UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                                FORM 10-QSB/A
                               Amendment No. 2

[X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended September 30, 1996.

[ ]  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 small business issuer 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
                        (Issuer's telephone number)

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or Section 15(d) of the Exchange Act during the past 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 November 13, 1996, 41,566,563 shares of the issuer's Common Stock, par
value $.0001 per share, were issued and outstanding.

Transitional Small Business Disclosure Format (Check one):  
Yes [ ] or No [X]

<PAGE>

     [This Amendment No. 2 is filed to amend Notes 2 and 5 to the
registrant's consolidated financial statements included in its Form 10-QSB
filed November 14, 1996, as amended by Amendment No. 1, filed January 22,
1996.]


                              fonix (TM) corporation
                          [A Development Stage Company]

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - NOTES RECEIVABLE / PAYABLE

     Between May 14, 1996 and August 13, 1996, the Company advanced a total
     of $1,900,000 in short-term debt financing to K.L.S. Enviro Resources,
     Inc., a Nevada corporation ("KLS"), in increments of $710,000, $450,000,
     $150,000 and $590,000.  KLS executed a promissory note for the first
     advance in June 1996, but on August 13, 1996, and pursuant to ongoing
     negotiations between the Company and KLS, KLS executed and delivered a
     replacement note for the first advance and notes for each of the
     subsequent advances totaling $1,900,000 (the "Notes").  The Notes were
     secured by all assets of KLS, except for certain real property owned by
     KLS.  In addition, the Notes were convertible at the option of the
     Company into restricted shares of KLS common stock.  Specifically, the
     Notes provided that the $710,000 increment is convertible at the rate of
     $0.30 per share and the balance of the financing ($1,190,000) is
     convertible at the rate of $0.40 per share.  Incident to the provision
     of the debt financing described in this paragraph, Thomas A. Murdock, an
     executive officer, director and significant shareholder of the Company,
     assumed a position on the KLS board of directors effective July 10,
     1996.  In addition, a group comprised of a current executive officer and
     director of KLS and a private entity controlled by Mr. Murdock and two
     other executive officers and directors of the Company, namely Mr.
     Studdert and Mr. Dudley, known as SMD L.L.C. ("SMD"), agreed to purchase
     3,561,000 shares of common stock and 100,000 shares of preferred stock
     convertible into 500,000 shares of common stock from the estate of a
     former executive officer and director of KLS.  The Company demanded
     payment of the foregoing sums prior to September 30, 1996 and was
     advised by the debtor that it was not in a position to pay all or
     substantially all of the amount then due.  The board of directors of the
     Company, after obtaining independent counsel and advice, determined it
     did not wish to convert the Notes to restricted common stock.  SMD
     agreed to loan KLS $1,673,700 for the purpose of making a payment in
     that amount to the Company.  On September 30, 1996, using funds borrowed
     from SMD, KLS paid the Company $1,673,700, leaving a balance due and
     owing at September 30, 1996, of $272,156.  The principal amount of such
     remaining balance, being $270,000, was subsequently sold by the Company
     to a shareholder of KLS(and non-affiliate of the Company) on December
     31, 1996, who thereafter converted it to restricted common stock of KLS
     at a rate of $.30 per share.  After the repayment of $1,673,700, the
     Company loaned $200,000 to KLS on the same terms of the previous
     advances leaving a total indebtedness of $470,000.  These loans were
     repaid in full by December 31, 1996.  See Note 5, below.

<PAGE>

     The Company loaned $500,000 to an unrelated entity on August 26, 1996.
     The obligation bears interest at 12% per annum, is secured by assets of
     the borrower and is due on demand.
     
     At September 30, 1996 the Company had an unsecured note receivable from
     an entity not affiliated with the Company 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.  At September 30, 1996 accrued
     interest on the note receivable amounted to $10,055. 

     At September 30, 1996 the Company had a revolving note payable in the
     amount of $15,843,553 to a bank at an interest rate of 5.75%.  This note
     payable is due November 7, 1996, and is secured by a certificate of
     deposit in the amount of $20,000,000.  On November 7, 1996, similar
     terms were negotiated to extend the note.

NOTE 5 - RELATED PARTY TRANSACTIONS

     The Company recorded the following expenses for services rendered and
     recorded the following balances which were payable to a company owned by
     the majority shareholders for the three months ended, and nine months
     ended, September 30, 1996:


                                 Three months ended       Nine months ended
                                September 30, 1996       September 30,1996
                                ---------------------    ------------------
     Expenses:
       Management fees expense    $         -              $   200,000  
       Base rent expense                 13,428                 30,380

     Payables:
         Accounts payable         $     380,421            $   380,421 
  
     
     The Company has rented office space from a company owned by the majority
     shareholders under a month-to-month lease for $2,000 per month.  In May
     1996 the month-to-month base lease increased to Approximately $4,476 per
     month. 

     Prior to September 30, 1996, management of the Company reviewed the
     status of various loans made to third parties, including loans to KLS
     which then totaled $1,900,000.  The loans accrue interest at the rate of
     12% per annum and are due on demand.  As a result of that review
     management determined that KLS was unlikely to repay the balance then
     due, together with interest accruing thereon, without significant delays
     and, possibly, commencement of foreclosure proceedings.  Management also 
     considered conversion of the unpaid balance of principal and interest 
     into common stock of the borrower at conversion prices ranging between 
     $.30 and $.40 per share.  In this regard, management engaged an 
     independent consultant to determine whether such conversion would allow 
     the Company an opportunity to obtain repayment of the indebtedness more  
     quickly than if the balance due and owing under the various loans was
     demanded by the Company.  The independent consultant concluded that it

<PAGE>

     was highly unlikely that the Company could convert all or a significant
     part of the debt due and owing from the borrower into common stock of
     the borrower and thereafter dispose of the common stock in a fashion
     which would allow the Company to recover an amount equal to or greater
     that the balance due and owing under the loans.  Based upon that
     assessment, SMD proposed to loan KLS funds to repay $1,673,700 of the
     amounts owing to the Company. The Company received payment of the same
     amount of principal and interest from KLS from the funds provided by
     SMD.

     Subsequent to the end of the period covered by this report, on December
     31, 1996, Mr. Studdert and Mr. Dudley joined the board of directors of
     KLS, and Mr. Studdert accepted the position of Chairman of that board
     and Mr. Dudley accepted the position of Chief Financial Officer of KLS. 
     In addition, the KLS board appointed Joseph Verner Reed and Rick D.
     Nydegger, directors of the Company, to fill newly created vacancies on
     the KLS board.  Since December 31, 1996, Mr. Reed chairs the
     compensation committee of the KLS board and Mr. Dudley chairs its audit
     committee.  Mr. Studdert, Mr. Murdock and Mr. Dudley serve as three of
          the four members of the KLS board's executive committee.

<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:     January 23, 1997              /s/ Thomas A. Murdock
     -----------------------           -------------------------
                                       Thomas A. Murdock, President         
                 
                                                                           
      



Date:     January 23, 1997              /s/ Roger D. Dudley   
      -----------------------          -------------------------- 
                                       Roger D. Dudley, Executive Vice      
                                       President