Securities and Exchange Commission
                              Washington D.C. 20549

                                   Form 10-QSB


(Mark One)
    |X|  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended            February 28, 1998
                                            ------------------------------------


         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

         For the transition period from                        to
                                         ---------------------    --------------

                        Commission File Number         0-15304
                                               -------------------------

                               AVESIS INCORPORATED
--------------------------------------------------------------------------------
                     (Exact name of small business issuer as
                            specified in its charter)

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


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

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

         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
                           -----    -----

         The number of outstanding  shares of the  registrant's  Common Stock on
         March 11, 1998 was 4,021,126.

         TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
         (Check One)       Yes    |X|    No
                                     1 of 10
<PAGE>
                          PART I FINANCIAL INFORMATION

Item 1    Financial Statements
                               AVESIS INCORPORATED
                                  BALANCE SHEET
                             AS OF FEBRUARY 28, 1998
                                   (Unaudited)
<TABLE>
<CAPTION>
                                     ASSETS
                                     ------
<S>                                                                                 <C>          
Current assets:
    Cash and cash equivalents                                                       $     797,820
    Receivables, net                                                                      377,399
    Prepaid expenses and other                                                            109,916
                                                                                    -------------
         Total current assets                                                           1,285,135
Property and equipment, net                                                               423,129
Deposits and other assets                                                                 258,296
                                                                                   --------------
                Total Assets                                                        $   1,966,560
                                                                                    =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
    Accounts payable                                                                $     855,424
    Accrued expenses-
       Compensation                                                                        41,196
       Rent                                                                                30,158
       Other                                                                               23,251
    Capital lease, short-term                                                              10,288
    Notes payable to stockholders                                                         160,000
    Deferred income                                                                        16,950
                                                                                    -------------
           Total current liabilities                                                    1,137,267
Accrued rent                                                                               68,544
Capital lease, long-term                                                                   33,652
                                                                                    -------------
           Total liabilities                                                            1,239,463
                                                                                    -------------

Stockholders' equity:
    Preferred stock $.01 par value, authorized 
      12,000,000 shares:
        $100 Class A, nonvoting cumulative convertible preferred 
         stock, Series 1, $.01 par value; authorized 1,000,000  
         shares; none issued and outstanding (liquidation preference
         of $100 per share)                                                             - - - - -
        $10 Class A, nonvoting cumulative convertible preferred stock,
         Series 2, $.01 par value; authorized 1,000,000 shares; 388,180 
         shares issued and outstanding (liquidation preference of
         $10 per share)                                                                     3,882
        Class A, voting cumulative convertible preferred stock,
         Series 3, $.01 par value; authorized 100,000 shares; none issued
         and outstanding (liquidation preference of $100 per share)                     - - - - -
    Common stock of $.01 par value, authorized
        12,000,000 shares; 4,021,126 shares issued and outstanding                         40,211
    Additional paid-in capital                                                          9,929,321
    Accumulated deficit                                                                (9,246,317)
                                                                                    -------------
           Net stockholders' equity                                                       727,097
                                                                                    -------------
                                                                                    $   1,966,560
                                                                                    =============
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      - 2 -
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF OPERATIONS
  FOR THE QUARTER AND NINE MONTHS ENDED FEBRUARY 28, 1998 AND FEBRUARY 28, 1997
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      Quarters Ended                          Nine Months Ended
                                                      --------------                          -----------------
                                            February 28,         February 28,        February 28,       February 28, 
                                            ------------         ------------        ------------       ------------ 
                                                 1998                 1997               1998               1997
                                                 ----                 ----               ----               ----
<S>                                        <C>                  <C>                   <C>              <C>              
Service revenues:
      Administration fees                  $      1,675,511     $      1,001,962      $  4,594,003     $       2,678,431
      Provider fees                                  32,163               38,885            86,959               107,221
      Buying group                                  392,165              368,344         1,197,774             1,127,865
      Other                                           2,373                7,323             4,980                52,301
                                           -----------------    -----------------    --------------    ------------------
      Total service revenues                      2,102,212            1,416,514         5,883,716             3,965,818

Cost of services                                  1,572,476            1,091,994         4,422,165             2,856,054
                                           -----------------    -----------------    --------------    ------------------

      Income from services                          529,736              324,520         1,461,551             1,109,763

General and administrative expenses                 252,989              250,832           710,736               757,776

