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 Six Months Ended June 30, 1997
                          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.)

                            107 The Executive Center
                    Hilton Head Island, South Carolina 29928
                     (Address of Principal Executive Office)

       Registrant's telephone number including area code: (803) 785-7850

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

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 August 13,1997
            -----                          -----------------------------
 
     Common Stock, $1.00 par value                     15,155,018
<PAGE>
                               ETHIKA CORPORATION

                                      INDEX

                                     

PART I:   FINANCIAL INFORMATION

Item 1. Financial Statements

               Consolidated balance sheets - June 30, 1997 and
               December 31, 1996   

               Consolidated statements of operations for the three
               and six months ended June 30, 1997 and 1996 

               Consolidated statements of cash flows for the six
               months ended June 30, 1997 and 1996   

               Notes to consolidated financial statements  

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

PART II.  OTHER INFORMATION

          None

               SIGNATURES                                            
<PAGE>
<TABLE>
<CAPTION>
                       Ethika Corporation and Subsidiaries
         Consolidated Balance Sheet June 30, 1997 and December 31, 1996
                                   (UNAUDITED)


                                                   June 30,      December 31,
                                                    1997            1996
                                                -----------     -----------       
<S>                                              <C>             <C>
  ASSETS
  Current Assets:
    Cash and cash equivalents                    $1,210,962      $1,908,142
    Accounts receivable, net of allowance for
    doubtful accounts of $4,232 and $8,258           95,739         137,487
    Federal income tax refund receivable                  -         135,817
    Leases receivable                               112,764         105,705
    Note Receivable                                 146,370               -
    Inventory                                        19,850          21,672
                                                -----------     -----------       

  Total Current Assets                            1,585,685       2,308,823

  Property and equipment, net of accumulated       
  depreciation                                      509,837         544,943
  Leases  receivable                                219,164         277,430
  Intangible and other assets, net of
  accumulated amortization of $823,204 and          
  $596,572                                          756,532         913,551
                                                 ----------      ----------
  Total Assets                                   $3,071,218      $4,044,747
                                                 ==========      ==========
                                                                    

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities:
    Accounts payable and accrued expenses         $ 541,721        $591,048
    Current portion of notes payable                120,339         134,916
    Deferred revenue                                369,134         285,944
                                                -----------     -----------       

  Total Current Liabilities                       1,031,194       1,011,908

  Notes payable                                     247,202         205,092
  Deferred income taxes                                  -           45,500
                                                  ---------      ---------- 
  Total Liabilities                               1,278,396       1,262,500
                                                  =========       =========
                                                            
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       Ethika Corporation and Subsidiaries
         Consolidated Balance Sheet June 30, 1997 and December 31, 1996
                                  (continued)
                                   (UNAUDITED)
                                                   June 30,      December 31,
                                                    1997            1996
                                                -----------     -----------       
<S>                                              <C>             <C>
  Stockholders' Equity
  Common Stock, $1 par value authorized
  50,000,000 shares; issued 15,155,018 shares
  and 13,851,585; outstanding 15,127,706 shares 
  and 13,824,273 shares; June 30, 1997 and                          
  December 31, 1996 include 2,500,000
  contingently returnable shares                 12,627,706      12,447,706
  
  Discount on Common Stock                       (1,202,459)     (1,123,709)
  Accumulated Deficit                            (9,632,425)     (8,541,750)
  Total Stockholders' Equity                      1,792,822       2,782,247
                                                -----------     -----------       
  Contingencies                                           -               -
                                                -----------     -----------       
  Total Liabilities and Stockholders' Equity    $ 3,071,218     $ 4,044,747           
                                                ===========     ===========           
                                               
  The Accompanying notes are an integral part of these Consolidated
  Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             Ethika Corporation and Subsidiaries
                           Consolidated Statement of Operations and
                   Changes in Retained Deficit for the Three and Six Months
                                 Ended June 30, 1997 and 1996
                                          (Unaudited)


