United States
                       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 September 30, 1999


[ ]  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                                 (IRS Employer
 incorporation or organization)                              Identification No.)


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


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


The number of outstanding shares of the registrant's Common Stock on November 2,
1999 was 7,343,297.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(Check One) [ ] Yes [X] No

                                     1 of 12
<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               AVESIS INCORPORATED
                                  BALANCE SHEET
                            AS OF SEPTEMBER 30, 1999
                                   (Unaudited)

                                     ASSETS
Current assets:
  Cash and cash equivalents                                        $  2,587,237
  Receivables, net                                                      290,490
  Prepaid expenses and other                                            213,823
                                                                   ------------
      Total current assets                                            3,091,550
  Property and equipment, net                                           498,075
  Deposits and other assets                                             345,681
                                                                   ------------
                                                                   $  3,935,306
                                                                   ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                 $  1,265,840
  Current installments of obligations under capital lease                10,288
  Accrued expenses-
    Compensation                                                         47,033
    Other                                                                11,646
  Deferred income                                                        17,478
                                                                   ------------
      Total current liabilities                                       1,352,285
Obligations under capital lease, excluding current installments          16,604
                                                                   ------------
      Total liabilities                                               1,368,889
                                                                   ------------
Stockholders' equity:
  Preferred stock $.01 par value, authorized 12,000,000 shares:
    $3.75 Class A, senior nonvoting cumulative convertible
      preferred stock, Series A, $.01 par value; authorized
      1,000,000 shares; 297,660 issued and outstanding
      (liquidation preference of $3.75 per share)                         2,977
    $10 Class A, nonvoting cumulative convertible preferred stock,
      Series 2, $.01 par value; authorized 1,000,000 shares; 5,000
      shares issued and outstanding (liquidation preference of
      $10 per share) and $31,500 of dividends in arrears at $6.30
      per share; dividends accrue at $.225 per share per calendar
      quarter                                                                50
  Common stock of $.01 par value, authorized 20,000,000 shares;
    7,343,297 shares issued and outstanding                              73,433
  Additional paid-in capital                                         10,434,475
  Accumulated deficit                                                (7,944,518)
                                                                   ------------
         Total stockholders' equity                                   2,566,417
                                                                   ------------
                                                                   $  3,935,306
                                                                   ============

        The accompanying notes are an integral part of these statements.

                                        2
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF OPERATIONS
       FOR THE QUARTERS AND FOUR MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                Quarters Ended                Four Months Ended
                                         ----------------------------    ----------------------------
                                         September 30,   September 30,   September 30,   September 30,
                                             1999            1998            1999            1998
                                         ------------    ------------    ------------    ------------
<S>                                      <C>             <C>             <C>             <C>
Service revenues:
  Administration fees                    $  2,071,843    $  2,050,742    $  2,758,762    $  2,691,817
  Provider fees                                37,685          41,312          51,720          52,814
  Buying group                                330,984         394,597         470,051         538,044
  Other                                         2,744             753           2,979           1,385
                                         ------------    ------------    ------------    ------------
  Total service revenues                    2,443,256       2,487,404       3,283,512       3,284,060

Cost of services                            1,684,641       1,852,946       2,318,268       2,471,884
                                         ------------    ------------    ------------    ------------
  Income from services                        758,615         634,458         965,244         812,176

Gel and administrative expenses               284,458         236,317         377,370         315,717

Selling and marketing expenses                277,169         253,346         362,581         341,604
                                         ------------    ------------    ------------    ------------
  Income from operations                      196,988         144,795         225,293         154,855
                                         ------------    ------------    ------------    ------------
Non-operating income:
  Other income                                    714           1,419             714           1,419
  Interest income                              28,905          12,543          37,627          15,967
  Interest expense                               (773)         (1,081)         (1,146)         (1,453)
                                         ------------    ------------    ------------    ------------
  Net non-operating income                     28,846          12,881          37,195          15,933
                                         ------------    ------------    ------------    ------------
  Net income                             $    225,834    $    157,676    $    262,488    $    170,788
                                         ============    ============    ============    ============
Preferred stock dividends                     (26,240)        (27,781)        (34,987)        (37,042)

