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 March 31, 1997

[ ] 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: 0-23952

AVERT, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

Colorado 84-1028716
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization

301 Remington, Fort Collins, CO 80524
--------------------------------------
(Address of principal executive offices)

970/484-7722
--------------------------------------------------
(Registrant's telephone number, including area code)

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

Check whether the registrant (1) 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 issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

[X] Yes [ ] No

As of May 12, 1997 the issuer had 3,488,125 shares of Common Stock, no par
value, outstanding.

Transitional Small Business Disclosure Format.
[ ] Yes [X] No

Form 10-QSB
Quarter Ended March 31, 1997

INDEX

PAGE

PART I - FINANCIAL INFORMATION

ITEM 1. Financial statements

Unaudited balance sheets.......................... 3

Unaudited statements of income.................... 4

Unaudited statements of cash flows................ 5

Notes to unaudited financial statements........... 6

ITEM 2. Management's Discussion and Analysis or
Plan of Operations................................. 7

PART II - OTHER INFORMATION

ITEMS 1, 2, 3, 4, 5 and 6 Not applicable................

Signatures.............................................. 11

PART I - FINANCIAL INFORMATION
AVERT, INC.
BALANCE SHEETS

ASSETS

MARCH 31, DECEMBER 31,
1997 1996
--------- -----------
(unaudited)

Current assets:
Cash and cash equivalents ................................................. $ (75,200) $ 360,300
Marketable securities ..................................................... 5,651,800 5,576,700
Accounts receivable, net of allowance ..................................... 986,200 787,900
Prepaid expenses and other ................................................ 326,800 159,000
----------- -----------
Total current assets ............................................. $ 6,889,600 6,883,900

Property and equipment, net ........................................................ 2,884,100 2,510,900

Other assets ....................................................................... 0 0
----------- -----------
Total assets ....................................................................... $ 9,773,700 $ 9,394,800
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 509,100 $ 464,400

Accrued expenses .......................................................... 274,800 224,600

Deferred revenue .......................................................... 24,600 20,000
----------- -----------
Total current liabilities ........................................ 808,500 709,000

Shareholders' equity:
Preferred shares, no par value; authorized
1,000,000 shares; none outstanding ...................................... -- --

Common stock, no par value; authorized
9,000,000 shares; 3,446,988 shares issued
and outstanding ......................................................... 4,991,400 4,960,600
Treasury Stock ............................................................ (215,100) (215,100)
Retained earnings ......................................................... 4,188,900 3,940,300
----------- -----------
Total shareholders' equity ....................................... 8,965,200 8,685,800
----------- -----------

Total liabilities and shareholders' equity ......................................... $ 9,773,700 $ 9,394,800
=========== ===========

See accompanying notes to the financial statements.

AVERT, INC.
STATEMENTS OF INCOME
(unaudited)

Three Months Ended
March 31,
-------------------------
1997 1996
---- ----

Net revenues:
Search and product fees ....................... $ 1,992,900 $ 1,550,400
Interest and other income ..................... 103,000 101,900
----------- -----------
2,095,900 1,652,300
Expenses:
Search and product costs ...................... 895,100 705,000
Marketing ..................................... 331,200 272,000
General and administrative .................... 329,400 243,600
Software development .......................... 103,100 91,100
Depreciation and amortization.................. 28,600 32,800
----------- -----------
1,687,400 1,344,500
----------- -----------
Income before income taxes ............................. 408,500 307,800

Income tax expense ............................ (159,800) (116,800)
----------- -----------
Net income ............................................. $ 248,700 $ 191,000
=========== ===========
Net income per common share ............................ $ .07 $ .06
=========== ===========
Weighted average common
shares outstanding ............................ 3,417,855 3,437,107
=========== ===========

See accompanying notes to the financial statements.

