SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-Q

           {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934

                      For Three Months Ended March 31, 1999
                          Commission File Number 0-3296

                               ETHIKA CORPORATION
             (Exact name of registrant as specified in its charter)


                             MISSISSIPPI 64-0440887
                  (State of other jurisdiction of (IRS Employer
               incorporation or organization) Identification No.)

                              11249 W. 103rd Drive
                           Westminster, Colorado 80021
                     (Address of Principal Executive Office)

        Registrant's telephone number including area code: (303) 637 2351


Former name,  former  address,  and former  fiscal year,  if changed  since last
report: NONE.

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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.

       CLASS                                    Outstanding at May 8, 1999
    Common Stock, $1.00 par value                     23,360,346



<PAGE>




                               ETHIKA CORPORATION

                                      INDEX

PART I: FINANCIAL INFORMATION

  Item 1. Financial Statements

          Consolidated  balance  sheets - March 31, 1999
          and  December  31, 1998......................................3

          Consolidated  statements of operations for the three
          months ended March 31, 1999 and 1998.........................4

          Consolidated statements of cash flows for the three months
          ended September 30, 1999 and 1998............................5

          Notes to consolidated financial statements...................6

  Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................13

PART II. OTHER INFORMATION

         None

Signatures .......................................................... 15

                                       2
<PAGE>


ETHIKA CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet  March 31, 1999 and December 31,  1998
(Unaudited)
                                              March 31, 1999   December 31, 1998
ASSETS
Current Assets:
  Cash and cash equivalents                    $      36,483       $      48,318
  Accounts receivable, net of allowance
  for doubtful accounts                                7,457               7,457
  Investment securities- Trading                     135,000             135,000
  Note Receivable                                     62,683              74,683
                                                      ------              ------
Total Current Assets                                 241,623             265,458

Note Receivable - Non current                         69,516              69,515

Total Assets                                    $    311,139        $    334,973
                                                ============        ============



LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable and accrued expenses         $    227,344        $    233,343
                                                ------------        ------------

Total Current Liabilities                            227,344             233,343
                                                ------------        ------------


Stockholders' Equity
Common Stock, $1 par value authorized 50,000,000 shares;
 issued 23,387,658 shares and 14,975,018; outstanding
 23,360,346 shares and 14,947,706 shares;         23,361,458         20,361,458
Discount on Common Stock                        ( 11,108,528)      (  8,123,528)
Accumulated Deficit                              (12,168,023)       (12,135,188)
Less: 27,312 shares of Treasury stock at cost   (      1,112)      (      1,112)
                                                 -----------        -----------
Total Stockholders' Equity
                                                      83,795            101,630
                                                      ------            -------
Total Liabilities and Stockholders' Equity     $     311,139      $     334,973
                                               =============      =============




The  Accompanying  notes are an integral  part of these  Consolidated  Financial
Statements
                                       3
<PAGE>

Ethika Corporation and Subsidiaries
Consolidated Statement of Operations
For the three months ended March 31, 1999 and 1998
(Unaudited)


                                             March 31, 1999       March 31, 1998
                                             --------------       --------------
  General and administrative expenses        $       32,849       $      129,991


  Interest income                                        14               17,715
  Gain (loss) on disposal of fixed Assets                                  2,402
  Gain (loss) from investment securities                                   5,255



  Interest expense                                        -                    -
                                                     ------              -------
Income tax benefit                                        -                    -
                                                     ------              -------

Loss from continuing operations                  (   32,835)           (104,619)
                                                ------------           ---------


Net loss                                         ($  32,835)          ($104,619)
                                                 ===========          ==========

Basic and diluted earnings per share:
Loss from continuing operations                      $(.001)             $(.005)
                                                     ======              ======

Loss from discontinued operations                    $(.001)             $(.000)
                                                     ======              ======

Basic and diluted net loss per share                 $(.001)             $(.005)
                                                     ======              ======




The  Accompanying  notes are an integral  part of these  Consolidated  Financial
Statements


















                                       4

<PAGE>

    Ethika Corporation and Subsidiaries Consolidated Statement of Cash Flows
               For the three months ended March 31, 1999 and 1998

