UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                FORM 10-KSB/A-1


(Mark One)

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

                   For the Fiscal Year ended December 31, 1998

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

                        Commission File Number 0-28566

                            HENLEY HEALTHCARE, INC.
                (Name of small business issuer in its charter)

                   TEXAS                                  76-0335587
      (State or other jurisdiction of         (IRS Employer Identification No.)
      incorporation or organization)                         

120 INDUSTRIAL BOULEVARD, SUGAR LAND, TEXAS               77478-3128
 (Address of principal executive offices)                 (Zip code)

  Issuer's telephone number: 281-276-7000

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

                         COMMON STOCK, $.01 PAR VALUE
                               (Title of Class)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 [  ]

      Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

      The issuer's revenues for its most recent fiscal year are $41,931,617.

      The aggregate market value of voting stock held by non-affiliates of the
registrant on April 23, 1998, based upon the average bid and ask price as
reported on the Nasdaq SmallCap Market, was $8,665,226. The number of shares of
the issuer's common stock, $.01 par value, outstanding as of April 23, 1998 was
5,789,820.

      Documents incorporated by reference: None.

      Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The Company's common stock currently trades in and is quoted on The Nasdaq
SmallCap Market under the symbol "HENL." The following table sets forth the
range of high and low bid prices on the Company's common stock for calendar
years 1998 and 1997 on The Nasdaq SmallCap Market:

      CALENDAR PERIOD                       HIGH      LOW
      ---------------                      ------    ------
      1998:
      First Quarter....................    $7.250    $4.625
      Second Quarter...................     7.000     5.125
      Third Quarter....................     5.875     2.562
      Fourth Quarter...................     4.875     2.000

      1997:
      First Quarter....................    $6.500    $4.125
      Second Quarter...................     7.750     4.375
      Third Quarter....................     7.500     4.937
      Fourth Quarter...................     9.000     5.187


      The Company has authorized 20,000,000 shares of common stock, par value
$.01 per share. As of April 9, 1999, there were 5,789,820 shares issued and
outstanding and 279 shareholders of record, although the Company believes that
there are other persons who are beneficial owners of the Company's securities
held in "street" names. All shares of common stock currently outstanding are
validly issued, fully paid and nonassessable.

      The stock market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. In particular, the market price of the Company's
securities may be highly volatile. Factors such as announcements by the Company
or its competitors concerning acquisitions, technological innovations, new
commercial products or procedures by the Company or its competitors, proposed
governmental regulations and developments in both the U.S. and foreign
countries, disputes relating to patents or proprietary rights, publicity
regarding actual or potential medical results relating to products sold by the
Company or its competitors, public concern as to the safety of these products,
and economic and other external factors, as well as period-to-period
fluctuations and financial results, may have a significant effect on the market
price of the Company's securities.

      From time to time, there has been limited trading volume with respect to
the Common Stock. In addition, there can be no assurance that there will
continue to be a trading market or that any analysts will continue to provide
research coverage with respect to the Common Stock. Accordingly, with respect to
the Common Stock, no assurances can be made that such factors will not affect
the market for the Common Stock.

      The Company has neither declared nor paid any dividends on common stock
since its inception and presently anticipates that no dividends will be declared
in the foreseeable future. Any future dividends will be subject to the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, the operating and financial condition of the Company,
its capital requirements, debt obligation agreements, general business
conditions and other pertinent facts. Therefore, there can be no assurance that
any dividends on the common stock will be paid in the future.

