FORM 10-QSB

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                 
        SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 1998

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   
         SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from  ________ to ________

Commission File #0-11078

THE AMERICAN EDUCATION CORPORATION
(Exact name of registrant as specified in its charter)

Colorado
(State or other jurisdiction of incorporation, or organization)

84-0838184
(IRS Employer Identification number)
 

7506 North Broadway Extension, Suite 505, Oklahoma City, OK  73116
(Address of principal executive offices)

(405) 840-6031
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.025 per share


Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 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



Number of shares of the registrant's common stock outstanding as 
of Sept. 30, 1998:         12,913,046

Transitional Small Business Disclosure Format				         
YES           NO   X 


THE AMERICAN EDUCATION CORPORATION


                                     INDEX

                                  
                                                          Page No.


PART I - FINANCIAL INFORMATION

Item 1     Balance Sheets                                    3
           September 30, 1998 and December 31, 1997

           Statements of Income
           For the Three Months Ended September 30, 1998	 4
           and for the Three Months Ended 
           September 30, 1997

           For the Nine Months Ended September 30, 1998      5
           and for the Nine Months Ended 
           September 30, 1997

           Statements of Cash Flows                          6
           For the Nine Months Ended September 30, 1998
           and for the Nine Months Ended 
           September 30, 1997

           Notes to Interim Financial Statements             7


Item 2     Management's Discussion and Analysis of           9
           Financial Conditions and Results of Operations


PART II - OTHER INFORMATION                                  13

SIGNATURE PAGE                                               15

Part 1 - FINANCIAL INFORMATION
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS


ASSETS                                   30-Sep-98       31-Dec-97
                                         Unaudited        Audited
Current assets:
Cash                                    $  787,449       $ 283,636
Accounts receivable, net of allowance
 for uncollectible accounts of $67,159   
 and $32,805                             1,385,392       $ 623,287 
Inventories                                 60,820           8,168
Prepaid expenses and deposits              243,556          32,593
Deferred income taxes                       15,748          13,122
                                        ----------       ---------
 Total current assets                    2,492,965         960,806

Property and equipment, at cost            386,720         314,998
 Less accumulated depreciation and 
 amortization                             (182,009)      (150,938)
                                        -----------      ---------
 Net property and equipment                204,711        164,060

Other assets:
 Capitalized software costs, net of                
 accumulated amortization of $1,167,702 
 and $1,000,730                           1,035,723        764,505
 Organizational costs                        33,793
 Goodwill, net of accumulated amortization
 of $264,863 and $246,800                    222,772             0
 Deferred income taxes                       874,639     1,506,032
                                          ----------    ---------- 
Total other assets                         2,166,927     2,270,537
                                          ----------    ----------

Total Assets                             $ 4,864,603    $3,395,403
                                         ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable trade                  $   202,261    $  132,156
 Accrued liabilities                         324,726       319,818
 Accounts Payable - Affiliate                 90,006        18,000
 Customer Deposits                           117,703       125,739
 Current portion of capital lease
  Obligation                                  13,412         8,021
 Income taxes payable                          5,154         9,512
                                         -----------    ----------
Total current liabilities                    753,262       613,246

Long-term debt                                26,243        58,000
Capital lease obligation                      81,800        46,761
                                          ----------    ----------
Total liabilities                            861,305       718,007

Commitments and contingencies                    

Stockholders' Equity
 Preferred Stock, $.001 par value;
  Authorized-50,000,000 shares-issued and
  Outstanding-none                                 0             0
 Common stock, $.025 par value
  Authorized 30,000,000 shares-issued and 
  outstanding-12,913,046 shares               322,826      304,590
 Additional paid-in capital                 5,503,536    5,237,093
 Retained Earnings/(Deficit)               (2,864,287)  (2,864,287)
Year-to-date earnings                       1,041,223           -         
                                           ----------   ----------
 Total stockholders' equity                 4,003,298    2,677,396
                                           ----------   ----------
Total liabilities and stockholders'
 equity                                    $4,864,603   $3,395,403   
                                          ===========  ===========

The accompanying notes are an integral part of the financial 
statements.


THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
                                         1998             1997

Net Sales                          $  1,529,188       $1,081,084
Cost of goods sold                      176,776           17,680
                                   ------------     ------------- 
Gross profit                          1,352,412        1,063,404

Operating expenses:
 Sales and marketing                    428,771          510,714
 Operations                              98,272               -
 General and administrative             283,213          283,281 
 Amortization of capitalized 
  software costs                         44,496           24,858
                                   ------------      ------------
Total operating expenses                854,752          818,853
                                   ------------      ------------
Operating Income                        497,660          244,551

Other income/(expense)
 Interest and Dividend Income             4,515              625
 Miscellaneous income                    58,625            1,101
 Interest Expense                        (7,807)          (1,443)
 Other                                  (41,209)         (19,444)
                                   -------------      ------------
Net income before taxes                 511,784          225,390

 Current income taxes                     9,978       
 Deferred income taxes                  249,538           81,140
 Valuation allowance - change at 
  beginning of year                          -           (81,140)
                                  -------------       ------------
Net income                          $   252,268       $  225,390
                                  =============       ============
                                                
Basic                                12,323,579         12,127,393

Earnings per share                  $     0.020        $     0.019

Diluted                              13,370,007         13,694,155

Earnings per share                  $     0.019        $     0.016


The accompanying notes are an integral part of the financial 
statements.



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED) 
                                          1998             1997
 
Net Sales                          $  4,637,744      $  3,091,157
Cost of goods sold                      512,540           245,092
                                   ------------      ------------
Gross profit                          4,125,204         2,846,065

Operating expenses:
 Sales and marketing                  1,180,373           858,847
 Operations                             264,900                -
 General and administrative             796,366           960,356
 Amortization of capitalized 
  software costs                        121,023            65,593
                                   ------------       ----------- 
Total operating expenses              2,362,662         1,884,796
                                   ------------       -----------
Operating income                      1,762,542           961,269

Other income (expense)
 Interest and Dividend Income             8,841             1,213
 Miscellaneous income                    62,370             7,511
 Interest Expense                       (14,837)           (4,386)
 Other                                 (125,397)          (19,444)
                                   -------------       -----------
Net income before taxes               1,693,519           946,163

 Current income taxes                    18,238
 Deferred income taxes                  634,058           340,619
 Valuation allowance - change at 
  beginning of year                           -          (340,619)
                                  -------------       ------------
Net income                         $  1,041,223        $  946,163
                                  =============       ============

Basic                                12,323,579         12,127,393

Earnings per share                  $     0.084         $    0.078

Diluted                              13,370,007         13,694,155

Earnings per share                  $     0.078        $     0.069


The accompanying notes are an integral part of the financial 
statements.


THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)

                                         1998            1997

Cash flows from operating activities:

Net income                         $ 1,041,223        $   946,163
 Adjustments to reconcile net income
  To net cash provided by (used in)
  Operating activities:
 Depreciation and amortization         216,106            118,435   
 Reserve for bad debts                  19,554            (40,553)
 Stock issued for compensation          20,250                 -
 Stock issued in lieu of interest
  Payment                                3,750                 -
 Other                                  42,886                 -

Changes in assets and liabilities:
 Accounts receivable                  (698,045)          (463,465)
 Inventories                           (28,670)             3,275 
 Prepaid expenses and other           (199,170)            12,244
 Deferred tax asset                    628,767                 -
 Accounts payable and accrued 
  liabilities                           (3,708)           (35,111)
 Accounts payable - Affiliate           72,006                 -
 Customer Deposits                     (35,677)           (63,733) 
                                   ------------      -------------
 Net cash provided by operating 
  activities                         1,079,272            477,255
                                   ------------      -------------

Cash flow from investing activities:
 Acquisition of net assets of
  Subsidiary                           (70,275)                -
 Capitalization of organizational
  Costs and goodwill                   (33,793)                -      
 Purchase of capitalized software 
  costs                               (438,191)          (263,552)
 Purchase of property and equipment    (22,905)           (26,668)
                                   ------------       ------------
 Net cash used in investing 
  activities                          (565,164)          (290,220)

