SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                    FORM 10-QSB
                                  

                 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                         THE SECURITIES EXCHANGE ACT OF 1934


          For the Quarterly Period Ended          Commission File Number
               JANUARY 31, 1999                             0-9922
               ----------------                             ------



                             AMERICAN ELECTROMEDICS CORP.
                             ----------------------------
          (Exact Name of Small Business Issuer as Specified in its Charter)


                    DELAWARE                           04-2608713
                    --------                           ----------
          (State or Other Jurisdiction            (IRS Employer ID No.)
               of Incorporation
               or Organization)


              13 COLUMBIA DRIVE, SUITE 5, AMHERST, NEW HAMPSHIRE 03031
              ---------------------------------------------------------
               (Address and Zip Code of Principal Executive Offices)


            Issuer's telephone number, including area code:  603-880-6300
                                                              ------------

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

                Securities registered pursuant to Section 12(g) of the
                                    Exchange Act:

                        COMMON STOCK, PAR VALUE $.10 PER SHARE
                        --------------------------------------
                                   (Title of Class)


          Indicate by check mark whether the Issuer (1) has filed all
          reports required to be filed by Section 13 or 15(d) of the
          Exchange Act during the past 12 months, and (2) has been subject
          to such filing requirements for the past 90 days. 
          YES  X  NO  
              ---    ---

          As of March 11, 1999, there were outstanding 7,668,464 shares of
          the Issuer's Common Stock, $.10 par value.


     <PAGE>


                             AMERICAN ELECTROMEDICS CORP.

                                        Index
                                        -----


                                                                       Page
                                                                       ----
          PART I - FINANCIAL INFORMATION

          Item 1.  Consolidated Financial Statements

               Consolidated Balance Sheets, January 31, 1999 and
                 July 31, 1998  . . . . . . . . . . . . . . . . . . . . . 3

               Consolidated Statements of Operations for the Three and 
                 Six Months Ended January 31, 1999 and January 31, 1998 . 4

               Consolidated Statements of Cash Flows for the Six 
                 Months Ended January 31, 1999 and January 31, 1998 . . . 5

               Notes to Consolidated Financial Statements  . .  . . . . . 6

          Item 2.   Management's Discussion and Analysis or Plan
                    of Operation  . . . . . . . . . . . . . . . . . . . . 7

          PART II - OTHER INFORMATION

          Item 2.   Changes in Securities . . . . . . . . . . . . . . . . 9

          Item 6.   Exhibits and Reports on Form 8-K  . . . . . . . . . . 9

          SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . .10


                                      -2-
          <PAGE>


          PART I  -  FINANCIAL INFORMATION

          Item 1.  CONSOLIDATED FINANCIAL STATEMENTS


                  AMERICAN ELECTROMEDICS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                   JANUARY 31,   JULY 31,
                                                       1999       1998
                                                   ----------- -----------
                                                   (Unaudited) 
          ASSETS                                         (Thousands)
          Current Assets:
          Cash and cash equivalents . . . . . . .      $  107       $  396 
          Accounts receivable . . . . . . . . . .       1,443        1,169 
          Inventories . . . . . . . . . . . . . .       2,432        1,951
          Prepaid and other current assets  . . .         356          223
                                                      -------      ------- 
            Total current assets  . . . . . . . .       4,338        3,739

          Property and equipment  . . . . . . . .         900          794
          Accumulated depreciation  . . . . . . .        (467)        (436)
                                                      -------      ------- 
                                                          433          358
          Goodwill . . . . . . . . . . . . . . .        4,174        4,298
          Patents  . . . . . . . . . . . . . . .        2,932        3,027
          Other  . . . . . . . . . . . . . . . .           29           36
                                                      -------      ------- 
                                                      $11,906      $11,458
                                                      =======      ======= 