AVERT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)

THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
---- ----

Cash Flows From Operating Activities:
Net income .............................................. $ 248,700 $ 191,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................... 64,600 32,800
Bad debt expense ................................... 3,100 7,500
Increase/(decrease) in marketable securities and
other gains ............................... (75,100) 419,600
Changes in operating assets and liabilities:
Accounts receivable ........................... (201,500) (157,700)
Prepaid expenses and other current assets ..... (70,100) 300
Other assets .................................. -- --
Accounts payable .............................. 44,600 (12,600)
Accrued expenses .............................. (47,500) (48,200)
Income taxes payable .......................... -- 41,700
Deferred revenue and deposits ................. 4,600 (5,700)
--------- ---------
Net cash provided by operating activities .......... (28,600) 468,700
--------- ---------
Cash Flows from Investing Activities:
Additions to furniture and equipment ................... (437,700) (390,800)
Proceeds from sale of furniture and equipment .......... -- 500
--------- ---------
Net cash provided by investing activities ........ (437,700) (390,300)
--------- ---------
Cash Flows from Financing Activities:
Purchase of Treasury Stock ....................... -- (76,400)
Warrants exercised ............................... 30,800 --
--------- ---------
Net cash provided by financing activities ........ 30,800 (76,400)

Increase/(Decrease) in Cash and Cash Equivalents ............ (435,500) 2,000

Cash and Cash Equivalents, beginning of period .............. 360,300 159,700
--------- ---------
Cash and Cash Equivalents, end of period .................... $ (75,200) $ 161,700
========= =========

See accompanying notes to the financial statements.

AVERT, INC.
NOTES TO FINANCIAL STATEMENTS

The financial information contained herein is unaudited, but includes all
adjustments (consisting of only normal recurring accruals) which, in the opinion
of management, are necessary to present fairly the information set forth. The
financial statements should be read in conjunction with the Notes to Financial
Statements which are included in the Annual Report on Form 10-KSB of the Company
for the year ended December 31, 1996.

The results for interim periods are not necessarily indicative of results
to be expected for the fiscal year of the Company ending December 31, 1997. The
Company believes that the three month report filed on Form 10-QSB is
representative of its financial position, its results of operations and its cash
flows as of and for the periods ended March 31, 1997 and 1996 covered thereby.

On June 22, 1994, the Company completed an initial public offering ("IPO")
of 1,000,000 units ("Units"), each consisting of one share of Common Stock and
one Redeemable Warrant. The Units separated on December 7, 1994, and the Common
Stock and the Redeemable Warrants began trading separately as of that date. Two
Redeemable Warrants entitle the holder to purchase one share of Common Stock at
a price of $6.50 per share (subject to adjustment) for a nine month period
originally stated as March 22, 1995 and ending December 22, 1995. On October 11,
1995, the Company announced that it extended the expiration date of its
Redeemable Warrants from December 22, 1995 to April 30, 1996. The expiration
date was further extended to April 30, 1997, as announced on Form 8-K dated
March 6, 1996. All of the other terms of the Redeemable Warrants remain the
same. The Redeemable Warrants are redeemable by the Company at a redemption
price of $0.05 per Redeemable Warrant at any time commencing March 22, 1995, on
at least 30 days prior written notice, provided that the closing price of the
Common Stock equals or exceeds $7.50 per share for a period of 15 consecutive
trading days ending within 15 days prior to the notice of redemption. Net
proceeds from the IPO totalled approximately $4,382,300. As of March 31, 1997
$30,800 had been received in connection with the exercising of warrants. As of
April 30, 1997, 88,125 shares had been purchased totalling approximately
$572,800, not including offering costs.