Cash flows from financing activities:
 Payments on notes and leases          (37,975)                -
 Issuance of common stock               27,680                 -
                                   ------------       ------------
 Net cash provided by financing 
  activities                           (10,295)                -

Net increase in cash                   503,813            187,035

Cash at beginning of the period        283,636            193,347
                                   ------------       -----------
Cash at end of the period          $   787,449       $    380,382
                                   ============       ===========

 

The accompanying notes are an integral part of the financial 
statements.

 


THE AMERICAN EDUCATION CORPORATION
Part I
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED September  30, 1998 AND 1997


NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


1.  Nature of Business:

The American Education Corporation (the Company) and its 
subsidiary's business is the development of educational computer 
software, and its distribution to school districts nationally.

2.  Basis of Presentation:

The summary of significant accounting policies of The American 
Education Corporation (the Company) is presented to assist in 
understanding the Company's financial statements. These accounting 
policies conform to generally accepted accounting principles and 
have been consistently applied in the preparation of the financial 
statements.

The Company's consolidated financial statements include the 
results from its wholly owned subsidiary, Projected Learning 
Programs, Inc. All material intercompany transactions have 
been eliminated.

The interim consolidated financial statements at September 30, 
1998, and for the three and nine month periods ended September 30, 
1998, and 1997 are unaudited, but include all adjustments which 
the Company considers necessary for a fair presentation.  The 
December 31, 1997, balance sheet was derived from the Company's 
audited financial statements.

The accompanying unaudited financial statements are for the 
interim periods and do not include all disclosures normally 
provided in annual financial statements and should be read 
in conjunction with the Company's audited financial statements 
included in the Company's Form 10-KSB for the year ended 
December 31, 1997.  The accompanying unaudited interim financial 
statements for the three and nine month periods ending September 
30, 1998, are not necessarily indicative of the results which can 
be expected for the entire year.

The preparation of the financial statements in conformity with 
generally accepted accounting principles requires management to 
make estimates and assumptions that affect the reported 
amounts of assets, liabilities and disclosure of contingent assets 
and liabilities at the date of the financial statements and the 
reported revenues and expenses during the reporting period.  
Actual results could differ from those estimates.

3.  Revenue Recognition:

The Company recognizes revenue in accordance with the American 
Institute of Certified Public Accountant's Statement of Position 
91-1 on software revenue recognition.

4.  Capitalized Software Costs:

Capitalized software costs consist of licenses for the rights to 
produce and market computer software, salaries, and other direct 
costs incurred in the production of computer software. Costs 
incurred in conjunction with product development are charged to 
research and development expense until technological feasibility 
is established. Thereafter, all software development costs are 
capitalized and amortized on a straight-line basis over the 
product's estimated economic life of between three and five 
years.

5.  Goodwill:

Goodwill relates to the acquisition by the Company in 1998 of 
Projected Learning Programs, Inc. and is amortized over a period 
of 10 years.

6.  Inventories:

Inventories are stated at the lower of cost (first-in, first-out), 
or market.

7.  Property and Equipment:

Property and equipment is stated at cost. Depreciation is provided 
on the straight-line basis over the estimated useful life of the 
assets, which is five years.

8.  Statements of Cash Flows:

In the Statements of Cash Flows, cash and cash equivalents may 
include currency on hand, demand deposits with banks, or other 
financial institutions, treasury bills, commercial paper, mutual 
funds or other investments with original maturities of three 
months or less.

9.  Income Taxes:

The Company has adopted the provisions of Statement of Financial 
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 
109). SFAS 109 requires recognition of deferred tax liabilities 
and assets for the expected future tax consequences of events that 
have been included in the financial statements or tax returns, 
determined by using the enacted tax rates in effect for the year 
in which the differences are expected to reverse.

