SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Nine Months Ended September 30, 1998
Commission File Number 0-3296
ETHIKA CORPORATION
(Exact name of the registrant as specified in its charter)
MISSISSIPPI 64-044887
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11249 West 103rd Drive
Westminster, Colorado 80021
(Address of Principal Executive Office)
Registrant's telephone number including area code: (303) 637-2351
9975 Wadsworth Parkway #220
Westminster, Colorado 80021
Former name, former address, and former fiscal year,
If changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes (X) No ( ) and
(2) has been subject to such filing requirements for the past 90 days Yes (X)
No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of their latest practicable date.
CLASS Outstanding at November 10, 1998
Common Stock, $1.00 par value 20.360.346
<PAGE>
ETHIKA CORPORATION
INDEX
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1998 and December 31, 1997......................3
Consolidated Statements of Operations
For the three and nine months ended
September 30, 1998 and 1997...................................4
Consolidated Statements of Cash Flows
For the nine months ended
September 30, 1998 and 1997...................................5
Notes to Consolidated Financial Statements......................6
Item 2. Management's Discussion and Analysis of financial Condition
And Results of Operations.......................................8
PART II: OTHER INFORMATION
Legal Proceedings
Signatures.....................................................10
<PAGE>
ETHIKA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited) For the Period Ending
September 30, 1998 and December 31, 1997
_____________________________________________________________________________
1998 1997
__________ __________
ASSETS:
Current Assets
Cash and cash equivalents $ 83.101 $ 535,651
Accounts receivable
net of allowance for doubtful accounts - -
Leases receivable 112,764 112,763
Investment securities - Trading 496,060 549,281
Note Receivable
($450,000 less reserve $450,000) 0 0
Net assets held for sale 0 739,545
__________ __________
Total Current Assets 691,925 1,937,240
Property and equipment,
Net of accumulated depreciation 0 45,097
Leases receivable 82,581 166,746
__________ __________
Total Assets $ 774,506 $ 2,149,083
__________ __________
__________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 239,129 $ 367,992
Accrued loss on discontinued operations 0 80,000
__________ __________
Total Current Liabilities 239,129 447,992
__________ __________
Total Liabilities 239,129 447,992
Stockholders' Equity
Common Stock, $1 par value authorized
50,000,000 shares; issued 20,387,658 shares
and 20,387,658; outstanding 20,360,346 shares
and 20,360,346 shares; 20,360,346 20,360,346
Discount on Common Stock (8,123,528) (8,123,528)
Accumulated Deficit (11,701,441) (10,535,727)
__________ __________
Total Stockholders' Equity 535,377 1,701,091
__________ __________
Contingencies 0 0
__________ __________
Total Liabilities and Stockholders' Equity $ 774,506 $ 2,149,083
__________ __________
__________ __________
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Page 3
<PAGE>
ETHIKA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the three and nine months ended
September 30, 1998 and 1997
_____________________________________________________________________________
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
________ ________ ________ ________
General and administrative
expense $ (53,410) $ (355,508) $ (382,508)$ (919,934)
Interest income 7,872 36,762 36,030 107,837
Gain (loss) on disposal
of fixed assets 0 341,849 (35,987) 341,849
Gain (loss) from
investment securities (46,266) - (326,205) -
Reserve for NADC notes
receivable (450,000) - (450,000) -
Interest expense -0- (89) - (24,400)
________ ________ ________ ________
Income tax benefit - - - -
________ ________ ________ ________
(Loss) from
continuing operations (541,804) (23,014) (1,158,740) (494,648)
Discontinued operations:
Income (loss) from
operations 0 (157,479) (6,974) (729,922)
(Loss) on disposals - - - -
________ ________ ________ ________
Net loss $ (541,804) (134,465) (1,165,710)(1,224,570)
________ ________ ________ ________
________ ________ ________ ________
Basic and diluted earnings
per share:
(Loss) from continuing
operations $ (0.027) $ (0.002) $ (0.057) $ (0.039)
________ ________ ________ ________
________ ________ ________ ________
Gain from discontinued
operations 0 .012 0 (0.058)
________ ________ ________ ________
________ ________ ________ ________
Basic and diluted net (loss)
per share $ (0.027) $ (0.011) $ (0.057) $ (0.097)
________ ________ ________ ________
________ ________ ________ ________
Weighted average number
of shares 20,360,346 12,627,706 20,360,346 12,607,706
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Page 4
<PAGE>
ETHIKA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended
September 30,
_____________________________________________________________________________
1998 1997
__________ __________
Cash flows from Operating Activities:
Net loss $ (1,165,714) $ (1,224,570)
Adjustments to reconcile net (loss)
to net cash provided by operating activities 0 0
Depreciation and amortization 0 456,805
Loss on disposal of fixed assets 35,987 0
Realized and unrealized (gain) loss on
investment securities 326,127 0
Changes in balance sheet accounts:
(Increase) decrease in accounts &
notes receivable 450,000 (110,476)
Decrease in income taxes 0 135,817
(Increase) decrease in inventory 0 10,755
Decrease in assets held for sale 739,545 0
(Decrease) in accounts payable &
