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                                 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     June 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 October 30, 1998, the Company had 1,000 shares of common stock,
$1.00 par value, issued and outstanding.

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                                AMERICAN EQUITIES INCOME FUND, INC.


                                               INDEX
   

                                                                                     Page(s)

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements:

          Balance Sheet as at June 30, 1998                                             3

          Statement of Cash Flows as at June 30, 1998                                   4

          Statement of Operations as at June 30, 1998                                   5

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

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




                                                    -2-


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

                                                      As of June 30, 1998

                                                     1998            1997
Assets

Current Assets:                              
  Cash in banks                                  $  569,902          $2,422,002
  Financed receivables                            9,704,642           2,542,205
  Other current assets                               88,216              40,750
                    Total current assets        $10,362,760          $5,004,957

Deferred Costs:
  Deferred organizational costs                  $  636,795          $1,003,546
  Deferred note costs                               869,715             232,785
    Less accumulated amortization                  (300,911)            (18,130)
                    Total other assets           $1,205,599          $1,218,201

                    Total Assets                $11,568,359          $6,223,158

Liabilities and Stockholders' Equity

Current Liabilities:
  Accrued interest and expenses payable           $ 226,014          $   16,941
  Other current liabilities                               0              55,568
                    Total current liabilities     $ 226,014          $   72,509

                    

Other liabilities:
  Notes payable                                 $11,298,000          $5,182,000
  Escrow payable                                    280,000             950,000
                   Total long-term liabilities  $11,578,000          $6,132,000

                         Total liabilities      $11,844,014          $6,204,509

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)                        (315,655)            (21,351)
                    Total Stockholders' Equity $   (275,655)       $     18,649

    Total Liabilities and Stockholders' Equity $ 11,568,359         $ 6,223,158<PAGE>

                                                   -3-

                                  AMERICAN EQUITIES INCOME FUND, INC.
                                         STATEMENT OF CASH FLOWS

     
                                                               As of June 30,
 
                                                            1998           1997

Net Income (loss)                                       ($  53,006)      $   (7,766)

   Adjustments to reconcile Net Income to Net Cash
    from Operating Activities:
    Depreciation and amortization                       $  188,758       $    9,065
   Increase in financed receivables                     (3,436,452)      (1,963,796)
   Decrease in other current assets                        (73,226)               0
   Increase in accrued expenses and interest                 4,796           (1,334)
   Increase due to others                                  535,822          (14,343)
     Total Adjustments                                 ($2,780,302)     ($1,970,408)

     Net cash flows from (used in) operating activities($2,833,308)     ($1,978,174)

Cash Flows from (used in) Investing Activities:     
    Increase in note and organizational costs             (222,645)        (512,673) 
     
     Net cash flows from (used in) Investing Activities  ($222,645)       ($512,673)

Cash Flows from (used in) Financing Activities:
   Increase in long-term interest payable               $  108,564        $        0
   Proceeds from notes payable                           3,015,000         2,965,000
   Increase in escrow payable                             (131,000)          734,000

     Net cash flows from financing activities           $2,992,564        $3,699,000

Net Increase in Cash                                     $( 63,389)       $1,208,153

Cash at beginning of period                              $ 633,291        $1,213,849 
Cash at end of period                                      569,902         2,422,002

Net increase (decrease) in cash                          ($ 63,389)       $1,208,153

                                                   -4-
 
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                                   AMERICAN EQUITIES INCOME FUND, INC.

                                           STATEMENT OF OPERATIONS

                                                              Six months ended June 30,
                                                                  1998           1997

Revenues:
Fee income                                                     $749,907       $169,622
Other income                                                     10,054         40,428
                              Total Revenues                   $759,961       $210,050


Operating Expenses:
General & administrative expenses                             $   5,256      $   3,627
Interest expense                                                618,953        205,124
                              Total expenses                   $624,209       $208,751

Net Income
before depreciation, amortization, 
and provision for income taxes                                 $135,752      $   1,299

Net Income
after depreciation, amortization, 
and provision for income taxes                                 ($53,006)       ($7,766)

                                                   -5-

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                                  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                                      (315,655)   (315,655)
  6/30/98

Total Stockholders' Equity    1,000   $1,000     $39,000   ($315,655)   ($275,655)

                                                   -6-

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                                   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 intends 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 - ONGOING 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

                                                   -7-

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.

An aggregate of $11,298,000 principal amount of Notes were issued as of June 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 June 30, 1998, the financed receivables are as follows:

                                   June 30, 1998

                         Face Amount         $23,467,537
                         Less Reserve        (13,762,895)
                         Net                 $ 9,704,642 

                                                   -8-

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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.

         Six months ended June 30, 1998 compared to the six months ended June 30, 1997.

         Gross revenues increased 262% to $759,961 for the six months ended June 30, 1998
from $210,050 for the six months ended June 30, 1997, primarily because of the increase in
funds available through the Company's initial public offering which enabled the Company to
purchase more Receivables and therefore generate more fee income.

         Net income before depreciation, amortization, and provision for income taxes
increased by $134,453 to $135,752, or 17.9% of gross revenues, for the six months ended June 30,
1998 from $1,299 or .6% of gross revenues for the six months ended June 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 Receivables and therefore generate more
fee income.

         Operating expenses increased by $1,629, to $5,256, or .7% of gross revenues, for the
six months ended June 30, 1998, from $3,627 for the six months ended June 30, 1997.  This
increase was primarily due to increased legal and accounting expenses related to the
Company's ongoing public offering of Notes.

         Interest expense increased $413,829 to $618,953 or 81.4% of gross revenues, for the
six months ended June 30, 1998, compared to $205,124, for the six months ended June 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. 

                                                   -9-

         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

              None.

                                                    -10-

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                                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: October 27, 1998                            By:/S/ David S. Goldberg                  
   
                                                              David S. Goldberg
                                                              Chief Executive Officer and
                                                              Acting Chief Financial Officer


                                                   -11-
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