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 May 31, 1999 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 Identification No.)
incorporation or organization)

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 [ ]
<PAGE>
     Check if 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. [ ]

     State issuer's revenues for its most recent fiscal year: $10,206,467.

     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 August 2, 1999 was $966,700. 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 August
2, 1999 was 7,356,297.

     Transitional Small Business Disclosure Format (check one):  Yes [ ]  No [X]
<PAGE>
                               AVESIS INCORPORATED
                            FORM l0-KSB ANNUAL REPORT
                             YEAR ENDED MAY 31, 1999

                                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......  13
ITEM 7.     Financial Statements ..........................................  17
ITEM 8.     Changes In and Disagreements with Accountants on Accounting
              and Financial Disclosure ....................................  18


                              PART III

ITEM 9.     Directors, Executive Officers, Promoters, and Control Persons;
              Compliance with Section 16(a) of the Exchange Act............  18
ITEM 10.    Executive Compensation ........................................  22
ITEM 11.    Security Ownership of Certain Beneficial Owners and
              Management ..................................................  24
ITEM 12.    Certain Relationships and Related Transactions.................  26
ITEM 13.    Exhibits and Reports on Form 8-K ..............................  28
SIGNATURES ................................................................  29
<PAGE>
                                     PART I

ITEM I. DESCRIPTION OF BUSINESS

GENERAL

     Avesis Incorporated, a Delaware corporation (together with its subsidiary,
Avesis of Washington, D.C., Inc., collectively the "Company"), incorporated in
June 1978, 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 opticians, optometrists, ophthalmologists,
dentists, chiropractors and hearing specialists ("Providers").

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

                                            Fiscal Years Ended May 31,
                                            --------------------------
                                              1999             1998
                                              ----             ----

Vision and Hearing Program                     87%              80%
Dental Program                                 13%              20%


VISION PROGRAM

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

     Under the Company's 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.

                                       1
<PAGE>
     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
     ------------    -------------------   ----------------    -----------------
     May 31, 1999           5,151                 45                817,000
     May 31, 1998           4,550                 48                649,000

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,
above 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.

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 the Member's spouse,
children, parents and grandparents.

                                       2
<PAGE>
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
     ------------    -------------------   ----------------    -----------------
     May 31, 1999           8,397                 42                144,000
     May 31, 1998          10,683                 43                148,000

Included in the number of providers in the table above as of May 31, 1998 are
5,553 providers who participate in a third party's Provider network. The Company
had a network rental agreement that allowed Members to utilize the services of
the third party's Provider network that ended during fiscal 1999. As of August
13, 1999 the Company had 8,940 providers participating in its Dental Program.

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. The Company derived
its first revenues from the Chiropractic Program in the first quarter of fiscal
1997. Although the Company has not generated significant revenues from the
Chiropractic Program, Management believes the Program is important as 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 since
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.

     Two major Sponsors accounted for 48% and 14% of total service revenues in
fiscal 1999 and three major Sponsors accounted for 28%, 15% and 10% in fiscal
1998. Two of the three major Sponsors accounted for separately during fiscal
1998 were combined during fiscal 1999 to be one major Sponsor. The Company is
substantially dependent on a limited number of Sponsors and may be materially
adversely affected by termination of its agreements with Sponsors.

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, 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 August 2, 1999, the Company had 47 full-time and 2 part-time
employees, compared to 42 full-time and 2 part-time employees as of August 10,
1998. The Company believes that its relationship with its employees is good.

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.
On December 16, 1998, the Company entered into a lease agreement to expand its
current principal office location by approximately 3,200 square feet to 9,900
square feet. The term of the lease will run concurrently with the current lease
on the principal office location 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. 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 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. For the years ended May 31, 1999 and 1998, rent expense
related to the subleased premises was $169,426 and $159,623, respectively, and
sublease rental income was $168,071 and $161,720, respectively.

                                       6
<PAGE>
     The Company maintains sales and administrative offices at 11460 Cronridge
Drive, Suite 118, Baltimore, Maryland 21117 and at 5321 First Place NE,
Washington, D.C. 20011. The offices are used pursuant to verbal agreements with
the lessees that are terminable at will and are 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.

ITEM 3. LEGAL PROCEEDINGS

     Not applicable.


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

     Not applicable.

                                       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. 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 fiscal 1998 and 1999. 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 fiscal 1998 or fiscal 1999 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.

                                        Series 2 Shares         Common Stock
                                        ---------------         ------------
                                      Bid Quotation Range    Bid Quotation Range
                                      -------------------    -------------------

Fiscal Year 1998                       High         Low        High       Low
----------------                       ----         ---        ----       ---
First Quarter ended Aug. 31, 1997     $1.25       $1.25      $0.25     $0.1875
Second Quarter ended Nov. 30, 1997     1.25        1.00       0.21875   0.15625
Third Quarter ended Feb. 28, 1998      1.125       1.0625     0.27      0.1875
Fourth Quarter ended May 31, 1998      1.125       1.125      0.27      0.1875


Fiscal Year 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

                                       8
<PAGE>
1998 EXCHANGE OFFER

     During fiscal 1998 the Company completed an Exchange Offer which offered
one share of its Class A Senior Nonvoting Cumulative Convertible Preferred
Stock, Series A ("Series A Shares"), for each outstanding share of the Class A
Nonvoting Cumulative Convertible Preferred Stock, Series 2 ("Series 2 Shares")
of the Company. The purpose of this offer was to eliminate or significantly
reduce the number of Series 2 Shares outstanding including the related dividend
arrearage and to adjust the Company's capital structure.

     The Exchange Offer expired on May 27, 1998, and resulted in the tendering
of 317,880 (approximately 82%) of the 388,180 then outstanding Series 2 Shares
for the Series A Shares.

     Series 2 Shares are entitled to receive a cumulative dividend at an annual
rate of 9% of the face value of $10.00 ($0.90 per share). Each share is
currently convertible into 2.5 shares of the Company's Common Stock. Series A
Shares are entitled to receive a cumulative dividend at an annual rate of
$0.3375 per share paid semi-annually and each share is currently convertible
into 10 shares of the Company's Common Stock.

     The exchange of the Series 2 Shares pursuant to the Exchange Offer and the
Company's repurchase program, under which it repurchased and retired 64,300
Series 2 Shares at $3.00 per share during fiscal 1999, significantly reduced the
number of the Series 2 Shares that trade publicly and the number of holders of
the shares. These reductions may adversely affect the liquidity and the "pink
sheet" market value of remaining Series 2 Shares. At the same time, there is no
assurance that any market will develop for the Series A Shares issued pursuant
to the Exchange Offer.

