subsidiary of the Company, fonix  Acquisition
             ("Acquisition");

        *    Acquisition will also assume the obligations of Synergetics to all
             holders of Project Shares;

        *    The Company and Acquisition will release Synergetics from any
             further obligation or duty under the Synergetics Agreements;

        *    In consideration for the assignment of the rights to the royalty
             by Synergetics to Acquisition, the Company will issue warrants to
             Synergetics and the holders of Project Shares to acquire, in the
             aggregate, up to 4,800,000 shares of the Company's common stock
             at an exercise price of $10.00 per share (the Warrants).  A holder
             of Project Shares will be entitled to receive Warrants to purchase
             800 shares of the Company's common stock for each Project Share
             held; provided, however, that the number of Warrants to be issued
             will be reduced by the amount of one Warrant for each $37.50 in
             Advances;

        *    The Warrants will become exercisable subject to progress made in
             further development of the ASRT Technology and the first to occur
             of (i) a minimum daily closing bid price for shares of the
             Company's common stock of $37.50 for a period of at least 15
             consecutive trading days, or (ii) thirty months from the date the
             Warrants are issued.  The exercise date shall be accelerated upon
             certain business combinations or reorganizations, such as a
             merger, involving the Company.  The terms relating to development
             of the ASRT Technology will be subject to a confidentiality and
             non-disclosure agreement and covenants;

        *    In consideration of the assumption by Acquisition of the
             obligations of Synergetics, the release of Synergetics from its
             further duties under the Synergetics Agreements, and the issuance
             of the Warrants to Synergetics and holders of Project Shares, the
             royalty and Project Shares tendered in exchange for Warrants will
             be canceled;

        *    Effective March 1997, the Company employed certain former members
             of the Synergetics project team as employees of the Company on
             terms and conditions approximately equivalent to the terms and
             conditions of their prior employment with Synergetics, and
             including the right to participate in the Company's employee stock
             option plans; and

        *    The Company engaged the founder and principal stockholder of
             Synergetics as a full-time consultant to assist with the further
             development of the ASRT.

        The parties to the Memorandum have acknowledged the consummation of the
        transactions described above will require, among other things, execution
        of definitive agreements and compliance with applicable federal and
        state laws, including securities laws.  Those agreements will include
        standard terms and provisions that are typical of such transactions,
        including mutual releases and indemnification covenants.  Synergetics
        has other business interests and activities and will continue to
        conduct its business in the usual course following the closing.

        The Company presently anticipates that the U.S. Patent and Trademark
        Office will issue the initial patent describing 36 claims on June 17,
        1997.  Assuming issuance of the patent, as described above, the Company
        anticipates that it will thereafter enter into license and/or original
        equipment manufacturer agreements with third parties, which could result
        in revenues prior to the end of 1997.

9.     INCOME TAXES

        At March 31, 1997, net deferred tax assets, before considering the
        valuation allowance, totaled approximately $8,800,000.  The amount of
        and ultimate realization of the benefits from the deferred tax assets
        for income tax purposes is dependent, in part, upon the tax laws then in
        effect, the Company's future earnings, and other future events, the
        effects of which cannot presently be determined. Because of the
        uncertainty surrounding the realization of the loss carryforwards the
        Company has established a valuation allowance for all net deferred tax
        assets.  Accordingly, because of recurring losses and the valuation
        allowance, there is no provision for income taxes in the accompanying
        statements of operations.  The net change in the valuation allowance was
        approximately $997,224 for the three months ended March 31, 1997.
        The Company has available at March 31, 1997, unused federal operating
        loss carryforwards of approximately $19,700,000 and unused state
        operating loss carryforwards of approximately $20,500,000, which may be
        applied against future taxable income and which expire in various years
        beginning in 2008 through 2011.