  Net income available to common
  stockholders                           $    199,594    $    129,895    $    227,501    $    133,746
                                         ============    ============    ============    ============
Earnings per share - Basic               $       0.03    $       0.02    $       0.03    $       0.02
                                         ============    ============    ============    ============
Earnings per share - Diluted             $       0.02    $       0.02    $       0.02    $       0.02
                                         ============    ============    ============    ============
Weighted average common shares
outstanding - Basic                         7,352,482       6,095,247       7,353,420       5,634,905
                                         ============    ============    ============    ============
Weighted average common and equivalent
shares outstanding - Diluted               10,525,181       9,302,937      10,514,801       8,887,419
                                         ============    ============    ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
                               AVESIS INCORPORATED
                            STATEMENTS OF CASH FLOWS
              FOR THE FOUR MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (Unaudited)

                                                        1999           1998
                                                     -----------    -----------
Cash flows from operating activities:
  Net income                                         $   262,488    $   170,788
                                                     -----------    -----------
  Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation and amortization                         47,797         37,727
    Provision for losses on accounts receivable          (14,771)           -0-
    Increase (decrease) in cash resulting
      from changes in:
      Receivables                                         65,286        158,847
      Prepaid expenses and other                          43,078        (75,852)
      Other assets                                      (111,762)       (12,982)
      Accounts payable                                   (98,745)       165,358
      Accrued expenses                                   (49,262)       (30,623)
      Deferred income                                      5,276          5,824
      Accrued rent                                           -0-         (7,834)
                                                     -----------    -----------
        Total adjustments                               (113,103)       240,465
                                                     -----------    -----------
        Net cash provided by operating activities        149,385        411,253
                                                     -----------    -----------
Cash flows from investment activities:
  Purchases of property and equipment                    (79,784)       (58,006)
  Proceeds from dispositions of property
    and equipment                                            -0-          1,370
                                                     -----------    -----------
        Net cash used in investing activities            (79,784)       (56,636)
                                                     -----------    -----------
Cash flows from financing activities:
  Principal payments under capital lease obligation       (3,764)        (3,457)
  Exercise of stock options and warrants                     -0-      1,228,657
  Payment of dividend on preferred stock                 (50,821)           -0-
  Payments for repurchase of common
    and preferred stock                                  (27,121)      (658,262)
                                                     -----------    -----------
        Net cash (used in) provided by
          financing activities                           (81,706)       566,938
                                                     -----------    -----------
        Net (decrease) increase in cash
          and cash equivalents                           (12,105)       921,555

Cash and cash equivalents, beginning of period         2,599,342        993,610
                                                     -----------    -----------
Cash and cash equivalents, end of period             $ 2,587,237    $ 1,915,165
                                                     ===========    ===========

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>
                               AVESIS INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1999 AND 1998
                                   (Unaudited)

NOTE 1. BASIS OF PRESENTATION

     The accompanying  unaudited condensed  consolidated financial statements of
Avesis Incorporated,  and its wholly-owned  subsidiaries,  Avesis of Washington,
D.C. and Avesis Reinsurance Incorporated (collectively, the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and  pursuant  to  the  rules  and  regulations  of  the
Securities and Exchange Commission.  Accordingly, they do not include all of the
information and footnotes required by generally accepted  accounting  principles
for a complete financial statement  presentation.  In the opinion of Management,
such unaudited interim information reflects all adjustments,  consisting only of
a normal recurring nature, necessary to present the Company's financial position
and the  results of  operations  and cash flows for the periods  presented.  The
results of operations for interim periods are not necessarily  indicative of the
results to be expected  for a full fiscal  year.  These  condensed  consolidated
financial  statements  should be read in conjunction with the Company's  audited
consolidated  financial  statements  included in the Company's  Annual Report on
Form 10-KSB, for the year ended May 31, 1999.

     Change in Fiscal Year - On October 5, 1999, the Company  changed its fiscal
year-end  from May 31 to  December  31 to  conform  to the  year-end  of  Avesis
Reinsurance Incorporated ("ARI").  Reinsurance corporations are required to have
a December 31 fiscal year-end and submit  calendar  year-end  audited  financial
statements by the Arizona Department of Insurance.

