SEC Info - Fonix Corp - 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2007, or

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

Commission File No. 0-23862

Fonix Corporation

(Exact name of registrant as specified in its charter)

Delaware	22-2994719
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9350 South 150 East, Suite 700

Sandy, Utah 84070

(Address of principal executive offices with zip code)

(801) 553-6600

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [X] No[ ].

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (Check One): Larger Accelerated Filer __ Accelerated Filer __ Non-Accelerated Filer X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-25 of the Exchange Act). Yes __ No X

As of November 14, 2007, there were issued and outstanding 3,641,961,290 shares of our Class A common stock.

FONIX CORPORATION

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

		Page

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – As of September 30, 2007, and December 31, 2006	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2007 and 2006	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 6.	Exhibits	34

Fonix Corporation and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2007			2006

ASSETS

Current assets
Cash and cash equivalents	$	13,000		$	5,000
Prepaid expenses and other current assets		2,000			4,000

Total current assets		15,000			9,000

Property and equipment, net of accumulated depreciation of $1,290,000 and $1,261,000, respectively		19,000			48,000

Deposits and other assets		117,000			117,000

Goodwill		2,631,000			2,631,000

Total assets	$	2,782,000		$	2,805,000

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Accrued liabilities	$	3,910,000		$	2,054,000
Accounts payable		1,375,000			1,504,000
Net liabilities of discontinued subsidiaries		20,819,000			20,819,000
Derivative liability		20,669,000			20,941,000
Accrued payroll and other compensation		258,000			214,000
Accrued settlement obligation		737,000			1,530,000
Deferred revenues		446,000			460,000
Notes payable - related parties		902,000			800,000
Series E debentures		1,754,000			1,754,000
Advance on Series N Preferred Stock		10,000			-
Current portion of notes payable		3,512,000			2,883,000
Deposits and other		7,000			7,000

Total current liabilities		54,399,000			52,966,000

Long-term notes payable, net of current portion		3,583,000			2,988,000

Total liabilities		57,982,000			55,954,000

Commitments and contingencies

Stockholders' deficit
Preferred stock, $0.0001 par value; 50,000,000 shares authorized;
Series A, convertible; 166,667 shares outstanding (aggregate liquidation preference of $6,055,000)		500,000			500,000
Common stock, $0.0001 par value; 5,000,000,000 shares authorized;
Class A voting, 2,812,270,287 shares and 1,309,965,981 shares outstanding, respectively		281,000			131,000
Class B non-voting, none outstanding		-			-
Additional paid-in capital		238,446,000			236,936,000
Outstanding warrants to purchase Class A common stock		474,000			474,000
Cumulative foreign currency translation adjustment		10,000			10,000
Accumulated deficit		(294,911,000	)		(291,200,000	)

Total stockholders' deficit		(55,200,000	)		(53,149,000	)

Total liabilities and stockholders' deficit	$	2,782,000		$	2,805,000

See accompanying notes to condensed consolidated financial statements.

Fonix Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006


Revenues	$	339,000		$	386,000		$	1,344,000		$	1,024,000
Cost of revenues		54,000			6,000			133,000			12,000

Gross profit		285,000			380,000			1,211,000			1,012,000

Expenses:
Selling, general and administrative		502,000			2,024,000			1,966,000			4,444,000
Product development and research		338,000			551,000			1,263,000			1,711,000

Total expenses		840,000			2,575,000			3,229,000			6,155,000

Other income (expense):
Interest expense		(476,000	)		(528,000	)		(1,393,000	)		(1,279,000	)
Gain on forgiveness of liabilities		199,000						199,000
Gain (loss) on derivative liability		247,000			(1,763,000	)		776,000			(1,763,000	)

Other income (expense), net		(30,000	)		(2,291,000	)		(418,000	)		(3,042,000	)

Net loss from continuing operations		(585,000	)		(4,486,000	)		(2,436,000	)		(8,185,000	)
Net loss from discontinued operations		-			(6,361,000	)		-			(11,247,000	)

Net loss		(585,000	)		(10,847,000	)		(2,436,000	)		(19,432,000	)
Preferred stock dividends		(436,000	)		(16,192,000	)		(1,278,000	)		(18,295,000	)

Loss attributable to common stockholders	$	(1,021,000	)	$	(27,039,000	)	$	(3,714,000	)	$	(37,727,000	)


Basic and diluted loss per common share from continuing operations	$	(0.00	)	$	(0.03	)	$	(0.00	)	$	(0.04	)

Basic and diluted loss per common share from discontinued operations	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.02	)


Net loss	$	(585,000	)	$	(10,847,000	)	$	(2,436,000	)	$	(19,432,000	)
Other comprehensive (loss) income - foreign currency translation		-			-			-			7,000

Comprehensive loss	$	(585,000	)	$	(10,847,000	)	$	(2,436,000	)	$	(19,425,000	)

See accompanying notes to condensed consolidated financial statements.

Fonix Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,	2007			2006
Cash flows from operating activities
Net loss	$	(2,436,000	)	$	(19,432,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Discontinued operations		-			11,643,000
Gain (loss) on derivative liability		(776,000	)		1,763,000
Gain on forgiveness of liabilities		(199,000	)		-
Accretion of discount on notes payable		774,000			603,000
Accretion of discount on legal settlement		-			98,000
Write down of intercompany receivable		-

Fonix Corp · 10-Q · For 9/30/07

Filed On 11/14/07 5:16pm ET · SEC File 0-23862 · Accession Number 1096906-7-1560

Quarterly Report · Form 10-Q
Filing Table of Contents

10-Q · Fonix Corporation Form 10-Q September 30, 2007

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Fonix Corp · 10-Q · For 9/30/07

Filed On 11/14/07 5:16pm ET · SEC File 0-23862 · Accession Number 1096906-7-1560

Quarterly Report · Form 10-QFiling Table of Contents

10-Q · Fonix Corporation Form 10-Q September 30, 2007

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Quarterly Report · Form 10-Q
Filing Table of Contents