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, 1997
                                        ----------------------------------------

  [_]    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, 1997 was 4,100,420.

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

Item 1    Financial Statements
<TABLE>
<CAPTION>
                               AVESIS INCORPORATED
                                  BALANCE SHEET
                              AS OF AUGUST 31, 1997

                                     ASSETS
                                     ------
<S>                                                                        <C>        
Current assets:
  Cash and cash equivalents                                                $   924,282
  Receivables, net                                                             288,799
  Prepaid expenses and other                                                    89,199
                                                                           -----------
      Total current assets                                                   1,302,280
Property and equipment, net                                                    215,729
Deferred debenture issuance costs, net                                             600
Deposits                                                                       247,913
                                                                           -----------
      Total Assets                                                         $ 1,766,522
                                                                           ===========

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

Current liabilities:
  Accounts payable                                                         $   593,292
  Accrued expenses-
      Compensation                                                              50,341
      Other                                                                     41,773
  Convertible subordinated debentures                                          189,000
      Less unamortized debenture discount                                         (635)
  Notes payable to stockholders                                                160,000
  Deferred income                                                               15,118
                                                                           -----------
      Total current liabilities                                              1,048,889

Accrued rent                                                                    86,953
                                                                           -----------
      Total liabilities                                                      1,135,842
                                                                           -----------
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                                                     (9,363,364)
                                                                           -----------
      Net stockholders' equity                                                 630,680
                                                                           -----------
                                                                           $ 1,766,522
                                                                           ===========
</TABLE>
        The accompanying notes are an integral part of these statements.
                                       -2-
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF OPERATIONS
                 FOR THE QUARTERS ENDED AUGUST 31, 1997 AND 1996
                                   (Unaudited)

                                               Quarters Ended
                                          August 31      August 31
                                         --------------------------
                                             1997           1996
                                         -----------    -----------

Service revenues:
  Administration fees                    $ 1,364,712    $   912,084
  Buying group sales                         418,530        388,629
  Provider fees                               26,466         34,051
  Other                                        1,504         14,277
                                         -----------    -----------

    Total service revenues                 1,811,212      1,349,041

Cost of services                           1,382,649        888,809
                                         -----------    -----------

    Income from services                     428,563        460,232

General and administrative expenses          227,139        254,965

Selling and marketing expenses               143,260        166,384
                                         -----------    -----------

    Income from operations                    58,164         38,883

Non-operating income (expense):
  Other income                                 1,710           --
  Interest income                              8,753          6,238
  Interest expense                            (7,385)        (7,385)
                                         -----------    -----------

    Net non-operating income (expense)         3,078         (1,147)
                                         -----------    -----------

    Net income                           $    61,242    $    37,736
                                         ===========    ===========

Net income per common share              $      (.00)   $      (.01)
                                         ===========    ===========

        The accompanying notes are an integral part of these statements.
                                       -3-
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF CASH FLOWS
                 FOR THE QUARTERS ENDED AUGUST 31, 1997 AND 1996
                                   (Unaudited)

                                                        Quarters Ended
                                                       1997         1996
                                                    ---------    ---------
Cash flows from operating activities:
  Net income                                        $  61,242    $  37,736
                                                    ---------    ---------
  Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation and amortization                      25,609       41,634
    Provision for losses on accounts receivable          --           (154)
    Changes in assets and liabilities:
      Decrease in receivables                          51,557       74,371
      Decrease in prepaid expenses                     10,317       11,112
      (Increase) in other assets                      (48,775)        --
      Increase (Decrease) in accounts payable         128,917       (2,496)
      (Decrease) in accrued expenses                  (50,298)     (20,291)
      (Decrease) in deferred income                    (8,114)      (9,035)
      (Decrease) Increase in accrued rent              (5,091)       4,114
                                                    ---------    ---------
        Total adjustments                             104,122       99,255
                                                    ---------    ---------

        Net cash provided by operating activities     165,364      136,991
                                                    ---------    ---------

