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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

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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

11/14/07  Fonix Corp                        10-Q        9/30/07    5:83                                     Southridge Svcs LLC/FA

Quarterly Report   ·   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Fonix Corporation Form 10-Q September 30, 2007      HTML    367K 
 2: EX-31.1     Certification of President                          HTML     11K 
 3: EX-31.2     Certification of Chief Financial Officer            HTML     11K 
 4: EX-32.1     Certification of President Pursuant to Section 906  HTML      7K 
                          of the Sarbanes-Oxley Act of 2002                      
 5: EX-32.2     Certification of Chief Financial Officer Pursuant   HTML      7K 
                          to Section 906 of the Sarbanes-Oxley Act               
                          of 2002                                                


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


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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)

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.







 
 
 
 
1

 
 

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






 
 
 
 
2

 
 

Fonix Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

   
September 30,
     
 
     
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.
 
 
 
 
3

 
 

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

   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
       
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.


 
 
 
 
4

 
 

Fonix Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30,
     
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
   
-