                                              March 31, 1999      March 31, 1998
Cash Flows from Operating Activities:
Net loss                                        ($    32,835)         ($104,619)
Adjustments to reconcile net (loss)
 to net cash provided by operating activities
Depreciation and Amortization                              -              1,202
Realized and unrealized (gain)loss on
 investment securities                                     -             (4,059)
Changes in balance sheet accounts:
(Increase) decrease in  accounts receivable
(Increase) decrease in  inventory
Decrease in Assets held for sale                                        176,822
Increase ( decrease) in accounts payable         (     6,000)          (173,351)
 and other liabilities
Increase ( decrease) in deferred revenue
Sales of investment securities - trading                                113,340
                                                                        -------
Net cash provided by (used from)
Operating activities                             (    38,835)             9,335

Cash flows from investing activities:
Payments received from leases                                            28,632
Note Receivable                                       12,000           (450,000)
                                                      ------           --------
Net cash (used from) provided by                      12,000           (421,368)
                                                      ------           --------
Investing activities


Cash flows from financing activities:
Stock issued for Directors Fees                       15,000               NONE
                                                     -------            -------

Net increase (decrease) in cash and cash
Equivalents                                    (      11,835)          (412,033)
Cash and cash equivalents - beginning of
Period                                                48,318            535,651
                                                      ------            -------

Cash and cash equivalents - end of period      $      36,483          $ 123,618
                                               =============          =========
Supplemental Cash Flow Information:
Cash payments for interest                                 0                  0
                                               =============          =========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:                     NONE               NONE
                                               =============          =========


The  accompanying  notes are an integral  part of these  Consolidated  Financial
Statements.



                                       5


<PAGE>

                               ETHIKA CORPORATION
                    Notes to Unaudited Consolidated Financial
              Statements For the three months ended March 31, 1999.


NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Ethika  Corporation (the  "Corporation")  had operated as an applied  technology
company through its formerly wholly-owned subsidiaries,  Text Retrieval Systems,
Inc.  ("TRS"),  Compass Data Systems,  Inc. ("CDS") and Legislative  Information
Systems, Inc. ("LIS"). See business combination  information in Note 5. TRS, CDS
and LIS are engaged in publishing  electronic  libraries  that link related data
sources for convenient  access by personal  computers.  Certain products of TRS,
CDS,  and LIS are sold  nationally,  while others are specific to states such as
Florida, Missouri, and Kansas.

BASIS OF PRESENTATION

During the first quarter of 1998, the Board of Directors and management began to
implement a plan of disposition for the Corporation's  operating units; TRS, CDS
and LIS.  Accordingly,  the  operations of these segments have been presented as
discontinued operations in the accompanying financial statements.

On February 17,  1998,  the  Corporation  completed  the sale of Text  Retrieval
Systems,  Inc. to TRS Acquisition  Corporation,  a closely held  corporation for
$150,000 cash and future  royalties not to exceed  $1,500,000  over the next ten
years.  Moreover on April 2, 1998, the Corporation  completed a transaction with
Ben Ezra  Weinstein and Company,  Inc., a publicly  held New Mexico  corporation
("BNEZ") engaged in the electronic  publishing of financial software to sell CDS
and its 8% equity interest in InfoDynamics,  Inc., including the note receivable
from  InfoDynamics,  Inc. The selling price of $850,000 was paid in  convertible
preferred stock BNEZ which has not resulted in any impairment of the net assets.
The negotiations on or about July 1, 1998, management closed the business of LIS
and have taken appropriate action to dissolve the LIS Corporation.

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements include the financial  statements of the
Corporation  and its wholly owned  subsidiaries.  All  significant  intercompany
accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  include cash in banks and money market  investments,
which  carry no  withdrawal  restrictions,  and that have  original  maturity of
ninety days or less.