10.  Computation of Income Per Share:

The Company has adopted Statement of Financial Accounting 
Standards No. 128 "Earnings Per Share" (SFAS 128) as required, 
effective November 1, 1997. SFAS 128 requires presentation of 
basic and diluted earnings per share, including a restatement of 
all prior periods presented. Basic earnings per share is 
calculated based only upon the weighted average number of common 
shares outstanding during the period. Diluted earnings per share 
are calculated based upon the weighted average number of common 
and, where dilutive, potential common shares outstanding during 
the period, utilizing the treasury stock method. Potential common 
shares include options, warrants and convertible securities. 

The weighted average number of basic and diluted common shares 
outstanding is as follows:

               September 30, 1998              September 30, 1997	
	
    Basic            12,323,579                      12,127,393    
    Diluted          13,370,007                      13,694,155	

11.  Stockholders' Equity:

On March 11, 1996 the Company granted options to employees, 
officers, and directors, to purchase 1,301,195 shares of common 
stock at $.50 per share.  The options expire March 11, 1999. 
Additional options were issued on January 23, 1998 to 24 employees 
in the amount of 230,500 options. These options expire on January 
23, 2001 or, like the previously issued options, ninety days 
after termination of employment. A total of 55,000 options have 
been exercised and 113,000 options have expired due to termination 
of employment.

During the first quarter of 1998, the Board of Directors approved 
the issuance of a total of 40,500 shares of common stock as an 
annual bonus for contributions made to the Company in 1997.  The 
recipients of 10,000 shares each as a bonus award are: Jeffrey E. 
Butler, President; Thomas Shively, Executive Vice President; and 
Jeffrey E. Butler, Jr., Vice President of Marketing.  In addition, 
Patrick Timmons, Director of Programming was awarded 7,500 shares 
and each of the outside directors Newton Fink, Monty McCurry 
and Stephen Prust were each awarded 1,000 shares of common stock. 

During the second and third quarters of 1998, 130,000 additional 
stock options were issued to eight  new employees. These options 
have been ratified by the Board of Directors to be included under 
the employee plan approved at the Annual Meeting of Shareholders 
held May 29, 1998. A total of 200 of these options have been 
exercised.

At December 31, 1997, $50,000 of convertible notes with a 
conversion price per share of $0.1346 were outstanding. On 
September 30, 1998, these notes, along with $11,750 of accrued 
interest due on the notes were converted into 458,767 shares of 
the Company's common stock. 

2.  COMMITMENTS AND CONTINGENCIES

The Company amortizes capitalized software costs over the 
product's estimated useful life.  Due to inherent technological 
changes in the software development industry, the period over 
which such capitalized software cost is being amortized may have 
to be accelerated.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report contains forward-looking statements. These forward-
looking statements can generally be identified as such because the 
context of the statement will include words such as the Company 
"believes", "plans", "intends", "anticipates", "expects", or words 
of similar import. Similarly, statements that describe the 
Company's future plans, objectives, estimates, or goals are also 
forward-looking statements. Such statements address future events 
and conditions concerning capital expenditures, earnings, 
litigation, liquidity, capital resources, and accounting matters. 
Actual results in each case could differ materially from 
those currently anticipated in such statements by reason of 
factors such as economic conditions, including changes in customer 
demands; future legislative, regulatory and competitive 
developments in markets in which the Company operates; and other 
circumstances affecting anticipated revenues and costs.

LIQUIDITY AND CAPITAL RESOURCES

The Company views accounts receivable, inventory, and cash as its 
principal measures of liquidity.  To supplement its anticipated 
short-term working capital requirements, the Company has, in the 
past, entered into various convertible loan agreements beginning 
in January 1991, with private investors. Several of these loans 
were convertible into common stock of the Company at conversion 
prices ranging from $0.1346 to $0.50 per common share. These loans 
were converted into common stock of the Company in June of 1996 
and September of 1998. 

The Company's working capital was $1,739,703 at September 30, 
1998, an improvement of $1,392,143 from $347,560 at December 31, 
1997.  This significant improvement is associated with higher 
levels of sales and collection of sales proceeds.