Cash flows from investing activities:
  Purchases of property and equipment                 (58,617)     (62,582)
                                                    ---------    ---------

        Net cash used in investing activities         (58,617)     (62,582)
                                                    ---------    ---------

Cash flows from financing activities:
                                                    ---------    ---------
        Net cash used in financing activities            --           --
                                                    ---------    ---------

        Net increase in cash and cash equivalents     106,747       74,409

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

Cash and cash equivalents at end of period          $ 924,282    $ 510,492
                                                    =========    =========

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

    Interest paid during the period:
    Debentures                                           --           --
    Notes payable to stockholders                        --           --

        The accompanying notes are an integral part of these statements.
                                       -4-
<PAGE>
                               AVESIS INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                            AUGUST 31, 1997 AND 1996
                                   (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  August 31, 1997,  are not
     necessarily  indicative  of the results to be expected for any other period
     or the complete fiscal year.

2.   For the quarter ended August 31, 1997, 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  for the
     quarter) 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 Ended August 31, 1997 and 1996

The statements contained in this discussion and analysis regarding  management's
anticipation of adequacy of cash reserves for  operations,  adequacy of reserves
for claims,  adequacy of capital allocation for debentures,  sustained viability
of the Company, continued positive cash flows and increased marketability of the
Company,  constitute  "forward-looking"  statements  within  the  meaning of the
Private Securities Litigation Reform Act of 1995.  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   dental,
chiropractic, vision and hearing managed care and discount programs ("Programs")
nationally  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  networks  of  providers  such  as  dentists,   chiropractors,
opticians, optometrists, ophthalmologists and hearing specialists ("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  $1,811,212 for the quarter ended
August 31,  1997,  compared to  $1,349,041  for the same period in fiscal  1996,
representing a increase of $462,171  (34%).  The increase is principally  due to
the addition of a vision plan Sponsor who added approximately 95,000 cardholders
during  January 1997 and a second  vision plan  Sponsor who added  approximately
130,000 cardholders during July 1997.

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.

Administration fees from the Company's vision and hearing programs accounted for
$1,057,207  (58%)  and  $535,342  (40%) of total  service  revenues  during  the
quarters ended August 31, 1997 and 1996, respectively.  There were approximately
579,000 vision and 7,000 hearing  cardholders as of August 31, 1997, compared to
approximately  356,000  vision and 82,000  hearing  cardholders as of August 31,
1996. The increase in vision and hearing  revenue during the current quarter was
the result of the two new vision plan Sponsors  mentioned above. The decrease in
hearing  cardholders was largely due to the  discontinuation of services for two
hearing plan Sponsors with approximately  70,000 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.  Vision provider fee revenue declined
by $7,585  (22%) during the quarter  ended  August 31, 1997,  as compared to the
same  period  in  fiscal  1996 due in part 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.
                                       -6-
<PAGE>
Administration  fees from the Company's  dental  program  accounted for $297,389
(16%) and $409,891  (30%) of total service  revenues  during the quarters  ended
August 31, 1997 and 1996,  respectively.  There were  approximately  124,000 and
112,000  dental  cardholders as of August 31, 1997 and 1996,  respectively.  The
Company's  dental  program  revenue  has  decreased  while the  number of dental
cardholders  has increased due to pricing  differences  among the different plan
benefits,  as discussed above.  The changes in the number of dental  cardholders
were due to Sponsors' Member and employee fluctuations.

The Company makes available to its 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  were $418,530  (23%) and $388,629  (29%) for the
quarters ended August 31, 1997 and 1996, respectively.

