AMERICAN EQUITIES INCOME FUND INC, SB-2/A, 1996-08-02

AMERICAN EQUITIES INCOME FUND INC
SB-2/A, 1996-08-02
MISCELLANEOUS BUSINESS CREDIT INSTITUTION

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As Filed with the Securities and Exchange Commission on August 1, 1996
Registration No. 333-2856

AMENDMENT NO. 4
TO
FORM SB-2

U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

AMERICAN EQUITIES INCOME FUND, INC.
(Exact name of registrant as specified in charter)

DELAWARE 6159 22-3429295
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Corp. No.) Identification No.)

East 80 Route 4
Paramus, New Jersey 07652
(201) 368-5900
(Address, and telephone number of registrant's principal executive offices)

(Address of principal place of business or intended principal place of business)
David S. Goldberg
Chief Executive Officer
East 80 Route 4
Paramus, New Jersey 07652
(201) 368-5900
(Name, address, and telephone number of agent for service)

With a copy to:

H. Bruce Bronson, Jr., Esq.
Bronson & Migliaccio
287 Bowman Avenue
Purchase, New York 10577

Approximate date of commencement of proposed sale to the public: From time to time
after the Registration Statement becomes effective.

If any of the securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. [ ].

If any of the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest reinvestment plans, check
the following box. [X]

CALCULATION OF REGISTRATION FEE

Proposed Proposed
Title of each class Amount maximum (1) maximum Amount of
of securities to be to be offering aggregate Registration
registered registered price per Note offering price fee

12% Notes $15,000,000 $1,000 $15,000,000 $5,172.41

Total Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,172.41

(1) Stated only for purposes of calculating registration fee.

The Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.

<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.

Cross Reference Sheet

Item
Number Caption in Form SB-2 Caption in Prospectus

Item 1 Forepart of Registration Cover page of Registration
Statement and Outside Front Statement and Outside Front
Cover Page of the Prospectus Cover Page

Item 2 Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of the Prospectus Cover Pages of Prospectus

Item 3 Summary Information and Risk Summary of the Offering, Risk
Factors Factors

Item 4 Use of Proceeds Use of Proceeds

Item 5 Determination of Offering Price Not Applicable

Item 6 Dilution Not Applicable

Item 7 Selling Security Holders Not Applicable

Item 8 Plan of Distribution Plan of Distribution; Summary
of the Offering

Item 9 Legal Proceedings Business

Item 10 Directors, Executive Officers, Management
Promoters and Control
Persons

Item 11 Security Ownership of Certain Security Ownership of Certain
Beneficial Holders and Beneficial Holders and
Management Management

Item 12 Description of Securities Description of Securities,
Summary of the Offering

Item 13 Interest of Names Experts and Not Applicable
Counsel

Item
Number Caption in Form SB-2 Caption in Prospectus

Item 14 Disclosure of Commission Management
Position on Indemnification for
Securities Act Liabilities

Item 15 Organization within Last Five Certain Relationships and
Years Related Transactions

Item 16 Description of Business Business

Item 17 Management's Discussion and Plan of Operations
Analysis or Plan of Operations

Item 18 Description of Property Business

Item 19 Certain Relationships and Related Certain Relationships and
Transactions Related Transactions

Item 20 Market for Common Equity and Not Applicable
Related Stockholder Matters

Item 21 Executive Compensation Management

Item 22 Financial Statements Financial Statements

Item 23 Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure<PAGE>

Subject to Completion, Dated August 1, 1996
PROSPECTUS
AMERICAN EQUITIES INCOME FUND, INC.

$15,000,000
12% Notes, due September 30, 2006
$1,000 Per Note; Minimum to Break Escrow: $500,000
Minimum Purchase: 2 Notes

American Equities Income Fund, Inc., a Delaware corporation (the "Corporation"),
was formed in 1996 as a special purpose corporation wholly-owned by American Equities
Group, Inc. ("AEG") to acquire, service and collect upon accounts receivable (the
"Receivables") originated primarily from small to mid-sized businesses (the "Obligors").
THE COMPANY IS NOT AN INVESTMENT COMPANY AND IS NOT SUBJECT
TO THE INVESTMENT COMPANY ACT OF 1940 AND THE COMPANY IS NOT
AFFILIATED WITH THE UNITED STATES GOVERNMENT AND THE NOTES
ARE NOT BACKED OR GUARANTEED BY THE GOVERNMENT.

The Corporation is offering subscriptions for a maximum of up to $15,000,000
aggregate principal amount of its 12% Notes (the "Notes")in denominations of $1,000
each, or any integral multiple thereof (the "Offering"). Investor funds will be held in an
interest bearing Escrow Account at Republic National Bank of New York, NY (the
"Escrow Agent") until a minimum of $500,000 of Notes are sold (the "Minimum
Offering"). The Dealer Manager and its affiliates may purchase Notes in connection
with this offering; however, any such purchases shall not be counted towards the
Minimum Offering amount. In the event the Minimum Offering is not subscribed for
within six (6) months from the date of this Prospectus, the Offering will be terminated
and the escrowed funds returned to investors within 10 days, with interest. The Notes
will bear simple interest at the rate of 12% per annum, payable interest only as described
below, with all principal and accrued interest, if any, due on September 30, 2006.
Interest is calculated on the basis of a 360-day year (the "Calculation Basis") but is paid
at the option of the investor in one of the following options: (i) 12 equal monthly
installments, (ii) annually or (iii) upon maturity, regardless of the number of days in each
month or year (the "Payment Basis"), with any difference between interest determined on
the Calculation Basis and the Payment Basis paid in the final installment due under the
Notes. The first interest payment for those investors who choose to be paid monthly
shall be paid at the end of the first full month after such investor's investment in this
Offering. Interest shall be due on the first day of the month or year in arrears or upon
maturity, with a 30-day grace period prior to the Notes being in default. Accrued but
unpaid interest will be compounded monthly at the rate of 12% per annum. A Note
Holder may accelerated his Note on the first day of the fifth, sixth, seventh, eighth and
ninth years after issuance of such Note upon six months written notice. The Notes will
be secured by the Receivables acquired with the proceeds of the Offering or funds
obtained from the repayment of such Receivables or any after acquired Receivables.
The Notes are prepayable in whole or in part at any time without premium or penalty.

The minimum purchase is two (2) Notes; however, the Corporation reserves the
right, in its sole discretion, to offer and sell less than the minimum number of Notes to
any investor. The price and amount of Notes offered by the Corporation has been
established arbitrarily and bears no relationship to its asset value, book value, net worth
or any other established criteria of value. A NOTE HOLDER WILL NOT ACQUIRE
OR OBTAIN ANY BENEFITS WHICH MIGHT ACCRUE THROUGH AN EQUITY
INTEREST IN THE CORPORATION BY A PURCHASE OF NOTES.

THESE ARE SPECULATIVE SECURITIES. This Offering involves a high degree
of risk and should not be made by investors who cannot afford the loss of their
investment. See "RISK FACTORS" beginning on page 11.
-------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Price to Commissions and Proceeds to
Public (1) Concessions (1)(2)(3)(4) Corporation(5)

Per Note $ 1,000 $ 85 $ 915
Total Minimum $ 500,000 $ 42,500 $ 457,500
Total Maximum $15,000,000 $1,275,000 $13,725,000

(Footnotes on following page)

The date of this Prospectus is , 1996

MERRILL WBER & CO, INC.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE. <PAGE>
(1) The Notes are being offered on a "best-efforts" basis through Merrill Weber
& Co., Inc. (the"Dealer Manager"), and Selected Dealers (collectively referred to as the
"Participating Dealers") who are members of the National Association of Securities
Dealers, Inc. (the "NASD"). See "PLAN OF DISTRIBUTION."

(2) The Corporation has agreed to indemnify the Dealer Manager and Selected Dealers
against certain liabilities, including liabilities under the Securities Act of 1933. See
"PLAN OF DISTRIBUTION."

(3) The Corporation will pay the Dealer Manager a selling commission of up to 7% of
the offering price for all Notes sold, a due diligence and non-accountable expense
allowance of 1%, which may be reallowed to Selected Dealers, and a Dealer Manager
fee of .50%. See "PLAN OF DISTRIBUTION."

(4) This is before deducting other expenses of issuance and distribution payable by
the Corporation in connection with this Offering. If the Maximum Offering is sold, the
Corporation will pay from the proceeds of this Offering all of such expenses, currently
estimated not to exceed $300,000. If the only the Minimum Offering is sold, AEG will
pay all expenses of the Offering, estimated to be approximately $75,000.

(5) American Equities Group, Inc. will receive a one-time payment of approximately 5%
of the gross offering proceeds for preparing all of the necessary systems required in
order to set up the operations of the Corporation. See "PLAN OF OPERATIONS
- -Operations and Overhead Expenses."

If the Minimum Offering is sold and if the Corporation does not terminate the
Offering earlier, which in the sole discretion of Management it may, the offering of
Notes will continue until the Corporation raises an aggregate of$15,000,000, provided
that the offering period for all Notes of the Corporation will not exceed 24 months from
the date of this Prospectus.

The Notes are being offered subject to prior sale, withdrawal, cancellation or
modification of the offer, including its structure, terms and conditions, without notice.
The Corporation reserves the right, in its sole discretion, to reject, in whole or in part,
any offer to purchase the Notes. See "PLAN OF DISTRIBUTION."

UNTIL THE TERMINATION OF THIS OFFERING, AND IN ANY EVENT 90
DAYS AFTER THE DATE OF THIS PROSPECTUS AND ANY SUPPLEMENTS,
ALL PARTICIPATING DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES TO WHICH THIS PROSPECTUS RELATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF PARTICIPATING DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes effective. This
Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the securities laws of
any such state. The Subscription Agreement for the Notes must be executed, and the
Notes may only be delivered in such states. Resale or transfer of the Notes may be
restricted under state law. See "RISK FACTORS - No Market; Limited Transferability
of Notes" and "LACK OF LIQUIDITY OF NOTES."

No dealer, salesman or other person has been authorized in connection with this
Offering to give any information or to make any representations other than those
contained in this Prospectus or in supplements to this Prospectus, or in literature issued
by the Corporation. No person associated with this Offering or the Corporation has
been sponsored, recommended, or approved, nor has his abilities or qualifications in any
respect been passed upon by any state or any agency or officer of any state or by the
United States or any agency or officer of the United States. Neither the delivery of this
Prospectus or any Supplement hereto nor any sale hereunder shall under any
circumstances create an implication that there has been no change in the affairs of the
Corporation since the date thereof; however, if any material change in the Corporation's
affairs occurs at any time when this Prospectus is required to be delivered, this
Prospectus will be amended or supplemented.

Prospective Investors are encouraged to read the entire Prospectus, which
contains a complete copy of the form of the Notes, Security Agreement and Indenture of
Trust, and each supplement or amendment thereto, if any. Each prospective Investor is
also encouraged to seek the advice of his or her attorney, tax consultant, business advisor
and financial advisor with respect to the legal and business aspects of this investment
prior to subscribing for the Notes issued by the Corporation.

ADDITIONAL INFORMATION

The Corporation is an SEC reporting company by virtue of the effectiveness of
this Registration Statement under the Securities Act of 1933, as amended. The
Corporation has filed with the Securities and Exchange Commission, Washington, D.C., a
Registration Statement under the Securities Act of 1933 with respect to the securities
offered hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, its amendments and exhibits. For further information pertaining
to the Notes offered hereby, and the Corporation, reference is made to the Registration
Statement, including the exhibits, financial statements and schedules filed therewith or
incorporated by reference as a part thereof. Statements in this Prospectus concerning
the contents of any contract or other document referred to are not necessarily complete.
Where such contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit, to which
reference is hereby made for a full statement of the provisions thereof. The Registration
Statement may be inspected and copied at the Commission's Washington, D.C. office at
450 Fifth Street, N.W., Washington, D.C. 20439 and the Northeast Regional Office and
Midwest Regional Office at the following addresses: 7 World Trade Center, Suite 1300,
New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511, respectively. The Registration Statement also may be inspected
but not copied at the Commission's Atlanta, Georgia office. Further, copies can be
obtained at prescribed rates from the Washington, D.C. office. Exchange Act reports
may be inspected and copied at the Commission's Washington, D.C. office and Northeast
and Midwest Regional Offices and may be obtained at prescribed rates from the
Commission's Washington, D.C. office.

REPORTS TO NOTE HOLDERS

The Corporation intends to distribute to the Note Holders annual reports containing
financial statements that have been examined and reported on by an independent
certified public accountant. The Corporation may furnish such other reports as the
Board of Directors may deem necessary to inform the Note Holders of major
developments concerning the Corporation. In the event the Corporation is no longer
required to make required filings under the Securities Exchange Act of 1934 it is
anticipated that the Corporation will suspend the filing of such reports. However, the
Corporation will continue to distribute annual reports to Note Holders as well as any
reports required under the Trust Indenture Act of 1939. See "DESCRIPTION OF THE
SECURITIES - Indenture of Trust."

SUITABILITY STANDARDS: WHO CAN INVEST?

Notes will only be sold to a person who makes the required minimum purchase and
represents in writing that he has either: (i) a minimum annual gross income of at least
$30,000 and a net worth of $30,000 (exclusive of home, home furnishings and
automobiles); or (ii) a net worth of $75,000 (exclusive of home, home furnishings and
automobiles); or(iii) that he is purchasing in a fiduciary capacity for a person who (or for
an entity which) meets such conditions. In the case of sales to fiduciary accounts, the
suitability standards must be satisfied by the beneficiary; however, where the fiduciary is
the donor of funds used for investment in the Corporation, the fiduciary and not the
beneficiary must meet the standards set forth above. Certain states may impose higher
suitability standards which an Investor must satisfy.

All Participating Dealers will make reasonable inquiry to assure that there is
compliance with these suitability standards, and the Corporation will not accept
subscriptions from any person who does not represent in the Subscription Agreement
that he meets such standards.

Arkansas Investors: Arkansas investors must have a $45,000 gross income and a
$45,000 net worth (exclusive of home, home furnishings and automobiles) or $150,000
net worth (exclusive of home, home furnishings and automobiles).
California Investors: California investors must have a liquid net worth (exclusive of
home, home furnishings and automobiles) of $60,000 plus a minimum annual gross
income of at least $60,000 or a liquid net worth of $225,000 (exclusive of home, home
furnishings and automobiles).

Missouri Investors: Missouri investors must have a net worth (exclusive
of home, home furnishings and automobiles) of $60,000 plus a minimum annual gross
income of at least $60,000 or a net worth of $225,000 (exclusive of home, home
furnishings and automobiles).

North Carolina Investors: North Carolina investors must have a net worth (exclusive
of home, home furnishings and automobiles) of $60,000 plus a minimum annual gross
income of at least $60,000 or a net worth of $225,000 (exclusive of home, home
furnishings and automobiles).

Wisconsin Investors: Wisconsin investors must have a $45,000 gross income and
$45,000 net worth (exclusive of home, home furnishings and automobiles) or $150,000
net worth.

No transfers will be permitted of less than the minimum permitted purchase, nor may
an investor transfer, fractionalize or subdivide Notes so as to retain less than such
minimum purchase.

The reasons for establishing these standards include the relative lack of liquidity of
Notes and certain risk factors associated with an investment in the Notes. See "RISK
FACTORS."
<PAGE>
TABLE OF CONTENTS
Page

I. PROSPECTUS

Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Reports to Note Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Suitability Standards: Who Can Invest?. . . . . . . . . . . . . . . . . . . . 4

Summary of the Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Security Ownership of Certain Beneficial Owners and Management . . . . . . . .34

Plan of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Description of the Securities. . . . . . . . . . . . . . . . . . . . . . . . .37

Tax Aspects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

Certain Relationships and Related Transactions . . . . . . . . . . . . . . . .44

Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

Lack of Liquidity of Notes . . . . . . . . . . . . . . . . . . . . . . . . . .46

Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Glossary of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . F-1
Prior Performance Tables . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

II. EXHIBITS

A. Secured Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

B. Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

C. Indenture of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

D. Subscription Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . D-1

E. Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1<PAGE>
SUMMARY OF THE OFFERING

The following summary is qualified in its entirety by the detailed information and
financial statements appearing elsewhere in this Prospectus.

The Corporation

The Corporation was formed under the laws of the State of Delaware in 1996,
with its principal place of business at East 80 Route 4, Suite 202, Paramus, New Jersey
07652, telephone (201) 368-5900. The Corporation, as a special purpose corporation, is
restricted by its certificate of incorporation to acquiring and/or financing accounts
receivables and factoring such receivables through a management agreement with its
parent, American Equities Group, Inc. ("AEG"). The Corporation will not be allowed to
borrow funds, except from AEG, which loans will be subordinated to the debt of the
Note Holders, or engage in any business other than the financing of accounts receivable
and financial services. No funds of the Corporation will be deposited or commingled
with funds of AEG or its affiliates.

The Corporation will engage in the business of factoring accounts receivable.
Factoring is one of the oldest and most innovative methods of financing, possibly the
earliest recorded form of commercial banking, whereby a factor will purchase the
accounts receivable of businesses at a discount from their face value thereby providing
such businesses with immediate cash flow. This financing tool allows a business to put its
accounts receivable to work and allows companies to obtain working capital without
taking on new debt or giving up equity. The result is a streamlining of credit and
collection efforts and an enhanced cash flow. Small businesses are attracted to factoring
due to the fact that many small businesses cannot qualify for traditional bank loans and
factoring provides them with the immediate cash they need to operate and grow without
having to rely on the typical repayment terms of 30, 60, 90 days or longer. As businesses
grow, factoring can serve a vital need of providing cash flow. An increasing number of
smaller to mid-size companies are turning to factoring as a cash management tool.
Large companies routinely factor their invoices to speed up cash flow and smaller
businesses are beginning to take advantage of this financial option.

In factoring, revenues and profits are generated in two primary ways: either as a
factor who actually purchases invoices as an investment, or as a broker who brings
factors and clients together and earns a fee on the transaction. In addition, the factoring
process may be done on a recourse or non-recourse basis. In a recourse transaction, the
factor may charge back uncollected or problem accounts to the Client, thus the Client
assumes the credit risk. In a non-recourse transaction, the factor will assume the credit
risk associated with the debtor's inability to pay the invoice. In a non-recourse
transaction, only certain accounts are charged back to the Client. The Corporation will
not act as a broker and may acquire Receivables on either a recourse or non-recourse
basis.

In a typical factoring transaction, a business owner will receive an advance of 70-75%
against the face value of an invoice. Once the invoice is paid, the business owner will
receive the balance (or reserve) of the invoice amount less a discount for the factor's fee.
This fee is negotiated but usually ranges from 7-10% of the face amount of the
Receivables. The reserve provides the factor with available funds from which to draw its
fees, and furnishes a buffer against defaults by Clients and/or account debtors.

