SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended Commission file number
                            DECEMBER 31, 1997 0-3296

                               ETHIKA CORPORATION
             (Exact Name Of Registrant As Specified In Its Charter)

                             MISSISSIPPI 64-0440887
                   (State or other jurisdiction (IRS employer
              of 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

           Securities registered pursuant to section 12(g) of the Act:
                   Common Capital Stock par value $1 per share
                                (Title Of Class)

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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT  FILERS  PURSUANT TO ITEM 405
OF REGULATION  S-K IS NOT CONTAINED  HEREIN,  AND WILL NOT BE CONTAINED,  TO THE
BEST OF REGISTRANT'S  KNOWLEDGE,  IN DEFINITIVE PROXY OR INFORMATION  STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [  ] 

AS OF MARCH  20,  1998,  20,360,346  COMMON  SHARES  WERE  OUTSTANDING,  AND THE
AGGREGATE  MARKET VALUE OF THE COMMON SHARES (BASED UPON THE CLOSING  AVERAGE OF
THE BID AND ASKED PRICES ON THE  OVER-THE-COUNTER  MARKET) OF ETHIKA CORPORATION
HELD BY NON-AFFILIATES WAS APPROXIMATELY $4,072,069.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                Certain Exhibits
<PAGE>
PART I

ITEM 1 - BUSINESS

General

Ethika  Corporation  ("Ethika" or the  "Corporation"),  through its wholly-owned
subsidiaries,  Compass Data Systems, Inc. ("CDS") a Utah corporation acquired on
August  17,  1996,  Legislative  Information  Systems,  Inc.  ("LIS") a Virginia
corporation acquired on June 10, 1997, and Text Retrieval Systems,  Inc. ("TRS")
a Florida Corporation,  has for the last two fiscal years been primarily engaged
in publishing  electronic reference libraries that link related data sources for
convenient access by personal computers.  As a result of the recent developments
described below, the Corporation's  future business plan following completion of
the pending  acquisition  of North  American  Digicom  Corporation  ("NADC"),  a
Colorado corporation is to be engaged in the  Tele-communications  industry. The
transaction is a reverse  acquisition where the Corporation will issue shares of
its' common  stock in exchange  for all of the common  stock of NADC (See Recent
Developments),  but NADC will  become the  historical  reporting  company and is
treated as the acquirer for accounting purposes.

Recent Developments

The discussion  that follows  includes  forward-looking  statements that involve
risks  and  uncertainties.   The  Corporation's   actual  results  could  differ
materially from those discussed  herein.  Factors that could cause or contribute
to such  differences  include,  but are not limited to those  discussed  in this
section and elsewhere in this report.

On December 12, 1997 the  Corporation  entered into a Settlement  Agreement with
the Plaintiffs of the legal action filed in U.S. District Court for the Southern
District of Mississippi Jackson Division (see Legal  Proceedings).  The terms of
the  settlement  included;  the dismissal of the pending  proceeding  and mutual
release of any and all other claims  between the parties,  the sale of 7,000,000
shares of the Corporation's  common stock to La Salle  Investment,  Ltd., one of
the  Plaintiffs  for  $630,000,  ( comprised of cash  ($25,000)  and  marketable
securities   ($605,000)),   the  resignations  of  three  of  the  Corporation's
directors,  and the appointment of three directors designated by the Plaintiffs.
The  resignation of the  Corporation's  President was requested and received and
Dennis Brovarone,  one of the newly appointed directors was made President.  The
new management of the Corporation then embarked on the actions described below.

On January 26, 1998,  the  Corporation  entered  into an  Agreement  and Plan of
Reorganization  (the  Reorganization  Agreement)  with  North  American  Digicom
Corporation  ("NADC"),  a privately  owned  company  headquartered  in Lakewood,
Colorado,  to  acquire  100%  of the  outstanding  common  stock  of  NADC.  The
Reorganization  Agreement also requires that the  Corporation's  common stock be
reverse  split on the basis of one (1) new share  for every  twenty-two  and one
half (22.5)  shares  presently  outstanding  with all  fractional  shares  being
rounded  up to the  next  highest  multiple  of  fifty  (50)  shares.  Then  the
shareholders of NADC will exchange their common stock for Ethika common stock at
the rate of three (3) shares of Ethika  common stock for four (4) shares of NADC
stock. The NADC shareholders will receive  approximately 19.6 million post-split
shares of Ethika, which will represent approximately 95% of the then outstanding
shares.  The  Reorganization  Agreement  also  requires  that the  Corporation's
Articles  of  Incorporation  be  amended  to  eliminate  the  par  value  of the
Corporation's  common stock,  authorize a class of preferred  stock whose rights
and preferences can be set by the Board of Directors and authorize a name change
<PAGE>
of the Corporation to North American  Digicom  Corporation.  The  Reorganization
Agreement also calls for the Corporation's shareholders to approve a re-domicile
of the Corporation to Colorado. Upon execution of the Reorganization  Agreement,
the remaining four directors, Anthony Spuria, William Stubblefield, Marcia Cohen
and Herbert Rogers  resigned.  Philip Grey,  Louis Scotti and Wayne Johnson were
appointed to the Corporation's Board of Directors.  Mr. Grey, Mr. Scotti and Mr.
Johnson are  officers  and  directors  of NADC.  This  transaction  is a reverse
acquisition where the NADC will become the historical  company and is treated as
the acquirer for accounting purposes.

Closing of the  Reorganization  Agreement is  conditioned  upon surrender of the
NADC common stock for exchange for the  Corporation's  common stock and approval
of the  Reorganization  by  Shareholders  at  the  Annual  Shareholders  meeting
together  with  approval  by  shareholders  of the  reverse  split and the above
described amendments to the Corporation's Article of Incorporation.  Closing was
also conditioned upon the execution of a Voting Trust Agreement by a stockholder
group,  (See  Security  Interest of  Beneficial  Owners)  which holds  fifty-one
percent (51%) of the Corporation's common stock. This Voting Trust Agreement was
executed  on or about March 16, 1998 and  irrevocably  gives the Trustee  voting
authority  over the subject  common  stock and  requires  the Trustee to vote in
favor of the items included in the Reorganization Agreement and submitted to the
Corporation's  shareholders for vote at the May 29, 1998 Shareholders Meeting. A
meeting of the NADC  shareholders  has been called for April 15, 1998 to approve
the transaction.

Based  upon  the  Board  of  Directors  and  management's  confidence  that  the
Reorganization Agreement will be approved and closed as planned,  management has
proceeded with the  integration of the  Corporation's  operations  with those of
NADC and taken the actions described below.

North American Digicom Corporation was incorporated as a Colorado corporation on
December 27, 1995. NADC was initially formed to explore potential  opportunities
associated  with, and arising from the  deregulation  of the  telecommunications
industry.  On December 23, 1996 NADC  commenced  actual  operations  through the
activation of its P.C. based debit card platform.

In April of 1997, NADC commenced sales of private line and other local services.
On May 1, 1997,  North American  Digicom  Corporation  loaded its first switched
one-plus  customers.  On June 7,  1997,  NADC  acquired  in a  stock  for  stock
exchange,  United Online,  Inc., a Colorado  corporation engaged in the sales of
Internet  services.  On October  20,  1997,  NADC  acquired in a stock for stock
exchange,  Kidztime TV, Inc.,  ("KTV" or the "Network") a Colorado  corporation.
United Online utilizes a network-marketing model to distribute its products, and
Kidztime TV is a two-year-old  cable network  specializing in providing violence
free children's programming on various cable systems.

Disposition of Electronic Publishing Operating Units

Based  upon  analysis  of the  electronic  publishing  market  and the amount of
capital  that will be  required  to  compete  effectively  in this  marketplace,
together with the poor  performance the  Corporation  has experienced  since its
entry into this  industry,  the Board of Directors and management has determined
it to be in the  best  interest  of the  Corporation  to  divest  itself  of its
electronic  publishing  business  unit which is  comprised  of TRS, CDS and LIS.
Accordingly,  the  accompanying  financial  statements  reflect the  decision to
dispose of this segment.  This  divestiture  will allow the Corporation to focus
its attention and resources on its new Tele-communications business.
<PAGE>
Acquisition and Disposition of Text Retrieval Systems, Inc.

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  these  shares  resulted  in
additional goodwill.

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  affiliated  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.

As a result of the continued  losses in TRS and its  extensive  capital needs to
achieve  profitability  the Corporation  negotiated an agreement to sell TRS. 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.

Acquisition and Disposition of Compass Data Systems, Inc. and Code Manager

On August 17, 1996 Ethika purchased 100% of Compass Data Systems,  Inc. ("CDS"),
a privately-held  corporation based in Salt Lake City, Utah for a total purchase
price of $500,000  paid as $100,000 in cash and 726,612  shares of common  stock
valued at $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.
<PAGE>
On November 22, 1996 the Corporation entered into an agreement with the American
Medical  Association  ("AMA") to  cooperatively  publish and  distribute a newly
developed  electronic  reference library for medical service providers.  The new
PC-based product, known as CodeManager, simplifies and speeds the coding process
of procedures and diagnoses for health  insurance  claim forms.  The publishing,
distribution, and future development rights of the CodeManager Reference Library
were purchased from American  Practice  Management,  Inc. ("APM") and Consulting
Concepts,  Inc. in a  transaction  closed on January  31,  1997 in exchange  for
180,000   shares  of  Ethika   common  stock  having  a  fair  market  value  of
approximately  $101,250.  The  preparation and updating of this product line are
included with the results of CDS.

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
(including  Code  Manager,  see  below),  and its 8%  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.

Acquisition and Disposition of Legislative Information Systems, Inc.

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. LIS is an electronic  publishing  company
located in Annandale,  Virginia  specializing in federal  aviation  regulations,
banking regulations, and custom service contracts.

In March 1998, the Corporation initiated negotiations with BNEZ to sell LIS. The
selling price is expected be paid in preferred  stock of BNEZ. The selling price
of LIS is expected to be in excess of its net equity, therefore no impairment of
assets are anticipated.

Investment in Alanco Stock

As part  of the  Settlement  with  the  Peeper  Group,  in  December  1997,  the
Corporation  received  891,500  shares of Alanco  stock  having a fair  value of
$605,000 in  connection  with the issuance of 7,000,000  shares of Ethika common
stock  issued to La Salle  Investment,  Ltd.,  a member of the Peeper Group (see
Legal  Proceedings  below).  The Corporation has subsequent to December 31, 1997
sold 172,500  shares at a loss of $4,038.  Alanco is a publicly  traded  company
that files  periodic  reports under the  Securities  Exchange Act of 1934 and is
traded on the NASDAQ  SmallCap  Market  under the symbol  ALAN.  At December 31,
1997, the  Corporation  recorded an unrealized  loss of $55,719 related to these
shares.

Sale of Life Insurance Company

The  Corporation  was organized in 1966 as a Mississippi  corporation  under the
name "Dixie National Corporation". The name was changed to Ethika Corporation in
June 1996. Until the sale on October 2, 1995 to Standard Life Insurance  Company
of Indiana  ("Standard")  of its 99.3% owned  subsidiary,  Dixie  National  Life
Insurance Company ("Dixie Life"), a Mississippi  corporation  organized in 1965,
the Corporation was an insurance  holding company  primarily engaged in the life
<PAGE>
insurance  business.  Prior  to the  sale of Dixie  Life,  virtually  all of the
Corporation's  consolidated  revenues were represented by premium income and net
investment  income  generated by Dixie Life's insurance  operations.  Dixie Life
represented virtually all of the Corporation's  principal assets and operations.
The sale of Dixie Life has been accounted for as a discontinued operation.

