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               August 31, 1996
                                            -----------------------------------


    | |  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.)


  100 West Clarendon Avenue, Suite 2300          Phoenix, Arizona  85013
-------------------------------------------------------------------------------
                    (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 October 10,
1996 was 4,100,420.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(Check One)       | | Yes       | | No

                                     1 of 9
<PAGE>
                          PART I FINANCIAL INFORMATION

Item 1    Financial Statements
<TABLE>
<CAPTION>
                               AVESIS INCORPORATED
                                  BALANCE SHEET
                                 AUGUST 31, 1996

                                     ASSETS
                                     ------
<S>                                                                                 <C>          
Current assets:
    Cash and cash equivalents                                                       $     510,492
    Receivables, net                                                                      241,190
    Prepaid expenses and other                                                            101,964
                                                                                    -------------
         Total current assets                                                             853,646
Property and equipment, net                                                               618,171
Deferred debenture issuance costs, net                                                      2,398
Deposits                                                                                  183,815
                                                                                    -------------
                Total Assets                                                        $   1,658,030
                                                                                    =============

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

Current liabilities:
    Accounts payable                                                                $     218,412
    Accrued expenses-
       Compensation                                                                        63,090
       Other                                                                              102,984
    Deferred income                                                                        22,330
                                                                                    -------------
           Total current liabilities                                                      406,816

Convertible subordinated debentures                                                       189,000
    Less unamortized debenture discount                                                    (2,541)
Accrued rent                                                                              107,316
Notes payable to stockholders                                                             160,000
                                                                                    -------------
           Total liabilities                                                              860,591
                                                                                    -------------

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
        20,000,000 shares; 4,100,420 shares issued and outstanding                         41,004
    Additional paid-in capital                                                          9,949,158
    Accumulated deficit                                                                (9,196,605)
                                                                                    -------------
           Net stockholders' equity                                                       797,439
                                                                                    -------------
                                                                                    $   1,658,030
                                                                                    =============
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      - 2 -
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
                                   (Unaudited)

                                                          Quarters Ended
                                                    August 31          August 31
                                                  ------------------------------
                                                     1996               1995
                                                  -----------       -----------

Service revenues:
    Administration fees                           $   912,084       $ 1,113,741
    Buying group sales                                388,629           362,154
    Provider fees                                      34,051            57,720
    Other                                              14,277            28,346
                                                  -----------       -----------

     Total service revenues                         1,349,041         1,561,961

Cost of services                                      888,809           963,396
                                                  -----------       -----------

       Income from services                           460,232           598,565

General and administrative expenses                   254,965           294,335

Selling and marketing expenses                        166,384           232,417
                                                  -----------       -----------

     Income from operations                            38,883            71,813

Non-operating income (expense):
    Other income                                          -0-            15,417
    Interest income                                     6,238             6,662
    Interest expense                                   (7,385)           (8,238)
                                                  -----------       -----------

     Net non-operating income
     (expense)                                         (1,147)           13,841
                                                  -----------       -----------

     Net income                                   $    37,736       $    85,654
                                                  ===========       ===========

Net income per common
share                                             $      (.01)      $      (.01)
                                                  ===========       ===========

        The accompanying notes are an integral part of these statements.
                                      - 3 -
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                            Quarters Ended
                                                                        1996              1995
                                                                   --------------     ------------
Cash flows from operating activities:
<S>                                                                <C>                <C>         
    Net income                                                     $      37,736     $      85,654
                                                                   --------------     ------------
    Adjustments to reconcile net income to net
      cash provided by (used in) operating activities:
      Depreciation and amortization                                       41,634            28,351
      Gain on sale of property and equipment                                 -0-            (8,250)
      Gain on retirement of debentures                                       -0-            (7,067)
      Provision for losses on accounts receivable                           (154)             (625)
      Changes in assets and liabilities:
        Decrease (increase) in receivables                                74,371          (341,658)
        Decrease (increase) in prepaid expenses                           11,112           (58,531)
        Decrease in other assets                                             -0-               150
        Decrease in accounts payable                                      (2,496)          (30,949)
        Decrease in accrued expenses                                     (20,291)           (5,837)
        Decrease in deferred income                                       (9,035)          (10,194)
        Increase in accrued rent                                           4,114             4,370
                                                                   -------------      ------------
             Total adjustments                                            99,255          (430,240)
                                                                   -------------      ------------

             Net cash provided by (used in) operating activities         136,991          (344,586)
                                                                   -------------      ------------


Cash flows from investing activities:
    Purchases of property and equipment                                  (62,582)          (19,228)
    Proceeds from dispositions of property and equipment                     -0-             8,250
                                                                   --------------     ------------

