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, 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
         April 2, 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
                               AVESIS INCORPORATED
                                  BALANCE SHEET
                             AS OF FEBRUARY 28, 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                     ASSETS
                                     ------
<S>                                                                              <C>        
Current assets:
    Cash and cash equivalents                                                    $   560,211
    Receivables, net                                                                 518,083
    Prepaid expenses and other                                                        76,873
                                                                                 -----------
         Total current assets                                                      1,155,167
Property and equipment, net                                                          568,349
Deferred debenture issuance costs, net                                                 1,499
Deposits                                                                             183,815
                                                                                 -----------
                Total Assets                                                     $ 1,908,830
                                                                                 ===========

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

Current liabilities:
    Accounts payable                                                             $   516,820
    Accrued expenses-
       Compensation                                                                   51,066
       Other                                                                         145,460
    Convertible subordinated debentures                                              189,000
       Less unamortized debenture discount                                            (1,588)
    Deferred income                                                                   23,264
                                                                                 -----------
           Total current liabilities                                                 924,022

Accrued rent                                                                         108,884
Notes payable to stockholders                                                        160,000
                                                                                 -----------
           Total liabilities                                                       1,192,906
                                                                                 -----------
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; 4,100,420 shares issued and outstanding                    41,004
    Additional paid-in capital                                                     9,949,158
    Accumulated deficit                                                           (9,278,120)
                                                                                 -----------
           Net stockholders' equity                                                  715,924
                                                                                 -----------
                                                                                 $ 1,908,830
                                                                                 ===========
</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, 1997 AND FEBRUARY 29, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                           Quarters Ended               Nine Months Ended
                                      February 28    February 29    February 28    February 29
                                      --------------------------    --------------------------
                                         1997           1996           1997           1996
                                      -----------    -----------    -----------    -----------
<S>                                   <C>            <C>            <C>            <C>        
Service revenues:
    Administration fees               $ 1,001,962      1,031,131    $ 2,678,431    $ 3,146,040
    Provider fees                          38,885         48,599        107,221        157,721
    Buying group                          368,344        370,284      1,127,865      1,103,971
    Other                                   7,323         18,506         52,301         70,466
                                      -----------    -----------    -----------    -----------

     Total service revenues             1,416,514      1,468,520      3,965,818      4,478,198

Cost of services                        1,091,994        953,973      2,856,054      2,880,245
                                      -----------    -----------    -----------    -----------

       Income from services               324,520        514,547      1,109,763      1,597,953

General and administrative expenses       250,832        426,851        757,776      1,017,933

Selling and marketing expenses            101,340        230,784        392,291        692,167
                                      -----------    -----------    -----------    -----------

     Income (loss) from operations        (27,652)      (143,088)       (40,304)      (112,147)
                                      -----------    -----------    -----------    -----------

Non-operating income (expense):
    Other income (expense)              - - - - -      - - - - -            (79)        15,171
    Interest income                         6,447          7,570         18,680         19,589
    Interest expense                       (7,332)        (7,358)       (22,076)       (22,401)
                                      -----------    -----------    -----------    -----------

     Net non-operating income
     (expense)                               (885)           212         (3,475)        12,359
                                      -----------    -----------    -----------    -----------

     Net (loss)                       $   (28,537)   $  (142,876)   $   (43,779)   $   (99,788)
                                      ===========    ===========    ===========    ===========

Net income (loss) per common
share                                 $     (0.03)   $     (0.06)   $     (0.07)   $     (0.09)
                                      ===========    ===========    ===========    ===========

Weighted average common
shares and equivalents
outstanding                             4,100,420      4,075,420      4,100,420      4,075,420
                                      ===========    ===========    ===========    ===========
</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, 1997 AND FEBRUARY 29, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                      1997         1996
                                                                    ---------    ---------
<S>                                                                 <C>          <C>       
Cash flows from operating activities:
    Net (loss)                                                      $ (43,779)   $ (99,788)
                                                                    ---------    ---------
    Adjustments to reconcile net income to net
      cash provided by in operating activities:
      Depreciation and amortization                                   127,449       91,486
      Gain on sale of property and equipment                              -0-       (8,004)
      Gain on retirement of debentures                                    -0-       (7,067)
      Provision for losses on accounts receivable                        (149)      (6,948)
      Changes in assets and liabilities:
        (Increase) decrease in receivables                           (202,527)       1,023
        Decrease (increase) in prepaid expenses                        36,203      (16,175)
        Decrease in other assets                                          -0-        2,907
        Increase in accounts payable                                  292,910       35,095
        Increase in accrued expenses                                   10,161       30,838
        (Decrease) in deferred income                                  (8,101)     (15,212)
        Increase in accrued rent                                        5,683       12,598
                                                                    ---------    ---------
             Total adjustments                                        261,629      120,541
                                                                    ---------    ---------

             Net cash provided by operating activities                217,850       20,753
                                                                    ---------    ---------

Cash flows from investment activities:
    Purchases of property and equipment                               (93,722)    (278,522)
    Proceeds from dispositions of property and equipment                  -0-        8,250
                                                                    ---------    ---------

             Net cash used in investing activities                    (93,722)    (270,272)
                                                                    ---------    ---------

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

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

             Net increase (decrease) in cash and cash equivalents     124,128     (309,262)

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

Cash and cash equivalents, end of period                            $ 560,211    $ 506,305
                                                                    =========    =========

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

(a) Interest paid during the period -
    Debentures                                                          8,978        8,978
    Notes payable to stockholders                                       5,629        4,839
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      - 4 -
<PAGE>
                               AVESIS INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                     FEBRUARY 28, 1997 AND FEBRUARY 29, 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  February 28, 1997,  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,  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 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, 1997 and February 29, 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,  relevance
of the  Company's  historical  performance,  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.