Employees

At  December  31,  1997,  the  Corporation  had  (in all  locations)  twenty-six
employees including Officers. As of December 31, 1997, NADC had eighty-five (85)
full time employees.

ITEM 2 - PROPERTIES

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 the Corporation. The Corporation
has operating lease agreements for office space in Salt Lake City, Utah ("CDS"),
Annandale,  VA, ("LIS"),  and Hilton Head Island,  SC (Corporate  Headquarters).
Ethika's  corporate  office space is leased from a former member of the Board of
Directors for $ 1,400 per month.

North American  Digicom  Corporation is headquarted in Lakewood,  Colorado.  The
Lakewood  facility  houses NADC's  executive  staff,  marketing  and  television
operations.  This facility is sub-leased from Cowels Enthusiastic Media, and has
approximately  17 months  remaining on the sub-lease.  The Lakewood  facility is
approximately 12,000 square feet and costs the Company approximately  $12,000.00
per month.  Additionally,  the Company  leases an aggregate of 8,000 square feet
from Local Service  Corporation in Aurora,  Colorado.  The Company  conducts all
technology  functions  and  customer  services  from  this  facility.  NADC pays
approximately  $8,500.00 per month and has  approximately 30 months remaining on
this lease.

ITEM 3 - LEGAL PROCEEDINGS

As previously reported,  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 seven  member  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.
<PAGE>
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).  As a result of the
issuance of the  7,000,000  shares,  and the  cancellation  of the  contingently
issued  shares  to the  TRS  shareholders,  the  holdings  of the  Peeper  Group
increased  to 51%  resulting  in change of control of Ethika  Corporation.  (See
Security Interest of Beneficial Owners below.)

The Corporation was notified by Standard Management  Corporation ("SMC") 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.

Regulatory Agency Administrative Proceedings

Prior to NADC's  acquisition of kidZtime TVTM,  Inc.  ("KTV") in October,  1997,
Capital Funding and Financial Group, Inc. ("Capital  Funding"),  as an affiliate
of KTV, solicited and sold approximately $47,000,000 of partnership interests in
seventy-two KTV territorial  affiliates which received licenses to cablecast KTV
programming  within  their  respective  territories.   Upon  closing  of  NADC's
acquisition  of KTV on October 20, 1997,  KTV ceased its affiliate  relationship
with Capital  Funding,  no new KTV affiliates were formed by Capital Funding and
no offering  and sales of  partnership  interests  were made by Capital  Funding
other  than to close  the  then  pending  KTV  affiliate  partnership  offering.
Approximately  twenty-five  state  securities law regulatory  agencies have made
inquiries or entered Cease and Desist  Orders  against  Capital  Funding and KTV
based upon assertions KTV affiliate  partnership interests were offered and sold
as unregistered  securities.  KTV entered into voluntary consent orders with the
States of Arizona, Idaho, Kansas, Oregon and Wisconsin whereby KTV did not admit
<PAGE>
or deny any violations of state  securities  law, and consented any future sales
of  securities  in  these  states  would  be in  compliance  with  each  State's
securities law. On December 5, 1997 the Securities and Exchange Commission (SEC)
ordered a formal  investigation  on the same matters.  As of March 31, 1998, the
SEC's  investigation  remains  ongoing and NADC has been,  and intends to, fully
cooperate with the investigation.

On or about March 20, 1998,  KTV, NADC and other  defendants  were served with a
civil action entitled CREATIVE  COMMOTION,  LLP, Plaintiff v. KIDZTIME TV, INC.,
et al, filed in the District  Court,  City and County of Denver,  Colorado.  The
action alleges breach of contract and fraudulent  inducement  with respect to an
alleged  consulting  contract with the plaintiff for advertising,  marketing and
public relations services for KTV. NADC intends to vigorously defend against the
claims and counterclaim against the plaintiff.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE
                                     PART II

ITEM 5- MARKET FOR REGISTRANT'S COMMON EQUITY AND
                 RELATED STOCKHOLDER MATTERS

The Corporation's common stock was traded in the over-the-counter market and was
quoted on the  NASDAQ  Small Cap  market  system  under the  symbol  ETKA  until
February 13, 1998.  At that time,  the  Corporation  was notified  that a NASDAQ
Listings Qualifications Panel had ruled that as a result of the trading price of
its common  stock being below the $1.00 per share  minimum  price for  continued
listing,  the stock was  delisted  from the NASDAQ  Small Cap  Market.  Ethika's
common  stock is currently  trading on the NASD OTC  Electronic  Bulletin  Board
"Pink Sheets" under its ETKA symbol.  The  Corporation  has filed an appeal with
NASDAQ to  reinstate  its listing on the Small Cap Market  based upon the Market
Capitalization  Alternative Listing requirements.  At this time, there can be no
assurance  that the  Corporation  will be relisted on the Small Cap Market.  The
following  table sets forth the reported high and low sales price as reported by
the National Quotation Bureau, Inc. for the quarters indicated. This information
does not include retail markups, markdowns, or commissions.

                                         1997                   1996         
                                    ---------------       ---------------
                                    High       Low        High        Low      
                                    ----       ---        ----        ---      
            
           Quarter                                                           
           First                    5/8       13/32        1           1/8      
           Second                   9/16       1/4         7/8         3/8      
           Third                    9/16       9/64        11/16       3/8      
           Fourth                   9/64       3/32        1           13/32 
                                                                               
No  dividends  were paid on the  Corporation's  common stock during the last two
years,  and the Corporation  does not intend to pay dividends in the foreseeable
future.  The number of holders of record of common stock of the  Corporation  on
March 20, 1998 was 2,414.
<PAGE>
The  Corporation  issued  shares  of  common  stock  in  connection  with  three
acquisition  transactions  and a private  placement of securities in 1997. These
include the issuance of: 180,000 shares issued in February 1997 in consideration
for the CodeManager  Reference Library,  1,123,433 shares issued in June 1997 in
consideration  for the  acquisition  of LIS and 732,640  shares  issued as final
settlement of the TRS transaction and 7,000,000 shares at $0.09 per share issued
in December 1997 under a Subscription  Agreement entered into in connection with
the settlement of the EURAM,  B.V., Peeper, et al. vs. Ethika lawsuit (see Legal
Proceedings).  The securities  were issued in private  transactions  pursuant to
negotiated   purchase  agreements  and  in  reliance  upon  the  exemption  from
registration  pursuant  to  Section  4(2) of the  Securities  Act of  1933.  See
"Business Recent Developments."

ITEM 6 - SELECTED FINANCIAL DATA

Selected consolidated financial data for the Corporation and its subsidiaries is
set forth in the following  table.  (For additional  information,  see "Notes to
Consolidated Financial Statements").
<TABLE>
<CAPTION>

                        1997            1996 (1)          1995 (1)          1994 (2)         1993 (2)
                  ------------      ------------      ------------      ------------      ------------
<S>               <C>               <C>               <C>               <C>               <C> 
FOR THE YEAR
ENDED
DECEMBER 31:

Loss from
continuing
Operations        $  1,123,195      $  1,314,334      $  1,439,976      $    119,564      $    117,910

Other income
(expense)              401,643           894,718          (941,767)           29,929              --
Loss from
discontinuing
Operations           1,317,925         2,019,344         4,668,025         2,465,144           839,228
                  ------------      ------------      ------------      ------------      ------------

NET LOSS          $ (1,993,977)     $ (2,438,960)     $ (6,875,251)     $ (2,554,779)     $   (957,138)
                  ============      ============      ============      ============      ============

PER COMMON
SHARE AMOUNTS
Basic and
diluted
Net (loss)        $      (.151)     $      (.203)     $      (.649)     $       (.39)     $       (.15)
                  ============      ============      ============      ============      ============
AT YEAR-END:
TOTAL ASSETS      $  2,594,522      $  4,044,747      $  5,342,461      $ 44,577,452      $ 56,255,734
                  ============      ============      ============      ============      ============

Total Debt        $          0      $    340,008      $    481,636      $  6,103,839      $  6,253,670
                  ============      ============      ============      ============      ============
</TABLE> 
(1) Amounts have been restated to reflect the pooling-of-interest with LIS.
(2)  The years ended  December 31, 1994 and 1993 have not been  restated for the
     LIS  transaction as Ethika was engaged only in the life insurance  industry
     at that time.
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

The following should be read in conjunction with the Selected Financial Data and
the Consolidated  Financial  Statements and notes thereto appearing elsewhere in
this report.

RESULTS OF OPERATIONS

During 1995 the Corporation sold its insurance company  operations which was its
only business in prior years.

The  Corporation  began its transition to an applied  technology  company during
1996 through the acquisition of TRS and CDS. In 1997, the  Corporation  acquired
the Code Manager product and LIS (See "Recent Developments" above). TRS, CDS and
LIS are primarily engaged in publishing electronic reference libraries that link
related data sources for convenient access by personal  computers.  In the first
quarter of 1998, the Board of Directors and management began to dispose of these
subsidiaries  and to discontinue  operations in this segment.  Accordingly,  the
results of operations from this segment have been reclassified,  for all periods
presented, to "Loss from discontinued operations".  Additionally, a provision of
$80,000  has been made  related  to the  anticipated  losses  from this  segment
subsequent to 1997 through the disposal of all components of the segment.

Selling,   general,  and  administrative  expenses  decreased  by  approximately
$191,139  in 1997  resulting  primarily  from  decreased  legal  fees due to the
litigation as discussed in Item 3 - Legal  Proceedings,  acquisition  search and
related costs. Other income and expense items generated $401,643 and $894,718 in
income for the periods  December 31, 1997 and 1996. This is primarily due to the
sale of the former  corporate  headquarters  located in Jackson,  Mississippi in
1997 and rental  income and  interest  income in 1996.  A decrease  in  interest
expense to $18,868  from  $66,747 in 1997 and 1996 was due to the lower  average
debt level; the gain on the sale of the Alanco stock in 1996 was $671,160.

There were no  provisions  from income  taxes in 1997 or 1996 due to taxable net
operating loss generated by current operations. The deferred tax benefit in 1997
is directly attributable to the sale of the former corporate  headquarters noted
above.  The  realization of future tax benefits from these items is uncertain at
this time.

On October 2, 1995, the Corporation  completed the sale of Dixie Life, which was
99.3% owned by the  Corporation,  to  Standard.  The sale  resulted in a loss of
$4,174,535  ($.441 per share).  In accordance with Accounting  Principles  Board
Opinion No. 30 (APB 30) which calls for reporting the operations of discontinued
operations  as  a  single  net  amount  in  the  statement  of  operations,  the
Corporation's  prior year's  financial  statements have been restated to reflect
discontinued  operations.  The Company incurred a net loss of $6,875,251 in 1995
compared to a net loss of $2,554,779 in 1994. On a per-share  basis the net loss
for 1995 was $.65 compared to a net loss of $.39 in 1994.