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results of Operations

Comparison of quarters ended March 31, 1997 and March 31, 1996

Total net revenues increased from $1,652,300 for the three month period
ended March 31, 1997 to $2,095,900 for the comparable three month period in 1996
or approximately 26.8%. The breakdown of net revenues, exclusive of product
discounts and other miscellaneous income items, is as follows:

Three Months Ended Three Months Ended Percent
March 31, 1997 March 31, 1996 of
-------------------- ---------------------- Increase
Revenues % total Revenues % total (Decrease)
-------- ------- -------- ------- ----------
Products:

Workers compensation histories ............ $ 296,600 14.2% $ 283,700 17.2% 1.05%
Criminal history reports ................. $1,012,200 48.3% $ 841,400 50.9% 20.3%
Previous employment reports/ ............. $ 229,600 11.0% $ 176,000 10.7% 30.5%
credit reports
Motor vehicle driving records ............ $ 261,500 12.5% $ 217,800 13.2% 20.1%
Other products ........................... $ 130,900 6.2% $ 106,100 6.4% 23.4%
Services: .................................. $ 89,100 4.3% $ 0 0.0% 100.0%

Interest income ............................ $ 77,200 3.7% $ 82,900 5.0% (6.9)%
--------- ---------
NET REVENUES ...................... $2,095,900 $1,652,300 26.8%

Moderate to strong growth in sales of all of the Company's products
continued during the first quarter of 1997. Growth of approximately 20.3%
occurred in the criminal history reports area. In total dollars, criminal
history reports contributed the most net revenues, representing $1,012,200 in
net revenues in the period ended March 31, 1997, as compared to $841,400 in the
period ended March 31, 1996. The criminal history reports product line accounted
for approximately 48.3% of total net revenues in the first quarter 1997, and
approximately 50.9% of total net revenues in the first quarter 1996. The Company
believes there continues to be a trend nationwide to check prospective
employees' criminal records and it continues to focus on obtaining the quickest,
most accurate data available.

Workers' compensation histories, represented $296,600 in the period in
1997, or approximately 14.2% of total net revenues, as compared to $283,700 for
the first three months of 1996, or approximately 17.2% of total net revenues.
While this product actually decreased as a percentage of total net revenues, it
still represents the second largest product line in terms of revenues. The
Company believes that as it enters new markets, workers' compensation histories
will continue to be a viable product, but will continue to decrease as a
percentage of total net revenues.

The largest product growth of 30.5% was in the area of Previous
Employment/Credit. This product represented $229,600 and approximately 11.0% of
total net revenues in the first quarter 1997, compared to $176,000 in the first
quarter 1996 and approximately 10.7% of total net revenues. The Company
continues to customize the Previous Employment product line, increasing its
attractiveness to its customer base.

Net revenues generated in the area of motor vehicle driving records
increased from approximately $261,500 in first three months of 1997 to
approximately $217,800 in the first three months of 1996, representing an
increase of approximately 20.1%.

There was 23.4% growth for revenues generated in the areas of
education/credential verification, employment applications and first check,
which increased from $106,100 in first quarter 1996 to $130,900 in first quarter
1997.

Service sales, which have been added in the chart above, increased from $0
in first quarter 1996 to $89,100 in first quarter 1997. This is primarily
attributable to the implementation of the Avert Advantage program in July, 1996,
which accounted for $33,100 in revenues for the three month period in 1997, and
was not in effect at all in the three month period in 1996. In addition, a
variety of services that were not offered until July, 1996 produced
approximately $56,000 in first quarter 1997.

Income before income taxes increased from $307,800 in first quarter 1996 to
$408,500 in first quarter 1997, or approximately 32.7% and represented
approximately 19.5% of total net revenues in 1997 compared to approximately
18.6% in 1996, resulting from decreases in several expense categories.