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

Service  revenues  totaled  $1,416,514  and  $3,965,818 for the quarter and nine
months ended  February 28, 1997,  compared to $1,468,520  and $4,478,198 for the
same periods in fiscal 1996, representing decreases of $52,006 (4%) and $512,380
(11%) for the quarter and nine months ended  February  28, 1997  compared to the
same periods in the prior year, respectively.  The Company's administration fees
from vision and hearing programs accounted for $753,868 (53%) and $624,852 (43%)
of total service  revenues for the quarters ended February 28, 1997 and February
29, 1996,  respectively,  and  $1,727,865  (44%) and  $1,909,003  (43%) of total
service  revenues for the nine months  ended  February 28, 1997 and February 29,
1996, respectively. The net change in vision and hearing revenue, from the prior
fiscal year to the current  fiscal year, was primarily the result of the loss of
one sponsor  during  October  1996 and the addition of a new vision plan sponsor
during  January  1997.  A "sponsor" is an employer,  insurance  group,  or other
organization  that offers the Company's  benefits to it  employees/members.  The
loss of the above  mentioned  sponsor  reduced total vision,  hearing and dental
cardholders  by  approximately  60,000.  This loss was  partially  offset by the
addition of a new sponsor that enrolled  approximately 37,000 cardholders in the
Company's vision plan. There were  approximately  366,000 and 399,000 vision and
40,000 and 93,000  hearing  cardholders as of February 28, 1997 and February 29,
1996,  respectively.  The other changes to cardholder totals primarily  resulted
from  fluctuations  in cardholder  amounts in previously  existing plans, in the
normal course of business.

Vision  provider fee revenue  declined by $9,714 (20%) and $50,500  (32%) during
the quarter and nine months ended February 28, 1997 compared to the same periods
in fiscal year 1996 due in part to a  modification  of the Company's  agreements
with its providers. A provider is a doctor or other practitioner that has agreed
to  provide  services  to the  Company's  benefit  plan  cardholders.  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 $245,921 (17%) and $472,375 (32%) of
total service revenues for the quarters ended February 28, 1997 and February 29,
1996,  respectively,  and $946,590 (24%) and  $1,386,943  (31%) of total service
revenues  for the nine months  ended  February  28, 1997 and  February 29, 1996,
respectively.  The change in revenue for this line of  business,  from the prior
fiscal  year  to  the  current  fiscal  year,  was  due to the  loss  of  60,000
cardholders,  as discussed  above, and the addition of cardholders in previously
existing  plans,  in the normal  course of  business.  There were  approximately
80,000 and 125,000  dental  cardholders as of February 28, 1997 and February 29,
1996, respectively.

On December 28, 1992,  the Company  completed  the sale of its pharmacy  line of
business to Med Net  (formerly  Medi-Mail,  Inc.) for 298,333  unregistered  and
35,000  registered  shares of Medi-Mail 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
Medi-Mail  during the conversion of the claims  processing,  the Company entered
into a month to month agreement to continue to provide  administrative  services
to Medi-Mail.  Medi-Mail terminated the agreement in August 1995; therefore, the
Company did not generate any revenues related to the pharmaceutical  program for
the quarter ended February 28, 1997.  Pharmaceutical  revenues were $78,281 (2%)
of total service revenues during the nine months ended February 29, 1996.
                                       -6-
<PAGE>
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 accounted for $368,344 (26%) and $370,290 (25%) of
total service revenues for the quarters ended February 28, 1997 and February 29,
1996,  respectively,  and $1,127,865 (28%) and $1,103,971 (24%) of total service
revenues  for the nine months  ended  February  28, 1997 and  February 29, 1996,
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.

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.  The Company's  four
largest   sponsors  account  for   approximately   59%  and  65%  of  the  total
administration fee revenue for the quarters ended February 28, 1997 and February
29, 1996, respectively.