Acquisition of North American Digicom Corporation

On January 26,  1998,  the Ethika Board of  Directors  unanimously  approved the
Agreement and Plan of Reorganization  calling for the acquisition of 100% of the
outstanding common stock of North American Digicom  Corporation (NADC). On March
4, 1998 by mutual  agreement of the parties,  the closing date has been extended
<PAGE>
to on or before June 12, 1998, to allow for the vote of  shareholders at the May
Annual Meeting. As a result of a Voting Trust Agreement (see Recent Developments
above)  whereby  fifty-one   percent  (51%)  of  the   Corporation's   presently
outstanding  shares  of  common  stock  are  committed  to vote in  favor of the
Reorganization  with  NADC,  the  Corporation  has  been  operating  as  if  the
Reorganization was completed.

At  closing  of  this   transaction,   subsequent  to  the  approval  by  Ethika
shareholders  at its annual meeting to be held in May 1998, the  Shareholders of
NADC will  exchange  their common  stock for Ethika  common stock at the rate of
three (3) shares of Ethika common stock for every four (4) shares of NADC stock.
At the conclusion of this transaction, current Shareholders of NADC will receive
approximately   19.6   million   post-split   shares  of   Ethika   representing
approximately 95% of the  then-outstanding  shares and will be in control of the
Corporation.  Three of the  nominees for the Board of  Directors  are  full-time
Officers  of  NADC.  Upon  approval  of the  transaction,  the  name  of  Ethika
Corporation will be changed to North American Digicom Corporation.

NADC's audited financial  statements (see exhibit (4)(2) (5)) for the six months
ended  December  31,  1997 show  revenues of  $2,467,540  of which  $1,844,  609
represent  revenue  recognized from long distance  telephone  service  including
prepaid telephone calling cards (deferred revenue from prepaid cards at December
31, 1997 was  $5,823,983  representing  revenues to be recognized  during 1998);
$610,688  represent  earnings  from  television  licensing and  programming  and
$12,243  form  Internet  services.  Operating  losses for the six  months  ended
December 31, 1997, were $789,091 for the long distance segment; $289,598 for the
television  segment and $214,204 for the Internet segment.  NADC's  consolidated
balance sheet at December 31, 1997 had current  assets of  $9,251,635  and plant
and  equipment  net  of  accumulated  depreciation  of  $2,160,894.  Liabilities
excluding deferred revenue (see above) were $7,191,516.

Liquidity and Capital Resources

The Corporation  accomplished the acquisitions of TRS, CDS, Code Manager and LIS
through the issuance of its common stock.  The  acquisition of NADC will also be
accomplished  by the  exchange of stock.  Heavy cash drains were placed upon the
Corporation as a result of the litigation  activities,  (see Legal Proceedings),
failed acquisition attempts and continued negative cash flows experienced by the
TRS and LIS  divisions  during  the last six  months  of 1997 and the  first two
months of 1998. As a result of these  developments,  management does not believe
that its current working capital and anticipated levels of internally  generated
funds  will be  sufficient  to fund  its  operating  requirements  for  1998 and
management  has sought to cut the  Corporation's  operational  expenses  through
divestiture of its  unprofitable  subsidiaries  so that it may  concentrate  its
capital resources on the Tele-communications  business. (See Recent Developments
above).  Additionally,  NADC,  the  entity  that the  Corporation  has  proposed
acquiring,  received a going concern opinion from its  independent  accountants,
with regard to its December 31, 1997 financial statements.

Limited  Operating  History,  New  Business  Strategy and  Potential  Changes to
Business Strategies

Ethika has had a limited  operating history since the sale of its life insurance
subsidiary  in 1995.  The  Corporation  reported  a net loss of  $1,993,977  and
$2,438,960  for the year ended  December 31, 1997 and 1996,  and an  accumulated
deficit of $10,535,727 and $8,541,750 as of ended December 31, 1997 and 1996. No
assurance can be given that the  Corporation  will be able to achieve or sustain
profitable operations.
<PAGE>
The  Corporation's  business  strategy has been to pursue the acquisition of new
business  opportunities;  initially  focusing on  businesses  utilizing  applied
technology. The Corporation began implementing this strategy in early 1996 based
on Management's analysis of the potential markets,  products,  opportunities and
difficulties that faced the Corporation.  (See Recent Developments - Disposition
of Electronic  Publishing  Segment).  The pending  acquisition of NADC marks the
Corporation's entry into the mass  telecommunications  industry. The strength of
NADC lies in its ability to  integrate  multi  facets of the  telecommunications
network services under one umbrella.

There can be no assurance that underlying  assumptions accurately reflect trends
in the industry or market and industry  and  customer  acceptance  of the target
products.  Competitive  forces  on  marketing,  distribution,  and  price of the
Corporation's  products,  coupled  with a need to  generate  new and  innovative
developments on a continual basis, make estimates of customer acceptance, sales,
revenues and costs extremely difficult and unpredictable.  There is no assurance
that factors may not arise, presently known and unknown, that could dramatically
alter or diminish the  Corporation's  market  opportunities  or the value of its
products.

Subsequent to the completion of the acquisition of NADC, the Corporation intends
to focus on expanding its Tele-communications  business through acquisitions and
internal  growth.  However,  no  assurance  can be given  that it can  identify,
develop or acquire  such  companies  and  products  on terms  acceptable  to the
Corporation  or  that,   once  acquired,   such  businesses  and  products  will
successfully  contribute to the growth of the Corporation.  The Corporation may,
from time to time,  undertake  acquisitions  or  transactions  in businesses and
industries  different from those currently  engaged in by the  Corporation.  The
effectiveness  of the  Corporation's  strategies will not be measurable for some
period of time.

Product Development and Technological Change

The Corporation must  continually  update the content and delivery method of its
products  and  services by adapting  its  products  and services to emerging and
changing  technology.  No assurance can be given that the  corporations  current
technology  will not be replaced by other  technology,  or that the  Corporation
could adapt its products and services to any such alternative  technologies on a
timely basis. Furthermore,  the Corporation may choose not to invest significant
resources to explore the feasibility of adopting alternative technologies.

From time to time,  operating  system and delivery  technology  developers  will
announce   substantial   modifications   to  their   systems.   Following   such
developments,  the Corporation may be required to expend  substantial  financial
and personnel resources to achieve compatibility with the Corporation's products
and  services,  the costs of which will  increase  as the  Corporation  offers a
greater number of products and services. Should technology changes occur without
the  Corporation  having  the  opportunity  to develop  or modify  products  and
services that are compatible with such changes,  the resulting decline in demand
for the Corporation's products and services could have a material adverse effect
on the Corporation's results of operations and financial condition.
<PAGE>
The telecommunications and information distribution markets are characterized by
continuously  evolving  standards and technology.  The Corporation's  ability to
anticipate   industry   standards,    to   continue   to   apply   advances   in
telecommunications and electronic information  distribution  technologies and to
develop new complementary  products and services will be a significant factor in
the  Corporation's  ability to grow and remain  competitive.  The  Corporation's
business and results of operations could be materially and adversely affected if
new technologies were introduced or alternative technology developed to displace
widespread  use of the current  technology.  There can be no assurance  that the
Corporation will be able to respond in a timely manner to technological  changes
or  that  the  ability  of  competitors  to  successfully  incorporate  evolving
standards and technologies  into new products will not render the  Corporation's
products  noncompetitive.  The  failure  by  the  Corporation  to  adapt  to  or
incorporate new standards or technology  could have a material adverse effect on
the Corporation's business and results of operations.

Early State of Development of Industry; Unpredictable Market Acceptance

While  the   Corporation   believes   that  the   market  and  demand  for  mass
telecommunications  systems and services will continue to grow,  there can be no
assurance  as to the extent of any such growth.  In  addition,  even if there is
continued  growth in the use of such systems,  there can be no assurance that an
increasing  number  of  customers  will  elect  to  use  products  such  as  the
Corporation's,   to  fulfill  their  needs,  in  lieu  of  obtaining  and  using
alternative  systems,   services  and  equipment  to  fulfill  such  needs.  The
Corporation's  estimates of future performance are based on Management's current
analysis of the potential markets, products, opportunities and difficulties that
face the  Corporation.  There can be no assurance  that  underlying  assumptions
accurately  reflect  trends in the  industry or market and industry and consumer
reactions to the products or services.

Competition

The   Corporation   through   the  NADC   acquisition,   will   compete  in  the
Tele-communications  industry  comprised  of  companies  such as AT&T  and  MCI.
Existing  competitors  may continue to broaden their product lines and potential
competitors, including large manufacturers, and Tele-communications supplies may
enter or increase  their focus on the market,  resulting in greater  competition
for  the  Corporation.   New  or  existing  competitors  may  also  utilize  new
technologies,  to develop  alternative  systems  for  delivering  these types of
information.  There can be no assurance that any of the  Corporation's  products
and services  will compete  effectively  against  other  products in business to
business long distance services,  internet services or in children's  television
programming. The Corporation's competitors include many companies, most of which
have  substantially  greater  financial,  development,  marketing  and personnel
resources than those of the Corporation.

Dependence on Key Personnel; Integration of New Management

The Corporation's  future success depends to a significant  extent on its senior
management and other key employees of NADC, including key development personnel.
The loss of the  services of any of these  individuals  or group of  individuals
could have a material adverse effect on the Corporation's results of operations.
The Corporation  also believes that its future success will depend in large part
on its ability to attract and retain  additional key employees.  Competition for
such  personnel in the industries the  Corporation  competes in is intense,  and
there can be no assurance that the Corporation  will be successful in attracting
and retaining such personnel.
<PAGE>
Intellectual Property and Proprietary Rights

The  Corporation  relies  primarily on a combination  of copyright and trademark
laws, trade secrets,  confidentiality  procedures and contractual  provisions to
protect its  proprietary  rights.  The  Corporation  currently has no registered
trademarks, copyrights, patents or patent applications pending. NADC however has
trademarks on its United Online  service,  kidZtime TV TM,  kidZtime  Online TM,
kidZtime  Challenge TM and Citybites TM. The  Corporation  also seeks to protect
its software,  documentation  and other written materials under trade secret and
copyright laws, which afford only limited protection.

The  Corporation  seeks to protect its brand names  under  trademark  and unfair
competition laws.  Despite the Corporation's  efforts to protect its proprietary
rights,  unauthorized  parties may attempt to copy aspects of the  Corporation's
products  or  services  or to obtain and use  information  that the  Corporation
regards as proprietary.  Policing unauthorized use of the Corporation's products
or services is difficult,  and while the  Corporation is unable to determine the
extent to which  piracy of its products  exists,  piracy can be expected to be a
persistent  problem.  There can be no assurance that the Corporation's  means of
protecting  its  proprietary  rights will be adequate or that the  Corporation's
competitors will not independently develop similar technology.

Potential Volatility of Trading in the Corporation's Common Stock

Trading  volumes of the  Corporation's  common stock have been  relatively  low.
Factors such as variations in the Corporation's revenue,  earnings and cash flow
and  announcements  of  technological  innovations  or price  reductions  by the
Corporation,  its competitors,  or providers of alternative products or services
could cause the market  price of the  Corporation's  common  stock to  fluctuate
substantially.   In  addition,  the  stock  markets  recently  have  experienced
significant  price and  volume  fluctuations  that  particularly  have  affected
technology-based  companies  and resulted in changes in the market prices of the
stocks of many  companies  that have not been directly  related to the operating
performance of those companies.