Selling and marketing expenses                      219,936              101,340           553,021               392,291
                                           -----------------    -----------------    --------------    ------------------

      Income (loss) from operations                  56,811              (27,652)          197,794               (40,304)
                                           -----------------    -----------------    --------------    ------------------

Non-operating income (expense):
      Other income (expense)                            807            - - - - -           (24,980)                  (79)
      Interest income                                 6,976                6,447            24,394                18,680
      Interest expense                               (3,759)              (7,332)          (18,920)              (22,076)
                                           -----------------    -----------------    --------------    ------------------
      Net non-operating income (expense)              4,024                 (885)          (19,506)               (3,475)
                                           -----------------    -----------------    --------------    ------------------
          Net income (loss)                $         60,835     $        (28,537)    $     178,288     $         (43,779)
                                           =================    =================    ==============    ==================

Net (loss) per common
Share - Basic                                        $(0.01)              $(0.03)           $(0.02)               $(0.07)
                                           =================    =================    ==============    ==================

Net (loss) per common
Share - Diluted                                      $(0.01)              $(0.03)           $(0.02)               $(0.07)
                                           =================    =================    ==============    ==================

Weighted average common
shares and equivalents
outstanding - Basic                               4,065,661            4,100,420         4,088,045             4,100,420
                                           =================    =================    ==============    ==================


Weighted average common
shares and equivalents
outstanding - Diluted                             4,065,661            4,138,220         4,113,245             4,138,220
                                           =================    =================    ==============    ==================
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      - 3 -
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF CASH FLOWS
        FOR THE NINE MONTHS ENDED FEBRUARY 28, 1998 AND FEBRUARY 28, 1997
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                               1998                  1997
                                                                               ----                  ----
<S>                                                                       <C>                   <C>             
Cash flows from operating activities:
      Net income (loss)                                                   $       178,288       $       (43,779)
                                                                          ----------------      ----------------
      Adjustments to reconcile  net income to net 
         cash  provided by in operating activities:
         Depreciation and amortization                                             85,132               127,449
         Loss on fixed asset disposal                                               2,124                     0
         Provision for losses on accounts receivable                               10,000                  (149)
         Changes in assets and liabilities:
            (Increase) in receivables                                             (47,043)             (202,527)
            Decrease in prepaid expenses and other                                  3,698                36,203
            (Increase) decrease in other assets                                   (73,256)                  -0-
            Increase in accounts payable                                          391,045               292,910
            (Decrease) increase in accrued expenses                               (77,966)               10,161
            (Decrease) in deferred income                                          (6,282)               (8,101)
            Increase in accrued rent                                                6,658                 5,683
                                                                          ----------------      ----------------
                Total adjustments                                                 294,110               261,629
                                                                          ----------------      ----------------

                Net cash provided by operating activities                         472,398               217,850
                                                                          ----------------      ----------------

Cash flows from investment activities:
      Purchases of property and equipment                                        (331,424)              (93,722)
      Proceeds from dispositions of property and equipment                          5,000                   -0-
                                                                          ----------------      ----------------

                Net cash used in investing activities                            (326,424)              (93,722)
                                                                          ----------------      ----------------

Cash flows from financing activities:
      Capital lease                                                                48,002                   -0-
      Repayment of capital lease                                                   (4,062)                  -0-
      Repurchase of capital stock                                                 (20,629)                  -0-
      Repurchase of convertible subordinated debentures                          (189,000)                  -0-
                                                                          ----------------      ----------------

                Net cash used in financing activities                            (165,689)                  -0-
                                                                          ----------------      ----------------

                Net (decrease) increase in cash and cash equivalents              (19,715)              124,128

Cash and cash equivalents, beginning of period                                    817,535               436,083
                                                                          ----------------      ----------------

Cash and cash equivalents, end of period                                          797,820               560,211
                                                                          ================      ================



Supplemental information:
-------------------------

(a) Interest paid during the period -
      Debentures                                                                    8,978                 8,978
      Notes payable to stockholders                                                 5,629                 5,629
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      - 4 -
<PAGE>
                               AVESIS INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                     FEBRUARY 28, 1998 AND FEBRUARY 28, 1997
                                   (Unaudited)

1.  The condensed financial statements included herein have been prepared by the
    Company  without  audit  pursuant  to  the  rules  and  regulations  of  the
    Securities and Exchange Commission.

