Fonix Corp. Reports Q3 2004 Results.

SALT LAKE CITY -- Fonix(R) Corp. (OTC BB: FNIX), an integrated communications carrier providing telecommunications services and value-added speech technologies, today released financial results for the quarter ended Sept. 30, 2004.

Highlights for the third quarter include:

--Reported quarterly revenue of $4,426,000, which includes revenue from The Fonix Telecom Group, an increase of 868 percent over reported quarterly revenue for the same period in 2003.

--Reported revenue of $10,593,000 for the nine months ended Sept. 30, 2004, which includes revenue from The Fonix Telecom Group, an increase of 531 percent over reported revenue of $1,678,000 for the same period in 2003.

--Implemented Voice over Internet Protocol (VoIP) on Broadband over Power Lines (BPL) through Fonix's Atlanta-based subsidiary, LecStar Telecom Inc., which is a member of The Fonix Telecom Group. Fonix is one of the first companies in the United States to announce successful delivery of this technology.

--Ubisoft published "Tom Clancy's Rainbow Six 3(R): Black Arrow(TM)" featuring Fonix VoiceIn.

"This quarter continues to highlight the benefit of our strategic deployment of cutting-edge telecom services and speech technology," said Thomas A. Murdock, Fonix chairman and CEO. "Our telecom customers will gain the added value and flexibility provided by VoIP, and more videogame players can enjoy our convenient and innovative speech interfaces. We will continue to see new revenue opportunities emerge as these and other Fonix products gain market acceptance."

Consolidated revenues were $4,426,000 for the quarter ended Sept. 30, 2004 compared to $457,000 for the same period in 2003. Operating expenses, exclusive of non-cash amortization and impairment charges, were $4,408,000 for the third quarter of 2004 compared to $2,461,000 for the third quarter of 2003. Net loss was $3,321,000 ($0.04 per common share) for the third quarter of 2004 compared to $2,818,000 ($0.11 per common share) for the same period in 2003. The company has also reduced accrued payroll and other compensation-related expenses by $3,929,000 since Jan. 1, 2004.

"Both the telecom and speech technology groups have expanded into new markets, thereby increasing their revenue potential," said Roger D. Dudley, Fonix executive vice president and CFO. "As we continue to meet our objectives of aggregation in the telecom market and realize the resulting efficiencies and higher operating margins, the long-term benefits of our growth strategy will become even more apparent."

About Fonix

Fonix Corp. is an innovative communications and technology company that provides integrated telecommunications services and value-added speech technologies. Through its subsidiary, LecStar Telecom Inc., a rapidly growing Atlanta-based provider of communications services to businesses and consumers in the Southeast, Fonix provides a full array of wireline voice, data, long distance and Internet telephone service utilizing traditional lines as well as next-generation networks such as Voice over Internet Protocol, Broadband over Power Lines and fixed wireless technology. In addition, Fonix currently offers voice technology solutions for mobile/wireless devices; interactive videogames, toys and appliances; computer telephony systems; the assistive market and automobiles. The combination of interactive speech technology and integrated telecommunications services allows Fonix to provide customers with comprehensive cost-effective solutions to enhance and expand their communications needs.

Statements released by Fonix that are not purely historical are forward looking within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, intentions and strategies for the future. Investors are cautioned that forward-looking statements involve risk and uncertainties that may affect the company's business prospects and performance. The company's actual results could differ materially from those in such forward-looking statements. Risk factors include general economic, competitive, governmental and technological factors as discussed in the company's filings with the SEC on Forms 10-K, 10-Q and 8-K. The company does not undertake any responsibility to update the forward-looking statements contained in this release.

"Ubisoft" is a trademark of Ubisoft Entertainment in the United States and/or other countries. "Xbox" is a registered trademark of Microsoft Corp. in the United States and/or other countries. "PlayStation" is a registered trademark of Sony Computer Entertainment Inc.

Fonix Corp.

                 Consolidated Statement of Operations


                      Three Months Ended         Nine Months Ended
                   Sep 30, 2004 Sep 30, 2003 Sep 30, 2004 Sep 30, 2003
                   ------------ ------------ ------------ ------------

Revenues            $4,426,000     $457,000  $10,593,000   $1,678,000
Cost of revenues    (2,227,000)     (13,000)  (5,288,000)    (196,000)
Impairment loss on
 capitalized
 software
 technology                  -            -            -     (822,000)
                   ------------ ------------ ------------ ------------

Gross profit         2,199,000      444,000    5,305,000      660,000

Expenses:
Selling, general
 and administrative  3,816,000    1,338,000    9,950,000    5,082,000
Impairment loss on
 intangible assets           -            -      738,000      302,000
Amortization of
 intangible assets   1,586,000            -    3,867,000       51,000
Product
 development and
 research              592,000    1,123,000    2,058,000    3,882,000
                   ------------ ------------ ------------ ------------

Total expenses       5,994,000    2,461,000   16,613,000    9,317,000

Total other income
 (expense)             474,000     (801,000)      79,000   (2,017,000)

Net loss            (3,321,000)  (2,818,000) (11,229,000) (10,674,000)
Preferred stock
 dividends            (315,000)           -   (3,615,000)           -
                   ------------ ------------ ------------ ------------

Loss attributable
 to common
 stockholders       (3,636,000)  (2,818,000) (14,844,000) (10,674,000)

Basic and diluted
 net loss per
 common share           $(0.04)      $(0.11)      $(0.18)      $(0.37)
                   ============ ============ ============ ============


                      Consolidated Balance Sheets

                      As of        As of
                   Sep 30, 2004 Dec 31, 2004
                   ------------ ------------

Assets              20,790,000    3,173,000
Liabilities         23,374,000   13,570,000
Stockholders'
 deficit            (2,584,000) (10,397,000)