UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended June 27, 1998 or

[n]  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 0-17885
                        BEI MEDICAL SYSTEMS COMPANY, INC.
             (Exact name of Registrant as specified in its charter)


        Delaware                                         71-0455756
------------------------                    ------------------------------------
(State of incorporation)                    (I.R.S. Employer Identification No.)


                               100 Hollister Road
                           Teterboro, New Jersey 07608
                           ---------------------------
                    (Address of principal executive offices)
            (Formerly 83 Hobart Street, Hackensack, New Jersey 07601)

                                 (201) 727-4900
                                 --------------
                         (Registrant's telephone number)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 Yes _X_  No ___

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

      Common Stock: $.001 Par Value, 7,728,296 shares as of August 1, 1998


<PAGE>


BEI MEDICAL SYSTEMS COMPANY, INC. AND SUBSIDIARIES

INDEX


PART 1.   FINANCIAL INFORMATION                                             PAGE
          ---------------------                                             ----

Item 1.   Financial Statements

          Condensed  Consolidated  Balance  Sheets--June 27, 1998
          (unaudited) and September 27, 1997                                  3

          Condensed Consolidated Statements of Operations - Three
          Month and Nine Month  Periods  ended June 27,  1998 and
          June 28, 1997 (unaudited)                                           4

          Condensed Consolidated  Statements of Cash Flows - Nine
          Month  Periods  ended June 27, 1998 and June 28, 1997 
          (unaudited)                                                         5

          Notes    to    Condensed     Consolidated     Financial
          Statements--June 27, 1998                                           6

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


PART II.  OTHER INFORMATION
          -----------------
Item 1.   Legal Proceedings                                                  13

Item 5.   Other Information                                                  13

Item 6.   Exhibits and Reports on Form 8-K                                   13

               (a)  Exhibits

                    27.1 Financial Data Schedule

               (b)  Reports on Form 8-K
                                                        
          SIGNATURES                                                         14


                                       -2-
<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

BEI MEDICAL SYSTEMS COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

                                                 June 27,         September 27,
                                                   1998               1997
                                               -----------      ----------------
                                               (Unaudited)      (See note below)
                                                       (dollars in thousands)

ASSETS
Cash and cash equivalents                        $ 5,041            $ 9,271
Trade receivables, net                             1,751              1,958
Inventories -- Note 2                              3,295              2,939
Other current assets                               2,188                296
                                                 -------            -------
      Total current assets                        12,275             14,464
Property, plant and equipment, net                   828                811
Tradenames, patents and other, net                 2,673              3,708
Goodwill, net                                      3,415              3,595
Other assets                                         137                  6
                                                 -------            -------
                                                 $19,328            $22,584
                                                 =======            =======
                                                                    
                                                                    
LIABILITIES AND STOCKHOLDERS' EQUITY                                
Trade accounts payable                           $ 1,441            $   346
Accrued expenses and other liabilities             1,927              2,843
Current portion of long-term debt                     54                190
                                                 -------            -------
      Total current liabilities                    3,422              3,379
                                                                    
Long-term debt, less current portion                  --                 22
Minority interest                                     --              1,523
Stockholders' equity                              15,906             17,660
                                                 -------            -------
                                                 $19,328            $22,584
                                                 =======            =======
                                                                    
                                                                 
See notes to condensed consolidated financial statements.


Note:  The balance sheet at September 27, 1997 has been derived from the audited
consolidated balance sheet at that date but does not include all the information
and footnotes required by generally accepted accounting  principles for complete
financial statements.