                                            Three Months Ended          Six Months Ended
                                          ----------------------    -------------------------                              
                                                  June 30                    June 30
                                             1997         1996         1997           1996
                                             ----         ----         ----           ----
<S>                                     <C>          <C>          <C>            <C>
Software sales                            $ 409,747     $263,321     $653,645     $  389,785 
                                        
Costs and expenses
  Cost of Sales                             170,018       62,030      340,149        130,837
  Selling ,general and administrative   
    and product development                 622,785      713,284    1,129,159      1,040,482
  Depreciation and Amortization
                                            179,977      148,290      308,813        157,440

Loss from operations                       (563,033)    (660,283)  (1,124,476)      (938,974)
                                                       

Other income (expense)
  Rental Income                                   -       47,125            -         93,775
  Interest income                            31,994       39,675       68,242         83,391
  Gain (Loss) from investment securities          -            -            -        672,785
  Interest expense                           (6,449)      (8,423)     (13,974)       (19,422)
  Equity in net loss of affiliate                36            -           36       (265,463)
                                              


Income /(Loss) from operations             (537,452)    (581,906)   1,070,172)      (374,088)
Income taxes                                (13,399)      (6,200)     (19,933)       (14,449)
Income /(Loss) from operations             (550,851)    (588,106)  (1,090,105)      (388,537)

Retained deficit at beginning of period  (9,081,574)  (5,903,221)  (8,542,320)    (6,102,790)
                                              
Retained deficit at end of period       ($9,632,425) ($6,491,327) ($9,632,425)   ($6,491,327)
                                               
Primary and fully diluted net loss     
per share                                    ($.044)      ($.059)      ($.087)        ($.033)


    The Accompanying notes are an integral part of these Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                      Ethika Corporation and Subsidiaries
             Consolidated Statement of Cash Flows for the Six Months 
                    Ended June 30, 1997 and 1996 (Unaudited)

 
                                                           Six Months Ended
                                                                June 30
                                                         1997            1996
                                                    -----------       ---------
<S>                                                 <C>               <C>
Cash Flows from Operating Activities:
Net income (loss) from operations ..............    ($1,090,105)      ($388,537)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and Amortization ..................        308,813         157,440
Changes in balance sheet accounts:
(Increase) decrease in lease, accounts, and
other receivables ..............................         82,402          32,381
(Increase) decrease in income taxes ............         45,500
(Increase) in  inventory .......................          1,822         (31,228)
Decrease in accrued investment income
Increase ( decrease) in accounts payable and
other liabilities  .............................        (21,794)        157,001 
Increase ( decrease) in deferred revenue .......         83,190
Sales of investment securities - trading

Net cash provided by (used from) operating 
activities  ....................................       (590,172)        192,700
                                                    -----------       ---------
Cash flows from investing activities:

Purchases of equipment .........................        (64,898)      1,333,769
Payments received from leases
Others
Proceeds from investments sold or matured ......                              0
Costs of investments acquired ..................                      1,360,337
Temporary investments, net
Proceeds from sales of equipment and other
assets

Net cash (used from) provided by investing .....        (64,898)      1,333,769
activities

Cash flows from financing activities:
Net borrowing (payments) on debt ...............        (42,110)        (54,405)
Purchase of treasury stock

Net cash used from financing activities ........        (42,110)        (54,405)

Net increase (decrease) in cash and cash 
equivalents ....................................       (697,180)      1,472,064
Cash and cash equivalents - beginning of 
period .........................................      1,908,142       1,377,869
                                                    -----------       ---------

Cash and cash equivalents - end of period ......     $1,210,962      $2,849,933
                                                                             
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                      Ethika Corporation and Subsidiaries
             Consolidated Statement of Cash Flows for the Six Months 
                    Ended June 30, 1997 and 1996 (Unaudited)
                                  (continued)

 
                                                           Six Months Ended
                                                                June 30
                                                         1997            1996
                                                    -----------       ---------
<S>                                                 <C>               <C>
Supplemental Cash Flow Information:                  $        0      $        0
                                                        
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Common stock issued for equity securities of  
 nonaffiliated company..........................      1,303,433
                                                      =========
 
