SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange
    Act of 1934

    For the fiscal year ended December 31, 2000

                                       or

[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
    Act of 1934

    For the transition period from __________ to _____________

    Commission File Number: 0-15304


                               AVESIS INCORPORATED
                 (Name of small business issuer in its charter)

             Delaware                                           86-0349350
  (State or other jurisdiction of                              (IRS Employer
   incorporation or organization)                            Identification No.)

   3724 North Third Street, Suite 300
          Phoenix, Arizona                                        85012
(Address of principal executive offices)                        (Zip Code)

                   Issuer's telephone number: (602) 241-3400


      Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $.01 par value &
          $l0 Class A Nonvoting Cumulative Convertible Preferred Stock,
                            Series 2, $.01 par value
                                (Title of Class)

     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.
Yes [X] No [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year: $7,808,695.

     The   aggregate   market   value  of  the  voting   common  stock  held  by
non-affiliates  of the  registrant,  based upon the  average of the last bid and
asked prices of the  registrant's  Common Stock in the  over-the-counter  market
reported  by the  Electronic  Bulletin  Board  of the  National  Association  of
Securities  Dealers,  Inc.  ("NASD") on March 2, 2001 was $1,447,737.  Shares of
Common Stock held by each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in that such persons may
be  deemed to be  affiliates.  This  determination  of  affiliate  status is not
necessarily conclusive.

     The number of outstanding shares of the registrant's  Common Stock on March
6, 2001 was 7,621,047.

    Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
                               AVESIS INCORPORATED
                            FORM l0-KSB ANNUAL REPORT
                          YEAR ENDED DECEMBER 31, 2000

                                TABLE OF CONTENTS

                                     PART I
                                                                            Page
                                                                            ----

ITEM l.  Description of Business ............................................  1
ITEM 2.  Description of Properties ..........................................  6
ITEM 3.  Legal Proceedings ..................................................  7
ITEM 4.  Submission of Matters to a Vote of Security Holders ................  7

                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters............  8
ITEM 6.  Management's Discussion and Analysis or Plan of Operation........... 12
ITEM 7.  Financial Statements ............................................... 16
ITEM 8.  Changes In and Disagreements with Accountants on Accounting
         and Financial Disclosure............................................ 17

                                    PART III

ITEM 9.  Directors, Executive Officers, Promoters, and Control Persons;
         Compliance with Section 16(a) of the Exchange Act................... 17
ITEM 10. Executive Compensation ............................................. 20
ITEM 11. Security Ownership of Certain Beneficial Owners and Management...... 22
ITEM 12. Certain Relationships and Related Transactions...................... 24
ITEM 13. Exhibits and Reports on Form 8-K ................................... 26
SIGNATURES .................................................................. 27
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     Avesis Incorporated, a Delaware corporation (together with its
subsidiaries, the "Company"), markets and administers vision, dental,
chiropractic and hearing managed care and discount programs ("Programs")
nationally. The Programs are designed to enable participants ("Members"), who
are enrolled through various sponsoring organizations such as insurance
carriers, HMOs, Blue Cross and Blue Shield organizations, corporations, unions
and various associations ("Sponsors"), to realize savings on purchases of
products and services through networks of providers such as ophthalmologists,
optometrists, opticians, dentists, chiropractors and hearing specialists
("Providers").

Administration fee and provider fee revenue has been derived from the product
lines in the following proportions:

                                                Transition Period   Fiscal Year
                               Year Ended             Ended            Ended
                            December 31, 2000   December 31, 1999   May 31, 1999
                            -----------------   -----------------   ------------
Vision and Hearing Program         91%                 90%              87%
Dental Program                      9%                 10%              13%

ABSOLUTECARE, INC.

     On July 24, 2000, the Company founded AbsoluteCare, Inc. ("AbsoluteCare" or
"Centers"), a wholly owned subsidiary, in Delaware. AbsoluteCare was established
to create infectious disease centers, with a current concentration on HIV/AIDS
treatment, on a national basis. AbsoluteCare combines all of the services that
HIV patients need under one roof. These include professional care, in-house
pharmacy and laboratory.

     AbsoluteCare's first medical center opened in Atlanta, Georgia (the first
HIV Medical center to open in Atlanta in almost a decade), in late November of
2000. The Center has seen its patient base grow to approximately 310 patients as
of March 28, 2001. The Atlanta Center also has a relationship with Absolute
Wellness, a non-affiliated, not-for-profit that provides alternative health care
therapies to the HIV/AIDS population. AbsoluteCare provides medical services to
all patients with private health insurance, Medicaid/Medicare or those who are
private pay.

VISION PROGRAM

     The Company offers provider networks and administrative services for group
vision programs ("Vision Program"). The Vision Program is designed to provide
savings by reducing the cost of eye examinations and vision products (frames,
eyeglass lenses and contact lenses).

                                       1
<PAGE>
     Under the Vision Program, a Member is entitled to discounted pricing that
Providers offer for eye examinations and the purchase of eyewear at network
Provider locations. The Member may be fully responsible for paying the Provider
unless the Sponsor (a self-funding employer or insurer) is obligated to pay the
Provider, or reimburse the Member. In some cases, the Company may act as a third
party administrator for the Sponsor and pay the Providers from funds provided by
the Sponsor for that purpose.

     Under some Programs, each Member pays an annual enrollment fee to the
Company for the right to utilize network Providers and receive discounts. In
other cases, typically involving Sponsors who pay benefits, the Sponsors pay a
periodic enrollment fee for each Member.

     If the Program has insured or self-funded benefits, the Sponsor determines
the products and services which will be covered, how frequently the benefit is
available and, subject to local regulation, whether reimbursement for
non-network Provider purchases will be made.

     The Company principally derives revenues from fees paid by or on behalf of
Members for enrollment, plan administration and services, and claims
administration, and in certain cases also derives revenues from fees paid by
Providers when Members purchase eyewear and services.

     The table below sets forth the approximate numbers of Providers and Members
enrolled in the Vision Program at the dates indicated:

      Date            Number of Providers   Number of States   Number of Members
      ----            -------------------   ----------------   -----------------
December 31, 2000            7,064                 48              1,401,000
December 31, 1999            6,700                 46                687,000
May 31, 1999                 5,151                 45                817,000

Substantially all of the Providers indicated above are optometrists. The numbers
of Members indicated in the above table are as reported to the Company by
Sponsors and generally do not include eligible spouses and children of Members.

     The Company administers a buying group for vision Providers so that they
may take advantage of volume buying discounts for eyeglass frames. The Company
has entered into arrangements with certain frame manufacturers that enable
Providers to obtain frames at prices below wholesale. The Company is billed
directly by the frame manufacturers and is responsible for the billing and
collection of amounts due from the Providers. The Company receives a discount,
greater than the amount given to the Providers, from the frame manufacturers to
pay for the cost of administering the buying group program. Providers are not
obligated to purchase from designated suppliers.

                                       2
<PAGE>
HEARING PROGRAM

     The Company's hearing program (the "Hearing Program") has been marketed
principally as an adjunct to the Vision Program. Revenues from the Hearing
Program have not been significant. A Hearing Program Member may obtain a hearing
evaluation by a Provider for a reduced fee. In addition, the Member may purchase
a hearing aid from a Provider at wholesale cost plus a professional fee or at a
discount from the Provider's usual charge, depending on the options selected by
the Plan Sponsor. Such benefits are also available to a Member's spouse,
children, parents and grandparents.

DENTAL PROGRAM

     The Company establishes and maintains dental Provider networks that it also
makes available to Sponsors. Fees charged to Members by Providers are based upon
panel fee schedules that the Providers have agreed to accept. Similar to the
Vision Program, the Company's dental program (the "Dental Program") is offered
both for Members who are themselves responsible for paying 100% of the costs of
their care to their Providers, and for Programs under which the Sponsor assumes
the obligation of paying Providers (or reimbursing Members) for the agreed-upon
costs of specified care. Revenues from the Dental Program principally are
derived in the same manner as the Vision Program.

     The table below sets forth the approximate number of Providers and Members
enrolled in the Dental Program at the dates indicated, as reported to the
Company by Sponsors:

       Date           Number of Providers   Number of States   Number of Members
       ----           -------------------   ----------------   -----------------
December 31, 2000            9,149                 43               25,000
December 31, 1999            8,945                 43               73,000
May 31, 1999                 8,397                 42              144,000

See also Item 6 - "Management's Discussion and Analysis or Plan of Operation."

CHIROPRACTIC PROGRAM

     The Company has developed a program for the delivery of chiropractic
services (the "Chiropractic Program"). Members pay reduced fees to the Provider
for history and physical examinations, spinal manipulation, non-manual
procedures, physiotherapy, acupuncture and additional care. Although the Company
has not generated significant revenues from the Chiropractic Program, Management
believes the Chiropractic Program is important because it enables the Company to
offer to Sponsors a complete line of ancillary benefits.

                                       3
<PAGE>
PROVIDER NETWORKS

     The Company usually contracts with Providers to provide services
simultaneously with the plan Sponsor's development of a membership base in a
geographic area; however, some Providers are enlisted in expansion areas where
there currently is little or no membership base. The Programs supplement the
practices of Providers by enabling them to obtain additional patients who are
Members while allowing Providers to retain their existing practices. Although
Members generally pay fees and charges less than those of non-Member patients,
Member patients can be an important source of incremental revenue to Providers.
There can be no assurance that Providers will continue to participate in the
Programs even if their participation results in an increase in revenues because
the portion of their practices derived from the Programs may be less profitable
than other aspects of their practices.

     The Company periodically reviews a portion of the Providers. This review
includes a patient survey form which is distributed on a random basis by the
Company to Members, the investigation of any complaints received from Members
and a desk or field audit by a Company auditor to confirm that Members were not
charged more than the contracted prices for services and products.

PROGRAM ADMINISTRATION AND ADMINISTRATION OF CLAIMS

     The Company receives fees from Sponsors for program administration
services. These fees vary depending upon the type of program involved, the
number of card-holding Members in a Sponsor's program, and the extent of claims
administration and other administrative services involved.

     When the Company acts as a third party administrator for Programs under
which the Sponsor pays for Provider services, Members obtaining services from
Providers present their cards to the Providers, who in certain cases contact the
Company to confirm eligibility and, upon performance of services, submit claim
forms to the Company. The Company processes the claims, requests funds from the
appropriate Sponsors, and forwards payments to the Providers and/or Members from
the funds received from Sponsors. Monthly information about the use of the
Programs by Members and cost savings is reported to certain Sponsors.

     Although the Company does not believe it would have any liability due to
any malpractice on the part of any Provider, the usual form of Provider
Agreement requires each Provider to indemnify the Company against any claim
based on the negligence or other wrongdoing of the Provider in the performance
of services for Members. In addition, Providers are required to carry
malpractice insurance with limits equal to or greater than their state required
minimums.

                                       4
<PAGE>
MARKETING

     The Company markets nationally to potential Sponsors that have or have
access to a large number of potential Members. Marketing is done through the
efforts of the Company's sales personnel and unaffiliated insurance brokers,
general agents and employee benefit consultants compensated on a commission
basis. Substantial marketing services are also provided through National Health
Enterprises, Inc. ("NHE"), an affiliate. See Item 12 - "Certain Relationships
and Related Transactions - Agreements with National Health Enterprises, Inc."
See also Item 6 - "Management's Discussion and Analysis or Plan of Operations -
Results of Operations."

     The Company's sales and marketing personnel market the full range of the
Company's products and services. The Company believes that offering a range of
products and services in multiple product lines differentiates it from its
competitors and enables it to offer a more comprehensive solution to its
customers' benefits needs.

     Four major Sponsors accounted for 22%, 15%, 9% and 9% of total service
revenues during the fiscal year ended December 31, 2000, 47% and 15% of total
service revenues during the transition period ended December 31, 1999, and 48%
and 14% of total service revenues in the fiscal year ended May 31, 1999. The
Company is substantially dependent on a limited number of Sponsors and may be
materially adversely affected by termination of any of its agreements with
Sponsors.

     To minimize the Company's risk related to its dependence on a limited
number of Sponsors, the Company has developed the Avesis Advantage Vision
Program and the Avesis Advantage Dental Program. These insured products allow
the Company to market and contract directly with employers, unions and other
groups either through the Company's internal sales staff or the broker
community. The Company derived its first revenues from its Avesis Advantage
Vision Program in December 1999, and had approximately 9,500 Members as of
December 31, 2000. The majority of the current groups are based in Arizona. The
Company is currently having discussions with several brokers and insurance
companies to acquire their insured vision books of business. These acquisitions
would expand the Avesis Advantage Vision Program through the Southeast and
Midwest and expand the distribution channel for future growth. The Company
expects to earn revenue from the Avesis Advantage Dental Program during the
second half of calendar 2001.

COMPETITION

     The Company competes for potential Sponsors, Members and Providers,
depending on the geographic area or market, with various provider organizations,
health maintenance organizations and health care membership programs. Most of
these competitors have significantly greater financial, marketing and
administrative resources than the Company. The Company believes it has a
competitive advantage as it is able to offer a full line of ancillary benefits
while substantially all of its competitors concentrate on one benefit line.

                                       5
<PAGE>
REGULATION

     Certain registration and licensing laws and regulations (including those
applicable to third party administrators, reinsurers, preferred provider
organizations, franchises and business opportunities) in many states in which
the Company operates may have application to various aspects of the Company's
programs. In addition, statutes and regulations applicable to insurers and
providers, including those relating to fee splitting, referral fees,
advertising, patient freedom of choice, provider rights to participate and
antidiscrimination in reimbursement, may impact the Company. The Company
believes that it is in compliance with applicable laws and regulations as they
are currently interpreted. However, there can be no assurance that changes in
interpretation will not occur in the future or that existing laws and
regulations will not be broadened. In that event, the Company could be required
to register in various additional states and/or post substantial fidelity or
surety bonds. Alternatively, the Company may be required to alter its services,
modify its contractual arrangements with Sponsors, Providers and Members, be
precluded from providing some or all of its services in some states, or be
subject to substantial fines or penalties. Any or all of the foregoing
consequences could materially adversely affect the Company.