          LIABILITIES AND STOCKHOLDERS' EQUITY
          Current Liabilities:
          Bank debt . . . . . . . . . . . . . . .      $1,223       $1,033
          Loans from related parties. . . . . . .         425           - 
          Other short-term debt . . . . . . . . .         650           -
          Accounts payable  . . . . . . . . . . .       2,263        1,118
          Accrued liabilities . . . . . . . . . .         568          723
          Dividends payable . . . . . . . . . . .         327           72
                                                      -------      ------- 
            Total current liabilities . . . . . .       5,456        2,946

       
          Stockholders' equity:
          Series A Convertible Preferred
           stock,$.01 par value; Authorized -  
           1,000,000 shares; Outstanding -3,000 shares  2,387        2,387
          Common stock, $.10 par value; 
           Authorized - 20,000,000 shares;
           Outstanding - 7,668,464
           shares at January 31, 1999 and
           7,058,136 at January 31, 1998. . . . .         767          705
          Additional paid-in capital  . . . . . .      12,270       12,643
          Retained deficit  . . . . . . . . . . .      (8,322)      (5,680)
          Accumulated other comprehensive loss. .        (190)        (249)
                                                      -------      ------- 
                                                        6,912        9,806
          Deferred compensation . . . . . . . . .        (462)      (1,294)
                                                      -------      ------- 
               Total stockholders' equity . . . .       6,450        8,512
                                                      -------      -------
                                                      $11,906      $11,458
                                                      =======      =======

                               See accompanying notes.


                                      -3-
     <PAGE>


                  AMERICAN ELECTROMEDICS CORP.AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (Unaudited)


                                    THREE MONTHS ENDED    SIX MONTHS ENDED
                                    ------------------    -----------------
                                    JANUARY   JANUARY    JANUARY    JANUARY
                                   31, 1999   31, 1998  31, 1999    31,1998
                                   --------   --------   --------  ---------
                                     (Thousands, except per share amounts)


        Net sales . . . . . . . . .  $2,290     $1,805     $4,396     $3,635
        Cost of goods sold. . . . .   1,454        821      2,673      1,879
                                     ------     ------     ------     ------ 
        Gross profit. . . . . . . .     836        984      1,723      1,756 

        Selling, general and
         administrative . . . . . .   1,966        903      3,888      1,590 
        Research and development. .      77        -          205        - 
                                     ------     ------     ------     ------ 
         Total operating expenses .   2,043        903      4,093      1,590 
                                     ------     ------     ------     ------ 

        Operating income (loss). .   (1,207)         81    (2,370)       166

        Other income (expenses):
         Undistributed earnings
          of affiliate. . . . . .       -           77        -           77
         Interest, net  . . . . .       (58)       (40)       (75)      (118)
         Minority interest in
          affiliate . . . . . . .       -          -          -          (85) 
          Other . . . . . . . . .       (91)       (52)      (197)         6
                                     ------     ------     ------     ------ 
                                       (149)       (15)      (272)      (120)

        Income (loss) before
         provision for income taxes  (1,356)        66     (2,642)        46
        Provision for income taxes      -          (2)         -          (2)
                                     ------    -------     ------     ------ 
        Net income (loss). . . .    $(1,356)    $   64    $(2,642)     $  44
                                     ======    =======     ======     ====== 

        Net income (loss) 
          attributable to common 
          stockholders*  . . . .    $(1,494)    $   64    $(2,897)     $  44
                                     ======    =======     ======     ======

        Weighted average number
         of common and
         common equivalent shares
         outstanding               7,369,800  4,096,830  7,217,218  3,282,142
                                   =========  =========  =========  =========

        Earnings (loss) per
         common and common
         equivalent share:
           Basic                      $ (.20)    $  .02     $ (.40)    $  .01
                                      ======    =======     ======    =======
           Diluted                    $ (.20)    $  .02     $ (.40)    $  .01
                                      ======    =======     ======    =======

                            See accompanying notes.