     As of August 2, 1999, there were 7,356,297 shares of the Common Stock
outstanding held by approximately 165 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.

                                       9
<PAGE>
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. 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.

RECENT SALES OF UNREGISTERED SECURITIES

     On May 27, 1998, the Company's Offer to Exchange one share of Class A,
Senior Nonvoting Cumulative Convertible Preferred Stock, Series A, par value
$.01 for each outstanding share of Class A, Nonvoting Cumulative Convertible
Preferred Stock, Series 2, par value $.01 expired. The Offer resulted in 317,880
of the 388,180 outstanding Series 2 Shares being exchanged for the Series A
Shares.

     The Exchange Offer was made by the Company in reliance on the exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), afforded by Section 3(a)(9) thereof and under certain
state law exemptions. The Company did not pay any commission or other
remuneration to any broker, dealer, salesman or other person for soliciting
tenders of the Series 2 Shares.

     Each Series A Share is currently convertible into 10 shares of Common
Stock. This conversion ratio is subject to adjustment for any subdivisions,
combinations or any other adjustments made to the Company's Common Stock.

     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

                                       10
<PAGE>
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. The modification expired on August 31, 1998, and all terms
returned to the original exercise terms for all unexercised stock options and
warrants.

     Pursuant to the revised terms, the following individuals exercised their
stock options or warrants during August 1998, in the following amounts at the
following exercise prices per option or warrant:

                                 Number of         Number of
                                Common Stock     Common Stock      Modified
Option/Warrant Holder              Options         Warrants     Exercise Price
---------------------              -------         --------     --------------

Alan S. Cohn                      1,054,750                         $0.31
Alan S. Cohn                        700,000                         $0.26
Kenneth L. Blum, Jr               1,064,750                         $0.31
Kenneth L. Blum, Jr                 700,000                         $0.26
William L. Richter                   50,000                         $0.31
William L. Richter                                  109,091         $0.31
William L. Richter                                   50,909         $0.26
Richter & Co., Inc.                  72,500                         $0.31
Richter & Co., Inc.                                 163,636         $0.31
Richter & Co., Inc.                                  76,364         $0.26
Gerald L. Cohen                     100,000                         $0.26
William R. Cohen                    100,000                         $0.26

     The total cash received by the Company from the exercise of the above stock
options and warrants was $1,228,657. Of the preceding amount, approximately
$400,712 was used to repurchase all 931,888 shares of the Company's common stock
held by the founder of the Company, at a price of $0.43 per share. The excess
funds received from these transactions was used as working capital.

RETIREMENT OF STOCK INFORMATION

     Subsequent to year-end the Company made the following stock repurchase:

                                                  Total Purchase Price
         Date              Series 2 Shares        including Commissions
         ----              ---------------        ---------------------
     June 29, 1999              1,000                    $3,276

                                       11
<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 each of the five fiscal years ending May
31, 1995 through 1999, have been derived from the Company's audited financial
statements. The selected financial data are included herein as additional
information.

<TABLE>
<CAPTION>
                                                           Years Ended May 31,
                                 -------------------------------------------------------------------
Selected Operating Data:            1999          1998         1997           1996           1995
                                 -----------   ----------   -----------    -----------    ----------
<S>                              <C>           <C>          <C>            <C>            <C>
Operating revenues               $10,206,467   $8,336,631   $ 5,645,276    $ 6,019,896    $6,351,106
Operating expenses                 9,300,195    8,010,021     5,739,503      6,106,694     5,986,897
Net income (loss)                  1,006,265      313,875      (190,265)      (124,859)      505,411
Net income (loss) per share of
Common Stock - Basic (1)                 .13          .06          (.13)          (.12)          .02

                                                           As of May 31,
                                 -------------------------------------------------------------------
Selected Balance Sheet Data:        1999          1998         1997           1996           1995
                                 -----------   ----------   -----------    -----------    ----------
Working capital                  $ 1,651,410   $  350,418   $   293,595    $   422,922    $  747,566
Current assets                     3,197,248    1,588,969     1,271,505        864,566     1,242,534
Total assets                       3,897,255    2,241,705     1,639,389      1,650,527     1,839,377

Current liabilities                1,545,838    1,238,551       977,910        441,644       494,968
Long term obligations                 20,368       90,475        92,044        449,183       484,850
Total liabilities                  1,566,206    1,329,026     1,069,954        890,827       979,818
Total stockholders' equity         2,331,049      912,679       569,435        759,700       859,559
</TABLE>

(1)  After provision for preferred stock dividends as follows: $107,936 in 1999;
     $63,270 in 1998 (70,300 Series 2 Shares outstanding as of May 31, 1998
     times $0.90 per share); and $349,162 in 1997, 1996 and 1995.

                                       12
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS FOR THE FISCAL
YEARS ENDED MAY 31, 1999 AND 1998:

     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 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, Year 2000 issues 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.

                                       13
<PAGE>
RESULTS OF OPERATIONS

     The following table details the Company's major revenue and expense
categories for the years ended May 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                   Year Ended                  Year Ended
                                  May 31, 1999                May 31, 1998           Increase/(Decrease)
                            --------------------------   ------------------------   ---------------------
                                             % of                        % of
                                         Total Service              Total Service
Revenue:                                    Revenue                    Revenue                   % Change
--------                                    -------                    -------                   --------
<S>                         <C>               <C>        <C>             <C>        <C>              <C>
Total Service Revenue       $10,206,467       100%       $8,336,631      100%       $1,869,836       22%
Vision & Hearing Program      7,386,670        72%        5,258,750      63%         2,127,920       40%
Vision Provider Fee             142,863        1%           124,397       1%            18,466       15%
Dental Program                1,054,660        10%        1,266,548      15%          (211,888)    (17%)
Buying Group Program          1,607,000        16%        1,655,298      20%           (48,298)     (3%)

Expenses:
Cost of Services              7,131,269        70%        6,120,416      73%         1,010,853       17%
General & Administrative      1,066,390        10%        1,121,099      14%           (54,709)     (5%)
Selling & Marketing           1,102,536        11%          768,506       9%           334,030       43%

Income from Operations          906,272        9%           326,610       4%           579,662      177%
Net Income                    1,006,265        10%          313,875       4%           692,390      221%
</TABLE>

     Past and future revenues in 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.