10.    COMMITMENTS AND CONTINGENCIES

        Employment Agreements - On November 1, 1996, the Company entered into
        three employment contracts with executive officers which expire on
        December 31, 2001.  The minimum salary payments required on these
        contracts are as follows:

        Year Ending December 31:
          1997                                     $      787,500  
          1998                                          1,025,000  
          1999                                          1,337,500  
          2000                                          1,750,000  
          2001                                          1,875,000  
                                                   ---------------
          Total                                    $    6,775,000
                                                   ===============
                                                                   
        Litigation - On February 10, 1997 an action (the "Palomba Action") was
        filed against the Company and six of its directors.  The Palomba Action
        is a derivative action seeking relief on behalf of all shareholders for
        the benefit of the Company.  The Palomba Action alleges that certain
        employee directors caused the Company to engage in a series of loan
        transactions with K.L.S. Enviro Resources, Inc. and thereafter
        appropriated for themselves certain corporate opportunities resulting
        from such loan transactions.  A settlement agreement in principle was
        reached prior to service of the complaint and is currently being
        documented.  The settlement agreement will be subject to the approval of
        the court and will not cost the Company anything except incidental
        attorneys fees.  The terms of the settlement are confidential until
        approved by the court.  Because of market factors, it is not presently
        possible to predict the amount of benefit to the Company under the
        settlement.
        
        Lease Agreement - The Company has a long-term operating lease agreement
        for office space with an unrelated party.  The future aggregate minimum
        obligations under this operating lease are as follows:
        
        Years ending December 31:                                       
          1997                                           $     340,672  
          1998                                                 340,672  
          1999                                                 340,672  
          2000                                                 340,672  
          2001                                                 340,672  
          Thereafter                                           958,549  
                                                         --------------
          Total                                          $   2,661,909
                                                         ==============
         
11.    SUBSEQUENT EVENTS
                                   
        Subsequent to March 31, 1997 the Company paid $2,058,536 to reimburse
        certain officers for any taxes payable by the officers in conjunction
        with the exercise of 3,700,000 warrants in 1995 by a company owned by
        the officers (See Note 7 - Related Party Transactions).
  
  
Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operation
  
  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 BELOW IN THE SECTION ENTITLED "FACTORS AFFECTING FUTURE OPERATING
  RESULTS."
  
  Overview
  
      fonix is a development-stage company engaged in scientific research and
  development of proprietary Automated  Speech Recognition Technologies
  ("ASRT") comprised of components which may be licensed in whole or in part. 
  The Company has completed the core technologies related to the ASRT such that
  they are available for third-party licensing and co-development.  Heretofore,
  on advice of intellectual property counsel, the Company has not licensed the
  ASRT to any third party vendor or co-developer pending receipt of formal
  notice of allowance of its initial patent application.  Having received such
  notice of allowance, the Company is presently engaged in discussions with
  potential licensees and co-developers.  However, the Company has to date
  received no revenues from operations, including licenses, and there can be no
  assurance that revenues from operations will be received in the future.  
  
      The Company's primary development objective is to further develop the
  main components of its ASRT and certain supplemental technologies.  The
  Company's initial marketing direction is to focus on licensing its ASRT to
  third parties and co-developers.  These licenses will be made broadly
  available to many segments of the computer industry, including  application
  software, operating systems, computers and microprocessor chips, and research
  and development entities worldwide, including academia, government, industry
  and commercial speech product developers who may want to take advantage of
  the Company's ASRT or related technologies in their existing products.  The
  Company will sell or license its ASRT or related technologies on terms
  advantageous to the Company.  Run-time product license royalty rates will
  vary according to applications, sales volumes, and end-user pricing of
  products using the ASRT.  The Company will reserve exclusive rights in some
  fields of use for the internal development of high value end-user products
  and applications. 
  