RECENT SALES OF UNREGISTERED SECURITIES

      For December 1998, the Company sold 50,000 shares of common stock to a
private investor in Mexico for $3 per share pursuant to an exemption from
registration available under Section 4(2) of the Securities Act of 1993, as
amended (the "Securities Act").
<PAGE>
                                    PART III

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

EXECUTIVE OFFICERS AND DIRECTORS

      The following table provides information concerning each executive officer
and director of the Company as of the date hereof:

NAME                       AGE     POSITION
----                       ---     --------
Michael M. Barbour          54     Director, Chief Executive Officer
Dan D. Sudduth              57     Executive Vice President, Chief Financial 
                                   Officer, Director
Theron L. Morrow            44     Vice President - Sales and Marketing
Daniel M. Lavelle           48     Vice President - International Sales and 
                                   Marketing
Tracy Matthews              37     Vice President - Operations, Controller
Ronnie V. Shields           36     Treasurer
Chadwick F. Smith, MD       65     Medical Director, Director, Chairman of Board
Pedro A. Rubio, M.D., Ph.D. 54     Director
Kenneth W. Davidson         51     Director
Ernest J. Henley, Ph.D.     72     Director

      Michael M. Barbour has been President, Chief Executive Officer and
Director of the Company since May 1991. He has over 13 years experience in the
field of laser products. Prior to forming Lasermedics, he was President of
Medical Training Centers of America (formerly The Houston Laser Institute) from
January 1987 to April 1991, which he founded in order to train and inform
doctors in the medical and surgical use of lasers. From April 1984 to January
1987, he was President of Surgimedics, a Houston, Texas, manufacturer and
distributor of medical products. Mr. Barbour graduated from the University of
Houston in 1967 with a B.B.A. in marketing.

      Dan D. Sudduth joined the Company as Executive Vice President and Chief
Financial Officer in February 1997. He has been a Director of the Company since
January 1996. Mr. Sudduth was Chief Financial Officer for Mezzanine Telecom,
Inc., a Houston-based telecommunications company ("MTI"), from 1994 to January
1997 and currently serves as a Director of MTI. During 1995 and 1996, Mr.
Sudduth was President and Director of AMC Home Healthcare, Inc., a respiratory
therapy company in Houston, Chairman of Mezzanine Financial Relations, Inc., a
merchant banking firm in Houston, and Chief Financial Officer and Director of
Creative Communications International, Inc., a Houston telecommunications
company. From 1992 to 1994, Mr. Sudduth served as Chairman and Chief Executive
Officer of Heart Labs of America, Inc. From 1988 to 1992, he was President and
Chief Financial Officer of American Biomed, Inc. Mr. Sudduth received a B.B.A.
in 1964 from Lamar University.

      Theron L. Morrow has been Vice President-Sales and Marketing of the
Company since November 1997. He has over 12 years of experience in the medical
devices industry. From 1991 to 1996, Mr. Morrow was divisional Vice President of
Marketing for Maxxim Medical, Inc. Mr. Morrow holds a B.S. degree in sports
medical sciences from Texas Christian University.

      Daniel M. Lavelle has 19 years of sales and marketing experience with
emphasis on international distribution of physical therapy and pain management
product lines. He received his education at Valley State College in Los Angeles
and began his professional career as Vice President of Sales and Marketing for
Tru-Trac Healthcare division of Maxxim Medical, Inc. (NYSE: MAM), from 1989 to
1996. After the Company's acquisition of the Henley Division of Maxxim Medical,
Inc. in 1996, Lavelle joined the Company as Vice President of International
Sales and Marketing.

      Tracy Matthews received his B.B.A. in accounting from Lamar University in
1984. He began his accounting career in the same year as a staff accounting
manager and progressed to general accounting manager for Goodman Manufacturing,
one of the world's largest makers of air conditioners. He was accounting manager
for Thermal Supply from 1990 to 1991, when he started working for Southwest
Medical Packaging, Inc., which was acquired by Maxxim Medical, Inc. in 1994.
Prior to the Company's acquisition of Maxim Medical, Inc.'s Henley Division in
April 1996, Matthews transferred to the Henley division as Controller, and he
has remained in that position to date.
<PAGE>
      Ronnie V. Shields has served as Treasurer of the Company since August
1998.  Prior to joining the Company, Mr. Shields served as Vice President -
Finance for Wilson Financial Group, a consolidation company in the deathcare
industry, from June 1996 through July 1998.  Mr. Shields began his career at
Arthur Andersen LLP after graduating from Texas Southern University with a
B.B.A. in accounting in May 1988.  Mr. Shields worked at Arthur Andersen LLP
through 1996 and achieved the level of experienced manager.  Mr. Shields'
experience centered primarily around growth-oriented, owner-managed companies
during his tenure at Arthur Andersen LLP.

