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

                                   FORM 10-QSB

[ X ]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
         ACT OF 1934

For the Quarterly Period Ended:     September 30, 1996

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

For the Transition Period from       to

Commission File Number:    0-17190

                      WASATCH EDUCATION SYSTEMS CORPORATION
        (Exact name of small business issuer as specified in its charter)

             UTAH                                         87-0458433
-------------------------------             -----------------------------------
(State or other jurisdiction of               (IRS Employer Identification No.)
or incorporation organization)

                         5250 South 300 West, Suite 101
                           Salt Lake City, Utah 84107
                    (Address of principal executive offices)

                                (801) 261-1001
                          (Issuer's telephone number)

                                    No Change
                (Former name, former address and former fiscal year,
                 if changed since last report)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

 X  yes      no

The Company had  3,606,668  shares of common stock  outstanding  at November 14,
1996.


<PAGE>
<TABLE>
<CAPTION>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                      Wasatch Education Systems Corporation
                             Condensed Balance Sheet
                                   (Unaudited)
<S>                                                                                   <C>
Assets                                                                                September 30,
                                                                                          1996
                                                                                     --------------
Current assets:
   Cash                                                                                $  110,815
   Accounts receivable, net of allowance for doubtful accounts of $15,000                 727,129
   Inventories                                                                             48,588
   Other current assets                                                                    31,639
                                                                                     --------------
      Total current assets                                                                918,171

Equipment, furniture and fixtures, net of accumulated
   depreciation of $607,020                                                               175,836

Courseware development costs, net of accumulated
   amortization of $2,386,695                                                           3,819,257

Other assets, net                                                                          18,333
                                                                                     ==============
      Total assets                                                                     $4,931,597
                                                                                     ==============

Liabilities and stockholders' equity

Current liabilities:
   Convertible subordinated debentures                                                 $1,197,000
   Accounts payable                                                                       167,608
   Accrued employee costs                                                                 256,892
   Other accrued liabilities                                                               27,735
   Deferred revenue                                                                       251,887
                                                                                     --------------
      Total current liabilities                                                         1,901,122
                                                                                     --------------

Stockholders' equity:
   Preferred  stock,   20,000,000   shares   authorized   Series  A  convertible
      redeemable, 4,412,431 shares
        outstanding, $4,412,431 involuntary liquidation value                           4,628,285
      Series B $.375 cumulative convertible redeemable,
         91,151 shares outstanding, $158,254
         involuntary liquidation value                                                    118,496
      Series C redeemable, 5,300,000 shares outstanding,
         $5,300,000 preferred liquidation value                                         5,300,000
   Common stock, no par value; 200,000,000 shares authorized,
      3,606,668 shares outstanding                                                     11,781,511
   Accumulated deficit                                                                (18,797,817)
                                                                                     --------------
      Total stockholders' equity                                                        3,030,475
                                                                                     --------------
         Total liabilities and stockholders' equity                                   $ 4,931,597
                                                                                     ==============


                  The accompanying notes are an integral part of this condensed balance sheet.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                      Wasatch Education Systems Corporation
                         Condensed Statements of Income
                                   (Unaudited)

                                                                 Three Months Ended September 30,
                                                                       1996             1995
                                                               -----------------   ---------------
<S>                                                            <C>                  <C>
Revenue:
  Courseware license rights                                     $   399,403         $   896,901
  Services and other                                                109,455             161,577
                                                               -----------------   ---------------
                                                                    508,858           1,058,478
                                                               -----------------   ---------------

Cost of revenue:
  Courseware license rights                                         297,676             233,743
  Services and other                                                 94,265             143,422
                                                               -----------------   ---------------
                                                                    391,941             377,165
                                                               -----------------   ---------------
Gross margin                                                        116,917             681,313
                                                               -----------------   ---------------

Operating expenses:
  General and administrative                                        290,749             317,273
  Sales and marketing                                               122,837             172,002
  Research and development                                           84,015              60,346
                                                               -----------------   ---------------
                                                                    497,601             549,621
                                                               -----------------   ---------------
(Loss) income from operations                                      (380,684)            131,692

Interest expense                                                     40,731              40,731
                                                               -----------------   ---------------
(Loss) income before provision for income taxes                    (421,415)             90,961

Provision for income taxes                                                -               2,080
                                                               -----------------   ---------------
Net (loss) income                                                  (421,415)             88,881