  Results of Operations
  
      Research and Development 
  
      The Company's scientific research and development activities
  historically have been conducted by an unaffiliated third party, Synergetics,
  Inc. ("Synergetics")  pursuant to product development and assignment
  contracts between the Company and Synergetics (the "Synergetics Agreements"). 
  Under that arrangement, Synergetics provided personnel and facilities, and
  the Company financed such scientific research and development activities on
  an as-required basis.  There was no minimum requirement or limit with respect
  to the amount of funding the Company was obligated to provide to Synergetics
  under the Synergetics Agreements, and the Company was obligated to use its
  best efforts in raising all of the necessary funding for the development of
  the ASRT.  The amounts of payments to Synergetics pursuant to the Synergetics
  Agreements were determined as Synergetics submitted weekly pre-authorized
  work orders and budgets, which were then reviewed and approved by the
  Company.  All funds paid to Synergetics have been accounted for by the
  Company as research and development expense.  Moreover, under the Synergetics
  Agreements, the Company, if and when the Company began receiving revenue from
  sales of the ASRT or products incorporating the ASRT, was obligated to pay
  the Royalty to Synergetics.  On March 13, 1997, the Company and Synergetics
  reached an agreement in principle represented by a Memorandum of
  Understanding (the "Memorandum" ) to modify the Synergetics Agreements with
  regard to the development and assignment of the Company's ASRT.  Under the
  Memorandum, and further assuming that the definitive agreements relating
  thereto are executed and the other preconditions to the effectiveness of the 
  Memorandum are satisfied, of which there can be no assurance, the Company
  will no longer have any obligation to pay to Synergetics the Royalty or any
  percentage of the gross revenue received from entering into licensing and/or
  co-development agreements or otherwise from the manufacture of products
  incorporating the ASRT.  The Company does not expect there to be a material
  change to research and development spending as a result of the Memorandum.
  
      As a development stage company which has not yet licensed its ASRT, the
  Company has not received any revenues from operations.  During the three
  months ended March 31, 1997 the Company incurred research and development
  expenses of $1,610,058 an increase of $793,397 or approximately 97 percent
  over the three months ended March 31, 1996.  This increase is due in part to
  increases in research and development personnel.  The Company anticipates
  similar or increased research and development costs as it continues to
  develop and market its technologies.   
  
      Operating Losses
  
      General and administrative expenses were $1,293,391 and $363,202,
  respectively, for the three months ended March 31, 1997 and March 31, 1996. 
  This increase over the comparable period was due primarily to increases in
  salaries, rents, legal fees, accounting fees and other outside services.  Due
  to the lack of revenues and these general and administrative and research and
  development expenses, the Company has incurred losses from operations of
  $2,903,449 and $1,179,863 for the three months ended March 31, 1997 and 1996,
  respectively.  Income from other income and expenses was $39,986 for the
  three months ended March 31, 1997, an increase of $17,310 over the three
  months ended March 31, 1996.  This increase was due primarily to increases in
  interest income from the Company's cash management program .  The Company has
  not incurred any losses from its cash management program.  At March 31, 1997,
  the Company had an accumulated deficit of $22,705,270 and stockholders'
  equity of $4,163,130.  The Company anticipates that its investment in ongoing
  scientific research and development of the ASRT and artificial intelligence
  and compression/decompression technologies will continue at present or
  increased levels for at least the remainder of fiscal 1997. 
  
  Liquidity and Capital Resources
  
      The Company's current assets exceeded its current liabilities by
  $2,630,766 at March 31, 1997 and $4,906,520 at December 31, 1996.  The
  current ratio of assets to liabilities was 1.12 at March 31, 1997 as compared
  with 1.26 at December 31, 1996.  Current assets decreased by $712,817 to
  $23,254,784 from December 31, 1996 to March 31, 1997.  Current liabilities
  increased by $1,562,937 to $20,624,018 during the same period.  The decrease
  in working capital over this period is primarily attributable to minimal
  sales of the Company's securities during the three months ended March 31,
  1997.  Total assets were $24,787,148 at March 31, 1997 as compared to
  $25,331,270 at December 31, 1996. 
  
      From its inception, the Company's principal source of operating capital
  has been private and other exempt sales of the Company's equity securities. 
  Private and other exempt sales of the Company's securities resulted in net
  cash proceeds of $425,000 for the three months ended March 31, 1997.
  
      Although the Company presently anticipates that it will enter into
  third party license or co-development agreements for its ASRT by the end of
  the first half of fiscal 1997, there can be no assurance that the Company
  will be able to license the ASRT within that time frame.  Even assuming that
  the Company is able to begin licensing the ASRT during the first half of
  1997, the Company may not receive revenues from operations until later in
  1997.  Accordingly, the Company expects to incur significant losses at least
  through the end of fiscal 1997 and until such time as it is able to enter
  into substantial licensing and co-development agreements and actually receive
  substantial revenues from such arrangements. 
  