EMPLOYEES

     As of March 12, 2001 and March 13, 2000, the Company had 39 full-time
employees as compared to 47 full-time and 2 part-time employees as of August 2,
1999. The Company believes that its relationship with its employees is good.
There are no employees represented by a union.

ITEM 2. DESCRIPTION OF PROPERTIES

     The Company maintains its executive offices at 3724 North Third Street,
Suite 300, Phoenix, Arizona 85012, in space leased from an unaffiliated party.
The property is covered by two lease agreements, one for approximately 3,200
square feet and one for approximately 6,700 square feet, for a total of
approximately 9,900 square feet. The term of the leases run concurrently and
will expire on September 30, 2002.

     Until October 1997, the Company maintained its executive offices at 100
West Clarendon, Suite 2300, Phoenix, Arizona 85013. The lease agreement covered
approximately 13,300 usable square feet of space and was scheduled to expire on
September 30, 2000. On October 29, 1996 the Company entered into an agreement to
sublease approximately 9,090 usable square feet of space through October 1,
1997, and all 13,300 usable square feet thereafter, until the expiration of the
Company's lease agreement. For the fiscal year ended May 31, 1999, rent expense
related to the subleased premises was $169,426 and sublease rental income was
$168,071. On February 24, 1999, the Company was released by the landlord from
the lease agreement and by the lessee from the sub-lease agreement covering the

                                       6
<PAGE>
Company's former principal office. The write-off of unamortized broker's
commissions and accrued rent that related to the lease for the Company's former
principal office resulted in approximately $47,000 of miscellaneous income in
the fiscal year ended May 31, 1999. The Company also maintains sales and
administrative offices at 10324 S. Dolfield Road, Owings Mills, Maryland 21117
and at 5321 First Place NE, Washington, D.C. 20011. The DC office is used
pursuant to a verbal agreement with the lessee that is terminable at will and is
at no cost to the Company. The Company entered into a lease agreement on June 3,
1999 for approximately 1,500 usable square feet of space in Owings Mills,
Maryland for a term of five years, which began November 1, 1999. The lease
agreement is with KA Real Estate Associates, LLC, a related party owned by
Messrs. Cohn and Blum, Jr., with the terms being no less favorable than an arm's
length transaction. Until November 1999, the Company maintained a sales and
administrative office at 11460 Cronridge Drive, Suite 118, Owings Mills,
Maryland 21117. The former Maryland office was used pursuant to a verbal
agreement with the lessee that was terminable at will and was available at no
cost to the Company. The Company owns and leases various computer, data
processing and other office equipment. The Company believes that its facilities
and equipment are maintained in good operating condition and are adequate for
the present level of operations. See Item 12 - "Certain Relationships and
Related Transactions."

     On August 9, 2000, AbsoluteCare entered into a lease agreement for
approximately 5,000 square feet at 2581 Piedmont Road, Suite A400, Atlanta,
Georgia 30324, with an unrelated party. The lease term is for three years and
began November 1, 2000. AbsoluteCare's first infectious disease center is
located on the premises.

ITEM 3. LEGAL PROCEEDINGS

     Not applicable.

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

     None submitted during fourth quarter.

                                       7
<PAGE>
                                    PART II

ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

     The Company's Common Stock and its Class A Nonvoting Cumulative Convertible
Preferred Stock, Series 2 ("Series 2 Shares") Shares are quoted in the
over-the-counter market, except that the Company's Series 2 Shares were not
quoted during the Transition Period and the fiscal year ended December 31, 2000.
As of December 31, 2000, only 4,700 of the Series 2 Shares remain outstanding.
Quotations are reported in the "pink sheets" published by the National Quotation
Bureau, Inc. and via the National Association of Securities Dealers' Inc.
Electronic Bulletin Board. The following table sets forth the high and low bid
price for the Company's Series 2 Shares and Common Stock as reported by the
National Quotation Bureau, Inc. for each quarterly period during the fiscal year
ended May 31, 1999. The following table also sets forth the high and low bid
price for the Company's Common Stock as reported by the National Quotation
Bureau, Inc. for two periods during the Transition Period and for each quarterly
period during the fiscal year ended December 31, 2000. Such market quotations
reflect inter-dealer prices, without retail markup, markdown or commission and
may not represent actual transactions. The Company's Class A Senior Nonvoting
Cumulative Convertible Preferred Stock, Series A ("Series A Shares") Shares were
not quoted during the periods presented and quotes are currently not available
pursuant to the National Quotation Bureau, Inc. and via the National Association
of Securities Dealers' Inc. Electronic Bulletin Board.

<TABLE>
<CAPTION>
                                                  Series 2 Shares               Common Stock
                                                -------------------        -----------------------
                                                Bid Quotation Range          Bid Quotation Range
                                                -------------------        -----------------------
                                                High           Low           High           Low
                                                ----           ---           ----           ---
<S>                                             <C>           <C>          <C>            <C>
FISCAL YEAR ENDED MAY 31, 1999
First Quarter ended Aug. 31, 1998               $1.25         $1.00        $0.21875       $0.21875
Second Quarter ended Nov. 30, 1998               2.75          1.25            0.29        0.21875
Third Quarter ended Feb. 28, 1999                2.75          2.75            0.30           0.29
Fourth Quarter ended May 31, 1999                2.75          2.75         0.46875           0.30

TRANSITION PERIOD ENDED DECEMBER 31, 1999
Four Months ended Sept. 30, 1999                                           $   0.50       $ 0.4375
Three Months ended Dec. 31, 1999                                             0.6875           0.39

FISCAL YEAR ENDED DECEMBER 31, 2000
First Quarter ended March 31, 2000                                         $   2.50       $   0.38
Second Quarter ended June 30, 2000                                            0.875           0.51
Third Quarter ended September 30, 2000                                         0.51           0.51
Fourth Quarter ended December 31, 2000                                        0.625            0.4
</TABLE>

                                       8
<PAGE>
COMMON STOCK

     As of March 13, 2001, there were 7,621,047 shares of Common Stock
outstanding held by approximately 160 stockholders of record. Trading activity
with respect to the Common Stock has been limited and the volume of transactions
may not of itself be deemed to constitute an "established public trading
market." A public trading market having the characteristics of depth, liquidity
and orderliness depends upon the existence of market makers as well as the
presence of willing buyers and sellers, which are circumstances over which the
Company does not have control.

DIVIDENDS

     The Company has not paid any dividends on its Common Stock since its
inception and does not expect to pay dividends on its Common Stock at any time
for the foreseeable future. The Series A Shares are senior in rights to annual
dividends and redemptions to the Series 2 Shares. Under the Certificate of
Designation for the Series A Shares, no dividends may be paid on the Series 2
Shares or the Common Stock until the Series A Shares have received all current
and cumulative dividends and the earliest of any of the following events occur
(i) every outstanding share of the Series A Shares has been either redeemed or
converted, (ii) any time after May 31, 2005, or (iii) the first day of any
fiscal year following two consecutive fiscal years in which the Company had net
income and net cash flow in each year in excess of $1.5 million and the
Company's tangible net equity at the end of the second fiscal year is at least
$5 million. The terms of the Series 2 Shares provide that as long as any of the
Series 2 Shares remain outstanding, the Company may not declare or pay any
dividend, whether in cash or property, on the Common Stock of the Company unless
the full dividends on the Series 2 Shares for all past dividend periods and the
then current dividend period shall have been paid or declared and a sum set
aside for payment thereof.

RECENT SALES OF UNREGISTERED SECURITIES

     On March 24, 2000 the Company purchased substantially all of the assets of
Southern States Eye Care, LLC, including but not limited to the name "Southern
States Eye Care", service marks, trade marks, trade names, current client
contracts, provider contracts and managed care contracts. The acquisition was
made pursuant to the Agreement by and between Southern States Eye Care, LLC,
Philip E. Johnson, R. Whitman Lord, Larry Forth, Brent Layton, Michael McQuaig
and Avesis Incorporated. The aggregate purchase price for the acquisition of
$549,324, determined through arms-length negotiations between the parties, was
$250,000, 350,000 shares of the Company's Common Stock and $36,842 of
transaction related expenses. The issuance was exempt from registration under
Regulation D.

                                       9
<PAGE>
CONVERSION OF PREFERRED STOCK TO COMMON STOCK

     Each share of the Company's Series A Preferred Stock is currently
convertible at any time at the option of the holders of the Series A Preferred
Stock into 10 shares of Common Stock of the Company. Each share of the Company's
Series 2 Preferred Stock is currently convertible at any time at the option of
the holders of the Series 2 Preferred Stock into 2.5 shares of Common Stock of
the Company. The conversion ratios are subject to adjustment for stock splits
and combinations, stock dividends, reclassifications, exchanges or substitutions
relating to the Company's Common Stock, and any reorganization, merger,
consolidation or sale of assets of the Company.

The following table provides information concerning the conversion of Series A
Preferred Stock subsequent to the filing of the Company's Form 10-QSB for the
quarter ended September 30, 2000.

                   Number of Shares of Series A Preferred   Number of Shares of
     Date             Stock Converted to Common Stock       Common Stock Issued
     ----             -------------------------------       -------------------
November 10, 2000                100                               1,000

The following table provides information concerning the conversion of Series 2
Preferred Stock.

                   Number of Shares of Series 2 Preferred   Number of Shares of
     Date             Stock Converted to Common Stock       Common Stock Issued
     ----             -------------------------------       -------------------
September 6, 2000                300                                 750

                                       10
<PAGE>
SELECTED FINANCIAL DATA

     The following table sets forth selected financial information regarding the
Company. This information should be read in conjunction with the Company's
Financial Statements and related notes and Management's Discussion and Analysis
or Plan of Operation included elsewhere in this Form 10-KSB. The selected
financial data for the fiscal year ended December 31, 2000, the Transition
Period ended December 31, 1999 and each of the three fiscal years ending May 31,
1997 through 1999, have been derived from the Company's audited financial
statements. The selected financial data are included herein as additional
information.

<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended May 31,
                                Fiscal Year Ended     Transition     -----------------------------------------
                                December 31, 2000       Period          1999            1998           1997
                                -----------------     -----------    -----------    -----------    -----------
<S>                                <C>                <C>            <C>            <C>            <C>
SELECTED OPERATING DATA:
Operating revenues                 $ 7,808,695        $ 5,614,154    $10,206,467    $ 8,336,631    $ 5,645,276
Operating expenses                   7,755,404          5,024,537      9,300,195      8,010,021      5,739,503
Net income (loss) (1)                  184,443          1,045,838      1,006,265        313,875       (190,265)
Net income (loss) per share of
Common Stock - Basic (2)                   .01                .13            .13            .06           (.13)

                                         As of December 31,                          As of May 31,
                                   ---------------------------       -----------------------------------------
                                      2000            1999              1999           1998           1997
                                   -----------     -----------       -----------    -----------    -----------
SELECTED BALANCE SHEET DATA:
Working capital                    $ 1,955,011     $ 2,198,148       $ 1,651,410    $   350,418    $   293,595
Current assets                       2,793,938       2,961,887         3,197,248      1,588,969      1,271,505
Total assets                         4,323,594       3,905,999         3,897,255      2,241,705      1,639,389

Current liabilities                    838,927         763,739         1,545,838      1,238,551        977,910
Long term obligations                      274          13,614            20,368         90,475         92,044
Total liabilities                      839,201         777,353         1,566,206      1,329,026      1,069,954
Total stockholders' equity           3,484,393       3,128,646         2,331,049        912,679        569,435
</TABLE>

(1)  Transition Period Net income includes the cumulative effect of a change in
     accounting method that increased income by $521,000 ($470,000 after taxes).

(2)  After provision for preferred stock dividends as follows: $95,409 in 2000;
     $61,049 in the Transition Period; $107,936 in 1999; $63,270 in 1998; and
     $349,162 in 1997.

                                       11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

     The statements contained in this discussion and analysis regarding
management's anticipation of adequacy of cash reserves for operations, adequacy
of reserves for claims, anticipated level of operating expenses related to new
cardholders, viability of the Company, cash flows and marketability of the
Company may constitute "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve risks
and uncertainties, which could cause actual results to differ materially from
the forward-looking statements. Management's anticipation is based upon
assumptions regarding the market in which the Company operates, the level of
competition, the level of demand for services, the stability of costs, the
retention of Sponsors and Members enrolled in the Company's benefit programs,
the relevance of the Company's historical performance, the expansion of the
AbsoluteCare concept and the stability of the regulatory environment. Any of
these assumptions could prove inaccurate, and therefore there can be no
assurance that the forward-looking information will prove to be accurate.

     The Company derives its administration fee revenue from Plan Sponsors who
customarily pay a set fee per Member per month. Administration fee revenue is
recognized on the accrual basis during the month that the Member is entitled to
use the benefit. Certain Sponsors pay for services rendered by the Company on a
fee for service basis. Based upon the type of program (e.g., managed care,
discount, third party administration) the Provider's claim for service provided
to Members is paid either by the Company, Sponsor, Member or combination
thereof. Buying Group revenues are recorded at the total amount billed to
participating Providers and recognized in the month the product is shipped.
Vision Provider fee revenue is based upon a percentage of materials sold by
certain participating Providers under certain plans.

     On March 24, 2000 the Company purchased substantially all of the assets of
Southern States Eye Care, LLC ("SSEC"), including but not limited to the name
"Southern States Eye Care", service marks, trade marks, trade names, current
client contracts, provider contracts and managed care contracts. The aggregate
purchase price for the acquisition of $549,324, was $250,000, 350,000 shares of
the Company's Common Stock and $36,842 of transaction related expenses. The
Company used its existing cash to finance the purchase. The acquisition of SSEC
broadens the Company's client base and increases the Company's vision provider
network in Georgia, Alabama and North Carolina. The Company is using the
acquired assets to continue SSEC's current lines of business, which the Company
is operating out of its corporate headquarters in Phoenix, Arizona.

                                       12
<PAGE>
CHANGE IN FISCAL YEAR

     On October 5, 1999, the Company changed its fiscal year-end from May 31 to
December 31 to conform to the year-end of Avesis Reinsurance Incorporated
("ARI"). Reinsurance corporations are required by the Arizona Department of
Insurance to have a December 31 fiscal year-end and to submit calendar year-end
audited financial statements. The transition period resulting from the change in
fiscal year-end is measured from the Company's former fiscal year-end of May 31.
Accordingly, the seven-month period resulting from this change, June 1, 1999
through December 31, 1999, is referred to herein as the "Transition Period."