The market for accounts receivable financing in the United States is extensive due to
the extremely conservative lending standards of banks. Consequently, there are many
businesses which require alternative financing. AEG and the Corporation are confident
that through their existing resources and marketing efforts they will generate significant
suitable clients for accounts receivable financing.

The Corporation will purchase accounts receivable (the "Receivables") primarily
of small to medium-sized corporations with sales between $500,000 and $10,000,000
annually. AEG, the Corporation's parent and sole stockholder will originate the
Receivables purchasing them from client companies (the "Clients") and assigning them
without recourse (as to AEG) to the Corporation. AEG, as Manager for the
Corporation, services and collects the Receivables. The Corporation's day-to-day affairs
shall be performed by employees of AEG, including, but not limited to, marketing for
new business, evaluating the quality and credit of the Receivables and Client companies,
determining which Receivables are to be purchased, effecting Receivables purchases,
collecting upon the Receivables for the account of the Corporation, effecting the
disbursement of funds to Clients and preparing checks for the Corporation for interest
and principal payments on the Notes and mailing such checks to Note Holders with
statements of account.

AEG typically concentrates its purchase of Receivables in the publishing, printing
and general services industries. These are industries that can best utilize the
comprehensive services of AEG which include back office functions such as credit
checks, billing, reporting and collections. The amount AEG has advanced on a typical
pool of receivables is generally collected within 120 days. While the rate of payment by
account debtors may vary, Receivables are typically paid by account debtors between 60
and 90 days. On such basis, AEG's funds are utilized approximately 5 times per year
with an average factoring fee charged of 8%, giving an annualized return of
approximately 40%. AEG's fees are charged on the total value of accounts receivable
presented and advance rates vary. There are no assurances that Receivables purchased
by the Corporation will be collected in 60 to 90 days or that the Corporation will average
returns equal to 40%. Based upon the prior performance of investment facilities of
which AEG currently serves as Manager, a Receivable pool can be expected to turn over
approximately every 60 to 90 days. See "BUSINESS" and "MANAGEMENT - Prior
Performance." There is no limit placed in advance on purchasing the accounts receivable
from one company or one those generated by any one obligor, however, AEG retains the
right to not purchase a receivable if it deems the account debtor excessive for the
account of a Client.

The Corporation will typically charge 7% to 10% of the face amount of the
Receivables as a fee and will initially advance 65% to 80% of the face amount of the
Receivables which is collateral for the payment of Receivables. See "BUSINESS -
Acquisition of Receivables." There is no assurance that all transactions will be identical
to the above and fees and advance rates may be increased or reduced depending upon
competition and the relative risk of the Receivables.

The Notes and the Offering

The Corporation is offering subscriptions for a maximum of up to $15,000,000
aggregate principal amount of the Corporation's 12% Promissory Notes (the "Notes") in
denominations of $1,000 each, or any integral multiple thereof, with a minimum
investment of $2,000; however, the Corporation reserves the right, in its sole discretion,
to offer and sell less than the minimum number of Notes to any investor. Investor funds
will be held in an interest bearing Escrow Account at Republic National Bank of New
York, New York, NY (the "Escrow Agent") until a minimum of $500,000 of Notes are
sold (the"Minimum Offering"). In the event the Minimum Offering is not subscribed for
within six (6) months of the date of this Prospectus, the Offering will be terminated and
the escrowed funds returned, with interest. The Notes will bear simple interest at the
rate of 12% per annum, payable interest only, as described below, with all principal and
accrued interest, if any, due on September 30, 2006. Interest is calculated on the basis of
a 360-day year(the "Calculation basis") but is paid in one of the following options: (i) 12
equal monthly installments, (ii) annually or (iii) upon maturity, as chosen by the investor
upon subscription, regardless of the number of days in each month (the "Payment
Basis"), with any difference between interest determined on the Calculation Basis and
the Payment Basis paid in the final installment due under the Notes. Interest shall be
due on the first day of the month or year in arrears, or upon maturity, with a 30-day
grace period prior to the Notes being in default. Accrued but unpaid interest will be
compounded monthly at the rate of 12% per annum. The Notes may be accelerated by
the individual Note Holders on the first day of the fifth, sixth, seventh, eighth, and ninth
years after issuance of the Notes upon six months written notice. The Notes will be
secured by a group of Receivables acquired with the proceeds of the Offering or funds
obtained from the repayment of such Receivables or any after acquired Receivables.
The Notes are prepayable in whole or in part at any time without premium or penalty.

The price and amount of Notes offered by the Corporation has been established
arbitrarily and bears no relationship to its asset value, book value, net worth or any other
established criteria of value. A NOTE HOLDER WILL NOT ACQUIRE OR OBTAIN
ANY BENEFITS WHICH MIGHT ACCRUE THROUGH AN EQUITY INTEREST
IN THE CORPORATION BY A PURCHASE OF NOTES.

Use of Proceeds

The net proceeds of the Offering will be used to acquire accounts receivable and to
pay the Dealer Manager Fee and the Overhead Allowance.

Risk Factors

An investment in the Notes being offered pursuant to this Prospectus involves a
high degree of risk and should not be made by investors who cannot afford the loss of
their entire investment. Accordingly, it is urged that each potential investor consult with
personal legal, tax and financial advisors before making this investment. Such Risk
Factors include:

. No operating history; Reliance on Experience of Management. The Corporation
is a newly organized corporation which will be dependent upon the management
expertise of the Manager and its officers and directors. The success of the Corporation
will, to a large extent, depend upon the extent to which the Corporation is able to
acquire and successfully collect accounts receivable to the extent of advances on such
receivables and on the quality of the services provided by AEG, its management and
employees, particularly as it relates to evaluating the merits of proposed investments.
The loss of services of any one or more of AEG's key employees could have a materially
adverse effect on the Company's operations and prospects.
. No Market; Limited Liquidity of the Notes. There is no market for the Notes
and one is not expected to develop. Accordingly, Investors should purchase Notes only
as a long-term investment as they may not be able to liquidate their investment quickly,
if at all.
. Sources of Payments on the Notes. Interest and Principal on the Notes will be
derived primarily from cash flow generated by the Receivables. If sufficient funds are
not available from cash flow or other sources, the repayment of all or part of the interest
or principal on the Notes may be delayed or never be made.
. No Rating of the Notes. The Notes will not be rated by any rating agency.
Accordingly, Investors will not have any independent evaluation of the credit worthiness
of the Corporation or its debt securities.
. Non-Self-Amortizing Loan. The Notes do not provide for the amortization of
principal prior to maturity. The ability of the Corporation to repay at maturity the
outstanding principal amount of such loans is dependent upon the Corporation's ability
to collect the Receivables at a profit. There can be no assurance that the Corporation
will have sufficient cash available for repayment of the Notes upon their maturity.
. Conflicts of Interest. Officers and Directors of the Corporation are officers and
directors of AEG and other similar corporations which engage in the factoring of
accounts receivable and may have conflicts of interest in allocating management time,
services and functions between this Corporation and Affiliates of the Corporation.
Furthermore, there may be competition among the various Affiliated entities for certain
receivables.
. Uncertainty of Tax Treatment. The Corporation is thinly capitalized and
therefore the debt evidenced by the Notes could be deemed a capital contribution. Such
a determination could have a materially adverse effect on the profitability of the
Corporation and its ability to make interest and principal payments to investors when
due.

Tax Aspects

Interest payments under the Notes will be treated as ordinary income. Income or
loss on the disposition of the Notes will be treated as a capital gain or loss.

Selected Financial Information

April 30, 1996

Assets $40,000
Liabilities 0
Stockholders Equity $40,000

As of April 30, 1996, the Corporation had not engaged in any activities and had no
revenues. The Corporation has not paid any cash dividends on its common shares.

Plan of Distribution

The Notes are being offered by Merrill Weber & Co., Inc on a best efforts/all or
none basis as to the Minimum ($500,000) and a best efforts basis as to the Maximum
($15,000,000). <PAGE>
RISK FACTORS

A purchase of the Notes issued by the Corporation involves various risk factors,
including, but not limited to, those set forth below. Prospective investors should consider
these risk factors before making a decision to purchase the Notes.

1. No Market; Limited Transferability of Notes.

No public or other market for the Notes exists and there can be no assurance that
one may develop in the future. Because the Notes are subject to certain restrictions on
their transfer and because there is a lack of a market for the Notes, investors should
purchase the Notes only as a long-term investment, as they may not be able to liquidate
their investment in the Notes in the event of an emergency or for any other reason.

2. Limited Sources of Payment on the Notes; No Sinking Fund Provisions.

The sole sources of payment of interest on the Notes will be cash flow generated by
the Receivables which are security for the Notes, capital contributions or loans of the
sole shareholder or its Affiliates, or operational borrowings obtained from AEG. The
sole sources of repayment of principal and accrued interest on the Notes at the end of
their term will be a refinancing of the Notes, a sale of the Receivables which are pledged
as security for the Notes, proceeds from the repayment of the Receivables not used to
acquire additional Receivables, or loans or capital contributions from the sole
shareholder or its Affiliates. There is no present intention or potential for a loan or
capital contribution between the Corporation and its shareholder or Affiliates. In
addition, the Corporation reserves the right to sell additional notes or equity interests in
a public offering or an offering exempt from registration under federal and state
securities laws to provide additional financing for the Corporation. If sufficient funds are
not available from any of such sources, the repayment of all or part of the interest or
principal on the Notes may be delayed or never by made. See Exhibit A - Secured Note,
Exhibit B - Security Document, and Exhibit C - Indenture of Trust."

In addition, as Investors may choose the frequency of their interest payments, Note
Holders who choose to receive interest payments annually or upon maturity face greater
risks of non-payment of interest than Note Holders who receive monthly interest
payments because the ability of the Corporation to pay interest annually or at maturity is
dependent upon the Corporation's cash flow at such time and its ability to collect the
Receivables at a profit. The Corporation intends to make monthly interest payments to
Notes Holders even if it appears likely that payments to be made annually or upon
maturity may not be able to be made. Accordingly, such monthly interest payments may
deprive the Corporation of its ability to make annual other scheduled payments of
interest when due.

There is no sinking fund for payment of principal or interest on the Notes.

3. Notes Secured by the Receivables.

The source of collateral for the Notes is the Receivables. Although the Note
Holders have been granted a security interest for the Notes, if such security interest were
not perfected, the Note Holders would not have a priority claim on the Receivables and
would, in effect, be treated as any unsecured creditor of the Corporation. Upon an
Event of Default under the Notes, if the Note Holders did not have a priority claim on
the Collateral through perfection of their security interest, their ability to sell the
Receivables and use the proceeds to repay the Notes would be adversely affected as
other unsecured creditors would have an equal claim to the Receivables and Note
Holders could suffer a partial or total loss of principal and unpaid interest on the Notes.
The Note Holders security interest in the Receivables will be perfected by filing UCC-1
financing statements on all of the assets of the Corporation.

4. Effect of a Default on Receivables.

In the event there is a default on Receivables, the Corporation will first offset the
defaulted amount against the deferred portion of the purchase price of all Receivables
acquired from the Client. If this amount is inadequate, the Corporation, through AEG,
will pursue the Obligor on the Receivables and any other security that it holds on the
Client's assets. There is no assurance that the market value of the Receivables pledged
to secure the Notes will at any time be equal to or greater than the aggregate principal
amount of the Notes then outstanding, plus accrued interest thereon. Therefore, upon
an Event of Default with respect to such Notes, the proceeds of any sale of such
Receivables and the other collateral may be insufficient to pay in full the principal of and
interest on such Notes. In the event of fraud or misappropriation of funds, the
Corporation generally has the right to pursue certain principals of the Client. Despite
the Corporation's and AEG's best efforts certain Receivables may prove to be
uncollectible.

5. No Rating of the Notes.

The Notes will not be rated by any rating agency. The Corporation has not pursued,
nor does it intend to pursue, rating of the Notes from any of the rating agencies.
Accordingly, Investors will not have any independent evaluation of the credit worthiness
of the Corporation or its debt securities.

6. Non-Self-Amortizing Loan.

The Notes do not provide for the amortization of any of the principal amount prior
to maturity. Such Notes involve greater risks than loans in which the principal amount is
amortized over the term of the loan because the ability of the Corporation to repay at
maturity the outstanding principal amount of such loans is dependent upon the
Corporation's ability to collect the Receivables at a profit.

7. Limitations on Enforceability.

The enforceability of the Notes is subject to laws relating to bankruptcy, insolvency
and other laws affecting the enforceability of
creditors' rights generally. There is no assurance that any of these laws will not operate
to impair the enforceability of the Notes.

8. Prepayment of Notes. The Corporation may repay the Notes in whole or
in part at any time without penalty. In the event of such repayment of the Notes,
Investors may not receive the cumulative return that they may have originally expected.

9. Loss on Notes. If a Note Holder suffers a loss on his Notes, it may be treated
as a capital loss rather than an ordinary loss, which may affect the manner in which such
loss may be utilized for tax purposes.

10. No Interest in the Corporation; No Voting Rights.

A NOTE HOLDER WILL NOT ACQUIRE OR OBTAIN ANY BENEFITS
WHICH MIGHT ACCRUE THROUGH AN EQUITY INTEREST IN THE
CORPORATION BY A PURCHASE OF NOTES. Note Holders have no voting rights
and no right or power to take part in the management of the Corporation or AEG.
Accordingly, no person should purchase any of the Notes offered hereby unless he is
willing to entrust all aspects of the management and control of the business of the
Corporation to AEG, its officers, directors and employees. See "MANAGEMENT."

11. Competition for Acquisition of Receivables.

In connection with the acquisition of Receivables, the Corporation may encounter
significant competition from persons or entities which may have objectives similar in
whole or in part to those of the Corporation. Many of such competitors may be
substantially better financed and have reputations and public awareness of their
operations which are more widely known and accepted. The pressure of such
competition may require that the Corporation pay more for Receivables it acquires or to
acquire Receivables of lesser quality, which could reduce or eliminate payments to Note
Holders.

12. Regulation.

The Corporation is duly qualified to do business in the State of New Jersey. To the
best of the Corporation's knowledge, there are no state laws affecting lending and
factoring of accounts receivable which would adversely affect the business of the
Corporation. The Corporation and AEG will obtain licenses wherever necessary prior to
engaging in business in order to factor receivables. In the event that the Corporation is
required to obtain a license to factor accounts receivable in any state, there is no
assurance that the Corporation will be able to acquire such a license. Such a license
requirement would also limit the number of Receivables that the Corporation could
acquire.

13. General Risks.

a. Lack of Diversity of Receivables

The Corporation will be funded with the proceeds from the sale of the Notes. In
the event the Corporation sells less than the $15,000,000 of Notes offered hereunder, the
Corporation may only be able to acquire a limited number and less diversified portfolio
of Receivables as collateral, and Note Holders may have an increased risk of loss.

b. Investment of Proceeds

The success of the Corporation, in large part, depends on its ability to keep its
assets continuously invested in Receivables. The Corporation intends to have between
50% and 90% of its assets invested in Receivables at any given time. The Corporation
may be unable to keep the maximum anticipated percentage of its assets so invested,
which may result in lower rates of return from the investment of its assets in other
permitted investments.

c. Reliance on and Experience of Management; Broad Discretion of Management

The Corporation's day-to-day affairs, including, but not limited to, evaluating the
Receivables, determining which Receivables are to be purchased, effecting Receivable
purchases, collecting and turning over to the Corporation for direct deposit into the
Corporation's bank account the payments on the Receivable and pursuing remedies for
defaulted Receivables and making payments due on the Notes to Note Holders from
funds provided by the Corporation, will be administered entirely through and decisions
with respect thereto will be made exclusively by AEG. See "BUSINESS - American
Equities Group, Inc. as Manager." The Corporation's actions will be limited to receiving
the proceeds of this Offering, releasing such proceeds for investment in Receivables at
the direction of AEG, depositing Receivable payments processed by AEG, releasing
funds for payments to Note Holders by AEG and for payments due AEG under a
Management Agreement and executing those contracts, commitments and agreements to
which the Corporation is a party not executed on its behalf by AEG as Manager.
See"BUSINESS - American Equities Group, Inc. as Manager." The officers and
directors of the Corporation are also officers and directors of the Affiliated
Corporations, including AEG. The success of the Corporation will, to a large extent,
depend on the quality of the services provided by AEG, its management and employees,
particularly as it relates to evaluating the merits of proposed investments. The loss of
services of any one or more of Messrs. Goldstick, Goldberg or Socha could have a
materially adverse effect on the Company's operations and prospects. There is no
key-man insurance on any management of the Corporation or AEG and none of Messrs.
Goldstick, Goldberg or Socha have entered in employment agreements with either the
Corporation or AEG, nor is it anticipated that any of such officers shall enter into any
employment agreements with either the Corporation or AEG.

d. Competition by the Corporation with Affiliated Corporations for
Management Services; Conflicts of Interest.

The officers and directors of the Corporation are also officers and directors of
the Affiliated Corporations and are expected to become officers and directors of similar
corporations which may be formed in the future. Management of the Corporation and
management and employees of AEG will devote only so much of their time to the
business of the Corporation as in their judgment is reasonably required. Management of
the Corporation and management and employees of AEG may have conflicts of interest
in allocating management time, services and functions between this Corporation, the
Affiliated Corporations, and any future entities which they may organize, as well as other
business ventures in which they are involved. Furthermore, there may be competition
among the various entities for certain receivables. AEG has attempted to minimize
these problems by rotating the purchase of receivables based upon availability of funds.
See, "BUSINESS - Acquisition of Receivables." Management of the Corporation and
management of AEG believe that they have sufficient staff personnel to be fully capable
of discharging their responsibilities to all entities they have organized.

All overhead costs, including those of employees available to work on the business
of the Corporation will be borne by AEG with the exception of costs of legal,
accounting, filing fees and taxes. See, "PLAN OF OPERATIONS - Operations and
Overhead Expenses."

e. Unidentified Investments

The uncertainty and risk of an investment in the Notes is increased to the extent
that investors are unable to evaluate for themselves the economic merit of the
Receivables. Although the Corporation is currently seeking suitable Receivables, no
agreement or understanding has been reached for any specific Receivables. Investors
must depend solely upon the ability of Management with respect to the selection of
Receivables. See "MANAGEMENT" for a description of the experience of Management
and its affiliates with similar investment vehicles. There can be no assurance that the
Corporation will be successful in using all of the proceeds of the Offering to acquire
Receivables. The inability of the Corporation to find suitable Receivables to acquire
with the proceeds of this Offering may result in delays in investment of such proceeds
and in the receipt by investors of a return, if any, from such investments.

f. Investment Company Act of 1940

Due to the nature of the Corporation's business, the Corporation is not an
"Investment Company" as defined under the Investment Company Act of 1940 and
therefore is not be subject to regulation under the Investment Company Act of 1940.
AEG's officers and employees will monitor the purchase of Receivables and the
investment of those portions of proceeds of this Offering not immediately used, or from
time to time not used, in the purchase of Receivable so that the Corporation does not
come within the definition of an investment company under such Act. As a result, the
Corporation may have to forego certain investments which would produce a more
favorable return to the Corporation. See "BUSINESS - Monitor of Corporation
Investments." In the unlikely event that the Corporation were required to register as an
investment company, such registration and compliance under such act would have an
adverse effect on the current operations of the Corporation.