other liabilities (208,863) (199,077)
Increase (decrease) in deferred revenues 0 82,301
Gain on sale of facility 0 (341,849)
Sales of investment securities - trading 206,616 0
___________ __________
Net cash provided by (used from)
operating activities 383,698 (1,190,294)
___________ __________
Cash flows from investing activities:
Purchases of equipment 0 (93,864)
Proceeds from sale of facility 0 700,000
Disposal of fixed assets 9,109 0
Payments received from leases 84,165 125,000
Proceeds from sale of CDS (479,522)
Issuance of notes receivable (450,000) (256,755)
___________ __________
Net cash (used from) provided by
investing activities (836,248) 474,381
___________ __________
Cash flows from financing activities:
Net borrowing (payments) on debt 0 (340,008)
___________ __________
Net cash used from financing activities 0 (340,008)
___________ __________
Net increase (decrease) in case &
cash equivalents (452,550) (1,055,921)
Cash and cash equivalents
beginning of period 535,651 1,908,142)
___________ __________
___________ __________
Cash and Cash Equivalents
end of period $ 83,101 $ 852,221
___________ __________
___________ __________
Supplemental Cash Flow Information:
Cash payments for income taxes $ 0 $ 0
___________ __________
___________ __________
Cash payments for interest $ 89 $ 24,400
___________ __________
___________ __________
Supplemental Schedule of Non-cash
Investing and Financing Activities: None 1,303,433
The accompanying notes are an integral part of these Consolidated Financial
Statements.
Page 5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ETHIKA CORPORATION (Unaudited)
SEPTEMBER 30, 1998
NOTE 1 - BUSINESS COMBINATION
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 headquarted in Lakewood, Colorado, to acquire 100% of the
outstanding common stock of NADC in exchange for Ethika common
stock. The NADC shareholders would have received approximately
95% of the then outstanding shares. The Reorganization Agreement
also required certain amendments to the Corporation's Articles of
Incorporation. This transaction was to be a reverse acquisition,
where NADC would become the historical reporting company and
treated as the acquirer for accounting purposes.
Closing of the Reorganization Agreement was conditioned upon
surrender of the NADC common stock in exchange for the
Corporation's common stock and approval of the Reorganization and
Amendments by Shareholders at the Annual Shareholders meeting.
The NADC shareholders were also required to provide their
approval of the terms and conditions of this transaction.
Subsequent to the approval of the Reorganization Agreement by the
Board of Directors of Ethika and NADC, Ethika extended a line of
credit to NADC not to exceed $500,000 to be secured by NADC's
equipment and accounts receivable. As of March 31, 1998,
$450,000 with interest at 6% had been advanced against this line
of credit.
On July 30, 1998, the Registrant received notification from North
American Digicom Corporation (NADC) that it had abandoned its
Reorganizational Plan with the Registrant. Concurrent with ths
termination, Phillip F. Grey, Wayne Johnson and Louis Scotti
resigned from the Registrant's board of directors. The
Registrant and NADC had previously agreed to extend the closing
of the Agreement and Plan of Reorganization until August 31,
1998. However, due to the inability of either party to satisfy
the terms of the agreement on or before such date, NADC chose to
terminate the Reorganization Plan.
Repayment of the $450,000 loaned by the Registrant to NADC is in
default. The Registrant has filed a legal action against NADC to
obtain a judgment for the amount of the loan to NADC. A Reserve
of $50,000 has been recorded as of September 30, 1998 to account
for this default. The action is a cross claim filed as part of
the Registrant's Answer to the action brought by various
investors in NADC and its subsidiary, Kidztime TV. NADC's latest
audited financial statements were for the period ended December
31, 1997 and included a going concern opinion from their auditor.
Additionally, the Board of Directors and management had
determined it to be in the best interest of the Corporation to
divest itself of its electronic publishing business units and
focus upon the reorganization with NADC. Despite the termination
of the Plan of Reorganization by NADC, management continues to
believe it was in the best interest of the Corporation to divest
itself of its electronic publishing business units in order to
avoid continuing losses from these units.
As previously disclosed in Form 10-Q for March 31, 1998, 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 Company received preferred stock in BNEZ
that was convertible to $850,000 of common stock from this
transaction. The security was converted to 1,676,000 shares of
common stock on August 12, 1998, which are currently unregistered
and the Company is restricted from selling for at least a one-
year period. Managment requested to convert the preferred stock
prior to one year and BNEZ agreed to the early conversion so that
in the opinion of Management, the Company could take advantage of
decline in the price of BNEZ common stock and thereby acquire a
greater number of shares of common stock. The fair value of BNEZ
common shares currently, based on traded market prices, is
approximately $570,000. Management has not recorded any gain on
the sale and has valued the securities at $476,000 as of
September 30, 1998. This lower value reflects managment's best
estimate of the discount associated with the restrictions
discussed above and other factors.