      Chadwick F. Smith, M.D., has been a Director of the Company since May 1991
and Chairman of the Board of Directors since June 1993. He has also served as a
Consultant to the Company. See "Certain Relationships and Related Transactions."
Dr. Smith is a Clinical Professor of Orthopedic Surgery at the University of
Southern California School of Medicine, a position he has held since 1981. He
has also been a member of the Medical Staff of Orthopedic Hospital, Los Angeles,
California, since 1966. Dr. Smith graduated with a B.A. from Southern Methodist
University in 1954, graduated from the University of Texas Medical School in
1958 and has been a Diplomate of the American Board of Orthopedic Surgery since
1968.

      Pedro A. Rubio, M.D., Ph.D., has been a Director of the Company since
January 1996. He is currently a Clinical Associate Professor of Surgery at the
University of Texas Health Science Center in Houston. He was Director of
Education of the Laser Training Institute of Houston from November 1993 until
January 1996. He served as World President of the International College of
Surgeons in Chicago in 1995 and was Chairman of the Department of Surgery at the
Columbia/HCA Medical Center Hospital in Houston from 1976 to 1994, when he
became Chairman Emeritus. Dr. Rubio holds the degrees of Bachelor of Science,
Master of Science in Surgical Technology, Doctor of Philosophy in Biomedical
Technology and Doctor of Medicine and Surgery. Dr. Rubio is a Diplomate of the
American Boards of Surgery, Laser Surgery, Abdominal Surgery, Forensic Medicine,
Quality Assurance and Utilization Review, Forensic Examiners and Pain
Management.

      Kenneth W. Davidson has been a Director of the Company since April 1996.
He has also been President, Chief Executive Officer and Chairman of the Board of
Directors of Maxxim Medical, Inc., since November 1986, and a Director since
1982. Prior to that time, Mr. Davidson was the Corporate Director of Business
Development at Intermedics, Inc., which is principally a manufacturer of
implantable devices such as pacemakers. Mr. Davidson is also a Director of
Encore Orthopedics, Inc., a designer and manufacturer of implantable orthopedic
devices.

      Ernest J. Henley, Ph.D., has been a Director of the Company since April
1996 and is also a consultant to the Company. He has been a Director of Maxxim
since 1976. See "Certain Relationships and Related Transactions." Dr. Henley's
principal employment for more than 15 years has been as a Professor of Chemical
Engineering at the University of Houston.

      All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified.  All
non-employee directors of the Company are reimbursed for expenses incurred for
attendance at meetings of the Board of Directors and any Board committee and
are eligible to receive stock options pursuant to the 1996 Non-Employee
Director Stock Option Plan.  See "Item 10.  Executive Compensation."

      Each officer of the Company serves at the discretion of the Board of
Directors, subject to the terms of his employment agreement, if any, and is
eligible to receive stock options pursuant to the 1996 Incentive Stock Plan. See
"Item 10. Executive Compensation" below, for a discussion of the Company's
employment agreement with Mr. Barbour. Each member of management devotes his
full time to the Company's affairs.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      Section 16(a) of the Exchange Act requires a company's directors and
executive officers, and persons who own more than 10 percent of the equity
securities of the Company to file initial reports of ownership and reports of
changes in ownership of the Common Stock with the Securities and Exchange
Commission. Officers, directors and greater than 10 percent shareholders are
required to furnish the Company with copies of all Section 16(a) reports they
file.