NOTE 2. EARNINGS PER SHARE

     A summary of the  reconciliation  from basic  earnings per share to diluted
earnings per share for the quarters and four months ended September 30, 1999 and
1998 follows:

<TABLE>
<CAPTION>
                                                     Quarter ended        Quarter ended
                                                   September 30, 1999   September 30, 1998
                                                      -----------          -----------
<S>                                                   <C>                  <C>
Net earnings                                          $   225,834          $   157,676
Less: preferred stock dividends                            26,240               27,781
                                                      -----------          -----------
Income available to common stockholders                   199,594              129,895
                                                      ===========          ===========
Basic EPS - weighted average shares outstanding         7,352,482            6,095,247
                                                      ===========          ===========
Basic earnings per share                              $      0.03          $      0.02
                                                      ===========          ===========
Basic EPS - weighted average shares outstanding         7,352,482            6,095,247
Effect of dilutive securities:
  Stock Purchase Options - common stock                   160,013                   --
  Convertible preferred stock                           3,012,687            3,207,690
                                                      -----------          -----------
Dilutive EPS - weighted average shares outstanding     10,525,181            9,302,937
Net earnings                                          $   225,834          $   157,676
                                                      -----------          -----------
Diluted earnings per share                            $      0.02          $      0.02
                                                      ===========          ===========
</TABLE>

                                        5
<PAGE>
<TABLE>
<CAPTION>
                                                   Four Months ended    Four Months ended
                                                   September 30, 1999   September 30, 1998
                                                      -----------          -----------
<S>                                                   <C>                  <C>
Net earnings                                          $   262,488          $   170,788
Less: preferred stock dividends                            34,987               37,042
                                                      -----------          -----------
Income available to common stockholders                   227,501              133,746
                                                      ===========          ===========
Basic EPS - weighted average shares outstanding         7,353,420            5,634,905
                                                      ===========          ===========
Basic earnings per share                              $      0.03          $      0.02
                                                      ===========          ===========
Basic EPS - weighted average shares outstanding         7,353,420            5,634,905
Effect of dilutive securities:
  Stock Purchase Options - common stock                   145,313                   --
  Convertible preferred stock                           3,016,067            3,242,514
                                                      -----------          -----------
Dilutive EPS - weighted average shares outstanding     10,514,801            8,877,419
Net earnings                                          $   262,488          $   170,788
                                                      -----------          -----------
Diluted earnings per share                            $      0.02          $      0.02
                                                      ===========          ===========
</TABLE>

NOTE 3. USE OF ESTIMATES

     Management  of the  Company  has made  certain  estimates  and  assumptions
relating to the  reporting  of assets,  liabilities,  revenues  and  expenses to
prepare  the  financial   statements  in  conformity  with  generally   accepted
accounting principles. Actual results could differ from those estimates.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE QUARTERS AND FOUR MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

     The  statements   contained  in  this  discussion  and  analysis  regarding
management's anticipation of adequacy of cash reserves for operations,  adequacy
of reserves for claims,  anticipated level of operating  expenses related to new
Members,  viability of the Company,  cash flows and marketability of the Company
constitute  "forward-looking"  statements  within  the  meaning  of the  Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve risks and
uncertainties,  which could cause actual results to differ  materially  from the
forward-looking statements.  Management's anticipation is based upon assumptions
regarding the market in which the Company  operates,  the level of  competition,
the level of demand for  services,  the  stability  of costs,  the  retention of
Sponsors and Members enrolled in the Company's benefit  programs,  the relevance
of the Company's historical  performance,  Year 2000 issues and the stability of
the regulatory environment. Any of these assumptions could prove inaccurate, and
therefore there can be no assurance that the  forward-looking  information  will
prove to be accurate.