                                       6
<PAGE>
INVESTMENTS

At December 31, 1998, and 1997 marketable securities were classified as trading,
which, under the provisions of Statement of Financial  Accounting  Standards No.
115 - Accounting  for Certain  Investments in Debt and Equity  Securities,  were
reported at market value with unrealized  market gains or losses being reflected
in the statement of  operations.  During the years ended  December 31, 1998, and
1997,  the  reported  unrealized  losses of  $648,888  and  $55,719  and $19,296
realized losses in 1998.

REVENUE RECOGNITION

The Corporation recognized revenue for software sales ratably over the period of
each  product's  subscription  life.  The  Corporation's  various  products were
updated annually,  quarterly and monthly based on content,  availability  and/or
specific customer  agreements.  The  Corporation's  various products are updated
annually,  quarterly and monthly based on content  availability  and/or specific
customer  agreements.  Revenue associated with sales of TRS' primary product are
not recognized  until cash is collected due to the customer' right of return and
limited  history of returns for the product.  Revenue  associated  with customer
programming was recorded, when completed and billed.

PROPERTY AND EQUIPMENT

Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful  lives of these assets  which are thirty  years for the  building;  three
years for computer hardware and software;  and five to seven years for furniture
and fixtures.

INVENTORY

Inventory  consists  primarily  of  software  product  manuals  and  promotional
materials. Inventory is valued based on an average cost method.

INTANGIBLE ASSETS

Intangible  assets consist primarily of assets acquired through the acquisitions
of TRS and CDS. Acquired goodwill and software products are amortized over three
years.  Non-compete  agreements  are  amortized  over  the  life of the  related
agreement (2-3 years). The Corporation  regularly reviews its ability to realize
future  economic  benefit from  software  products  and goodwill  based upon the
expected future cash flows of the related subsidiary or product.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those estimates.
                                       6
<PAGE>
INCOME TAXES

Deferred taxes are provided on a liability  method  whereby  deferred tax assets
are recognized for deductible  temporary  differences and operating loss and tax
credit  carry-forwards  and deferred tax  liabilities are recognized for taxable
temporary  differences.  Temporary  differences are the differences  between the
reported amounts of assets and liabilities and their income tax bases.  Deferred
tax  assets  are  reduced  by a  valuation  allowance  when,  in the  opinion of
management,  it is more likely than not that some portion or all of the deferred
tax  assets  will not be  realized.  Deferred  tax assets  and  liabilities  are
adjusted for changes in tax laws and rates on the date of enactment.

Financial instruments that potentially subject the Corporation to concentrations
of credit risk consist principally of trade accounts receivable. The Corporation
extends  credit  to its  customers  based  on an  evaluation  of the  customer's
financial condition, generally without requiring collateral.  Exposure to losses
on accounts  receivables  is primarily  dependent on each  customer's  financial
condition. The Corporation monitors its exposure for credit losses and maintains
allowances for such losses.

EARNINGS PER SHARE

The Corporation adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") during 1997. SFAS No. 128 provides for new
accounting  principles to be used in the  calculation  of earnings per share and
was effective for financial statements for both interim and annual periods ended
after December 15, 1997. The Corporation has restated its net loss per share for
all  periods  presented  to give  effect  to SFAS  No.  128 and to  reflect  the
acquisition  of LIS.  Basic  and  diluted  earnings  per  share are based on the
weighted  average  number  of  common  shares   outstanding  of  20,360,346  and
13,161,467, and for the years ended December 31, 1998, and 1997, respectively.

RESTATEMENT AND RECLASSIFICATIONS

Certain 1997 amounts have been retroactively restated to reflect the merger with
LIS, which has been accounted for as a pooling-of-interests.  Certain amounts in
the prior year'  statements  have been  reclassified to conform with the current
year financial statements.