    Certain information and footnote  disclosures normally included in financial
    statements  prepared at the fiscal year end have been  condensed  or omitted
    pursuant to such rules and  regulations,  although the Company believes that
    the  disclosures  are  adequate  to  make  the  information   presented  not
    misleading.

    In the opinion of Management,  the adjustments  included in the accompanying
    interim  financial  statements  include all adjustments,  which are all of a
    normal recurring nature, necessary in order to make the financial statements
    not misleading,  and present fairly the Company's financial position and the
    results of operations and cash flows for the periods indicated.

    The results of operations  for the period ended  February 28, 1998,  are not
    necessarily indicative of the results to be expected for the complete fiscal
    year.

2.  For the quarter and nine months ended  February  28,  1998,  loss per common
    share is computed by dividing net loss, after giving  appropriate  effect to
    undeclared  preferred stock dividends  payable and accrued during the period
    ($87,342 and $262,026 for the quarter and nine months,  respectively) by the
    weighted average number of common shares outstanding during the period. (See
    Exhibit 11) 
                                     - 5 -
<PAGE>
Item 2    Management's Discussion and Analysis or Plan of Operations
          For the Quarters and Nine Months Ended February 28, 1998 and 
          February 28, 1997

The statements contained in this discussion and analysis regarding  management's
anticipation of adequacy of cash for continuing operations, adequacy of reserves
for claims, sustained viability of the Company and continued positive cash flows
constitute  "forward-looking"  statements  within  the  meaning  of the  Private
Securities Litigation Reform Act of 1995. These  forward-looking  statements are
based upon assumptions that 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,  demand for  services,
stability  of costs,  retention  of  sponsors  and  cardholders  enrolled in the
Company's benefit programs, and 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.

Avesis Incorporated,  a Delaware corporation (together with its subsidiary,  the
"Company"),  incorporated in June 1978, markets and administers vision, hearing,
dental  and  chiropractic  managed  care  and  discount  programs   ("Programs")
nationally.  The  Programs  are designed to enable  participants  ("Members"  or
"Cardholders"),  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  networks of providers such as  ophthalmologists,
optometrists,   opticians,  hearing  specialists,   dentists  and  chiropractors
("Providers").

The  Company  derives its  administration  fee revenue  from plan  Sponsors  who
customarily  pay a set fee per  member per month.  There are  arrangements  with
certain  Sponsors  to 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  as the  total  amount  billed  to  participating
Providers.  Vision  Provider fee revenue is based upon a percentage of materials
sold by certain participating providers under certain plans.


Results of Operations:
----------------------

The Company's total service revenues  totaled  $2,102,212 and $5,883,716 for the
quarter and nine months  ended  February 28, 1997,  compared to  $1,416,514  and
$3,965,818 for the same periods in the prior year,  representing  an increase of
$685,698 (33%) and $1,917,898 (33%),  respectively.  The increase is principally
due to the  addition of a vision  plan  Sponsor  who added  130,000  Cardholders
during  July 1997 and the steady  increase of  Cardholders  in a majority of the
Company's existing plans.

Past and future  revenues in all lines of business are  directly  related to the
number of Cardholders enrolled in the Company's benefit programs. However, there
may be  significant  pricing  differences  to Sponsors  depending on whether the
benefit is funded in part or whole by the plan Sponsor. A substantial portion of
the Company's Cardholder base is derived from a limited number of Sponsors.  The
Company's four largest sponsors  accounted for  approximately 83% and 59% of the
total  administration  fee revenue for the quarters  ended February 28, 1998 and
1997, respectively.

The Company's administration fees from vision and hearing programs accounted for
$1,412,283  (67%) and $753,868 (53%) of total service  revenues for the quarters
ended  February  28,  1998 and  1997,  respectively,  and  $3,698,152  (63%) and
$1,727,865  (44%) of total service  revenues for the nine months ended  February
28, 1998 and 1997,  respectively.  There were  approximately  676,000 vision and
6,500 hearing  cardholders  as of February 28, 1998,  compared to  approximately
366,000  vision and 40,000  hearing  cardholders  as of February 28,  1997.  The
increase  in vision and  hearing  revenue  during the  current  quarter and nine
months was  largely  the result of three  vision  plan  Sponsors  who  increased
Cardholders by approximately  300,000.  The decrease in hearing  cardholders was
largely due to the discontinuation of services for one hearing plan Sponsor with
approximately 32,000 total cardholders.  The loss of hearing cardholders did not
have a  material  impact on total  service  revenues.  The other  changes in the
number of vision and  hearing  cardholders  were due to  Sponsors'  employee  or
Member fluctuations in the normal course of business.
                                      - 6 -
<PAGE>
Vision  provider fee revenue  declined by $6,722 (17%) and $20,262  (19%) during
the quarter and nine months ended  February  28,  1998,  as compared to the same
periods in fiscal 1997 largely due to a modification of the Company's agreements
with its  Providers  in response to  competitive  pressures.  Under the modified
agreement,  for new Sponsors,  the Providers are not required to pay a fee based
on gross sales to that Sponsor's Members.