     The increase in the Company's total service revenues was principally due to
the growth of the Company's managed care vision products. The Company was able
to decrease operating expenses as a percentage of total service revenues in
fiscal 1999 by 5% compared to fiscal 1998 results. The Company anticipates that
the trend of decreased operating expenses as a percentage of total service
revenues will continue during fiscal 2000, due to the operational efficiencies
achieved during fiscal 1999 and the expected efficiencies to be achieved related
to the new systems currently under development.

     The increase in vision and hearing revenues primarily resulted from the
addition of a significant Sponsor, with approximately 86,000 managed care vision
Members, and the increase in the level of benefits provided to a portion of the
membership of a significant Sponsor, with approximately 100,000 affected vision
cardholders. Revenues derived from the Company's managed care programs have a
significantly higher cost of service than the revenues derived from the
Company's discount programs. There were approximately 817,000 vision and 6,000
hearing Members as of May 31, 1999, compared to approximately 649,000 vision and
6,000 hearing Members as of May 31, 1998.

                                       14
<PAGE>
     Vision provider fee revenue remained constant as a percentage of total
service revenues from fiscal 1998 to fiscal 1999.

     The decrease in Dental Program revenues resulted from a Sponsor's loss of
approximately 18,000 Members. This loss of Members was partially offset by
increases of Members from various other current Sponsors. The revenue derived
from the new Members was less than the lost revenue due to the differences in
the level of benefits provided. There were approximately 144,000 dental Members
as of May 31, 1999, compared to approximately 148,000 as of May 31, 1998.

     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.

     Cost of Services primarily relates to servicing Members, Providers and
Sponsors under the Company's vision, hearing, dental and chiropractic benefit
programs as well as the cost of frames that are sold through the Company's
buying group program as discussed above. Cost of Services and General and
Administrative Expenses continued to decrease as a percentage of total service
revenues in the current fiscal year as compared to the two prior fiscal years.
This is due to the efficiencies of scale that the Company is experiencing as its
Total Service Revenues and Member base continue to grow. Included in 1998
General and Administrative Expense is $142,000 of legal and professional fees
directly related to the Company's Offer to Exchange Series 2 Preferred shares
for Series A Preferred shares.

     Selling and marketing expenses include marketing fees, broker commissions,
employee sales and marketing salaries and related expenses, travel related to
the Company's sales activities and an allocation of other overhead expenses
relating to the Company's sales and marketing functions. The increase in
expenses in the current fiscal year resulted from the increase of commissions
directly related to the increase in administration fee revenue, the addition of
an experienced salesperson during September 1998 and the increase of travel and
related expenses to expand the Company's markets. A significant amount of the
Company's marketing activities has been outsourced to management consultants,
National Health Enterprises. See Item 12 - "Certain Relationships and Related
Transactions - Agreements with National Health Enterprises, Inc.."

     Non-operating income/(expense) was $112,993 and ($12,735) in fiscal 1999
and 1998, respectively. Included in non-operating income was $85,875 and $30,982
of interest income for the years ended May 31, 1999 and 1998, respectively. Also
included in current year non-operating income was approximately $47,000 related
to the write-off of unamortized broker's commissions and accrued rent that
related to the lease for the Company's former principal office. Prior year

                                       15
<PAGE>
non-operating expense includes $25,373 for the write-off of virtually all of the
unamortized moving expenses related to the Company's previous relocation of the
principal office.

LIQUIDITY AND CAPITAL RESOURCES

     On May 31, 1999, the Company's cash and cash equivalents were $2,599,342,
compared to $993,610 as of May 31, 1998. The increase of $1,605,732 was
primarily due to the Company's profitability, coupled with the timely
collections of accounts receivable and the favorable timing of vendor and claim
payments. The Company also received cash of $1,228,657 from the exercise of
stock options by members of the Board of Directors, which was offset by $714,016
for repurchases of capital stock throughout the year. 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 May 31, 1999, the Company had $1,364,586 of Accounts Payable,
compared to $1,106,165 in the prior fiscal year. The increase is predominately
due to claims reserves of $1,082,072 in the current year compared with $786,052
in the prior year, included in Accounts Payable. The reserves are for incurred
but not reported claim reimbursements to Providers who participate in certain
managed care programs. The Company has continued to realize significant growth
during the current year of managed vision care revenues and the associated
claims. The Company believes this reserve is adequate.

     During fiscal 1998 the Company retired the final $189,000 of Convertible
Subordinated Debentures, due December 1, 1997, and all $160,000 of subordinated
notes payable to certain affiliates due March 18, 1998, with funds provided by
operations.

     The Company expects to pay dividends of approximately $50,821 on the Series
A Shares to holders of record on November 30, 1999.

YEAR 2000 COMPLIANCE

     The Year 2000 issue is the result of computer systems that were written
using two digits rather than four to define the applicable year. This
programming decision may prevent such systems from accurately processing dates
occurring in the Year 2000 and thereafter. This could result in system failures
or in miscalculations causing a disruption of operations, including, but not
limited to, a temporary inability to process Member eligibility information, to
process claims payments, or to engage in routine business activities and
operations.

                                       16
<PAGE>
     During July 1997 the Company contracted with a third party vendor to
develop new systems to support the Company's claims payment, customer and
provider service, quality assurance and network development functions. As of
August 1999, the new system was in the implementation phase and is expected to
be fully implemented as of September 1, 1999. As of May 31, 1999, the Company
had paid approximately $384,000 for software development and related hardware,
which was properly capitalized. The Company expects to incur approximately
$100,000 of additional software development and related hardware expenses during
fiscal 2000.

     The Company has reviewed all internally used software and believes that its
systems that have recently been developed and are currently under testing and
all other critical applications are Year 2000 compliant. Based upon its current
computer operations and systems development, the Company believes that its risks
related to Year 2000 compliance are minimal. The Company does not presently
anticipate that any additional costs to address the Year 2000 issue will have a
material adverse effect on the Company's financial condition, results of
operations or liquidity.

     The Company is in the process of contacting all vendors and clients who
forward data electronically to determine the extent of their compliance and to
plan accordingly. Based upon information received from third parties, the
Company believes that all significant vendors and clients have Year 2000
remediation efforts underway. The Company's five largest Sponsors that
collectively account for greater than 90% of the total administration fee
revenue, either electronically transmit data using a four digit year or forward
data in a hard copy format. To the extent that the Company's vendors and clients
data are not Year 2000 compliant, the Company's new systems have been written
with the flexibility to translate the data accordingly into a Year 2000
compliant format. While the Company believes that its risks related to
disruption arising from Year 2000 compliance by vendors and its clients are
minimal, it does not have any control over these third parties and cannot
determine to what extent future operating results may be adversely affected by
the failure of third parties to successfully address Year 2000 issues.