Total expenses increased from $1,344,500 for the three month period ended
March 31, 1996 to $1,687,400 for the comparable period in 1997 or approximately
25.5% A breakdown in expenses is as follows:

Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996 Increase (Decrease)
----------------------- ----------------------- % of Revenues
Expenses % of Revenue Expenses % of Revenue 1997 over 1996
-------- ------------ -------- ------------ --------------

Search and product ................. $ 895,100 42.7% $ 705,000 42.7% 0.0%
Marketing .......................... 331,200 15.8 272,000 16.5 (0.7)
General and administration ......... 329,400 15.7 243,600 14.7 1.0
Software development ............... 103,100 4.9 91,100 5.5 (0.6)
Depreciation and amortization ...... 28,600 1.4 32,800 2.0 (0.6)
--------- ----- ------------ ---- ----
Expenses ................... $1,687,400 80.5% $1,344,500 81.4% (0.9)%
========= ===== ============ ==== ====

Search and product fees remained stable at 42.7% of total net revenues for
both three month periods in 1997 and 1996. There is a continued focus for the
development of existing couriers and addition of new couriers and improved
methods of retrieval of criminal records, with that product line representing
the bulk of this expense category.

There were decreases in the expense categories of marketing, software
development and depreciation and amortization when expressed as a percentage of
total net revenues. There is an on-going marketing campaign designed to target
lead generation, marketing communication and market development for both current
customers and new customers, via both independent sales representatives and
in-house marketing personnel. Specifically, the lead generation costs as a
percentage of total net revenues in the first quarter 1997 as compared to the
first quarter 1996 represent the decrease in the marketing expense category. The
decrease in software development expenses as a percentage of total net revenues
in the three month period ended March 31, 1997 as compared to the three month

period ended March 31, 1996, resulted from the capitalization of expenses
related to the development of new software and upgrade of existing software. See
"Liquidity and Capital Resources" below in this Item for further discussion. The
depreciation and amortization expenses have decreased as a percentage of total
net revenues due to the fact that substantial purchases were required both in
the areas of computer hardware and furniture and equipment for the new office
facility placed in service in first quarter 1996.

Income taxes varied slightly for the combined federal and state statutory
rate of approximately 38% in the first quarter 1996 and approximately 39% in the
first quarter 1997, resulting in net income of $191,000 or $.06 per share on
3,437,107 shares for the first three months ended March 31, 1996, as compared to
net income of $248,700 or $.07 per share on 3,417,855 shares for the first three
months ended March 31, 1997.

Liquidity and Capital Resources

The Company's financial position at March 31, 1997 remained strong with
working capital at that date of $6,081,100 compared to $6,174,900 at December
31, 1996. Cash and cash equivalents and marketable securities at March 31, 1997
were $5,651,800 and increased from $5,576,700 at December 31, 1996. Net cash
provided from operations for the three month period ended March 31, 1997 was
$28,600 and consisted primarily of net income of $248,700 plus a $44,600
increase in accounts payable, a $201,500 increase in accounts receivable, and a
$70,100 increase in prepaid expenses and other current assets. The Company had
capital expenditures of $437,700 for the three month period ended March 31, 1997
as compared to $390,800 for the three months ended March 31, 1996. The majority
of the capital expenditures during the three months ended March 31, 1997 was
attributable to the development of new software and upgrade of existing
software. The Company expects to spend up to $1.5 million in connection with
this project. The majority of these are costs paid to independent consultants.
The Company expects the new software and upgrade of its existing software to
allow the Company to: (1) manage its higher volume with a lower cost per
transaction; (2) introduce new products and services at a much quicker pace; (3)
directly integrate the Company's information technology systems with strategic
partners, suppliers, and large customers; and (4) maintain the Company's
competitive position and provide leading edge, but safe and proven, technology
for its customers. Development and upgrade of the software will be financed by
available cash derived from past or continued operations. Development and
upgrading of the software presently is expected to be complete in late 1997 or
early 1998, with scheduled software releases occurring prior to that time.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

NONE

ITEM 6. Exhibits and Reports on Form 8-K

(a) NONE

(b) NONE

SIGNATURES

In accordance with 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.

AVERT, INC.

DATE: May 14, 1997 BY: /s/ Dean A. Suposs
----------------------------------
Dean A. Suposs, President

DATE: May 14, 1997 BY: /s/ Jamie M. Burgat
---------------------------------
Jamie M. Burgat, Vice President of
Operations and Chief Financial Officer