The cost of  services  increased  by  $493,840  (56%) to  $1,382,649  during the
quarter ended August 31, 1997 from $888,809  during the quarter ended August 31,
1996. These costs relate to servicing cardholders, 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 increase in cost of services during the current quarter
was  primarily  due to the  payment  of  benefits  for  Members  of the new plan
Sponsors of approximately  $432,000,  which did not exist in the prior year, and
an increase of other benefit payments for other plans of approximately  $53,000.
The  Company's  cost of services  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  $227,139  during the quarter  ended
August 31, 1997,  which  represents a decrease of $27,826 (11%)  compared to the
same period in fiscal 1996. The decrease in general and administrative  expenses
in the  quarter  ended  August 31, 1997 as compared to the same period in fiscal
1996 is due to a decrease in personnel  involved in the  accounting  and finance
functions,  a decrease in rent  expense  resulting  from the  sublease of excess
office space, and a decrease in depreciation  expense as the Company abandoned a
significant portion of software prior to the start of the current quarter.

Selling and marketing expenses were $143,260 during the quarter ended August 31,
1997, representing a decrease of $23,124 (14%) 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.  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 functions internally.

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

The Company  had cash and cash  equivalents  of $924,282 as of August 31,  1997,
compared to  $817,535  as of May 31,  1997.  The  increase  of $106,747  was due
primarily  to  the  Company's  ability  to  reduce  expenses,   increase  timely
collections of accounts  receivable and advantageously  time payments to vendors
during the quarter. The Company is maintaining its policy of paying vendors on a
net 45 day basis  and  continues  to be  current  on all of its  trade  accounts
payable.  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.

During the first  quarter of fiscal 1998 the Company  entered  into an agreement
with a third party to develop new  software  systems.  The cost of the  project,
including necessary hardware, of approximately $250,000 will be financed through
cash from operations.

As of August 31, 1997, the Company had $593,292 of Accounts Payable, compared to
$218,412 in the prior fiscal year. The increase is predominately due to reserves
for claims of $286,472 in the current year for the two new  Sponsors,  for claim
reimbursements  to Providers who  participate in certain  managed care programs.
The Company believes this reserve is conservative and adequate.
                                       -7-
<PAGE>
As of August 31,  1997,  the Company had  $189,000 of  Convertible  Subordinated
Debentures, less $635 of unamortized discount, due December 1, 1997 and $160,000
of subordinated  notes payable to  stockholders  due March 18, 1998. The Company
has allocated the required capital to repay the debenture  holders upon maturity
and has reported the amount on the Balance Sheet in cash and cash equivalents.

The  Company  signed a new lease  agreement  for office  space  during the first
quarter of fiscal  1998,  and is  scheduled  to move the  weekend of October 17,
1997.  The  Company's new office lease  agreement is expected to reduce  monthly
rent  expense by  approximately  $6,000 as compared to the monthly  rent expense
paid for the prior  office  space,  which has been  subleased at a rate at least
equal to the Company's expense.
                                       -8-
<PAGE>
                            PART II OTHER INFORMATION

Item 3.  Defaults Upon Senior Securities

(b)  The  Company  determined  not  to  pay  the  quarterly  dividend  otherwise
     scheduled  for payment in October 1997, on shares of its Series 2 Preferred
     Stock.  The  dividend is  cumulative.  The  arrearage is  $1,747,340  as of
     September 30, 1997.

Item 5.  Other Information

     Effective  October 17, 1997, the Company will move its principal  executive
     offices to:

               3724 North Third Street
               Suite 300
               Phoenix, Arizona  85012
               (602) 241-3400

Item 6.  Exhibits and Reports on Form 8-K

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

     11    Statement re:  Computation of Per Share Earnings
     27    Financial Data Schedule

(b)  No reports on Form 8-K were filed during the quarter ended August 31, 1997.
                                       -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:        October 13, 1997                   /s/ Neal A. Kempler
     ------------------------           ----------------------------------------
                                        Neal A. Kempler, Vice President
                                        and Secretary



Date:        October 13, 1997                   /s/ Joel H. Alperstein
     ------------------------           ----------------------------------------
                                        Joel H. Alperstein, Director of Finance
                                        (Principal Financial Officer)
                                      -10-