ITEM 7. FINANCIAL STATEMENTS

     Financial Statements appear commencing at page F-1 immediately hereafter.

                                       17
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                        Consolidated Financial Statements

                              May 31, 1999 and 1998

                   (With Independent Auditors' Report Thereon)
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Avesis Incorporated:

We  have  audited  the  accompanying   consolidated   balance  sheet  of  Avesis
Incorporated  and  subsidiary as of May 31, 1999,  and the related  consolidated
statements of earnings, stockholders' equity, and cash flows for the years ended
May  31,  1999  and  1998.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Avesis Incorporated
and subsidiary as of May 31, 1999, and the results of their operations and their
cash flows for each of the years in the two-year  period ended May 31, 1999,  in
conformity with generally accepted accounting principles.


                                        /s/ KPMG LLP


Phoenix, Arizona
July 16, 1999

                                       F-1
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                           Consolidated Balance Sheet

                                  May 31, 1999

                                     ASSETS

Current assets:
  Cash and cash equivalents                                         $ 2,599,342
  Receivables, net                                                      341,005
  Prepaid expenses and other                                            256,901
                                                                    -----------
        Total current assets                                          3,197,248

Property and equipment, net                                             466,088
Deposits                                                                233,919
                                                                    -----------
                                                                    $ 3,897,255
                                                                    ===========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                  $ 1,364,586
  Current installments of obligations under capital lease                10,288
  Accrued expenses:
     Compensation                                                        75,232
     Other                                                               32,709
  Dividends payable                                                      50,821
  Deferred income                                                        12,202
                                                                    -----------
        Total current liabilities                                     1,545,838

  Obligations under capital lease, excluding current installments        20,368
                                                                    -----------
        Total liabilities                                             1,566,206
                                                                    -----------
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
      1,000,000 shares; 301,160 and outstanding
      (liquidation preference of $3.75 per share)                         3,012
    $10 Class A, nonvoting cumulative convertible preferred stock,
      Series 2, $.01 par value; authorized 1,000,000 shares;
      6,000 shares issued and outstanding (liquidation preference
      of $10 per share) and $35,100 of dividends in arrears at
      $5.85 per share; dividends accrue at $.225 per share each
      calendar quarter                                                       60
    Common stock of $.01 par value, authorized 20,000,000 shares;
      7,356,297 shares issued and outstanding                            73,563
  Additional paid-in capital                                         10,461,420
  Accumulated deficit                                                (8,207,006)
                                                                    -----------
        Total stockholders' equity                                    2,331,049

Commitments and contingencies (notes 4, 10, 11, 12 and 13)
                                                                    -----------
                                                                    $ 3,897,255
                                                                    ===========

See accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                       Consolidated Statements of Earnings

                        Years ended May 31, 1999 and 1998


                                                      1999             1998
                                                   ------------    ------------
Service revenues:
  Administration fees                              $  8,447,735       6,550,966
  Buying group                                        1,607,000       1,655,298
  Provider fees                                         142,863         124,397
  Other                                                   8,869           5,970
                                                   ------------    ------------
    Total service revenues                           10,206,467       8,336,631

Cost of services                                      7,131,269       6,120,416
                                                   ------------    ------------
    Income from services                              3,075,198       2,216,215

General and administrative expenses                   1,066,390       1,121,099

Selling and marketing expenses                        1,102,536         768,506
                                                   ------------    ------------
    Income from operations                              906,272         326,610
                                                   ------------    ------------
Non-operating income (expense):
  Interest income                                        85,875          30,982
  Interest expense                                       (3,960)        (19,305)
  Other                                                  31,078         (24,412)
                                                   ------------    ------------
    Total non-operating expense                         112,993         (12,735)
                                                   ------------    ------------
    Income before income taxes                        1,019,265         313,875

Income taxes                                            (13,000)             --
                                                   ------------    ------------
    Net income                                        1,006,265         313,875

Preferred stock dividends                              (107,936)        (63,270)
                                                   ------------    ------------
    Net income available to common stockholders    $    898,329         250,605
                                                   ============    ============
Earnings per share - basic                         $       0.13            0.06
                                                   ============    ============
Earnings per share - diluted                       $       0.10            0.06
                                                   ============    ============
Weighted average common and equivalent
  shares outstanding - basic                          6,788,944       4,073,918
                                                   ============    ============
Weighted average common and equivalent
  shares outstanding - diluted                        9,902,713       5,089,657
                                                   ============    ============

See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                 Consolidated Statements of Stockholders' Equity

                        Years ended May 31, 1999 and 1998


<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, 1997            $        --          3,882        41,004      9,949,159     (9,424,610)      569,435

Repurchase of 79,294 shares
  of common stock                         --             --          (793)       (19,838)            --       (20,631)

Exchange offer (Series 2 for
  Series A preferred)                  3,179         (3,179)           --             --             --            --

Issuance of 250,000 shares of
  common stock in connection
  with the Supplemental
  Investment Banking Agreement            --             --         2,500         47,500             --        50,000

Net income                                --             --            --             --        313,875       313,875
                                 -----------    -----------   -----------    -----------    -----------   -----------
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, 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
                                 ===========    ===========   ===========    ===========    ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                        Years ended May 31, 1999 and 1998