RESULTS OF OPERATIONS

     The following table details the Company's major revenue and expense
categories for the year ended December 31, 2000 and the corresponding period
from January 1, 1999 to December 31, 1999 (unaudited):

<TABLE>
<CAPTION>
                                  Twelve Months Ended             Twelve Months Ended
                                   December 31, 2000         December 31, 1999 (unaudited)       Increase/(Decrease)
                               --------------------------     -------------------------      ------------------------
                                             % of Total                      % of Total
                                           Service Revenue                 Service Revenue                   % Change
                               ----------- ---------------    -----------  ---------------   -----------     --------
<S>                            <C>               <C>          <C>               <C>          <C>                <C>
REVENUE:
Total Service Revenue          $ 7,808,695       100%         $ 9,957,445       100%         $(2,148,750)       (22%)
Vision & Hearing Program         5,693,485        73%           7,400,941        74%          (1,707,456)       (23%)
Vision Provider Fee                 89,127         1%             132,058         1%             (42,931)       (33%)
Dental Program                     559,193         7%             866,341         9%            (307,148)       (35%)
Buying Group Program             1,418,740        18%           1,548,544        16%            (129,804)        (8%)
AbsoluteCare, Inc.                  35,847         0%                  -0-                        35,847

EXPENSES:
Cost of Services - Avesis
Incorporated & Subsidiaries
excluding AbsoluteCare, Inc.     5,289,352        68%           6,544,817        66%          (1,255,465)       (19%)
Operating Expenses -
AbsoluteCare, Inc.                 250,372         3%                  -0-                       250,372
General & Administrative         1,380,623        18%           1,145,508        12%             235,115         21%
Selling & Marketing                816,431        10%           1,094,075        11%            (277,644)       (25%)

Income from Operations
- AbsoluteCare, Inc.              (214,525)       (3%)                 -0-                      (214,525)
Income from Operations
- Avesis Incorporated &
Subsidiaries excluding
AbsoluteCare, Inc.                 267,816         3%           1,176,045        12%            (908,229)       (77%)
Net Income                         184,443         2%           1,687,733        17%          (1,503,290)       (89%)
</TABLE>

     Past and future revenues for all lines of business are directly related to
the number of Members enrolled in the Company's benefit programs. However, there
may be significant pricing differences to Sponsors depending on whether the
benefit offered is funded in part or whole by the plan Sponsor. A substantial
portion of the Company's Member base is derived from a limited number of
Sponsors.

                                       13
<PAGE>
     The decrease in the Company's total service revenues during the year ended
December 31, 2000 as compared to the corresponding period ended December 31,
1999 is principally due to a vision plan Sponsor that is not renewing the
benefit for their Members upon their annual renewal but instead is providing a
lesser benefit internally. As of December 31, 2000, the Company had
approximately 30,000 Members from this Sponsor, as compared to approximately
192,000 Members as of December 31, 1999. During September 2000, the Company
entered into a contract with this Sponsor to provide benefits to approximately
28,000 of their Members on an ongoing basis. The Company is anticipating the
loss of the remaining 2,000 Members from this Sponsor as the participants renew
their benefits during the upcoming year. The Company's vision and hearing
revenue received from this Sponsor decreased by approximately $3,040,000 during
the year ended December 31, 2000 as compared to the corresponding period ended
December 31, 1999. Except for revenues from this Sponsor, the Company's vision
and hearing revenues increased by approximately $1,332,000 during the year ended
December 31, 2000 as compared to the twelve months ended December 31, 1999, of
which approximately $1,096,000 was from former clients of SSEC.

     The Company had approximately 1,401,000 vision and 13,000 hearing Members
as of December 31, 2000 compared to approximately 687,000 vision and 5,000
hearing Members as of December 31, 1999. The vision Member counts for December
31, 2000 include approximately 848,470 Members received through the transaction
with SSEC. The vision and hearing revenue derived from the Sponsors from the
SSEC transaction accounted for 14% of the Company's total service revenues for
the year ended December 31, 2000. The revenue and profit expected to be derived
per Member under SSEC's vision benefit program, in general, is less than the
revenue and profit derived from the Sponsor that decreased its Membership, as
described above, due to the provision of a different level of benefit. The
decrease in vision and hearing revenue during the year ended December 31, 2000
as compared to the twelve months ended December 31, 1999 was the result of the
vision plan Sponsor mentioned above, partially offset by the revenue derived
from the former clients of SSEC. Two new Sponsors with approximately 17,000 and
81,000 Members were added during the last quarter of the year ended December 31,
2000. Other changes in the number of vision and hearing Members occurred due to
Sponsors' employee or Member fluctuations in the normal course of business.
Vision provider fee revenue remained constant as a percentage of total service
revenues from the twelve months ended December 31, 1999 to the year ended
December 31, 2000.

     The Company had approximately 25,000 dental Members as of December 31,
2000, compared to approximately 73,000 dental Members as of December 31, 1999.
The decline of the Company's Dental Program revenue and membership resulted from
the loss of approximately 44,000 Members from three Sponsors who did not renew
their contracts with the Company. There also have been reductions in Members
from various Sponsors in the normal course of business.

                                       14
<PAGE>
     To minimize the Company's risk related to its dependence on a limited
number of Sponsors, the Company has developed the Avesis Advantage Vision
Program and the Avesis Advantage Dental Program. These insured products allow
the Company to market and contract directly with employers, unions and other
groups either through the Company's internal sales staff or the broker
community. The Company derived its first revenues from its Avesis Advantage
Vision Program in December 1999, and had approximately 9,500 Members as of
December 31, 2000. The Company has revised its projection concerning the
timeframe in which it expects to derive its first revenues from the Avesis
Advantage Dental Program from the fourth quarter of calendar 2000 to the second
half of calendar 2001.

     The Company makes available to its vision Providers a buying group program
that enables the Provider to purchase eyeglass frames from the manufacturers at
discounts from wholesale costs. These discounted prices are generally lower than
a Provider could negotiate individually, due to the large volume of purchases of
the buying group. The Company has not actively marketed its buying group program
in the past. Due to the recent development of systems to better handle the
transaction data from the eyeglass frame manufacturers, the Company has started
to test market the buying group to Providers during the first quarter of 2001.

     Costs of Services primarily relate to servicing Members, Providers, and
Sponsors under the Company's vision, hearing and dental benefit programs as well
as the cost of frames that are sold through the Company's buying group program
as discussed above. The increase in Cost of Services as a percentage of total
service revenues in the year ended December 31, 2000, as compared to the
corresponding period ended December 31, 1999, resulted from an increase in
claims experience as a percentage of revenue from the newly acquired accounts
from SSEC, as mentioned above.

     General and Administrative expenses increased as a percentage of total
service revenue during the year ended December 31, 2000 compared to the twelve
months ended December 31, 1999 due to increases in depreciation and amortization
related to the Company's new computer systems, amortization of goodwill created
by the SSEC transaction, increases in payroll related to administrative
functions and increases in the payments under the Company's Management Agreement
and Investment Advisor Agreement, both with affiliated entities.

     Selling and marketing expenses include marketing fees, broker commissions,
inside sales and marketing salaries and related expenses, travel related to the
Company's sales activities and an allocation of related overhead expenses. A
significant amount of the Company's marketing activities has been outsourced to
a management consultant, National Health Enterprises (an affiliate). Selling and
marketing expenses declined slightly as a percentage of total service revenue
during the year ended December 31, 2000 as compared to the corresponding period
ended December 31, 1999 due to the absence of sales commissions on the acquired
SSEC accounts. See Item 12 - "Certain Relationships and Related Transactions -
Agreements with National Health Enterprises, Inc."

                                       15
<PAGE>
     During the Transition Period the Company changed its methodology of
accounting for cost of services provided in connection with the Company's vision
program that resulted in a change in accounting. The change in method has been
reflected as a change in accounting principle on the Company's Consolidated
Statements of Earnings and increased earnings by $470,000.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's cash and cash equivalents decreased by $585,205 during the
year ended December 31, 2000 from $2,483,739 as of December 31, 1999 to
$1,898,534 as of December 31, 2000. The decrease is primarily a result of the
cash payment of $250,000 by the Company for the acquisition of the assets of
Southern States Eye Care, LLC on March 24, 2000 and the capital expenditures
related to the development of AbsoluteCare. Current cash on hand and cash
provided from operations are expected to allow the Company to sustain operations
for the foreseeable future.

     The Company is party to a revolving credit facility for an amount not to
exceed $100,000. The credit facility allows the Company flexibility to better
manage its cash liquidity. To date, the Company has never drawn funds on the
credit facility.

     As of December 31, 2000, the Company had $769,813 of Accounts Payable,
compared to $679,649 as of December 31, 1999. The increase in Accounts Payable
primarily relates to the opening of AbsoluteCare's pharmacy and medical office.
Claims reserves of $273,364 as of December 31, 2000 and $489,814 as of December
31, 1999 are included in Accounts Payable. The reserves are for incurred but not
reported claim reimbursements to Providers who participate in certain managed
care programs. As mentioned above, the Company changed its methodology of
accounting for cost of services provided in connection with the Company's vision
program during the transition period. The change of accounting method resulted
in a decrease of claims reserves of $470,000. The Company believes this reserve
is adequate based upon historical trends and its experience.

     The Company expects to pay dividends of approximately $46,000 on the Series
A Shares to holders of record on May 31, 2001.

ITEM 7. FINANCIAL STATEMENTS

     Financial Statements appear commencing at page F-1 hereafter.

                                       16
<PAGE>
















                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 2000 and 1999
                   (With Independent Auditors' Report Thereon)
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Avesis Incorporated:

We have audited the accompanying consolidated balance sheets of Avesis
Incorporated and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 2000, Transition Period ended December 31, 1999 and
the year ended May 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 financial position of Avesis Incorporated
and subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for the year ended December 31, 2000, Transition
Period ended December 31, 1999 and the year ended May 31, 1999, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in note 1 to the consolidated financial statements, during the
Transition Period the Company changed its method of accounting for the cost of
services provided in connection with the vision program that resulted in a
change in accounting.


                                         /s/ KPMG LLP

Phoenix, Arizona
March 9, 2001

                                      F-1
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                           Consolidated Balance Sheets
                           December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                                     2000                 1999
                                                                                 ------------         ------------
<S>                                                                              <C>                     <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents                                                      $  1,898,534            2,483,739
  Accounts receivable, net                                                            478,517              301,048
  Inventory                                                                           114,973                   --
  Income taxes receivable                                                              27,141                   --
  Prepaid expenses and other                                                          274,773              177,100
                                                                                 ------------         ------------
       Total current assets                                                         2,793,938            2,961,887

Property and equipment, net                                                           666,713              511,604
Goodwill, net of accumulated amortization of $52,793                                  496,549                   --
Deposits and other assets                                                             366,394              432,508
                                                                                 ------------         ------------

       Total assets                                                              $  4,323,594            3,905,999
                                                                                 ============         ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                               $    769,813              679,649
  Current installments of obligations under capital lease                              10,288               10,288
  Accrued expenses:
    Compensation                                                                       23,652               43,642
    Other                                                                              21,378               16,096
  Deferred income                                                                      13,796               14,064
                                                                                 ------------         ------------
       Total current liabilities                                                      838,927              763,739

  Obligations under capital lease, excluding current installments                         274               13,614
                                                                                 ------------         ------------
       Total liabilities                                                              839,201              777,353
                                                                                 ------------         ------------
Stockholders' equity:
  Preferred stock, $.01 par value, authorized 12,000,000 shares:
    $3.75 Class A, senior nonvoting cumulative convertible preferred
    stock, Series A, $0.01 par value; authorized 12,000,000 shares;
    270,160 and 272,160 issued and outstanding at December 31, 2000
    and 1999, respectively (liquidation preference of $3.75 per share)                  2,702                2,722
  $10 Class A, nonvoting cumulative convertible preferred stock, Series 2,
    $.01 par value; authorized 1,000,000 shares; 4,700 and 5,000 shares
    issued and outstanding at December 31, 2000 and 1999 (liquidation
    preference of $10 per share) and $37,125 and $32,625 of dividends in
    arrears at $7.43 and $6.53 per share at December 31, 2000 and 1999,
    respectively; dividends accrue at $.225 per share each calendar quarter                47                   50
  Common stock of $.01 par value, authorized 30,000,000 shares; 7,621,047
    and 7,250,297 shares issued and outstanding at December 31, 2000 and
    1999, respectively                                                                 76,210               72,503
  Additional paid-in capital                                                       10,524,176           10,265,360
  Accumulated deficit                                                              (7,118,742)          (7,211,989)
                                                                                 ------------         ------------
       Total stockholders' equity                                                   3,484,393            3,128,646
                                                                                 ------------         ------------
Commitments and contingencies (notes 4, 10, 11, 12, 13 and 16)
                                                                                 $  4,323,594            3,905,999
                                                                                 ============         ============
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                      Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                                            TRANSITION
                                                                             YEAR ENDED    PERIOD ENDED     YEAR ENDED
                                                                            DECEMBER 31,    DECEMBER 31,      MAY 1,
                                                                                2000           1999            1999
                                                                            -----------     -----------    -----------
<S>                                                                         <C>               <C>            <C>
Service revenues:
  Administration fees                                                       $ 6,288,525       4,719,319      8,447,735
  Buying group                                                                1,418,740         816,420      1,607,000
  Provider fees                                                                  89,127          73,653        142,863
  Other                                                                          12,303           4,762          8,869
                                                                            -----------     -----------    -----------
       Total service revenues                                                 7,808,695       5,614,154     10,206,467
Cost of services                                                              5,404,285       3,740,468      7,131,269
                                                                            -----------     -----------    -----------
       Income from services                                                   2,404,410       1,873,686      3,075,198
General and administrative expenses                                           1,527,518         674,496      1,066,390
Selling and marketing expenses                                                  823,601         609,573      1,102,536
                                                                            -----------     -----------    -----------
       Income from operations                                                    53,291        589,617        906,272
                                                                            -----------     -----------    -----------
Non-operating income (expense):
  Interest income                                                               136,583          72,316         85,875
  Interest expense                                                               (1,394)         (1,838)        (3,960)
  Other                                                                           2,963           1,743         31,078
                                                                            -----------     -----------    -----------
       Total non-operating income                                               138,152          72,221        112,993
                                                                            -----------     -----------    -----------
       Income before income taxes and cumulative effect of
         change in accounting principle                                         191,443         661,838      1,019,265