             Net cash used in investing activities                       (62,582)          (10,978)
                                                                    -------------     ------------

Cash flows from financing activities:
    Repurchase of debentures                                                 -0-           (59,743)
                                                                   --------------     ------------

             Net cash used in financing activities                           -0-           (59,743)
                                                                   -------------      ------------

             Net increase (decrease) in cash and cash equivalents         74,409          (415,307)

Cash and cash equivalents at beginning of period                         436,083           815,567
                                                                   -------------      ------------

Cash and cash equivalents at end of period                         $     510,492     $     400,260
                                                                   =============     =============

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

    Interest paid during the period:
    Debentures                                                               -0-               -0-
    Notes payable to stockholders                                            -0-               -0-
</TABLE>

        The accompanying notes are an integral part of these statements.
                                      - 4 -
<PAGE>
                               AVESIS INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1996 AND 1995
                                   (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 are all of a normal recurring nature 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  August 31,  1996,  are not
   necessarily  indicative of the results to be expected for the complete fiscal
   year.

2. Income per common  share is  computed by dividing  net income,  after  giving
   appropriate  effect to  undeclared  preferred  stock  dividends  payable  and
   accrued during the period  ($87,342 for each of the quarters ended August 31,
   1996 and 1995) by the weighted  average  number of common shares  outstanding
   during the period.

   For the quarter  ended August 31, 1996,  earnings per share is  calculated as
   follows.  Note that the  inclusion  of  common  stock  equivalents  (Series 2
   Preferred stock,  options and warrants) and potentially  dilutive convertible
   debt has an immaterial dilutive effect.
<TABLE>
<CAPTION>
                                                                    Primary             Fully Diluted
                                                                    -------             -------------
<S>                                                               <C>                       <C>      
    Net income                                                      $37,736                   $37,736
    Add: interest expense on convertible
      debentures that are not CSEs based
      on the interest rate test                                                                 4,489
    Subtract: preferred stock dividends                              87,342                    87,342
    Net income applicable to common shares                        ($49,606)                 ($45,117)

    Shares:
    Weighted average common shares
       outstanding                                                4,100,420                 4,100,420
    Add common stock equivalents:
      Convertible preferred stock                                   970,450                   970,450
      Incremental shares from outstanding
         options and warrants                                     1,039,834                 1,039,834
    Add convertible debentures (potentially
      dilutive securities which are not CSEs)                                                  51,800
    Adjusted shares outstanding                                   6,110,704                 6,162,504

    Earnings per share                                                (.01)                     (.01)
</TABLE>
                                      - 5 -
<PAGE>
Item 2    Management's Discussion and Analysis or Plan of Operations
          For the Three Months Ended August 31, 1996

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

Service  revenues  totaled  $1,349,041  for the quarter  ended  August 31, 1996,
compared  to  $1,561,961  for the same  period in fiscal  1995,  representing  a
decrease of $212,920 (14%). The Company's vision and hearing programs  accounted
for  $535,342  (40%) and $656,123  (42%) of total  service  revenues  during the
quarters ended August 31, 1996 and 1995, respectively.  There were approximately
356,000 vision and 82,000 hearing cardholders as of August 31, 1996, compared to
approximately  383,000  vision and 85,000  hearing  cardholders as of August 31,
1995. The decrease in vision and hearing  revenue during the current quarter was
the result of one sponsor  reducing the number of cardholders  covered under the
Company's  benefit plan. This sponsor,  whose  cardholders are covered under the
Company's  vision,  hearing  and  dental  plans,  reduced  its  total  number of
cardholders by  approximately  27,000.  The reduction from this sponsor has been
marginally  offset by the addition of a new account that enrolled  approximately
30,000 and 52,000 uninsured  cardholders  under the Company's hearing and dental
plans,  respectively.  The other  changes in the  amounts of vision and  hearing
cardholders were due to sponsors'  employee  fluctuations in their normal course
of business.  Vision  provider fee revenue  declined by $23,669 (41%) during the
quarter ended August 31, 1996, as compared to the same period in fiscal 1995 due
in part to a modification of the Company's agreements with its providers.  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.

The Company's dental program  accounted for $409,891 (30%) and $465,403 (30%) of
total  service  revenues  during the  quarters  ended  August 31, 1996 and 1995,
respectively.  There were approximately 112,000 and 81,000 dental cardholders as
of August 31, 1996 and 1995,  respectively.  The change in this line of business
during the current quarter was primarily due to the loss of approximately 27,000
uninsured  cardholders  and the  addition  of the new  account of  approximately
52,000  uninsured  cardholders  under the  Company's  dental plan,  as discussed
above.  The other  changes  in the  amounts  of dental  cardholders  were due to
sponsors' employee fluctuations in their normal course of business.