                                                         1999          1998
                                                      -----------   -----------
Cash flows from operating activities:
  Net income                                          $ 1,006,265       313,875
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                       124,538       112,071
      Provision for losses of accounts receivable          11,283         9,898
      Loss on disposal of fixed assets                     18,245         2,124
      Common stock issued for professional services            --        50,000
      Increase (decrease) in cash resulting from
        changes in:
        Receivables                                       127,620      (149,450)
        Prepaid expenses and other                       (141,450)       (1,837)
        Deposits                                            9,590       (60,626)
        Accounts payable                                  258,421       641,788
        Deferred income                                    (4,746)       (6,284)
        Accrued rent                                      (92,827)      (16,842)
        Accrued expenses                                   36,278       (53,125)
        Dividend payable                                   50,821            --
                                                      -----------   -----------
          Net cash provided by operating activities     1,404,038       841,592
                                                      -----------   -----------
Cash flows from investing activities:
  Purchases of property and equipment                    (209,389)     (294,307)
  Proceeds from dispositions of property
    and equipment                                           9,745         5,000
                                                      -----------   -----------
          Net cash used in investing activities          (199,644)     (289,307)
                                                      -----------   -----------
Cash flows from financing activities:
  Payment of dividend on preferred stock                 (102,536)           --
  Repayment of convertible subordinated debentures             --      (189,000)
  Payments for repurchase of common stock                (714,016)      (20,631)
  Proceeds from exercise of stock options
    and warrants                                        1,228,657            --
  Repayment of shareholder notes payable                       --      (160,000)
  Principal payments under capital lease obligations      (10,767)       (6,579)
                                                      -----------   -----------
          Net cash provided by/(used in) financing
            activities                                    401,338      (376,210)
                                                      -----------   -----------
          Net increase in cash and cash equivalents     1,605,732       176,075

Cash and cash equivalents, beginning of year              993,610       817,535
                                                      -----------   -----------
Cash and cash equivalents, end of year                $ 2,599,342       993,610
                                                      ===========   ===========
Supplemental information:
  Cash paid for interest                              $     3,960        20,118
                                                      ===========   ===========
  Equipment acquired under capital lease              $        --        48,002
                                                      ===========   ===========

See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  NATURE OF BUSINESS AND CONSOLIDATION POLICY

          Avesis  Incorporated,  a Delaware  Corporation,  and its  wholly-owned
          subsidiary,  Avesis  of  Washington,  D.C.,  a  District  of  Columbia
          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
          consolidated  financial  statements  include  the  accounts  of Avesis
          Incorporated   and  its  wholly-owned   subsidiary.   All  significant
          intercompany   balances  and  transactions  have  been  eliminated  in
          consolidation.

     (b)  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.

     (c)  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.

     (d)  REVENUE RECOGNITION

          Administrative  fee revenue is  recognized  on the accrual  basis,  in
          accordance with generally accepted accounting  principles,  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.

     (e)  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.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     (f)  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.

     (g)  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.

          Prior to June 1, 1996, the Company accounted for its stock option plan
          in  accordance  with the  provisions of  Accounting  Principles  Board
          ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,  and
          related interpretations. As such, compensation expense was recorded on
          the date of grant only if the current  market price of the  underlying
          stock  exceeded  the  exercise  price.  On June 1, 1996,  the  Company
          implemented  SFAS No. 123,  ACCOUNTING FOR  STOCK-BASED  COMPENSATION,
          which permits entities to recognize as expense over the vesting period
          the  fair  value  of all  stock-based  awards  on the  date of  grant.
          Alternatively,  SFAS No. 123 also allows entities to continue to apply
          the  provisions of APB Opinion No. 25 and provide pro forma net income
          and pro forma earnings per share disclosures for employee stock option
          grants made in 1996 and  subsequent  years as if the  fair-value-based
          method  defined  in SFAS No. 123 had been  applied.  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.

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

          The  Company  reviews  long-lived  assets  and  certain   identifiable
          intangibles are reviewed 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 net 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  exceed 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.

     (i)  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.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     (j)  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.

     (k)  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 May
          31, 1999.

     (l)  SEGMENT REPORTING

          The Company  has one  operating  business  segment  which  markets and
          administers vision, hearing, dental and chiropractic programs.

(2)  RECEIVABLES

     As of May 31, 1999 receivables consists of:

          Trade accounts receivable                                  $  382,038
          Less allowance for doubtful accounts                          (41,033)
                                                                     ----------
                                                                     $  341,005
                                                                     ==========

(3)  PROPERTY AND EQUIPMENT

     As of May 31, 1999 property and equipment consists of:

          Furniture and fixtures                                     $  267,946
          Equipment                                                     805,197
          Software                                                      370,486
                                                                     ----------
                                                                      1,443,629
          Less accumulated depreciation and amortization                977,541
                                                                     ----------
                                                                     $  466,088
                                                                     ==========

(4)  LEASES

     The Company leases office space under an agreement which expires  September
     30, 2002. Until October 1997, the Company  maintained its executive offices
     at a different location. The lease agreement was set to expire on September
     30,  2000.  On October 29, 1996,  the Company  entered into an agreement to
     sublease the space until the expiration of the Company's  lease  agreement.
     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
     Company's former principal office.  The Company also leases equipment under
     long-term operating lease agreements.  For the years ended May 31, 1999 and
     1998,  rent expense for all  operating  leases was  $185,785 and  $159,224,

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     respectively.  For the years  ended May 31,  1999 and 1998,  sublease  rent
     expense was $169,426 and $159,623, respectively, and sublease rental income
     was $168,071 and $161,720, respectively.

     The Company is obligated  under one capital lease for  telephone  equipment
     that  expires  in  October  2001.  As of May 31,  1999 the gross  amount of
     equipment and  accumulated  depreciation  recorded under this capital lease
     was $48,002 and $16,000, respectively.

     The Company records rent expense using the  straight-line  method.  For the
     lease that expires September 30, 2002, there is no difference  between rent
     expense and actual rent paid.

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

                                                        CAPITAL       OPERATING
                                                         LEASE         LEASES
                                                       ----------    ----------
     Years ending May 31:
         2000                                          $   14,731    $  208,625
         2001                                              14,731       178,128
         2002                                               4,911       179,899
         2003                                                  --        86,007
         2004                                                  --        26,569
         Thereafter                                            --        12,394
                                                       ----------    ----------
              Total future minimum lease payments          34,373    $  691,622
                                                                     ==========

      Less amount representing interest (at 10.4%)          3,717
                                                       ----------
      Present value of net minimum lease payments          30,656

      Less current installments of obligations
        under capital lease                                10,288
                                                       ----------
      Obligations under capital lease, excluding
        current installments                           $   20,368
                                                       ==========

(5)  INCOME TAXES

     For the year ended May 31, 1999, income tax expense amounted to $13,000. No
     income tax benefit was recorded  for the year ended May 31, 1998.  This was
     due  to  the  establishment  of a  100%  valuation  allowance  against  the
     Company's  deferred tax assets because of the  uncertainty  surrounding the
     Company's ability to realize its net operating loss carryforwards.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     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 years  ended May 31, 1999 and
     1998 are as follows:

                                                          1999          1998
                                                      -----------   -----------
     Computed "expected" federal income tax expense   $   346,550        80,325
     Change in valuation allowance                       (350,117)     (129,660)
     Other                                                 16,567        49,335
                                                      -----------   -----------
                                                      $    13,000            --
                                                      ===========   ===========

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

       Deferred tax assets:
         Net operating loss carryforwards (NOL)                     $ 2,075,667
         Accrued expenses and other                                      37,819
         Property and equipment                                         (14,199)
         Valuation allowance                                         (2,099,287)
                                                                    -----------
           Net deferred tax assets                                  $        --
                                                                    ===========

     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
     May  31,  1999  and  1998  was  a  decrease  of  $290,868   and   $361,945,
     respectively.