Income taxes                                                                     (7,000)        (86,000)       (13,000)
                                                                            -----------     -----------    -----------
       Income before cumulative effect of change in accounting principle        184,443         575,838      1,006,265

Cumulative effect of change in accounting principle,
  net of income taxes of $51,000                                                     --         470,000             --
                                                                            -----------     -----------    -----------

       Net income                                                               184,443       1,045,838      1,006,265

Preferred stock dividends                                                       (95,409)        (61,049)      (107,936)
                                                                            -----------     -----------    -----------
       Net income available to common stockholders                          $    89,034        984,789        898,329
                                                                            ===========     ===========    ===========
Basic earnings per share:
  Income before cumulative effect of change in accounting principle         $      0.01            0.07           0.13
  Cumulative effect of change in accounting principle                                --            0.06             --
                                                                            -----------     -----------    -----------
       Net income                                                           $      0.01            0.13           0.13
                                                                            ===========     ===========    ===========
Diluted earnings per share:
     Income before cumulative effect of change in accounting principle      $      0.01            0.06           0.10
     Cumulative effect of change in accounting principle                             --            0.04             --
                                                                            -----------     -----------    -----------
     Net income                                                             $      0.01            0.10           0.10
                                                                            ===========     ===========    ===========
Weighted average common and equivalent shares outstanding - basic             7,534,420       7,334,719      6,788,944
                                                                            ===========     ===========    ===========
Weighted average common and equivalent shares outstanding - diluted           7,924,639      10,459,631      9,902,713
                                                                            ===========     ===========    ===========
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

     Year ended December 31, 2000, Transition Period ended December 31, 1999
                           and year ended May 31, 1999

<TABLE>
<CAPTION>
                                                PREFERRED STOCK                                                     TOTAL
                                             -------------------    COMMON      ADDITIONAL       ACCUMULATED    STOCKHOLDERS'
                                             SERIES A   SERIES 2     STOCK    PAID-IN CAPITAL      DEFICIT         EQUITY
                                             --------   --------     -----    ---------------      -------         ------
<S>                                         <C>         <C>        <C>          <C>             <C>               <C>
Balance, May 31, 1998                         $ 3,179     703        42,711       9,976,821       (9,110,735)       912,679

Repurchase of shares                             (167)    643)      (11,568)       (701,638)              --       (714,016)
Exercise of stock options                          --      --        38,420       1,072,601               --      1,111,021
Exercise of warrants                               --      --         4,000         113,636               --        117,636
Dividends declared, $.3375 per Class A,
 Senior nonvoting cumulative convertible
 preferred stock, stock, Series A                  --      --            --              --         (102,536)      (102,536)
Net income                                         --      --            --              --        1,006,265      1,006,265
                                              -------    ----       -------     -----------       ----------     ----------
Balance, May 31, 1999                           3,012      60        73,563      10,461,420       (8,207,006)     2,331,049

Repurchase of shares                             (290)    (10)       (1,060)       (196,060)              --       (197,420)
Dividends declared, $.16875 per Class A,
 Senior nonvoting cumulative convertible
 preferred stock, stock, Series A                  --      --            --              --          (50,821)       (50,821)
Net income                                         --      --            --              --        1,045,838      1,045,838
                                              -------    ----       -------     -----------       ----------     ----------
Balance, December 31, 1999                      2,722      50        72,503      10,265,360       (7,211,989)     3,128,646

Stock conversions                                 (20)     (3)          207            (184)              --             --
Stock issuances                                    --      --         3,500         259,000               --        262,500
Dividends declared, $.16875 per Class A,
 senior nonvoting cumulative convertible
 preferred stock, Series A                         --      --            --              --          (91,196)       (91,196)
Net income                                         --      --            --              --          184,443        184,443
                                              -------    ----       -------     -----------       ----------     ----------

Balance, December 31, 2000                    $ 2,702      47        76,210      10,524,176       (7,118,742)     3,484,393
                                              =======    ====       =======     ===========       ==========     ==========
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                    Year ended December 31, 2000, Transition
           Period ended December 31, 1999 and year ended May 31, 1999

<TABLE>
<CAPTION>
                                                                                      TRANSITION
                                                                     YEAR ENDED      PERIOD ENDED      YEAR ENDED
                                                                    DECEMBER 31,     DECEMBER 31,        MAY 1,
                                                                        2000             1999             1999
                                                                    -----------       ----------       ----------
<S>                                                                      <C>               <C>             <C>
Cash flows from operating activities:
 Net income                                                         $   184,443        1,045,838        1,006,265
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization                                        224,407           86,333          124,538
   Cumulative effect of change in accounting principle                       --         (521,000)              --
   Provision for losses of accounts receivable                               --               --           14,884
   Loss on disposal of fixed assets                                          --               --           18,245
   Increase (decrease) in cash resulting from changes in:
    Accounts receivable                                                (177,469)          39,957          124,019
    Inventory                                                          (114,973)              --               --
    Income tax receivable                                               (27,141)              --               --
    Prepaid expenses and other                                          (97,673)          79,801         (141,450)
    Deposits                                                             66,114         (198,589)           9,590
    Accounts payable                                                     90,164         (163,937)         258,421
    Deferred income                                                        (268)           1,862           (4,746)
    Accrued rent                                                             --               --          (92,827)
    Accrued expenses                                                    (14,708)         (48,203)          36,278
    Dividend payable                                                         --               --           50,821
                                                                    -----------       ----------       ----------
          Net cash provided by operating activities                     132,896          322,062        1,404,038
                                                                    -----------       ----------       ----------
Cash flows from investing activities:
 Purchases of property and equipment                                   (326,723)        (131,849)        (209,389)
 Payments for acquisition                                              (286,842)              --               --
 Proceeds from dispositions of property and equipment                        --               --            9,745
                                                                    -----------       ----------       ----------
          Net cash used in investing activities                        (613,565)        (131,849)        (199,644)
                                                                    -----------       ----------       ----------
Cash flows from financing activities:
 Payment of dividend on preferred stock                                 (91,196)        (101,642)        (102,536)
 Payments for repurchase of capital stock                                    --         (197,420)        (714,016)
 Proceeds from exercise of stock options and warrants                        --               --        1,228,657
 Principal payments under capital lease obligations                     (13,340)          (6,754)         (10,767)
                                                                    -----------       ----------       ----------
          Net cash provided by (used in) financing activities          (104,536)        (305,816)         401,338
                                                                    -----------       ----------       ----------

          Net increase (decrease) in cash and cash equivalents         (585,205)        (115,603)       1,605,732

Cash and cash equivalents, beginning of period                        2,483,739        2,599,342          993,610
                                                                    -----------       ----------       ----------
Cash and cash equivalents, end of period                            $ 1,898,534        2,483,739        2,599,342
                                                                    ===========       ==========       ==========
Supplemental disclosures of cash flow information:
 Cash paid for interest                                             $     2,963            1,740            3,960
                                                                    ===========       ==========       ==========
</TABLE>

Supplemental disclosure of noncash investing and financing activities:
  During 2000, 350,000 shares of common stock valued at $262,500 were issued
  in connection with an acquisition.

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  NATURE OF BUSINESS AND CONSOLIDATION POLICY

          Avesis Incorporated, a Delaware Corporation, and its wholly-owned
          subsidiaries, Avesis of Washington, D.C., a District of Columbia
          Corporation, Avesis Reinsurance Incorporated, an Arizona Corporation,
          Avesis of New York, Inc., a New York Corporation, Avesis Third Party
          Administrators, Inc., an Arizona Corporation, and AbsoluteCare, Inc.,
          a Delaware Corporation (collectively, the Company), markets and
          administers vision, hearing, dental and chiropractic programs which
          are designed to enable participants (members), who are enrolled
          through various sponsoring organizations such as insurance carriers,
          Blue Cross and Blue Shield organizations, corporations, unions, and
          various associations (sponsors) to realize savings on purchases of
          products and services through Company-organized networks of providers,
          such as opticians, optometrists, ophthalmologists, hearing
          specialists, dentists and chiropractors (providers). The Company also
          makes available to its vision providers a buying group program that
          enables the provider to purchase frames from the manufacturers at
          discounts from wholesale costs. These discounted prices are generally
          lower than a provider could negotiate individually, due to the large
          volume of purchases of the buying group. The Company receives a fee
          for its services which varies according to the volume of activity. The
          Company incorporated Avesis Reinsurance Incorporated in October 1999,
          to enable the Company to insure risks as a life and disability
          reinsurer, thereby maximizing the potential revenues and earnings
          related to its Programs. The Company incorporated AbsoluteCare, Inc.
          (AbsoluteCare) in July 2000 to create infectious disease centers, with
          a current concentration on HIV/AIDS treatment, on a national basis.
          AbsoluteCare opened a clinic in Atlanta, Georgia in November 2000. The
          consolidated financial statements include the accounts of Avesis
          Incorporated and its wholly-owned subsidiaries. All significant
          intercompany balances and transactions have been eliminated in
          consolidation.

          On March 24, 2000, the Company purchased Southern States Eye Care, LLC
          for an aggregate purchase price of $549,342, including transaction
          related costs of $36,842. The total purchase price for the acquisition
          comprised $250,000 cash and the issuance of 350,000 shares of common
          stock valued at $0.75 per share based on prices quoted by stock
          exchange. The acquisition was accounted for under the purchase method.
          There were no tangible assets or liabilities acquired in this
          purchase. As such, the entire purchase price was treated as goodwill
          and is being amortized over eight years on a straight-line basis. The
          amortization period of the goodwill is based upon the Company's past
          client experience.

     (b)  CHANGE IN FISCAL YEAR END

          During 1999, the Company changed its year-end from May 31 to December
          31. Accordingly, the Company began a new 12-month fiscal year on
          January 1, 2000. The seven-month period resulting from this change,
          June 1, 1999 through December 31, 1999, is referred herein as the
          "Transition Period".

                                      F-6
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     (c)  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 disclosure of contingent assets and liabilities as of
          the financial statement date and the reported amounts of revenue and
          expenses during the reporting period. Actual results could differ from
          those estimates.

     (d)  CHANGE IN ACCOUNTING PRINCIPLE

          During the Transition Period, the Company changed its methodology of
          accounting for cost of services provided in connection with the
          Company's vision program that resulted in a change in accounting. The
          cumulative effect of the change in the accounting method as of June 1,
          1999, is separately reported in the accompanying statement of earnings
          as the cumulative effect of a change in accounting principle in the
          amount of $470,000, after taxes.

     (e)  CASH AND CASH EQUIVALENTS

          Cash and cash equivalents include cash on hand, money market funds,
          and short-term investments with original maturities of 90 days or
          less.

     (f)  INVENTORY

          Inventory is stated at the lower of cost or market. Cost is determined
          using the first-in, first-out method.

     (g)  PROPERTY AND EQUIPMENT

          Property and equipment are stated at cost and are depreciated using
          the straight-line method over estimated useful lives which range from
          five to ten years. Software is amortized over the estimated useful
          life of five years. Leasehold improvements are amortized over the
          lesser of the lease term or the estimated useful lives of the
          respective assets, generally three years.

     (h)  GOODWILL

          Goodwill, which represents the excess of purchase price over fair
          value of net tangible assets acquired, is amortized on a straight-line
          basis over the expected periods to be benefited. The Company assesses
          the recoverability of goodwill by determining whether the amortization
          of the goodwill over its remaining life can be recovered through
          undiscounted future operating cash flows of the acquired operation.
          The amount of goodwill impairment, if any, is measured based on
          projected future operating cash flows using a discount rate reflecting
          the Company's average cost of funds. The assessment of the
          recoverability of goodwill will be impacted if estimated future
          operating cash flows are not achieved.

                                      F-7
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     (i)  REVENUE RECOGNITION

          Administrative fee revenue is recognized on the accrual basis during
          the month that the member is entitled to use the benefit.
          Substantially all administrative fee revenue is received in the month
          the member is entitled to use the benefit. Any amounts received in
          advance are recorded as deferred income and recognized ratably over
          the membership period. Buying group revenue is recognized in the month
          the merchandise is shipped to the provider. Provider fee revenue,
          based on member utilization, is recognized when the service is
          performed.

     (j)  DEFERRED REVENUE

          Deferred revenue represents cash received on membership fees received
          from sponsors in advance of services being rendered, as allowed under
          fee agreements.

     (k)  EARNINGS PER SHARE

          In accordance with SFAS 128, basic EPS is computed by dividing net
          income, after deducting the preferred stock dividends requirement, by
          the weighted average number of shares of common stock outstanding.

          Diluted EPS reflects the maximum dilution that would result after
          giving effect to dilutive stock options and warrants and to the
          assumed conversion of all dilutive convertible securities and stock.

     (l)  INCOME TAXES

          The Company accounts for income taxes under the asset and liability
          method. Under this method, deferred tax assets and liabilities are
          recognized for the estimated future tax consequences attributable to
          differences between the financial statement carrying amounts of
          existing assets and liabilities and their respective tax bases.
          Deferred tax assets and liabilities are measured using enacted tax
          rates expected to be in effect during the year in which those
          temporary differences are expected to be recovered or settled. The
          effect on deferred tax assets and liabilities of a change in tax rates
          is recognized in income in the period that includes the enactment
          date.

     (m)  STOCK OPTION PLAN AND WARRANTS

          All stock options and warrants are granted at the fair market value or
          greater of the underlying securities on the date of grant. The Company
          has elected to continue to apply the provisions of APB Opinion No. 25
          and provide the pro forma disclosure provisions of SFAS No. 123.

