<TABLE>
<S>           <C>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB



(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 Number:   333-2856                                         

                                   American Equities Income Fund, Inc.        
                          (Exact name of registrant as specified in its charter)

         Delaware                                                      22-3429295                   
(State of incorporation)                               (I.R.S. Employer Identification No.) 
          
                           East 80 Route 4, Suite 202, Paramus, New Jersey                   07652   
                                (Address of principal executive offices)                     (Zip Code) 

                                             (201) 368-5900                                 
                          (Registrant's telephone number, including area code)

                                                                                                        
       (Former name, former address and former fiscal year, if changed since last report)

Check 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  

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Securities Exchange act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
                                                Yes       No  
        
                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date:  As of December 8, 1998, the Company had 1,000 shares of
common stock, $1.00 par value,  issued and outstanding.<PAGE>
                         AMERICAN EQUITIES INCOME FUND, INC.
  
                                                 INDEX


                                                                                     Page(s)

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements:

          Balance Sheet as at September 30, 1998                                       3

          Statement of Cash Flows as at September 30, 1998                             4

          Statement of Operations as at September 30, 1998                             5

          Statement of Stockholders' Equity as at September 30, 1998                   6

          Notes to Financial Statements                                              7 - 8
          
Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                                        9

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                                            10

Item 2.   Changes in Securities                                                        10 
          
Item 3.   Defaults upon Senior Securities.                                             10

Item 4.   Submission of Matters to a Vote of Security Holders                          10

Item 5.   Other Information.                                                           10

Item 6.   Exhibits and Reports on Form 8-K.                                            10







<PAGE>
                                      AMERICAN EQUITIES INCOME FUND, INC.
                                                BALANCE SHEET
                                                 (Unaudited)

                                                                As of September 30
                                                            1998               1997
Assets

Current Assets:                              
  Cash in banks                                           $1,081,007          $1,992,314
  Financed receivables - Net                               9,711,739           4,024,151
  Other current assets                                     1,249,833             495,077
                    Total current assets                 $12,042,579          $6,511,542

Deferred Costs:
  Deferred organizational costs                           $  766,915          $  925,629
  Deferred note costs                                        869,715             232,785
    Less accumulated amortization                           (427,567)            (20,150)
                    Total other assets                     $1,209,063          $1,138,264

                    Total Assets                          $13,251,642          $7,649,806

Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts Payable and accrued expenses                     $  37,119           $    14,035
  Interest Payable                                            122,825                 2,907
  Other current liabilities                                   605,708                77,684
                    Total current liabilities               $ 765,652           $    94,626   

Other liabilities:
  Notes payable                                           $12,644,000           $ 6,864,000
  Escrow payable                                                    0               723,200
  Other Long term liabilities                                 169,207                     0
                    Total long-term liabilities           $12,813,207           $ 7,587,200

                         Total liabilities                $13,578,859           $ 7,681,826

Stockholders' Equity:
  Common Stock, $1 par value,
  1,000 shares authorized, 1,000 shares
  issued and outstanding                                $       1,000          $     1,000
  Additional paid-in capital                                   39,000               39,000
  Accumulated profit (loss)                                 (367,217)             (72,020)
                    Total Stockholders' Equity          $   (327,217)          $  (32,020)

    Total Liabilities and Stockholders' Equity          $  13,251,642          $ 7,649,806

<PAGE>
                              AMERICAN EQUITIES INCOME FUND, INC.
                                    STATEMENT OF CASH FLOWS

     
                                                                              As of September 30,
 
                                                                               1998               1997

Net Income (loss)                                                          ($ 104,518)        $  (58,435)

   Adjustments to reconcile Net Income to Net Cash
    from Operating Activities:
    Depreciation and amortization                                          $  304,329         $        0
   Increase in financed receivables                                        (3,445,656)        (3,444,177)
   Increase in other current assets                                          (603,713)          (495,077)
   Increase in accrued expenses                                                27,473                 35
   Increase in other current liabilities                                      498,215             20,008
     Total Adjustments                                                    ($3,127,909)       ($3,919,211)