NOTE 3 - BUSINESS COMBINATIONS

On April 2, 1996, the Corporation completed the acquisition of Text Retrieval
Systems, Inc. ("TRS"), a privately-held  corporation based in Ponte Vedra Beach,
Florida.  The  transaction  has been accounted for as a purchase and accordingly
the results of operations of TRS since April 2, 1996,  have been included in the
Corporation's   Results  of  Operations.   TRS  publishes  electronic  reference
libraries  that link  related  data  sources for  convenient  access by personal
computers.  The  Corporation  had  previously  acquired a 35% initial  ownership
interest in TRS through the  issuance of 100,000  shares of its stock to the TRS
shareholders  and the extension of a line of credit during 1995.  The completion
of the purchase transaction included cash paid through prior advances to TRS and
the  issuance of  2,500,000  shares of  contingently  returnable  common  stock.
Management  originally  believed it was probable  that the  established  targets
would be met in total;  accordingly,  as of April 2, 1996, the fair value of the
2,500,000  contingently  returnable  shares  ($1,991,250)  was  included  in the
purchase price resulting in a total  estimated  purchase price at acquisition of
$2,659,482.  In the fourth quarter of 1996,  management determined that earnings
targets would not be met in total and accordingly, recorded an adjustment to the
purchase price reducing  intangible assets by the remaining  unamortized balance
related to the contingent  shares of $1,792,125.  The Corporation in March 1997,
amended the  agreement  whereby the  earnings  targets were revised and extended
through  December  31,  1997.   Based  upon  this  amended   agreement  and  the
Corporation's  actual  performance  for the year ended  December 31,  1997,  the
number of shares issued in this transaction were reduced to 732,640 shares.  The
remaining 1,767,360 contingently  returnable shares issued have been returned to
the Corporation and canceled.  The issuance of the additional shares resulted in
recording of additional goodwill in 1997.  Additional  consideration of $181,571
was  recorded as goodwill in the fourth  quarter of 1997.  Related  amortization
expenses of $67,829  have been  recorded in the  December  31,  1997,  financial
statements.
                                       7
<PAGE>
During 1995 and the first  quarter of 1996,  the  Corporation  accounted for its
initial  investment  in TRS by the equity  method under which the  Corporation's
share of the net  loss of the  affiliate  was  recognized  in the  Corporation's
operations and included as an adjustment to the investment  balance.  The losses
recorded by the  Corporation  were  $265,643  and $48,687 for the quarter  ended
March 31, 1996, and the year ended December 31, 1995, respectively.

Amortization  expense of approximately  $503,000  recorded during the year ended
December  31, 1996,  relating to TRS  intangible  assets  include a write-off of
$171,000  for one of the two  products  being  developed  by TRS at the  time of
acquisition (a real estate library product).  During the fourth quarter of 1996,
the Corporation elected to abandon this product because management  subsequently
determined the product had limited marketability.

On February 17,  1998,  the  Corporation  completed  the sale of Text  Retrieval
Systems,  Inc. to TRS Acquisition  Corporation,  a closely held  corporation for
$150,000 cash and future  royalties not to exceed  $1,500,000  over the next ten
years.

Effective  August 17, 1996, the  Corporation  purchased 100% of the  outstanding
common stock of CDS, a privately-held  corporation based in Salt Lake City, Utah
for a total  purchase  price of $500,000  which included the issuance of 726,612
shares of the  Corporation's  common stock with a fair market value of $400,000.
The transaction has been accounted for as a purchase, accordingly the results of
operations of CDS since August 17, 1996, have been included in the  accompanying
financial statements.

Effective October 1, 1996, the Corporation revised estimates used in determining
the lives of intangible  assets acquired  through its acquisition of TRS and CDS
from five years to three years.

On June 10, 1997,  the  Corporation  acquired  Legislative  Information  Systems
Corporation  ("LIS") in a  business  combination  accounted  for as a pooling of
interests.  LIS became a wholly owned subsidiary of the Corporation  through the
exchange of 1,123,433 shares  ($616,203) of the  Corporation's  common stock for
all of the  outstanding  stock of LIS. The effect of the LIS acquisition for the
years ended  December 31, 1996,  and 1995 was to include  $633,814 and $634,804,
respectively, of additional revenues and $153,601 and $25,679,  respectively, of
additional net loss.  These amounts are included in the amount reported for loss
from discontinued operations.
                                       8
<PAGE>
NOTE 4 - DISCONTINUED OPERATIONS