Cost of services were  $1,091,994  and $953,973 for the quarters  ended February
28, 1997 and February 29, 1996, respectively,  and $2,856,054 and $2,880,245 for
the nine months ended  February  28, 1997 and  February 29, 1996,  respectively.
Cost of services  increased  $138,021  (14%) and decreased  $24,191 (1%) for the
quarter and nine months ended February 28, 1997,  respectively,  compared to the
same periods in the prior fiscal year. 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 increase in cost of
services  during the quarter ended February 28, 1997 compared to the same period
in the prior  fiscal year was  primarily  due to the  increased  claims  expense
directly related to the new sponsor, mentioned above and discussed further under
"Liquidity and Capital Resources" below. The decrease in cost of services during
the nine months ended February 28, 1997 compared to the same period in the prior
fiscal year was due to the  associated  decrease in revenue  during that period.
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. However,  due to the
reorganization  in the  customer  service  and  claims  processing  area  of the
Company's  activities,  where a portion of the middle management was eliminated,
the Company  realized a decrease in  personnel  expense  included in the cost of
services.

General and administrative  expenses were $250,832 and $426,851 for the quarters
ended  February 28, 1997 and February 29, 1996,  respectively,  and $757,776 and
$1,017,933  for the nine months  ended  February 28, 1997 and February 29, 1996,
respectively.  General and administrative  expenses decreased $176,019 (41%) and
$260,157  (26%)  for the  quarter  and nine  months  ended  February  28,  1997,
respectively, compared to the same periods in the prior fiscal year. These costs
include depreciation, legal and professional fees, insurance and consulting fees
related to National Health Enterprises (management consultants). The decrease is
primarily due to a reduction in personnel involved in the finance and accounting
functions,  and legal fees and expenses of  approximately  $175,000 related to a
lawsuit settled in the prior fiscal year.

Selling and marketing expenses were $101,340 and $230,784 for the quarters ended
February 28, 1997 and February 29, 1996, respectively, and $392,291 and $692,167
for the nine months ended February 28, 1997 and February 29, 1996, respectively.
Selling and marketing  expenses  decreased $129,444 (56%) and $299,876 (43%) for
the quarter and nine months ended February 28, 1997,  respectively,  compared to
the same  periods in the prior  fiscal  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 is due to the reduction in broker commissions
directly  related to the reduction in revenue,  the  outsourcing of a portion of
the  activities   previously   performed  by  the  inside  sales  and  marketing
department,  and the  reduction  of travel  and  entertainment  expenditures.  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.
                                       -7-
<PAGE>
Liquidity and Capital Resources
-------------------------------

The  Company  had cash and cash  equivalents  of  $560,211  and  $506,305  as of
February 28, 1997 and February 29, 1996, respectively.  The net increase in cash
of $53,906  during the period  from  February  29,  1996 to  February  28,  1997
consists of a decrease in cash of $70,222  during the first three  months of the
period (March 1, 1996 through May 31, 1996), and an increase in cash of $124,128
the last nine months of the period (June 1, 1996 through February 29, 1997). The
negative cash flow  mentioned  above is primarily  associated  with the software
development project for the Company's new mainframe computer.  The positive cash
flow for the  nine  months  ended  February  28,  1997 is  primarily  due to the
collections of accounts receivable,  decrease in prepaid expenses, and timing of
vendor  payments.  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 is  expected  to allow the  Company  to  sustain
operations for at least the next twelve months.

The new sponsor added during January 1997 remits their vision administration fee
payments  within the first week after the end of the month in which the revenues
are earned by the  Company.  The Company is  currently  reserving a  substantial
portion of the total amount  received from the new sponsor for claims  payments.
This  reserve is based upon  historical  utilization  percentages.  The  monthly
vision  administration  fee  revenue  from  the  new  sponsor  is  approximately
$140,000.  The  resulting  amounts are included in the February 28, 1997 balance
sheet as accounts receivable and accounts payable, and account for a significant
portion of the increases to these accounts.

The Company's  convertible  subordinated  debentures mature on December 1, 1997.
The Company is allocating  the required  capital to repay the debenture  holders
upon maturity.

The Company's  management has taken the following  steps in order to sustain the
viability  of the Company and  continue  positive  cash flows:  the  sublease of
unused office space, thereby reducing monthly rent by approximately $10,000; the
maintenance of the appropriate  level of staff,  reducing monthly salary expense
and consulting fees by  approximately  $10,000;  the temporary  deferral of cash
payments made to related parties  (National  Health  Enterprises) for consulting
services  of  approximately  $6,000  per  month,  the  balance  of $42,000 as of
February  28,  1997 is to be  repaid on an  undetermined  future  date;  and the
addition  of a new  sponsor,  as  previously  discussed,  replacing  most of the
reduced number of cardholders caused by the loss of a major sponsor in the prior
fiscal year.  The Company has also  established  a  chiropractic  benefit and is
expanding its dental network of providers to increase its marketability.
                                       -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  April  1997,  on  shares  of its  Series 2
         Preferred  Stock.   The  dividend  is  cumulative.   The  arrearage  is
         $1,543,548 as of February 28, 1997.

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 February 28,
         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:      April 11, 1997                    /s/ Neal A. Kempler
      -----------------------           ----------------------------------------
                                        Neal A. Kempler, Vice President
                                        and Secretary



Date:      April 11, 1997                    /s/ Joel H. Alperstein
      -----------------------           ----------------------------------------
                                        Joel H. Alperstein, Director of Finance
                                        (Principal Financial Officer)
                                     - 10 -