     Net cash flows from (used in) operating activities                   ($3,323,870)       ($3,977,646)

Cash Flows from (used in) Investing Activities:     
    Payment of organizational costs                                          (352,765)          (814,779) 
     
     Net cash flows from (used in) Investing Activities                      ($352,765)         ($814,779)

Cash Flows from (used in) Financing Activities:
   Decrease in Escrow payables                                              $(411,000)           $507,200
   Increase in interest payable                                               174,350              (1,333)
   Proceeds from notes payable                                              4,361,000            4,647,000

     Net cash flows from financing activities                              $4,124,350           $5,152,867

Net Increase in Cash                                                        $ 447,715          $  360,442

Cash at beginning of period                                                 $ 633,292          $1,631,872 

Cash at end of period                                                      $1,081,007          $1,992,314

    <PAGE>
                               AMERICAN EQUITIES INCOME FUND, INC.

                                          STATEMENT OF OPERATIONS
     
                                                                     Nine months ended September 30,
                                                                                1998      1997

Revenues:
Fee income                                                            $1,152,685       $287,183
Other income                                                              17,445         57,265
                                         Total Revenues               $1,170,130       $344,448

Operating Expenses:
General & administrative expenses                                      $   5,548       $ 42,011
Interest expense                                                         964,771        360,872
                                         Total expenses                 $970,319       $402,883

Net Income
before depreciation, amortization, 
and provision for income taxes                                          $199,811       $(58,435)

Net Income
after depreciation, amortization, 
and provision for income taxes                                          ($104,518)      ($58,435)

<PAGE>
                                   AMERICAN EQUITIES INCOME FUND, INC.

                                    STATEMENT OF STOCKHOLDER' EQUITY

                                                             Additional
                                    Number                     Paid in               Net
                                    of shares   Value          Capital              Loss   Total

Date of incorporation                    0       $0                $0                  $0       $0
  (March 11, 1996)

Shares issued for cash on            1,000    $1,000          $39,000                  $0    $40,000
  March 22, 1996

Accumulated loss as of                                                           (367,217)   (367,217)
  9/30/98

Total Stockholders' Equity           1,000    $1,000          $39,000            ($367,217)  ($327,217)

<PAGE>
                              AMERICAN EQUITIES INCOME FUND, INC.

                                   NOTES TO FINANCIAL STATEMENTS

NOTE A - FORMATION AND OPERATION OF THE COMPANY

American Equities Income Fund, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on March 11, 1996.  

The Company is in the business of factoring accounts receivable (the "Receivables") and
providing other financial services to client companies.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

Accounting records of the Company and financial statements are maintained and prepared on
the accrual basis.

Year End

The Company's year end for financial reporting tax purposes is December 31.

Cash Equivalents

For financial statement purposes, with respect to the Statement of Cash Flows, cash
equivalents include time deposits and all highly liquid investments with original maturities of
three months or less.  The amount included on the Company's Statement of Cash Flows is
comprised of exclusively of cash.

NOTE C - STOCKHOLDERS' EQUITY

The Company is authorized to issue 1,000 shares of common stock at $1.00 par value.  On
June 30, 1998, there were 1,000 shares of common stock issued and outstanding.

The holders of the common stock are entitled to one vote per share on all matters to be voted
on by shareholders.

NOTE D - SECURED NOTE OFFERING

On August 26, 1996, the Company commenced offering subscriptions for up to $15,000,000
aggregate principal amount of its 12% Notes in denominations of $1,000 each, or any
integral multiple thereof.  The Notes bear simple interest at 12% per annum, payable interest
only monthly, annually or upon maturity, at the option of the investor, with all principal and
accrued interest, if any, due on September 30, 2006.  Accrued but unpaid interest will be
compounded monthly at the rate of 12% per annum.  The Notes may be accelerated by the
Note Holders on the first day of the fifth, sixth, seventh eighth and ninth years upon six
months written notice to the Company.  The Notes will be secured by the Receivables
acquired with the proceeds of the offering or funds obtained from the repayment of such
Receivables or any after acquired Receivables.  The Notes are prepayable in whole or in part
at any time without premium or penalty.