NASDAQ Qualification Standards; "Penny Stock" Regulations

The Corporation's common stock was traded in the over-the-counter market and was
quoted on the  NASDAQ  Small Cap  market  system  under the  symbol  ETKA  until
February 13, 1998.  At that time,  the  Corporation  was notified  that a NASDAQ
Listings Qualifications Panel had ruled that as a result of the trading price of
its common  stock being below the $1.00 per share  minimum  price for  continued
listing,  the stock was  delisted  from the NASDAQ  Small Cap  Market.  Ethika's
common stock is currently trading on the NASD OT Electronic Bulletin Board under
its ETKA symbol.  The  Corporation  has filed an appeal with NASDAQ to reinstate
its  listing  on the Small  Cap  Market  based  upon the  Market  Capitalization
Alternative Listing  requirements.  At this time, there can be no assurance that
the Corporation will be relisted on the Small Cap Market.

In addition,  if the Corporation is unsuccessful in its appeal with NASDAQ,  and
no other  exclusion  from the definition of a "penny stock" under the Securities
Exchange Act of 1934 (the "Exchange Act") is available, then any broker engaging
in a transaction in the  Corporation's  securities  would be required to provide
any customer with a risk disclosure  document,  disclosure of market quotations,
if any,  disclosure of the compensation of the broker-dealer and its salesperson
in the transaction and monthly account  statements  showing the market values of
the Corporation's  securities held in the customer's accounts. The bid and offer
quotation and  compensation  information must be provided prior to effecting the
transaction  and must be contained on the  customer's  confirmation.  If brokers
become subject to the "penny stock" rules when engaging in  transactions  in the
Corporation's  securities,  they  would  become  less  willing to engage in such
transactions.
<PAGE>



ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS


                                                                              

    Report of independent                                                     
    accountants...............................................................

    Report of independent                                                     
    accountants...............................................................

    Consolidated balance sheet as of  December 31, 1997,
    and 1996................................................................. 

         Consolidated statement of operations for the years ended
      December 31, 1997, 1996, and 1995.......................................

    Consolidated statement of cash flows for the years ended
      December 31, 1997, 1996, and 1995.......................................

    Consolidated statement of changes in stockholders' equity for the
      years ended December 31, 1997, 1996, and 1995...........................

    Note to Consolidated Financial Statements.................................


<PAGE>
                        Report of Independent Accountants


To the Board of Directors and Shareholders
Of  Ethika Corporation

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Ethika
Corporation  and its  subsidiaries  (the Company) at December 31, 1997 and 1996,
and the results of their  operations  and their cash flows for each of the three
years in the period ended  December  31,  1997,  in  conformity  with  generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

As more fully  discussed in Note 1, on January 26, 1998 the Company entered into
an Agreement and Plan of  Reorganization  (Reorganization  Agreement) with North
American Digicom  Corporation to acquire 100% of the outstanding common stock of
North American Digicom Corporation.  The Reorganization  Agreement,  among other
things,  requires the  Company's  common stock to be reverse  split,  which will
result in North American Digicom  Corporation  owning  approximately  95% of the
then outstanding shares. The Reorganization  Agreement is subject to approval by
the  shareholders  of both the Company and North American  Digicom  Corporation.
Subsequent  to the date of the  Reorganization  Agreement  and through March 20,
1998, the Company has loaned  approximately  $425,000 to North American  Digicom
Corporation.  Furthermore,  the  Company's  Board of  Directors  and  management
determined  it to be in the best interest of the Company to divest itself of its
electronic  publishing  business units,  and since February 1998 the Company has
sold two of its operating  companies and has entered into  negotiations  to sell
its remaining operation.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 14 to the
financial statements,  the Company has suffered recurring losses from operations
and has an accumulated deficit that raise substantial doubt about its ability to
continue as a going concern.  Additionally,  North American Digicom Corporation,
also  received a going  concern  opinion,  dated  February  14,  1998,  from its
independent   accountants  with  regard  to  its  December  31,  1997  financial
statements.  Management's plans in regard to these matters are also described in
Note 14. The  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

/s/PRICE WATERHOUSE, LLP
------------------------
PRICE WATERHOUSE, LLP
Atlanta, Georgia
March 20, 1998, except as to Note 1 paragraph 6 and Note 8 paragraph 4 which are
as of April 2, 1998
<PAGE>

                        Report of Independent Accountant


To The Shareholders
Ethika Corporation (formerly Dixie National Corporation)
Hilton Head Island, SC



We  have  audited  the  accompanying   consolidated   statement  of  operations,
stockholders'  equity  and cash  flows of  Ethika  Corporation  (formerly  Dixie
National  Corporation)  and  subsidiaries  as of December  31, 1995 prior to the
restatement   described  in  Note  5.  These   financial   statements   are  the
responsibility of the Company's  management.  Our responsibility is to report on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations  and cash flow of
Ethika  Corporation  and  subsidiaries  for the year ended December 31, 1995, in
conformity with generally accepted  accounting  principles.  We have not audited
the consolidated financial statements of Ethika Corporation and its subsidiaries
for any  period  subsequent  to  December  31,  1995  nor have we  examined  any
adjustments applied to the 1995 financial statements.

/s/HORNE CPA GROUP
------------------
HORNE CPA GROUP


Jackson, Mississippi
March 7, 1996
<PAGE>
<TABLE>
<CAPTION>
Ethika Corporation and Subsidiaries
Consolidated Balance Sheet December 31,  1997 and 1996
                                                                           1997                          1996
                                                                       ------------                 ------------
<S>                                                                    <C>                          <C> 
ASSETS
Current Assets:
  Cash and cash equivalents                                            $    535,651                 $  1,908,142
  Accounts receivable, net of allowance for doubtful
       accounts of $8,258                                                        --                      137,487
  Federal income tax refund receivable                                           --                      135,817
  Leases receivable                                                         112,763                      105,705
  Investment securities- Trading                                            549,281                         --   
  Inventory                                                                    --                         21,672
  Net assets held for sale                                                  739,545                         --   
                                                                       ------------                 ------------

Total Current Assets                                                      1,937,240                    2,308,823

Property and equipment, net of accumulated depreciation                      45,097                      544,943
Leases  receivable                                                          166,746                      277,430
Intangible and other assets, net of accumulated
       amortization of  $567,233                                                 --                      913,551
                                                                       ------------                 ------------
Total Assets                                                           $  2,149,083                 $  4,044,747
                                                                       ============                 ============

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
  Accounts payable and accrued expenses                                $    367,992                 $    591,048
  Current portion of notes payable                                             --                        134,916
  Deferred revenue                                                             --                        285,944
  Accrued loss on discontinued operations                                    80,000                         --   
                                                                       ------------                 ------------

Total Current Liabilities                                                   447,992                    1,011,908

Notes payable                                                                  --                        205,092

Deferred income taxes                                                          --                         45,500
                                                                       ------------                 ------------
Total Liabilities                                                           447,992                    1,262,500

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ethika Corporation and Subsidiaries
Consolidated Balance Sheet December 31,  1997 and 1996
                                                                           1997                          1996
                                                                       ------------                 ------------
<S>                                                                    <C>                          <C>   
Stockholders' Equity
Common Stock, $1 par value authorized 50,000,000 shares;
       issued 20,387,658 shares and 14,975,018;  outstanding
       20,360,346 shares and 14,947,706 shares;                          20,360,346                   12,447,706
December 31, 1996 include 2,500,000 contingently returnable shares
Discount on Common Stock                                                 (8,123,528)                  (1,123,709)
Accumulated Deficit                                                     (10,535,727)                  (8,541,750)
                                                                       ------------                 ------------
Total Stockholders' Equity                                                1,701,091                    2,782,247
                                                                       ------------                 ------------

Contingencies
Total Liabilities and Stockholders' Equity                             $  2,149,083                 $  4,044,747
                                                                       ============                 ============

</TABLE>
The  Accompanying  notes are an integral  part of these  Consolidated  Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
Ethika Corporation and Subsidiaries
Consolidated Statement of Operations
For the years ended  December 31, 1997,
1996 and 1995
                                                   1997             1996             1995
                                               -----------      -----------      -----------
<S>                                            <C>              <C>              <C>
  General and administrative expenses          $ 1,123,195      $ 1,314,334      $ 1,439,976
  Rental income                                          0          138,775           46,400
  Interest income                                  134,381          174,945          101,565
  Gain (loss) on disposal of  fixed Assets         341,849          (23,415)          16,835
  Gain (loss) from investment securities           (55,719)         671,160         (693,339)

  Interest expense                                 (18,868)         (66,747)        (436,204)
                                               -----------      -----------      -----------

                                                  (721,552)        (419,616)      (2,404,719)

Income tax benefit                                  45,500              -0-          174,517
                                               -----------      -----------      -----------

Loss from continuing operations                   (676,052)        (419,616)      (2,230,202)

Discontinued operations:
Loss from operations                            (1,237,925)      (2,019,344)        (470,514)

Loss on disposals                                  (80,000)               0       (4,174,535)
                                               -----------      -----------      -----------

Net loss                                       $(1,993,977)     $(2,438,960)     $(6,875,251)
                                               ===========      ===========      ===========
Basic and diluted earnings per share:
Loss from continuing operations                $     (.051)     $     (.035)     $     (.211)
                                               ===========      ===========      ===========

Loss from discontinued operations              $     (.100)     $     (.168)     $     (.438)
                                               ===========      ===========      ===========

Basic and diluted net loss per share           $     (.151)     $     (.203)     $     (.649)
                                               ===========      ===========      ===========
</TABLE>
The  Accompanying  notes are an integral  part of these  Consolidated  Financial
Statements
<PAGE>
<TABLE>
<CAPTION>
                Ethika Corporation and Subsidiaries Consolidated Statement of Cash Flows
                          For the years ended December 31, 1997, 1996 and 1995


                                                            1997             1996             1995
                                                        -----------      -----------      ----------- 
<S>                                                     <C>              <C>              <C>            
Cash Flows from Operating Activities:
Net loss                                                $(1,993,977)     $(2,438,960)     $(6,875,251)
Adjustments to reconcile net (loss)
to net cash provided by operating activities
Depreciation and Amortization                               672,634          674,553           84,754
Net loss in earnings of affiliate                              --            265,643             --   
Loss on disposal discontinued operations                     80,000             --          4,174,535
(Gain) Loss on disposal of fixed assets                    (341,849)          23,415             --   
Realized and unrealized (gain)loss on
investment securities                                        55,719         (672,785)         755,919
Provision for deferred taxes                                   --            (81,983)            --   
Changes in balance sheet accounts:
(Increase)  decrease in  goodwill  and other assets          (2,646)         (18,052)             632
(Increase) decrease in  accounts receivable                 (16,173)         114,569          (83,611)
(Increase) decrease in  income taxes                         90,317          166,183          123,884
(Increase) decrease in  inventory                            21,672             (584)
(Increase)  decrease  in accrued  investment income         (13,737)            --            412,705
                                                        -----------      -----------      -----------