Additional working capital beyond that available within the 
Company has been and may be required to expand operations.  
Management has and will consider options available in providing 
such funding, including debt financing and capital enhancement.

During the second quarter the Company closed a revolving line of 
credit facility establishing a $500,000 line of credit with  UMB 
Oklahoma Bank. The interest rate on borrowed funds is the national 
prime rate. The line of credit is subject to a borrowing base and 
at September 30, 1998 was unused.






RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER  30, 1998
AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1997

Net sales for the three months ended September 30, 1998, totaled 
$1,529,188 compared to  $1,081,084 for the same period in 1997.  
This represents an increase of approximately 41% over the 1997 
quarter.  The increase in sales for the third  quarter of 1998 
over the comparable quarter in 1997 is attributable to the 
availability and customer acceptance of additional secondary grade 
level titles released in the latter part of fiscal 1997 and the 
first half of 1998 and expanded channels of distribution. The 
Company now has effective, trained distribution in 48 states that 
contributed to quarterly sales performance.

Cost of goods sold as a percentage of sales revenue for the three 
months ending September 30, 1998, increased to 11.6% from 1.7% in 
the three-month period ending June 1997. However, the 1997 period 
included a one-time adjustment in the cost of goods calculation. 
Even though the 1998 results include the lower gross margin 
software sold by Projected Learning Programs, the relatively 
high overall gross margins reflect the efficiency in which 
software products are now produced on CD-ROM.  The use of this 
medium also positively affects the cost of packaging, handling and 
freight associated with products that are marketed primarily to 
the school market, as opposed to traditional retail outlets.  Cost 
of goods sold represents the actual cost to produce the software 
products, including certain allocated overhead costs, a 
portion of which is fixed.  Excluding the costs of allocated 
overhead, product costs provide gross profit margins ranging from 
75 to 95 percent on the Company's principal products.  
Consolidated Company gross margins are expected to trend down 
slightly as lower gross margins on PLP catalog sales become a 
higher percentage of total corporate revenues.

Total operating expenses, which include selling and marketing, 
general and administrative, operations, and amortization of 
product development costs, were $854,752  for 
the three months ended September  30, 1998, compared to $818,853 
for the previous year.  This represents an increase of 
approximately 4% but only represents 56% of sales compared to 76% 
of sales for the comparable 1997 period. This decrease in 
operating expenses as a percentage of revenues is 
primarily due to volume related efficiencies where much of the 
operating cost is fixed, but is set at a level which can support 
higher revenues currently and in the future.

Selling and marketing costs decreased by approximately 16%, from 
$510,714 for the three months ended September 30, 1997, to 
$428,771 for the current period.  The decrease in 1998 is 
related to reduced promotional costs necessary to achieve the 
current sales levels, due to increased acceptance of the 
Company's products in the marketplace and a wider distribution 
system already in place. 

General and administrative and operations expenses increased by 
approximately 35% during the 1998 quarter, from $283,281 to 
$381,485.  This increase is primarily attributable to the 
increases in personnel over the prior year, which represent an 
important investment in the future growth of the business.

Pre-tax income increased by 127% to $511,784 from $225,390 for the 
comparable 1997 quarter.This improvement reflects the higher 
revenues which are being achieved without a comparable 
increase in operating costs, primarily due to volume related 
efficiencies. Because the 1998 net income amount includes a full 
provision for corporate income taxes, whereas the 1997 results do 
not, management believes that pre-tax earnings comparisons are a 
more meaningful measure of the progress of the Company than 
comparisons of net income.

Net income for the three months ended September 30, 1998, improved 
by approximately 12% as compared to the prior year from $225,390 
in 1997 to $252,268 in 1998. Net income for 1998 was impacted by a 
one-time adjustment resulting from a change in the estimated 
annual effective income tax rate which was recorded during the 
quarter.  

Average earnings per diluted share were $0.019 for the quarter 
ending September 30, 1998 compared to $0.016 for the same period 
in 1997.  The average number of diluted shares outstanding 
decreased from 13,694,155 to 13,370,007 during the same period as 
a result of  expiration of previously issued stock options. 