     (n)  IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
          OF

          The Company reviews long-lived assets and certain identifiable
          intangibles for impairment whenever events or changes in circumstances
          indicate that the carrying amount of an asset may not be recoverable.
          Recoverability of assets to be held and used is measured by a
          comparison of the carrying amount of an asset to future undiscounted
          cash flows expected to be generated by the asset. If such assets are
          considered to be impaired, the impairment to be recognized is measured
          by the amount by which the carrying amount of the assets exceeds the
          fair value of the assets. Assets to be disposed of are reported at the
          lower of the carrying amount or fair value less costs to sell.

                                      F-8
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     (o)  FAIR VALUE OF FINANCIAL INSTRUMENTS

          The carrying amount of cash and cash equivalents approximated fair
          value because their maturity is generally less than three months. The
          fair value of accounts receivable, accounts payable, and accrued
          expenses approximates the carrying value due to the short-term nature
          of these instruments.

     (p)  COMPREHENSIVE INCOME

          On June 1, 1998, the Company adopted SFAS No. 130, REPORTING
          COMPREHENSIVE INCOME. SFAS 130 establishes standards for reporting and
          presentation of comprehensive income and its components in a full set
          of financial statements. Comprehensive income consists of net income
          and net unrealized gains (losses) on securities and does not affect
          the Company's consolidated financial statements for the year ended
          December 31, 2000, Transition Period ended December 31, 1999 and year
          ended May 31, 1999.

     (q)  SEGMENT REPORTING

          The Company has two operating business segments, one which markets and
          administers vision, hearing, dental and chiropractic programs and one
          which operates an infectious disease clinic.

     (r)  RECLASSIFICATION

          Certain reclassifications have been made in the May 31, 1999
          consolidated statement of cash flows to conform to the Transition
          Period's presentation.

(2)  ACCOUNTS RECEIVABLE

     Accounts receivable consists of:

                                                          2000           1999
                                                       ----------    ----------
     Trade accounts receivable                         $  502,877       329,309
     Less allowance for doubtful accounts                 (24,360)      (28,261)
                                                       ----------    ----------

                                                       $  478,517       301,048
                                                       ==========    ==========

(3)  PROPERTY AND EQUIPMENT

     Property and equipment consists of:
                                                          2000           1999
                                                       ----------    ----------
     Furniture and fixtures                            $  292,240       267,946
     Leasehold improvements                               132,663         1,221
     Equipment                                            620,333       837,125
     Software                                             522,764       469,186
                                                       ----------    ----------

                                                        1,568,000     1,575,478
     Less accumulated depreciation and amortization      (901,287)   (1,063,874)
                                                       ----------    ----------

                                                       $  666,713       511,604
                                                       ==========    ==========

                                      F-9
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


(4)  LEASES

     On June 3, 1999, the Company entered into a lease agreement with KA Real
     Estate Associates, LLC, (a related party) for office space in Owings Mills,
     Maryland. This lease expires in November 2004. The Company paid $23,393 and
     $3,060 in rent and related expenses during the year ended December 31, 2000
     and the Transition Period, respectively.

     The Company leases office space and equipment under non-cancelable
     operating leases. For the years ended December 31, 2000, Transition Period
     ended December 31, 1999 and year ended May 31, 1999, rent expense for all
     operating leases was $221,137, $136,594 and $185,785, respectively. For the
     year ended May 31, 1999, sublease rent expenses were $169,426 and sublease
     rental income was $168,071.

     The Company is obligated under one capital lease for telephone equipment
     that expires in October 2001. As of December 31, 2000, the gross amount of
     equipment and accumulated depreciation recorded under this capital lease
     was $48,002 and $31,201, respectively. As of December 31, 1999, the gross
     amount of equipment and accumulated depreciation recorded under this
     capital lease was $48,002 and $21,600, respectively.

     Future minimum lease payments for capital lease payments and operating
     leases are as follows:

                                                           CAPITAL     OPERATING
                                                            LEASE       LEASES
                                                           --------    --------
     Years ending December 31:
       2001                                                $ 11,048    $243,150
       2002                                                      --     209,743
       2003                                                      --     101,869
       2004                                                      --      32,612
       2005                                                      --      12,228
       Thereafter                                                --          --
                                                           --------    --------

           Total future minimum lease payments               11,048    $599,602
                                                                       ========

Less amount representing interest (at 10.4%)                   (486)
                                                           --------

Present value of net minimum lease payments                  10,562

Less current installments of obligations under
  capital lease                                             (10,288)
                                                           --------
Obligations under capital lease, excluding
  current installments                                     $    274
                                                           ========

(5)  INCOME TAXES

     For the year ended December 31, 2000, the Transition Period and year ended
     May 31, 1999, income tax expense amounted to $7,000, $86,000 and $13,000,
     respectively.

                                      F-10
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     Components of income tax expense for the year ended December 31, 2000, the
     Transition Period ended December 31, 1999 and year ended May 31, 1999
     include:

                                         CURRENT         DEFERRED         TOTAL
                                         -------         -------         -------
     December 31, 2000:
      Federal                            $    --              --              --
      State                                7,000              --           7,000
                                         -------         -------         -------

                                         $ 7,000              --           7,000
                                         =======         =======         =======
     December 31, 1999:
      Federal                            $ 4,246              --           4,246
      State                               81,754              --          81,754
                                         -------         -------         -------

                                         $86,000              --          86,000
                                         =======         =======         =======
     May 31, 1999:
      Federal                            $13,000              --          13,000
      State                                   --              --              --
                                         -------         -------         -------

                                         $13,000              --          13,000
                                         =======         =======         =======

     The provision for income taxes differs from the amount computed by applying
     the statutory federal income tax rate to income before taxes. The sources
     and tax effects of the differences for the year ended December 31, 2000,
     Transition Period ended December 31, 1999 and year ended May 31, 1999 are
     as follows:

<TABLE>
<CAPTION>
                                                                          TRANSITION
                                                         YEAR ENDED       PERIOD ENDED       YEAR ENDED
                                                         DECEMBER 31,     DECEMBER 31,         MAY 31,
                                                            2000              1999              1999
                                                          --------          --------          --------
<S>                                                      <C>                <C>               <C>
     Computed "expected" federal income tax expense       $ 65,091           225,025           346,550
     Change in valuation allowance                         (38,791)         (261,710)         (350,117)
     State taxes                                             5,489           116,290                --
     AMT credit carryforward                               (16,685)               --                --
     Other                                                  (8,104)            6,395            16,567
                                                          --------          --------          --------

                                                          $  7,000            86,000            13,000
                                                          ========          ========          ========
</TABLE>
                                      F-11
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     The tax effects of temporary differences that give rise to significant
     portions of deferred tax assets and liabilities are as follows:

                                                   DECEMBER 31,     DECEMBER 31,
                                                      2000              1999
                                                   -----------      -----------
     Deferred tax assets:
       Net operating loss carryforwards (NOL)      $ 1,920,319        1,952,633
       Accrued expenses and other                       64,661           42,650
       Property and equipment                          (58,796)         (30,308)
       Valuation allowance                          (1,926,184)      (1,964,975)
                                                   -----------      -----------

               Net deferred tax liability          $        --               --
                                                   ===========      ===========

     Management estimates that it is more likely than not that it will not
     realize a substantial portion of the benefits of its deferred tax assets.
     Accordingly, it has established a valuation allowance to reflect this
     uncertainty. The net change in the valuation allowance for the year ended
     December 31, 2000, Transition Period ended December 31, 1999 and year ended
     May 31, 1999 was a decrease of 38,791, an increase of $134,312 and an
     increase of $290,868, respectively. The Transition Period change in
     valuation allowance is the net effect of a $332,655 increase from a change
     in tax rate, a current year benefit of $261,710 resulting from utilization
     of federal NOLs and the effect of the cumulative change in accounting
     principle of $205,257.

     The Company's federal NOLs of approximately $5,647,996 expire between 2004
     and 2013.

(6)  COMMON STOCK

     During 2000, 2,000 shares of Series A preferred stock were converted into
     20,000 shares of common stock at a conversion ratio of 10 shares of common
     stock to one share of preferred stock. Additionally, 300 shares of Series 2
     preferred stock were converted into 750 shares of common stock.

     During the Transition Period, the Company repurchased 106,000 shares of
     common stock for prices ranging from $0.43 to $0.50 per share, 1,000 shares
     of Class A, nonvoting cumulative convertible preferred stock, Series 2, for
     a price of $3.25 per share and 29,000 shares of Class A, senior nonvoting
     cumulative convertible preferred stock, Series A, for a price of $5.00 per
     share. Subsequent to the repurchases, the Company retired these shares.

     During the year ended May 31, 1999, the Company repurchased 1,156,829
     shares of common stock for prices ranging from $0.23 to $0.43 per share,
     64,300 shares of Class A, nonvoting cumulative convertible preferred stock,
     Series 2, for a price of $3 per share and 16,720 shares of Class A, senior
     nonvoting cumulative convertible preferred stock, Series A, for prices
     ranging from $2.63 to $3.81 per share. Subsequent to the repurchases, the
     Company retired these shares.

                                      F-12
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


(7)    EARNINGS PER SHARE

     A summary of the reconciliation from basic earnings per share to diluted
     earnings per share for the year ended December 31, 2000, the Transition
     Period ended December 31, 1999 and year ended May 31, 1999 follows:

<TABLE>
<CAPTION>
                                                                                      TRANSITION
                                                                   YEAR ENDED        PERIOD ENDED        YEAR ENDED
                                                                   DECEMBER 31,      DECEMBER 31,          MAY 31,
                                                                      2000               1999               1999
                                                                   -----------        -----------        -----------
<S>                                                                <C>                    <C>              <C>
     Income before cumulative effect of change in
       accounting principle                                        $   184,443            575,838          1,006,265
     Less: preferred stock dividends                                   (95,409)           (61,049)          (107,936)
                                                                   -----------        -----------        -----------
     Income before cumulative effect of change in
       accounting principle available to common stockholders       $    89,034            514,789            898,329
                                                                   ===========        ===========        ===========

     Basic EPS - weighted average shares outstanding                 7,534,420          7,334,719          6,788,944
                                                                   ===========        ===========        ===========
     Basic earnings per share - before cumulative
       effect of change in accounting principle                    $      0.01               0.07               0.13
                                                                   ===========        ===========        ===========

     Basic EPS - weighted average shares outstanding               $ 7,534,420          7,334,719          6,788,944

     Effect of diluted securities:
       Convertible debentures                                               --                 --                 --
       Convertible preferred stock                                          --          2,976,927          3,113,769
       Employee stock options                                          390,219            147,985                 --
                                                                   -----------        -----------        -----------
     Dilutive EPS - weighted average shares outstanding              7,924,639         10,459,631          9,902,713
     Net earnings                                                       89,034            575,838          1,006,265
                                                                   -----------        -----------        -----------

     Diluted earnings per share                                    $      0.01               0.06               0.10
                                                                   ===========        ===========        ===========
</TABLE>

(8)  STOCK OPTION PLANS AND WARRANTS

     In 1993 the Company adopted a stock option plan (the "Plan"). The stock
     option plan sets aside 900,000 shares of common stock (including incentive
     qualified and non-qualified stock options) to be granted to employees at a
     price not less than the fair market value of the stock at the date of
     grant. The vesting provisions are determined by the Board of Directors at
     the dates of grant. At December 31, 2000, there were 265,000 incentive
     options outstanding under this plan (of which 195,002 were exercisable at
     prices ranging from $0.48 to $0.85 per share) and 120,000 non-qualified
     options outstanding under this plan (of which 110,000 were exercisable at
     prices ranging from $0.40 to $1.00 per share). At December 31, 1999, there
     were 220,000 incentive options outstanding under this plan (of which
     173,324 were exercisable at $0.48) and 120,000 non-qualified options
     outstanding under this plan (of which 110,000 were exercisable at prices
     ranging from $.40 to $1.00 per share). At May 31, 1999, there were 170,000
     incentive options outstanding under this plan (of which 113,333 were
     exercisable at $0.48) and 110,000 nonqualified options outstanding under
     this plan exercisable at prices ranging from $.40 -$1.00 per share.

                                      F-13
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     In connection with the Long-Term Management Agreement, National Health
     Enterprises, Inc. of Owings Mills, Maryland (NHE) received ten-year options
     to purchase up to 4,400,000 shares of the Company's common stock. Options
     to purchase 1,400,000 shares at an exercise price of $.40 per share were
     vested at inception, and the remaining options to purchase shares at an
     exercise price of $.48 per share vested on December 5, 1994, in connection
     with a Board of Directors resolution. NHE transferred all of the options in
     March 1993 to certain individuals affiliated with NHE. Effective December
     5, 1994, these individuals collectively transferred an aggregate of 125,000
     of the options exercisable at $.48 per share to Richter & Co., Inc.

     On July 30, 1998, the Company's Board of Directors approved a modification
     providing all outstanding stock option and warrant holders the opportunity
     to exercise any or all of their vested options and warrants at a discounted
     exercise price from their original grant, during the period from August 1,
     1998 to August 31, 1998. The discounted price was calculated by discounting
     the stated exercise price of each stock option or warrant by 10% per annum
     from the expiration date back to August 1998, and rounding the calculated
     price to the nearest whole cent. The discounted price in no case was
     allowed to be less than the prevailing market price of the Company's common
     stock at the time of exercise of the options, defined as the high bid
     price, and rounded to the nearest whole cent. During August 1998, 3,842,000
     options were exercised at prices ranging between $0.26 and $0.31. The
     modification expired on August 31, 1998 and all terms returned to the
     original exercise terms for all unexercised stock options and warrants.

     A summary of stock option activity for the year ended December 31, 2000,
     Transition Period ended December 31, 1999 and year ended May 31, 1999
     follows:

                                                                    PRICE PER
                                                      OPTIONS        OPTION
                                                     ----------   -------------
     Balance outstanding, May 31, 1998                4,890,000
     Options granted                                         --
     Options exercised                                3,842,000    $0.26 - 0.31
     Options canceled                                    10,000    $       0.48
                                                     ----------
     Balance outstanding, May 31, 1999                1,038,000
     Options granted                                     60,000    $0.48 - 0.60
     Options exercised                                       --
     Options canceled                                        --
                                                     ----------
     Balance outstanding, December 31, 1999           1,098,000
     Options granted                                     45,000    $0.51 - 0.85
     Options exercised                                       --
     Options canceled                                        --
                                                     ----------

     Balance outstanding, December 31, 2000           1,143,000
                                                     ==========

     As of December 31, 2000, Transition Period ended December 31, 1999 and year
     ended May 31, 1999, options to purchase 1,063,002, 1,041,334 and 981,333
     shares, respectively, at prices ranging from $.40 to $1.00 were
     exercisable.