The offering terminated on August 26, 1998.  An aggregate of $12,928,208 principal amount
of Notes were issued as of September 30, 1998.

NOTE E - RELATED PARTY TRANSACTIONS
     
The Company and American Equities Group, Inc. will share the fees charged, 50% to the
Company and 50% to American Equities Group, Inc.  American Equities Group, Inc. will
pay all overhead, expenses and salaries of the Company from its portion of the fees as relates
to the ongoing business of the Company, except for legal, accounting, filing fees, taxes and
other administrative expenses related to the Company.

NOTE F - ACCOUNTS RECEIVABLE

The Company's policy is to record the accounts receivable it purchases from borrowers at
the face amount, less the portion held back by the Company as a loss reserve.

At September 30, 1998, the financed receivables are as follows:

                                   September 30, 1998

                         Face Amount         $32,068,451
                         Less Reserve        (22,356,712)
                         Net                 $ 9,711,739 

<PAGE>
ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS

         The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Form 10-QSB.

         This management's discussion and analysis of financial conditions and results of
operations contains certain "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995.  Such statements relating to future events and financial
performance are forward-looking statements that involve risks and uncertainties, detailed
from time to time in the Company's various Securities and Exchange Commission filings. 
No assurance can be given that any such matters will be realized.

         Nine months ended September 30, 1998 compared to the nine months ended
September 30, 1997.

         Gross revenues increased to $1,170,130 or 240% for the nine months ended
September 30, 1998 from $344,448 for the nine months ended September 30, 1997,
primarily because of the increase in funds available through the Company's initial public
offering which enabled the Company to purchase more accounts receivable and therefore
generate more fee income. 

         Net income before depreciation, amortization, and provision for income taxes
increased by $258,246 to $199,811, or 17.1% of gross revenues, for the nine months ended
September 30, 1998 from $(58,435) or (.17)% of gross revenues for the nine months ended
September 30, 1997.  This increase was primarily due to the increase in funds available
through the Company's public offering of notes which enabled the Company to purchase
more accounts receivable and therefore generate more fee income.

         Operating expenses decreased by $36,463, to $5,548, or .5% of gross revenues, for
the nine months ended September 30, 1998, from $42,011 for the nine months ended
September 30, 1997.  This decrease was primarily due to decreased legal and accounting
expenses, as well as the absence of securities filing fees, related to the Company's public
offering of promissory notes.

         Interest expense increased $603,899 to $964,771 or 82.4% of gross revenues, for the
nine months ended September 30, 1998, compared to $360,872, for the nine months ended
September 30, 1997.  This increase was primarily due to the increase in investors notes
outstanding.

Liquidity and Capital Resources

         The Company's principal sources of liquidity have been internally generated funds
and through the public offering of its 12% Notes.  It is anticipated that funds from operations
and the receipt of the net proceeds of such offering will provide the Company with sufficient
liquidity to meet its debt service and operating requirements for at least the next 12 months. 

         The ability of the Company to meet operating forecasts included in its expansion plans
will depend in part upon the successful completion of this offering and its ability to develop
and implement new or additional financial services.

                                     PART II.  OTHER INFORMATION


Item 1. Legal Proceedings

         None.

Item 2. Changes in Securities

         None.

Item 3. Defaults upon Senior Securities

         None.

Item 4. Submission of Matters to a Vote of Security Holders

         None.
         
Item 5. Other Information

         None.

Item 6. Exhibits and Reports on Form 8-K.

         (a)  Exhibits 

              Financial Data Schedule.

         (b)  Reports on Form 8-K

              The Company filed a Form 8-K relating to the replacement of its independent
auditors on November 19, 1998.
<PAGE>
                                SIGNATURES




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



         Date: December 18, 1998                           By:/S/ David S. Goldberg                 
                                                                        David S. Goldberg
                                                                        Chief Executive Officer and
                                                                        Chief Financial Officer

</TABLE>