14. Securities Law Liabilities.

Management of the Corporation and its affiliates have in the past and may in the
future organize offerings of similar investment programs. Such programs were not and
may not be registered or qualified under federal or state securities laws. There is no
assurance that Management and its affiliates may not incur liabilities in the future or as a
result of such activities, in which event they may not be able to carry out the
management functions assumed with respect to the Corporation, and the capital of the
Corporation might also be adversely affected. To the knowledge of Management of the
Corporation there are no existing claims pending under any federal or state securities
laws that could have a materially adverse affect on the business of the Corporation.

15. Limited Diversification of Business.

The Corporation's business will not be diversified in that it will own only accounts
receivable. In the event of an economic recession in areas in which the makers of the
Receivables are located, the Corporation's ability to realize income from its operations
may be adversely affected, which may affect the Corporation's ability to make
distributions to Note Holders. The Corporation does not anticipate limiting its
acquisition of Receivables to specific geographical areas of the United States.

16. No Operating History.

The Corporation has no significant operations as of the date of this Prospectus. The
success of the Corporation and its ability to make payments to the Note Holders is
dependent upon the extent to which the Corporation is able to acquire and successfully
collect accounts receivable to the extent of advances on such receivables. However,
other affiliated investment vehicles with similar businesses have not experienced any
significant delays in the making of interest payments to the investors of such investment
vehicles. This is due to the fact that the Corporation books its fee up front upon the
initial advance of funds and therefore immediately has funds available for the payment of
interest. There is no assurance that the Corporation will be able to acquire and to
collect on all or a majority of the Receivables, if any, or provide sufficient proceeds to
make payments to Note Holders.

17. Determination of Offering Price of Notes.

The price and amount of Notes offered by the Corporation has been established
arbitrarily and bears no relationship to its asset value, book value, net worth or any other
established criteria of value or to the earning potential of the Corporation or the Notes.

18. Competition by the Corporation with Other Affiliated Corporations.

Management may engage of its own account, or for the account of others, including
other public or private entities, in other business ventures, and neither the Corporation
nor the Note Holders shall be entitled to any interest therein. Management has in the
past and may form in the future other entities, some of which may have the same
investment objectives as the Corporation.

19. Increase in Trustee Reimbursement Upon the Occurrence of an Event of
Default.

The Indenture of Trust provides that, in addition to the fee of $2,000 per
year to be paid to the Trustee, upon the occurrence of an Event of Default as defined in
the Indenture of Trust or the Security Agreements, the Trustee will receive an additional
fee of $150 per hour for time incurred in rendering his duties as Trustee. If such an
Event of Default occurs, there is no assurance that the Trustee will not be required to
expend a significant amount of time in exercising his duties as Trustee, and the resulting
compensation paid to the Trustee will reduce funds available to satisfy the Notes.

20. Officers and Directors Maintain Control of the Corporation.

Following completion of this Offering, the current officers and directors of the
Company will indirectly own in the aggregate 100% of the Corporation's outstanding
Common Stock. As a result, the current officers and directors of the Corporation are in
a position to have complete control over the outcome of all matters on which
stockholders are entitled to vote, including the election of directors. See"PRINCIPAL
STOCKHOLDERS."

21. Uncertainty of Tax Treatment of the Notes.

The Corporation currently has a capitalization of $40,000. The Internal Revenue
Service has taken the position in the past that debt of a thinly capitalized Corporation
may be considered as a capital contribution not giving rise to a deduction for interest
expense by the debtor. See "TAX ASPECTS - Thinly Capitalized Corporation." Such a
determination could have a materially adverse effect on the profitability of the
Corporation and would result in less funds being available for the payment of
distributions to Note Holders. Further, the interest payments could be recharacterized
as taxable dividends for income tax purposes on an investor's tax return.

22. Absence of Outside Directors.

The directors of the Corporation are each officers of the Corporation and of AEG.
Accordingly, the Corporation has no outside directors and does not anticipate obtaining
the services of any outside directors in the near future. Such inside directors may not
have the level of independent judgment that could be expected of an outside director
and such directors could have conflicts of interest in connection with their relationship
with the Corporation, AEG and/or the Underwriter. See "MANAGEMENT - Conflicts
of Interest."

(The balance of this page has been intentionally left blank)<PAGE>
USE OF PROCEEDS

The net proceeds which the Corporation will receive from the sale of the Notes
offered hereby, after deduction of sales commissions and all expenses of the Offering,
will be approximately $13,500,000 if the Maximum number of Notes are sold, or $450,000
if the Minimum number of Notes are sold. The Corporation intends to utilize the net
proceeds of the Offering as follows:

$500,000 $15,000,000
Minimum(2) % Maximum %

Acquisition of Receivables $432,500 94.5 $12,750,500 94.4

Overhead Allowance(1) $25,000 5.5 $750,000 5.5

$457,500 100.0 $13,500,000 100.0%

(1) AEG will receive this fee for all operating and overhead costs and expenses
including personnel, providing accounting systems, computer systems and collection. See
"BUSINESS - Operations and Overhead Expenses."

(2) In the event that only the Minimum is sold, AEG will pay all expenses associated
with this Offering, other than offering commissions and fees.

CAPITALIZATION

The following table sets forth the capitalization of the Corporation at March 31,
1996, and as adjusted to give effect to the issuance of the maximum and minimum
amounts of Notes offered hereby. This table should be read in conjunction with the
Corporation's financial statements and the notes thereto included elsewhere in this
Prospectus.
March 31, 1996

As adjusted to As adjusted to
reflect Maximum reflect Minimum
Actual Offering Offering

Long-Term Debt $ - $15,000,000 $500,000

Common Stock, $1.00 par value;
authorized 1,000 shares;
1,000 shares issued
and outstanding $1,000 $1,000 $1,000
Additional Paid in Capital $39,000 $39,000 $39,000
Total Stockholder's equity $40,000 $40,000 $40,000
Total Capitalization $40,000 $15,040,000 $540,000<PAGE>
BUSINESS

General

The Corporation was formed on March 11, 1996 to be a special purpose corporation
in financial services and to acquire and factor receivables. The Corporation is a wholly
owned subsidiary of American Equities Group, Inc. ("AEG"), a New York corporation
formed on June 17, 1992 to act as a general partner of partnerships and acquire and
factor receivables, lend funds to businesses, engage in leasing transactions and act as a
financial intermediary and manager for its special purpose subsidiaries. AEG is general
partner of one partnership and the parent corporation of six special purpose corporations
and may sponsor other partnerships or special purpose corporations in the future. AEG
also has entered into management agreements with its six special purpose subsidiaries to
provide services similar to the services it will be providing to the Corporation.

The Corporation believes that there is a great demand for financing through the
factoring of receivables in the United States due to the increased regulation of banks and
the tightening of lending criteria, which the Corporation and AEG expect will continue
for the next several years. Accordingly, the Corporation believes that many small and
medium sized companies are precluded from borrowing from traditional banks and
financial institutions due to their net worth, size, industry type or years in business; even
though their receivables may be of high quality. For example, a small manufacturing
corporation may sell its products to a fortune 500 corporation which would pay the seller
on 30 or 60 day terms. This receivable may be a high quality receivable which is
desirable from a credit standpoint regardless of the financial condition of the firm that
generated it. AEG's target market is companies requiring cash flow for expansion
purposes that do not have the ability to borrow from banks due to size or the number of
years in business.

Industry Overview

The factoring business has become highly fragmented over the past decade largely
due to the economic expansion of the mid-1980's and the subsequent commercial credit
crunch a few years later. It is estimated that the amount of accounts receivable factored
in the United States exceeds $62 billion annually. Most of this volume (approximately
$50 billion in 1993) reflects the activity of the 13 largest factoring companies. 60% of
the factoring companies in the United States today account for approximately 3% of the
total factoring volume. These companies typically factor less than $50 million annually.

During the past fifteen years factoring has become more readily available to small
and medium-sized businesses than traditional bank lending. To obtain bank financing
today, companies generally need to (i) produce audited financial statements
demonstrating profitable operations, (ii) possess a strong collateral basis including
equipment, real estate and other hard assets, and (iii) maintain a debt/equity ratio of 2:1
or better, depending on the industry.

Many growing enterprises fail to meet bank criteria. By contrast, a commercial
business becomes a reasonable factoring prospect so long as it can demonstrate (i) that is
has an unencumbered portfolio of accounts receivable payable by credit worthy account
debtors, (ii) that it has the margins necessary to absorb the factoring fees, and (iii) that
factoring will, in fact, improve the company's cash position and enable it to accommodate
increased sales.

In addition to providing funds for growth and expansion, factoring also provides a
practical transition tool for restructuring long-term financial arrangements, such as
unfavorable or overly restrictive bank relationships. Furthermore, numerous young
businesses rely on factoring to help them reach the point where they become viable
candidates for less expensive bank financing or equity financing.

American Equities Group, Inc. as Manager

Management of the Company's day-to-day affairs will be provided by AEG.
AEG is a rapidly growing, national, accounts receivable financing organization. Since
1992, AEG and its Affiliates have provided more than $40 million of financing to
businesses through a highly diversified and qualified portfolio of accounts receivable.

The Corporation will purchase Receivables primarily of small to medium-sized
corporations with sales between $500,000 and $10,000,000 annually. AEG, as Manager,
will originate the Receivables purchasing them from client companies (the "Clients") and
assigning them to the Corporation. AEG, as Manager for the Corporation, will also
service and collect the Receivables. The Corporation's day-to-day affairs, including but
not limited to, marketing its accounts receivables program to new business, evaluating
the quality and credit of the Receivables and Clients and their account debtors,
determining which Receivables are to be purchased, effecting Receivables purchases,
collecting upon the Receivables for the account of the Corporation, effecting the
disbursement of funds to Clients and preparing checks for the Corporation for interest
and principal payments on the Notes and mailing such checks to Note Holders with
statements of account, will be performed by employees of AEG. Typically, Receivables
are purchased only after investigation of the credit worthiness of the company selling the
receivable and the company that is obligated on the Receivable, combined with the
subjective assessment by AEG'spersonnel. In making such investigation, AEG, as
Manager for the Corporation, considers many factors such as the type of business that
generated the Receivable and the risk of loss based upon potential non-performance.
AEG primarily acquires verifiable Receivables where all events have occurred necessary
for the Receivable to become an obligation of a company not subject to rejection of
goods or other circumstances. See, "Acquisition of Receivables" below.

AEG provides separation to each investor pool to offer additional security.
Although each investor fund has the ability to participate in the overall clientele of AEG,
all funds are segregated. This is accomplished by the establishment of separate bank
accounts and a highly efficient accounting staff who identify and separately maintain the
specific investor funds that purchased a particular Receivable. Therefore, as Receivables
are collected, monies are deposited directly into the investor fund which acquired those
Receivables. AEG assigns the Receivables to each participating fund via a formal
assignment and such Receivables are secured by the filing of appropriate UCC-1
financing statements.

AEG maintains a hands-on approach to management. Separate management
departments have been established to provide the most efficient service possible to the
Corporation's Clients. An effective level of customer service has been achieved while
maintaining the checks and balances necessary in operating each client company. Each
department is headed by a manager who reports directly to the President and CEO.
Weekly manager meetings ensure that the entire management staff is focused, organized
and prioritized. In addition, the Corporation's computer systems are password-protected
at several levels and redundant systems have been set up for maximum assurance of
security and for the highest level of quality control.

Marketing

AEG markets its accounts receivable program through direct mail campaigns,
industry publications and newspaper advertisements as well as referrals from existing
clients, accountants, attorneys and other professionals. AEG will acquire accounts
receivable related to most industries; however, AEG has developed a niche market in
acquiring accounts receivables from periodicals. Such Receivables are typically those of
national advertisers with substantial credit worthiness. AEG has many industry contacts
and relationships which refer business to AEG.

Acquisition of Receivables

AEG typically concentrates its purchase of Receivables in publishing, printing and
general services industries (e.g. firms which have no tangible products but conduct such
services as telemarketing and market research). These are industries that can best utilize
the comprehensive services of AEG which include back office functions such as credit
checks, billing, reporting and collections. See "RISK FACTORS - General Risks;
Unidentified Investments." AEG, as Manager, has established certain criteria for
determining if a potential Client's Receivables meet AEG's investment goals. This
criteria consists of many qualitative and quantitative factors that AEG will consider and
review in each case. These factors have been designed based on professional practices
and the current and overall returns historically sought by AEG in structuring and
purchasing Receivables similar to those to be purchased and assigned to the Corporation.
Management may from time to time reevaluate and modify such criteria.

Typically, AEG will review the financial viability of the entity desiring to finance
receivables or borrow funds based upon its receivables. AEG will utilize TRW, Dunn &
Bradstreet or other services to determine whether or not the Client is in a position to
factor its receivables and to assess the credit worthiness of Client's account debtors. In
addition to the standard underwriting practice, UCC searches will be conducted to
determine whether or not the Client had previously pledged its receivables, as well as to
determine if any tax liens or judgments are outstanding against the Client. AEG reviews
a prospective Client's aged receivables report, operating reports, history of the firm and
confers with the prospective Client's major customers to determine quality of the
Receivables and establish collection procedures. AEG has established credit systems to
assure that acquired Receivables are valid obligations which are not in dispute. Such
systems include a sign off and confirmation forms of goods delivered and/or services
rendered, shipping verification and order checking. In some instances AEG pays
vendors, such as printers in the magazine industry, directly to ensure that the funds are
properly utilized and the product is completed and ready to be shipped or sold on time.
By providing the vendor with the cash payment directly rather than the Client the vendor
receives a greater degree of comfort. When dealing with Clients in the publishing
industry, AEG will often purchase a Client's entire issue of magazines rather than simply
all of its Receivables. In this way AEG is able to ensure the distribution of such issue.

Qualitative Factors

The major qualitative factors included in the Corporation's guidelines for acquiring
Receivables are the account debtor's prior payment performance, the current financial
position of the Client and the generator of the Receivables, the Client's current market
position, an assessment of the Client's management and the general fit of the
Receivables with the Corporations's target profile.

Payment Performance of Account Debtor's. One of the most important criteria
used by AEG in determining the desirability of the Client's Receivables is the prior
payment history of its account debtors. In the case of a new account debtor with which
AEG is not acquainted with, AEG requires aged receivables reports of accounts
receivable in order to determine past payment record of the account debtor. If only
limited information is available regarding the aging of an account debtor's payment
record, this fact may affect the final advance rate which AEG feels appropriate based on
the risk involved.

Current Financial Position. Historic and current operating performance will be
important when considering the acquisition of Receivables. The Corporation analyzes
the profitability of the Client by reviewing its profit and loss statements, tax returns,
supplier contracts, receivables aging and other necessary documentation along with
in-depth personal interviews with the principals of the company. One of the most
important aspects of this review is the ability of the Client to properly produce and/or
deliver the product or service represented by the Receivable. In addition, the Client
should be able to demonstrate that it enjoys sufficient margins to absorb the factoring
fees, that factoring will enable it to expand sales or reduce expenses and that factoring
will enhance its overall financial position. The Corporation anticipates that in most cases
Clients will have positive cash flow from operations and will be profitable or nearly
profitable.

Current Market Position. Market opportunity for a Client is also an important
factor in the acquisition of Receivables. A potential Client should exhibit a substantial
opportunity for growth in its revenues through (1) favorable growth characteristics of the
markets its serves, (2) expanding into new markets or (3) growing its revenues through
capturing greater market share within a particular market. A Client must be able to
demonstrate that it can produce and deliver its products or services that it sells in a
timely fashion.

Management. The Client's management team is another crucial factor impacting
the acquisition of Receivables. The Corporation will seek potential clients having
management teams with integrity that possess the experience and skill required to
accomplish the Client's near term objectives. The management team's commitment to a
Client is also critical to success. The Corporation will expect that a Client's management
will own or have the right to acquire a significant ownership position in the Client or
have some other benefits package that rewards management based upon performance.
The Corporation also looks to see if management of a potential Client has committed
substantial personal financial resources to the Client.

General Fit with Corporation's Target Profile. AEG's general target profile is a
business that desires to finance its accounts receivable to generate cash flow in order to
grow and/or expand its business. The prospective business must demonstrate the ability
to utilize the proceeds of factoring accounts receivable to the benefit of such growth or
expansion. Current cash flow should be positive or the prospect must demonstrate that
with the enhancement of account receivable financing the company'scash flow will be
positive. AEG desires companies with sales volume of between $500,000 to $10,000,000.
Generally, if the management of AEG believes that the services it would provide a Client
would enhance the growth of that Client and the Client demonstrates that it could
deliver qualified accounts receivable and provide its good and services to its clientele as
per its agreements, and its management team appears to be sound, then AEG would
consider financing that business.

If at any time after AEG enters into a contract with a company that company
experiences adverse financial difficulties, then AEG has the right to terminate its
agreement and not continue financing the receivables of that Client. Additionally, if a
Client has breached any of its obligations to AEG including, but not limited to, providing
AEG with a valid account receivable for services rendered or goods delivered, AEG has
the right to terminate the agreement. Furthermore, AEG has the right to purchase but
not advance funds on any invoice presented which might be questionable or not
credit-worthy at the discretion of AEG.

Another factor that AEG considers when evaluating a potential Client is whether the
Client can show that it can successfully address such problems as outstanding trade debt
within a reasonably short period of time. AEG also looks at a Client's long-term debt
obligations. Such debt will not necessarily preclude a factoring relationship so long as
AEG can effectively negotiate its priority security position with other creditors.

Quantitative Factors

The quantitative factors included in the Corporation's criteria are (1) Receivable
concentration limits, (2) restrictions regarding purchasing receivables from companies
involving Affiliates and (3) the prior payment performance of a Client's account debtors.