     Avesis   Incorporated,   a   Delaware   corporation   (together   with  its
subsidiaries, the "Company"), incorporated in June 1978, markets and administers
vision,  dental,  chiropractic  and hearing  managed care and discount  programs
("Programs")  nationally.  The  Programs  are  designed  to enable  participants
("Members"),  who are enrolled through various sponsoring  organizations such as
insurance   carriers,   HMOs,   Blue  Cross  and  Blue   Shield   organizations,
corporations,  unions and various associations ("Sponsors"),  to realize savings
on  purchases of services and  products  through  networks of providers  such as
ophthalmologists,  optometrists,  opticians, dentists, chiropractors and hearing
specialists  ("Providers").  The Company incorporated Avesis Reinsurance Inc. in
October  1999,  to enable the Company to insure  risks as a life and  disability
reinsurer, thereby maximizing the potential revenues and earnings related to its
Programs.

                                       6
<PAGE>
     The Company derives its  administration  fee revenue from plan Sponsors who
customarily  pay a set fee per Member per month.  Administration  fee revenue is
recognized  on the accrual basis during the month that the Member is entitled to
use the benefit.  Certain Sponsors pay for services rendered by the Company on a
fee for  service  basis.  Based upon the type of Program  (e.g.,  managed  care,
discount,  third party administration) the Provider's claim for service provided
to  Members  is paid  either by the  Company,  Sponsor,  Member  or  combination
thereof.  Buying  Group  revenues  are  recorded at the total  amount  billed to
participating  Providers  and  recognized  in the month the  product is shipped.
Vision  Provider  fee revenue is based upon a percentage  of  materials  sold by
certain participating Providers under certain plans.

RESULTS OF OPERATIONS:

     The  following  tables  detail the  Company's  major  revenue  and  expense
categories for the quarters and four months ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                Quarter Ended                Quarter Ended
                              September 30, 1999           September 30, 1998          Increase/(Decrease)
                           ------------------------     ------------------------     ------------------------
                                        % of Total                    % of Total
                                      Service Revenue              Service Revenue                 % Change
Revenue:                              ---------------              ---------------                 ----------
<S>                        <C>           <C>            <C>           <C>            <C>           <C>
Total Service Revenue      $2,443,256       100%        $2,487,404       100%        $  (44,148)        (2%)
Vision & Hearing Program    1,865,228        76%         1,746,235        70%           118,993          7%
Vision Provider Fee            37,685         2%            41,312         2%            (3,627)        (9%)
Dental Program                206,607         8%           301,228        12%           (94,621)       (31%)
Buying Group Program          330,984        14%           394,597        16%           (63,613)       (16%)

Expenses:
Cost of Services            1,684,641        69%         1,852,946        74%          (168,305)        (9%)
General & Administrative      284,458        12%           236,317        10%            48,141         20%
Selling & Marketing           277,169        11%           253,346        10%            23,823          9%

Net Income                    225,834         9%           157,676         6%            68,158         43%

                               Four Months Ended           Four Months Ended
                              September 30, 1999           September 30, 1998          Increase/(Decrease)
                           ------------------------     ------------------------     ------------------------
                                        % of Total                    % of Total
                                       Service Revenue              Service Revenue                 % Change
Revenue:                               ---------------              ---------------                 ----------
Total Service Revenue      $3,283,512       100%        $3,284,060       100%        $     (548)         (0%)
Vision & Hearing Program    2,486,302        76%         2,286,988        70%           199,314           9%
Vision Provider Fee            51,720         2%            52,815         2%            (1,095)         (2%)
Dental Program                272,448         8%           398,496        12%          (126,048)        (32%)
Buying Group Program          470,051        14%           538,044        16%           (67,993)        (13%)

Expenses:
Cost of Services            2,318,268        71%         2,471,884        75%          (153,616)         (6%)
General & Administrative      377,370        11%           315,717        10%            61,653          20%
Selling & Marketing           362,581        11%           341,604        10%            20,977           6%

Net Income                    262,488         8%           170,788         5%            91,700          54%
</TABLE>

     Past and future  revenues in all lines of business are directly  related to
the number of Members enrolled in the Company's benefit programs. However, there
may be  significant  pricing  differences  to Sponsors  depending on whether the

                                        7
<PAGE>
benefit  offered  is  funded  in part or whole by the plan  Sponsor.  Two  major
Sponsors  accounted  for 48% and 14% of total service  revenues  during the four
months ended September 30, 1999, and three major Sponsors accounted for 28%, 17%
and 14% of total  service  revenues  during the four months ended  September 30,
1998. Two of the Company's three major Sponsors  accounted for separately during
the four months  ended  September  30, 1998 were  combined  prior to the current
fiscal  year.  The Company is  substantially  dependent  on a limited  number of
Sponsors  and  may  be  materially  adversely  affected  by  termination  of its
agreements with those Sponsors.