In February 1998, the Corporation's  Board of Directors and management adopted a
formal plan to divest itself of its electronic  publishing business,  consisting
of TRS, CDS and LIS (collectively the "Segment"),  based upon an analysis of the
electronic  publishing market and the amount of capital that management  expects
will be required to compete effectively in that market, together with the recent
poor performance  that the Corporation has experienced  since its entry into the
industry.  The Segment represents  virtually all of the Corporation's assets and
operations.  The Segment has been accounted for as a  discontinued  operation in
accordance  with APB 30,  which  among  other  provisions  requires  the plan of
disposal  to  be  carried  out  within  one  year.  Accordingly,  the  financial
statements have been restated for this  transaction.  A provision of $80,000 has
been recorded in the financial statements related to anticipated losses from the
operations of the Segment through the actual disposal dates. Further, net assets
consisting  primarily of accounts  receivable,  notes  receivable,  property and
equipment,  intangibles,  accounts  payable and deferred revenue of this segment
have been reclassified to net assets held for sale.

Revenues  for the Segment  approximated  $510,767 and  $1,641,000  for the years
ended December 31, 1998, and 1997, respectively.

As a part of the plan of disposal,  the Corporation completed the sale of TRS to
TRS Acquisition  Corporation,  a closely held corporation,  for $150,000 in cash
and future  royalties  not to exceed  $1,500,000  over the next ten  years.  The
Corporation  placed  $50,000 in escrow to pay unrecorded  liabilities  and other
items. As of December 31, 1998, $42,731 of these funds has been disbursed.

On  April  2,  1998,  the  Corporation  completed  a  transaction  with Ben Ezra
Weinstein and Company,  Inc.  ("BNEZ"),  a publicly held New Mexico  corporation
engaged in the electronic  publishing of financial software, to sell CDS and its
8%  equity  interest  in  InfoDynamics,   including  the  note  receivable  from
InfoDynamics.  The selling price of $850,000 was paid in  convertible  preferred
stock of BNEZ which has not  resulted in any  impairment  of the net assets.  No
provision  for  loss on sale of these  subsidiaries  has  been  provided  as the
management expects that the value of the securities received will exceed the net
book value of the Segment.


NOTE 5 - NOTE RECEIVABLE

During 1995, the Corporation  entered into leasing  activities  which consist of
the leasing of fry cook units to be placed in various  locations and operated by
the lessee.  All of the Corporation's  leases are classified as direct financing
leases.  Under the direct financing  method of accounting for leases,  the total
net rental receivable under the lease contracts are recorded as a net investment
in direct financing leases,  and the unearned income on each lease is recognized
each month at a constant periodic rate of return on the unrecovered  investment.
At December 31, 1998, the Corporation  had a net investment in direct  financing
leases of $171,490.

On March 12, 1999,  the  Corporation  entered into an agreement  with the Parent
Corporation of the lessee,  whereby the  Corporation  assigned its leases to the
Parent  Corporation for a non interest bearing  promissory note in the amount of
$128,000  plus a $12,000 cash  payment.  The note  provides for sixteen  monthly
installments of $8,000 beginning on April 15, 1999. The Corporation recorded the
note at present value of $144,198  imputing  interest at 8.00%.  The Corporation
recognized a loss of $27,292 on this transaction.
                                       9
<PAGE>
NOTE 6 - CONTINGENCIES

The  Corporation  was notified by Standard  Management  Corporation  on June 26,
1997,  that its subsidiary,  Standard Life Insurance of Indiana,  had received a
Citation and Original  Petition  captioned  "Rilla Lindley versus  Standard Life
Insurance  Company of Indiana,  Dixie  National Life  Insurance  Company,  Randy
Owens" filed in 2nd  Judicial  District  Court,  Parish of  Brenville,  State of
Louisiana.  Standard's  notification  constituted  a claim  notice  pursuant  to
Section  10.3 of the Second  Restated  Stock  Purchase  Agreement  dated  August
30,1995,  by and among  Standard Life and Dixie National Life and Dixie National
Corporation  (now  Ethika  Corporation)  in which  Ethika  agreed  to  indemnify
Standard  under  certain   conditions   against  qualified   third-party  claims
originating  prior to the sale of Dixie National Life to Standard.  The scope of
Ethika's indemnity obligation,  if any, under the Agreement is limited to claims
predicated  upon  occurrences  prior to closing based on actions or inactions of
Dixie National Life Insurance Company.