Shareholders' equity as a percent of total assets improved to 82% 
from 79% at December 31, 1997. The Company's current ratio has 
improved from 1.57 at December 31, 1997 to 3.31 at September 30, 
1998. 

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998
AS COMPARED TO THE NINE  MONTHS ENDED SEPTEMBER 30, 1997

Net sales for the nine months ended September 30, 1998, totaled 
$4,637,744 compared to  $3,091,157 for the comparable 1997 period.  
This represents an increase of approximately 50%.  This 
significant increase in the 1998 total Company revenues highlights 
the increasing acceptance of the Company's products by 
schools as the Company is now installed in over 5500 U.S. and 
Puerto Rican schools.  Significantly, the Company penetrated new 
areas of the country with its expanded distribution force, but 
also enjoyed a strong re-order trend from existing customers.  
Several districts expanded the scope of curriculum 
published by the Company, or ordered additional software for 
deployment in other schools within their districts.  

Cost of goods sold for the nine months ended September 30, 1998, 
was $512,540 or 11% of net sales, compared to $245,092 or 8% for 
the same period in 1997. The increase is primarily attributable
to the inclusion this year of the results of Projected Learning
Systems, which sells a higher cost product in relation to sales
than the base business. The relatively low cost of sales compared
to net sales, however, reflects the efficiency in which software
products are now produced on CD-ROM.  The use of this medium also
reduces the cost of packaging, handling, and freight associated
with products that are marketed primarily to the school market,
as opposed to traditional retail outlets.  Cost of goods sold
represents the actual cost to produce the software products,
including certain allocated overhead costs, a portion of which
is fixed.   Excluding the costs of allocated overhead, product
costs provide gross profit margins ranging from 75 to 95 percent
on the Company's principal products.  As sales volumes increase,
consolidated Company gross margins are expected to trend down
slightly as lower gross margins on PLP catalog sales become a
higher percentage of total corporate revenues.

Total operating expenses, which include selling and marketing, 
general and administrative, operations, and amortization of product 
development costs were $2,362,662 for the nine months 
ended September 30, 1998, compared to $1,884,796 for the previous 
year.  This represents an increase of approximately 25%. During 
the nine-month period, revenue per employee increased 
by 7% compared to the prior year, demonstrating greater operating 
efficiencies. In prior periods, the Company had to maintain a 
fixed support staff of technical and business professionals to 
provide for critical expansion functions as both an investment in 
its ability to service a rapidly growing customer base and its 
public company status.  Management believes that the operating 
expense category has now stabilized in its cost structure 
relationship to revenues and that higher revenue and business 
activities can be attained with modest incremental additions to 
operating costs.  Accordingly, it is believed that with stringent 
control and planning, management has a high leverage category of 
expenditures to concentrate on to secure continuing efficiencies 
from the business in future periods.  Total operating expenses for 
the nine-month period were also impacted by the ongoing 
development costs associated with the planned expansion 
and updating of the curriculum of the product line and continued 
investment into the Company software technology. 

Selling and marketing costs increased by approximately 37%, from 
$858,847 for the nine months ended September 30, 1997 to 
$1,180,373 for the comparable 1998 period.  The increase 
for this category of expense in the 1998 nine-month period is 
attributable to expanded sales, marketing, distributor training 
and commission costs related to the higher sales levels and the 
release of 14 new titles this year.

General and administrative and operations expenses increased by 
approximately 11% during the 1998 nine month period from $960,356 
to $1,061,266. As a percentage of sales, general and 
administrative expenses (including "operations" in 1998) fell from 
31% to 23%. This dollar increase is primarily related to higher 
expenses associated with the final development efforts 
associated with new title and curriculum content released during 
the period. During the period, the Company released eight new, 
updated titles, replacing its award winning elementary and 
middle school science family originally comprised of four titles 
that were released in 1994. Ten new titles under its existing 
license with Humanities Software, Inc. were also released to 
expand the content offering and grade level range of this well 
received product family.  Additional content development update 
work was initiated on the language arts and social studies 
product groups to bring these significant elements of the 
Company's product lines to a current level of conformity 
with recent national and state standards for release in future 
periods.  The Company plans to continue this investment into an 
aggressive new content title development schedule as well as its 
software programming technology.  These investments should 
position the Company to maintain its growth and penetration of 
existing and new markets.