                                      F-14
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     A summary of stock options for common stock granted at December 31, 2000
follows:

                   OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
  -----------------------------------------------------   ----------------------
                   NUMBER        WEIGHTED                   NUMBER
                 OUTSTANDING      AVERAGE      WEIGHTED   EXERCISABLE   WEIGHTED
  RANGE OF           AT         REMAINING      AVERAGE        AT         AVERAGE
  EXERCISE       DECEMBER 31,   CONTRACTUAL    EXERCISE   DECEMBER 31,  EXERCISE
   PRICE            2000           LIFE         PRICE        2000         PRICE
   -----            ----           ----         -----        ----         -----
   $0.40            100,000        2.3         $  0.40       100,000     $  0.40
   $0.48            978,000        3.3         $  0.48       938,000     $  0.48
$0.51 - $1.00        65,000        8.9         $  0.65        25,002     $  0.65
                 ----------                    -------     ---------     -------

$0.40 - $1.00     1,143,000                    $  0.48     1,063,002     $  0.48
                 ==========                    =======     =========     =======

     The weighted average fair value at date of grant for options granted during
     the year ended December 31, 2000 and the Transition Period was $0.30 and
     $0.18, respectively. There were no options granted during the year ended
     December 31, 2000 and May 31, 1999. The fair value of each option was
     estimated on the date of grant using the Black-Scholes pricing model with
     the following assumptions:

                                        DECEMBER 31,    DECEMBER 31,    MAY 31,
                                           2000            1999          1999
                                           -----          -----          -----
     Dividend yield                           0%             0%             0%
     Expected volatility                  71.45%         54.10%         54.92%
     Risk-free interest rate               5.56%          6.28%          8.00%
     Forfeiture rate                          0              0              0
     Expected term in years                   6              6              6

                                      F-15
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     The Company applies APB Opinion No. 25 and related interpretations in
     accounting for its plan. Accordingly, no compensation cost has been
     recognized for the Plan. Had compensation cost for the Company's
     stock-based compensation plan been determined consistent with FASB
     Statement No. 123, the Company's net income would have been reduced to the
     pro forma amounts indicated below:

                                                    TRANSITION
                                   YEAR ENDED      PERIOD ENDED      YEAR ENDED
                                  DECEMBER 31,     DECEMBER 31,        MAY 31,
                                      2000             1999             1999
                                    --------        ---------         ---------
     Net income:
         As reported                $184,443        1,045,838         1,006,265
         Pro forma                   179,450        1,042,271         1,003,622

     Earnings per share:
         Basic:
           As reported                   .01              .13               .13
           Pro forma                     .01              .13               .13

     Diluted:
         As reported                     .01              .10               .10
         Pro forma                       .01              .10               .10


     The management agreement discussed above and related transactions with NHE
     and certain other substantial transactions were structured and negotiated
     for the Company by Richter & Co., Inc. (RCI), a New York investment banking
     firm, whose principal, William L. Richter, is a member of the Company's
     Board of Directors. RCI received cash consideration of $50,000 and ten-year
     warrants to purchase 400,000 shares of common stock. 160,000 of these
     warrants had been assigned to William L. Richter. In August 1998, RCI and
     William L. Richter exercised their warrants at exercise prices of $.26 and
     $.31.

(9)  PREFERRED STOCK

     The Company has authorized 12,000,000 shares of $10 Class A, Nonvoting
     Cumulative Convertible Preferred Stock, Series 2 (the Series 2 Shares) with
     a par value of $.01 per share and quarterly dividends at the fixed annual
     rate of $.90 per share. The Series 2 Shares are convertible at the option
     of the holder into common stock of the Company at $4.00 per share, subject
     to adjustment under certain conditions. There is a liquidation preference
     which entitles holders to receive, out of the assets of the Company, $10.00
     per share plus all accrued and unpaid dividends, before any amounts are
     distributed to the holders of common stock. As of December 31, 2000 and
     1999, there were 4,700 and 5,000 Series 2 Shares outstanding, with each
     share entitled to receive a cumulative dividend at an annual rate of 9% of
     the face value of $10.00 ($0.90 per share). As of December 31, 2000 and
     1999, dividend arrearages on the Series 2 Shares were $7.425 per share and
     $6.525 per share, respectively, or $34,898 and $32,625, respectively.

                                      F-16
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


     As of December 31, 2000 and 1999, there were 270,160 and 272,160,
     respectively, Series A Shares outstanding, with each share entitled to
     receive a cumulative dividend at an annual rate of $0.3375 per share paid
     semi-annually. The Series A Share dividends shall accrue through the last
     day of each semi-annual period and shall be payable to holders of record on
     the last day of such semi-annual period.

     The Company has not paid any dividends on its common stock since its
     inception and does not expect to pay dividends on its common stock at any
     time for the foreseeable future. The Series A Shares are senior in rights
     to annual dividends and redemptions to the Series 2 Shares. Under the
     Certificate of Designation for the Series A Shares, no dividends may be
     paid on the Series 2 Shares or the common stock until the Series A shares
     have received all current and cumulative dividends and the earliest of any
     of the following events occur (i) every outstanding Series A Share has been
     either redeemed or converted, (ii) any time after May 31, 2005, or (iii)
     the first day of any fiscal year following two consecutive fiscal years in
     which the Company had net income and net cash flow in each year in excess
     of $1.5 million and the Company's tangible net equity at the end of the
     second fiscal year is at least $5 million. Moreover, the terms of the
     Series 2 Shares provide that as long as any of the Series 2 Shares remain
     outstanding, the Company may not declare or pay any dividend, whether in
     cash or property, on the common stock of the Company unless the full
     dividends on the Series 2 Shares for all past dividend periods and the then
     current dividend period shall have been paid or declared and a sum set
     aside for payment thereof.

(10) CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

     The Company's programs and services are offered throughout the United
     States. Most of the Company's customers are located in the Midwest, Texas,
     the Southwest states, Southeastern states, and the D.C. metropolitan area.
     For the year ended December 31, 2000, four major customers provided 22%,
     15%, 9% and 9% of total service revenues. For the Transition Period and
     year ended May 31, 1999, two major customers provided 47% and 15% and 48%
     and 14% of total service revenues, respectively.

(11) LONG-TERM MANAGEMENT AND MARKETING AGREEMENT

     In March 1993, the Company entered into a Long-Term Management Agreement
     with NHE, which provides for NHE to manage all aspects of the Company's
     business. The initial term of the agreement was five years and was
     renewable. NHE also received options to purchase up to 4,400,000 shares of
     the Company's common stock. In December 1997, the Company renewed this
     agreement for a term of five years with payments of $250,000 per year due
     to NHE. In May 1999, the Company increased the payments, effective June
     1999, to $300,000 per year. For the year ended December 31, 2000 and the
     Transition Period, payments of $300,000 and $175,000, respectively, were
     made under this agreement.

     Additionally, the Company entered into a Marketing Representation Agreement
     with NHE, whereby NHE is entitled to receive a commission of 7.5% of
     enrollment fees from sponsor contracts generated by NHE, or 2.5% of
     enrollment fees where marketing assistance is rendered. For the year ended
     December 31, 2000, the Transition Period and year ended May 31, 1999, the
     Company paid approximately $149,184, $155,167 and $310,000, respectively,
     to NHE under the terms of this agreement.

                                      F-17
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


(12) RELATED PARTY TRANSACTIONS

     The Company has contracted with NCS to lease its computer system for
     approximately $1,000 per month. The Company paid $12,000 of computer lease
     charges for the year ended December 31, 2000. The Company paid $7,000 of
     computer lease charges for the Transition Period and $12,000 of computer
     lease charges for the year ended May 31, 1999.

     The Company entered into a Registration Rights Agreement (the "Registration
     Rights Agreement") effective March 18, 1993 with NHE, and two shareholders.
     The Registration Rights Agreement provides two demand registrations with
     respect to 100,000 shares previously purchased and the shares issuable
     pursuant to the ten-year options discussed in note 8 ("Registrable
     Securities"). The first demand registration is exercisable at the request
     of holders of at least 900,000 Registrable Securities after the exercise by
     NHE and/or its transferees of at least 900,000 options. The second demand
     registration is exercisable at the request of holders of at least 1,000,000
     options after completion of a fiscal year in which the Company has profits
     of at least $1,000,000. The Registration Rights Agreement also provides
     piggyback registration rights with respect to registrations in which other
     selling stockholders are participating. The Company is obligated to pay the
     offering expenses of each such registration, except for the selling
     stockholders' pro rata portion of underwriting discounts and commissions.
     No precise prediction can be made of the effect, if any, that the
     availability of shares pursuant to registrations under the Registration
     Rights Agreement will have on the market price prevailing from time to
     time. Nevertheless, sales of substantial amounts of the common stock
     pursuant to such registrations could adversely affect prevailing market
     prices.

     Effective January 18, 1995, the Company retained RCI as exclusive financial
     advisor and placement agent. RCI's fees under this arrangement are payable
     only upon completion of defined transactions and, in such event, are
     calculated upon the basis of a percentage of the transaction value. The
     agreement is terminable by the Company upon 90 days notice, provided that
     RCI is entitled to receive certain fees for two years following termination
     in the event a transaction is concluded with an entity introduced to the
     Company by RCI.

     RCI provided substantial ongoing financial management and other services to
     the Company at no charge through May 1999. In May 1999, the Company's Board
     of Directors approved a cash payment to RCI at an annual rate of $30,000 to
     commence in June 1999. For the year ended December 31, 2000, and the
     Transition Period, payments of $44,906 and $17,500, respectively, were made
     under this agreement. Effective November 6, 1999, the investment banking
     agreement was assigned to RCI's parent company, Richter Investment Corp.,
     and modified so as to delete any functions, and any attendant compensation,
     providable only by broker-dealers. In the opinion of management, the terms
     of the Company's arrangements with RCI, NHE and NCS taken as a whole are at
     least as favorable to the Company as could be obtained from third parties.

     During the year ended December 31, 2000 and the Transition Period, the
     Company made payments of $23,393 and $3,060 to KA Real Estate Associates
     for a lease of office space.

                                      F-18
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


(13) EMPLOYEE BENEFIT PLAN

     The Company has a qualified 401(k) Plan (defined contribution plan). The
     plan covers substantially all employees who have completed three months of
     service and attained age twenty-one. Subject to limits imposed by Internal
     Revenue Service regulations and other options retained by the Company
     affecting participant contribution, participants may voluntarily contribute
     a percentage of their annual wages not to exceed limits established by the
     Tax Reform Act of 1986. Participants are immediately vested in the amount
     of their direct contribution. For the year ended December 31, 2000, the
     Transition Period and year ended May 31, 1999, the Company did not
     contribute to the plan.

(14) INDUSTRY SEGMENTS

     During 2000, the Company began operating in two reportable business
     segments, the marketing and administration of vision, hearing, dental and
     chiropractic services and the operation of an infectious disease clinic.
     The two segments have infrastructures that offer different products and
     services. The accounting policies of the reportable segments are the same
     as those described in note 1. The Company evaluates the performance of its
     operating segments based on income before income taxes, accounting changes
     and nonrecurring items. There were no intersegment sales or transfers.

     Summarized financial information concerning the Company's reportable
     segments is shown below:

                                                VISION, HEARING,
                                                  DENTAL, AND        INFECTIOUS
                                                 CHIROPRACTIC          DISEASE
     2000                                          SERVICES            CLINIC
                                                  ----------           ------
     Revenues                                     $7,772,848           35,847
     Segment profit (loss)                           405,970         (214,527)
     Total assets                                  3,907,907          415,687
     Depreciation and amortization                   212,766           11,641

(15) ACQUISITION OF SOUTHERN STATES EYE CARE, LLC

     The following unaudited pro forma information presents a summary of
     consolidated results of operations of the Company as if the acquisition of
     Southern States Eye Care, LLC had occurred June 1, 1999, with pro forma
     adjustments together with related income tax effects. The pro forma results
     have been prepared for comparative purposes only and do not purport to be
     indicative of the results of operations that would actually have resulted
     had the combination been in effect on the date indicated.

                                         YEAR ENDED      TRANSITION PERIOD ENDED
                                      DECEMBER 31, 2000     DECEMBER 31, 1999
                                      -----------------     -----------------
     Total revenues                      $8,140,173              6,446,912
     Net income                             290,159              1,129,144
     Basic earnings per common share           0.03                   0.14

                                      F-19
                                                                     (Continued)
<PAGE>
                      AVESIS INCORPORATED AND SUBSIDIARIES

                        Consolidated Financial Statements

          December 31, 2000, Transition Period ended December 31, 1999
                          and year ended May 31, 1999


(16) COMMITMENTS AND CONTINGENCIES

     During the Transition Period, the Company established two letters of credit
     totaling $200,000 at December 31, 1999. The letters of credit are included
     in Deposits and other assets on the balance sheet and relate to Avesis
     Reinsurance, Inc. and the Avesis Advantage Vision Plan.

     The Company had available a revolving line of credit for an amount not to
     exceed $100,000, which expires October 2001. The line of credit bears
     interest at the bank's National Association Base rate plus 1%. As of
     December 31, 2000, the Company had not drawn on this line of credit.

                                      F-20
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

     The following table sets forth the names of the directors and executive
officers of the Company and certain biographical information (as of March 13,
2001) relating to them.