                                      -3-
<PAGE>


BEI MEDICAL SYSTEMS COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
                                                                              Quarter Ended                   Nine Months Ended
                                                                         -------------------------         -------------------------
                                                                         June 27,         June 28,         June 27,         June 28,
                                                                           1998             1997             1998             1997
                                                                         --------         --------         -------          --------
                                                                               (dollars in thousands except per share amounts)
<S>                                                                      <C>              <C>              <C>              <C>    
Revenues                                                                 $ 2,293          $ 2,472          $ 7,246          $ 7,606
Cost of sales                                                              1,350            1,534            4,239            4,426
                                                                         -------          -------          -------          -------
Gross profit                                                                 943              938            3,007            3,180
Selling, general and administrative expenses                               1,757            2,216            6,253            6,012
Research, development and related
    expenses                                                                 778              479            1,772            1,380
                                                                         -------          -------          -------          -------

Loss from operations                                                      (1,592)          (1,757)          (5,018)          (4,212)
Interest income                                                               54               16              272              128
Interest expense                                                              (2)             (13)             (21)             (53)
                                                                         -------          -------          -------          -------
Loss from continuing operations
    before income taxes                                                   (1,540)          (1,754)          (4,767)          (4,137)
Provision (benefit) for income taxes                                        (563)            (617)          (1,443)          (1,421)
                                                                         -------          -------          -------          -------

Loss from continuing operations                                             (977)          (1,137)          (3,324)          (2,716)
Income from discontinued operations,
    net of income taxes                                                       --            1,696               --            3,183
                                                                         -------          -------          -------          -------
Net income (loss)                                                        $  (977)         $   559          $(3,324)         $   467
                                                                         =======          =======          =======          =======


                                               Earnings (Loss) per Common Share - Note 3

                                           Basic and Diluted Earnings (Loss) per Common Share
                                               
Loss from continuing operations                                          $ (0.13)         $ (0.17)         $ (0.45)         $ (0.40)
Income from discontinued operations, net
    of income taxes                                                           --             0.25               --             0.47
                                                                         -------          -------          -------          -------
Net income (loss) per common share                                       $ (0.13)         $  0.08          $ (0.45)         $  0.07
                                                                         =======          =======          =======          =======
Dividends per common share
                                                                         $    --          $  0.02          $    --          $  0.06
                                                                         =======          =======          =======          =======
</TABLE>

See notes to condensed consolidated financial statements



                                      -4-
<PAGE>


BEI MEDICAL SYSTEMS COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


                                                            Nine Months Ended
                                                          June 27,      June 28,
                                                            1998          1997
                                                          -------       -------

                                                          (dollars in thousands)


Net cash used in operating activities                     $(3,717)      $(2,966)
                                                                       
Cash flows from investing activities:                                  
         Purchases of property, plant and equipment          (247)         (161)
         Purchase of patents and licenses                    (108)         (186)
         Other                                                 --            18
                                                          -------       -------
                                                                       
                Net cash used in investing activities        (355)         (329)
                                                                       
Cash flows from financing activities:                                  
         Payments on long-term debt                          (158)         (714)
         Proceeds from issuance of common stock                --           872
         Purchase of treasury stock                            --        (1,303)
         Payment of cash dividends                             --          (563)
         Funding from discontinued operations                  --        (3,153)
                                                          -------       -------
                Net cash used in financing activities        (158)       (4,861)
                                                          -------       -------
                                                                       
Net decrease in cash and cash equivalents                  (4,230)       (8,156)
                                                                       
Cash and cash equivalents at beginning of period            9,271         9,128
                                                          -------       -------
                                                                       
Cash and cash equivalents at end of period                $ 5,041       $   972
                                                          =======       =======
                                                                       
                                                                    
See notes to condensed consolidated financial statements.



                                      -5-
<PAGE>


BEI MEDICAL SYSTEMS COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

June 27, 1998


NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  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 interim  periods  presented  are not
necessarily  indicative  of the results that may be expected for the year ending
October 3, 1998. For further  information,  refer to the consolidated  financial
statements and footnotes thereto in the Company's Annual Report on Form 10-K for
the year ended September 27, 1997.