     The Company's federal NOLs of approximately  $6,100,000 expire between 2004
     and 2013.

(6)  COMMON STOCK

     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  repurchase,  the
     Company retired these shares.

     During the year ended May 31, 1998, the Company  repurchased  79,294 shares
     of  common  stock  for  prices  ranging  from  $0.25  to $0.27  per  share.
     Subsequent to the repurchase, the Company retired these shares.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


(7)  EARNINGS PER SHARE

     A summary of the  reconciliation  from basic  earnings per share to diluted
     earnings per share for the years ended May 31, 1999 and 1998 follows:

                                                         1999          1998
                                                      -----------   -----------
      Net earnings                                    $ 1,006,265       313,875
      Less: preferred stock dividends                    (107,936)      (63,270)
                                                      -----------   -----------
      Income available to common stockholders         $   898,329       250,605
                                                      ===========   ===========
      Basic EPS - weighted average
        shares outstanding                              6,788,944     4,073,918
                                                      ===========   ===========
      Basic earnings per share                        $      0.13          0.06
                                                      ===========   ===========
      Basic EPS - weighted average
        shares outstanding                              6,788,944     4,073,918

      Effect of diluted securities:
        Convertible debentures                                 --        19,162
        Convertible preferred stock                     3,113,769       996,577
                                                      -----------   -----------
      Dilutive EPS - weighted average
        shares outstanding                              9,902,713     5,089,657

      Net earnings                                      1,006,265       313,875
      Interest expense on non-CSE debt                         --         8,978
                                                      -----------   -----------
                                                        1,006,265       322,853

      Diluted earnings per share                      $      0.10          0.06
                                                      ===========   ===========

(8)  STOCK OPTION PLANS AND WARRANTS

     In 1993 the Company  adopted a stock  option plan (the  "Plan").  The stock
     option plan sets aside 600,000 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 May 31, 1999, there were 170,000  incentive  options
     outstanding  under this plan (of which 113,333 were  exercisable  at $0.48)
     and 310,000  nonqualified  options  exercisable at prices ranging from $.40
     -$1.00 per share.

     In connection  with the Long-Term  Management  Agreement,  National  Health
     Enterprises,  Inc. of Owing 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.

                                      F-11                           (Continued)
<PAGE>
                       AVESIS INCORPORATED AND SUBSIDIARY

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     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 years  ended May 31, 1999 and
     1998 follows:

                                                                     PRICE PER
                                                       OPTIONS        OPTION
                                                     -----------    -----------
     Balance outstanding, May 31, 1997                 4,710,000
     Options granted                                     180,000    $       .48
     Options exercised                                        --
     Options canceled                                         --
                                                     -----------
     Balance outstanding, May 31, 1998                 4,890,000
     Options granted                                          --
     Options exercised                                 3,842,000    $ .26 - .31
     Options canceled                                     10,000    $       .48
                                                     -----------
     Balance outstanding, May 31, 1999                 1,038,000
                                                     ===========

     As of May 31,  1999 and 1998,  options to purchase  981,333  and  4,770,000
     shares,   respectively,   at  prices   ranging  from  $.40  to  $1.00  were
     exercisable.

     A summary  of stock  options  for  common  stock  granted  at May 31,  1999
     follows:

                    OPTIONS OUTSTANDING                    OPTIONS EXERCISABLE
     -------------------------------------------------   -----------------------
                                WEIGHTED
                   NUMBER        AVERAGE     WEIGHTED      NUMBER       WEIGHTED
      RANGE OF   OUTSTANDING    REMAINING    AVERAGE     EXERCISABLE    AVERAGE
      EXERCISE    AT MAY 31,   CONTRACTUAL   EXERCISE     AT MAY 31,    EXERCISE
       PRICE        1999          LIFE        PRICE         1999         PRICE
     ---------   -----------   -----------   ---------   -----------   ---------
     .40-$1.00       858,000     4 years     $     .47       858,000   $     .47
        1.00          10,000     8 years          1.00        10,000        1.00
        .48          170,000     9 years           .48       113,333         .48
                 -----------                 ---------   -----------   ---------
                   1,038,000                       .48       981,333         .48
                 ===========                 =========   ===========   =========

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     No stock options were granted in 1999. The per share  weighted-average fair
     value of stock  options  granted  during  1998 was $0.30 on the date of the
     grant  using the  Black-Scholes  option  pricing  model with the  following
     weighted-average  assumptions:  1999 expected  dividend yield rate of 0.0%,
     risk-free interest rate of 8.0%, volatility of 54.92%, and an expected life
     of six years; 1998 expected dividend yield rate of 0.0%, risk-free interest
     rate of 8.0%, volatility of 57.98% and an expected life of six years.

     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:

                                                         1999          1998
                                                      -----------   -----------
     Net income/(loss):
       As reported                                    $ 1,006,265       313,875
       Pro forma                                        1,003,622       305,633

     Earnings per share:
       Basic:
         As reported                                          .13           .06
         Pro forma                                            .13           .06

     Diluted:
       As reported                                            .10           .06
       Pro forma                                              .10           .06

     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  1,000,000  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.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     During  fiscal 1998 the Company  completed an Exchange  Offer which offered
     one share of its Class A, Senior Nonvoting Cumulative Convertible Preferred
     Stock,  Series A, par value $.01 ("Series A Shares"),  for each outstanding
     share of the Class A, Nonvoting  Cumulative  Convertible  Preferred  Stock,
     Series 2, par value $.01, of the Company.  The purpose of this offer was to
     eliminate or significantly reduce the number of Series 2 Shares outstanding
     including  the  related  dividend  arrearage  and to adjust  the  Company's
     capital structure.

     The Exchange  Offer expired on May 27, 1998,  and resulted in the tendering
     of 317,880  (approximately  82%) of the 388,180 outstanding Series 2 Shares
     for the Series A Shares.