     *    The three and six months ended January 31,1999  includes the impact of
          $138,000 and $255,000, respectively, of dividends on Preferred Stock.


                                      -4-     
     <PAGE>


                  AMERICAN ELECTROMEDICS CORP.AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                       SIX MONTHS ENDED
                                                       ----------------
                                                  JANUARY 31,   JANUARY 31,
                                                      1999         1998
                                                  -----------   ----------
                                                         (Thousands)
          OPERATING ACTIVITIES:
          Net income (loss)                          $ (2,642)       $  44
          Adjustments to reconcile net income
            (loss) to net cash used in operating
            activities:
            Depreciation and amortization                 284          132
            Deferred compensation                         832            - 
            Undistributed earnings of affiliate             -          (77)
            Minority interest in affiliate                  -           85 
            Changes in operating assets and
              liabilities:
              Accounts receivable                        (252)         341 
              Inventories, prepaid and other
               current assets                            (528)      (1,339)
              Accounts payable and accrued
               liabilities                                969         (264)
                                                      -------      ------- 
              Net cash used in operating
               activities                              (1,337)      (1,078)

          INVESTING ACTIVITIES:
          Purchase of property and equipment,
            net                                          (125)         (94)
                                                      -------      ------- 
             Net cash used in investing
              activities                                 (125)         (94)

          FINANCING ACTIVITIES:
          Principal payments on long-term debt              -          (72)
          Proceeds from long-term debt and bank
            line of credit                                  -          (28)
          Proceeds from issuance of common
            stock, net                                      -          994
          Net proceeds from bank debt                     153            -
          Net proceeds from related party debt            425            -
          Net proceeds from other short-term debt         650            -
          Issuance of common stock, net                   (79)           -
          Proceeds from exercise of stock
            options                                        22            -
                                                      -------      ------- 
            Net cash provided by
             financing activities                       1,171          894
                                                      -------      ------- 

          Effect of exchange rate changes on
            cash and cash equivalents                       2            1 
          Decrease in cash and cash equivalents          (289)        (277) 
          Cash and cash equivalents, beginning
            of period                                     396          533
                                                      -------      ------- 
          Cash and cash equivalents, end of
            period                                      $ 107        $ 256
                                                      =======      ======= 

          NON-CASH ACTIVITIES:
          Conversion of convertible subordinated                            
            debt into common stock                     $    -        $ 720
                                                      =======      ======= 
          Common Stock issued in connection
            with acquisitions                          $    -        $ 210
                                                      =======      =======

          Common stock issued under
            conversion provision of warrants           $   59        $   -
                                                      =======      =======



                               See accompanying notes.


                                      -5-
     <PAGE>


                  AMERICAN ELECTROMEDICS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 1999
                                   (Unaudited)


          1.   BASIS OF PRESENTATION
               ---------------------

          The accompanying unaudited consolidated financial statements have been
          prepared in accordance with generally accepted  accounting  principles
          for interim financial  information.  Accordingly,  they do not include
          all of the  information and footnotes  required by generally  accepted
          accounting  principles  for  complete  financial  statements.  In  the
          opinion of management, all adjustments (consisting of normal recurring
          accruals)  considered  necessary  for a fair  presentation  have  been
          included.

          Operating  results for the three and six month  periods  ended January
          31, 1999 are not  necessarily  indicative  of the results  that may be
          expected for the year ending July 31, 1999.  For further  information,
          refer to the financial  statements and footnotes  thereto  included in
          the Company's annual report on Form 10-KSB for the year ended July 31,
          1998.

          Foreign Currency Translation

          The financial statements of the Company's foreign subsidiary have been
          translated into U.S. dollars in accordance with Statement of Financial
          Accounting Standards No. 52, Foreign Currency Translation. All balance
          sheet amounts have been translated  using the exchange rates in effect
          at the balance sheet date.  Statement of Operations  amounts have been
          translated   using  average  exchange  rates.  The  gains  and  losses
          resulting  from changes in exchange rates from the date of acquisition
          of Rosch GmbH to January 31, 1999 have been  reported  separately as a
          component of stockholders' equity. The aggregate transaction gains and
          losses are insignificant.