The third-party  claim  involves,  among other things,  allegations  regarding a
vanishing  premium life insurance policy issued by Dixie National Life which was
purchased by the plaintiff in August 1989 from defendant Owens, an employee of a
general  insurance  agency in  Louisiana.  The claim appears to be styled in the
form of a class action. An investigation into the Citation's  allegations by the
defendants,   including  legal  representation  of  the  Corporation,  has  been
initiated.  Potential  liabilities,  if any, of the various  defendants have not
been determined.

Pursuant to agreements  with Plaintiff  counsel no answer would be filed pending
settlement  discussions and the filing of an amended complaint properly pleading
as a class action suit. In January 1998,  the  Corporation  informed SMC that it
could  not  defend  the  action.  To the  Corporation's  knowledge,  no  further
settlement discussions have been held and no amended complaint has been filed.

On  September  20,  1998,  the  Registrant  was  served  with the Third  Amended
Complaint in an action entitled Jeffrey Allard,  et al. v. Kidztime TV, Inc., et
al in Colorado  District Court,  Jefferson County,  Colorado.  The Third Amended
Complaint  which named Ethika  Corporation as a Defendant  alleges that Kidztime
TV, Inc., a  subsidiary  of North  American  Digicom  Corporation  engaged in an
illegal   enterprise   whereby  Kidztime  TV  and  other   Defendants   obtained
approximately $50,000,000 from more than 3,000 individuals during 1996 and 1997,
including  approximately  $1,300,000  obtained  from the  Plaintiffs.  The Third
Amended  Complaint alleges that Ethika is jointly and severally liable with the
other Defendants in that Ethika was controlled by NADC and acted in continuation
of concealment of the illegal  enterprise in violation of the Colorado Organized
Crime  Control Act by its  execution of a letter of intent and the Agreement and
Plan of Reorganization with NADC and by the joint press releases disseminated by
Ethika  Corporation  and NADC. The Third Amended  Compliant does not allege that
Ethika  Corporation sold securities in violation of the Colorado  Securities Act
or the Colorado Consumer Protection Act.
                                       10
<PAGE>
The Registrant filed its Answer on October 16, 1998,  denying the allegations of
participation in an illegal enterprise  contained in the Third Amended Complaint
in that the sale of securities to the  Plaintiffs  all occurred  prior to Ethika
entering into the letter of intent and the Agreement and Plan of  Reorganization
with  NADC  and  prior  to the  joint  press  releases  disseminated  by  Ethika
Corporation  and NADC. In addition the Registrant  denied that it was controlled
by NADC or  otherwise  participated  in the illegal  enterprise  or received any
proceeds thereof.  The Registrant  believes that it has substantial  defenses to
all  allegations  made  against  it.  While it is not  possible  at this time to
estimate the potential liability of the allegations,  any liability in excess of
$10,000 would have a materially adverse effect upon the Registrant.

On January 6, 1999, the  Registrant  was served with an Amended  Complaint in an
action  entitled  Romona  Chapman et al v.  Kidztime TV, Inc., et al in Colorado
District  Court,  Jefferson  County,   Colorado.  This  complaint  is  virtually
identical to the action described above.

The  Registrant  also  filed a Cross  Claim  against  NADC for the  $450,000  of
principal and accrued  interest loaned to NADC during the first quarter of 1998.
As of the date of this Report, NADC has not yet answered the Cross Claim.