      Based solely on a review of the forms the Company has received or
prepared, the Company believes that during the year ended December 31, 1998, all
filing requirements applicable to the Company's directors, officers and greater
than 10 percent shareholders were met.
<PAGE>
ITEM 10.    EXECUTIVE COMPENSATION

      SUMMARY OF COMPENSATION.  The following table provides information
concerning compensation paid or accrued during the fiscal years ended December
31, 1998, 1997 and 1996, to the Company's President and Chief Executive
Officer, Michael M.  Barbour, Chief Financial Officer, Dan D. Sudduth and Vice
President-Sales and Marketing, Theron L. Morrow.  During 1998, 1997 and 1996,
no other executive officers received compensation which exceeded $100,000:
<TABLE>
<CAPTION>
                                                                                       LONG-TERM COMPENSATION
                                                                  -------------------------------------------------------------
                                      ANNUAL COMPENSATION                    AWARDS                 PAYOUTS
                                --------------------------------  --------------------------------  -------  ------------------
                                                                                    SECURITIES     
                                                    OTHER ANNUAL    RESTRICTED      UNDERLYING       LTIP           ALL
 NAME AND POSITION        YEAR   SALARY     BONUS   COMPENSATION   STOCK AWARDS  OPTIONS/ SARS (#)  PAYOUTS  OTHER COMPENSATION
------------------------  ----  --------  --------  ------------  -------------  -----------------  -------  ------------------
<S>                       <C>   <C>         <C>                                       <C>                             
Michael M. Barbour        1998  $147,200    50,000      --              --            11,666          --            --
CEO                       1997  $160,000    40,000      --              --             3,333          --            --
                          1996  $171,657     --         --              --              --            --            --
                                                                                                   
Dan D. Sudduth (1)        1998  $138,000    30,000      --              --            11,666          --            --
CFO                       1997  $134,811     --         --              --             3,333          --            --
                          1996     --        --         --              --              --            --            --
                                                                                                   
Theron L. Morrow          1998   $87,016    15,000      --              --             1,667          --            --
VP-Sales and Marketing    1997   $60,000     --         --              --              --            --            --
                          1996   $55,000     --         --              --              --            --            --
</TABLE>
(1)   Mr. Sudduth was a consultant to the Company prior to February 1997 when
      he became an employee.

      OPTION/SAR GRANTS. The following table provides certain information with
respect to common stock options granted during the fiscal year ended December
31, 1998 by the Company's Chief Executive Officer, Chief Financial
Officer and Vice President-Sales and Marketing:

                         NUMBER OF  
                        SECURITIES     PERCENT OF   
                        UNDERLYING    TOTAL OPTIONS     EXERCISE   
    NAME AND            OPTION/SARS   /SARS GRANTED       PRICE       EXPIRATION
    POSITION              GRANTED     TO EMPLOYEES      ($/SHARE)        DATE
------------------      -----------   -------------   ------------    ----------
Michael M. Barbour
CEO                       25,000           29%        $6.125/share     7/16/08

Dan D. Sudduth
CFO                       25,000           29%        $6.125/share     7/16/08

Theron L. Morrow
VP-Sales and Marketing     5,000           6%          $3.00/share     12/30/08
<PAGE>
      AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR ENDED
OPTION VALUES. The following table provides certain information with respect to
option exercises during the fiscal year ended December 31, 1998 by the Company's
Chief Executive Officer, Chief Financial Officer and Vice President - Sales and
Marketing:
<TABLE>
<CAPTION>
                                                    NUMBER OF                    VALUE OF
                                               SECURITIES UNDERLYING            UNEXERCISED
                                                   UNEXERCISED                  IN-THE-MONEY        
                        SHARES                     OPTIONS/SARS                OPTIONS/SARS AT     
                      ACQUIRED ON   VALUE      AT FISCAL YEAR END (#)      FISCAL YEAR END ($) (1)
   NAME                EXERCISE    REALIZED      DECEMBER 31, 1998                REALIZED
-------------------   -----------  --------  --------------------------  --------------------------
                                             EXERCISABLE  UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
                                             -----------  -------------  -----------  -------------
<S>                                            <C>            <C>                            
Michael M. Barbour        --         --        240,000        20,000         --            --
                                                                                     
Dan D. Sudduth            --         --        50,000         20,000         --            --
                                                                                     
Theron L. Morrow          --         --         5,000         3,333          --            --
</TABLE>
(1)   Calculated by multiplying the number of shares underlying outstanding
      in-the-money options by the difference between the last sales price of the
      common stock on December 31, 1998 ($3.00 per share) and the exercise
      prices, which range between $3.00 and $7.88 per share. Options are
      in-the-money if the fair market value of the underlying common stock
      exceeds the exercise price of the option.