     The increase in total service  revenues is principally due to a vision plan
Sponsor who has  increased  the level of benefit of its Members,  over the prior
year,  and a second  vision plan Sponsor which has added  approximately  100,000
Members since September 1998.

     The Company had  approximately  710,000 vision and 4,000 hearing Members as
of  September  30,  1999,  compared to  approximately  800,000  vision and 5,000
hearing  Members as of September  30,  1998.  The increase in vision and hearing
revenue during the quarter and four months ended  September 30, 1999 as compared
to the same  periods in the  previous  fiscal year was largely the result of the
two vision plan Sponsors  mentioned  above.  The decrease in vision  Members was
partially  caused by the  termination  of an account with  approximately  91,000
Members in a discount program,  which did not provide significant revenue to the
Company.  Other changes in the number of vision and hearing Members occurred due
to Sponsors'  employee or Member  fluctuations in the normal course of business.
Vision provider fee revenue  remained  constant as a percentage of total service
revenues from the four months ended  September 30, 1998 to the four months ended
September 30, 1999.

     The Company had  approximately  124,000  dental Members as of September 30,
1999, compared to approximately 159,000 dental Members as of September 30, 1998.
The decline of the Company's dental program revenue and membership resulted from
a  Sponsor's  loss of  approximately  23,000  Members  who  participated  in the
Company's  dental  program.  There also have been  reductions  in  Members  from
various Sponsors in the normal course of business.

     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.

     Costs of Services  primarily 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.  Cost of  Services  decreased  as a
percentage  of total service  revenues  during the quarter and four months ended
September  30,  1999,  as compared to the same periods in the prior fiscal year.
The  decrease  in Cost of  Services  in the  current  periods as compared to the
previous  year  primarily  resulted from lower  Provider  claims for services on
which  the  Company  is  responsible  for  payment.  However,  Cost of  Services
increased  slightly as a percentage  of total  service  revenue  during the four
months ended  September 30, 1999 (71%) as compared to the average for the entire
previous fiscal year (70%). This increase was largely due to the Company's focus
on Customer Service, Network Development and Provider communication.

                                       8
<PAGE>
     General and  Administrative  expenses  increased as a  percentage  of total
service  revenue during the quarter and four months ended September 30, 1999, as
compared to the quarter and four months ended  September 30, 1998.  The increase
was largely due to increases in rent, depreciation and equipment rentals related
to the expansion of the Company's principal offices beginning February 1999. The
Company's   payments  under  its  Management   Agreement  with  National  Health
Enterprises, Inc. (an affiliate) increased by $50,000 to $300,000 annually as of
June 1,  1999.  The  Company  also  began  making  monthly  payments  under  its
Investment  Advisor  Agreement  with Richter & Co.,  Inc. (an  affiliate)  at an
annual rate of $30,000 as of June 1, 1999.

     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 related overhead  expenses.  The
increase in expenses during the quarter and four months ended September 30, 1999
as compared to the same periods in the previous fiscal year was primarily due to
the  payroll  and  related  expenses  for a senior  salesperson  that joined the
Company during September 1998. A significant  amount of the Company's  marketing
activities  has been  outsourced  to  management  consultants,  National  Health
Enterprises (an affiliate).