Administration  fees from the Company's  dental  program  accounted for $256,312
(12%) and $245,921  (17%) of total service  revenues  during the quarters  ended
February 28, 1998 and 1997,  respectively  and $878,548 (15%) and $946,590 (24%)
of total  service  revenues  during the nine months ended  February 28, 1998 and
1997,   respectively.   There  were  approximately  129,000  and  80,000  dental
cardholders as of February 28, 1998 and 1997, respectively. The Company's dental
program revenue has increased  during the current  quarter  compared to the same
period in the prior  fiscal  year,  and the  number  of dental  cardholders  has
increased.  Due to pricing  differences  among the different plan  benefits,  as
discussed above, revenue did not increase at a rate proportional to the increase
of  cardholders,  which  accounted  for the  decrease  in revenue in the current
nine-month  period.  The changes in the number of dental cardholders were due to
one new Sponsor and significant increases in two other Sponsors' Members.

The Company makes available to its vision  Providers a buying group program that
enables  the  Provider  to  order  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.  Buying  group  revenues  accounted  for  $392,165  (19%) and
$368,344  (26%) of total service  revenues for the quarters  ended  February 28,
1998 and 1997, respectively,  and $1,197,774 (20%) and $1,127,865 (28%) of total
service  revenues  for the  nine  months  ended  February  28,  1998  and  1997,
respectively.

Card production activity for non-Avesis groups was phased out during the quarter
ended February 28, 1997, as the historical revenues generated from this activity
were not sufficient to justify the resources  expended.  Revenues resulting from
this activity were recorded by the Company as other service revenues.

Cost of services were  $1,572,476  (75%) and  $1,091,994  (77%) for the quarters
ended  February  28,  1998 and  1997,  respectively,  and  $4,422,165  (75%) and
$2,856,054  (72%)  for the  nine  months  ended  February  28,  1998  and  1997,
respectively.  These costs relate 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.  The  Company's  cost of services  for the current
fiscal year as compared to the prior fiscal year  increased  as a percentage  of
total  service  revenues due to a shift in product mix from  discount to managed
care programs  which have greater  associated  costs due to additional  customer
service and claims payment functions.

General and  administrative  expenses were $252,989 (12%) and $250,832 (18%) for
the quarters ended February 28, 1998 and 1997, respectively,  and $710,736 (12%)
and  $757,776  (19%)  for the nine  months  ended  February  28,  1998 and 1997,
respectively.  The  decrease  in  general  and  administrative  expenses,  as  a
percentage  of total  service  revenues,  in the quarter  and nine months  ended
February  28,  1998,  as compared to the same periods in fiscal 1997 is due to a
decrease  in  rent  expense  resulting  from  the  relocation  of the  Company's
principal office, a decrease in depreciation  expense as the Company abandoned a
significant  portion of software prior to the start of the current year, and the
increase in total service revenues in fiscal 1998.

Selling and marketing  expenses  were  $219,936  (14%) and $101,340 (7%) for the
quarters ended February 28, 1998 and 1997,  respectively,  and $553,021 (9%) and
$392,291   (10%)  for  the  nine  months  ended  February  28,  1998  and  1997,
respectively.  Selling and marketing  expenses  include  marketing fees,  broker
commissions,  inside sales and marketing  salaries and related expenses,  travel
related to the Company's  sales  activities  and an allocation of other overhead
expenses relating to the Company's sales and marketing  functions.  The increase
in  expenses  during the current  period was  primarily  due to the  addition of
personnel  involved in the  Company's  sales and  marketing  activities  and the
increase  of   commissions   directly   related  to  the   Company's   increased
administrative  fee revenues.  A significant  amount of the Company's  marketing
activities  has been  outsourced  to  management  consultants,  National  Health
Enterprises, for a cost lower than the Company incurred when performing the same
functions  internally.  Effective  March 18, 1998, the fixed portion of the cash
compensation  paid to National Health  Enterprises  will increase by $50,000 per
year to $250,000 per year.
                                      - 7 -
<PAGE>
Other  expense of $24,980 for the nine months ended  February 28, 1998  includes
the write-off of unamortized moving expenses of $25,835 related to the Company's
previous  relocation of the principal office. The Company capitalized $14,588 of
moving  expenses,  included  in  deposits  and  other  assets,  related  to  the
relocation of the Company's  principal office during October 1997, which will be
amortized over the five-year life of the current lease agreement.