Name                     Age                  Position(s) with Company
----                     ---                  ------------------------
William R. Cohen          69      Co-Chairman and Director

William L. Richter        58      Co-Chairman and Director

Kenneth L. Blum, Sr.      74      Director, Former Acting President and CEO from
                                  September 1996 to May 1998

Gerald L. Cohen           56      Director

Brent D. Layton           33      Director

Alan S. Cohn              45      President, CEO and Director

Kenneth L. Blum, Jr.      37      Director
                                  Corporate Secretary

Shannon R. Barnett        32      Controller

Joel H. Alperstein        32      Treasurer, Chief Financial Officer

                                       17
<PAGE>
     William R. Cohen, 69, Co-Chairman of the Board, has served as a Director of
the Company since April 1986. Mr. Cohen is the Chairman of Go Lightly Candy
Company. Mr. Cohen has served as Chairman of American Mobile Communications, a
cellular communications company, and has also held various positions with CFC
Associates, a venture capital partnership, and its predecessor organizations.
Mr. Cohen serves as a lifetime trustee of the Hospital Center, Orange, New
Jersey. Mr. Cohen is not related to Gerald L. Cohen.

     William L. Richter, 58, Co-Chairman of the Board, has been a Director of
the Company since August 1993. Mr. Richter has been President of Richter
Investment Corp., a merchant banking firm, (or its predecessor organization) for
the past eleven years and has been a Senior Managing Director of Cerberus
Capital Management, L.P., an asset management organization (or its predecessor
organizations) since their founding in late 1992. Mr. Richter was Co-Chairman of
Rent-A-Wreck of America, Inc., a franchiser of automobile rental agencies, from
November 1989 to June 1993 and has been Vice Chairman of that Company since June
1993.

     Kenneth L. Blum, Sr., 74, has served as a Director of the Company since
August 1993. Mr. Blum was acting President and Chief Executive Officer of the
Company from September 1996 to May 1998. Mr. Blum has been Chairman of the Board
of Rent-A-Wreck of America, Inc., an automobile rental franchiser, since June
1993, President from June 1993 to October 1994, and Chief Executive Officer
since January 1994. Mr. Blum has been the President of KAB Leasing, Inc., an
automobile wholesaler, since its inception during 1998. Mr. Blum has been the
President of KAB, Inc., a management company, since 1990. Mr. Blum co-founded
United HealthCare, Inc., a Baltimore, Maryland-based healthcare company, in 1974
and served as its President and Chief Executive Officer until 1990. Since 1990,
Mr. Blum has been a management consultant to a variety of companies, including
National Computer Services, Inc., a computer service bureau; American Business
Information Systems, Inc., a high-volume laser printing company; and Mail-Rx, a
mail-order prescription drug company. Mr. Blum is the father of Kenneth L. Blum,
Jr. and the father-in-law of Alan S. Cohn. See "Management Services Agreement."

     Gerald L. Cohen, 56, has served as a Director of the Company since March
1985. Mr. Cohen is a managing director of Greenley Capital Company, a limited
partnership which is a New York-based investment banking firm. Mr. Cohen is the
sole shareholder of the general partner (Greenley Corp.) of Greenley Capital
Company. From August 1982 through April 1989, Mr. Cohen was a managing director
of Richter, Cohen & Co., a New York-based investment banking firm. Mr. Cohen is
not related to William R. Cohen.

     Brent D. Layton, 33, became a Director of the Company as of April 2000. Mr.
Layton has been the President of Layton & Associates, Inc., a Health Care
Consulting Firm, since 1995, and has been a consultant to the Company since
September 1999. Most recently he was the General Manager of SouthernStates Eye
Care and has been an owner of five different IPAs. He served as a Deputy
Insurance Commissioner in Georgia from 1991 to 1995.

                                       18
<PAGE>
     Alan S. Cohn, 45, became the President and CEO of the Company as of June
1998 and a Director of the Company as of August 1998. Mr. Cohn is providing
management services on behalf of the Company through an arrangement with NHE.
Mr. Cohn has been a management consultant for NHE and KAB, Inc. since 1993 and
1990, respectively. Since 1990, Mr. Cohn has been a principal or management
consultant to a variety of companies, including National Computer Services,
Inc., a computer service bureau; American Business Information Systems, Inc., a
high-volume laser printing company; Rent-A-Wreck of America, Inc., an automobile
franchiser; Allscripts, Inc., formerly Physician Dispensing Systems, Inc., a
pharmaceutical dispensing company; Lawphone, Inc., a prepaid legal fee company;
and Mail-Rx, a mail-order prescription drug company. Mr. Cohn is the son-in-law
of Kenneth L. Blum, Sr., the Company's former acting President and CEO, and a
member of the Board of Directors.

     Kenneth L. Blum, Jr., 37, became the Corporate Secretary of the Company as
of November 2000 and has been a Director of the Company since August 1998. Mr.
Blum is the President, Chief Executive Officer and the sole stockholder of NHE.
Mr. Blum is also President and Secretary of Rent-A-Wreck of America, Inc., an
automobile rental franchiser, President of National Computer Services, Inc., a
computer service bureau, and President of American Business Information Systems,
Inc., a high-volume laser printing company. Kenneth L. Blum, Sr., the Company's
former acting President and CEO, and a member of the Board of Directors, is the
father of Kenneth L. Blum, Jr. See "Management Services Agreement."

     Shannon R. Barnett, 32, has been the Controller of the Company (Principal
Accounting Officer) since August 1996 and was a Senior Accountant of the Company
from November 1995 until August 1996. Ms. Barnett was Assistant Controller of
Quality Hotel and Marlyn Nutraceuticals, a vitamin manufacturer, from September
1994 until November 1995 and Staff Accountant of General Atlantic Resources,
Inc., an oil and gas company, from November 1992 until June 1994.

     Joel H. Alperstein, 32, has been the Treasurer of the Company since
December 1997, the Chief Financial Officer of the Company since December 1999
and the Director of Finance of the Company from January 1997 until December
1999. Mr. Alperstein has been a management consultant to American Business
Information Systems, Inc., a high-volume laser printing company, since March
1999 and Rent-A-Wreck of America, Inc., an automobile franchiser, since December
1999. Mr. Alperstein was a self-employed financial consultant from September
1996 until December 1996. Mr. Alperstein was a Manager at Stout, Causey &
Horning, P.A., a full service public accounting firm, from September 1992 until
August 1996, and a Senior Accountant at Arthur Andersen, LLP, from July 1990
until September 1992. Mr. Alperstein has a Masters of Business Administration
from Loyola College of Maryland and is a Certified Public Accountant.

                                       19
<PAGE>
     All directors will hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Officers
are appointed annually and serve at the pleasure of the Board of Directors.

MANAGEMENT SERVICES AGREEMENT

     Effective March 18, 1993, the Company entered into a Management Agreement
(the "Management Agreement") with National Health Enterprises, Inc., a Maryland
corporation ("NHE") pursuant to which NHE agreed to manage substantially all
aspects of the Company's business, subject to certain limitations and the
direction of the Company's Board of Directors. See Item 12 - "Certain
Relationships and Related Transactions."

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common and Preferred Stock are required to report their initial
ownership of the Company's Common and Preferred Stock and any subsequent changes
in that ownership to the Securities and Exchange Commission. Specific due dates
for these reports have been established and the Company is required to disclose
any failure to file by these dates. The Company believes that all of these
filing requirements were satisfied during the year ended December 31, 2000. In
making these disclosures, the Company has relied solely on representations
obtained from certain of its former and current directors, executive officers
and ten percent holders and/or copies of the reports that they have filed with
the Commission.

ITEM 10. EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

The following table and related notes set forth information regarding the
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer during the year ended December 31, 2000, the transition period ended
December 31, 1999 and the year ended May 31, 1999. No executive officer that was
serving as an executive officer during the year ended December 31, 2000 received
salary and bonus that aggregated at least $100,000 for services rendered to the
Company.

<TABLE>
<CAPTION>
                                                                               Long Term Compensation
                                                 Annual Compensation   --------------------------------------
                                                 -------------------                  Awards
                                                                       --------------------------------------
Name and Principal Position          Year             Salary ($)       Securities Underlying Options/SARs (#)
---------------------------          ----             ----------       --------------------------------------
<S>                          <C>                     <C>               <C>
Alan S. Cohn, CEO (1)                2000                 $0                             --
                              Transition Period           $0                             --
                                     1999                 $0                             --
</TABLE>

(1)  Mr. Cohn is compensated through the Management Agreement with National
     Health Enterprises, Inc.

     See also Item 12 -- "Certain Relationships and Related Transactions -
     Agreements with National Health Enterprises, Inc. -- Stock Option Grant."

                                       20
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS

     No employment contracts, termination of employment, or change-in-control
arrangements currently exist except for the National Health Enterprises, Inc.
arrangement described below.

DIRECTOR COMPENSATION

     Directors are reimbursed for out-of-pocket expenses incurred in connection
with each Board of Directors or committee meeting attended. Directors who also
are employees of the Company are eligible to participate in the Company's
Incentive Stock Option Plan and the Company's 401(k) Plan, and all directors are
eligible to participate in the Company's 1993 Stock Option Plan (the "1993
Plan"). Pursuant to the 1993 Plan, options for 100,000 shares of the Company's
Common Stock were granted on April 8, 1993 to each of directors William R.
Cohen, Gerald L. Cohen, and Sam Oolie. The exercise price of such options is
$.40 per share, which was at least the fair market value of the Company's Common
Stock on the date of grant. (See Item 5 - "Market for Common Stock and Related
Stockholder Matters - Recent Sales of Unregistered Securities"). Options for
25,000 shares of Common Stock were exercisable by each of the optionees as of
the date of grant, with the balance vesting in equal parts at the end of each of
the 10 three-month periods following the date of grant.

     During August 1998, William R. Cohen and Gerald L. Cohen each exercised
their 100,000 stock options pursuant to the reduced pricing as approved by the
Board of Directors. See Item 5 - "Market for Common Stock and Related
Stockholder Matters - Recent Sales of Unregistered Securities."

     On April 5, 2000, the Board of Directors voted to compensate all outside
Directors $5,000 for their service to the Company during calendar year 1999. For
purposes of this vote, outside Directors were defined as Directors not otherwise
receiving compensation from the Company, including through any consulting
arrangement. All of the outside Directors, except Mr. Oolie, waived receipt of
the payment and no payment to present outside Directors was made. Mr. Oolie
retired from the Company's Board of Directors during April 2000.

                                       21
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of February 23, 2001 there were 7,621,047 shares of Common Stock, 4,700
Series 2 Shares and 270,160 Series A Shares outstanding. The table below sets
forth as of March 13, 2001, certain information regarding the shares of Common
Stock and Series A Preferred Stock beneficially owned by each director of the
Company and each named executive officer in the Summary Compensation table set
forth in Item 10, by all of the Company's executive officers and directors as a
group, and by those persons known by the Company to have owned beneficially 5%
or more of the outstanding shares of Common Stock, which information as to
beneficial ownership is based upon statements furnished to the Company by such
persons. None of the directors or executive officers owns any Series 2 Shares.

<TABLE>
<CAPTION>
                                                        Common issuable upon conversion or exercise of:(1)
                                                        ---------------------------------------------------
                                                                       % of                 Total Common
                                                        Series A     Series A               Beneficially      Percent of
                                 Common       % of      Preferred    Preferred                Owned (1)       Common (2)
Name and Address                  Stock       Common      Stock        Stock    Options    (fully diluted)  (fully diluted)
----------------                  -----       ------      -----        -----    -------    ---------------  ---------------
<S>                              <C>            <C>       <C>           <C>     <C>        <C>                <C>
Gerald L. Cohen*                 253,359        3.3       20,292        7.5          --        456,279            5.8

William R. Cohen*                161,117(3)     2.1       10,552        3.9          --        266,637            3.5

William L. Richter             1,194,620(4)    15.7       50,099       18.5          --      1,695,610(4)        20.9
C/o Richter Investment Corp.
450 Park Ave., 28th Floor
New York, NY 10022

Kenneth L. Blum, Sr              140,000(5)     1.8        2,000        0.7          --        160,000            2.1
17133 Ericarose Street
W. Boca Raton, FL 33496

Kenneth L. Blum, Jr            1,814,750       23.8           --         --          --      1,814,750           23.8
10324 S. Dolfield Rd
Owings Mills, MD 21117

Alan S. Cohn                   1,804,750       23.7           --         --          --      1,804,750           23.7
10324 S. Dolfield Rd
Owings Mills, MD 21117

Brent D. Layton                   46,376        0.6%          --         --          --         46,376            0.6
3600 Dallas Highway, N.W
Suite 230-393
Marietta, GA 30064

Sam Oolie                        220,021(6)     2.9       24,023        8.9     100,000        560,251            7.0
Oolie Enterprises
11 Industrial Avenue
Upper Saddle River, NJ 07458

All directors and              5,414,972(3)    71.1       82,943       30.7     200,000      6,444,402           74.5
Executive officers as
a group (9 persons)
</TABLE>

*    Business Address: 3724 North Third Street, Suite 300, Phoenix, Arizona
     85012.

                                       22
<PAGE>
(1)  Includes shares of Common Stock with respect to which the identified person
     had the right to acquire beneficial ownership on or within 60 days of the
     date of the above table pursuant to the Series A Preferred or options, as
     indicated. Each share of Series A Preferred Stock indicated in the table is
     convertible into 10 shares of Common Stock and such shares of Common Stock
     are included in the total Common Stock beneficially owned.

(2)  The percentages shown include Common Stock actually owned as of the date of
     the above table and Common Stock as to which the person had the right to
     acquire beneficial ownership within 60 days of such date pursuant to the
     Series A Preferred or options, as indicated. In calculating the percentage
     of ownership, all shares of Common Stock which the identified person had
     the right to acquire within 60 days of the date of the above table are
     deemed to be outstanding when computing the percentage of Common Stock
     owned by such person but are not deemed to be outstanding when computing
     the percentage of Common Stock owned by any other person.

(3)  Includes 6.67% of the 6,337 shares of common stock and 19,412 shares of
     Series A Preferred stock held by an affiliated corporation, with respect to
     which William R. Cohen owns 6.67% of the outstanding stock.

(4)  Includes 462,500 shares of Common Stock and shares of Common Stock issuable
     upon conversion of 30,713 shares of Series A indirectly owned via an
     affiliated corporation, Richter Investment Corp. ("RIC"), which thereby
     beneficially owns in its own name 769,630 shares or 9.7% of the Company's
     Common Stock. Also includes shares of Common Stock issuable upon conversion
     of 2,500 shares of Series A Preferred and 15,169 shares of Common Stock
     held by family members, as to which Mr. Richter disclaims beneficial
     ownership.