Pre-tax income improved 79% from $946,163 to $1,693,519 in the 
nine-month period ending September 30, 1998 compared to the 
comparable 1997 period, reflecting the higher revenues 
being achieved without a commensurate increase in operating costs. 
This is due to volume-related efficiencies and increases in 
revenue per employee. Because the 1998 results include a 
full provision for corporate income taxes, whereas the 1997 
results do not, management believes that pre-tax comparisons are a 
more meaningful measure of the progress of the Company than 
comparisons of net income.

Net after tax earnings for the nine months ended September 30, 
1998, improved by approximately 10% as compared to the prior 1997 
period. Net cash provided by operating activities increased from 
$477,255 in the 1997 period to $1,079,272 in the comparable 1998 
period. This 126% increase reflects the Company's ability to 
generate additional cashflow from its ongoing operations.

Average diluted earnings per share were $0.078 for the nine months 
ending September 30, 1998 compared to $0.069 for the same period 
in 1997 which is an increase of 13%.  The average number of 
diluted shares outstanding decreased from 13,694,155 to 13,370,007 
during the same period.  This decrease is primarily attributable
to the retirement of previously issued stock options, which have
expired.

Prior to 1996, the Company had incurred net operating losses since 
its inception in 1981.  As a result, there was substantial doubt 
as to the realization of the $4,900,000 net operating loss 
carryforwards at December 31, 1995.  The Company has subsequently 
utilized approximately $1,200,000 of net operating loss 
carryforwards during the years ending December 31, 1997 and 
1996 as a result of improvements in operations.  Management 
believes that the Company will be generating net income in future 
years, and therefore, a deferred tax asset resulting from the net 
operating loss carryforwards, in the amount of $890,387 is 
recorded on the Company's financial statement at September 30, 
1998.  No valuation allowance has been recorded against the 
deferred tax asset.

Company management believes that significant, future opportunities 
exist in both the school and home markets for its products. The 
Company is now equipped with Macintosh and Windows software 
engines that facilitate the rapid and less expensive development 
of new subject titles. Management also believes that the Company 
is well positioned to compete in the educational software market 
as a result of its ongoing investment in software development 
tools, experienced and stable professional staff, growing 
distribution coverage of key markets and a rapidly expanding 
installed base within the school market. Management believes that 
the Company can make significant progress within its existing 
product development and marketing budgets to allow the Company to 
maintain the continued, profitable expansion of the business.

The Company is investigating sources of intellectual property and 
potential partnerships with other publishers with whom it may base 
future publications, Internet commercial activities, or marketing 
alliances.  Some of these investigations may lead to possible 
Company acquisition opportunities, such as the purchase of the 
stock of Learning Pathways, Ltd. Of Derby, England, which 
was announced in August of 1998, and which should close in the 
fourth quarter of  this year.  Increasingly, management views 
these potential acquisitions of other entities as a possible 
avenue for accelerating the growth of the Company.



THE AMERICAN EDUCATION CORPORATION

PART II - OTHER INFORMATION


Item 1.     Legal Proceedings

In October 1996, the Company became a party to litigation in 
United States District Court for the District of Columbia entitled 
Securities and Exchange Commission, Plaintiff v. The American 
Education Corporation, Defendant (the "Action").  In the Action, 
the Company admitted that, in violation of certain provisions of 
the Securities and Exchange Act of 1934, as amended (the "Exchange 
Act"), it failed to file, among other things, certain annual and 
quarterly reports.  The Company voluntarily entered into a 
Consent and Undertaking pursuant to which the Court has issued a 
Final Judgment of Permanent Injunction requiring the Company to 
(i) file all its delinquent Exchange Act reports and (ii) in the 
future, timely file all of its Exchange Act reports.  The failure 
to file any required report could result in a contempt citation, 
the assessment of fines against the Company, or an action by 
the Securities and Exchange Commission to deregister the Company's 
common stock. As of September 30, 1998 the Company was current 
with all filings with the SEC through the end of the fiscal 
year December 31, 1997 and the six months ending June 30, 1998. 