Liquidity and Capital Resources
-------------------------------

The Company had cash and cash  equivalents  of $797,820 as of February 28, 1998,
compared  to  $817,535  as of May 31,  1997.  The  decrease  of $19,715  was due
primarily to the Company's financing of the development of new software systems,
the  purchase of  necessary  new computer  hardware  and the  retirement  of the
remaining convertible subordinated debentures outstanding, from cash provided by
operations.  Current cash on hand and cash provided from  operations is expected
to allow the Company to sustain operations for at least the next twelve months.

As of  February  28,  1997,  the  Company had paid  approximately  $253,000  for
software  development  and related  hardware of the projected total of $250,000.
The budget overage of approximately  $3,000 was a result of additional  hardware
needs due to the growth of staff.  These  expenses also would have been incurred
on the  previous  platform  and  are in  the  normal  course  of  business.  All
significant expenses related to the new systems development have been paid as of
February 28, 1998. The project is anticipated to be completed and operational by
the end of the Company's fiscal year.

As of February 28, 1998, the Company had $855,424 of Accounts Payable,  compared
to $516,820 in the prior fiscal year. The increase is  predominately  due to the
increase in reserves for claims of $372,500 to $564,348 as of February 28, 1998,
for claim  reimbursements  to  Providers  who  participate  in the managed  care
programs.  The Company believes this reserve is conservative  and adequate.  The
remaining change in Accounts Payable was due to the timing of invoices  received
in the normal  course of business.  The Company is current and in good  standing
with its vendors.

As of February 28, 1998, the Company had $160,000 of subordinated  notes payable
to stockholders that were due and paid on March 18, 1998.
                                       -8-
<PAGE>
                            PART II OTHER INFORMATION


Item 3. Defaults Upon Senior Securities

(b)     Company determined not to pay the quarterly dividend otherwise scheduled
        for  payment in April 1998,  on shares of its Series 2 Preferred  Stock.
        The dividend is cumulative.  The aggregate and per-share arrearages were
        $1,892,910 and $4.88, respectively, as of February 28, 1998.

Item 5. Other Information:  Retirement of Stock Information

        As  previously  disclosed in the  Company's  Form 10-QSB for the quarter
        ended November 30, 1997, filed on January 14, 1998, on December 16, 1997
        and  January 5, 1998 the  Company  bought  back and  retired  17,000 and
        12,000 common shares, respectively.

        On February 5, 1998 the Company bought back and retired 40,294 shares of
        common  stock,  reducing  total  outstanding  shares of common  stock to
        4,021,126.

Item 6. Exhibits and Reports on Form 8-K

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

(b)     As  previously  disclosed in the  Company's  Form 10-QSB for the quarter
        ended November 30, 1997, filed on January 14, 1998, A report on Form 8-K
        dated  December  12,  1997 was filed to  disclose,  under Item 5 - Other
        Events,  the  extension  and  amendment  of  the  Company's   Management
        Agreement with National Health Enterprises.
                                       -9-
<PAGE>
                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                               AVESIS INCORPORATED
               - - - - - - - - - - - - - - - - - - - - - - - - - -
                                  (Registrant)



Date:        4/13/98                                        /s/ Neal A. Kempler
      ----------------------                     -------------------------------
                                                 Neal A. Kempler, Vice President
                                                 and Secretary



Date:        4/13/98                                     /s/ Joel H. Alperstein
      ----------------------                     -------------------------------
                                                 Joel H. Alperstein, Director
                                                 of Finance and Treasurer 
                                                 (Principal Financial Officer)
                                     - 10 -
<PAGE>
                                  Exhibit Index
                                       To
                               Avesis Incorporated
               Form 10-QSB for the Quarter Ended February 28, 1998


Exhibit No.  Description
-----------  -----------

11           Statement re:  Computation of per Share Earnings     Filed herewith

27           Financial Data Schedule                              Filed herewith