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash equivalents of $2,587,237 as of September 30,
1999,  compared to  $2,599,342  as of May 31,  1999.  The decrease of $12,105 is
primarily  due to the  Company's  net income earned during the four months ended
September 30, 1999,  offset by fixed asset purchases,  the payment of a dividend
on the  Company's  Series A  preferred  stock and the  transfer of $100,000 to a
certificate  of deposit,  included in other assets,  related to the formation of
ARI. Current cash on hand and cash provided from operations is expected to allow
the Company to sustain operations for the foreseeable future.

     As of September 30, 1999, the Company had  $1,265,841 of Accounts  Payable,
compared to  $1,364,586  as of May 31,  1999.  Included in Accounts  Payable are
reserves for claims of $1,057,850 as of September 30, 1999, and $1,082,072 as of
May  31,  1999.   The   reserves  are  for  incurred  but  not  reported   claim
reimbursements  to Providers who  participate in certain  managed care programs.
The Company believes this reserve is adequate based upon historical results.

     The Company expects to pay dividends of approximately $49,000 on the Series
A Preferred Stock on December 1, 1999.

                                       9
<PAGE>
YEAR 2000 COMPLIANCE

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

     During July 1997,  the  Company  contracted  with a third  party  vendor to
develop  new systems to support  the  Company's  claims  payment,  customer  and
provider  service,  quality  assurance and network  development  functions.  The
Company  missed  its  anticipated  implementation  date  for the new  system  of
September 1, 1999, due to issues with data conversion from its current  systems.
As of October 4, 1999, the issues had been  addressed in a  satisfactory  manner
and the new system was fully implemented as of November 1, 1999. As of September
30, 1999, the Company had paid approximately  $440,000 for software  development
and  related  hardware,  which was  capitalized.  The  Company  expects to incur
approximately  $44,000 of additional  software  development and related hardware
expenses during fiscal 2000.

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

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

                                       10
<PAGE>
                            PART II OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(b)  The Certificate of Designation for the Company's Class A, Senior  Nonvoting
     Cumulative  Convertible Preferred Stock, Series A, restricts the payment of
     dividends  on the  Company's  Series 2  Preferred  Stock and Common  Stock.
     Accordingly,  the  Company  may not pay the  quarterly  dividend  otherwise
     scheduled  for  payment  during  October  1999,  on shares of its  Series 2
     Preferred  Stock.  Such  dividend  is  cumulative,  and the total  dividend
     arrearage is $31,500,  or $6.30 per share, as of September 30, 1999 for all
     5,000 shares outstanding.

ITEM 5. OTHER INFORMATION

     RETIREMENT OF STOCK INFORMATION

     As previously  disclosed in the Company's Form 10-QSB for the quarter ended
     August 31, 1999,  filed on October 13, 1999, the Company made the following
     stock repurchases and retirements:

                                             Series A      Total Purchase Price
           Date            Common Shares      Shares       including Commissions
           ----            -------------      ------       ---------------------
     September 3, 1999         13,000                              $ 6,392
     September 13,1999                         3,500               $17,522

     Subsequent to the filing of the Company's Form 10-QSB for the quarter ended
     August 31,  1999,  the Company  made the  following  stock  repurchase  and
     retirement:

                               Series A        Total Purchase Price
           Date                 Shares         including Commissions
           ----                 ------         ---------------------
     November 1, 1999            7,500                $37,522

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

(b)  No reports on Form 8-K were filed during the quarter  ended  September  30,
     1999.

                                       11
<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: 11/11/99                          /s/ Neal A. Kempler
                                        ----------------------------------------
                                        Neal A. Kempler, Vice President
                                        and Secretary


Date: 11/11/99                          /s/ Joel H. Alperstein
                                        ----------------------------------------
                                        Joel H. Alperstein, Director of Finance
                                        and Treasurer
                                        (Principal Financial Officer)

                                       12
<PAGE>
                               Avesis Incorporated
                                  Exhibit Index
              Form 10-QSB for the Quarter Ended September 30, 1999


Exhibit No.   Description                 Incorporated by Reference from the:
-----------   -----------                 -----------------------------------
11            Statement re: Computation   Earnings (Loss) per Share Computation,
              of per Share Earnings       see Note 2 to the Notes to Condensed
                                          Consolidated Financial Statements

27            Financial Data Schedule     Filed herewith