On September 27, 1997,  BEI  Electronics,  Inc.  ("Electronics")  distributed to
holders  of  Electronics   common  stock  one  share  of  common  stock  of  BEI
Technologies,  Inc. ("Technologies"),  a newly formed subsidiary, for each share
of Electronics  common stock held (the  "Distribution").  In connection with the
Distribution,  Electronics  transferred  to  Technologies  all  of  the  assets,
liabilities  and  operations  of  its  BEI  Sensors  &  Systems  Company,   Inc.
("Sensors") and Defense Systems Company,  Inc.  ("Defense")  business  segments.
Accordingly,  the  financial  position and results of  operations of Sensors and
Defense are shown as discontinued  operations.  On November 4, 1997, Electronics
merged its subsidiary,  BEI Medical Systems Company,  Inc. into Electronics (the
"Merger"). After the Merger, Electronics changed its name to BEI Medical Systems
Company, Inc. (the "Company").


NOTE 2--INVENTORIES

                                                       June 27,        September
                                                         1998          27, 1997
                                                       --------        ---------
                                                         (dollars in thousands)
                                                                
Finished products                                      $2,220           $1,843
Work in process                                           158              230
Materials                                                 917              866
                                                       ------           ------
Inventories                                            $3,295           $2,939
                                                       ======           ======


                                      -6-
<PAGE>



NOTE 3--EARNINGS (LOSS) PER COMMON SHARE

The following  table sets forth the  computation  of basic and diluted  earnings
loss per common share:

<TABLE>
<CAPTION>
                                                      Quarter Ended         Nine Months Ended
                                                   June 27,    June 28,   June 27,     June 28,
                                                     1998        1997       1998         1997
                                                  ---------    -------    ---------    -------
                                                 (dollars in thousands except per share amounts)
<S>                                               <C>          <C>        <C>          <C>     
                      Numerator
                      ---------
Loss from continuing operations                   $    (977)   $(1,137)   $  (3,324)   $(2,716)
Income from discontinued operations,
    net of income taxes                                  --      1,696           --      3,183
                                                  ---------    -------    ---------    -------
Net income (loss) available to common
   stockholders                                   $    (977)   $   559    $  (3,324)   $   467
                                                  =========    =======    =========    =======

                      Denominator
                      -----------
Denominator for basic and diluted
earnings per common share --
   weighted average shares, net of nonvested
   shares (Quarter and Nine Months ended June         7,428      6,810        7,316      6,826
   27, 1998 - 361 and 383 shares, respectively;
   Quarter and Nine Months ended
   June 28, 1997 - 207 and 221 shares,
   respectively)

           Basic and diluted earnings (loss)
           ---------------------------------
                   per common share
                   ----------------
From continuing operations, net of income
   taxes                                          $   (0.13)   $ (0.17)   $   (0.45)   $ (0.40)
From discontinued operations, net of income
   taxes                                                          0.25           --       0.47
                                                  ---------    -------    ---------    -------
Net income (loss)                                 $   (0.13)   $  0.08    $   (0.45)   $  0.07
                                                  =========    =======    =========    =======
</TABLE>


Due to the loss  from  continuing  operations,  earnings  per  share is based on
weighted  average  common  shares only, as any  assumption of the  conversion of
equivalent shares would be antidilutive.



                                      -7-
<PAGE>


NOTE 4--CONTINGENCIES AND LITIGATION

CooperSurgical, Inc. vs. BEI Medical Systems Company, Inc. et al.
-----------------------------------------------------------------

In October 1993,  CooperSurgical,  Inc., a subsidiary  of The Cooper  Companies,
filed a claim for unspecified damages alleging unfair competition due to actions
by the Company and its president at the time,  Richard Turner, a former employee
of The Cooper  Companies,  and others.  On January 31, 1996,  the Court issued a
ruling,  which affirmed the legal basis for the Company to assert a counterclaim
for  damages  against  CooperSurgical  regarding  the  parties'  electrosurgical
generator contract.

