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, 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 May 13, 199
    Common Stock, $1.00 par value                           14,031,585
<PAGE>
                               ETHIKA CORPORATION

                                      INDEX

                                                                                

PART I:  FINANCIAL INFORMATION

            Item 1.        Financial Statements

                           Consolidated balance sheets - March 31, 1997 and
                           December 31, 1996 ...................................

                           Consolidated statements of operations for the three
                           months ended March 31, 1997 and 1996 ................

                           Consolidated statements of cash flows for the three
                           months ended March 31, 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 March 31, 1997 and December 31, 1996
(UNAUDITED)
                                                                 March 31      December 31
                                                                  1997             1996
                                                             ------------     ------------
<S>                                                          <C>              <C>
ASSETS
Current Assets:
  Cash and cash equivalents .............................    $  1,377,359     $  1,906,085
  Accounts receivable, net of allowance for
     doubtful accounts of $7,116 and $8,258 .............          87,062           86,235
  Federal income tax refund receivable ..................          51,714          135,817
  Leases receivable .....................................         123,081          105,705
  Investment securities- Trading
  Inventory .............................................          23,390           21,672
                                                             ------------     ------------

Total Current Assets ....................................       1,662,606        2,255,514

Property and equipment , net of accumulated depreciation          498,738          499,892
Leases  receivable ......................................         234,896          277,430
Intangible and other assets, net of accumulated
    amortization of $693,812 and  $567,233...............         858,883          884,212

                                                             ------------     ------------

Total Assets ............................................    $  3,255,123     $  3,917,048
                                                             ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
  Accounts payable and accrued expenses .................    $    262,928     $    527,762
  Current portion of notes payable ......................         116,098          116,201
  Deferred revenue ......................................         305,874          243,399
                                                             ------------     ------------

Total Current Liabilities ...............................         684,900          887,362

Notes payable ...........................................         176,592          205,092
Deferred income taxes ...................................          45,500           45,500
                                                             ------------     ------------

Total Liabilities .......................................         906,992        1,137,954
                                                             ------------     ------------
<PAGE>
<CAPTION>
Ethika Corporation and Subsidiaries
Consolidated Balance Sheet March 31, 1997 and December 31, 1996
(UNAUDITED)(continued)
                                                                 March 31      December 31
                                                                  1997             1996
                                                             ------------     ------------
<S>                                                          <C>              <C>
Stockholders' Equity
Common Stock, $1 par value authorized 50,000,000
   shares; issued 14,031,585 shares and 13,851,585;
   outstanding 14,004,273 shares and 13,824,273 shares;
   March 31, 1997 and December 31, 1996 include
   include 2,500,000 contingently returnable shares .....      11,504,273       11,324,273
Discount on Common Stock ................................      (1,202,459)      (1,123,709)
Accumulated Deficit .....................................      (7,953,683)      (7,421,470)
                                                             ------------     ------------
Total Stockholders' Equity ..............................       2,348,131        2,779,094
                                                             ------------     ------------
Contingencies ...........................................            --               --   
                                                             ------------     ------------

Total Liabilities and Stockholders' Equity ..............    $  3,255,123     $  3,917,048
                                                             ============     ============

     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 Months Ended March 31, 1997 and 1996 (UNAUDITED)
                                                                   March 31,       March 31
                                                                     1997            1996
                                                                 -----------     -----------
<S>                                                              <C>             <C>
Software sales ..............................................    $   128,241
Costs and expenses
  Cost of Sales .............................................        126,387
  Selling ,general and administrative and product development        434,195     $   237,698
  Depreciation and Amortization .............................        128,836           9,150
                                                                 -----------     -----------

Loss from operations ........................................       (561,177)       (246,848)
                                                                 -----------     -----------

Other income ( expense)
  Rental Income .............................................         46,650
  Interest income ...........................................         36,488          43,310
  Gain (Loss) from investment securities ....................        671,160
  Interest expense ..........................................         (7,525)        (10,998)
  Equity in net loss of affiliate ...........................           --          (265,643)
                                                                 -----------     -----------
                                                                      28,963         484,479
                                                                 -----------     -----------

Income /(Loss) from operations ..............................       (532,214)        237,631
                                                                 -----------     -----------
Income taxes ................................................           --              --
                                                                 -----------     -----------
Income /(Loss) from operations ..............................       (532,214)        237,631

  Retained deficit at beginning of period ...................     (7,421,470)     (5,138,079)

  Retained deficit at end of period .........................    ($7,953,683)    ($4,900,448)
                                                                 ===========     ===========

Earnings per share primary and fully diluted:

Primary and fully diluted net income/(Loss) per share .......    $     (.046)    $      .022 
                                                                 ===========     ===========

     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 Three Months
Ended March  31, 1997 and 1996 (UNAUDITED)                          March 31,      March 31,
                                                                     1997             1996
                                                                  -----------     -----------
<S>                                                               <C>             <C>
Cash Flows from Operating Activities:
Net income (loss) from operations ............................    ($  532,214)    $   237,631
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
Depreciation and Amortization ................................        128,836           9,150
Changes in balance sheet accounts:
(Increase) decrease in lease, accounts, and other receivables          83,276          15,680
(Increase) decrease in income taxes
(Increase) in  inventory .....................................         (1,718)
Decrease in accrued investment income
Increase ( decrease) in accounts payable and other liabilities       (293,437)          9,159
Increase ( decrease) in deferred revenue .....................         62,475
Sales of investment securities - trading .....................              0               0
                                                                  -----------     -----------