COMPENSATION OF DIRECTORS

      Effective January 15, 1996, the Board of Directors of the Company (the
"BOD") adopted the following plans which were approved by the Company's
shareholders in July 1996: (i) the 1996 Incentive Stock Plan under which the
Company can issue up to 1.2 million shares of the Company's common stock to
eligible officers, employees and consultants of the Company, and (ii) the 1996
Non-Employee Directors Stock Option Plan (the "Outside Director Plan") under
which the Company can issue up 250,000 shares of common stock to its outside
directors. On February 17, 1998, the Company filed a registration statement on
Form S-8 covering all of the shares issuable under both plans with the
Securities and Exchange Commission.

      In connection with their re-election to the BOD in July 1998, Drs. Rubio,
Smith, and Henley and Mr. Davidson were each granted a stock option under the
Outside Director Plan to purchase 10,000 shares of the Company's common stock at
a price of $6.125 per share. Also, in connection with their membership in the
BOD in 1998, each of Messrs. Sudduth and Barbour was granted an option under the
1996 Incentive Stock Plan to purchase 25,000 shares of the Company's common
stock at a price of $6.125 per share. The options granted to Messrs. Barbour and
Sudduth vest over a three-year period.

      The Outside Director Plan also provides that at the discretion of the BOD,
the Company may pay a cash fee to non-employee directors from time to time for
serving on and for attendance at meetings of the BOD or any committee thereof
(as such fees are set by the BOD from time to time.) During the year ended
December 31, 1998, the Company paid the non-employee directors $500 per person
for attendance at each meeting of the BOD.

EMPLOYMENT CONTRACTS

      In November 1996, the Company entered into an agreement with Michael M.
Barbour, effective as of May 1, 1996, employing him as its Chief Executive
Officer at a base annual salary of $160,000. The agreement also provides for an
annual bonus amount payable to Mr. Barbour based on specific formula as provided
in the agreement. During 1998 Mr. Barbour accepted an 8% salary reduction as
part of the Company's cost reduction initiative. The agreement terminated on
December 31, 1998.
<PAGE>
ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information regarding the number
and percentage of shares of common stock beneficially owned as of April 28,
1999, by any person (including any group of affiliated persons) known by the
Company to own 5 percent or more of the outstanding shares of the Company's
common stock, each named executive officer and director, and all executive
officers and directors of the Company as a group. Unless otherwise indicated,
the Company has been advised that all holders listed have the power to vote and
dispose of the number of shares set forth as beneficially owned by them.
                                              
NAME AND ADDRESS                           AMOUNT AND NATURE OF       PERCENT
OF BENEFICIAL OWNER (1)                    BENEFICIAL OWNERSHIP(2)    OF CLASS
-----------------------                    -----------------------    --------
                                                                     
Maxxim Medical, Inc.................          2,525,000  (3)             34.6%
      10300 49th Street North                                        
      Clearwater, FL 33762                                           
                                                                     
Chadwick F. Smith, MD...............            540,666  (4)              9.0%
      1127 Wilshire Blvd.                                            
      Los Angeles, California 90017                                  
                                                                     
Michael M. Barbour..................            491,748  (5)              8.2%
                                                                     
Pedro A. Rubio, MD, Ph.D............            239,128  (6)              4.1%
                                                                     
Dan D. Sudduth......................            158,511  (7)              2.7%
                                                                     
Ernest J. Henley, Ph.D..............             55,000  (8)              0.9%
                                                                     
Kenneth W. Davidson.................             30,000  (8)              0.5%
      10300 49th Street North                                        
      Clearwater, FL 33762                                           
                                                                     