The trial started in October 1997 in the Superior Court of New Jersey for Bergen
County,  Chancery  Division,  and  was  adjourned  in  January  1998  pending  a
settlement  discussion.  During the third quarter of fiscal 1998 an agreement in
principal  was reached,  and in July 1998,  the final  settlement  agreement was
signed  whereby the Company  agreed to pay  $300,000 in cash,  net of  insurance
reimbursement, and up to $100,000 in royalties on future product sales.

Other

From time to time the  Company  may  become  involved  in or  subject to various
litigation  and legal  proceedings  incidental  to the  general  conduct  of the
Company business. The Company is not involved in any material legal proceedings.



                                      -8-
<PAGE>


Item 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Except for the historical information contained herein, the following discussion
contains  forward-looking  statements that involve risks and uncertainties.  The
Company's  actual results could differ  materially  from those  discussed  here.
Factors that could cause or contribute to such differences  include, but are not
limited  to,  those  discussed  in this  section,  and  those  discussed  in the
Company's Form 10-K for the year ended September 27, 1997.

On September 27, 1997,  BEI  Electronics,  Inc.  ("Electronics")  distributed to
holders  of  Electronics   common  stock  one  share  of  common  stock  of  BEI
Technologies,  Inc. ("Technologies"),  a newly formed subsidiary, for each share
of Electronics  common stock held (the  "Distribution").  In connection with the
Distribution,  Electronics  transferred  to  Technologies  all  of  the  assets,
liabilities  and  operations  of  its  BEI  Sensors  &  Systems  Company,   Inc.
("Sensors") and Defense Systems Company,  Inc.  ("Defense")  business  segments.
Accordingly,  the  financial  position and results of  operations of Sensors and
Defense are shown as discontinued  operations.  On November 4, 1997, Electronics
merged its subsidiary,  BEI Medical Systems Company,  Inc. into Electronics (the
"Merger"). After the Merger, Electronics changed its name to BEI Medical Systems
Company, Inc. (the ("Company").

The following table sets forth, for the fiscal periods indicated, the percentage
of revenues represented by certain items in the Company's Condensed Consolidated
Statements of Operations.

<TABLE>
<CAPTION>
                                                          Quarter Ended          Nine Months Ended
                                                       -------------------     --------------------
                                                       June 27,    June 28,    June 27,    June 28,
                                                        1998        1997        1998        1997
                                                       ------      -------     -------     -------
<S>                                                      <C>         <C>         <C>         <C> 
Revenues                                                 100%        100%        100%        100%
Cost of sales                                             59          62          58          58 
Gross margin                                            ----        ----        ----        ---- 
                                                          41          38          42          42 

Operating expenses                                                                        
   Selling, general and administrative expenses           76          90          86          79
   Research, development and related expenses             34          19          25          18
                                                        ----        ----        ----        ----
Loss from operations                                     (69)        (71)        (69)        (55)
Interest income                                            2           1           3           2
Interest expense                                          --          (1)         --          (1)
                                                        ----        ----        ----        ----
Loss from continuing operations before income                                             
    taxes                                                (67)        (71)        (66)        (54)
Provision (benefit) for income taxes                     (24)        (25)        (20)        (18)
                                                        ----        ----        ----        ----
Loss from continuing operations                          (43)%       (46)%       (46)%       (36)%
                                                        ====        ====        ====        ====
</TABLE>
                                                    

Quarters ended June 27, 1998 and June 28, 1997

Revenues  for the third  quarter of fiscal 1998 were  $2,293,000,  a decrease of
$179,000  or 7% from the  comparable  period  in fiscal  1997.  The  decline  in
revenues reflects the impact of lower OEM shipments, which decreased $291,000 in
the third quarter of fiscal 1998, and declined from 21% of total revenues in the
third  quarter of fiscal 1997 to 10% in the  comparable  quarter of fiscal 1998.
The above decrease 


                                      -9-
<PAGE>



in OEM shipments  reflects the impact of a one-time  $199,000 sale  occurring in
the third quarter of fiscal 1997 and the Company's  decision to reduce marketing
of its  lower-margin  OEM  products  in  order  to  focus  on its  higher-margin
gynecological   products.   Revenues  from   gynecological   products  increased
approximately  1% from the  comparable  quarter  of fiscal  1997  reflecting  an
increase in shipments of  disposable  catheter  products  partially  offset by a
decline in shipments of monopolar electrosurgery systems. The Company introduced
its new  bipolar  electrosurgery  system at the annual  meeting of the  American
College of  Gynecologists in May 1998 and began filling orders at the end of the
current  fiscal  period.  In  addition,  sales  of  gastro-intestinal   products
increased to $235,000 from $169,000 in the third quarter of fiscal 1997.