Increase ( decrease) in accounts payable
and other liabilities                                       (63,395)         177,715         (892,131)
Increase ( decrease) in deferred revenue                       (166)         190,759             --   
Deferred policy acquisition costs                              --               --           (307,364)
Value of insurance purchased, net                              --               --            699,285
Sales of investment securities - trading                       --          2,900,057             --
                                                        -----------      -----------      -----------
Net cash provided by (used from)
Operating activities:                                    (1,511,601)       1,300,530       (1,906,643)
                                                        -----------      -----------      -----------

Cash flows from investing activities:
Payments for acquisitions                                      --           (621,098)            --
Note to InfoDynamics                                       (250,000)            --               --
Proceeds from sale of building                              644,370             --               --   
Purchases of equipment                                      (43,878)         (96,124)         (37,172)
Payments received from leases                               103,626           88,137             --
Proceeds from investments sold or matured                      --               --          4,858,753
Costs of investments acquired                                  --               --         (2,314,683)
Temporary investments, net                                     --               --          4,192,867
Proceeds from sales of insurance assets                        --               --            410,771
Proceeds  from sale of discontinued operations, net            --               --          1,350,640
                                                        -----------      -----------      -----------
Net cash (used from) provided by
Investing activities                                        454,118         (629,085)       8,461,176
                                                        -----------      -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                Ethika Corporation and Subsidiaries Consolidated Statement of Cash Flows
                          For the years ended December 31, 1997, 1996 and 1995
                                              (continued)


                                                            1997             1996             1995
                                                        -----------      -----------      ----------- 
<S>                                                     <C>              <C>              <C> 
Cash flows from financing activities:
Net (payments) on debt                                     (340,008)        (141,628)      (5,634,713)
Proceeds from issuance of stock                              25,000             --               --   
Other                                                          --               --             (1,112)
                                                        -----------      -----------      -----------
Net cash used from financing activities                    (315,008)        (141,628)      (5,635,825)

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

Net increase (decrease) in cash and cash
Equivalents                                              (1,372,491)         529,817          918,708
Cash and cash equivalents - beginning of
Period                                                    1,908,142        1,378,325          459,617
                                                        -----------      -----------      -----------

Cash and cash equivalents - end of period               $   535,651        1,908,142        1,378,325
                                                        ===========      ===========      ===========

Supplemental Cash Flow Information:
Cash payments for interest                              $    18,868      $    64,779      $   436,204
                                                        ===========      ===========      ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Common stock issued for equity
securities of nonaffiliated company                     $   605,000      $      --        $ 2,000,000   
                                                        ===========      ===========      ===========   
</TABLE>

The  accompanying  notes are an integral  part of these  Consolidated  Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
Ethika Corporation
Statement of Changes in Shareholders' Equity
For the years ending December 31, 1997, 1996 and 1995

                                                                                                        Retained
                                         Common                       Discount on     Unrealized        Earnings/         Total
                                         Stock                           Common         Holding        Accumulated    Shareholders'
                                         Shares          Amount           Stock          Losses          Deficit          Equity
                                         ------          ------           -----          ------          -------          ------
<S>                                   <C>            <C>               <C>           <C>              <C>              <C>
Balance at December 31, 1994           9,518,406     $  9,518,406                    ($   925,011)    $    772,461     $  9,365,856


Net loss, as restated for LIS                                                                           (6,875,251)      (6,875,251)
Recovery of holding losses
In investments available for sale                                                         925,011                           925,011

Common stock issued                    2,202,688        2,202,688        (996,222)              0                         1,206,466
                                      ----------     ------------      -----------    -----------      -----------     ------------

Balance at December 31, 1995          11,721,094       11,721,094        (996,222)              0       (6,102,790)       4,622,082

Net loss, as restated for LIS                                                                           (2,438,960)      (2,438,960)

Common stock issuedforCDS acquisition    726,612          726,612        (127,487)              0                0          599,125
                                      ----------     ------------      -----------    -----------      -----------     ------------

Balance at December 31, 1996          12,447,706        12,447,70      (1,123,709)              0       (8,541,750)       2,782,247


Net loss                                                                                                (1,993,977)      (1,993,977)

Shares issued for AMA Product            180,000          180,000         (78,750)                                          101,250
Shares issued for consideration        7,000,000        7,000,000      (6,370,000)                                          630,000
Shares  issued  for TRS  business
combination                              732,640          732,640        (551,069)              0                0          181,571
                                      ----------     ------------      -----------    -----------      -----------     ------------


Balance at December 31, 1997          20,360,346     $ 20,360,346    $ (8,123,528)   $          0     $(10,535,727)    $  1,701,091
                                      ==========     ============    ============    ============     ============     ============

</TABLE>
The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ETHIKA CORPORATION
DECEMBER 31, 1997

NOTE 1 - SUBSEQUENT EVENTS

On January 26, 1998,  the  Corporation  entered  into an  Agreement  and Plan of
Reorganization  (the  "Reorganization  Agreement")  with North American  Digicom
Corporation  ("NADC"),  a privately  owned  company  headquartered  in Lakewood,
Colorado,  to  acquire  100%  of the  outstanding  common  stock  of  NADC.  The
Reorganization Agreement requires that the Corporation's common stock be reverse
split on the basis of one (1) new share for every twenty-two and one half (22.5)
shares presently  outstanding with all fractional shares being rounded up to the
next highest  multiple of fifty (50) shares.  Then the shareholders of NADC will
exchange  their  common  stock for Ethika  common stock at the rate of three (3)
shares  of Ethika  common  stock for four (4)  shares  of NADC  stock.  The NADC
shareholders  will  receive  approximately  19.6  million  post-split  shares of
Ethika,  which will represent  approximately 95% of the then outstanding shares.
The  Reorganization  Agreement also requires that the Corporation's  Articles of
Incorporation be amended to eliminate the par value of the Corporation's  common
stock,  authorize a class of preferred stock whose rights and preferences can be
set by the Board of Directors and authorize a name change of the  Corporation to
North American Digicom Corporation.  The Reorganization Agreement also calls for
the  Corporation's  shareholders  to approve a re-domicile of the Corporation to
Colorado. This transaction is a reverse acquisition,  where NADC will become the
historical  reporting  company  and is treated as the  acquirer  for  accounting
purposes.

Closing of the  Reorganization  Agreement is  conditioned  upon surrender of the
NADC common stock in exchange for the Corporation's common stock and approval of
the Reorganization by Shareholders at the Annual  Shareholders  meeting together
with  approval  by  shareholders  of the reverse  split and the above  described
amendments  to the  Corporation's  Article of  Incorporation.  Closing  was also
conditioned  upon the  execution  of a Voting Trust  Agreement by a  stockholder
group which holds  fifty-one  percent (51%) of the  Corporation's  common stock.
This  Voting  Trust  Agreement  was  executed  on or about  March  16,  1998 and
irrevocably gives the Trustee (Frank Grey, who is a member of Ethika's Board and
President of NADC) voting  authority  over the subject common stock and requires
the  Trustee  to vote in  favor  of the  items  included  in the  Reorganization
Agreement.  The NADC  shareholders must also provide their approval of the terms
and conditions of this transaction.

NADC is a mass  communications  company  which  integrates  retail and wholesale
long-distance  services including  nationwide  internet services,  prepaid phone
cards  through  its  wholly-owned  subsidiary,   United  Online,   violence-free
television   programming   distributed   nationwide   through  its  wholly-owned
subsidiary,  kidZtime TV TM, Inc., and other  telecommunications  services under
one umbrella  utilizing the most current technology in providing services to its
customers.

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 20, 1998, $425,000 with interest at 6% has been advanced against this line
of credit.
<PAGE>
Additionally,  the Board of Directors and  management has determined it to be in
the  best  interest  of the  Corporation  to  divest  itself  of its  electronic
publishing   business   units   and   focus  its   attentions   on  the   NADC's
Tele-communications business.

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 of BNEZ which has not  resulted  in any  impairment  of the net
assets. In March 1998, the Corporation initiated  negotiations with BNEZ to sell
Legislative  Information  Systems,  Inc.  (LIS).  The  selling  price  for  this
transaction is also expected to be paid in securities of BNEZ. (See Note 8)

NOTE 2--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations:  Ethika  Corporation  (the  "Corporation")  operates as an
applied technology company through its 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. As of October 2, 1995, the Corporation sold
its life insurance  subsidiary,  Dixie Life Insurance  Company  ("Dixie  Life").
Accordingly,  the operations of this segment have been presented as discontinued
operations in the accompanying financial statements.

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.

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.

Investments:   At  December  31,  1997  and  1995,  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. At December 31, 1996, the
Corporation had no investments in marketable securities.

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 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.
Revenue  associated  with customer  programming is recorded,  when completed and
billed.
<PAGE>
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.

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 13,161,467,
11,995,813,  and  10,592,075  for the years ended  December 31, 1997,  1996, and
1995,   respectively.   Earnings  per  share   calculations   for  1996  include
contingently returnable shares only if their impact is dilutive.

Restatement  and  Reclassifications:  Certain  1996 and 1995  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 years'  statements
have been reclassified to conform with the current year financial statements.
<PAGE>
NOTE 3 - PROPERTY AND EQUIPMENT

A summary of property and equipment at December 31 follows:
<TABLE>
<CAPTION>
                                                    1997                  1996
                                                -----------         -----------
<S>                                             <C>                 <C> 
Land                                            $         0         $   140,436
Building                                                  0             654,602
Furniture and  equipment                             64,797             122,918
Computer hardware and software                            0             159,655
                                                -----------         -----------
                                                     64,797           1,077,611
Less:  Accumulated depreciation                     (19,700)           (532,668)
                                                -----------         -----------
                                                $    45,097         $   544,943
                                                ===========         ===========
</TABLE>

The Corporation's former headquarters in Jackson,  Mississippi, was sold in July
1997 for a gain of $341,849.  The Corporation has operating lease agreements for
office space, and certain office equipment.  Ethika's  corporate office space is
leased  from  a  former  member  of the  Board  of  Directors  at  the  rate  of
approximately $1,400 per month. For the year ended December 31, 1997 payments on
all operating leases were $161,515.

NOTE 4- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

A summary of accounts payable and accrued expenses at December 31 follows:
<TABLE>
<CAPTION>
                                                       1997                1996
                                                     --------           --------
<S>                                                  <C>                <C>     
Accrued expenses                                     $323,837           $247,088
Accounts payable                                       41,681            150,253

Non-compete                                                 0
                                                                          50,000
Other                                                       0
                                                                          47,805
Accrued payroll and related                             2,474             32,616
                                                     --------           --------
Withholdings                                         $367,992           $527,762
                                                     ========           ========

</TABLE>

NOTE 5 - NOTE PAYABLE

At December  31,  1996,  the  Corporation  had a Note  Payable to a bank bearing
interest  at prime plus 3/4% (9.25% at December  31,  1996),  payable in monthly
installments of $11,846,  secured by the land and building. The Corporation sold
these  assets  (See Note 3) in 1997 and  repaid  the entire  note  balance.  The
Corporation  had no debt  obligations  other than  normal  accounts  payable and
accruals at December 31, 1997.
<PAGE>
NOTE 6 - 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.

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.
<PAGE>
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.