          Comprehensive Income (Loss)

          Effective  August 1, 1998, the Company adopted  Statement of Financial
          Accounting  Standard  No. 130,  Reporting  Comprehensive  Income (SFAS
          130).  SFAS 130 establishes new rules for the reporting and display of
          comprehensive income or loss and its components, however, the adoption
          of this  statement  had no  impact  on the  Company's  net  income  or
          shareholders'  equity.  For the three and six months ended January 31,
          1999,  the Company's only item of other  comprehensive  income was the
          foreign currency translation adjustment recognized in consolidation of
          its wholly-owned German subsidiary, Rosch GmbH. SFAS 130 requires such
          adjustments,  which  prior to adoption  were  reported  separately  in
          shareholders'  equity, to be included in other  comprehensive  income.
          Prior year financial  statements have been  reclassified to conform to
          the requirements of SFAS 130.

          The foreign currency translation adjustment and comprehensive loss for
          the  three  months   ended   January  31,  1999  was   $(29,000)   and
          ($1,385,000), respectively. For the six months ended January 31, 1999,
          the foreign currency translation adjustment and comprehensive loss was
          $59,000 and  ($2,583,000),  respectively.  As of January 31, 1999, the
          cumulative  translation adjustment and accumulated other comprehensive
          loss was ($190,000).



                                      -6-
     <PAGE>


         
          2.   DEBT
               ----

          In September 1998, the Company entered into a $505,000  line-of-credit
          with Guardian  Financial  Services,  Inc.  (owned by an officer of the
          Company).  This  line-of-credit is due on demand and bears an interest
          rate  of  10%  per  annum.  As  of  January  31,  1999,  $425,000  was
          outstanding under this  line-of-credit,  which expired on February 28,
          1999, and remains outstanding as a demand loan, which is to be secured
          by substantially all assets of the Company.

          On January 29, 1999,  the Company  entered  into a $50,000  Promissory
          Note bearing interest at 11.5%, and maturing on February 15, 1999. The
          Company's $600,000 term loan, originally due to expire on November 25,
          1998,  has  reverted  to a demand  loan and was still  outstanding  at
          January  31,  1999.  The  $650,000  total  balance was paid in full on
          February 3, 1999. See "Subsequent Event", below.



          3. AQUISITIONS
             -----------

          On  April  30,  1998,  the  Company  acquired  all of the  issued  and
          outstanding  capital stock of Dynamic Dental  Systems,  Inc.  ("DDS"),
          pursuant  to an  Agreement  and Plan of Merger,  whereby  DDS became a
          wholly-owned subsidiary of the Company. DDS was founded in 1997 and is
          a distributor of digital operator hardware, cosmetic-imaging software,
          intraoral dental camera systems and digital x-ray equipment. The total
          cost  of  acquisition  was  approximately   $3.2  million   consisting
          primarily of 750,000 shares of the Company's  Common Stock,  valued at
          an aggregate  price of $3,000,000  and $225,000 in cash.  The purchase
          price exceeded the fair value of net assets acquired by  approximately
          $3.4 million,  which is being amortized on a straight-line  basis over
          15 years.  The  acquisition  has been accounted for as a purchase and,
          accordingly,  the  operating  results of DDS have been included in the
          Company's   consolidated   financial  statements  since  the  date  of
          acquisition.