Gross margin as a percentage  of revenues  increased to 41% in the third quarter
of fiscal 1998  compared to 38% for the  comparable  period in fiscal 1997.  The
increase  was due to a  favorable  product  mix with a larger  portion of higher
margin  products  being sold during the third quarter of fiscal 1998 compared to
the same period in fiscal 1997.

Selling,  general and  administrative  expenses  declined to $1,757,000  for the
third quarter of fiscal 1998 compared to $2,216,000 for the comparable period in
fiscal 1997. The decline in expenses  reflects a benefit of  $1,313,000,  net of
settlement  costs,  representing the reversal of previously  expensed legal fees
which were reimbursed by the Company's insurance carrier.  Partially  offsetting
the  above  benefit  was  approximately  $355,000  in  expenses  related  to the
consolidation of the Company's  facilities.  The Company consolidated its former
manufacturing,  distribution and  administrative  facilities in Hackensack,  New
Jersey and  Chatsworth,  California  into a single  24,400  square foot facility
located in Teterboro,  New Jersey.  The Company believes the consolidation  will
reduce  operating  costs by  eliminating  redundant  operations and will provide
additional space to accommodate future growth. In addition, the Company incurred
a one-time charge of $471,000 to reduce the carrying value of certain intangible
assets to be disposed of to net realizable value.

Research,  development and related expenses as a percentage of revenues were 34%
in the third  quarter  of fiscal  1998  compared  to 19% for the same  period of
fiscal  1997.  The  increased   spending  reflects  costs  associated  with  the
development  and clinical trials of the HTA system in both the United States and
international  markets.  The Company  completed  the Phase II portion of the HTA
clinical  trials in June 1998 and applied to the FDA in July 1998 for permission
to proceed to Phase III. Spending related to the HTA clinical trials is expected
to continue to increase over the next several quarters.

The income tax benefit for the quarter  ended June 27, 1998 was  $563,000 or 37%
of the pretax  losses  compared  to a benefit of  $617,000  or 35% of the pretax
losses for the  quarter  ended June 28,  1997.  In fiscal  1998,  the income tax
benefit  reflects  the  Company's  ability to  carryback  losses for federal tax
purposes from fiscal year 1998. In fiscal 1997, the income tax benefit  reflects
the  Company's  ability to offset losses of  continuing  operations  against the
earnings of the discontinued operations at that time.


Nine Months ended June 27, 1998 and June 28, 1997

Revenues for the nine months ended June 27, 1998  decreased  $360,000 or 5% from
the  comparable  nine-month  period ended June 28, 1997. The decline in revenues
reflects the impact of lower OEM shipments, which decreased $532,000 in the nine
months ended June 27, 1998,  and  declined  from 17% of total  revenue in fiscal
1997 to 10% of total  revenues  in the  comparable  period of fiscal  1998.  The
decrease in OEM shipments reflects the Company's decision to reduce marketing of
its  lower-margin   OEM  products  in  order  to  focus  on  its   higher-margin
gynecological  products.  Shipments of the HTA in international  markets grew to
$236,000  in the first nine  months of fiscal  1998,  compared to $82,000 in the
comparable  period  ended  June 28,  1997.  The HTA  System is now  commercially
available


                                      -10-
<PAGE>


in  thirteen  foreign  countries.  Revenues  from  gynecological  products  were
slightly  higher in the first  nine  months of fiscal  1998 than the  comparable
period in fiscal 1997 reflecting increased shipments of disposable catheters and
endoscopic  hardware  generators offset by lower shipments of the GyneSys(R) and
monopolar  electrosurgical  systems.  Revenues from  gastro-intestinal  products
declined  approximately  1% in the first nine months of fiscal 1998  compared to
the same nine-month period of fiscal 1997.