      The Company has an established relationship with a major regional
  federally insured financial institution pursuant to which the Company has
  entered into an agreement allowing it to borrow against its own funds on
  deposit with the institution.  As of December 31, 1996, the Company had funds
  on deposit of $20,000,000, and the Company owed $16,377,358 to the
  institution.  As of March 31, 1997, the Company had funds on deposit of
  $20,000,000, and the Company owed the institution $18,269,888, which
  obligation matured on April 30, 1997.  The relationship with the institution
  is re-negotiated quarterly to enhance the earning potential to the Company of
  that deposit.  On April 30, 1997 the Company and the institution agreed to
  extend the term of the borrowing relationship for an additional three-month
  term on comparable competitive terms.  The rate of interest paid by the
  institution for the Company's funds on deposit at the institution and the
  interest rate paid to the Company by the institution is a net difference of
  1%.  Interest income and expense is payable monthly and the principal amount
  is payable in full at maturity. 
  
      Presently, the Company anticipates that it will need to raise
  additional funds to be able to satisfy its cash requirements during the next
  twelve months. The scientific research and development, corporate operations
  and marketing expenses will continue to require additional capital.  Because
  the Company presently has no revenue from operations, the Company intends to
  continue to rely primarily on financing through the sale of its equity and
  debt securities to satisfy future capital requirements until such time as the
  Company is able to enter into acceptable third party licensing or co-
  development arrangements such that it will be able to finance ongoing
  operations out of license,  royalty and sales revenue.   There can be no
  assurance that the Company will be able to enter into acceptable third party
  licensing or co-development agreements.  Furthermore, the issuance of equity
  securities or other securities which are or may become convertible to the
  equity securities of the Company in connection with such financing would
  result in dilution to the shareholders of the Company.
  
      In connection with the Memorandum, 55 employees of Synergetics became
  full-time or part-time employees of the Company.  Taking account of these
  employees, the Company presently employs 61 persons and has a need for
  approximately 15 additional scientific professionals and 10 additional
  technology asset managers.
  
      The Company has no plans to purchase any new plants or expand beyond
  any existing facility.
  
  Factors Affecting Future Operating Results
  
      Notwithstanding the Company's efforts and planning, any one or more of
  several factors could delay, obstruct or otherwise hinder the Company's
  ability to achieve its objectives or cause actual results of  operations to
  materially differ from expected or anticipated results including, without
  limitation, those which are expressed in forward-looking statements contained
  in this Report.  Included among such factors could be the following:
  
      Development Stage of Technology
  
      While the Company generally is pleased with the progress made to date
  with respect to the research and development of its ASRT, the Company
  presently has no commercial "shrink wrapped" product incorporating its ASRT
  and has not yet entered into revenue-generating third party licensing or co-
  development contracts.  Moreover, the Company has no present plans to
  manufacture such a "shrink-wrapped" product.  There can be no assurance that
  the Company will ever be able to license its ASRT such that the ASRT or
  products based thereon will be commercially viable.  
  
      Unproven Market; Risks of New Technology
  
      The Company believes that there is a market for products incorporating
  speaker-independent, natural language, continuous speech recognition
  technology with vocabulary contextually sufficient to be useful for general
  purpose consumer, commercial and industrial use, and capable of operating in
  real time with acceptable levels of accuracy.  Nevertheless, the Company is
  subject to all of the risks inherent in developing and marketing a new
  product with new technology, together with the risks associated with market
  acceptance of such technology, technological obsolescence, inappropriate
  intellectual property appropriation and inadequate funding to commence and/or
  sustain operations.  The Company's ASRT is new and represents a significant
  departure from technologies which have already found a degree of acceptance
  in the marketplace.  There can be no assurance that the Company's ASRT will
  receive similar acceptance.  Even if the ASRT is licensed and products
  incorporating such technology are manufactured and marketed, the occurrence
  of warranty or product liability, or retraction of market acceptance due to
  product failure, excess product returns or failure of the products to meet
  market expectations could prevent the Company from achieving or sustaining
  profitable operations.
  