Unpaid and undeclared preferred stock dividends                       4,546               4,546
                                                               =================   ===============
(Loss) income attributable to common stockholders                $ (425,961)         $   84,335
                                                               =================   ===============

   Net (loss) income per common share                            $     (.12)         $     0.01
                                                               =================   ===============

Weighted average common and common
   equivalent shares outstanding                                  3,595,931           8,009,099
                                                               =================   ===============

          The  accompanying  notes  are  an  integral  part  of  these condensed statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                      Wasatch Education Systems Corporation
                       Condensed Statements of Cash Flows
                                   (Unaudited)

                                                                  Three Months Ended September 30,
                                                                       1996             1995
                                                                ----------------   ---------------
<S>                                                              <C>               <C>
Cash flows from operating activities:
  Net (loss) income                                             $   (421,415)       $   88,881
     Adjustments to reconcile net (loss) income to net
        cash provided by operating activities:
          Depreciation and amortization                              326,136           282,642
            Increase (decrease) in cash from:
              Accounts receivable                                    161,552           659,686
              Inventories                                             18,095               872
              Other current assets                                     5,200             5,000
              Accounts payable                                        41,875           (73,495)
              Accrued liabilities                                    (20,381)         (203,701)
              Deferred revenue                                        27,646             9,974
                                                                ----------------   ---------------
                Net cash provided by operating activities            138,709           769,859
                                                                ----------------   ---------------


Cash flows from investing activities:
  Purchase of equipment, furniture and fixtures                       (4,730)          (67,830)
  Additions to courseware development costs                         (122,778)         (104,323)
                                                                ----------------   ---------------
               Net cash used in investing activities                (127,508)         (172,153)
                                                                ----------------   ---------------

Increase in cash                                                      11,201           597,706

Cash at beginning of period                                           99,614            76,150
                                                                ----------------   ---------------
Cash at end of period                                           $    110,815       $   673,856
                                                                ================   ===============

Supplemental disclosure of cash flow information:
   Cash paid for interest                                       $     40,731       $    40,731
                                                                ================   ===============
   Cash paid for income taxes                                   $        520       $    13,290
                                                                ================   ===============

             The  accompanying  notes are  an  integral part of  these condensed statements.
</TABLE>


<PAGE>


                      Wasatch Education Systems Corporation
                     Notes to Condensed Financial Statements
                                   (Unaudited)

(1) PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The accompanying  unaudited condensed financial statements have been prepared by
the Company in accordance  with the rules and  regulations of the Securities and
Exchange Commission for Form 10-QSB, and accordingly,  do not include all of the
information and footnotes required by generally accepted accounting  principles.
In  the  opinion  of  management,   these  financial   statements   reflect  all
adjustments,  which consist of normal recurring adjustments, which are necessary
to present fairly the Company's  financial  position,  results of operations and
cash flows as of September 30, 1996 and for the periods presented herein.  These
unaudited financial  statements should be read in conjunction with the financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-KSB for the fiscal year ended June 30, 1996.  The results of  operations  for
the three months ended September 30, 1996 are not necessarily  indicative of the
results  that may be expected  for the  remainder of the fiscal year ending June
30, 1997.

The  preparation  of the  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
disclosure of  contingent  assets and  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.

Pending  shareholder  approval,  the Company has entered into an agreement  with
Wasatch  Interactive   Learning  Corporation  ("WILC")  to  sell  the  Company's
Education  Market  net  assets  (see Note 4). If this sale is  consummated,  the
operations of the Company will change substantially in fiscal year 1997.


(2) INCOME TAXES

The Company  accounts  for income  taxes using the  parameters  of  Statement of
Financial  Accounting  Standards ("SFAS") No. 109. SFAS No. 109 requires the use
of the liability method for financial reporting purposes. The Company provides a
valuation  allowance against all deferred income tax assets,  due to uncertainty
as to their ultimate realizability.