Receivables Concentration. AEG will generally direct its purchasing efforts
toward small and medium sized companies that have credit worthy Receivables with
good payment histories. Generally AEG will purchase between $50,000 and $500,000 of
Receivables from any particular Client in any given month. AEG will not be limited in
the amount of Receivables that it may purchase from any one Client, however, AEG has
the right not to acquire or advance funds on any accounts receivable it deems a
concentration risk. Typically, if an account debtor represents more than 15% of the total
outstanding accounts receivable of a Client's portfolio, such accounts receivable will be
scrutinized prior to acquisition to avoid concentration problems. The Corporation will
not acquire Receivables if such Receivables when added to Receivables previously
acquired and not collected upon from any one Obligor, or group of related Obligors
would equal or exceed 10% of the Corporation's Receivables. The Corporation may
concentrate in the purchasing of Receivables from companies in particular industries
such as the publishing, printing or general service industries. See "RISK FACTORS -
General Risks; Lack of Diversity of Receivables."

Purchase of Receivables from Affiliates. AEG will not purchase Receivables
from any company which is affiliated with it, the Corporation or any affiliate of AEG or
the Corporation.

Past Performance of Account Debtors. Typically, AEG requires aging reports of
accounts receivable in order to determine past payment record of the account debtor.
AEG reserves the right not to acquire any Receivable it deems unacceptable. This
would include any account over 90 days past due or a recurring account showing a
history of late payments or multiple disputes.

Assuming the Client meets AEG's and the Corporation's standards, the Corporation
will acquire, factor or lend against the Receivables. The Corporation will enter into a
purchase or factoring agreement (the "Contract") with the Client which will typically
provide that all of the Client's receivables would be pledged or sold to the Corporation
for a cash advance payment of 65% to 80% of their face amount with the balance (the
"Deferred Portion") being due to the Client upon collection. Such advance rate, as well
as the fee to be charged, are negotiated and determined based upon the relative risk of
the Receivables. For instance, for Receivables purchased from a Client whose account
debtors have a history of slow payment or multiple disputes, AEG may provide for an
advance rate of only 50-60% of the face amount of the Receivables in order to ensure
that it collects its fee.

The Contract provides terms and conditions of the purchase including charge backs,
representations, term and a penalty charge for early termination. The Contract also
contains a trust provision that is executed by the principals of the Client and which
provides that any funds wrongfully collected by the Client will be held in trust for the
Corporation.

AEG has developed a system for placing Receivables with its different pools of
capital which it will apply to the funds raised by the Corporation in this Offering. Each
pool managed by AEG acquires definitive receivables on a rotating basis based upon
availability of funds. All pools and Receivables are accounted for in AEG's financial
accounting programs which were developed by AEG. Each fund has separate bank
accounts and funds are not commingled for any purpose. AEG, in managing the pools,
maintains corporate separateness for each affiliated entity in order to afford the
maximum amount of protection to investors.

The Corporation will typically charge 7% to 10% of the face amount of the
Receivables as a fee and will initially advance 65% to 80% of the face amount of the
Receivables. The Corporation will have the right to offset against the deferred portion
for any Receivables paid for and not collected including the Corporation's fees.
Additionally, the Client would be a guarantor for any advances made (plus the fee due
the Corporation). The Corporation and AEG will share the fees charged, 50% to the
Corporation and 50% to AEG. AEG will pay all overhead, expenses, and salaries from
its portion of the fees as relates to the ongoing business; except for legal, accounting,
filing fees, taxes and other administrative expenses related to the Corporation. See
"PLAN OF OPERATIONS." AEG will defer its fee if funds are insufficient to pay
interest and/or principal as it comes due. The portion of the Corporation's net revenues
not paid to the Note Holders, if any, is generally retained by the Corporation and
utilized to acquire additional accounts receivable. Dividends to the parent corporation,
AEG, may only be paid to the extent of such retained amounts; provided, that after the
payment of any dividends the Corporation's basis in its Receivables plus cash on hand
(less any liabilities) exceeds the face amount of all Notes outstanding.

Receivables are typically due upon delivery of good and services and are considered
late after thirty (30) days). If an account debtor has outstanding invoices more than 90
days, AEG will not advance funds on that newly presented invoice. No pre-defined
credit limit is established for any one account debtor. Credit limits for account debtors
are dealt with on a per amount basis and is determined by the credit-worthiness of that
particular account debtor, its history with AEG, its history with its service or product
provided, the total amount of outstanding invoices and the amount of those invoices
compared to the total amount of Receivables outstanding of the Client. Receivables
generally vary in size from $1.00 to $25,000, with an average of approximately $5,000.

AEG and/or the Corporation may in some cases pay a portion of their fees to third
parties as finder's fees for locating receivables for purchase. This is a common practice
in the industry as a method of securing business.

Monitoring the Receivables

Once the accounts receivable department of AEG has approved a batch of
Receivables as to their credit-worthiness and completeness and those Receivables are
subsequently purchased, they are entered into AEG's monitoring system and the
collection department reviews aging of all accounts receivable owned by AEG on a
weekly basis. There is currently a staff of six (6) employees including one manager of
that department. The staff calls on all account debtors over 30 days past due to
determine if any problems exist or when payments will be made. Statements are sent to
all account debtors monthly and summary statements showing account debtor aging is
shown to each Client monthly.

Customer Service

AEG also provides customer service to its Clients. Such value-added services
include such critical accounts receivable support as customer credit analysis and approval,
invoice handling, collection, posting, accounting and reporting. For many businesses, the
desire to obtain these services actually drives the decision to factor. AEG generates
computer records on each account Receivable pool and aging of such pools of
Receivables which can be accessed and reported on to Clients. These reports allow
AEG's Clients to monitor collections activity and cash flow. In addition, AEG acts as a
back office for many of its Clients by overseeing their billing and collection efforts. By
using AEG as their credit, billing and collection departments, Clients can save money
that would otherwise been used to hire additional personnel to provide such office
services.

AEG's services also help a Client determine which companies it should extend credit
to based upon financial information AEG can access as well as payout history from those
companies. AEG has nine employees dedicated to customer service.

The Corporation will not engage in any business other than as set forth above and
AEG, as Manager, will ensure that the Corporation incurs no liabilities. AEG will
handle all administrative matters and employ the necessary personnel. All receivables
acquired by the Corporation will either be owned by the Corporation or subject to
UCC-1 Financing Statements filed against the Client in favor of the Corporation.
Although AEG may sponsor other special purpose corporations or partnerships in the
future or raise funds and acquire receivables itself, all transactions will remain strictly
segregated. See "RISK FACTORS - General Risks; Competition by Corporation with
Affiliated Corporations for Management Services; Conflicts of Interest."

There is no assurance that all transactions will be identical to the above and fees
may be reduced or raised depending upon competition and the relative risk of the
receivables.

The following chart illustrates a typical account receivable financing transaction:
[Description of Chart to follow:]

On day 1, ABC Corp., a fully contracted Client, presents invoices or accounts
receivable valued at $100,000 (25 customers each owing ABC $4,000). AEG advances
78% or $78,000 to the Client Book Account and charges a total fee of $10,000 or 10% of
the net invoice value of the pool. AEG then deducts $8,000 or 80% of its fee
immediately. AEG remits $70,000 or 70% of the total net invoice value directly to the
Client.

By day 30, AEG collects 40% of the net invoice value ($40,000). By day 60, AEG
has successfully collected 80% of the net invoice value ($80,000) and captures the
remaining 20% of its fee ($2,000). At this point, AEG has collected all of the money it
has advanced to the Client and 100% of its fee.

By day 70, AEG collects the remaining $20,000 of outstanding Receivables and
remits the money to the Client. AEG has no collected all of the Receivables in the pool
and the pool is closed.

Perfection of Security Interest

AEG acquires the Receivables from its Clients pursuant to an Accounts Receivable
Purchase Contract (the "Purchase Contract"). This Purchase Contract includes UCC-1
financing statements which are typically filed on all the Receivables of a Client and in
some instances other assets of Client. AEG will then assign Receivables to the
Corporation and the funds to acquire the Receivables will be paid directly from the
Corporation to the Client. If a search indicates the existence of UCC-1 financing
statements covering a Client's Receivables, AEG will not enter into a Purchase Contract
without first obtaining subordinations, terminations and/or releases from the appropriate
secured parties. Depending upon the perceived risk relating to the payment of the
Receivables and the availability of the Client's assets, such payment may be secured by
the factored Receivables only, all of the Client's accounts receivable, whether factored or
not, or by the Client's accounts receivable and other business assets. In some cases,
AEG will also require the personal guarantees of the Client's principals as additional
collateral.

AEG will assign all of its right, title and interest in such Receivables to the
Corporation. Because of the ongoing nature of the acquisition and collection on
Receivables, the Corporation will not file UCC-1 financing statements delineating the
Corporation as an assignee, but rather a written assignment will be executed between
AEG and the Corporation specifically identifying the assigned Receivables. Pursuant to
the Purchase Contract the Corporation will generally file a "doing business as" certificate,
or d/b/a, in the jurisdiction of the Client's principal place of business with a name similar
to the Client's name indicating that the Corporation will be doing business under a name
similar to that of the Client for the purpose of collecting the Client's Receivables. All
funds remitted on the purchased Receivables are paid directly to the Corporation under
the assumed name and are deposited into a separate bank account under such assumed
name. Accordingly, funds are never commingled with AEG or funds of other Clients of
the Corporation. Nevertheless, if the security interests in collecting of receivables are
not properly perfected or assigned or if Receivables cannot be separately identified, it is
possible that a court could find that the Note Holders were general unsecured creditors
of the Corporation and/or AEG. See "RISK FACTORS - Notes Secured by the
Receivables" and "Effect of Default on Receivables."

Collections

In the event receivables are not paid when due, the Corporation will embark on a
strong collection effort through its staff of collectors. The first stage of collection
involves letters and telephone calls to the non-paying account debtor. If AEG is
unsuccessful in collecting, it utilizes law firms and national collection organizations.
AEG has established relationships with several national law firms that specialize in
collecting delinquent receivables and AEG will aggressively collect all such receivables.
Under 10% of all accounts receivable go to outside collection agencies. The results of
sending Receivables to collection agencies generally do not effect AEG, and should not
effect the investors if this Offering, due to the fact that any defaults on accounts
receivable are charged against the reserves after AEG has collected its fee.

Banking

The Corporation will maintain its banking accounts at a major money center bank.
Currently the Corporation's bank sends a courier to AEG each day for deposit of funds.

Pending acquisition of Receivables, funds are kept in checking accounts which are
both interest bearing and non-interest bearing.

Reports and Investor Services

The Corporation and/or AEG will provide the Corporation's investors with unaudited
quarterly balance sheets and activity reports and annual audited financial statements as
soon as possible after the end of the respective quarter or year.

AEG, as Manager for the Corporation, will prepare all interest payment checks and
handle all investor inquiries including change of ownership requests. In addition to
financial statements, periodic reports will also be generated.

Employees

As of the date of this Prospectus, there were twenty (20) employees of AEG
available to work on the business of the Corporation, three (3) of whom are
management and seventeen (17) of whom are administration. The loss of the services of
management could materially adversely affect the business of the Corporation.

The staff of the accounts receivable management department consists of four (4) full
time personnel including the manager of the department. The staff will make
evaluations as to credit, history and completeness and present these findings to the
manager who must approve the batch of invoices prior to submitting the request for
funding to senior management. Once the request for funding has been submitted to
senior management additional review takes place and requires sign off of the President
and CEO of AEG. This review consists of an overall assessment of the Client's status
which is supplied on a form submitted to senior management known as a "Request for
Funding" form. This form will show the details of that particular batch of Receivables
including total Receivables presented, total Receivables approved, an explanation for any
differences and a recommendation for funding or not and a breakdown of the fees that
would be sent to the Client. Furthermore, the Client's total account summary, including
total Receivables, total reserve and total exposure to the Client is documented. Once
the President and CEO approve the transaction, the form is forwarded to AEG's
accounting department. The accounting department consists of four (4) full time
personnel including the controller who is the manager of that department. The
accounting department, with the approval of the controller, will arrange for the
advancing of funds to the Client and will arrange for the proper accounting of the
transaction in the Corporation's general ledger system.

Legal Proceedings

Neither the Corporation nor AEG is currently a party to any material litigation, nor
to the knowledge of management, is there any material litigation threatened or
contemplated against the Corporation or AEG.

Real Property

The Corporation shares office space with AEG. AEG believes that the facility is
adequate for its immediate and near-term needs and does not anticipate the need for
significant expansion in the near future. <PAGE>
MANAGEMENT

The Corporation is wholly-owned by AEG. The Corporation's business will be
managed by AEG and the Corporation's officers and directors. The following persons
are the officers, directors and shareholders of AEG and officer and directors of the
Corporation:

Name Age Position

Phillip C. Goldstick 65 Director and Chairman

David S. Goldberg 35 CEO, Secretary, Treasurer and
Director

Stephen A. Socha 42 President and Director

Set forth below is a brief background of the executive officers and directors of the
Corporation:

Phillip C. Goldstick has served as a Director and Chairman of the Board for
the Corporation since its inception and of AEG since 1992. Since 1975, Mr. Goldstick
has served, and continues to serve, as the Chairman of G Equity Investment Group, Ltd.,
a NASD Broker-Dealer which will not participate in this Offering. Mr. Goldstick is
also the Senior Partner of the Law Firm of Phillip C. Goldstick & Associates, Ltd.,
located in Chicago, Illinois. Mr. Goldstick received a bachelors degree from the
University of Illinois (1953) and his law degree from DePaul University (1956).
Formerly, Mr. Goldstick was a member of the Illinois General Assembly, Chairman of
the Gateway National Bank of Chicago, and President for the Calumet Area Industrial
Commission. During his over thirty years of practicing real estate, tax and corporate law,
Mr. Goldstick has been an owner or general partner in numerous real estate and
business ventures. Currently, Mr. Goldstick also serves as a Director of the University of
Illinois Foundation where he is Chairman of the Budget Committee and serves as a
member of the Investment Policy Committee. He is also a member of the Cook County,
Illinois Economic Development Advisory Committee.

David S. Goldberg, has served as CEO, Secretary, Treasurer and a Director of the
Corporation since its inception and of AEG since 1992. In addition, Mr. Goldberg has
served as the President of Genesis Ventures Limited since 1992 which corporation acts
as consultant to companies seeking financial and marketing advice. Mr. Goldberg
advises and consults with corporate clients in the areas of financial management, finance,
corporate structure, marketing strategies, and corporate fund raising. Over the past 12
years, Mr. Goldberg and his affiliates have successfully arranged for over $250 million of
equity financing for corporations, limited partnerships, trusts, and individuals in
businesses ranging from real estate, cable television, equipment leasing, energy
development and medical technology. Most of this activity was accomplished through
Capital Planning Equity Corp. Mr. Goldberg was the President and sole shareholder of
Capital Planning Equity Corp. from 1985 to 1990 and provided underwriting and loan
placement services on behalf of, or for the benefit of, lending institutions, sponsors of
private loan placements, corporations and individuals. Mr. Goldberg was President of
Paramount Financial Group, Inc. from 1989 through April 1993, where he was
responsible for the raising of over $20 million in investor capital for the purpose of
developing affordable housing. Prior to his involvement with Paramount, from 1981 to
1985. Mr. Goldberg founded Capital Planning Services Inc., a financial planning firm
and registered investment advisor. Mr. Goldberg is President and a registered principal
of G Equity Investment Group, Ltd., a NASD member firm headquartered in Chicago,
IL which is not participating in this Offering.

Mr. Goldberg, who resides in Paramus, New Jersey, received his B.S. degree in
management from Fairleigh Dickinson University.

Stephen A. Socha, has served as the President of the Corporation since inception and
of AEG since January 1, 1994. Mr. Socha has a wide range of experience in the finance
and publishing fields, specializing in areas of administration, financial management and
marketing. From 1982 to 1985 Mr. Socha directed international sales for Expoconsul
International, and from 1985 to 1988 served as Vice President and Publisher of CDM
Communications, the founders of Performance Sailing and America's Cup Challenge
magazines. From 1988 to 1989 Mr. Socha was Executive Vice President of Cornwall
Group, which specialized in technical conferences and has served as a consultant to a
variety of trade and consumer publications. In 1989, after serving as consultant on
several major projects for Magazine Capital (a division of American Factor Group) he
joined Magazine Capital as Vice President in charge of publications. Over a four year
term, Mr. Socha managed the existing portfolio of accounts receivable of over $5,000,000
and designed and operated a new division called the small magazine group. During Mr.
Socha's term, sales for the small magazine group grew to over $13,000,000 per year. Mr.
Socha has served as a speaker and session chairman at the New York Folio Show and
has contributed articles to several industry trade magazines. Mr. Socha graduated with a
B.A. from Glassboro State College and also completed graduate courses in the area of
management and finance.

The Corporation does not pay salaries to Management. All management receive
salaries only from AEG.

Prior Performance

The tables set forth in Appendix I reflect the actual performance through
December 31, 1995 of all prior non-public securities offerings of AEG and its
subsidiaries and affiliates. INVESTORS IN THE NOTES SHOULD NOT ASSUME
THAT THEY WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO
THOSE EXPERIENCED BY INVESTORS IN SUCH PRIOR OFFERINGS.
INVESTORS WHO PURCHASE NOTES WILL NOT THEREBY ACQUIRE ANY
OWNERSHIP INTEREST IN ANY AFFILIATED ENTITY TO WHICH THE
FOLLOWING INFORMATION RELATES.

The officers and directors of the Corporation are also officers and directors of
AEG and as such have completed six (6) non-public offerings of securities of AEG and
its Affiliates. Such offerings all had similar investment strategies and were sold to
approximately 259 investors and aggregated $10,878,250. Each of the business operations
of AEG and its Affiliates are continuing. The first offering completed by AEG was in
1994 and was an offering of $1,000,000 of its preferred stock and limited partnership
interests in a partnership for which it acts as general partner. AEG has been utilizing
the funds from such offering (initial closing was November 1, 1993) to acquire
receivables. The other private securities offerings that AEG has also closed upon were
on behalf of its wholly-owned special purpose corporations, American Equities SPP
Series 1000, Ltd., American Equities Special Purpose Corporation, American Equities
SPP Series 2000, Ltd., American Equities SPP Series 3000, Ltd., and American Equities
SPP Series 4000, Ltd. which raised $2,000,000, $725,000, $2,000,000, $2,000,000 and
$3,153,250, respectively. Each of these corporations used the proceeds of such offerings
for the acquisition and financing of receivables.

AEG serves as manager for each of these investment vehicles. To date, investors
in these offerings have received interest payments aggregating $540,000, or an average
10% annual return on their investments. No scheduled interest payments have been
missed in connection with any of these offerings and AEG does not foresee any
difficulties in the meeting of any scheduled payment of principal or interest with respect
to any of these offerings.