      Competition and Technological Change
  
      The computer hardware and software industries into which the ASRT would
  be introduced are highly competitive.  Several companies already manufacture
  and market computer speech recognition products against which products
  incorporating the ASRT will compete.  Some, if not all, of those companies
  have greater experience in manufacturing and marketing speech recognition
  technology and products, and many have far greater financial and other
  resources than the Company and/or its potential licensees and co-developers,
  as well as broader name-recognition, more-established technology reputations,
  and mature distribution channels for their products.  Additionally, as the
  market for automatic speech recognition expands and matures, the Company
  expects many more entrants into this already competitive arena.  Computer
  technologies historically have changed and evolved at a rapid pace. 
  Consequently, there can be no assurance that the Company will be able to keep
  pace with such rapid evolution in the industry.  There can be no assurance
  that the distinguishing characteristics of the ASRT as completed and/or as
  may be enhanced in the future, and any products employing such technology
  will be sufficient to allow the Company to successfully compete in the
  marketplace.
  
       Ongoing Losses; Accumulated Deficit
  
       Since commencing its business of developing its ASRT, the Company has
  had no revenues from operations.  Since inception, the Company has sustained
  ongoing losses associated with its research and development costs.  As of
  March 31, 1997, the Company had an accumulated deficit of $22,468,174. 
  Additional losses will be incurred in the future until such time as the
  Company is able to complete licensing or co-development arrangements with
  third parties.
  
      Need for Additional Financing
  
      The Company has spent, and will continue to spend, substantial amounts
  of money in connection with the research and development of its ASRT.  During
  the three months ended March 31, 1997, the Company incurred total general and
  administrative and research and development expenses in the amount of
  $2,903,449.  It is not presently possible for the Company to predict whether
  its present cash resources will be sufficient to enable the Company to
  complete the development of its ASRT.  In the event that substantial amounts
  of additional financing are required, the Company does not believe it will be
  able to obtain such financing from traditional commercial lenders.  Moreover,
  if additional funding is necessary, the Company likely will have to conduct
  additional sales of its equity securities.  There can be no assurance that
  such additional equity financing will be available if and when, and in the
  amounts required, by the Company.  Moreover, even if such financing is
  available if and when required, there can be no assurance that such financing
  will be obtained on terms that are favorable to the Company, and substantial
  and immediate dilution to existing shareholders likely would result. 
  
      Controlling Interest of Related Parties
  
      Thomas A. Murdock, a director, executive officer and founding
  shareholder of the Company is the trustee of a voting trust into which is
  deposited a majority of the Company's issued and outstanding common stock
  which effectively gives Mr. Murdock control of the Company.  The Company
  believes that it will be controlled by its founding shareholders for the
  foreseeable future.
  
      Lack of Diversification of the Company's Business
  
      The Company is not engaged in and does not intend to engage in any
  business other than the further development and marketing of its ASRT and
  certain related technologies.
  
       Intellectual Property Protection 
  
       The Company has received formal notice of allowance from the United
  States Patent and Trademark Office for all 36 claims of its initial patent
  application.  The patent is now in the process of being prepared by the
  Patent and Trademark Office for issuance.  When a patent for such technology
  subsequently issues, as is anticipated on June 17, 1997, the Company will own
  such patent pursuant to the Synergetics Agreements and the Memorandum. 
  However, there can be no assurance that such patent, when issued, would be
  incontestable to a user with prior rights.  The Company is unaware of any
  facts or circumstances suggesting that the ASRT or the Company's anticipated
  use thereof infringes or will infringe any third party intellectual property
  rights.  Regardless of the foregoing, there can be no assurance that the ASRT
  will not infringe upon third party intellectual property rights, nor can
  there be any assurance that a third party will not assert that the Company
  has infringed its intellectual property rights, in which case the Company
  could be involved in protracted and costly litigation which could seriously
  impede the Company's development or otherwise adversely affect its
  operations.  Additionally, attempts may be made to copy or reverse engineer
  aspects of the ASRT, or to obtain, use or exploit information or methods
  which the Company deems proprietary.  Policing the use of the ASRT and
  possible infringing technology is difficult and expensive.  Litigation or
  other action may be necessary in the future to protect the Company's
  proprietary rights and to determine the validity and scope of the proprietary
  rights of others.  Such litigation or proceedings could result in substantial
  costs and diversions of resources and management's attention, and could have
  a material adverse impact upon the Company's business, operating results and
  financial condition.
  