Net cash provided by (used from) operating activities ........       (552,782)        271,620
                                                                  -----------     -----------

Cash flows from investing activities:

Purchases of equipment .......................................         (1,102)           (382)
Payments received from leases ................................         25,158
Others
Proceeds from investments sold or matured ....................                      2,227,904
Costs of investments acquired ................................                       (368,316)
Temporary investments, net
Proceeds from sales of equipment and other assets

Net cash (used from) provided by investing activities ........         24,056       1,859,206

Cash flows from financing activities:
Net borrowing (payments) on debt
Purchase of treasury stock

Net cash used from financing activities

Net increase (decrease) in cash and cash equivalents .........       (528,726)      2,130,826
Cash and cash equivalents - beginning of period ..............      1,906,085       1,377,869
                                                                  -----------     -----------
Cash and cash equivalents - end of period ....................    $ 1,377,359     $ 3,508,695
                                                                  ===========     ===========
<PAGE>
<CAPTION>
Ethika Corporation and Subsidiaries
Consolidated Statement of Cash Flows for the Three Months
Ended March  31, 1997 and 1996 (UNAUDITED) (continued)                       
                                                                    March 31,      March 31,
                                                                     1997             1996
                                                                  -----------     -----------
<S>                                                               <C>             <C>
Supplemental Cash Flow Information:
Cash payments for income taxes
Cash payments for interest ...................................    $     7,525     $    10,998
                                                                  ===========     ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Common stock issued for equity securities
of nonaffiliated company .....................................        180,000
                                                                      =======

     The Accompanying notes are an integral part of these Consolidated Financial
Statements
</TABLE>
<PAGE>
ETHIKA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 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 three months ended March 31, 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 two of its wholly-owned subsidiaries, Text Retrieval Systems, Inc. (TRS)
and Compass Data Systems (CDS). See business combination  information in Note 2.
TRS and CDS are engaged in  publishing  electronic  libraries  that link related
data sources for convenient  access by personal  computers.  Certain products of
TRS and CDS 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.

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, 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.

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  11,444,273  and  10,597,661
outstanding for the months ended March 31, 1997 and 1996 respectively.  Earnings
per share  calculations  include  contingently  returnable  shares only if their
impact is dilutive.  Previously  reported  earnings per share of $.034 have been
restated to $.022 in the  accompanying  financial  statements due to an error in
the prior calculations.
<PAGE>
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.

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.

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 $126,579 and $63,806 was
recorded  during  the  three  months  ended  March 31,  1997 and the year  ended
December 31, 1996 respectively.
<PAGE>
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.

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, and  CodeManager
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

Three Months Ended March 31, 1997 Compared to
Restated Three Months Ended March 31, 1996

The three months ended March 31, 1997,  generated a net loss from  operations of
$532,214  ($.046 per share)  compared to net income from  operations of $237,631
($.022 per share) for the  comparable  period of 1996.  This  decrease  resulted
primarily  from the fact that during the three months ended March 31, 1996,  the
Corporation had not yet completed the transition  from a life insurance  company
to an operating  company focused on  acquisitions of development  stage or stage
one  companies.  Its  income  for the three  months  ended  March  31,  1996 was
generated primarily from gain on sale of marketable securities of $671,160.  The
remainder  of  1996  was  devoted  to  completing  the   development  and  sales
introduction of its H/R Comply product  acquired with the TRS  acquisition.  See
Note 2 for  further  comment.  As  indicated  in Note 2,  the  Corporation  also
acquired CDS in August 1996. The Corporation recognizes revenue for its software
<PAGE>
sales  ratably  over the  period of each  products'  subscription  life  thereby
generating  currently earned revenue and deferred revenue each time a product is
sold.  During the three months ended March 31, 1997, the  Corporation  had gross
shipments of $205,489 of which  $150,990 has been  recorded as deferred  revenue
while  $54,499 has been  recognized as income for the period.  In addition,  the
Corporation  has recognized  $73,742 of previously  deferred  revenue during the
same time period.  Operating  expenses for the three months ended March 31, 1997
when  compared  to the  same  time  period  for  1996  reflect  the  build up of
operations  necessary  to  support  an  ongoing  business.   In  addition,   the
Corporation  has recorded  amortization  of  approximately  $126,000 during this
three months ended 3/31/97  resulting from the amortization of intangible assets
recorded at the time of each acquisition  compared to no amortization during the
comparable time period in 1996.
<PAGE>
Part II.  Other Information

Subsequent Event

The  Corporation  announced on May 15,  1997,  that they have signed a letter of
intent with TSG Holdings,  Inc., of Savannah,  Ga., which could potentially lead
to  the  acquisition  of  TSG  by  Ethika.   Successful  completion  of  ongoing
negotiations  and the  approval of each  company's  Board of  Directors  will be
required before the agreement becomes final.



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:  May 15, 1997                               G. Thomas Reed
                                                  President and
                                                  Chief Operating Officer

                                                  /s/David E. Williams  
                                                  --------------------
Date:  May 15, 1997                               David E. Williams
                                                  Vice President Finance
                                                  and Chief Financial Officer