Conflicts on Interest

AEG and its Affiliates, including the Underwriter of the Offering, may be subject
to various conflicts of interests in connection with their relationships and transactions
with the Corporation. The contractual and other arrangements between the
Corporation, AEG and the Underwriter have not been established by arm's length
negotiations. See "RISK FACTORS - General Risks; Competition by the Corporation
with Affiliated Corporations for Management Services; Conflicts of Interest."

1. Competition by the Corporation with other Affiliates for Management
Services. The Corporation will not have independent management or employees and will
rely upon AEG for the management and administration of the Corporation. AEG
currently serves in a similar function for a number of Affiliated entities and expects to be
Manager of other issuers in the factoring business, and expects to be involved in other
business ventures in the future and may have a conflict in allocating time and resources
to the operations of the Corporation. Management of AEG believe that they have
sufficient staff personnel to be fully capable of discharging their responsibilities to all
entities they have organized. The officers and directors of the Corporation will devote
such time to the affairs of the Corporation as they, in their sole discretion, determine to
be necessary for the conduct of the operations of the Corporation.

2. Competition by the Corporation with other Affiliates for the Acquisition of
Receivables. In addition to the competition with Affiliated entities for the management
services of AEG, there may be competition among the various Affiliated entities for
certain Receivables. AEG has attempted to minimize these problems by rotating the
purchase of receivables based upon availability of funds. See, "BUSINESS - Acquisition
of Receivables."

3. Lack of Separate Representation. The Corporation and AEG are represented by
the same legal counsel with respect to most matters. Separate counsel may be retained
by the Trustee in connection with any dispute under the Indenture of Trust.
Accordingly, it is possible that counsel may not have drafted the documents in the most
favorable manner to the Note Holders and may not have included legal protection for
the Note Holders which would have been obtained if the Note Holders or the
Corporation had retained independent counsel. It is anticipated that such dual
representation may continue in the future. However, should a future dispute arise
between the Corporation and the Manager, the Manager will cause the Corporation to
retain separate counsel for such matters.

Limitation on Liability and Indemnification Matters

The Corporation has adopted provisions in its Articles of Incorporation that
eliminate the personal liability of its directors for monetary damages arising from a
breach of their fiduciary duties under certain circumstances to the fullest extent
permitted by Delaware law and authorize the Corporation to indemnify its directors and
officers to the fullest extent permitted by Delaware law. Such limitation of liability does
not eliminate the duty of care or affect the availability of equitable remedies such as
injunctive relief or rescission. The Corporation's by-laws provide that the Corporation
shall indemnify its directors and officers to the fullest extent permitted by Delaware law,
including circumstances in which indemnification is otherwise discretionary under
Delaware law.

At present, there is no pending litigation or proceeding involving a director, officer,
employee or agent of the Corporation where indemnification will be required or
permitted. The Corporation is not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.

Notwithstanding the foregoing indemnification provisions of the Corporation's
Articles of Incorporation and Bylaws, the Corporation has been informed that it is the
opinion of the Securities and Exchange Commission that indemnification for liabilities
arising under the Securities Act is against public policy and is therefore
unenforceable.<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Set forth below is certain information as of the date of this Prospectus with respect
to any persons known to the Corporation to be the beneficial owner of more than 5% of
the Corporation's Common Stock and of the Common Stock owned by all directors and
all directors and officers of the Corporation as a group. Because the Notes do not
constitute and are not convertible into equity of the Corporation, the percentage of
ownership set forth below will not vary as a result of this Offering.

Name and Address
of Beneficial Shares of Common Stock Percentage of Outstanding
Owner(1) Title of Class Beneficially Owned Common Stock Owned

American Equities
Group, Inc. Common 1,000 100%

Phillip C. Goldstick(2) Common 360 36%
20 N. Clark Street
Chicago, IL 60602

David S. Goldberg(3) Common 360.5 36%

Stephen A. Socha(4) Common 80 8%

Officers and Directors Common 800.5 80%
as a group (three persons)(1)(2)(3)(4)

(1) The address of AEG and Messrs. Goldberg and Socha and of AEG is East 80, Route
4, Paramus, NJ 07652.

(2) Represents the indirect ownership in the corporation of the Phillip C. Goldstick
Revocable Trust U/A Dtd. 8/2/89 through the ownership of an aggregate of 4,500 shares
of AEG common stock.

(3) Represents the indirect ownership in the corporation of the David S. Goldberg
Family Trust, an affiliate of David S. Goldberg, through the ownership of an aggregate
of 4,500 shares of AEG common stock and the ownership of 6.25 shares of AEG
preferred stock, which is convertible into a like number of shares of AEG common stock.

(4) Represents the indirect ownership in the corporation of Mr. Socha through the
ownership of an aggregate of 1,000 shares of AEG common stock.

The Corporation is wholly-owned by AEG and the Corporation has the same
directors and officers as AEG. See "RISK FACTORS - Officers and Directors Maintain
Control of the Corporation" and "No Interest in the Corporation; No Voting Rights."

Other than as set forth above, the Corporation is not aware of any other
shareholders who beneficially own, individually or as a group, 5% or more of the
outstanding shares of Common Stock of the Corporation.

PLAN OF OPERATIONS

The Corporation intends to acquire accounts receivable principally from companies
in the publishing, printing and general service industries (e.g. firms which have no
tangible products but conduct such services as telemarketing and market research).
Based upon the prior performance of the Manager in similar investments, an Investor
can expect that approximately 50% of the purchased Receivables will come from
companies engaged in the publishing business, approximately 30% of the purchased
Receivables will come from companies engaged in the printing business and
approximately 20% of the purchased Receivables will come from companies engaged in
general services businesses.

Compensation and Fees to AEG and Affiliates

AEG, the Corporation's parent and manager will receive the following
compensation and fees from the Corporation in connection with this Offering and the
conduct of the Corporation's business.

Recipient(1) Nature of Payment Amount of Payment

AEG Operations and Overhead 5% of the gross proceeds of this
Expense Allowance Offering or $750,000 if the Maximum is
sold ($25,000 if only the Minimum is
sold).

Factoring Fee AEG will receive 50% of the factoring
fees obtained from acquisition of
Receivables during the Corporation's
operational stage. Such fees will
typically equal 7% to 10% of the face
amount of the receivables being factored.

Reimbursement of AEG will receive approximately $32,000
Offering Expenses from the gross proceeds of this Offering
as reimbursement of certain offering
expenses advanced by AEG in
connection with this Offering.

______________________

(1) While the officers and directors of the Corporation will not receive any direct
compensation from the Corporation in connection with their services, such officers and
directors are officers and directors of AEG and, therefore, will indirectly benefit from
the above payments.

Operations and Overhead Expenses

AEG will pay all operational and overhead expenses of the Corporation out of its
portion of the fees earned in the factoring of the Receivables, which fee will typically
equal 7% to 10% of the face amount of the Receivables being factored. The
Corporation and AEG will share the fees charged, 50% to the Corporation and 50% to
AEG. Such costs and expenses to be paid by AEG will include personnel costs,
including employee salaries, associated with the identification, evaluation, purchasing,
monitoring and collection of Receivables; the use of AEG's accounting and computer
systems; expenses incurred for administrating Investor accounts and other administrative
services and providing managerial assistance to the Corporation. Any costs and expenses
which exceed the amount of fees generated by the factoring of the Corporation's
Receivables shall be paid by AEG out of its own funds.

AEG shall also receive approximately 5% of the gross proceeds of this Offering as an
Overhead Allowance. AEG will receive this one-time fee for preparing all of the
necessary systems required in order to provide the Corporation with a turn-key
management program which will eliminate the traditional start-up time of a new
company. AEG has invested a significant amount of time and money to properly staff
the various departments that will require such increased staffing if and when the
Corporation sells the Minimum amount of the Offering. In addition, AEG has arranged
for the necessary computer systems, banking systems, servicing, collection and tracking
operations, credit review facilities, investor services systems, accounting procedures and
has procured the necessary office space in order to affectively service and manage the
Corporation's funds and Receivables that it acquires. Furthermore, AEG has initiated a
national marketing effort to arrange for business to be available to the Corporation once
it has raised the Minimum Offering.

In addition, the Dealer Manager will receive (i) sales commissions of up to 7% of
the Offering price, a due diligence and non-accountable expense of 1% of the Offering
price and a Dealer Manager fee of .5% of the Offering price. Assuming that the
Maximum Offering is sold, such fees and commissions would equal $1,050,000, $150,000
and $75,000, respectively. See "PLAN OF DISTRIBUTION."

The Trustee shall be entitled to a annual fee of $2,000 in consideration for his
services as Trustee of the Corporation's Indenture and may be entitled to additional
compensation in the event of a default under the Indenture. See "DESCRIPTION OF
SECURITIES - Indenture of Trust" and "RISK FACTORS - Increase in Trustee
Reimbursement Upon the Occurrence of an Event of Default."

There are no known trends, events or uncertainties that are reasonably likely to
materially impact the Corporation's short-term and long-term liquidity or results of
operations. The default rate for all Receivables acquired by AEG is under 10% of such
total amount of Receivables. However, none of such defaults have resulted in loss to
AEG or any of its Affiliates as such defaults are charged against the Client's reserve
after AEG receives its fee.

The Corporation believes it will be able to satisfy its cash requirements for the
foreseeable future if it does not expand its business by acquiring additional Receivables.
If the Corporation desires to acquire additional Receivables beyond those which can be
acquired with the proceeds of this Offering, it will need to raise additional funds in the
following twelve months. There is no assurance the Corporation will seek or secure
additional funds to acquire additional Receivables. Management does not believe that
investors in this Offering will be adversely affected if the Corporation is not able to
expand its business by acquiring additional Receivables.

DESCRIPTION OF THE SECURITIES

General

Up to $15,000,000 aggregate principal amount (ranging to a Minimum of
$500,000 aggregate principal amount) of the Corporation's ten-year promissory notes
(the "Notes") is being offered to qualified investors in denominations of $1,000 or any
integral multiple thereof, with a minimum investment of $2,000. The Notes will bear
interest at the rate of 12% per annum. Interest is payable monthly or annually in arrears
or upon maturity with the payments due on the first day of the each month or year.
Principal is payable in one payment upon maturity of the Notes. (A form of 12%
Note is attached hereto as Exhibit A.) The Corporation is not required to establish a
sinking fund; however, the Corporation will use its best efforts to reserve sufficient funds
for payment of the Notes on maturity by liquidating its portfolio of Receivables. See
"RISK FACTORS - Limited Sources of Payment of Notes; No Sinking Fund Provisions,
No Rating on Notes, Non-Self-Amortizing Loans, Limitations on Enforceability and
Prepayment of Notes."

Acceleration at Option of Note Holder

On the first day of January of each of the fifth, sixth, seventh, eighth and ninth years
after issuance of a Note, a Note Holder, upon six (6) months prior written notice, may
accelerate his Note and receive payment of principal and accrued interest at that time.

Prepayment

The Notes may be prepaid at any time at the option of the Corporation.

Subordination

Pursuant to the Note, the Corporation is representing to the investors that there
presently is no indebtedness senior or equal to that of the Notes. In addition, the
Corporation further represents that it will not incur any debt which is senior or equal to
the Note Holders, other than ordinary and necessary expenses of operations.

Restrictions as to Dividends and Certain Other Payments

The Corporation has agreed not to pay dividends, or make distributions on its stock
or purchase, redeem, or otherwise acquire or retire any of its stock if (a) an Event of
Default exists under any of the Notes or (b) it would reasonably appear that after any
such action the Corporation would not have sufficient funds to avoid an Event of Default
within six (6) months of such action.

Merger and Consolidation

Under the terms of the Notes, the Corporation may consolidate or merge with or
into any other entity or any other entity may consolidate or merge into the Corporation
and the Corporation may sell or transfer all or substantially all of its property and assets
to another entity, or another entity may sell or transfer all or substantially all of its
property and assets to the Corporation, provided that (i) such action is duly authorized
by the Corporation and its shareholders by the required actions thereto, (ii) the entity (if
other than the Corporation, formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such property and assets shall be a
corporation, partnership or trust, shall be organized and validly existing under the laws of
the United States and any state thereof and shall expressly assume payment of the
principal of, premium, if any, and interest on the Notes, and (iii) there shall not
immediately thereafter be an Event of Default under the Notes.

Events of Default

Events of Default under the terms of the Notes include among other things (i) the
Corporation fails to make payment of principal or interest for a period of more than 30
days after the due date; (ii) the Corporation makes an assignment for the benefit of
creditors, commences (as the debtor) any case in bankruptcy under Title 11 of the
United States Code ("Bankruptcy"), commences (as the debtor) any proceedings under
any other insolvency or receivership law or files a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute
or files an answer admitting the material allegations of a petition filed against it in any
proceeding under any such law or any corporate action is taken for the purpose of
effecting any of the foregoing; (iii) A case in Bankruptcy or any proceeding under any
insolvency or receivership law is commenced against the Corporation (as the debtor in
such case or proceeding) and a court having jurisdiction in the premises enters an order
for relief against the Corporation in such case or proceeding, or such case or proceeding
is consented to by the Corporation or remains undismissed for 40 days, or the
Corporation consents to or admits the material allegations against it in any case or
proceeding; or (iv) a trustee, receiver, agent or custodian (however named) is appointed
or authorized to take charge of substantially all of the property of the Corporation for
the purpose of enforcing a lien against such property for the benefit of creditors.

Security Agreement

The Notes will be secured by a security interest in the Receivables acquired with the
proceeds of the Offering. This interest will be subject to the provisions of a Security
Agreement and Collateral Assignment between the Corporation and the Trustee for the
benefit of Note Holders. A copy of the Security Agreement is attached hereto as Exhibit
B.

Indenture of Trust

An Indenture of Trust will be entered into between the Corporation and the
Trustee for the benefit of Note Holders. The trustee will accept title to the Security
Agreement on behalf of the Note Holders. The description of the Indenture of Trust set
forth below and references to Note Holders will be determined based on the Notes
issued to Note Holders. The duties of the Trustee are to hold the Security Agreement,
to perform certain obligations in the event of a default in the payment of the principal
and interest on the Notes, and to execute and deliver to the Corporation partial or full
satisfaction of the Security Agreement upon partial or full repayment of the Notes. See
"RISK FACTORS - Increase in Trustee Reimbursement Upon the Occurrence of an
Event of Default."

Sheldon Drobny will serve as the Trustee under the Indenture of Trust. Mr.
Drobny is a partner of the accounting firm of Adler Drobny Fisher, 95 Revere Drive,
Northbrook, Illinois 60062. Mr. Drobny is a certified public accountant with 30 years of
experience in investment banking, merchant banking, corporate finance and company
valuation. Pursuant to the terms of the Indenture of Trust, Mr. Drobny will receive a
fee of $2,000 per year plus reimbursement of actual expenses. In addition, upon the
occurrence of an Event of Default under the Trust Agreement or the Security
Agreement, the Trustee shall receive a fee of $150 per hour for time incurred in
rendering his duties as Trustee.

Events of Default

Subject to the following limitations, the following constitute Events of Default under
the Indenture of Trust:

(1) The Corporation receives written notice from a Note Holder of a default in the
payment of principal or interest on any Note when the same becomes due and payable;

(2) The Corporation fails to comply with any of its other agreements in the Notes,
the Security Agreement, or the Indenture and the default continues for the period and
after the notice specified below; or

(3) Pursuant to or within the meaning of any Bankruptcy Law;

(a) the Corporation commences a voluntary case,

(b) the Corporation consents to the entry of an order for relief against it in any
involuntary case or a court of competent jurisdiction enters an order or
decree for relief against the Corporation in an involuntary case,

(c) the Corporation consents to the appointment of a Receiver of it or for any
substantial part of its property or a court of competent jurisdiction enters an
order or decree for the appointment of a Receiver of the Corporation or for
any substantial part of its property,

(d) the Corporation makes a general assignment for the benefit of its creditors,
or fails generally to pay its debts as they become due; or

(e) a court of competent jurisdiction orders the liquidation of the Corporation,
and the order or decree remains unstayed and in effect for 90 days.

The term "Bankruptcy Law" means Title 11, United States Code, or any similar
federal or state law for the relief of debtors. The term "Receiver" means any receiver,
trustee, assignee, liquidator, or similar official under any Bankruptcy Law.

A default under section (2) above is not an Event of Default until the Trustee or the
Holders of at least a majority in principal amount of the Notes notify the Corporation of
the default and the Corporation does not cure the default within 90 days after receipt of
the notice. The notice must specify the default, demand that it be remedied, and state
that the notice is a "Notice of Default."

If an Event of Default occurs and is continuing either the Trustee or the Holders of
any Note, by written notice to the Corporation and, if applicable, the Trustee, may
declare the principal of and accrued interest on all the Notes to be due and payable
immediately. The Trustee may then pursue any available remedy by proceeding at law
or in equity to collect the payment of principal and interest on the Notes or to enforce
the performance of any provision of the Notes, the Security Agreement or the Indenture.
The Holders of a majority in principal amount of the Notes may direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. The Trustee, however, may refuse to
follow any direction that conflicts with law or the Indenture, that is unduly prejudicial to
the rights of other Note Holders, or that may involve the Trustee in personal liability.

Rights of Note Holders

The Holders of not less than 75% in aggregate principal amount of Notes at the
time outstanding may consent on behalf of the Holders of all such Notes to the
postponement of any interest payment for a period or periods not exceeding three years
from its due date. The waiver of any additional interest payments is not dependent upon
the payment of any previously waived interest payments. This is an exception to the
rights of each Note Holder provided under Section 316(b) of the Trust Indenture Act of
1939 (the "TIA").

Each Note Holder has the right to receive payment of principal and interest on or
after the respective due dates of the Notes and institute suit to enforce such payment on
or after the respective due dates, as provided for by Section 316(b) of the TIA. Waiver
of such right may not occur except upon the individual consent of each Note Holder.
This right provided for by Section 316(b) of the TIA applies notwithstanding any other
provision of the Indenture.

The Holders of a majority of the Notes may consent to the waiver of any past default
and its consequences, except a default in payment of principal and interest under Section
316(b) of the TIA.

A Note Holder may not use the Indenture to prejudice the rights of another Note
Holder or to obtain a preference or priority over the other Note Holder.

Priority of Payments under the Indenture

If the Trustee collects any money pursuant to the Indenture, it shall pay out the
money in the following order: (1) to the Trustee for amounts due under the Indenture;
(2) to Note Holders for amounts due and unpaid on the Notes for interest, then
principal, ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal and interest; and (3) to the Corporation.