NOTE 7 - SALE OF COMMON STOCK - LAWSUIT SETTLEMENT

On September 16, 1996, a lawsuit was filed in the United States  District  Court
for the Southern District of Mississippi,  Jackson Division,  styled EURAM B.V.,
Peeper,  et al. vs.  Ethika by certain  plaintiffs  against  Ethika and its then
Chairman,  S.L. Reed, Jr. This suit alleged breach of fiduciary  duties,  fraud,
and conspiracy to breach fiduciary duty of loyalty and care, breach of contract,
misrepresentation, and conversion. These allegations arose from the transactions
surrounding  the  Corporation's  issuance  of  2,000,000  shares of its stock in
exchange for 16% interest in PMM and the sale by the  Corporation  of $2,000,000
of its stock in exchange  for shares of Alanco  stock with an  aggregate  market
value of $2,000,000.  On October 30, 1996,  Ethika filed answers to the suit and
instituted a counterclaim  against the  individuals  named in the above suit and
other defendants not named in the original suit.

On December 12, 1997,  Ethika  entered into a settlement by mutual  agreement of
all parties to this lawsuit. Terms of the settlement includes (1) withdrawal and
dismissal  of any  present or future  lawsuits  among the  parties;  (2) sale of
7,000,000  shares of Ethika  unregistered  common stock to La Salle  Investment,
Ltd., a party to the lawsuit for $0.09 per share (see below); (3) Ethika calling
a Meeting of  Shareholders  for the purpose of electing  Directors and voting on
such other matters as necessary. Such meeting to take place at the earliest date
permitted  subject  to  Security  and  Exchange  Commission   regulations;   (4)
Resignation  of three  (3)  members  of the  current  Board of  Directors  to be
replaced  by  three  (3)  members  designated  by the  Peeper  Group to serve as
directors until the Meeting of Shareholders (3) above is held.

The  Corporation,  in  conjunction  with the  above  settlement  entered  into a
Subscription  Agreement  for the sale of  7,000,000  shares of its  unregistered
common stock to LaSalle  Investment,  Ltd., a party to the lawsuit for $0.09 per
share. The Corporation  received total  consideration of $630,000  consisting of
$25,000 cash and $605,000 of Alanco stock  (891,500  shares).  The Schedule 13-D
filed  with  the SEC  indicates  that  beneficial  ownership  of the  "Reporting
Persons" increased to 51% as a result of this transaction,  and the cancellation
of the contingently issued shares to the TRS shareholders resulting in change of
control of Ethika Corporation.
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<PAGE>
NOTE 8 - REORGANIZATION AGREEMENT

On January 26, 1998,  the  Corporation  entered  into an  Agreement  and Plan of
Reorganization (the "Reorganization  Agreement") with the North American Digicom
Corporation  ("NADC"),  a privately  owned  company  headquartered  in Lakewood,
Colorado,  to acquire 100% of the  outstanding  common stock of NADC in exchange
for Ethika common stock. The NADC shareholders would have received approximately
95% of the then outstanding shares.

Subsequent  to the  approval  of the  Reorganization  Agreement  by the Board of
Directors  of Ethika and NADC,  Ethika  extended a line of credit to NADC not to
exceed $500,000 to be secured by NADC's equipment and accounts receivable. As of
March 31, 1998, $450,000 with interest at 6% had been advanced against this line
of credit.

On July 30, 1998,  the  Registrant  received  notification  from North  American
Digicom  Corporation (NADC) that it had abandoned its  Reorganization  Plan with
the Registrant.  Concurrent with its termination, Phillip F. Grey, Wayne Johnson
and  Louis  Scotti  resigned  from  the  Registrant's  board of  directors.  The
Registrant and NADC had previously agreed to extend the closing of the Agreement
and Plan of Reorganization  until August 31, 1998. However, due to the inability
of either  party to satisfy the terms of the  agreement  on or before such date,
NADC chose to terminate the Reorganization Plan.

Repayment of the $450,000 loaned by the Registrant to NADC is in default and the
Registrant has provided $450,000 allowance against the note.

NOTE 9 - GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern.  For the twelve  month period ended
December 31, 1998, the Company incurred a loss from operations of $1,599,461 and
had an accumulated deficit of $12,135,188 that raise substantial doubt about its
ability to continue as a going concern.

NOTE 10 - YEAR 2000 COMPLIANCE

The only software program the Company utilizes is a general ledger program.  The
Company does not anticipate any compliance  problems with its software  programs
or vendors.