      Dependence on Key Personnel  
  
      The Company is dependent on the knowledge, skill and expertise of
  several key scientific employees and consultants, including but not limited
  to C. Hal Hansen, Dale Lynn Shepherd, R. Brian Moncur, and Tony R. Martinez,
  and its executive officers, Messrs. Studdert, Murdock and Dudley.  The loss
  of any of such personnel could materially and adversely affect the Company's
  future business efforts.  Moreover, although the Company has taken reasonable
  steps to protect its intellectual property rights, if one or more of the
  Company's key scientific employees or consultants resigns from the Company to
  join a competitor, the loss of such personnel and the employment of such
  personnel by a competitor could have a material adverse effect on the
  Company.  In the event of loss of any of the Company's key employees or
  consultants, there can be no assurance that the Company would be able to
  prevent the unauthorized disclosure or use of its proprietary technology by
  such former employees or consultants, although the Company's employees and
  consultants have entered into confidentiality agreements with the Company. 
  The Company does not presently have any key man life insurance on any of its
  employees.
   
                                   PART II
                                  
  Item 1.  Legal Proceedings.
  
      On February 10, 1997, an action (the "Palomba Action") was filed in the
  Delaware Chancery Court for New Castle County by Richard J. Palomba, the
  owner of approximately 15,000 shares of the Company's common stock, against
  the Company, six of its directors, and SMD, L.L.C. ("SMD"), a Utah limited
  liability company owned and controlled by Stephen M. Studdert, Roger D.
  Dudley and Thomas A. Murdock, each of whom is an executive officer and
  director of the Company and beneficially owns more than 10% of the Company's
  common stock.  The complaint seeks no damages from the Company.  The
  complaint alleges that certain of the individual employee director defendants
  wrongfully caused the Company to engage in a series of loan transactions with
  K.L.S. Enviro Resources, Inc., a Nevada corporation ("KLSE"), and thereafter
  appropriated to themselves certain corporate opportunities resulting from
  such loan transactions.  The Complaint further alleges that the non-employee
  director defendants wrongfully acquiesced in or ratified the conduct of the
  employee-directors, and that all of the individual defendants breached their
  fiduciary duties to the Company.  The Complaint seeks to compel an accounting
  for any alleged profits earned by the employee director defendants, equitable
  relief in the form of an order requiring certain of the employee director
  defendants to forfeit certain securities of KLSE they allegedly acquired in
  breach of their fiduciary duties to the Company, monetary damages in an
  unspecified amount, and costs and legal fees.  A settlement agreement in
  principle was reached prior to service of the complaint and is currently
  being documented.  The settlement agreement will be subject to the approval
  of the court and will not cost the Company anything except incidental
  attorneys fees.  The terms of the settlement are confidential until approved
  by the court.
  
  Item 2.  Changes in Securities
  
      c.   Unregistered sales of equity securities during quarter (other
           than in reliance on Regulation S).
  
      Recent Sales of Unregistered Securities.  During the quarterly period
  ended March 31, 1997, the Company issued equity securities that were not
  registered under the Securities Act of 1933, as amended (the "Act"), other
  than unregistered sales made in reliance on Regulation S under the Act, as
  follows:
  
      On January 1, 1997, a former employee exercised options to purchase
  150,000 shares of common stock for the exercise price of $300,000, which
  amount was satisfied by cancellation of invoices due such employee for
  services rendered.  The Company issued such shares without registration under
  the Act in reliance on Section 4(2) of the Act.  All of such common stock
  issued was issued as restricted securities and the certificates representing
  such shares were stamped with a restrictive legend to prevent any resale
  without registration under the Act or in compliance with an exemption.
  