The components of the Company's  deferred  income tax assets as of September 30,
1996 and June 30, 1996 are as follows:

                                   September 30,        June 30,
                                       1996               1996
                                   ------------       ----------
Tax net operating losses           $5,473,000         $5,324,000
Deferred software costs               272,000            363,000
Revenue deferred for
  financial reporting                  96,000             85,000
Reserves and accrued
  liabilities                          19,000             24,000
                                   ------------       -----------
Total deferred income tax assets    5,860,250          5,796,000

Valuation allowance                (5,860,250)        (5,796,000)
                                   ------------       -----------
Net deferred income tax assets     $      -           $    -
                                   ============       ===========




<PAGE>


(3) LICENSE AGREEMENT

     Effective  September  30,  1995,  the  Company  entered  into  a  licensing
agreement  with The Roach  Organization,  Inc.,  doing  business as TRO Learning
("TRO").  The  license  agreement  grants  TRO a  world-wide,  non-transferable,
exclusive license to distribute certain of the Company's products as part of the
courseware system marketed by TRO. TRO is obligated to pay the Company royalties
based on sales of the  Company's  products.  The term of the  agreement  and the
license  is two years and one month  commencing  September  30,  1995 and ending
October 31, 1997.  The Company  recognized  income  during the first  quarter of
fiscal year 1996 from a one-time licensing fee of $550,000 upon execution of the
agreement  which is  non-refundable.  Additionally,  TRO has guaranteed  minimum
royalty revenue to the Company of $800,000 for the period beginning  November 1,
1996 through June 30, 1997,  should the sale of the Company's  products not meet
specified  levels as set forth within the  agreement.  If the conditions are met
requiring the minimum royalty  payments,  cash payments would be due the Company
on July 15, 1997. The Company has no future obligations with respect to service,
support or product relative to this license agreement.


(4) SIGNIFICANT EVENT

     Effective July 1, 1996, pending shareholder  approval,  the Company entered
into an Acquisition  agreement  with Wasatch  Interactive  Learning  Corporation
("WILC"). The Company,  pending shareholder approval, has agreed to sell to WILC
the Education Market net assets of the Company relating to or arising out of the
Company's business of developing,  marketing and licensing proprietary and third
-party  educational  software and related products and services in the Education
Market.  The  Company,   pending  shareholder  approval,  also  has  granted  an
exclusive,  worldwide  license  to WILC to market  the  Company's  products  and
develop  derivative  products in the Education Market.  The Company will receive
cash of $1,500,000 and future  royalties.  In addition,  the Company will retain
all capitalized courseware costs,  convertible  subordinated  debentures and tax
net operating loss  carryforwards.  The sale is also dependent on WILC obtaining
the required funding to complete the transaction.



<PAGE>


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

Results of Operations:

     The following are explanations of significant  period to period changes for
the three months ended September 30, 1996 and 1995.

     Revenue for the three months ended September 30, 1996 of $509,000 decreased
$550,000 or 52 percent,  compared to the three months ended  September 30, 1995.
Courseware  license  rights  revenue  decreased  by  $497,000  or 55  percent to
$399,000 for the three months ended  September  30, 1996,  from $897,000 for the
three months ended  September 30, 1995.  This decrease is due to the recognition
of a one-time  licensing  fee of $550,000  during the first  quarter of the 1996
fiscal year (see Note 3 to the financial  statements),  however,  excluding this
transaction,  the Company  experienced a 15 percent  increase in new  courseware
sales  during the three months ended  September  30, 1996  compared to the three
months ended September 30, 1995.  Services and other revenues  decreased $52,000
or 32 percent to $109,000  for the three months  ended  September  30, 1996 from
$162,000 for the three months ended September 30, 1995. Customer support renewal
revenues  decreased  $43,000 to $66,000 at September  30, 1996 from  $109,000 at
September 30, 1995.  The decrease is primarily the result of delays in receiving
annual contracts from customers,  the most notable of which was the Chicago area
schools when the new contract  period began in September.  Other service related
revenues decreased $9,000.

     Gross margins decreased by $564,000 or 83 percent to $117,000 for the three
months  ended  September  30,  1996 from  $681,000  for the three  months  ended
September  30,  1995.  This  decrease is primarily  the result of lower  overall
sales.

     Operating  expenses  decreased  by 9 percent or $52,000 to $498,000 for the
three months ended  September  30, 1996 from $550,000 for the three months ended
September  30,  1995.  This  decrease is primarily  the result of the  Company's
ongoing  effort  to  maintain  lower  overall  operating  costs.   Additionally,
commissions  earned in the first  quarter are lower due to the  decreased  sales
levels.

     Operating  income decreased by $512,000 to a loss of $381,000 for the three
months  ended  September  30, 1996  compared to income of $132,000 for the three
months ended September 30, 1995.