The  Accompanying  notes are an integral  part of these  Consolidated  Financial
Statements
</TABLE>
<PAGE>
ETHIKA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997

Note 1 - Basis of Presentation

The  accompanying   unaudited   consolidated   financial  statements  of  Ethika
Corporation and  subsidiaries  ("Corporation")  have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and  with   instruction  to  Form  10-Q  and  Article  10  of  Regulations  S-X.
Accordingly,  they do not include all of the detail and disclosures  required by
generally  accepted  accounting  principles for complete  financial  statements.
Operating  results for the six months  ended June 30,  1997 are not  necessarily
indications of the results that may be expected for the year ending December 31,
1997.  More  detailed  information  is  contained  in the Notes to  Consolidated
Financial  Statements  included in the Corporation's Form 10-K Annual Report for
the year ended December 31, 1996.

Nature of operations:  The Corporation operates as an applied technology company
through three of its wholly-owned  subsidiaries,  Text Retrieval  Systems,  Inc.
(TRS),   Compass  Data  Systems  (CDS),  and  Legislative   Information  Systems
Corporation (LIS). See business combination information in Note 2. 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.

Principles of Consolidation:  The consolidated  financial statements include the
financial statements of the Corporation and its wholly-owned  subsidiaries.  All
significant inter-company accounts and transactions have been eliminated.

On June  10,  1997  (See  Business  Combinations  information  in Note  2),  the
Corporation acquired  Legislative  Information Systems Corporation 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 of the
Corporation's  common  stock  for  all of the  outstanding  stock  of  LIS.  The
accompanying  financial  statements for the year ended December 31, 1996 and the
three and six months  ended June 30,  1997 and 1996 are based on the  assumption
that the companies were combined for the entire period presented.

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

Intangible  assets:  Intangible  assets  consist  primarily  of assets  acquired
through the  acquisitions  of TRS,  CDS,  LIS,  and  CodeManager.  See  Business
Combination  information in Note 2. 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.
<PAGE>

Use of estimates:  The  preparation of financial  statements in accordance  with
generally accepted accounting  principles requires the use of certain estimates.
Actual results may differ from those estimates.

Earnings Per Share:  Primary and fully  diluted  earnings per share are based on
the  weighted  average  number of  common  shares  of  12,597,706  and11,721,094
outstanding for the months ended June 30, 1997 and 1996  respectively.  Earnings
per share  calculations  include  contingently  returnable  shares only if their
impact is dilutive.

Note 2 - 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. The
shares are returnable to the Corporation if certain 1997 earning targets are not
achieved.   Management  originally  believed  that  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  contingent  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 the 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 has amended the agreement with TRS whereby the earnings targets have
been revised and extended through December 31, 1997. The Corporation will adjust
intangible assets as the contingencies are resolved. If the earnings targets are
not  totally  met,  the  former  shareholders  will  return  all or  part of the
contingent shares to the Corporation.

During 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 loss recorded by the
Corporation was $265,643 for the quarter ended March 31, 1996.

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.
CDS publishes  electronic  information  reference  services to a wide variety of
industries and  organizations.  Among its principal  product offerings are state
tax law reference  libraries which keep subscribers  current on tax law changes.
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
statement of operations.  Intangible assets of $460,765 are being amortized over
a three year period.
<PAGE>

On January 31, 1997 Ethika  purchased for 180,000  shares valued at $101,250 the
publishing,  distribution,  and  future  development  rights of the  CodeManager
Reference  Library from American  Practice  Management and Consulting  Concepts,
Inc.

On June  10,  1997  (See  Business  Combinations  information  in Note  2),  the
Corporation acquired  Legislative  Information Systems Corporation 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 of the
Corporation's  common  stock  for  all of the  outstanding  stock  of  LIS.  The
accompanying  financial  statements for the year ended December 31, 1996 and the
three and six months  ended June 30,  1997 and 1996 are based on the  assumption
that the  companies  were combined for the entire  period  presented.  LIS is an
electronic  publishing  company  specializing in federal  aviation  regulations,
banking regulations, and custom service contracts.