NOTE 7 - INCOME TAXES

The Corporation files a consolidated  federal income tax return and state income
returns in various states as required by the applicable state income tax laws.

Net deferred tax liabilities (assets) from continuing  operations consist of the
following components as of December 31:
<TABLE>
<CAPTION>
                                                       1997              1996
                                                   -----------      -----------
<S>                                                <C>              <C>
Deferred tax liabilities:
    Depreciation                                          --        $    45,500
                                                   -----------      -----------
                                                          --             45,500
                                                   -----------      -----------

Deferred tax assets:
    Amortization of non-compete                    $    12,445            5,432
    Deferred revenue                                    97,165           82,756
    Unrealized loss on equity investment               357,410          357,410
    Allowance for bad debts                              5,199            2,808
    Net operating loss carry-forward                   953,882          524,744
    Unrealized loss in marketable securities            18,944                0
                                                   -----------      -----------

                                                     1,445,045          973,150
Valuation allowance                                 (1,445,045)        (973,150)
                                                   -----------      -----------
Deferred tax asset                                        --
                                                   -----------      -----------
Net deferred tax liability                         $      --        $    45,500
                                                   -----------      -----------
</TABLE>
The Corporation  recorded a valuation allowance of $1,445,045 and $973,150 as of
December  31,  1997,  and  1996  respectively,  due  to the  uncertainty  of the
Corporation's   ability  to  realize  future  benefits  of  net  operating  loss
carry-forwards or other future tax deductions.
<PAGE>
The (provision for) benefit from income taxes for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
                                   1997               1996                1995
                                ---------          ---------          ---------
<S>                             <C>                <C>                <C>
Current                         $ 429,138          $ (81,983)           302,000
Deferred                         (383,638)            81,983          $(127,483)
                                ---------          ---------          ---------

                                $  45,500          $       0          $ 174,517
                                =========          =========          =========
</TABLE>
The  Corporation has net operating loss  carry-forwards  at December 31, 1997 of
approximately $2,806,000 which expire through 2012.

The  Corporation's  effective  income tax  (provision)  benefit from  continuing
operations  differs from amounts applying the statutory  federal income tax rate
of 34% as follows:
<TABLE>
<CAPTION>
                                                   1997            1996             1995
                                              -----------      -----------      -----------
<S>                                           <C>              <C>              <C>
Expected tax benefit                          $   662,482      $   776,527      $ 2,388,200
Non-deductible goodwill                          (201,966)        (184,383)            --
Alternative Minimum Tax                              --               --             78,000
Loss on sale of life insurance subsidiary            --               --         (1,904,700)
Valuation allowance                              (471,895)        (498,469)       (474, 681)
Other                                              56,879          (93,675)          87,698
                                              -----------      -----------      -----------
Total income tax benefit                      $    45,500      $      --        $   174,517
                                              ===========      ===========      ===========

</TABLE>
NOTE 8 - 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.
<PAGE>
Revenues for the Segment approximated $1,641,000,  $921,000 and $635,000 for the
years ended December 31, 1997, 1996 and 1995, 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.

Additionally, 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. In March 1998, the Corporation also initiated  negotiations with BNEZ to
sell LIS. The selling price for this  transaction is expected to also be paid in
convertible  preferred  stock of BNEZ.  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.  However, the
preferred  stock  will not be  convertible  to common  stock for a period of one
year.

On October 2, 1995, the Corporation  completed the sale of Dixie Life, which was
99.3% owned by the  Corporation,  to Standard Life Insurance  Company of Indiana
("Standard").  Dixie Life represented  virtually all of the Corporation's assets
and operations. The selling price of the Corporation's interest in Dixie Life to
Standard was $7,389,086,  of which  $3,646,468 was in cash. The Corporation used
$1,720,000 of the cash proceeds to repay  Subordinated  Convertible Notes and to
purchase  from Dixie Life  lease  accounts  receivables  of  $503,258.  Standard
canceled a $3,688,746 term loan due from the Corporation held by a subsidiary of
Standard.  The Corporation also received accounts receivable of $53,872,  all of
which were written off as uncollectible at December 31, 1995.

The sale resulted in a loss of  $4,174,535.  The sale of Dixie Life  constitutes
discontinuance of the life insurance  business by the Corporation,  and, as such
has been accounted for as discontinued  operations in the accompanying financial
statements.  The loss from  operations  for the year  ended  December  31,  1995
includes losses of $396,148 for this transaction.

NOTE 9 - STOCK OPTIONS AND STOCK-BASED COMPENSATION

On May 26, 1995, the Corporation created the 1995 Stock Option Plan (the "Plan")
with a maximum  amount of 500,000  common  stock  shares  reserved  for  options
eligible to be granted under the Plan during its ten-year life. The  Corporation
granted  various stock options to Employees and Directors  during 1997, 1996 and
1995. As of December 31, 1997, there were 145,000  remaining common stock shares
reserved for granting and there were 355,000 options  outstanding from the Plan.
Employees  vest in stock  options  granted  at the  rate of 20%  each  year on a
cumulative  basis  commencing  one year after the date of grant.  Members of the
Corporation's  Board of Directors vest in stock options at the grant date. If an
optionee is involuntarily  terminated for reasons other than justifiable  cause,
all  outstanding  options  become  vested and may be executed  within  three (3)
months of termination.  Due to involuntary  terminations  subsequent to December
31, 1997,  290,000 options granted to purchase common stock, will be exercisable
on or before April 30, 1998.  If not  exercised at that time these  options will
expire.
<PAGE>
As  permitted  by SFAS  123,  "Accounting  for  Stock-Based  Compensation",  the
Corporation has elected not to record compensation cost for stock options in the
accompanying   statement  of   operations.   The   compensation   cost  for  the
Corporation's  stock options have been determined based on the fair value at the
grant  dates  consistent  with  the  methodology  prescribed  by SFAS  123.  The
Corporation's  net loss and loss per share would have been  increased to the pro
forma  amounts  indicated  below  if these  amounts  had  been  recorded  in the
financial statements:
<TABLE>
<CAPTION>
                                              1997                1996              1995
--------------------- ----------------- ---------------     --------------     ------------ 
<S>                   <C>               <C>                 <C>                <C>
Net Loss              As reported       $   (1,993,977)     $  (2,438,960)     $(6,875,251)
                      Proforma          $   (2,040,597)     $  (2,492,861)     $(6,943,332)

Loss per share        As reported       $       (0.151)     $      (0.203)     $    (0.649)
                      Proforma          $       (0.155)     $      (0.208)     $    (0.656)
</TABLE>
The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in 1997, 1996 and 1995:

                        Dividend yields                       0%
                        Expected volatility                 137%
                        Risk-free interest rate            6.26%
                        Expected life of option            4 years

The fair  value of  options  granted  during  1997,  1996 and 1995 was  $46,620,
$53,901 and $68,081 respectively.

The following  table  summarized  the changes in the number of options  included
under the Plan:
<TABLE>
<CAPTION>
                                                               Exercise          Weighted-Average
                                             Shares           Price Range         Exercise Price
                                             ------           -----------         --------------
<S>                                        <C>                <C>                      <C>
Outstanding at December 31, 1994                   0
Granted                                      140,000          $.50 - $.91              $.80 
                                           ---------                                        
                                                                                      
Outstanding at December 31, 1995             140,000          $.50 - $.91              $.80 
Granted                                      130,000          $.59 - $.68              $.62 
Canceled                                    (20,000)                 $.91              $.91 
                                           --------                                         
                                                                                            
Outstanding at December 31, 1996             250,000          $.50 - $.91              $.70 
Granted                                      125,000          $.35 - $.42              $.41 
Canceled                                    (20,000)                 $.68              $.68 
                                           --------                                         
Outstanding at December 31, 1997            355,000           $.35 - $.91              $.60 
                                           ======== 
</TABLE>

As of December 31, 1997 and 1996 the total number of  exercisable  stock options
was 88,000 and 40,000 respectively.
<PAGE>
NOTE 10 - LEASING ACTIVITIES

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.

The composition of the net investment in direct  financing leases at December 31
is as follows:
<TABLE>
<CAPTION>

                                                        1997          1996
                                                      --------      -------- 

<S>                                                   <C>           <C>
Total minimum lease payments to be received           $306,690      $454,929
Unearned lease income                                   27,181        71,794
                                                      --------      -------- 

         Net investment in direct financing leases    $279,509      $383,135
                                                      ========      ========
</TABLE>
The minimum future lease payments  receivable  under the direct financing leases
are as follows:



                        1998                            $148,239
                        1999                             137,514
                        2000                              20,937
                                                        -------- 
                        Total minimum future
                         Lease payments                 $306,690
                                                        ========

NOTE 11 - 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.
<PAGE>
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.


NOTE 12 - 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.
<PAGE>
NOTE 13 - INVESTMENT IN PHOENIX MEDICAL MANAGEMENT, INC. ("PMM")

On April 20, 1995, the  Corporation and UMS entered into an amended and restated
agreement  effective  as of March 24, 1995  ("Second  Amended and  Restated  UMS
Agreement") which provided that UMS had certain rights, since expired, to assist
the  Corporation  in  placing  shares  of the  Corporation's  common  stock.  In
connection with the Second Amended and Restated UMS Agreement, on June 29, 1995,
the Corporation  issued 2,000,000 shares of its common stock in exchange for 16%
of the outstanding common shares of PMM, a privately-owned  company, and 100,000
shares of its common  stock for an option to acquire  the  remaining  84% of the
common  shares of PMM for  10,400,000  additional  shares  of the  Corporation's
common stock. The 84% option was relinquished by the Corporation in July 1995.

As a result of the unaudited stockholders deficit of PMM as of December 31, 1995
and other factors,  the Corporation wrote off its entire remaining investment in
PMM, which  resulted in a loss of $1,051,217  during the year ended December 31,
1995.

NOTE 14 - 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, 1997, the Company incurred a loss from operations of $1,993,977 and
had an accumulated deficit of $10,535,727 that raise substantial doubt about its
ability to continue as a going concern. Additionally,  NADC, the entity that the
Corporation  has proposed  acquiring,  received a going concern opinion from its
independent   accountants  with  regard  to  its  December  31,  1997  financial
statements.

The  Corporation  anticipates  that  through  its reverse  acquisition  of North
American  Digicom  Corporation,  the  combined  company  will be able to  obtain
additional debt or equity capital.

LAST PAGE OF AUDITED FINANCIAL STATEMENTS
<PAGE>
ITEM 9 -  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors of the Corporation are:



                                       Director
           Name               Age        Since
           ----               ---        -----
 
Russell C. Burk                40        1997
Dennis Brovarone               42        1997
Philip F. Grey                 45        1998
Dennis P. Nielson              58        1997
Wayne Johnson                  40        1998
Louis Scotti                   42        1998


Each  director  holds office until the next annual  meeting of  shareholders  or
until a successor shall be duly elected and qualified. The executive officers of
the Corporation are:

                                                        Executive Officers
        Name                               Age                  Since
        ----                               ---                  -----

Dennis Brovarone                            42                   1997
Chairman and President Pro-Tem
Chief Executive Officer

David E. Williams                           48                   1996
Secretary, Treasurer, Vice President
Finance, and Chief Financial
Officer

The Corporation's officers serve at the pleasure of the Board of Directors.