          On May 12, 1998, the Company acquired Equidine  Systems,  Inc. ("ESI).
          ESI was  founded  in 1990 and is  engaged  in the  development  of the
          INJEX(TM)   needle-free  drug  injection  delivery  system,  which  is
          designed to eliminate the risks of contaminated needle stick accidents
          and the resulting  cross  contamination  of hepatitis,  HIV, and other
          diseases. The total cost of acquisition was approximately $2.6 million
          consisting  of  600,000  shares of the  Company's  Common  Stock.  The
          acquisition has been accounted for as a purchase and, accordingly, the
          operating   results  of  ESI  have  been  included  in  the  Company's
          consolidated  financial statements since the date of acquisition.  The
          excess of the aggregate  purchase  price over the fair market value of
          net assets  acquired of  approximately  $3.0  million,  which has been
          allocated to patents,  is being amortized over 15 years, the remaining
          life of the patent.

          The following  unaudited  proforma  consolidated  financial results of
          operations  for the three and six months ended January 31, 1998 assume
          the acquisitions of DDS and ESI occurred as of August 1, 1997.

                                            Three months ended  Six months ended
                                             January 31, 1998   January 31, 1998
                                            ------------------  ----------------
          Net sales. . . . . . . . . . . .      $2,488,000         $4,716,000
          Net loss . . . . . . . . . . . .         (55,000)          (233,000)
          Loss per share; basic and diluted           (.01)              (.05)


          4.   EQUITY
               ------

          Effective December 15, 1998, certain holders of oustanding warrants to
          purchase an  aggregate  of 1 million  shares of the  Company's  Common
          Stock at $1 per  share,  exercised  their  rights  under  the  related
          warrant  agreements to execute a cashless  exercise.  Upon exercise of
          these warrants, the Company issued 589,828 shares of its Common Stock,
          par $.10.


          5.   SUBSEQUENT EVENT
               ----------------

          On  February  3,  1999,  the  Company  sold  1,600  shares of Series B
          Preferred  Stock  to  three  purchasers  for  $1,000  per  share or an
          aggregate  purchase  price of $1.6 million,  together with Warrants to
          purchase  up to 25,000  shares  of the  Company's  Common  Stock at an
          exercise  price of $3.00 per share and  exercisable  until January 31,
          2002.

          The Series B Preferred  Stock is  convertible  at any time after April
          30, 1999 into  shares of common  stock at a  conversion  rate equal to
          $1,000  divided  by the lower of (i) $2.00 or (ii) 75% of the  average
          closing  bid price for the  common  stock  for the five  trading  days
          immediately  preceding  the  conversion  date.  The  Company may force
          conversion of all ( and not less than all) of the  outstanding  shares
          of Series B Preferred Stock at any time after the first anniversary of
          the effective date of a registration statement covering the underlying
          shares of Common Stock. There is no minimum  conversion price.  Should
          the  bid  price  of the  Common  Stock  fall  substantially  prior  to
          conversion, the holders of the Series B Preferred Stock could obtain a
          significant  portion  of the  Common  Stock  upon  conversion,  to the
          detriment of the then holders of the Common Stock.

          The Series B Preferred  Stock has a  liquidation  preference of $1,000
          per share, plus any accrued and unpaid dividends,  and provides for an
          annual dividend equal to 5% of the liquidation  preference,  which may
          be paid at the election of the Company in cash or shares of its common
          stock.

          The conversion terms of the Series B Preferred Stock could result in a
          discount  to  the  holders,  depending  on  the  market  price  of the
          Company's  Common  Stock  during  the five  trading  days  immediately
          preceding  a  future  conversion  date.  Any  such  discount  would be
          considered an additional  preferred stock dividend  resulting from the
          beneficial conversion feature of the securities, and would be recorded
          as a charge to income available to common  stockholders at the time of
          conversion.  As the Series B Preferred Stock is not convertible  until
          after  April 30,  1999,  the  amount of the  dividend  which  would be
          recognized, if any, cannot be determined at this time.

          The net proceeds of $1,500,000 (after offering  expenses)from the sale
          of the  Series  B  Preferred  Stock  were  used in part to  repay  the
          Company's  $600,000 term loan and $50,000 Promissory Note described in
          Note 2, above.