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.  Total amortization of $129,387 and $564,430 was
recorded during the three months ended June 30, 1997 and the year ended December
31, 1996 respectively.

Note 3 - Leasing Activities

During 1995, the Company  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 Company's leases are classified as direct financing  leases.
Under the  direct  financing  method of  accounting  for  leases,  the total net
rentals 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.

Note 4 - Contingencies

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 Chairman,  S.L. Reed, Jr.
This suit  alleges  breach of  fiduciary  duties,  fraud,  conspiracy  to breach
fiduciary duty of loyalty and care, breach of contract,  misrepresentation,  and
conversion.  These  allegations  arise  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  valued at  $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. The Corporation, on advice of outside legal counsel, believes the
plaintiffs'  suit is  without  merit,  and that its  resolution  will not have a
material effect on the Corporation,  however, it is too early in the proceedings
to assure the outcome.
<PAGE>

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

Liquidity and Capital Resources

The Corporation accomplished the acquisitions of TRS, CDS, CodeManager,  and LIS
through the issuance of its common  stock.  Management  anticipates  to continue
using its common stock to acquire additional companies. Management believes that
its current working capital and anticipated levels of internally generated funds
will be  sufficient  to fund its  operating,  product  development,  and capital
expenditure requirements.  This belief is based on the Corporation's current and
planned level of operations.

Results of Operations

Six  Months Ended June 30, 1997
Compared to Six Months Ended June 30, 1996

The six months  ended June 30,  1997,  generated a net loss from  operations  of
$1,090,105  ($.087 per share) compared to a net loss from operations of $377,222
($.033 per share) for the comparable  period of June 30, 1996.  This increase in
loss resulted  primarily from the recognition of a full six months  amortization
of goodwill in connection  with  acquisition  activity  totaling  $308,813.  The
Corporation recognizes revenue for its software sales ratably over the period of
each products'  subscription life thereby  generating  currently- earned revenue
and  deferred  revenue  each  time a  product  is sold.  Costs  associated  with
production of the product,  however,  are recorded as incurred and not deferred.
Revenues for the six months ended June 30, 1997  increased by $258,985  over the
same  period of 1996 while cost of sales  increased  by  $209,312  over the same
period of time. In addition, the Corporation had deferred revenue of $369,134 at
June 30, 1997.

Three Months Ended June 30, 1997
Compared to Three Months Ended June 30, 1996

For the three  months  ended June 30, 1997,  the  Corporation  had a net loss of
$535,567  ($.087 per share) compared to a net loss of $568,394 ($.033 per share)
for the  comparable  period in 1996.  This decrease in loss is  attributable  to
increased  recognized sales of $425,031 for the three months ended June 30, 1997
compared to $283,033 for the comparable period in 1996.

Part II.  Other Information

Subsequent Event

Ethika's previous headquarters building in Jackson, Mississippi was sold on July
16, 1997 for $700,000 less closing costs of $55,630 and the mortgage  balance of
$255,398 netting $388,972 in cash to Ethika.

On June 5, 1997 the Corporation entered into a loan agreement with InfoDynamics,
Inc. of Orem, Utah whereby Ethika provided  development capital in the form of a
line of credit not to exceed $250,000.  At June 30, 1997 a total of $143,000 had
been  advanced  against  this line.  Ethika  also  acquired  an 8%  interest  in
InfoDynamics  as part of this  transaction.  In addition,  the  agreement  gives
Ethika the right to acquire the remaining  outstanding shares of InfoDynamics on
or before  December 31, 1997.  InfoDynamics is a developer of software tools and
applications based on the Folio infobase platform.
<PAGE>

Item 6 - Exhibits and Reports on Form 8-K.

(a)  Exhibits
     (27) Financial Data Schedule

(b)  None
<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)

                                        /s/G. Thomas Reed
                                        -----------------
Date:  August 19, 1997                  G. Thomas Reed
                                        President and
                                        Chief Operating Officer

                                        /s/David E. Williams
                                        --------------------
Date:  August 19, 1997                  David E. Williams
                                        Vice President Finance
                                        and Chief Financial Officer