Gross margin as a percentage  of revenues was unchanged in the nine months ended
June 27, 1998 as compared to the same period in fiscal 1997.

Selling,  general and administrative expenses for the nine months ended June 27,
1998 increased $241,000 to $6,253,000 compared to $6,012,000 for the same period
in fiscal 1997. The increase in expenditures reflects  approximately $355,000 in
expenses related to the  consolidation of the Company's  facilities in the third
quarter of fiscal 1998. In addition,  the Company  incurred a one-time charge of
$471,000  to  reduce  the  carrying  value of  certain  intangible  assets to be
disposed of to net  realizable  value.  The increase in expenses  was  partially
offset by a benefit of  $723,000,  net of  settlement  costs,  representing  the
reversal  of  previously  expensed  legal  fees,  which were  reimbursed  by the
Company's insurance carrier.

Research,  development and related expenses as a percentage of revenues were 25%
for the nine months of fiscal 1998 compared to 18% for the same period of fiscal
1997. The increased  spending reflects costs associated with the development and
clinical  trials of the HTA system for  endometrial  ablation in both the United
States and international markets.

The provision for income tax benefit for the nine months ended June 28, 1998 was
$1,443,000 or 30% of the pretax losses as compared to a benefit of $1,421,000 or
34% of the pretax losses for the comparable period of fiscal 1997 reflecting the
impact of certain nondeductible expenses in fiscal 1998 that reduced the benefit
in fiscal 1998 as a percentage of pretax losses.  In fiscal 1998, the income tax
benefit  reflects  the  Company's  ability to  carryback  losses for federal tax
purposes from fiscal year 1998. In fiscal 1997, the income tax benefit  reflects
the  Company's  ability to offset losses of  continuing  operations  against the
earnings of the discontinued operations at that time.


Liquidity and Capital Resources

During  the first  nine  months  of fiscal  1998,  cash used in  operations  was
$3,717,000,  primarily resulting from the net loss of $3,324,000, an increase in
refundable income taxes of $1,512,000,  and a decrease in accrued liabilities of
$856,000.  Partially  offsetting the above were increases in accounts payable of
$1,095,000 and depreciation and amortization of $996,000.

Cash used in investing activities during the first nine months of fiscal 1998 of
$355,000 consisted primarily of purchases of equipment of $247,000 and increases
in long-term deposits of $108,000.

Cash flows used in  financing  activities  consisted  primarily  of  $158,000 in
scheduled payments made on long-term debt.

The Company's capital  requirements  depend on numerous  factors,  including the
progress of the Company's  clinical research and product  development  programs,
the timing and receipt of regulatory clearances and approvals, and the resources
the Company devotes to developing, manufacturing and marketing its products. The
Company's capital  requirements also depend on the resources  required to expand
and  develop  a direct  sales  force in the  United  States  and to  expand  the
Company's manufacturing capacity, and the extent to which the Company's products
gain  market  acceptance  and  sales.  The  


                                      -11-
<PAGE>


timing and amount of such capital  requirements cannot be predicted  accurately.
Consequently,  although the Company believes its existing cash balances together
with  operating  revenues and  anticipated  tax refunds  will  provide  adequate
funding to meet the Company's  capital  requirements for the next twelve months,
the Company is considering  various options to secure additional capital at this
time.  There can be no assurance  that  additional  capital will be available on
terms favorable to the Company,  or at all. Any additional  equity financing may
be  dilutive to  stockholders  and debt  financing,  if  available,  may involve
restrictive covenants and or also be dilutive to stockholders.