          6. YEAR 2000
             ---------

          The Year 2000 Issue is the result of computer  programs  being written
          using two digits rather than four to define the  applicable  year. Any
          of  the   Company's   computer   programs   or   hardware   that  have
          date-sensitive software embedded chips may recognize a date using "00"
          as the year 1900  rather  than the year 2000.  This could  result in a
          system failure or miscalculations  causing  disruptions of operations,
          including,  among  other  things,  a  temporary  inability  to process
          transactions,  send  invoices,  or engage in similar  normal  business
          activities.

          Based on recent  assessments,  the Company  determined that it will be
          required to modify or replace significant portions of its software and
          certain  hardware so that those  systems will  properly  utilize dates
          beyond  December 31, 1999.  The Company  presently  believes that with
          modifications  or  replacements  of  existing   software  and  certain
          hardware,  the Year 2000  Issue  can be  mitigated.  However,  if such
          modifications  and  replacements  are not made,  or are not  completed
          timely,  the Year  2000  Issue  could  have a  material  impact on the
          operations of the Company.

          The  Company's  plan to  resolve  the Year  2000  Issue  involves  the
          following   four   phases:   assessment,   remediation,   testing  and
          implementation.  To date, the Company has substantially  completed its
          assessment of all systems that could be significantly  affected by the
          Year  2000.  The  assessment  indicated  that  most  of the  Company's
          significant information technology systems will be affected, including
          its financial  information  system which includes its general  ledger,
          accounts payable,  billing and inventory  systems.  The assessment was
          also undertaken on the Company's products,  which are also at risk, as
          they utilize software and hardware (embedded chips) as well.  However,
          based on its review of its product  line,  the Company has  determined
          that most of the products it has sold and will continue to sell do not
          require  remediation  to be  Year  2000  compliant.  Accordingly,  the
          Company  does not  believe  that the Year  2000  presents  a  material
          exposure  as it  relates  to the  Company's  products.  The  Company's
          manufacturing processes consist principally of unautomated assembly of
          components  manufactured  by outside  third-parties.  The  Company has
          begun to gather  information  about the Year 2000 compliance status of
          its significant suppliers,  and will take appropriate steps to monitor
          their compliance on an ongoing basis.

          Regarding its information  technology exposures,  the Company utilizes
          an unmodified  off-the-shelf  software package, which is not year 2000
          compliant.  The Company has confirmed with its software  vendor that a
          year  2000-compliant  upgrade is readily  available,  and  anticipates
          purchasing this upgrade during its third fiscal quarter, which ends on
          April 30, 1999.  The upgrade would  provide full year 2000  compliance
          with  respect to its  financial  information  systems,  and as the new
          software will also be an unmodified  off-the-shelf package, testing to
          ensure Year 2000 compliance will not be necessary. Implementation will
          take place as early as possible  following the purchase of the system,
          and is expected to be completed no later than June 30, 1999.

          The Company does not presently  maintain  direct  interfaces  with any
          third-party  vendors.  The  Company  has made  various  queries of its
          significant  suppliers that do not share information  systems with the
          Company  (external  agents).  To date, the Company is not aware of any
          external agent with a Year 2000 issue that would materially impact the
          Company's  results of  operations,  liquidity,  or capital  resources.
          However,  the Company has no means of assuring  that  external  agents
          will be Year 2000 ready.  The inability of external agents to complete
          their  Year  2000  resolution   process  in  a  timely  fashion  could
          materially  impact  the  Company.  The  effect  of  non-compliance  by
          external agents is not determinable.

          The total cost of the  Company's  Year 2000  project is  estimated  at
          $25,000,  which will be funded through  operating cash flows. To date,
          the Company has not incurred any direct costs related to its Year 2000
          project. The project costs will consist principally of the cost of new
          software, which will be capitalized.