(5)  Mr. Blum's spouse holds the shares.

(6)  Includes 20% of the 6,337 shares of common stock and 19,412 shares of
     Series A Preferred stock held by an affiliated corporation, with respect to
     which Mr. Oolie owns 20% of the outstanding stock. Also includes 8,679
     shares owned by Mr. Oolie's wife, as to which Mr. Oolie disclaims
     beneficial ownership.

                                       23
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AGREEMENTS WITH NATIONAL HEALTH ENTERPRISES, INC.

     MANAGEMENT AGREEMENT. On December 12, 1997 the Company's Board of Directors
agreed to extend the term of the Company's Management Agreement with NHE to
March 18, 2003. Also, effective March 18, 1998, the Company's Board of Directors
agreed to increase the cash compensation paid to NHE under the Management
Agreement by $50,000 per year to $250,000 per year. On May 3, 1999, the
Company's Board of Directors agreed to increase the cash compensation paid to
NHE under the Management Agreement by an additional $50,000 per year to $300,000
per year. Messrs. Blum Sr., Blum Jr. and Cohn abstained from voting because of
their relationship with National Health Enterprises. The later increase became
effective as of June 1, 1999.

     STOCK OPTION GRANT. Pursuant to the Management Agreement, on March 18,
1993, the Company issued options (the "Options") to NHE for the purchase of up
to 4,400,000 shares of the Company's Common Stock. Also pursuant to the
Management Agreement, the Company entered into a Registration Rights Agreement
effective March 18, 1993 with NHE, Mr. Blum, Jr. and Mr. Cohn.

     During August 1998, Messrs. Blum, Jr., Cohn and Richter (to whom NHE had
transferred a portion of their options) exercised all of their outstanding
options from the March 18, 1993 Stock Option Grant. See Item 5 - "Market for
Common Stock and Related Stockholder Matters - Recent Sales of Unregistered
Securities."

     MARKETING AGREEMENT. Effective March 18, 1993, the Company and NHE entered
into a Marketing Representation Agreement (the "Marketing Agreement") pursuant
to which NHE is entitled to receive a commission equal to 7 1/2% of the
enrollment fees (as defined) from Sponsor contracts generated by NHE. The
Company also agreed to pay NHE commissions equal to 2 1/2% of the enrollment
fees from Sponsor contracts with respect to which NHE provides marketing
assistance in procuring the contract, but does not itself generate the initial
Sponsor contact. The term of the Marketing Agreement is coextensive with that of
the Management Agreement. During the year ended December 31, 2000, the
Transition Period and year ended May 31, 1999, the Company paid approximately
$149,000, $155,200 and $310,000, respectively, to NHE under the Marketing
Agreement. For the year ended December 31, 2000, the Transition Period and year
ended May 31, 1999, the Company paid approximately $13,700, $10,000 and $13,400,
respectively, in reimbursable marketing expenses to NHE under the Marketing
Agreement.

                                       24
<PAGE>
REAL ESTATE LEASE

     On June 3, 1999, the Company entered into a lease agreement with KA Real
Estate Associates, LLC, for office space in Owings Mills, Maryland. KA Real
Estate Associates, LLC is owned by Messrs. Cohn and Blum, Jr. The Company paid
$23,393 in rent & related expenses during the year ended December 31, 2000 and
$3,060 in rent & related expenses during the Transition Period. See Item 2 -
"Description of Properties."

INVESTMENT BANKING SERVICES

     On April 23, 1998, the Company entered into a Supplemental Agreement with
Richter & Co., Inc. ("RCI") for Investment Banking services related to the
Exchange Offer for the Company's Series 2 Preferred shares. RCI received cash
consideration of $50,000 and 250,000 shares of the Company's Common Stock. RCI
assigned 100,000 shares of the Company's Common Stock received under this
agreement to William L. Richter.

     On May 3, 1999, the Company's Board of Directors approved a cash payment to
Richter & Co., Inc. at an annual rate of $30,000 under the Investment Banking
Agreement. Mr. Richter abstained from voting due to his relationship to Richter
& Co., Inc. The payment commenced as of June 1, 1999. Richter & Co., Inc. was
merged into its parent company, Richter Investment Corp., as of December 31,
1999. The Investment Banking Agreement was modified to reflect the fact that
Richter Investment Corp. is not a broker-dealer.

     During the year ended December 31, 2000, Richter Investment Corp. received
a fee of $14,906 under the Investment Banking Agreement for services rendered
related to the Southern States Eye Care, LLC asset acquisition.

SOFTWARE DEVELOPMENT SERVICES

     During fiscal 1995, the Company contracted with National Computer Services,
Inc. ("NCS") to develop software related to the Company's vision, dental and
hearing programs. The Company did not pay any development fees related to the
software during the year ended December 31, 2000, the Transition period and the
year ended May 31, 1999. Additionally, the Company has contracted with NCS to
lease its computer system for approximately $1,000 per month. The Company paid
$12,000 of computer lease charges for the year ended December 31, 2000, $7,000
of computer lease charges for the Transition period and $12,000 of computer
lease charges for the year ended May 31, 1999. The Company terminated its
computer system lease agreement with NCS as of January 31, 2001. Kenneth L.
Blum, Jr., a Director, is President and a stockholder of NCS and the son of
Kenneth L. Blum, Sr., the former Acting President and CEO, and a Director of the
Company.

                                       25
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  See Exhibit Index following the Signatures page which Index is
          incorporated herein by reference.

     (b)  Reports on Form 8-K.

          No reports on Form 8-K were filed during the last quarter of the
          period covered by this report.

                                       26
<PAGE>
SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        AVESIS INCORPORATED

Date April 5, 2001                      By: /s/ Alan S. Cohn
     --------------                        ------------------------------------
                                            Alan S. Cohn
                                            President and CEO (Principal
                                            Executive Officer)

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signature                             Title                            Date
---------                             -----                            ----

/s/ Alan S. Cohn             President, CEO (Principal             April 5, 2001
------------------------     Executive Officer) and Director
Alan S. Cohn


/s/ Joel H. Alperstein       Treasurer and                         April 5, 2001
------------------------     Chief Financial Officer
Joel H. Alperstein           (Principal Financial Officer)


/s/ Shannon R. Barnett       Controller                            April 5, 2001
-----------------------      (Principal Accounting Officer)
Shannon R. Barnett


/s/ William R. Cohen         Co-Chairman of the                    April 5, 2001
----------------------       Board of Directors
William R. Cohen

/s/ William L. Richter       Co-Chairman of the                    April 5, 2001
------------------------     Board of Directors
William L. Richter

/s/ Kenneth L. Blum, Sr.     Director                              April 5, 2001
------------------------
Kenneth L. Blum, Sr.

/s/ Kenneth L. Blum, Jr.     Corporate Secretary and               April 5, 2001
------------------------     Director
Kenneth L. Blum, Jr.

/s/ Gerald L. Cohen          Director                              April 5, 2001
----------------------
Gerald L. Cohen

/s/ Brent D. Layton          Director                              April 5, 2001
-----------------------
Brent D. Layton

                                       27
<PAGE>
                               AVESIS INCORPORATED
                                  EXHIBIT INDEX
                                   FORM 10-KSB
                      FOR THE YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
EXHIBIT NO.         EXHIBIT                                     INCORPORATED BY REFERENCE FROM THE:
-----------         -------                                     -----------------------------------
<S>            <C>                                              <C>
    3.1        Amended and Restated Certificate of              Company's Registration Statement on Form
               Incorporation of the Company, as amended         S-1 (File No. 33-17217) filed January
                                                                12, 1988, and declared effective January 12, 1988.

    3.2        Bylaws of the Company                            Company's Registration Statement on Form
                                                                S-18 (File No. 33-6366-LA) filed July
                                                                11, 1986 and declared effective July 14, 1986.

    3.3        Amendments to Bylaws adopted December 6,         Company's Annual Report on Form 10-K for
               1991                                             the year ended May 31, 1992 (File No. 1-9758).

    3.4        Amendments to Bylaws adopted February            Company's Report on Form 10-KSB for the
               15, 2000                                         transition period ended December 31, 1999
                                                                (File No. 0-15304)

    3.5        Certificate of Amendment of the                  Company's Report on Form 10-QSB for the
               Certificate of Incorporation of the              quarter ended June 30, 2000 (File No. 0-15304)
               Company

    4.1        Statement of Designations, Preferences,          Company's Registration Statement on Form
               Privileges, Voting Powers, Restrictions,         S-l filed May 17, 1989 (File No. 33-28756).
               Qualifications and Rights of the Series
               2 Preferred

    4.2        Specimen Certificate representing $.0l           Company's Registration Statement on Form
               par value Common Stock                           S-18 (File No. 33-6366-LA) filed July
                                                                11, 1986 and declared effective July 14, 1986.

    4.3        Specimen Certificate representing $10            Amendment No. l to the Company's
               Class A Nonvoting Cumulative Convertible         Registration Statement on Form S-l filed
               Preferred Stock, Series 2                        June 29, 1989 (File No. 33-28756).

    4.4        Statement of Designations, Preferences,          Company's Schedule 13E-4 filed April 27, 1998
               Privileges, Voting Powers, Restrictions          (Annex A).
               and Qualifications of the Series A
               Preferred

   10.1        Incentive Stock Option Plan of the               Company's Registration Statement on Form
               Company, as amended                              S-1 (File No. 33-17217) filed January
                                                                12, 1988, and declared effective January 12, 1988.

   10.2        401(k) Plan of the Company                       Company's annual report on Form 10-K for
                                                                the year ended May 31, 1989 (File No. 1-9758).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.         EXHIBIT                                     INCORPORATED BY REFERENCE FROM THE:
-----------         -------                                     -----------------------------------
<S>            <C>                                              <C>
   10.3        Management Agreement dated March 18,             Company's report on Form 8-K dated March 18, 1993
               1993 between the Company and NHE                 (File No. 1-9758).

   10.4        Stock Option Grant to NHE dated March            Company's report on Form 8-K dated March 18, 1993
               18, 1993 relating to options for the             (File No. 1-9758).
               purchase of 4,400,000 shares of the
               Company's Common Stock

   10.5        Subordinated Promissory Note dated March         Company's report on Form 8-K dated March 18, 1993
               18, 1993 in the amount of $80,000                (File No. 1-9758).
               payable by the Company to Mr. and Ms.
               Blum

   10.6        Subordinated Promissory Note dated March         Company's report on Form 8-K dated March 18, 1993
               18, 1993 in the amount of $80,000                (File No. 1-9758).
               payable by the Company to Mr. and Mrs.
               Cohn

   10.7        Registration Rights Agreement dated              Company's report on Form 8-K dated March 18, 1993
               March 18, 1993 among NHE, Mr. Blum, and          (File No. 1-9758).
               Alan S. Cohn

   10.8        Marketing Agreement dated March 18, 1993         Company's report on Form 8-K dated March 18, 1993
               between the Company and NHE                      (File No. 1-9758).


   10.9        Option Transfer Documents dated March            Company's report on Form 8-K dated March 18, 1993
               31, 1993                                         (File No. 1-9758).

   10.10       Stock Purchase Warrant issued to Richter         Company's report on Form 8-K dated March 18, 1993
               & Co., Inc. dated March 18, 1993 for the         (File No. 1-9758).
               purchase of 240,000 shares of the
               Issuer's Common Stock

   10.11       Stock Purchase Warrant issued to William         Company's report on Form 8-K dated March 18, 1993
               L. Richter dated March 18, 1993 for the          (File No. 1-9758).
               purchase of 160,000 shares of the
               Issuer's Common Stock

   10.12       1993 Stock Option Plan                           Company's annual report on Form 10-KSB for the
                                                                year ended May 31, 1993 (File No. 1-9758).


   10.13       Lease Agreement between the Company and          Company's Report on Form 10-QSB for the three
               Phoenix City Square                              months ended February 28, 1995 (File No. 1-9758).


   10.14       Fee Agreement between the Company and            Company's Report on Form 10-QSB for the three
               Richter & Co., Inc.                              months ended February 28, 1995 (File No. 1-9758).


   10.15       Software Development Agreement between           Company's Report on Form 10-QSB for the three
               the Company and National Computer                months ended August 31, 1995 (File No. 1-9758).
               Services, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.         EXHIBIT                                     INCORPORATED BY REFERENCE FROM THE:
-----------         -------                                     -----------------------------------
<S>            <C>                                              <C>
   10.16       Litigation Agreement between the Company         Company's Report on Form 10-KSB for the year
               and Ken Blum, Sr., Ken Blum, Jr., and            ended May 31, 1997 (File No. 0-15304).
               Alan Cohn

   10.17       Sublease Agreement between the Company           Company's Report on Form 10-KSB for the year
               and InfoImage, Inc.                              ended May 31, 1997 (File No. 0-15304).


   10.18       Lease Agreement between the Company and          Company's Report on Form 10-KSB for the year
               Principal Mutual Life Insurance Company          ended May 31, 1997 (File No. 0-15304).


   10.19       Supplemental Agreement to the December           Company's Report on Form 10-KSB for the year
               5, 1994 Investment Banking Agreement             ended May 31, 1998 (File No. 0-15304).


   10.20       Lease Agreement between the Company and          Company's Report on Form 10-KSB for the
               KA Leasing, LLC                                  transition period ended December 31, 1999 (File
                                                                No. 0-15304)

   10.21       Modified Investment Banking Agreement            Company's Report on Form 10-KSB for the
                                                                transition period ended December 31, 1999 (File
                                                                No. 0-15304)

   10.22       Lease Agreement between AbsoluteCare,            Company's Report on Form 10-QSB for the quarter
               Inc. and NORO-Broadview Holding Company,         ended September 30, 2000 (File No. 0-15304)
               B.V.

   11          Statement recomputation of per-share             Earnings (Loss) per Share Computation, see Note 7
               earnings                                         to the Notes to Consolidated Financial
                                                                Statements.

   21          Subsidiary of Registrant                         Filed herewith
</TABLE>