Ronnie V. Shields...................             17,333  (9)              0.3%
                                                                     
Tracy Matthews......................             15,867 (10)              0.3%
                                                                     
Daniel M. Lavelle...................             15,767 (11)              0.3%
                                                                     
Theron Morrow.......................             15,667 (12)              0.3%
                                                                     
All Executive Officers and Directors                                 
as a Group (10 persons).............          1,579,687                  24.8%
                                                                     
(1)   Unless otherwise specified, the address of each beneficial owner is c/o
      Henley Healthcare, Inc.  120 Industrial Boulevard, Sugar Land, Texas
      77478.
(2)   Except as otherwise indicated, all shares are beneficially owned, and the
      sole investment and voting power is held, by the person named. This table
      is based on information supplied by the officers, directors and principal
      shareholders and reporting forms, if any, filed with the Securities and
      Exchange Commission on behalf of such persons. A person is deemed to
      beneficially own shares of common stock underlying options, warrants or
      other convertible securities if the stock can be acquired by such person
      within sixty days of the date hereof.
(3)   In addition to holding 1,025,000 shares of common stock, Maxxim is the
      holder of the Maxxim Note, which is currently convertible into 1,500,000
      shares of common stock (subject to adjustment).  See "Certain
      Relationships and Related Transactions."
(4)   Includes 245,000 shares issuable upon exercise of currently exercisable
      options.
(5)   Includes 240,000 shares issuable upon exercise of currently exercisable
      options.
(6)   Includes 88,333 shares issuable upon exercise of currently exercisable
      options.
(7)   Includes 75,000 shares issuable upon exercise of currently exercisable
      options or warrants.
(8)   The 55,000 and 30,000 shares listed for each of Dr. Henley and Mr.
      Davidson, respectively, consist entirely of warrants and/or options
      exercisable as of the date hereof.
(9)   Includes 3,333 shares issuable upon exercise of currently exercisable
      options.
(10)  Includes 1,667 shares issuable upon exercise of currently exercisable
      options.
(11)  Includes 1,667 shares issuable upon exercise of currently exercisable
      options.
(12)  Includes 1,667 shares issuable upon exercise of currently exercisable
      options.
<PAGE>
ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      On April 30, 1996, the Company entered into an agreement with Maxxim,
whereby the Company purchased certain assets (and assumed certain liabilities)
associated with for an estimated purchase price of approximately $13.5 million.
The purchase price was paid by the issuance of the Company's convertible
subordinated promissory note in the principal amount of $7 million, with the
balance of the purchase price paid in cash provided through a financing with a
bank. Mr. Davidson and Dr. Henley are currently employed by Maxxim, with Mr.
Davidson serving in the capacities of Chairman of the Board, Chief Executive
Officer and President and Dr. Henley serving as a Director and consultant. Dr.
Henley's consulting agreement, which was entered into between Dr. Henley and
Maxxim in 1987, was acquired in the transaction with Maxxim. The agreement
included a monthly consulting fee in the amount of $5,833 and terminated on
October 31, 1997. The Company currently uses Dr. Henley's services on as-needed
basis for a monthly consulting fee of $1,750.