                                       12
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Liquidity and Capital Resources

The  Registrant's  liquidity  is  highly  dependent  upon  payments  on its note
receivable,  which is current to date. The Registrant's plan of operations is to
hold a  shareholder's  meeting  in the  first of June 1999 for the  purposes  of
electing  directors, amending the Articles of Incorporation to eliminate the par
value of the common stock,  authorizing a reverse stock split of the outstanding
common stock and any other duly raised business.  The Registrant has reduced its
overhead  expenses  to  approximately  $6,000  per  month  and  expects  to have
sufficient cash resources for its reduced operations.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  Having  investment income as its only
source of income,  raises  substantial doubt about the ability of the Company to
continue as a going concern.

Results of Operations

The three  months  ended March 31,  1999,  generated a net loss from  continuing
operations of $32,835 ($.001 per share) which includes $15,000 of stock issuance
for shares issued to management compared to a loss of $104,619 ($.005 per share)
for the comparable period of 1998. The decrease in the loss is due to a $112,142
reduction in general and adminstrative expense.

Nine Months  Ended  September  30, 1998  Compared to Restated  Nine Months Ended
September 30, 1997

The nine months ended  September 30, 1998,  generated a net loss from continuing
operations of $1,158,740 ($.057 per share) compared to a loss of $494,648 ($.034
per share) for the comparable  period of 1997. This increase  results  primarily
from establishing a Reserve for the potential  uncollectability  of the $450,000
notes receivable from NADC and loses from investment securities of $326,205.
                                       13
<PAGE>
Part II Other Information:

Item 1.  Legal Proceedings

On  September  20,  1998,  the  Registrant  was  served  with the Third  Amended
Complaint in an action entitled  Jeffrey Allard,  et al v. Kidztime TV, Inc., et
al in Colorado  District Court,  Jefferson County,  Colorado.  The Third Amended
Complaint  which named Ethika  Corporation as a Defendant  alleges that Kidztime
TV, Inc., a  subsidiary  of North  American  Digicom  Corporation  engaged in an
illegal   enterprise   whereby  Kidztime  TV  and  other   Defendants   obtained
approximately $50,000,000 from more than 3,000 individuals during 1996 and 1997,
including  approximately  $1,300,000  obtained  from the  Plaintiffs.  The Third
Amended  Complaint  alleges that Ethika is jointly and severally liable with the
other Defendants in that Ethika was controlled by NADC and acted in continuation
of concealment of the illegal  enterprise in violation of the Colorado Organized
Crime  Control Act by its  execution of a letter of intent and the Agreement and
Plan of Reorganization with NADC and by the joint press releases disseminated by
Ethika  Corporation  and NADC. The Third Amended  Complaint does not allege that
Ethika  Corporation sold securities in violation of the Colorado  Securities Act
or the Colorado Consumer Protection Act.

The Registrant  filed its Answer on October 16, 1998 denying the  allegations of
participation in an illegal enterprise  contained in the Third Amended Complaint
in that the sale of securities to the  Plaintiffs  all occurred  prior to Ethika
entering into the letter of intent and the Agreement and Plan of  Reorganization
with  NADC  and  prior  to the  joint  press  releases  disseminated  by  Ethika
Corporation  and NADC. In addition the Registrant  denied that it was controlled
by NADC or  otherwise  participated  in the illegal  enterprise  or received any
proceeds thereof.  The Registrant  believes that it has substantial  defenses to
all  allegations  made  against  it.  While it is not  possible  at this time to
estimate the potential liability of the allegations,  any liability in excess of
$10,000 would have a materially adverse effect upon the Registrant.

The  Registrant  also  filed a Cross  Claim  against  NADC for the  $450,000  of
principal and accrued  interest loaned to NADC during the first quarter of 1998.
As of the date of this Report, NADC has not yet answered the Cross Claim.

Item 6 - Exhibits and Reports on 8K

Exhibits:

(27) Financial Data Schedule

(b) 8-K-None


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<PAGE>


SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                            Ethika Corporation
                                            (Registrant)

Date:    May 20, 1999                       /s/Dennis Brovarone
                                            -------------------
                                            President

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