BUSINESS EXPERIENCE

The principal  occupations  and business  experience  for the last five years or
more of the directors and executive officers of the Corporation are as follows:

Dennis  Brovarone  - Mr.  Brovarone,  42,  has  been  practicing  corporate  and
securities law since 1986 and as a sole practitioner  since 1990. He was elected
to the Board in  December  1997 and is Chairman  of the  Corporation's  Board of
Directors.  Mr.  Brovarone also serves as President  Pro-tem and Chairman of the
Executive Committee.  Prior to 1990, Mr. Brovarone served as in-house counsel to
R.B. Marich, Inc.; a Denver, Colorado based brokerage firm. Mr. Brovarone served
as President  (Chairman)  of the Board of Directors  of The  Community  Involved
Charter  School,  from  January  1995  to  March  1998,  a  four-year  old  K-12
independently  chartered  public school located in Lakewood,  Colorado.  He also
serves as a Director of Innovative Medical Services in San Diego, California.
<PAGE>
Russell C. Burk - Mr. Burk,  40, has been  practicing  corporate  securities law
since 1990 and as a sole practitioner since 1997. He was elected to the Board in
December 1997. From 1993 to 1997, Mr. Burk was Vice  President,  General Counsel
for RAF Financial Corporation, Denver, Co.

Philip F. Grey - Mr. Grey, 45, has served as President, Chief Executive Officer,
and  Director of North  American  Digicom  Corporation  since its  inception  in
December  1995.  He also  serves as Chairman  of the Board of United  Online,  a
wholly owned subsidiary of Digicom.  Since 1994 Mr. Grey has served as President
and  CEO  of  Premier  Financial  Services,   Inc.,  a  Denver,   Colorado-based
business-consulting  firm.  Since 1991, Mr. Grey has served as President and CEO
of Phillips Energy Corporation.

Wayne   Johnson   -  Mr.   Johnson,   40,   is  Chief   Operating   Officer   of
technical/delivery systems and a Director of North American Digicom Corporation.
He has served as Director of Engineering  for Key  Communications  Group and was
Director of Installation at  International  Network  Solutions.  Mr. Johnson has
owned and operated International Communications Consultants, Inc.

Louis C. Scotti - Mr. Scotti, 42, has been Chief Financial  Officer,  Treasurer,
and a Director of North American Digicom  Corporation since 1996. He also serves
as President and Chief Executive  Officer of kidZtime TV, Inc. Mr. Scotti served
as President and Managing Director of the Prometheus Group. From 1992 to 1995 he
served as President of Carcharodon Acquisitions, Inc.

Dennis Nielsen - Mr.  Nielsen,  55, has been a director since March 1993, he has
been self employed as a business  consultant  offering assistance to business on
restructuring,  financing or assisting  with possible  mergers or  acquisitions.
Previously he was owner of P&N, Inc. and Hufburn Sales,  Inc.,  both  automobile
dealerships.

David E.  Williams - Vice  President  Finance,  Secretary,  Treasurer  and Chief
Financial Officer of the Corporation since April 1, 1996.  Previously engaged as
a sole  practitioner of a Certified Public Accounting  practice.  Prior to that,
Mr. Williams served as Chief  Financial  Officer and Chief Operating  Officer of
Immunomedics,  Inc. and Psychiatric  Bio Sciences,  Inc. He also served as Group
Operations  Controller  for  Johnson &  Johnson  and for  Pfizer  Pharmaceutical
Corporation. He was Senior Auditor at Price Waterhouse. He is a Certified Public
Accountant  as well as a  Certified  Management  Accountant  and holds an MBA in
Finance from Seton Hall University.  He is a member of the American Institute of
Certified Public  Accountants,  the New Jersey State Society of Certified Public
Accounts, the South Carolina State Society of Certified Public Accountants,  and
the Institute of Management Accountants.

In 1992 the  Corporation was the subject of an  investigation  by the Securities
and Exchange  Commission  ("SEC"),  which was resolved by means of a settlement.
Pursuant to the  settlement,  on March 9, 1994, the United States District Court
for the District of Columbia  entered  final  judgment of  permanent  injunction
against the  Corporation.  The  judgment was entered on the basis of a complaint
filed by the SEC. The  Corporation  consented to the entry of final  judgment of
permanent  injunction without admitting or denying the allegations  contained in
the SEC's  complaint.  The final  judgment  to which the  Corporation  consented
enjoin it from violating or aiding and abetting future violations of sections of
the Securities  Act of 1933 and the Securities  Exchange Act of 1934 and certain
rules thereunder.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities  Exchange Act of 1934 requires the Corporation's
Executive Officers and Directors and persons who own more than 10% of its common
stock to file reports of ownership  and changes in ownership  with the SEC. Such
persons are required by SEC regulations to furnish the  Corporation  with copies
of all Section 16(a) forms filed by such person.

The interim  Directors  appointed;  Dennis  Brovarone,  Russell  Burk and Dennis
Nielson,  on December 22, 1997,  and those  appointed  January 26, 1998;  Philip
Grey, Louis Scotti and Wayne Johnson, did not timely file their forms 3 or forms
5. The directors who resigned January 26, 1998,;  Anthony Spuria,  Marcia Cohen,
Herbert  Rogers and  William  Stubblefield  did not timely file their forms 5 at
year end and to the best of the  Corporation's  knowledge  have not filed  their
form 5.  These  forms  have now all been  filed  and  indicate  that none of the
present Board of Directors hold common stock and that Dennis Brovarone,  Russell
Burk, and Dennis  Nielson after closing of the  Reorganization  agreement,  have
received options to acquire 7,500 post-split shares of the corporation's  common
stock at an exercise price of $5.00 per share.

ITEM 11 - EXECUTIVE COMPENSATION

Summary Compensation Table

The following Summary  Compensation  Table sets forth for each of the last three
years ended December 31, 1997,  information  concerning  the total  compensation
paid or  awarded to the  Corporation's  Chief  Executive  Officer  for  services
rendered in all capacities to the  Corporation and its  subsidiaries.  The total
compensation of none of the Corporation's Officers exceeded $100,000 in 1997.
<TABLE>
<CAPTION>
                                                                      Long-term
                                                                    Compensation/
                                                                      Number of
                                               Annual                Securities      
Name and                                    Compensation             Underlying          All Other     
Principal Position          Year          Salary      Bonus           Options           Compensation   
------------------          ----          ------      -----           -------           ------------   
<S>                         <C>          <C>            <C>           <C>                   <C>                              
S.L. Reed, Jr.              1997 (2)     $36,000        $0            50,000                $0
Chairman and CEO
                            1996         $36,000        $0            50,000                $0
                            1995 (1)     $25,346        $0            50,000                $0

Dennis Brovarone            1997 (3)     $     0        $0            0                     $0
Chairman and CEO
</TABLE>
(1)  Commenced employment January 1995
(2)  Resigned as Chairman and Director in December 1997 and CEO in January 1998
(3)  Joined the Board and elected  Chairman in December  1997.  Appointed CEO in
     January 1998.  Mr.  Brovarone  receives a fee of $5,000 per month  starting
     January 1998 as compensation for his services.

Option Grants in 1997

The following table sets forth information concerning options to purchase shares
of common stock which were granted during 1997 to the  individuals  named in the
Summary Compensation table.
<PAGE>
<TABLE>
<CAPTION>
 
                                                                                  Potential   Realizable  Value  at
                                                                                  Assumed  Annual  Rates  of  Stock
                                                                                  Price   Appreciation  for  Option
                                                                                  Term 10 Years
Individual Grants
                      Number of           % of Total
                      Securities          Options
                      Underlying          Granted to
                      Options             Employees in       Exercise      Expiration
Name                  Granted             Fiscal Year        Price         Date              5%          10%
----                  -------             -----------        -----         ----              --          ---
<S>                   <C>                      <C>           <C>           <C>            <C>          <C> 
S.L. Reed, Jr.        50,000 (1)               40%           $0.42         05/05/05       $48,052      $76,515
</TABLE>

(1) These  options  would have begun  vesting on May 30, 1998 at the rate of 20%
    per year for five years,  however, this option was accelerated in accordance
    with the  provisions of the Stock Option Plan since Mr.  Reed's  resignation
    was  requested in  conjunction  with the  settlement  of the "Peeper  Group"
    lawsuit.  (See  Certain  Relationships  and Related  Transactions  below for
    additional information).

Fiscal Year End Option Value Table

The following  table sets forth  information as of December 31, 1997  concerning
the  unexercised  options  held by Officers  named in the  Summary  Compensation
Table, none of whom exercised options in 1997. Options are  "in-the-money"  when
the fair market of  underlying  common stock  exceeds the exercise  price of the
option.  The closing  price of common  stock on December  31, 1997 was $0.19 per
share.
<TABLE>
<CAPTION>

                     Number of Securities Underlying         Value of Unexercised In-the-Money
                     Unexercised Options at                  Options at
Name                 December 31, 1997                       December 31, 1997
-------------------- --------------------------------------- ----------------------------------- 
                     Exercisable         Unexercisable       Exercisable          Unexercisable
                     -----------         -------------       -----------          -------------
<S>                    <C>                     <C>               <C>                  <C>
S.L. Reed, Jr.         150,000                 0                 None                 None
</TABLE>

COMPENSATION OF DIRECTORS

Directors who are not employees of the  Corporation  are paid a monthly base fee
of $400 and  receive  $250 per day per  meeting  attended.  At the July 31, 1997
Board Meeting, the Directors approved the suspension of the monthly retainer fee
of $400 and its subsequent reinstatement on March 31, 1998.

As a group, the previous six non-employee Directors of the Corporation were paid
$27,550 during fiscal year 1997. The current Directors  received no compensation
during fiscal year 1997.
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

The  following  table  sets forth  pertinent  information  as to the  beneficial
ownership of the  Corporation's  common stock as of February 20, 1998 of persons
known by the Corporation to be holders of 5% or more of the  outstanding  common
stock.  Information  as to the  number  of  shares  beneficially  owned has been
furnished by the persons named in the table and by reference to documents  filed
with the  Securities  and Exchange  Commission  by holders of 5% or more of such
common stock.
<TABLE>
<CAPTION>
        Name and Address                          Shares                     
        Of Beneficial Owner                       Beneficially Owned      Percent of Class
        -------------------                       ------------------      ----------------
<S>                                               <C>                        <C>
        Alfred Peeper                             0 (1)                      0%
        Calle Hamburg 22
        Benidorm, Spain ALC 03500

        Argere Holdings, S.A.                     420,000 (1)                1.9%
        18 Boulevard Royal
        L-2449 Luxembourg

        Eur-Am B.V.                               461,100 (1)                2.1%
        Calle Hamburg 22
        Benidorm, Spain ALC 03500

        La Roche Holdings, S.A.                   902,500 (1)                4.1%
        18 Boulevard Royal
        L-2449 Luxembourg

        La Salle Investment, Ltd.                 7,997,929 (1)              36.1%
        35 Rue De Bains
        Geneva, Switzerland 1205

        Rial Equity Group, S.A.                   600,000 (1)                2.7%
        C/o SAGEM
        35 Rue De Bains
        Geneva, Switzerland 1205

        Directors and Officers                    19,000                     *
        As a Group
</TABLE>

*     Less than 1%.