Communication with other Note Holders

Note Holders may communicate with other Note Holders by sending the Trustee a
written application by any three or more Note Holders stating that the applicants desire
to communicate with other Note Holders with respect to their rights under the Indenture
or under the Notes, and accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit. Note Holders must also
provide reasonable proof that each such applicant has owned a Note for a period of at
least six months preceding the date of such application. The Trustee shall, at its
election, either (1) afford to such applicants access to all information so furnished to or
received by the Trustee, or (2) inform such applicants as to the approximate number of
Note Holders and as to the approximate cost of mailing to such Note Holders the form
of proxy or other communication, if any, specified in such application. If the Trustee
shall elect not to afford to such applicants access to such information, the Trustee shall,
upon the written request of such applicants, mail to all such Note Holders copies of the
form of proxy or other communication which is specified in such request, after a tender
to the Trustee of the material to be mailed and of payment, or provision for payment, of
the reasonable expenses of such mailing.

If in the opinion of the Trustee such mailing would be contrary to the best interests
of the Note Holders or would be in violation of applicable law, the Trustee shall mail to
such applicants, and file with the SEC together with a copy of the material to be mailed,
a written statement to that effect. Such written statement shall specify the basis of such
opinion. After opportunity for hearing upon the objections specified in the written
statement so filed, the SEC will then decide if such materials may be lawfully sent to
such Note Holders.

Reports by Trustee

The Trustee shall provide to the Note Holders such reports as may be required
pursuant to the provisions of TIA Section 313(a) or (b) within the time periods provided
for in such sections. A copy of each report at the time of its mailing to Note Holders
shall be filed with the SEC and each stock exchange on which the Notes are listed, if
any.

Indemnification

The Corporation shall indemnify the Trustee against any loss or liability incurred by
it. The Trustee shall notify the Corporation promptly of any claim for which it may seek
indemnity. The Trustee shall defend the claims and the Corporation will reimburse
Trustee, either directly or from funds subject to this Trust Agreement, for reasonable
legal expenses. The Corporation need not pay for any settlement made without its
consent. Notwithstanding the foregoing, the Corporation need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee through the
Trustee's negligence or bad faith.

Resignation or Termination of Trustee

The Trustee may resign by so notifying the Corporation, but such resignation shall
not be effective until 60 days after such notification. The Holders of a majority in
principal amount of the Notes may remove the Trustee by so notifying the removed
Trustee and may appoint a successor Trustee with the Corporation's consent. The
Corporation may remove the Trustee under certain circumstances. If the Trustee resigns
or is removed or if a vacancy exists in the office of Trustee for any reason, the
Corporation shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Corporation. Immediately after that, the retiring Trustee
shall transfer all property held by it as Trustee to the successor Trustee, the resignation
or removal of the retiring Trustee shall become effective, and the successor Trustee shall
have the rights, powers, and duties of the Trustee under the Indenture. A successor
Trustee shall give notice of its succession to each Note Holder as provided in Section
7.02 of the Indenture.

If a successor Trustee does not take office within 60 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Corporation, or the Holders of a majority
in principal amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

If the Trustee fails to comply with Section 3.11 of the Indenture, any Note Holder
may petition any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.

TAX ASPECTS

The following paragraphs summarize the material federal income tax aspects of
purchasing the Notes. The Investors may rely upon the tax opinion of counsel to the
Corporation attached hereto as Exhibit E-1 and the following discussion relating to the
tax treatment of an investment on the Corporation, HOWEVER, EACH INVESTOR IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISER FOR MORE
DETAILED INFORMATION WITH RESPECT TO THE FEDERAL AND STATE
TAX CONSEQUENCES OF AN INVESTMENT IN THE CORPORATION.

Thinly Capitalized Corporation

The Corporation currently has a capitalization of $40,000. See the financial
statements included elsewhere in this Prospectus. The Internal Revenue Service ("IRS")
has taken the position in the past that debt of a thinly capitalized Corporation may be
considered as a capital contribution not giving rise to a deduction for interest expense by
the debtor. The case law on this issue is diverse and inconsistent in application. The
courts list numerous factors in determining whether or not a debt is true debt or a
contribution to capital, some of which are as follows: (1) the names given to the
certificates evidencing the indebtedness; (2) the presence or absence of a maturity date;
(3) the source of the payments; (4) the right to enforce the payment of principal and
interest; (5) participation in management; (6) a status equal to or inferior to that of
regular corporate creditors; (7) the intent of the parties; (8) "thin" or adequate
capitalization; (9) identity of interest between creditor and stockholder; (10) payment of
interest only out of "dividend" money; (11) the ability of the corporation to obtain loans
from outside lending institutions;(12) the extent to which the initial advances were used
to acquire capital; and (13) the failure of the debtor to pay on the due date or to seek a
postponement.

In the event the Notes were deemed by the IRS to be capital contributions,
distributions of interest payments to investors would be deemed to be taxable dividends
for income tax purposes and the repayment of principal would be deemed to be a non-
taxable return of capital in the absence of earnings and profits. If the Corporation has
earnings and profits the repayment of principal would be taxed as a dividend to the
extent of such earnings and profits. The extent and amount of earnings and profits the
Corporation would have is not determinable at this time. See "RISK FACTORS -
Uncertainty of Tax Treatment of Notes" and "Loss on Notes."

Interest Payments

Interest payments under the Notes will be treated as ordinary interest income and
taken into account under a Note Holder's general method of accounting (e.g., cash or
accrual). A trust has not been created for tax purposes and each Note Holder will
receive Form 1099 for his share of interest income from the Corporation.

Disposition of Notes

In the event of a sale or other taxable disposition of a Note prior to the stated
maturity date, gain is measured by the excess of the net proceeds of the sale or other
disposition over the Note Holder's adjusted tax basis. Any gain on sale will be capital
gain if the Note is held as a capital asset.

Loss will be recognized upon disposition of a Note in exchange for an amount less
than the Note Holder's adjusted basis in the Note. If the Note is held as a capital asset,
the deductibility of such loss may be limited by the rules contained in the Internal
Revenue Code of 1986, as amended (the "Code") relating to restrictions upon the
deductibility of capital loss. In addition, a sale to a related party could result in
limitations upon the deductibility of loss under Code Section 267. For Note Holders
other than initial Note Holders, gain recognized upon the maturity or earlier disposition
of a Note may be affected by the provisions of the Code governing market discount.

Possible Withholding

Payments of interest made by the Corporation on a Note and proceeds from the sale
of the Note to or through certain brokers may be subject to a back-up withholding tax at
a rate of 20%, unless the Note Holder complies with certain reporting and/or
certification procedures. All amounts withheld on such payments will be allowable as a
credit against the Note Holder's federal income tax liability.

The Corporation will make arrangements to provide each initial Note Holder with a
Form W-9 (or a substitute Form W-9) on which Note Holders can provide information
required by the Code in order to avoid the back-up withholding provisions.

Special considerations which may apply to any Note Holder who is not a United
States citizen or resident are not discussed in this Prospectus.

Unrelated Business Taxable Income

Section 501 of the Code provides that qualified pension, profit-sharing, and stock
bonus plans are exempt from federal income tax. This exemption also extends to
charitable, educational and other organization. However, Section 511 of the Code
imposes federal income tax on any "unrelated business taxable income" of organizations
exempt under Section 501.

Sections 512 and 513 of the Code define the phrase "unrelated business taxable
income" (or UBTI) as net income earned by an otherwise exempt organization from the
regular conduct of an unrelated trade or business. Section 512 generally excludes
interest income from the definition of unrelated business taxable income. Assuming that
a Note Holder does not incur any indebtedness with respect to its acquisition of a Note,
the interest on the Note will not be treated as unrelated business taxable income. Note
Holders should consult their own tax advisors on this matter.

ERISA Conditions

If an investor intends to purchase Notes through a pension, profit-sharing, or other
plan governed by Title I of the Employee Retirement Income Security Act of 1974
("ERISA"), the fiduciaries of such plan must consider: (a) whether the investment is
permitted under the governing instrument for the plan and is an appropriate investment
for the plan; (b) whether the investment satisfies the diversification requirements of
Section 404(a)(1)(C) of ERISA; (c) whether the investment is prudent; and (d) whether
the investment is for the exclusive purpose of providing benefits to participants.
Fiduciaries should also be aware that ERISA requires that assets of a plan be revalued at
least once each plan year, and that valuation of the Notes may be difficult because of the
lack of a resale market.

Section 406 of ERISA provides that the fiduciary of a plan governed by ERISA may
not cause the plan to become involved in a "prohibited transaction." Similarly, Section
4975 of the Code imposes taxes on "prohibited transactions" involving pension plans,
IRAs and Keogh plans. A "prohibited transaction" includes a transaction in which a plan
lends money to a "party in interest." A "party in interest" is broadly defined to include
parties such as plan fiduciaries, plan beneficiaries, person providing services to the plan,
and businesses, affiliates and relatives of such parties. An example of a "prohibited
transaction" would be if an individual purchased Notes through his pension,
profit-sharing or other plan when the individual also owned an equity interest in the
Corporation. Additionally, if a plan purchased Notes when the plan fiduciary owned an
interest in the Corporation, this purchase could also be considered a "prohibited
transaction." Section 4975 of the Code may impose a tax on such "prohibited
transactions."

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On August 1, 1996, the corporation entered into a Management Agreement (the
"Management Agreement") with its parent corporation American Equities Group, Inc.
("AEG"). Under the Management Agreement, AEG originates Receivables by
purchasing them from client companies and assigning them to the Corporation. AEG
also services and collects the Receivables on behalf of the Corporation. The Corporation
will typically charge a fee of 7% to 10% of the face amount of the receivables. Under
the Management Agreement the Corporation and AEG have agreed to share such fee
50% to the Corporation and 50% to AEG. See "BUSINESS - Acquisition of
Receivables." The officers and directors of the Corporation are officers and directors of
AEG.

The Corporation is the wholly-owned subsidiary of AEG. The capital stock AEG is
owned directly and indirectly by Messrs. Goldstick, Goldberg, and Socha and such
individuals are the sole officers and directors of AEG. In connection with this Offering
AEG will be paid a 5% Overhead Allowance (up to $750,000 if the Maximum Offering is
sold). See "PLAN OF OPERATIONS -Operations and Overhead Expenses." In
addition, all fees and discounts earned by the Corporation will be shared 50% to AEG,
as Manager, and 50% to the Corporation pursuant to the Management Agreement. As
officers and directors of AEG. Messrs. Goldstick, Goldberg and Socha will indirectly
benefit from such payments.

Messrs. Goldstick and Goldberg are also principals of G Equity Investment
Group, Inc., a NASD registered broker/dealer which will not participate in this Offering.
See "PLAN OF DISTRIBUTION."

The Corporation shall make no loans to its officers, directors or stockholders and is
forbidden to receive loans from any person or entity other than AEG. The Corporation
has adopted a policy that all future transactions with affiliates of the Corporation are to
be on terms no less favorable than could be obtained from unaffiliated third parties and
must be approved by a majority of the Board of Directors, including a majority of
disinterested directors.

PLAN OF DISTRIBUTION

Distribution will be made on a "best-efforts" basis by Merrill Weber & Co., Inc.
(the "Dealer Manager") and Selected Dealers that are members of the NASD (jointly
referred to as the "Participating Dealers").

Participating Dealers will execute Selling Agency Agreements with the Corporation;
however, such Participating Dealers will be under no obligation to sell any or all of the
Notes offered hereby. The Division of Corporation Finance of the U.S. Securities and
Exchange Commission has taken the position that any broker/dealer that sells Notes in
the Offering may be deemed an underwriter as defined in Section 2(11) of the Securities
Act of 1933, as amended. The Corporation has currently entered into a Dealer Manager
Agreement. There is no assurance that, even if any Participating Dealers sell the Notes
offered hereby, a court of competent jurisdiction or arbitration panel would deem any
such Participating Dealer to be an underwriter as so defined.

The Dealer Manager will receive a sales commission of up to 7% of the Offering
price for all Notes sold, a due diligence and non-accountable expense allowance of 1%,
which may be reallowed to Selected Dealers, and a Dealer Manager fee of .50%.

The Corporation intends to sell the Notes in this Offering only in the states in which
the Offering is qualified. An offer to purchase may only be made and the purchase of
the Notes may only be negotiated and consummated in such states. The Subscription
Agreement for the Notes must be executed, and the Notes may only be delivered in,
such states. Resale or transfer of the Notes may be restricted under state law. See
"RISK FACTORS - No Market of Notes" and "LACK OF LIQUIDITY OF NOTES"
below.

The Notes are being offered on a best efforts/all or none basis as to the Minimum
($500,000) and a best efforts basis as to the Maximum ($15,000,000). Assuming the
Minimum Offering is subscribed for within six (6) months of the date of this Prospectus
and the Corporation does not terminate the Offering earlier, which in the sole discretion
of Management it may, the Offering of Notes will continue until the Corporation raises
an aggregate of $15,000,000, provided that the offering period for all of Notes of the
Corporation will not exceed 24 months from the date of this Prospectus.

Each Participating Dealer has agreed in accordance with the provisions of SEC Rule
15c2-4 to cause all funds received for the sale of Notes to be promptly deposited with
the Corporation upon the receipt of the executed Subscription Agreement and related
funds by the Participating Dealer by or before noon of the next business day following
the sale of said Notes.

The Dealer Manager Agreement provides for reciprocal indemnification between the
Corporation and the Dealer Manager against certain liabilities in connection with the
Registration Statement of which this Prospectus is a part, including liabilities under the
Securities Act. To the extent this section may purport to provide exculpation from
possible liabilities under the federal securities laws, it is the opinion of the Securities and
Exchange Commission that such indemnification is against public policy and is therefore
unenforceable.

LACK OF LIQUIDITY OF NOTES

The Notes will be registered with the Securities and Exchange Commission and
the States of Arkansas, California, Connecticut, Colorado, Florida, Georgia, Illinois,
Maryland, Missouri, New Jersey, New York, Virginia and Wisconsin. The Notes may be
registered or exempt from registration in other states. NO PUBLIC OR OTHER
MARKET FOR THE NOTES EXISTS AND THERE CAN BE NO ASSURANCE
THAT ONE MAY DEVELOP IN THE FUTURE. Accordingly, the Notes should be
purchased only as an investment to be held to the end of the term of the Notes because
Note Holders may not be able to liquidate their investment in the event of any
emergency or for any other reason. See "RISK FACTORS- No Market; Limited
Transferability of Notes."

LEGAL MATTERS

The validity of the Notes offered hereby and the tax considerations of an investment
in the Notes will be passed upon by Bronson & Migliaccio, 287 Bowman Avenue,
Purchase, NY 10577, as counsel to the Corporation. The statements under the heading
"TAX ASPECTS" have been reviewed by Bronson & Migliaccio and have been included
herein, to the extent such statements constitute matters of law, in reliance upon the
authority of said firm as an expert thereon.

EXPERTS

The financial statements and related schedules of the Corporation included in this
Prospectus and in the Registration Statement have been audited by Rothenberg &
Company, independent certified public accountants, 1979 Marcus Avenue, Lake Success,
NY 11042; (516) 437-3800, to the extent and for the periods set forth in their reports
appearing elsewhere herein and in the Registration Statement, and are included in
reliance upon such reports given upon the authority of said firm as experts in auditing
and accounting. The Corporation may engage Rothenberg & Corporation as its auditors
to prepare the annual audited reports and review the quarterly reports.

ADDITIONAL INFORMATION

This Prospectus contains summaries of various provisions of the documents relating to
the Corporation. The summaries do not purport to be complete and are qualified in
their entirety by reference to the full texts of the actual documents. Copies of certain of
these documents are attached as Exhibits to this Prospectus and other documents not
included as exhibits to this Prospectus have been filed as exhibits to the Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission, of which
this Prospectus is a part.

GLOSSARY OF TERMS

The following terms used in this Prospectus shall (unless the context otherwise
requires) have the following respective meanings:

Acceptance: The acceptance by the Corporation of a prospective investor's subscription.

AEG: American Equities Group, Inc., the parent company of the Corporation.

Affiliate: (i) any person directly or indirectly controlling, controlled by or under
common control with another person, (ii) a person owning or controlling 10 percent or
more of the outstanding voting securities of such other person or (iii) if such other
person is an officer, director or partner or any Corporation for which such person acts in
any such capacity.

Clients: Companies from which the Corporation acquires Receivables.

Contract: The form of Accounts Receivable Purchase Agreement utilized by AEG to
acquire Receivables.

Code: The Internal Revenue Code of 1986, as amended.

Corporation: American Equities Income Fund, Inc., a Delaware corporation.

Counsel: Bronson & Migliaccio, a New York law firm.

Dealer Manager: Merrill Weber & Co., Inc.

Event of Default: Event of Default means an event of default on the Notes as set forth
in the Notes.

Federal Securities Act: Securities Act of 1933, as amended.

Investors: Investors in this Offering of the Corporation.

IRS: Internal Revenue Service.

Maximum Offering: Means the sale of up to fifteen thousand (15,000) Notes at
$1,000 each for an aggregate of $15,000,000.

Minimum Offering: Means the sale of up to five hundred (500) Notes at $1,000 each for
an aggregate of $500,000.

Note Holders: The Investors who purchase Notes.

Notes: The $15,000,000 of ten year Promissory Notes bearing interest at the rate of 12%
per annum to be issued by the Corporation.

Obligors: Those companies liable for payment of the Receivables.

Offering Termination Date: The earlier of the sale of the Maximum or 24 months from
the date of this Prospectus.

Parent Corporation: American Equities Group, Inc., a New York corporation, the
parent company of the Corporation.

Participating Dealers: The Dealer Manager and Selected Dealers.

Purchase Contract: The standard accounts receivable purchase contract utilized by AEG
and the Corporation to acquire Receivables.

Receivables: Accounts Receivable generated in the normal course of commerce.

Selected Dealers: Those NASD broker-dealers that execute a Selected Dealers
Agreement.

Subscription Documents: The Subscription Agreement and the subscriber's check for the
amount of Notes subscribed for. <PAGE>
TABLE OF CONTENTS

Page

Independent Auditor's Report F-2

Balance Sheet F-3

Statement of Stockholders' Equity F-4

Statement of Cash Flows F-5

Notes to Financial Statements F-6-7
<PAGE>
ROTHENBERG & COMPANY
Certified Public Accountants
1979 Marcus Avenue
Lake Success, N.Y. 11042
TEL NO. (516) 437-3800 AND (212) 986-2626
FAX NO. (516) 437-2235

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
American Equities Income Fund, Inc.

We have audited the accompanying balance sheet of American Equities Income Fund,
Inc. (A Development Stage Company) as of March 22, 1996, and the related statements
of stockholders' equity and cash flows for the period March 11, 1996 (inception) through
March 22, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of American Equities Income Fund, Inc., as of March 22,
1996 and its cash flows for the period then ended, in conformity with generally accepted
accounting principles.