     Interest  expense  remained  consistent  with the prior  fiscal year period
based on the $1,197,000 of convertible subordinated debentures outstanding.


Liquidity and Capital Resources:

     At September 30, 1996, the Company had liquid assets (cash and net accounts
receivable) of $838,000, a decrease of 15 percent or $150,000 from June 30, 1996
when liquid assets were $988,000.  Cash increased  $11,000 primarily as a result
of efforts to  collect  outstanding  accounts  receivable.  Accounts  receivable
decreased $162,000 or 18 percent to $727,000 at September 30, 1996 from $889,000
at June 30, 1996, primarily due to the lower overall sales level and to a lessor
extent due to increased collection efforts.

     Current assets decreased by $174,000 or 16 percent to $918,000 at September
30, 1996 from  $1,092,000  at June 30, 1996.  This  decrease was  primarily  the
result of the $162,000 decrease in accounts receivable.


<PAGE>


     Long-term  assets  during the three month period ended  September  30, 1996
decreased  $199,000 to  $4,013,000  from  $4,212,000  at June 30, 1996. Of this,
$168,000  was a decrease in  courseware  development  costs.  This  decrease was
primarily the result of regular  amortization  and a lessor amount of courseware
development  costs  capitalized  during the  period.  Equipment,  Furniture  and
FixtureFixed  assets  decreased  by $31,000  for the three  month  period  ended
September 30, 1996 as a result of regular depreciation.

     Current  liabilities  of the Company  increased by $49,000 to $1,901,000 at
September 30, 1996 from $1,852, 000 at June 30, 1996. This increase is primarily
the  result  of a  $28,000  increase  in  deferred  revenue  due to the  Company
receiving cash payments on a larger  percentage of its annual support  contracts
during  the first  three  months of the  fiscal  year as  compared  to the prior
quarter.

     The  Company's  working  capital  decreased  by $223,000  from a deficit of
$760,000 at June 30, 1996 to a deficit of $983,000 at September  30, 1996.  This
decrease is primarily the result of a lower accounts  receivable  balance due to
lower overall sales, and an increase in deferred revenue discussed above.

     Stockholders'  equity  decreased by $421,000 to $3,030,000 at September 30,
1996,  from  $3,451,000  at June 30,  1996.  This  decrease  is the  result of a
$421,000 net loss.

     In the opinion of  management,  debt and equity  capital  resources must be
increased  for the Company to fully pursue its goals in the next twelve  months.
The Company is addressing  the need for  longer-term  growth capital by entering
into an  agreement  (subject  to  shareholder  approval)  to sell the  Company's
Education  market net assets to WILC for  $1,500,000 in cash (see below) and new
sources of investment  funding.  The Company has in place an accounts receivable
financing  arrangement which allows the Company to borrow 70 percent against its
qualified  accounts  receivable  at a rate of 3 1/2 percent of the face value of
such  receivables.  The  Company  has  $1,197,000  of  convertible  subordinated
debentures  that are due on January 31, 1997.  Funds from  operations may not be
adaquate to repay these  debentures.  Should the Company not have  available the
funds to repay these debentures then the Company will pursue an extension to the
due date. The Company has no assurance that required  capital will be available,
or available on terms viable to the Company.


     Effective July 1, 1996, the Company  entered into an Acquisition  agreement
with WILC. The Company, pending shareholder approval, has agreed to sell to WILC
the  Education  Market  assets of the Company  relating to or arising out of the
Company's  business of  developing,  marketing  and  licensing  proprietary  and
third-party  educational  software  and  related  products  and  services in the
education market. The Company, pending shareholder approval, also has granted an
exclusive,  worldwide  license  to WILC to market  the  Company's  products  and
develop  derivative  products in the Education  Market.  If the  transaction  is
consummated,  the Company will receive cash of $1,500,000 and future  royalties.
The  Company  will  retain  all  capitalized   courseware   costs,   convertible
subordinated debentures and tax net operating loss carryforwards.

<PAGE>



                           PART II - OTHER INFORMATION



The  information  required by items in Part II is omitted  because the items are
not applicable,  the answer is negative or substantially the same information is
included  elsewhere  in this  report  or has  been  previously  reported  by the
registrant.






<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  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.






WASATCH EDUCATION SYSTEMS CORPORATION





/s/Barbara Morris                                 November 14, 1996
   Barbara Morris, President & CEO                      Date