The Company filed a complaint on July 8, 1997 in the United States 
District Court for the Western District of Oklahoma against 
Jostens Learning Corporation ("Jostens").  The complaint alleged, 
among other things, that Jostens has improperly adopted and used 
the mark "A+" and "A+dvantage" in connection with its educational 
software, and that Jostens' confusingly similar mark has caused 
damage to the Company. The complaint requested, among other 
things, monetary damages, and injunctive relief. On June 24, 1998 
the Company and Jostens reached a mediated settlement ,without 
proceeding to trial, that was favorable to the Company.


Item 2.     Changes in Securities

During the quarter ended September 30, 1998, the Company 
granted options to purchase 75,000 shares of the Common Stock at a 
price of $0.73 per share. These options were issued in a private 
transaction exempt from the registration requirements of the 
Securities Act pursuant to Section 4 (2) thereof. Additionally, 
options to purchase 55,200 shares of common stock were exercised 
at a total purchase price of $27,680. Convertible debt and accrued 
interest totaling $61,750 was converted into 458,767 shares of 
Common Stock during the quarter. 
               

Item 3.     Default Upon Senior Securities

Omitted from this report as inapplicable.

Item 4.     Submission of Matters to Vote of Securities Holders

None

Item 5.     Other Information

Omitted from this report as inapplicable.

Item 6.     Exhibits and Reports on Form 8-K

(a) The following exhibits have been filed as a part of this 
report:

Exhibit No.             Description

Exhibit 3.1*            Amended and Restated Articles of 
Incorporation of The American Education Corporation

Exhibit 3.2**           Bylaws of The American Education 
Corporation

Exhibit 4***            Form of Stock Certificate 

Exhibit 10.1****        Promissory Note of The American Education 
Corporation to Rich Carle

Exhibit 10.2*****       Directors' Stock Option Plan

Exhibit 10.3******      Stock Option Plan for Employees

Exhibit 10.4****        Loan Agreement between The American 
Education Corporation and UMB Oklahoma Bank

Exhibit 10.5****        Promissory Note between The American 
Education Corporation and UMB Oklahoma Bank

Exhibit 27.1*******     Financial Data Schedule (filed only 
electronically with the SEC)


*     Incorporated by reference to the same numbered exhibit in 
the Current Report on Form 8-K filed by the Company on June 25, 
1998.

**     Incorporated by reference to the registration statement on 
Form S-18 (File no. 2-78660-D) of the Company.

***    Previously filed with the Securities and Exchange 
Commission as an exhibit to the Company's registration statement 
on form S-18 (File no. 2-78660-D).

****   Previously filed with the Securities and Exchange 
Commission with Form 10-QSB dated August 6, 1998.

***** Incorporated by reference to Exhibit B to the Definitive 
Proxy Statement filed on April 24, 1998.

******  Incorporated by reference to Exhibit C to the Definitive 
Proxy Statement filed on April 24, 1998.

*******  Filed herewith.


B. Reports on Form 8-K

On June 25, 1998 the Company filed a Current Report on Form 8-K 
regarding the shareholders' approval of an amendment to the 
Company's Articles of Incorporation. Attached, as Exhibit 3.1 to 
such Form 8-K was a copy of the Amended and Re-stated Articles of 
Incorporation of the Company.

On September 28, 1998 the Company filed a Current Report on Form 
8-K regarding the appointment of Neil R. Johnson as Vice President 
and Chief Financial Officer.



SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 
1934, the registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized.

                               The American Education Corporation


November 12, 1998
                               By: /s/Jeffrey E. Butler, 
                                   Chief Executive Officer
                                   Chairman of the Board
                                   Treasurer