NOTE 2 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Ethika Corporation (the "Corporation")
operated 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"). TRS, CDS and LIS were engaged in
publishing electronic libraries that linked related data sources
for convenient access by personal computers. Certain products of
TRS, CDS and LIS were sold nationally, while others were specific
to states such as Florida, Missouri, and Kansas.
Basis of Presentation: During the first quarter of 1998, the
Board of Directors and management began to implement a plan of
disposition for the Corporation's operating units, TRS, CDS and
LIS. Accordingly, the operations of 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 September 30, 1998 and December 31, 1997,
Marketable securities were classified as trading, which, under
the provisions of Statement of Financial Accounting Standards No.
115 - Accounting for Certain Investments in Debt and Equity
Securities, were reported at market value with unrealized market
gains or losses being reflected in the statement of operations.
Revenue Recognition: The Corporation recognized revenue for
software sales ratably over a period of each product's
subscription life. The Corporation's various products were
updated annually, quarterly and monthly based on content
availability and/or specific customer agreements. Revenue
associated with sales of TRS's primary product were not
recognized until cash was collected due to the customers' right
of return and limited history of returns for the product.
Revenue associated with customer programming was recorded, when
completed and billed.
Property and Equipment: Property and equipment are stated at
cost less accumulated depreciation. Depreciation is computed
using the straight-line method over the estimated useful lives of
these assets which are thirty years for the building; three years
for computer hardware and software; and five to seven years for
furniture and fixtures.
Inventory: Inventory consisted primarily of software product
manuals and promotional materials. Inventory was valued based on
an average cost method.
Intangible Assets: Intangible assets consisted primarily of
assets acquired through the acquisitions of TRS and CDS.
Acquired goodwill and software products were amortized over three
years. Non-compete agreements were amortized over the life of
the related agreement (2-3 years). The Corporation regularly
reviewed 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 liailities and their
income tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of managment, 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 onthe date of
enactment.
Financial instruments that potentially subject the Corporation to
concentrations of credit risk consisted principally of trade
accounts receivable. The Corporation extended credit to its
customers based on an evaluation of the customer's financial
condition, generally without requiring collateral. Exposure to
looses on accounts receivables was primarily dependent on each
customer's financial condition. The Corporation monitored its
exposure for credit losses and maintained 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 onthe weighted average number of common shares outstanding
of 20,360,346 at September 30, 1998 and 12,607,706 for the nine
months ended September 30, 1997.
Restatement and Relassifications" Certain 1997 amounts have been
retroactively restated to reflect the merger with LIS, which had
beenn 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.
NOTE 3 - 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 had 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 was
recorded in the December 31, 1997 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 were reclassified to net assets held for sale at December
31, 1997. As of September 30, 1998, all assets that were being
held for sale have been disposed of and additional charge of
$6,974 was recorded.
As a part of the plan of disposal, on February 17, 1998 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.
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 Whom It May Concern: sell CDS and its 8%
equity interest in Infodynamics, including the note receivable
from InfoDynamics. The Company received preferred stock in BNEZ
that was convertible to $850,000 of common stock from this
transaction. The security was converted to 1,676,000 shares of
common stock on August 12, 1998, which are currently unregistered
and the Company is restricted from selling for at least a one-
year period. Management requested to convert the preferred stock
prior to one year and BNEZ agreed to the early conversion so that
in the opinion of Management, the Company could take advantage of
decline in the price of BNEZ common stock and thereby acquire
greater number of shares of common stock. The fair value of BNEZ
common shares currently, based on traded market prices, is
approximately $570,000. Management has not recorded any gain on
the sale and has valued the securities at $476,000 as of
September 30, 1998. This lower value reflects Management's best
estimate of the discount associated with the restrictions
discussed above and other factors.
In March 1998, the Corporation also initiated negotiations with
BNEZ to sell LIS. However, in July 1998 the Corporation closed
the business of LIS and initiated steps to dissolve the LIS
corporation pursuant to Delaware law. The closing of LIS was a
result of the resignation of its president, Donald Withrow on or
before May 22, 1998, without whose personal services LIS could
not continue to operate.