(1) Alfred  Peeper is an  investment  manager  headquartered  and  operating  in
Benidorm,  Spain. Mr. Peeper holds a power of attorney for each Reporting Person
which gives him  authority to  purchase,  sell,  and exercise all voting  rights
relating to each "Group  Member." This  Reporting  Person  represents 51% of the
total outstanding shares of Ethika common stock.
<PAGE>
Security Ownership of Management

The following table sets forth information as to the beneficial ownership of the
Corporation's  common stock as of February 20, 1998, by each Director,  nominee;
Executive Officer named in the Summary  Compensation  Table and by all Directors
and Executive Officers as a group.
<TABLE>
<CAPTION>

         Name of                             Shares                        Percent
         Beneficial Owner                    Beneficially Owned (1)        of Class
         ----------------                    ----------------------        --------
<S>                                          <C>                              <C>
         Russell C. Burk                     None                             0%
         Dennis Brovarone                    7,500                            *
         Philip F. Grey                      None                             0%
         Louis Scotti                        None
         Wayne Johnson                       None
         Dennis P. Nielsen                   None                             0%
         Directors, nominees, and            11,500 (2)                       *
         Executive  Officers  as a group (7
         persons)
</TABLE>

(1) Current Board Members who have no outstanding shares of Ethika common stock.

(2) Includes shares issuable upon exercise of vested stock options. * Represents
    less than 1%.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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. Mr. Don  Withrow,  who was a 55% owner of
LIS,  received  617,888 shares of Ethika common stock. In addition,  Mr. Withrow
entered into a one-year  employment contract at an annual salary of $80,000 plus
bonus based upon performance. LIS is an electronic publishing company located in
Annandale,  Virginia  specializing  in  federal  aviation  regulations,  banking
regulations, and custom service contracts.

Ethika  Corporation,  in conjunction  with  settlement of a lawsuit 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.,  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 Schedule 13-D filed with the SEC indicates that beneficial  ownership
of the  "Reporting  Persons"  increased  to 51% as a result of this  transaction
resulting in change of control of Ethika Corporation.

On January 8, 1998 the Corporation entered into a Letter of Intent to acquire in
a reverse  acquisition 100% of the outstanding common stock of NADC. (See Recent
Developments  for  additional  information).  On January  27,  1998 the  parties
executed a Definitive Agreement to accomplish the acquisition on or before March
6, 1998. On March 4, 1998, the parties agreed to extend the closing date of this
transaction to on or before June 30, 1998.
<PAGE>
At closing,  the shareholders of NAD will exchange their common stock for Ethika
common  stock at the rate of three (3) shares of Ethika  common  stock for every
four (4) shares of NAD stock.  The NAD shareholders  will receive  approximately
19.6 million post-split shares of Ethika, which will represent approximately 95%
of the then-outstanding shares.

NAD is a mass  communications  company  which  integrates  retail and  wholesale
long-distance  services including  nationwide  internet services,  prepaid phone
cards  through  its  wholly-owned  subsidiary,   United  Online,   violence-free
television   programming   distributed   nationwide   through  its  wholly-owned
subsidiary,  kidZtime TV, Inc., and other telecommunications  services under one
umbrella  utilizing  the most current  technology  in providing  services to its
customers.

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                REPORTS ON FORM 8-K

The following documents are filed as part of this report under Part II, Item 8:

Financial Statements

Reference  is made to the Index to  Financial  Statements  included in Item 8 of
Part II hereof, where such documents are listed.

(a) Exhibits as Required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
              Exhibit
               Number                  Description                               Incorporation by Reference to
               ------                  -----------                               -----------------------------             
<S>                        <C>                                                <C>
             (2)(a)        Restated Agreement dated as of October             Registrant's Quarterly Report on
                           27, 1994 between Dixie National                    Form 10-Q for the nine months
                           Corporation and Universal Management               ended September 30, 1994.
                           Services

             (2)(a)(1)     Seconded Amended and Restated                      Registrant's Quarterly Report on
                           Agreement dated as of March 24, 1995               Form 10-Q for the three months
                           Between Dixie National Corporation and             ended March 31, 1995.
                           Universal Management Services

             (2)(b)        Second restated stock purchase                     Proxy Statement relating to the
                           1995, effective as of April 18, 1995,              Annual Meeting of Shareholders on
                           among Standard Life Insurance Co.                  September 19, 1995.
                           of Indiana, Dixie Life Insurance Co.,
                           and Dixie National Corporation.

             (2)(c)        Accounts receivable financing agreement            Registrants Annual Report or
                           dated as of February 26, 1996 between              Form 10-K for the year ended
                           Dixie National Corporation and Text                December 31, 1995.  Exhibit (2)(c)
                           Retrieval Systems, Inc. including
                           Amended restated option agreement.
             (2)(a)        Acquisition of Compass Data Systems, Inc.          Registrants  Annual Report or Form 10-K for
                                                                              the year ended  December 31, 1996.
                                                                             
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                        <C>                                                <C>

             (2)(b)        Asset Purchase  Agreement between                  Registrants Annual Report of Form 10-K   
                           Ethika Corporation  and American Practice          the year ended December 31, 1996.
                           Management, Inc. and Consulting Concepts, Inc.
                                                      
             (3)(a)(1)     Articles of Incorporation as                       Registrant's Annual Report on
                           Amended and restated                               Form 10-K for the year ended
                           December 31, 1985. Exhibit (3a)
                                                                              
             (3)(a)(2)     Articles of Amendment to the                       Registrant's Annual Report of
                           Articles of Incorporation of                       Form 10-K for the year ended
                           Dixie National Corporation dated                   December 31, 1994. Exhibit
                           May 23, 1986                                       (3)(a)(2).

             (3)(a)(3)     Articles of Amendment to the                       Registrant's Annual Report on
                           Articles of Incorporation of                       Form 10-K for the year ended
                           Dixie National Corporation dated                   December 31, 1994.  Exhibit
                           January 24, 1995                                   (3)(a)(2).

             (3)(b)        Bylaws, as amended                                 Registrant's Annual Report on
                                                                              Form 10-K for the year ended
                                                                              December, 31, 1990.  Exhibit
                                                                              (3(b).

             (3)(b)(1)     Amendment to Article III of Bylaws                 Registrants Annual Report or
                           Effective January 24, 1996                         Form 10-K for the year ended
                                                                              December 31, 1995.  Exhibit (3)(b)(1)

             (3)(b)(2)     Amendment to Article IV of Bylaws                  Registrants Annual Report or
                           Effective March 24, 1996                           Form 10-K for the year ended
                                                                              December 31, 1995.  Exhibit (3)(b)(2)
             (3)(b)(3)     Amended Bylaws at Article III
                           Effective September 26, 1996

             (4)(a)(1)     Form of Dixie National Corporation                 Registrant's Current Report on
                           Subordinated Convertible Callable                  Form 8-K dated April 30, 1993.

             (4)(2) (1)    Agreement and Plan of Reorganization               Registrant's Annual Report of Form
                           For Ethika Corporation to acquire                  10-K for the year ended
                           North American Digicom Corporation                 December 31, 1997

             (4)(2) (2)    Memorandum of Agreement extending                  Registrant's Annual Report of Form
                           The closing date of the acquisition of             10-K for the year ended
                           North American Digicom Corporation                 December 31, 1997

             (4)(2) (3)    Voting Trust Agreement between                     Registrant's Annual Report of Form
                           Controlling group of stockholders and              10-K for the year ended
                           Trustee to vote block of shares at                 December 31, 1997
                           Annual Meeting

             (4)(2) (4)    North American Digicom Corporation                 Registrant's Annual Report of Form
                           Audited Financial Statements for the               10-K for the year ended
                           Periods ended December 31, 1997,                   December 31, 1997
                           June 30, 1997 and June 30, 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                        <C>                                                <C>
             (4)(2) (5)    Proforma Unaudited Balance Sheet and               Registrant's Annual Report of Form
                           Statement of operation for Ethika after            10-K for the year ended
                           The acquisition of North American                  December 31, 1997
                           Digicom Corporation

             (4)(2) (6)    Memorandum of Understanding between                Registrant's Annual Report of Form
                           Ethika Corporation and various litigation          10-K for the year ended
                           In settlement of the complaint styled              December 31, 1997
                           Eur. Am. Et al. Vs. Ethika et al., case
                           No. 3:96CV688LN

             (4)(2) (7)    Purchase Agreement between Ethika                  Registrant's Annual Report of Form
                           Corporation and TRS Acquisition Corp.              10-K for the year ended
                           For the sale of all of the stock and assets        December 31, 1997
                           Of Text Retrieval Systems, Inc. to TRS
                           Acquisition Corp.

             (4)(2) (8)    Stock Purchase Agreement between                   Registrant's Annual Report of Form
                           Ethika Corporation and Ben Ezra                    10-K for the year ended
                           Weinstein & Company for the sale of                December 31, 1997
                           Compass Data Systems, Inc. to Ben
                           Ezra Weinstein & Company

             (10)(c)*      1995 Stock Option Plan                             Proxy Statement relating to the
                                                                              Annual Meeting of Stockholders
                                                                              held on September 19, 1995.

             (21)          Subsidiaries of the Registrant

             (27)          Financial Data Schedule

</TABLE>

Registrant  agrees to file with the  Securities  and Exchange  Commission,  upon
request,  copies of any  instrument  defining  the rights of the  holders of its
consolidated long-term debt.

Schedules  other than those  referred  to above are  omitted for the reason that
they are not required, are not applicable,  or the required information is shown
in the financial statements or notes thereto, or is incorporated by reference.

(b) Reports on Form 8-K

The Corporation  filed the following reports on Form 8-K during the last quarter
of the year ended December 31, 1997:




   Date of Current Report
       (or Amendment)                        Items Reported
       --------------                        --------------
   
  December 29, 1997      Change in control of registrant; settlement of lawsuit.

<PAGE>

    (c)  Exhibits required by Item 601 of Regulation S-K

        The exhibits listed in Item 14(a)3 of this report,  and not incorporated
        by reference, follow "SIGNATURES." See "Exhibit Index."

    (d)  Financial statement schedules required by Regulation S-X

        The financial  statement  schedules  required by Regulation  S-X,  filed
        herewith,  are  identified  in the  Index to  Financial  Statements  and
        Financial Statement Schedules on page 13.


<PAGE>
SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  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: April 8, 1998                                By: /s/Dennis Brovarone
                                                       -------------------
                                                       Dennis Brovarone
                                                       Chairman of the Board
                                                       Chief Executive Officer

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

/s/Dennis Brovarone                                           April 8, 1998
-------------------
Dennis Brovarone
Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)

/s/Philip F. Grey                                             April 8, 1998
-----------------
Philip F. Grey
Director

/s/Russell C. Burk                                            April 8, 1998
------------------
Russell C. Burk
Director

/s/Dennis P. Nielsen                                          April 8, 1998
--------------------
Dennis P. Nielsen
Director

/s/Louis C. Scotti                                            April 8, 1998
------------------
Louis C. Scotti
Director

/s/Wayne Johnson                                              April 8, 1998
----------------
Wayne Johnson
Director

/s/David E Williams                                           April 8, 1998
-------------------
David E. Williams
Vice President Finance
(Principal Financial and Accounting Officer)