On December 30, 1992,  the Company  completed  the sale of its pharmacy  line of
business to Med Net, Inc. (formerly  Medi-Mail,  Inc.), for 298,333 unregistered
and 35,000 registered shares of Med Net Common Stock. The Company  contracted to
provide  certain  administrative  services  with respect to the pharmacy line of
business until December 31, 1993. However,  due to delays encountered by Med Net
during the conversion of the claims processing, the Company entered into a month
to month  agreement to continue to provide  administrative  services to Med Net.
Med Net  terminated  the  agreement  in  August  1995.  Pharmaceutical  revenues
constituted  $902 (0%) and $78,281  (5%) of total  service  revenues  during the
quarters ended August 31, 1996 and 1995, respectively.

The Company makes available to its 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.  Buying group  revenues  were $388,629  (29%) and $362,154  (23%) for the
quarters ended August 31, 1996 and 1995, respectively.

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  depending  on whether  the benefit is
insured in part or whole by the plan  sponsor.  The  Company's  cardholder  base
principally is derived from a limited number of sponsors.

Other  income  in the  first  quarter  of 1995  was  attributed  to the  sale of
furniture which was not repeated in 1996.

The cost of services  decreased by $74,587 (8%) from $963,396 during the quarter
ended  August 31, 1995 to $888,809  during the quarter  ended  August 31,  1996.
These costs primarily relate to servicing cardholders,  providers,  and sponsors
under the Company's  vision,  hearing and dental benefit programs as well as the
cost of frames  that are sold  through the  Company's  buying  group  program as
discussed above. The decrease in cost of services during the current quarter was
due to the  associated  decrease  in  revenue  during the  quarter.  The cost of
services did not decrease as greatly as revenue due to the loss of  efficiencies
of scale related to the volume of claims paid.
                                       -6-
<PAGE>
General and  administrative  expenses  were  $254,965  during the quarter  ended
August 31, 1996,  which  represents a decrease of $39,370 (13%)  compared to the
same period in fiscal 1995. The decrease in general and administrative  expenses
in the  quarter  ended  August 31, 1996 as compared to the same period in fiscal
1995 is primarily due to legal expenses related to an ongoing lawsuit during the
first quarter of fiscal 1995 that was settled prior to the current quarter,  and
a decrease in personnel involved in the accounting and finance functions.

Selling and marketing expenses were $166,384 during the quarter ended August 31,
1996, representing a decrease of $66,033 (28%) from the same period in the prior
year. 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 decrease in expenses during
the current period was primarily due to a decrease in personnel  involved in the
Company's sales and marketing  activities and reduced broker commissions related
to the  reduction in revenue.  A significant  amount of the Company's  marketing
activities are performed by National Health Enterprises.


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

The  Company  had cash and cash  equivalents  of  $510,492  at August 31,  1996,
compared to $436,083 at May 31, 1996.  The increase of $74,409 was due primarily
to the Company's  ability to reduce expenses and increase timely  collections of
accounts receivable during the quarter.

As  of  August  31,  1996,  the  Company  had  aggregate  outstanding  long-term
liabilities  of $453,775,  consisting  of $189,000 of  Convertible  Subordinated
Debentures,  less $2,541 of unamortized discount, $160,000 of subordinated notes
payable to stockholders, and $107,316 in accrued rent.

Current cash on hand is expected to allow the Company to sustain  operations for
at least the next twelve months.
                                       -7-
<PAGE>
                            PART II OTHER INFORMATION

Item 1. Legal Proceedings

        Information  regarding  legal  proceedings is  incorporated by reference
        from the  Company's  report on Form  10-KSB  for the year  ended May 31,
        1996.

Item 3. Defaults Upon Senior Securities

(b)     The  Company  determined  not to pay the  quarterly  dividend  otherwise
        scheduled  for  payment  in  October  1996,  on shares  of its  Series 2
        Preferred Stock. The dividend is cumulative. The arrearage is $1,368,864
        as of August 31, 1996.

Item 6. Exhibits and Reports on Form 8-K

(a)     The following exhibits are being filed with this report:

        27       Financial Data Schedule

(b)     No reports on Form 8-K were filed  during the quarter  ended  August 31,
        1996.
                                       -8-
<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:        10/15/96                            /s/ Neal A. Kempler
     ---------------------                       -------------------------------
                                                 Neal A. Kempler, Vice President
                                                 and Secretary
                                      - 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:        10/15/96                            /s/ Neal A. Kempler
     ---------------------                       -------------------------------
                                                 Neal A. Kempler, Vice President
                                                 and Secretary
                                     - 10 -