     As of May 31, 1999, there were 6,000 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 May 31, 1999, there were
     301,160 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 and the D.C.  metropolitan area. Two major customers provided
     48% and 14% of total  service  revenues in 1999 and three  major  customers
     provided 28%, 15% and 10% of total service revenues in 1998.

(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.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


     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.  The Company paid
     approximately  $310,000  and  $211,000  to NHE  under  the  terms  of  this
     agreement in fiscal 1999 and 1998, respectively.

(12) RELATED PARTY TRANSACTIONS

     During fiscal 1995, the Company contracted with National Computer Services,
     Inc.  ("NCS"),  a  company  owned by a  member  of the  Company's  board of
     directors,  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  fiscal 1999 and 1998.  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 in fiscal
     1999 and 1998.

     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  9  ("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.

     On April 23,  1998,  the Company  entered  into a  Supplemental  Investment
     Banking  Agreement with RCI for investment  banking services related to the
     Exchange  Offer  for the  Company's  Series 2  Shares.  RCI  received  cash
     consideration  of $50,000 and 250,000 shares of the Company's  common stock
     valued at $0.20 per share.

     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.  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.

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

                        Consolidated Financial Statements

                              May 31, 1999 and 1998


(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 years ended May 31, 1999 and 1998,
     the Company did not contribute to the plan.

                                      F-16
<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 relating to them.


Name                          Age         Position(s) with Company
----                          ---         ------------------------

William R. Cohen              68          Co-Chairman and Director

William L. Richter            56          Co-Chairman and Director

Kenneth L. Blum, Sr.          72          Director, Former Acting President and
                                          CEO as of May 31, 1998

Gerald L. Cohen               55          Director

Sam Oolie                     63          Director

Alan S. Cohn                  43          President, CEO and Director

Kenneth L. Blum, Jr.          36          Director

Neal A. Kempler               31          Corporate Secretary,
                                          Vice President of Operations

Shannon R. Barnett            31          Controller

Joel H. Alperstein            31          Treasurer, Director of Finance

                                       18
<PAGE>
     On July 30, 1998, the Company's Board of Directors expanded the Board of
Directors from 5 to 7 members. Consequently, Alan S. Cohn and Kenneth L. Blum,
Jr. were named to the Board of Directors to fill the two vacant seats until the
next stockholder meeting at which time they were re-elected as directors. The
election to the Board of Messrs. Cohn and Blum, Jr. was conditioned upon the
early exercise of their stock options.

     William R. Cohen, 68, 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, 56, Co-Chairman of the Board, has been a director of
the Company since August 1993. Mr. Richter has been President of Richter
Investment Corp. and its wholly-owned subsidiary, Richter & Co., Inc., a
registered broker-dealer and investment banking firm (or its predecessor
organization) for the past ten years and has been a Senior Managing Director of
Cerberus Capital Management, L.P. (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., 72, 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."

                                       19
<PAGE>
     Gerald L. Cohen, 55, 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
also serves as a Director of Marketing Systems of America. Mr. Cohen is not
related to William R. Cohen.

     Sam Oolie, 63, has served as a Director of the Company since March 1985.
Mr. Oolie has been Chairman of NoFire Technologies, Inc., a manufacturer of fire
retardant coatings and textiles, since August 1995 and has been Chairman of
Oolie Enterprises, an investment company, since July 1985. Mr. Oolie has held
various positions with CFC Associates, a venture capital partnership, and its
predecessor companies since January 1984. He was Vice Chairman of American
Mobile Communications, Inc. a cellular telephone company, from February 1986
until July 1989 and Chairman of the Nostalgia Network, a 24-hour cable
television program service, from April 1987 until January 1990. Mr. Oolie also
serves as a Director of NCT Group, Inc. (formerly Noise Cancellation
Technologies, Inc.) and Comverse Technology, Inc.

     Alan S. Cohn, 43, 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., 36, became a Director of the Company as of 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."

                                       20
<PAGE>
     Neal Kempler, 31, has been the Corporate Secretary of the Company since
June 1996, the Vice President of Marketing & Operations of the Company since
August 1996 and the Assistant to the President/Director of Marketing from
January 1993 until August 1996. Mr. Kempler served as Account Executive of
National Health Enterprises, Inc., a management company, from June 1990 until
January 1993.

     Shannon R. Barnett, 31, 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, 31, has been the Treasurer of the Company since
December 1997 and the Director of Finance of the Company (Principal Financial
Officer) since January 1997. Since March 1999, Mr. Alperstein has been a
management consultant to American Business Information Systems, Inc., a
high-volume laser printing company. 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.

     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."

                                       21
<PAGE>
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 May 31, 1999, except
that no Form 4 was received from a more than 10% shareholder in connection with
the Company's August 1998 repurchase of his shares. 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 May 31, 1999. No executive officer who was
     serving as an executive officer during fiscal 1999 received salary and
     bonus which aggregated at least $100,000 for services rendered to the
     Company during the year ended May 31, 1999.

<TABLE>
<CAPTION>
                                           Annual Compensation           Long Term Compensation
                                           -------------------   --------------------------------------
                                                                                 Awards
                                                                 --------------------------------------
Name and Principal Position         Year       Salary ($)        Securities Underlying Options/SARs (#)
---------------------------         ----       ----------        --------------------------------------

<S>                                 <C>            <C>                              <C>
Alan S. Cohn, CEO (1)               1999           $0                               --

Kenneth L. Blum, Sr., Acting CEO    1998           $0                               --
                                    1997           $0                               --
</TABLE>

----------
(1)  Mr. Cohn became CEO of the Company as of June 1, 1998. 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."

                                       22
<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."