      On February 12, 1997, the Company issued 100,000 shares of common stock
  to an individual upon the exercise of common stock purchase warrants
  previously issued.  The aggregate consideration received by the Company upon
  the exercise of such warrants was $50,000.  The Company issued such shares
  without registration under the Act in reliance on Section 4(2) of the Act. 
  All of such common stock issued was issued as restricted securities and the
  certificates representing such shares were stamped with a restrictive legend
  to prevent any resale without registration under the Act or in compliance
  with an exemption.
  
      On March 13, 1997, the Company issued options to purchase 200,000
  shares of common stock to a director and 100,000 shares of common stock to an
  employee.  All of such options were issued under the Company's 1997 Stock
  Incentive Plan without registration under the Act in reliance on Sections
  3(b) and  4(2) of the Act and the rules and regulations promulgated
  thereunder.  The exercise price of such options is $7.130 per share of common
  stock, which was the closing market price on the date of grant.
  
      On March 17, 1997, the Company offered and sold 100,000 shares of
  common stock to an unaffiliated private investor for the aggregate purchase
  price of $375,000.  Such common stock was issued without registration under
  the Act in reliance on Sections 3(b) and/or 4(2) of the Act and Regulation D
  promulgated thereunder.  All of such common stock was issued as restricted
  securities and the certificates representing such shares were stamped with a
  restrictive legend to prevent any resale without registration under the Act
  or in compliance with an exemption.
  
      On April 2, 1997, the Company granted options to purchase 25,000 shares
  of common stock to an employee.  All of such options were issued under the
  Company's 1997 Stock Incentive Plan without registration under the Act in
  reliance on Sections 3(b) and  4(2) of the Act and the rules and regulations
  promulgated thereunder.  The exercise price of such options is $6.250, which
  was the closing market price on the date of grant.
  
      On May 5, 1997, the Company granted options to purchase 10,000 shares
  of common stock to an employee.  All of such options were issued under the
  Company's 1997 Stock Incentive Plan without registration under the Act in
  reliance on Sections 3(b) and  4(2) of the Act and the rules and regulations
  promulgated thereunder.  The exercise price of such options is $7.150, which
  was the closing market price on the date of grant.
  
  Item 6.  Exhibits and Reports on Form 8-K
  
      a.   Regulation S-K Exhibits.
  
      Exhibit No.         Description
  
      (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)(i)         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)(i)         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)(ii)        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)            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
  
      (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)(v)        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)(vi)       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)(vi)       Employment Agreement by and between the Company and
                     Thomas A. Murdock, which is incorporated by
                     reference from the Company's Annual Report on Form
                     10-KSB for the fiscal year ended December 31, 1996
  
      (10)(vi)       Employment Agreement by and between the Company and
                     Roger D. Dudley, which is incorporated by reference
                     from the Company's Annual Report on Form 10-KSB for
                     the fiscal year ended December 31, 1996
  
      (27)           Financial Data Schedule, filed herewith.
  
      b.   Reports on Form 8-K
  
      During the quarter ended March 31, 1997, the Company filed two Current
  Reports on Form 8-K.  The first such report, dated as of March 13, 1997,
  contained Item 5 (Other Events) discussion of the Company's agreement in
  principle with Synergetics to modify the product development and assignment
  agreement pursuant to which Synergetics historically had conducted research
  and development associated with the Company's ASRT.  The second current
  report was dated as of March 24, 1997 and contained Item 4 (Changes in
  Registrant's Certifying Accountant) disclosure relating to the engagement by
  the Company of Deloitte & Touche LLP as its certifying accountant, to replace
  the accounting firm of Pritchett, Siler & Hardy, P.C.
  
  
<PAGE>  
                                  SIGNATURES
                                  
      In accordance with the requirements of the Exchange Act, the registrant
  caused this report to be signed on its behalf by the undersigned, thereunto
  duly authorized.
  
      fonix corporation
  
  
  
  
  
   Date:     May 15, 1997                       /s/ Thomas A. Murdock
         --------------------               -----------------------------
                                             Thomas A. Murdock, President 
  
  
  
  
   Date:     May 15, 1997                       /s/ Roger D. Dudley
         --------------------               -----------------------------
                                              Roger D. Dudley, Chief
                                                  Financial Officer