Rothenberg & Company

Lake Success, New York
March 22, 1996<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 22, 1996

A S S E T S

Cash $ 40,000

TOTAL ASSETS $ 40,000

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accounts Payable $ -

STOCKHOLDERS' EQUITY
Common stock, $1 par value, 1,000 shares
authorized, 1,000 shares issued and outstanding 1,000
Additional paid in capital 39,000

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 40,000

See notes to financial statements.<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
MARCH 22, 1996

Common Stock Additional
Number Paid in
of Shares Value Capital

Date of incorporation, March 11, 1996 - $ - $ -

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

Balance at March 22, 1996 1,000 $ 1,000 $ 39,000

See notes to financial statements.<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 11, 1996 (INCEPTION)
THROUGH MARCH 22, 1996

CASH FLOWS FROM OPERATING ACTIVITIES $ -

CASH FLOWS FROM INVESTING ACTIVITIES -

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 40,000

NET INCREASE IN CASH 40,000

CASH, BEGINNING OF PERIOD -

CASH, END OF PERIOD $ 40,000

See notes to financial statements.<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS

NOTE A - FORMATION AND OPERATIONS OF THE COMPANY

American Equities Income Fund, Inc. (the Company) was incorporated under the laws of
the state of Delaware on March 11, 1996. The Company is considered to be in the
development stage as defined in Financial Accounting Standard No. 7.

American Equities Income Fund, Inc. intends to be in the business of factoring accounts
receivable and providing other financial services to client companies.

No statement of operations has been included, since there were no operational activities
other than the issuance of common stock as presented in these financial statements and
accompanying footnotes.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

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

Year End

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

Cash Equivalents

For financial statement purposes, with respect to the Statement of Cash Flows, cash
equivalents include time deposits and all highly liquid instruments with original
maturities of three months or less. The amount included on the Company's Statement
of Cash Flows is comprised exclusively of cash.
<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)

NOTE C - STOCKHOLDERS' EQUITY

The Company is authorized to issue 1,000 shares of common stock at $1 par value. On
March 22, 1996, there were 1,000 shares of common stock issued and outstanding.

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

NOTE D - PROPOSED NOTE OFFERING

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

NOTE E - RELATED PARTY TRANSACTIONS

The Company and American Equities Group, Inc. will share the fees charged, 50% to
the Company and 50% to American Equities Group, Inc. American Equities Group,
Inc. will pay all overhead, expenses and salaries of the Company from its portion of the
fees as relates to the ongoing business; except for legal, accounting, filing fees, taxes and
other administrative expenses related to the Company.<PAGE>
APPENDIX I

TABULAR INFORMATION CONCERNING
PRIOR PRIVATE SECURITIES OFFERINGS

The information contained in the following Tables I, II and III is presented in
conjunction with and as a supplement to the narrative summary appearing elsewhere in
this Prospectus under "Management - Prior Performance" and is qualified in its entirety
by the information contained in such narrative summary. Such Tables show certain
relevant information concerning certain prior non-public securities offerings sponsored by
AEG (the "Prior Programs").

The programs listed in these Tables were organized by AEG and include
information beginning in 1993, the year of AEG's first non-public securities offering, and
ending December 31, 1995 relating to programs sponsored by AEG, all of which were for
businesses operating as factors and all of which had similar investment objectives to
those of the Corporation. Such investment objectives include the preservation of a
steady rate of return on investors funds and the repayment of principal through the
factoring of accounts receivable. These programs also involve material risks similar to
those inherent in an investment in the corporation. See "RISK FACTORS."

INVESTORS SHOULD NOTE THAT, BY ACQUIRING NOTES OF THE
CORPORATION, THEY WILL NOT BE ACQUIRING ANY INTEREST IN ANY
PRIOR PROGRAM SPONSORED BY AEG.

Description of Tables

Table I - Experience in Raising and Investing Funds, presents information
showing the experience of AEG and Affiliates in raising and investing funds of Prior
Programs, which securities offerings closed between May 15, 1993 and June 14, 1996.

The tables sets forth information on offering expenses incurred and the amounts
available for the purchase of accounts receivable. The table also shows the amount of
funds raised, the date such offerings began and the time required to raise the funds.

Table II - Compensation to Sponsor and Affiliates, presents information regarding
amounts and types of compensation paid to AEG and Affiliates.

The table indicates the total offering proceeds and the portion of such proceeds
paid to AEG or its Affiliates in connection with the Prior Programs.

Table III - Operating Results of Prior Programs, presents a summary of the
operating results of the Prior Programs. The table includes a summary of income or loss
on the basis of generally accepted accounting principles ("GAAP").
<PAGE>
Table I. Experience in Raising and Investing Funds

American American American American American American
Equities Equities Equities Equities Equities Equities
Group, Special SPP Series SPP Series SPP Series SPP Series
Inc./L.P. Purpose 1000, Ltd. 2000, Ltd. 3000, Ltd. 4000, Ltd.
Corporation

Dollar Amount offered $1,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $3,153,250

Dollar Amount raised 100% 36% 100% 100% 100% 100%

Less offering expenses: 10% 10% 10% 10% 10% 10%
Selling Commissions
and Discounts to
affiliates

Organizational Expense 8% 10.4% 11% 11% 11% 11%

Other (Agent Fees) 1% 1% - - - -

Reserves (% available for 82% 78% 79% 79% 79% 79%
purchase of Receivables)

Date offering Began 5/15/93 6/23/94 9/27/94 3/16/95 7/25/95 11/28/95

Length of Offering 12 months 15 months 8 months 10 months 11 months 7 months

Months to Invest 90% of 12 months 15 months 8 months 10 months 11 months 7 months
amount available for
investment<PAGE>
Table II. Compensation to Sponsor and Affiliates

Date Offering Commenced 5/15/93 6/23/94 9/27/94 3/16/95 7/25/95 11/28/95

Dollar Amount raised $1,000,000 $725,000 $2,000,000 $2,000,000 $2,000,000 $3,153,250

Amount paid to sponsor or
affiliates from proceeds of
offering:
Underwriting Fees $25,000/ $ 7,250 $200,000 $200,000 $200,000 $315,325
75,000

Organizational Expenses $18,850/ $ 62,000 $220,000 $220,000 $120,000 $346,858
63,750

Dollar amount of income $381,897 $122,308 $306,544 $181,848 $ 64,822 $ -0-
generated from operations
before deducting payments
to sponsor

Amount paid to sponsor
from operations:
Management fees $228,700 $100,844 $279,858 $160,609 $ 48,172 $ -0-

<PAGE>
Table III, Operating Results of Prior Programs

American Equities Group, Inc. American Equities Group, L.P.
1994 1995 1994 1995

Gross Revenue: $308,480 $885,604 $132,206 $95,192

Less: Operating Expenses $267,693 $789,442 $16,525 $10,732
Interest Expense $ 20,625 $ 41,599 $ - $ -
Depreciation & Amoritization $17,172 $ 37,699 $23,472 $23,472

Taxable Income $2,990 $16,894 $92,209 $60,988

Net Income $ 375 $ 1,894 $92,209 $60,988

Cash Generated from operations (1) $ 15,192 $ 39,593 $115,681 $84,460

Less Cash Distributions to investors $ -0- $18,750 $44,163 $76,878

Cash Generated (Deficiency)
From Operations After
Cash Distributions $ 15,192 $ 20,843 $71,517 $ 7,582

Tax and Distribution Data per
$1,000 Invested:
Ordinary Income (loss) $ .375 $ 2 $ 92 $ 61

Cash Distributed to Investor $ -0- $ 19 $ 44 $ 77

(1) Reflects cash flows from operating activities for each entity presented during the applicable fiscal year.
<PAGE>
Table III. Operating Results of Prior Programs

American Equities Special American Equities
Purpose Corporation SPP Series 1000, Ltd.
1994 1995 1994 1995

Gross Revenue: $-0- $94,050 $28,891 $296,984

Less: Operating Expenses $50 $ 6,535 $ 4,033 $ 11,850
Interest Expense - $40,160 $11,822 $173,174
Depreciation - $19,182 $11,061 $ 79,015

Taxable Income $(50) $28,173 $ 1,975 $ 32,945

Net Income (deficiency) $(50) $22,463 $ 1,475 $ 26,211

Cash Generated from $-0- $81,522 $24,358 $278,400
operations (1)

Less Cash Distributions $-0- $39,877 $11,822 $173,174
to investors

Cash Generated (Deficiency)
From Operations After
Cash Distributions $-0- $41,645 $12,536 $115,226

Tax and Distribution
Data per $1,000 Invested:
Ordinary Income (loss) $-0- $ 22 $ 1.50 $ 26

Cash Distributed to Investor $-0- $ 40 $ 12 $ 173

(1) Reflects cash flows from operating activities for each entity presented during the applicable fiscal year.<PAGE>

Table III. Operating Results of Prior Programs

American Equities American Equities American Equities
SPP Series 2000, Ltd. SPP Series 3000, Ltd. SPP Series 4000, Ltd.

1995 1995 1995

Gross Revenue: $121,539 $47,980 $ 415

Less: Operating Expenses $ 7,001 $ 992 $1,026
Interest Expense $ 41,543 $15,609 $ 0
Depreciation $ 46,116 $10,438 $ 19

Taxable Income $ 26,879 $20,941 $ (630)

Net Income (deficiency) $ 21,239 $16,651 $ (630)

Cash Generated from operations $108,846 $40,950 $ (611)

Less Cash Distributions to $ 41,491 $13,861 $ -0-
investors

Cash Generated (deficiency) $ 67,355 $27,089 $ (611)
from operations after
cash distributions

Tax and Distribution Data per
$1,000 Invested:
Ordinary Income (loss) $ 21 $ 17 $ -0-

Cash Distributed to Investor $ 41 $ 14 $ -0-

(1) Reflects cash flows from operating activities for each entity presented during the applicable fiscal year. <PAGE>

EXHIBIT A

12% PROMISSORY NOTE

$ Paramus, New Jersey
, 1996

FOR VALUE RECEIVED, the undersigned promises to pay to
(hereinafter, together with any holder hereof, called "Holder") at
or at such other place as the Holder may from time to time designate in writing, the
principal sum of Dollars ($ ), on , together
with simple interest thereon at the rate of 12% per annum payable interest only monthly
[or annually in arrears or upon maturity]. Interest is calculated on the basis of a 360-day
year (the "Calculation Basis") but is paid in 12 equal monthly installments, annually or
upon maturity, regardless of the number of days in each month (the "Payment Basis"),
with any difference between interest determined on the Calculation Basis and the
Payment Basis paid in the final installment due under the Note. The entire outstanding
principal balance and accrued interest, if any, shall be due on September 30, 2006.

Interest shall accrue on the Notes at the rate of 12% per annum which shall be
compounded annually.

This Note is one of an issue of an aggregate principal amount of up to Fifteen Million
Dollars ($15,000,000.00) ("Notes") of the undersigned in an aggregate principal amount
not to exceed Fifteen Million Dollars ($15,000,000.00) and is subject to an Indenture of
Trust by and between the undersigned and Sheldon Drobny as Trustee ("Trustee").
Reference is hereby made to the Indenture of Trust for a description of the rights,
limitations, obligations and immunities of the undersigned, the holders of the Notes and
the Trustee. This Note may only be deemed to be in default and the Holder may only
exercise any available rights and remedies thereon upon the occurrence of an Event of
Default as defined in the Security Agreement and the Indenture of Trust.

This Note and the instruments securing it have been executed and delivered in, and
their terms and provisions are to be governed and construed by the laws of the State of
New Jersey. The indebtedness evidenced by this Note is not subordinated to any other
indebtedness of the undersigned nor will the undersigned incur any indebtedness senior
to the indebtedness evidenced hereby.

This Note may be prepaid in whole or in part at any time without penalty. On the
first day of January of each of the fifth, sixth, seventh, eighth and ninth years, the Note
Holders, upon six (6) months prior written notice, may accelerate the Notes and receive
payment of principal and accrued interest at the time.

This Note is secured by a Security Agreement described in the Registration Statement
of the undersigned dated as of the day of , 1996, executed by the
undersigned in favor of the Trustee on behalf of the holders of the Notes.

If an Event of Default, as defined in the Indenture of Trust or Security Agreement,
shall have occurred and be continuing, the principal hereof may be declared due and
payable in manner, with the effect, and subject to the conditions provided in the
Indenture of Trust or Security Agreement.

Time is of the essence of this Note and in case this Note is collected by law or
through an attorney at law, or under advice therefrom, the undersigned agrees to pay all
costs of collection, including reasonable attorney's fees. Reasonable attorney's fees are
defined to include, but not be limited to, all fees incurred in all matters of collection and
enforcement, construction and interpretation, before, during and after suit, trail
proceedings and appeals, as well as appearances in and connected with any bankruptcy
proceedings or creditors' reorganization or similar proceedings.

The undersigned has agreed not to pay dividends, or make distributions on its stock
or purchase, redeem, or otherwise acquire or retire any of its stock if (a) an Event of
Default exists under any of the Notes or (b) it would reasonably appear that after any
such action the undersigned would not have sufficient funds to avoid an Event of Default
within six (6) months of such action.

The undersigned may consolidate or merge with or into any other entity or any other
entity may consolidate or merge into the undersigned and the undersigned may sell or
transfer all or substantially all of its property and assets to another entity, or another
entity may sell or transfer all or substantially all of its property and assets to the
undersigned, provided that (i) such action is duly authorized by the undersigned and its
shareholders by the required actions thereto, (ii) the entity (if other than the
undersigned), formed by or resulting from any such consolidation or merger or which
shall have received the transfer of such property and assets shall be a corporation,
partnership or trust, shall be organized and validly existing under the laws of the United
States and any state thereof and shall expressly assume payment of the principal of,
premium, if any, and interest on the Notes, and (iii) there shall not immediately
thereafter be an Event of Default under the Notes.

All persons now or at any time liable, whether primarily or secondarily, for the
payment of the indebtedness hereby evidenced, for themselves, their heirs, legal
representatives, successors and assigns respectively, hereby (a) expressly waive
presentment, demand for payment, notice of dishonor, protest, notice of nonpayment or
protest, and diligence in collection; (b) consent that the time of all payments or any part
thereof may be extended, rearranged, renewed or postponed by the Holder hereof and
further consent that the collateral security or any part thereof may be released,
exchanged, added to or substituted for releasing, affecting or limiting their respective
liability or the lien of any security instrument; and (c) agree that the Holder, in order to
enforce payment of this Note, shall not be required first to institute any suit or to
exhaust any of its remedies against the Maker or any other person or party to become
liable hereunder.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed on
the day and year first above written.

AMERICAN EQUITIES INCOME FUND, INC.,
a Delaware corporation

By:
David S. Goldberg, Chairman and CEO<PAGE>
EXHIBIT B

SECURITY AGREEMENT

This SECURITY AGREEMENT (hereinafter called this "Agreement") is made and
entered as of , 1996, by and between AMERICAN EQUITIES INCOME
FUND, INC., a Delaware corporation, located at East 80 Route 4, Suite 202, Paramus,
New Jersey 07652 (hereinafter called "Debtor"), and SHELDON DROBNY, as Trustee
("Trustee") on behalf of those persons listed on Schedule A (hereinafter collectively
called "Secured Party").

W I T N E S S E T H:

In consideration of the covenants and conditions stated in this Agreement, the parties
agree as follows:

1. Indebtedness Secured.

This Agreement and the Security Interest secure the payment of certain Secured
Notes issued and executed by Debtor, pursuant to the Indenture of Trust (the
"Indenture") dated even date herewith by and between Debtor and Trustee and made
payable to the holders of such Secured Notes in the aggregate principal sum of up to
$15,000,000.00 (hereinafter collectively called the "Note"), together with all other
indebtedness of every kind or nature owing by Debtor to Secured Party, whether now
existing or hereafter incurred, direct or indirect, absolute or contingent, and whether the
indebtedness is from time to time reduced and thereafter increased or entirely
extinguished and thereafter reincurred, and including any sums advanced and any costs
and expenses incurred by Secured Party pursuant to this Agreement, the Note or any
other note or evidence of indebtedness (all of such is herein sometimes referred to as
the "Indebtedness").

2. Security Interest.

For value received, Debtor hereby grants to Secured Party a security interest (the
"Security Interest") in and to all of the following: any and all accounts receivable (the
"Receivables") acquired with the funds constituting the Indebtedness or with funds
received from the repayment of said Receivables or any replacement Receivables,
including all rights to receive payments thereunder and security interest in and
instruments of title to the Receivables, whether now owned or hereafter acquired, all
funds in the following bank account ; all proceeds of the offering
pursuant to the Registration Statement of Debtor declared effective by the Securities and
Exchange Commission on , 1996 (the "Registration Statement"); and in all
products thereof and all cash and non-cash proceeds of any of the foregoing, in any
form, including, without limitation, proceeds of insurance policies from the loss thereof,
all titles to the Receivables and all assignment of liens, all Receivables, assignments or
other documents and instruments located in a separate, segregated, locked fireproof file
cabinet marked "American Equities Income Fund, Inc. - Secured Notes" (the
"Collateral"); provided, however, that the security interest granted hereunder is subject to
the conditions and limitations set forth in the Registration Statement.

3. Representation and Warranties of Debtor.

Debtor represents and warrants and so long as any portion of the Indebtedness
remains unpaid, shall be deemed continuously to represent and warrant that:

3.1. Debtor is the owner of the Collateral free and clear of all security interests or
other encumbrances and claims of any kind or nature in favor of any third persons, and
Secured Party has a first, perfected security interest in all of the Collateral;

3.2. Debtor is authorized to enter into this Agreement and into the transactions
contemplated hereby and evidenced by the Note;

3.3. The Collateral is used or bought for use solely in business operations, and all
of the relevant Collateral will remain personal property regardless of the manner in
which any of it may be affixed to real property.