                                       23
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of August 13, 1999 there were 7,356,297 shares of Common Stock, 5,000
Series 2 Shares and 301,160 Series A Shares outstanding. The table below sets
forth as of August 13, 1999, 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)
                                                                      -----------------------------------
                                                        Series A                             Total Common
                             Common         % of    Preferred Stock    % of      Options     Beneficially   Percent of
Name and Address              Stock        Common    (actual shares)   Pref.   or Warrants    Owned (1)     Common (2)
----------------              -----        ------   ----------------   -----   -----------   ------------   ----------
<S>                          <C>             <C>         <C>            <C>      <C>             <C>             <C>
Gerald L. Cohen*             253,359         3.4         22,274(7)      7.4           --         476,099         6.3

William R. Cohen*            161,117(4)      2.2         10,552         3.5           --         266,637         3.6

William L. Richter         1,194,620(3)     16.2         50,099(3)     16.6           --       1,695,610(3)     21.6
C/o Richter & Co., Inc.
450 Park Ave., 28th Floor
New York, NY 10022

Sam Oolie*                   220,021(5)      3.0         24,023         8.0      100,000         560,251         7.3

Kenneth L. Blum, Sr.         140,000(6)      1.9          2,000         0.7           --         160,000         2.2
17133 Ericarose Street
W. Boca Raton, FL 33496

Kenneth L. Blum, Jr.       1,814,750        24.7             --          --           --       1,814,750        24.7
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117

Alan S. Cohn               1,804,750        24.5             --          --           --       1,804,750        24.5
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117

All directors and          5,588,617(4)(5)  76.0        108,948        36.2      505,000       7,183,097        80.3
Executive officers as
A group (9 persons)
</TABLE>

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

                                       24
<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 or
     warrants, 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, options or warrants, 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 462,500 shares of Common Stock and shares of Common Stock issuable
     upon conversion of 22,300 shares of Series A indirectly owned via an
     affiliated corporation, Richter & Co., Inc. ("RCI"), which thereby
     beneficially owns in its own name 685,500 shares or 9.0% of the Company's
     Common Stock. Also includes shares of Common Stock issuable upon conversion
     of 3,883 and 4,530 shares of Series A Preferred held via two other
     corporations. 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.

(4)  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.

(5)  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.

(6)  The indicated shares are held by Mr. Blum's spouse.

(7)  Includes 43.75% of the 4,530 shares of Series A Preferred held by an
     affiliated corporation.

                                       25
<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 due to their
relationship to National Health Enterprises. The 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 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."

     SUBORDINATED PROMISSORY NOTES. On March 18, 1993, the Company obtained
loans in the amount of $80,000 from each of Mr. Blum, Jr. and Mr. Cohn. The
notes were due March 18, 1998 and accrued interest at the rate of 6% per annum,
provided that the holders could accelerate the notes if the Company terminated
the Management Agreement without cause. Interest was payable semiannually in
arrears, commencing September 18, 1993. The notes were unsecured and
subordinated to the Company's outstanding 9 1/2% Debentures and future
indebtedness of the Company for borrowed money. The Company paid $8,416 in
interest under the terms of these notes in fiscal 1998. On March 18, 1998 the
Company paid Mr. Blum, Jr. and Mr. Cohn the outstanding principal and accrued
interest amounts on the subordinated promissory notes.

     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

                                       26
<PAGE>
the Management Agreement. In fiscal 1999 and 1998, the Company paid
approximately $310,000 and $211,000, respectively, to NHE under the Marketing
Agreement. In fiscal 1999 and 1998, the Company paid approximately $13,446 and
$8,000, respectively, in reimbursable marketing expenses to NHE under the
Marketing Agreement.

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 Advisor
Agreement. Mr. Richter abstained from voting due to his relationship to Richter
& Co., Inc. The payment commenced as of June 1, 1999.

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 fiscal 1999 and 1998. 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 in fiscal 1999 and 1998. 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.

                                       27
<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.

                                       28
<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 August 24, 1999              By: /s/ Alan S. Cohn
          ------------------------         -------------------------------------
                                       Alan S. Cohn
                                       President and 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, Principal                August 24, 1999
------------------------     Executive Officer and Director
Alan S. Cohn

/s/ Neal A. Kempler          Corporate Secretary and             August 24, 1999
------------------------     Vice President of Operations
Neal A. Kempler

/s/ Joel H. Alperstein       Treasurer and Director              August 24, 1999
------------------------     of Finance
Joel H. Alperstein           (Principal Financial Officer)

/s/ Shannon R. Barnett       Controller                          August 24, 1999
-----------------------      (Principal Accounting Officer)
Shannon R. Barnett

/s/ William R. Cohen         Co-Chairman of the                  August 24, 1999
----------------------       Board of Directors
William R. Cohen

/s/ William L. Richter       Co-Chairman of the                  August 24, 1999
------------------------     Board of Directors
William L. Richter

/s/ Kenneth L. Blum, Sr.     Director                            August 24, 1999
------------------------
Kenneth L. Blum, Sr.

/s/ Kenneth L. Blum, Jr.     Director                            August 24, 1999
------------------------
Kenneth L. Blum, Jr.

/s/ Gerald L. Cohen          Director                            August 24, 1999
------------------------
Gerald L. Cohen

/s/ Sam Oolie                Director                            August 24, 1999
------------------------
Sam Oolie

                                       29
<PAGE>
                               AVESIS INCORPORATED
                                  EXHIBIT INDEX
                                   FORM 10-KSB
                     FOR THE FISCAL YEAR ENDED MAY 31, 1999

<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 S-1
                Incorporation of the Company, as amended           (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, 1991      Company's Annual Report on Form 10-K for the
                                                                   year ended May 31, 1992 (File No. 1-9758).

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

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

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

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

   10.1         Incentive Stock Option Plan of the Company, as     Company's Registration Statement on Form S-1
                amended                                            (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, 1993          Company's report on Form 8-K dated March 18,
                between the Company and NHE                        1993 (File No. 1-9758).

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

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

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

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

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

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

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

   10.11        Stock Purchase Warrant issued to William L.        Company's report on Form 8-K dated
                Richter dated March 18, 1993 for the purchase of   March 18, 1993 (File No. 1-9758).
                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 Richter      Company's Report on Form 10-QSB for the three
                & Co., Inc.                                        months ended February 28, 1995 (File No. 1-9758).

   10.15        Software Development Agreement between the         Company's Report on Form 10-QSB for the three
                Company and National Computer Services, Inc.       months ended August 31, 1995 (File No. 1-9758).

   10.16        Litigation Agreement between the Company and       Company's Report on Form 10-KSB for the year
                Ken Blum, Sr., Ken Blum, Jr., and Alan Cohn        ended May 31, 1997 (File No. 0-15304).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.     EXHIBIT                                            INCORPORATED BY REFERENCE FROM THE:
-----------     -------                                            -----------------------------------
<S>             <C>                                                <C>
   10.17        Sublease Agreement between the Company and         Company's Report on Form 10-KSB for the year
                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 5, 1994     Company's Report on Form 10-KSB for the year
                Investment Banking Agreement                       ended May 31, 1998 (File No. 0-15304).

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

   21           Subsidiary of Registrant                           filed herewith

   27           Financial Data Schedule                            filed herewith
</TABLE>