      In connection with the agreement entered into in April 1996 with Maxxim,
the Company issued to Maxxim a convertible subordinated promissory note in the
principal amount of $7 million (the "Note"). The Note is due and payable on May
1, 2003 with interest payable semi-annually on November 1 and May 1 of each
calendar year and calculated at a rate equal to 2 percent per annum and
increasing annually 2 percent per annum. The indebtedness under the Note is
secured by a second lien in substantially all of the assets of the Company. The
Company may redeem all or any portion of the outstanding principal amount of the
Note at redemption prices ranging from 104 percent to 110 percent of the
principal amount being redeemed, depending on when the redemption occurs as set
forth in the Note. In addition, the Note is subject to mandatory redemption in
annual principal installments of $1.4 million commencing on May 1, 1999 at
premiums starting at 7 percent and decreasing 1 percent each year. The Company
is currently in negotiations with Maxxim concerning this initial principal
payment. The Company is also required to redeem 40 percent of the Note upon the
completion of a public offering. The Note is convertible into common stock at a
conversion price of $2 per share, provided that upon the occurrence of any
default under the Note, the conversion price will be automatically adjusted to
an amount equal to the lesser of the conversion price then in effect or 80
percent of the average market price for the Company's common stock for the 30
trading days immediately preceding the event of default. The conversion price is
also subject to adjustment upon the occurrence of certain events (including
certain issuances of common stock for less than the conversion price) to provide
antidilution protection.

      Effective May 1996, the Company entered into a consulting agreement with
Chadwick F. Smith, MD, one of its Directors. The agreement includes an annual
compensation of $90,000 and terminated on December 31, 1998.

      In May 1996, the Company entered into an agreement with Mezzanine
Financial Relations, Inc., a financial relations company ("Mezzanine"), pursuant
to which Mezzanine agreed to provide financial consulting services with regard
to potential mergers and acquisitions in consideration for a monthly fee of
$10,000. Mr. Sudduth, Executive Vice President, Chief Financial Officer and a
Director of the Company, is a shareholder of Mezzanine and its Chairman of the
Board. The agreement terminated on January 31, 1997.

      In February and March 1998, the Company entered into agreements with
Maxxim pursuant to which Maxxim converted an aggregate of $4,000,000 of the Note
into an aggregate of 2,000,000 shares of the Company's common stock, par value
$.01 per share. The conversions were based on the current conversion price of
$2.00 per share under the Note. The agreements also provide that the entire $4
million of the Note so converted reduces the principal amount of the Note and
such sum shall be applied to the Company's full redemption obligation due in the
years 2003 and 2002 and partially to the Company's redemption obligation due in
the year 2001 as provided in the Note. The Company has filed a registration
statement covering the resale of the shares of Common Stock issued to Maxxim as
a result of the conversions described above.

      In February 1998, the Company entered into an agreement with Maxxim
whereby it acquired from Maxxim an office/warehouse building located in Sugar
Land, Texas, for a purchase price of approximately $1.3 million. The purchase
price was financed with a term note with a bank in the principal amount of
$1,260,000 with a maturity date of February 12, 2013.

      On February 9, 1998, we purchased substantially all of the assets and
assumed certain liabilities associated with AMC Acquisition Corp. for an
estimated purchase price of approximately $450,000 plus related acquisition
costs of approximately $30,000. The purchase price was paid by the issuance of
68,000 shares of common stock, with a market price of approximately $6.618 per
share. Mr. Sudduth and his son, Britton D. Sudduth, were shareholders of AMC and
each received 17,000 shares of common stock valued at $112,506.
<PAGE>
      In addition to the compensation earned by the named executive officers,
the following executive officers and managers earned compensation as listed
below during 1998:
<TABLE>
<CAPTION>
                                                                            TOTAL 
     NAME                    POSITION                                    COMPENSATION
     ----                    --------                                    ------------
<S>                   <C>                                                <C>    
Daniel M. Lavelle     Vice President - International Sales and Marketing    $69,618
Tracy Matthews        Vice President - Operations, Controller               $73,517
Steve Barbour(1)      Sales Manager                                        $108,402
</TABLE>
(1)   Mr. Barbour is the brother of Michael M. Barbour, Chief Executive Officer.
<PAGE>
                                   SIGNATURES

      In accordance with Section 13 or 15(d) and Section 12b-15 of the Exchange
Act, the registrant caused this Amendment No. 1 to this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 30th day of
April 1999.

                                          HENLEY HEALTHCARE, INC.
                                          (Registrant)


                                          By:  /s/ MICHAEL M. BARBOUR
                                                   MICHAEL M. BARBOUR,
                                         (President and Chief Executive Officer)