NOTE 4 - 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
originatiing 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 action 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 for
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 5 - GOING CONCERN
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. For the nine
month period ended September 30, 1998, the Company incurred a
loss of $1,165,714 and had an accumulated deficit of $11,701,447
that raise substantial doubt about its ability to continue as a
going concern.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Regristrant's plan of operations for the remainder of the
fiscal year is to complete its 1998 audit as soon as possible and
hold a shareholder's meeting in the first quarter of 1999 for the
purposes of electing directors, amending the Articles of
Incorporation to eliminate the par value of the common stock,
authorizing a reverse stock split of the outstanding common stock
and any other duly raised business. The Registrant has reduced
its overhead expenses to approximately $6,000 per month and
expects to have sufficient cash resources for its reduced
operations.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. Having
investment income as its only source of income raises substantial
doubt about the ability of the Company to continue as a going
concern.
Results of Operations
Three Months Ended September 30, 1998 Rompared to Restated Three
Months Ended September 30, 1997
The three months ended September 30, 1998, generated a net loss
from continuing operations of $541,804 ($.027 per share) compared
to a loss of $134,465 ($.011 per share) for the comparable period
of 1997. This increase results primarily from establishing a
Reserve for the potential uncollectability of the $450,000 notes
receivable from NADC and loses from investment securities of
$46,226.
Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
The nine months ended September 30, 1998, generated a net loss
from continuing operations of $1,158,740 ($.057 per share)
compared to a loss of $494,648 ($.034 per share) for the
comparable period of 1997. This increase results primarily from
establishing a Reserve for the potential uncollectibility of the
$450,000 notes receivable from NADC and loses from investment
securities of $326,205.
<PAGE>
Part II Other Information:
Item 1. Legal Proceedings
On September 20, 1998, the Registrant was served with the Third
Amended Complaint in an action entitled Jeffrey Allard, et al. v.
Kidztime TV, Inc., et al in Colorado District Court, Jefferson
County, Colorado. The Third Amended Complaint which named Ethika
Corporation as a Defendant alleges that Kidztime TV, Inc., a
subsidiary of North American Digicom Corporation engaged in an
illegal enterprise whereby Kidztime TV and other Defendants
obtained approximately $50,000,000 from more than 3,000
individuals during 1996 and 1997, including approximately
$1,300,000 obtained fromt he Plaintiffs. The Third Amended
Complaint alleges that Ethika is jointly and severally liable
with the other Defendants in that Ethika was controlled by NADC
and acted in continuation of concealment of the illegal
enterpirse in violation of the Colorado Organized Crime Control
Act by its execution of a letter of intent and the Agreement and
Plan of Reorganization with NADC and by the joint press releases
disseminated by Ethika Corporation and NADC. The Third Amended
Complaint does not allege that Ethika Corporation sold securities
in violation of the Colorado Securities Act or the Colorado
Consumer Protection Act.
The Registrant filed its Answer on October 16, 1998 denying the
allegations of participation in an illegal enterprise contained
in the Third Amended Complaint in that the sale of securities to
the Plaintiffs all occurred prior to Ethika entering into the
letter of intent and the Agreement and Plan of Reorganization
with NADC and prior to the joint press releases disseminated by
Ethika Corporation and NADC. In addition the Registrant denied
that it was controlled by NADC or otherwise participated in the
illegal enterprise or received any proceeds thereof. The
Registrant believes that it has substantial defenses to all
allegations made against it. While it is not possible at this
time to estimate the potential liability of the allegations, any
liability in excess of $10,000 would have a materially adverse
effect upon the Registrant.
The Registrant also filed a Cross Claim against NADC for the
$450,000 of principal and accrued interest loaned to NADC during
the first quarter of 1998. As of the date of this Report, NADC
has not yet answered the Cross Claim.
Item 6 - Exhibits and Reports on 8K
(a) Exhibits: (27) Financial Data Schedule
(b) 8-K filed October 9, 1998, dismissal of Price Waterhouse
Cooper, LLC as Auditors.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Ethika Corporation
(Registrant)
Date: November 18, 1998
By Dennis Brovarone
________________
Dennis Brovarone
President
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<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-START> JAN-01-1998 JUL-10-1997
<PERIOD-TYPE> 9-MOS OTHER
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 DEC-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 83,101 535,651
<SECURITIES> 496,060 549,281
<RECEIVABLES> 112,764 112,763
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<INVENTORY> 0 0
<CURRENT-ASSETS> 691,925 1,937,240
<PP&E> 0 45,097
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<CURRENT-LIABILITIES> 239,129 447,992
<BONDS> 0 0
0 0
0 0
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<OTHER-SE> (19,824,969) (18,659,255)
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<TOTAL-REVENUES> 36,030 107,837
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<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 382,578 919,934
<LOSS-PROVISION> 450,000 0
<INTEREST-EXPENSE> 0 24,400
<INCOME-PRETAX> (1,165,714) (1,224,570)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,158,740) (494,648)
<DISCONTINUED> (6,974) (729,922)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,165,714) (1,224,570)
<EPS-PRIMARY> (.057) (.039)
<EPS-DILUTED> (.057) (.097)
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