Year 2000 Compliance: Modification of Management Information Systems

Currently,  many computer systems and software products are coded to accept only
two digit  entries in the date code  field.  These date code fields will need to
accept four digit  entries to  distinguish  21st century dates from 20th century
dates. As a result, many companies' software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements.  The
Company and third  parties with which the Company does business rely on numerous
computer  programs in their day to day  operations.  The Company has completed a
preliminary  evaluation  of the Year 2000 issue as it  relates to the  Company's
internal  computer  systems and the third party systems with which it interacts.
This analysis  includes  such  activities  as order  taking,  billing,  accounts
payable and  inventory.  Systems  critical  to the  Company's  business  are all
commercial packages available from third party vendors with little modification.
The Company  anticipates that Year 2000 versions of these software programs will
become available before the Year 2000 and the cost of converting to the upgraded
versions  of  these  systems  will  not be  material.  In the  event  Year  2000
compatible  versions  of the  Company's  software do not become  available,  the
Company  anticipates  it will be able to convert to  software  supplied by other
vendors that is Year 2000 compatible.  While the Company currently believes Year
20000 issues will not have a material adverse impact on the Company's  business,
financial condition or results of operations, there can be no assurance that all
Year 2000 issues will be foreseen and resolved in 1998 or 1999. If not resolved,
Year  2000  issues  could  have a  material  adverse  impact  on  the  Company's
operations.

In  addition,  the Company has reviewed the Year 2000  situation  regarding  the
electronic products  manufactured for sale by the Company.  The Company believes
that none of its products are date  sensitive  or will require  modification  to
become Year 2000 compatible.


Effects of Inflation

Management  believes  that, for the periods  presented,  inflation has not had a
material effect on the Company's operations.


                                      -12-
<PAGE>


BEI MEDICAL SYSTEMS COMPANY, INC. AND SUBSIDIARIES

PART II.  OTHER INFORMATION
          -----------------

Item 1.   Legal Proceedings

CooperSurgical, Inc. vs. BEI Medical Systems Company, Inc. et al.
-----------------------------------------------------------------

In October 1993,  CooperSurgical,  Inc., a subsidiary  of The Cooper  Companies,
filed a claim for unspecified damages alleging unfair competition due to actions
by the Company and its president at that time, Richard Turner, a former employee
of The Cooper  Companies,  and others.  On January 31, 1996,  the Court issued a
ruling,  which affirmed the legal basis for the Company to assert a counterclaim
for  damages  against  CooperSurgical  regarding  the  parties'  electrosurgical
generator contract.

The trial started in October 1997 in the Superior Court of New Jersey for Bergen
County,  Chancery  Division,  and  was  adjourned  in  January  1998  pending  a
settlement  discussion.  During the third quarter of fiscal 1998 an agreement in
principal  was reached,  and in July 1998,  the final  settlement  agreement was
signed  whereby the Company  agreed to pay  $300,000 in cash,  net of  insurance
reimbursement, and up to $100,000 in royalties on future product sales.


Item 5.   Other Information

Pursuant to the  Company's  bylaws,  stockholders  who wish to bring  matters or
propose   nominees  for  director  at  the  Company's  1999  annual  meeting  of
stockholders  must provide  specified  information to the Company between a date
which is no later  than the close of  business  of the  sixtieth  (60th) day nor
earlier  than the close of  business  on the  ninetieth  (90th) day prior to the
first  anniversary of the preceding  year's annual meeting  (unless such matters
are included in the Company's proxy  statement  pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended).

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               27.1 Financial Data Schedule

          (b)  Reports on Form 8-K

               No  reports  on Form 8-K were  filed by the  Company  during  the
               quarter ended June 27, 1998.


                                      -13-
<PAGE>



SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized on August ____, 1998.



                               BEI Medical Systems Company, Inc.


                               By: /s/ Thomas W. Fry
                                   ---------------------------------------------
                                   Thomas W. Fry
                                   Vice President of Finance and Administration,
                                   Secretary and Treasurer
                                   (Chief Financial Officer)



                                      -14-