          Management of the Company  believes it has an effective  plan in place
          to resolve the Year 2000 Issue in a timely manner. As noted above, the
          Company has not yet completed  all  necessary  phases of its Year 2000
          project.  In  the  event  that  the  Company  does  not  complete  any
          additional  phases,  the  Company  could be  unable  to take  customer
          orders,  manufacture and ship products,  invoice  customers or collect
          payments. In addition,  disruptions in the economy generally resulting
          from Year 2000  issues  could  also  materially  adversely  affect the
          Company.

          The Company  currently has no contingency  plans in place in the event
          it does not complete all phases of its Year 2000 project.  The Company
          plans to evaluate the status of  completion in June 1999 and determine
          whether such a plan is necessary.



          Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                    OPERATION

          This Report  contains or refers to  forward-looking  information  made
          pursuant to the "safe  harbor"  provisions  of the Private  Securities
          Litigation  Reform  Act  of  1995.  That  information   covers  future
          revenues,  products and income and is based upon current  expectations
          that involve a number of business risks and  uncertainties.  Among the
          factors  that could cause  actual  results to differ  materially  from
          those expressed or implied in any  forward-looking  statement include,
          but not limited to, technological  innovations of competitors,  delays
          in product  introductions,  changes  in health  care  regulations  and
          reimbursements,  changes in foreign  economic  conditions  or currency
          translation, product acceptance or changes in government regulation of
          the Company's  products,  as well as other factors  discussed in other
          Securities and Exchange Commission filings for the Company.

          RESULTS OF OPERATIONS
          ---------------------

          Net sales for the three and six month  periods  ended January 31, 1999
          were $2,290,000 and $4,396,000,  respectively,  compared to $1,805,000
          and  $3,635,000  for the three and six month periods ended January 31,
          1998.  The  increase in sales in fiscal 1999 was  attributable  to the
          acquisitions of DDS and ESI in April and May 1998,  respectively.


                                      -7-
     <PAGE>


          Cost of sales for the three and six month  periods  ended  January 31,
          1999 were  63.5% and 60.8%,  compared  to 45.5% and 51.7% of net sales
          during the same  periods in the prior year.  The increase in cost as a
          percentage  of  sales  can be  attributed  to the  product  mix  which
          included sales of DDS in fiscal 1999. The intraoral  dental camera and
          related  product  lines  in the U.S.  generally  produce  lower  gross
          margins than the Company's other product lines.

          Total  operating  expenses for the three and six month  periods  ended
          January  31,  1999  were  $2,043,000  and  $4,093,000,   respectively,
          compared to $903,000  and  $1,590,000  for the  comparable  prior year
          periods.  The 1999 amounts reflect increased  marketing,  promotional,
          and  development  activity.  The fiscal 1999  amounts also include the
          selling,  general and administrative expenses of DDS and ESI, acquired
          in April  and May  1998,  respectively.  The  increase  also  includes
          $399,000  and  $832,000  for the  three and six  month  periods  ended
          January  31,  1999,   respectively,   for   amortization  of  deferred
          compensation  for  consultants  and for options  granted in connection
          with  the  acquisitions  of DDS and  ESI.  This  amortization  relates
          primarily to the deferred  compensation  recognized in connection with
          the   Company's   consulting   agreement   with   Liviakis   Financial
          Communications, and will be fully amortized as of March 15, 1999.

          Net loss for the three and six month  periods  ended  January 31, 1999
          were $1,356,000, or $.20 per common share, and $2,642,000, or $.40 per
          common  share,  compared to net profit of $64,000,  or $.02 per share,
          and  $44,000,  or $.01 per  share  for the same  periods  in the prior
          fiscal year. The decrease in net results is primarily  attributable to
          increased  selling,  general and  administrative  costs and  decreased
          gross margins.


