A new associative memory architecture has been conceived, which gives a large increase in memory capacity over the hopfield memory, and provides improved associative recall as well. Furthermore, the new memory solves the problem of overlearning in unsupervised adaptive operation. The new architecture may be described as a reflexive hetero-associative memory with orthonormal labels that are processed in a certain nonlinear manner. The operation involves signal flow in both directions, as in a resonator. In each iterative cycle, data are converted into labels, which then are turned back again into data. The phase II objective is the further development and analysis of this architecture, and the construction and testing of a rig such as to provide proof of concept, and the conduct of experiments to investigate a number of local adaptive mechanisms, as well as stochastic effects.