          LIQUIDITY AND CAPITAL RESOURCES
          -------------------------------

          Working  capital  (deficit)  of the  Company at January  31,  1999 was
          $(1,118,000), compared to $793,000 at fiscal year ended July 31, 1998.
          The  $1,911,000  decrease in working  capital  primarily  reflects the
          effect of operating  losses.  In February 1999,  the Company  received
          gross proceeds of $1,600,000 upon a private  placement of 1,600 shares
          of Series B Convertible Preferred Stock. As mentioned in Note 5 to the
          consolidated  financial  statements,  the Company used $650,000 of the
          proceeds to repay  portions of its  short-term  indebtedness,  and the
          remaining  proceeds of $850,000 (net of offering costs of $100,000) is
          being used for general working capital purposes.

          The Company has  incurred  net losses of  $1,356,000  and  $2,642,000,
          respectively,  for the three and six month  periods  ended January 31,
          1999, as well as a net loss of $3,674,000  for the year ended July 31,
          1998.  This and other factors,  such as working capital needed for the
          Company's  operations,  requires  additional funding beyond that which
          the Company  currently has available.  The Company therefore will need
          to immediately raise additional capital.

          The Company  announced  on January 5, 1999,  that it intends to change
          the Company's business strategy and direction in order to focus all of
          its resources on ESI, and the continued  development  of the INJEX(TM)
          System.  The Company  plans to affect this change  through the sale of
          its  audiometrics  and U.S. dental (DDS) business units.  The proceeds
          from such sales would likely provide additional  working capital,  and
          reduce the  Company's  expected  short-term  working  capital needs by
          eliminating  the  operating  losses  those  business  units  have been
          incurring. In addition, the Company continues to seek other sources of
          additional  working  capital  through equity and/or debt placements or
          secured financing.  No assurance can be given that the Company's plans
          to sell  its  audiometrics  and U.S.  dental  business  units  will be
          successfully  achieved, or that such other financing arrangements will
          be obtained.  Further,  no  assurance  can be given that such sales or
          financing  arrangements  would be  successfully  completed  within the
          necessary  time frame and,  if so, on terms not  dilutive  to existing
          stockholders.

          As a result  of the  foregoing,  substantial  doubt  exists  about the
          ability  of  the  Company  to  continue  as  a  going   concern.   The
          accompanying  financial  statements  do not  include  any  adjustments
          relating to the  recoverability  and  classification of asset carrying
          amounts or the amount and  classification  of  liabilities  that might
          result should the Company be unable to continue as a going concern.


                                      -8-
     <PAGE>


          PART II. - OTHER INFORMATION

          Item 2.   CHANGES IN SECURITIES

          Effective December 15, 1998, certain holders of oustanding warrants to
          purchase an  aggregate  of 1 million  shares of the  Company's  Common
          Stock at $1 per  share,  exercised  their  rights  under  the  related
          warrant  agreements to execute a cashless  exercise.  Upon exercise of
          these warrants, the Company issued 589,828 shares of its Common Stock,
          par $.10.

          Item 6.   EXHIBITS AND REPORTS ON FORM 8-K
          
          There were no reports on Form 8-K filed  during the  quarterly  period
          ended January 31, 1999. 

          Exhibits -

         27. Financial Data Schedule


                                      -9-
     <PAGE>


                                   SIGNATURES
                                   ----------

               In  accordance  with the  requirements  of the Exchange  Act, the
          registrant  caused  this  report  to be  signed  on its  behalf by the
          undersigned, thereunto duly authorized.

                             AMERICAN ELECTROMEDICS CORP.
                             ----------------------------


          Dated:  March 16, 1999           /s/ Thomas A. Slamecka
                                               ----------------------
                                               Thomas A. Slamecka
                                               Chairman 


          Dated:   March 16, 1999          /s/ Michael T. Pieniazek
                                               ------------------------
                                               Michael T. Pieniazek
                                               President and
                                               Chief Financial Officer


                                      -10-

<PAGE>
EXHIBIT INDEX

Exhibit                  Description
------                   -----------
27                       Financial Data Schedule