4. Covenants of Debtor.

Debtor covenants that so long as any Indebtedness remains unpaid, Debtor:

4.1. Will defend the Collateral against the claims and demands of all other parties,
except purchasers of inventory in the ordinary course of business;

4.2. Will keep the Collateral free and clear from all security interests, liens and
other encumbrances and claims of any kind or nature in favor of any third persons,
except the Security Interest; and Debtor will not pledge the Collateral as security for any
debts or obligations other than the Notes;

4.3. Will not sell, pledge, transfer, assign deliver, or otherwise dispose of any
Collateral or any interest therein, except that until the occurrence of an Event of Default
(as defined in paragraph 6.1 of this Agreement) it may deal with the Collateral, including
taking any aforementioned action, as described in the Registration Statement;

4.4. Will keep in accordance with generally accepted accounting principles,
consistently applied, accurate and complete records concerning the Collateral; will mark
such records and, upon request of the Secured Party made from time to time, the
Collateral to give notice of the Security Interest; and will, upon request made from time
to time, permit the Secured Party or its agents to inspect the Collateral and the Debtor's
records concerning the Collateral and to audit and make abstracts of such records or any
of the Debtor's books, ledgers, reports, correspondence and other records;

4.5. Upon demand will deliver to the Trustee any instruments, documents of title
and chattel paper representing or relating to the Collateral or any part thereof, and all
schedules, invoices, shipping, or delivery receipts, together with any required
endorsement or assignment and all other documents representing or relating to
purchases or other acquisitions or sales or other dispositions of the Collateral and the
proceeds thereof and any and all other schedules, documents, and statements.

4.6. Will notify the Secured Party in writing at least thirty (30) days in advance of
any change in the Debtor's address specified on the first page of this Agreement, of any
change in the location or of any additional locations at which the Collateral is kept, of
any change in the address at which records concerning the Collateral are kept and of any
change in the location of the Debtor's residence, chief executive office or principal place
of business;

4.7. Will execute and deliver to the Secured Party such financing statements and
other documents requested by the Secured Party and take such other action as described
in the Registration Statement and subject to the limitations set forth herein, to perfect,
protect or continue the perfection of the Security Interest and effect the purposes of this
Agreement;

4.8. Will pay or cause to be paid when due all taxes, assessments and other
charges of every kind and nature which may be levied or assessed upon or against the
transaction contemplated hereby or the Collateral;

4.9. Will deliver the Collateral to the Trustee pursuant to the Trust Indenture
between the Corporation, and Trustee on behalf of the Secured Party of even date
herewith;

4.10. Will not make any distributions to shareholders or payments to affiliates
except as set forth in the Registration Statement;

4.11. Will use the Collateral only for the purposes set forth in the Registration
Statement and will not commingle the Collateral constituting cash with funds of any
person or entity other than Debtor;

4.12. Upon an Event of Default, will deliver any Collateral in the form of
funds in Debtor's bank account to the Trustee and will surrender control of said accounts
to the Trustee;

4.13. Will keep all funds which constitute the Collateral in the following
segregated Bank Account , and will not commingle any other funds with funds in
said account; and

4.14. Will execute and deliver to the Trustee the Collateral Assignments as
required by the Secured Party.
<PAGE>
5. Verification of Collateral.

Secured Party shall have the right to verify the existence and value of the Collateral in
any manner and through any medium which Secured Party may consider appropriate,
and Debtor shall furnish such assistance and information and perform such acts as
Secured Party may require in connection therewith.

6. Default.

6.1. Events of Default. Subject to the following limitations, an Event of default
occurs if:

a. the Debtor receives written notice from a Secured Party of a default in the
payment of interest on any Note when the same becomes due and payable;

b. the Debtor receives written notice from a Secured Party of a default in the
payment of the principal of any Note when the same becomes due and payable;

c. the Debtor fails to comply with any of its other agreements in the Notes, this
Agreement or the Indenture of Trust and the default continues for the period and after
the notice specified below;

d. the Debtor pursuant to or within the meaning of any Bankruptcy Law;

(1) commences a voluntary case,

(2) consents to the entry of an order for relief against it in any involuntary
case,

(3) consents to the appointment of a Receiver of it or for any substantial part
of its property,

(4) makes a general assignment for the benefit of its creditors, or

(5) fails generally to pay its debts as they become due, or

e. a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

(1) is for relief against the Debtor in any involuntary case,

(2) appoints a Receiver of the Debtor or for any substantial part of its
property, or

(3) orders the liquidation of the Debtor,

and the order or decree remains unstayed and in effect for 90 days.

A default under section (c) is not an Event of Default until the Secured Party holding
at least a majority in principal amount of the Notes notifies the Debtor of the default
and the Debtor does not cure the default within 90 days after receipt of the notice. The
notice must specify the default, demand that it be remedied, and state that the notice is
a "Notice of Default."

6.2. Rights and Remedies Upon Default. If an Event of Default occurs and is
continuing, any Secured Party, by written notice to the Debtor, may declare the principal
of and accrued interest on all the Notes to be due and payable immediately. After a
declaration such principal and interest shall be due and payable immediately.

If an Event of Default occurs and is continuing, any Secured Party may pursue any
available remedy by proceeding at law or in equity to collect the payment of principal
and interest on the Notes or to enforce the performance of any provision of the Notes or
this Agreement.

6.3. Notice. Debtor agrees that any notice by Secured Party of the sale, lease
or other disposition of the Collateral or any other intended action hereunder, whether
required by the Uniform Commercial Code or otherwise, shall constitute reasonable
notice to Debtor if the notice is mailed by regular or certified mail, postage prepaid, at
least ten (10) days before the date of any public sale, lease or other disposition of the
Collateral, or the time after which any private sale, lease or other disposition of the
Collateral is to take place, to Debtor's address as specified in this Agreement or to any
other address which Debtor has notified Secured Party in writing as the address to which
notices shall be given to Debtor.

6.4. Costs. Debtor shall pay all costs and expenses incurred by Secured Party
in enforcing this Agreement, realizing upon any Collateral and collecting any
Indebtedness. Costs and expenses will include but not be limited to all reasonable
attorneys' and paralegals' fees and expenses.

6.5. Deficiency. In the event that the proceeds of the Collateral are
insufficient to satisfy the entire unpaid Indebtedness, Debtor will be responsible for the
deficiency and shall pay the same upon demand. Secured Party will account to Debtor
for any proceeds of the Collateral in excess of the Indebtedness and the costs and
expenses referred to in Section 6.4.

7. Miscellaneous.

7.1. Perfection of Security Interest. Debtor authorizes Secured Party at
Debtor's expense to file any financing statement or statements relating to the Collateral
(with or without Debtor's signature thereon), and to take any other action deemed
necessary or appropriate by Secured Party to perfect and to continue perfection of the
Security Interest. Debtor hereby irrevocably appoints Secured Party as its
attorney-in-fact to execute financing statements in Debtor's name and to perform all
other acts which Secured Party deems necessary or appropriate to perfect and protect
the Security Interest. Such appointment is binding and coupled with an interest. Upon
request of Secured Party before or after the occurrence of an Event of Default, Debtor
agrees to give Secured Party possession of any Collateral, possession of which is, in
Secured Party's opinion, necessary or desirable to perfect or continue perfection or
priority of the Security Interest. A photocopy of this Agreement is sufficient as a
financing statement and may be filed as such if Secured Party so elects.

7.2. Continuing Agreement. This Agreement is a continuing agreement with
respect to the subject matter hereof and shall remain in full force and effect until all of
the Indebtedness now or hereafter contracted for or created or existing and any
extensions or renewals of the Indebtedness together with all interest thereon has been
paid in full.

7.3. Right to Proceeds. Secured Party may demand, collect, and sue for all
proceeds of the Collateral (either in Debtor's or Secured Party's name at the latter's
option) with the right to enforce, compromise, settle, or satisfy any claim. Debtor hereby
irrevocably appoints Secured Party as Debtor's attorney-in-fact to endorse, by writing or
stamp, Debtor's name on all checks, commercial paper, and other instruments pertaining
to the proceeds. Such appointment is binding and coupled with an interest. Debtor also
authorizes Secured Party to collect and apply against the Indebtedness any refund of
insurance premiums or any insurance proceeds payable on account of the loss of or
damage to any of the Collateral and hereby irrevocably appoints Secured Party as
Debtor's attorney-in-fact to endorse, by writing or stamp, any check or draft representing
such proceeds or refund. Such appointment is binding and coupled with an interest.
Before or after an Event of Default, Secured Party may notify any party obligated to pay
proceeds of the Collateral of the existence of the Security Interest and may also direct
them to pay all such proceeds to Secured Party.

7.4. Property in Secured Party's Possession. As further security for the
repayment of the Indebtedness, Debtor grants to Secured Party a security interest in all
property of Debtor which is or may hereafter be in Secured Party's possession in any
capacity, including all monies owed or to be owed by Secured Party to Debtor; and with
respect to all of such property, Secured Party shall have the same rights as it has with
respect to the Collateral.

7.5. Set-Off. Without limiting any other right of secured Party, whenever
Secured Party has the right to declare any Indebtedness to be immediately due and
payable, Secured Party may set off against the Indebtedness all monies then owed to
Debtor by Secured Party in any capacity whether due or not.

7.6. Failure to Perform; Reimbursement. Upon Debtor's failure to perform
any of its duties hereunder, Secured Party may, but it shall not be obligated to, perform
any of such duties and Debtor shall forthwith upon demand reimburse Secured Party for
any expense incurred by Secured Party in doing so with interest thereof at a rate equal to
the lesser of eighteen percent (18%) per annum or the maximum rate permitted by
applicable law.

7.7. Non-Waiver. No delay or omission by Secured Party in exercising any
right or remedy hereunder or with respect to any Indebtedness shall operate as a waiver
of that or any other right or remedy, and no single or partial exercise of any right or
remedy shall preclude Secured Party from any other or future exercise of the right or
remedy or the exercise of any other right or remedy. Secured Party may agree to a cure
of any default by Debtor in any reasonable manner without waiving any other prior or
subsequent default by Debtor.

7.8. Third Parties. Secured Party shall have no obligation to take, and Debtor
shall have the sole responsibility for taking, any steps to preserve rights against all prior
parties to any document of title, general intangible, instrument or chattel paper in
Secured Party's possession as Collateral or proceeds of the Collateral.

7.9. Waiver of Notice of Dishonor and Protest, Etc. Debtor waives dishonor,
protest, presentment, demand for payment, notice of dishonor and notice of protest of
any instrument at any time held by Secured Party with respect of which Debtor is in any
way liable and waives notice of any other action by Secured Party.

7.10. Assignments. Debtor's right and obligations under this Agreement
are not assignable in whole or in part by operation of law or otherwise. Secured Party
may assign its rights and obligations under this Agreement, in whole or in part, without
notice to or consent of Debtor and all of such rights shall be enforceable by Secured
Party's successors and assigns.

7.11. Definitions; Multiple Parties; Section Headings. The term "person"
when referred to herein shall mean an individual, partnership, corporation or any other
legal entity. If more than one Debtor executes this Agreement, the term "Debtor"
includes each of the Debtors as well as all of them, and their obligations under this
Agreement shall be joint and several. Whenever the context so requires, the neuter
gender includes the feminine and masculine and the singular number includes the plural.
Unless otherwise defined herein or the context requires otherwise, terms used herein
shall have the same meaning as defined in the Uniform Commercial Code as enacted by
the State of New Jersey. Section headings are used herein for convenience only and do
not alter or limit the meaning of the language contained in each section.

7.12. Amendment; Waiver. This Agreement may not be modified or
amended nor shall any provision of it be waived except by a written instrument signed by
Debtor and by Secured Party.

7.13. Choice of Law; Waiver of Jury Trial. This Agreement has been
delivered in the State of New Jersey and shall be interpreted, and the rights and
liabilities of the parties hereto determined, in accordance with the internal laws (as
opposed to the conflicts of law provisions) of the State of New Jersey. Debtor and
Secured Party hereby waive any right to a trial by jury in any action to enforce or defend
any matter arising from or related to (i) this Agreement; (ii) any Note; or (iii) any
documents or agreements evidencing or relating to this Agreement or any Note. Debtor
agrees that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in any other jurisdiction by suit on the judgment or in any other
manner provided by law. Nothing in this paragraph shall affect or impair Secured Party's
right to serve legal process in any manner permitted by law, or Secured Party's right to
bring any action or proceeding against Debtor, or the property of Debtor, in the courts
of any other jurisdiction.

7.14. Expenses. Debtor shall pay all costs and expenses relating to this
Agreement and the Indebtedness, including but not limited to, filing and recording fees,
documentary stamps including, without limitation, New Jersey documentary stamps (if
any), and Secured Party's attorney's fees and expenses.

7.15. Notice. Except as otherwise provided herein, any notice required
hereunder shall be in writing and shall be deemed to have been validly served, given or
delivered upon deposit in the United States certified or registered mails, with proper
postage prepaid, addressed to the party to be notified as follows:

a. If to Secured Party at: Sheldon Drobny
c/o Adler, Drobny & Fisher, P.C.
95 Revere Drive, Suite A
Northbrook, IL 60062-1585

b. If to Debtor at: American Equities Income Fund, Inc.
East 80 Route 4, Suite 202
Paramus, NJ 07652

or to such other address as each party may designate for itself by like notice.

7.16. Severability. If any provision of this Agreement is prohibited by, or is
unlawful or unenforceable under, any applicable law of any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such prohibition without
invalidating the remaining provisions hereof; provided, however, that any such
prohibition in any jurisdiction shall not invalidate such provision in any other jurisdiction.

7.17. Reliance by Secured Party. All covenants, agreements,
representations and warranties made herein by Debtor shall, notwithstanding any
investigation by Secured Party, be deemed to be material to and to have been relied
upon by Secured Party.

7.18. Entire Agreement. This Agreement, the Note and the other
instruments, agreements and documents contemplated hereby contain the entire
agreement between Secured Party and Debtor with respect to the subject matter hereof
and supersedes and cancels any prior understanding and agreement between Secured
Party and Debtor with respect thereto.

7.19. Binding Effect. Subject to the provisions of paragraph 7.10, this
Agreement shall be binding upon the heirs, personal representatives, successors and
assigns of Debtor and shall inure to the benefit of the successors and assigns of Secured
Party.

7.20. Time. Time is of the essence in this Agreement.

7.21. Attorney's Fees. The parties hereby agree that in the event any of
the terms and conditions contained in this Agreement, including the indemnification
provisions contained herein, must be enforced by reason of any past, existing or future
delinquency of payment, of failure of observance or of performance by any of the parties
hereto, in each such instance, the defaulting party shall be liable for reasonable collection
and/or legal fees, trial and appellate levels, any expenses and legal fees incurred,
including time spent in supervision of paralegal work and paralegal time, and any other
expenses and costs incurred in connection with the enforcement of any available remedy.

7.22. Capacity. The Secured Party is entering into this Agreement solely in
its capacity as Trustee under the Indenture and shall be entitled to the privileges,
immunities and protections afforded it thereunder in any actions taken by it as Secured
Party hereunder.

IN WITNESS WHEREOF, the parties have executed this Security Agreement the
day and year first above written.

DEBTOR:

AMERICAN EQUITIES INCOME FUND, INC.

By:
David S. Goldberg, Chairman and CEO

SECURED PARTY:

By:
Sheldon Drobny,
Trustee

<PAGE>
SCHEDULE A

Collective List of Persons
Constituting the Secured Party

<PAGE>
EXHIBIT C

INDENTURE OF TRUST

This Indenture of Trust is dated as of the day of , 1996, by and
between AMERICAN EQUITIES INCOME FUND, INC., a Delaware corporation (the
"Company"), and , a trust company (the
"Trustee").

Each party agrees as follow for the benefit of the other party and for the equal and
ratable benefit of the Holders of the Company's Secured Notes due on September 30,
2006.

NOW, THEREFORE, for valuable consideration, the receipt, adequacy, and
sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE 1

Definitions and Incorporation by Reference

Section 1.01 Definitions.

"Collateral" means the collateral as described in the Security Documents.

"Company" means the party named as such in this Indenture until a successor replaces
it and thereafter means the successor.

"Default" means any event which is, or after notice or lapse of time or both would be,
an Event of Default.

"Holder" or "Note Holders" means the person in whose name a Note is registered on
the Registrar's books.

"Indenture" means this Indenture of Trust, as amended or supplemented from time to
time.

"Notes" means the Secured Notes of the Company issued pursuant to this Indenture.

"Officer" means the Chairman of the Board, the CEO, the President, any Vice
President, the Treasurer, or the Secretary of the Company.

"Officer's Certificate" means a certificate signed by an Officer or by an Assistant
Treasurer or Assistant Secretary of the Company.

"SEC" means the Securities and Exchange Commission.

"Security Agreement" means the Security Agreement which provides that the assets
described in Exhibit "B" hereto are pledged as security for the Notes.

"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77 aaa, et seq.) as
in effect on the date of this Indenture.

"Trustee" means the party named as such in this Indenture until a successor replaces
it and thereafter means the successor.

"Trust Officer" means any officer or assistant officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.

Section 1.02 Other Definitions.

Term Defined in Section

"Bankruptcy Law" 5.01

"Legal Holiday" 7.09

"Paying Agent" 2.03

"Registrar" 2.03

"Receiver" 5.01

Section 1.03 Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following TIA
terms used in this Indenture have the following meanings:

"Commission" means the SEC.

"Indenture Securities" means the Notes.

"Indenture Security Holder" means a Note Holder.

"Indenture to be Qualified" means this Indenture.

"Obligor" on the Indenture Securities means the Company.

All other TIA terms used in this Indenture that are defined by the TIA, defined by
TIA reference to another statute, or defined by SEC rule have the meanings assigned to
them.

Section 1.04 Rules of Construction.

Unless the context otherwise requires:

(a) a term the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles;

(d) words in the singular include the plural, and in the plural include the singular.

ARTICLE 2

The Securities

Section 2.01 Form and Dating.

The Notes shall be substantially in the form of Exhibit "A" attached hereto. The
Notes may have notations, legends, or endorsements required by law or usage. The
Company shall approve the form of the Notes and any notation, legend, or endorsement
on them. Each Note shall be dated the date of its issuance.

Section 2.02 Execution and Authentication.

An Officer shall sign and authenticate the Notes. Execution of the Notes is permitted
by the manual or facsimile signature of the obligor and authentication may be made by
manual signature. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture. If an Officer who signed a Note no longer holds
that office at a later date, the Note shall be valid nevertheless.

The aggregate principal amount of Notes outstanding at any time may not exceed
$15,000,000. Note dominations of $2,000 or any multiple thereof are authorized.

Section 2.03 Registration and Payment.

The Company shall act as Registrar and Paying Agent for purposes of registration or
transfer of the Notes. The Company shall keep a register of the Notes and of their
transfer and exchange. Notes shall be presented to the Company for payment.

Section 2.04 Note Holder Lists.

The Trustee shall preserve the most recent list provided to it by the Company of the
names and addresses of Note Holders. At the end of each month during the offering to
the end of each six months after the close of the offering, the Company shall furnish to
the Trustee and at such other times as the Trustee may request in writing a list in such
form and as of such date of the names and addresses of Note Holders. The Trustee may
conclusively rely on such list.

Section 2.05 Registration, Transfer, and Exchange.

When a Note is presented to the Registrar or a Co-registrar with a request to register
transfer, the Registrar shall register the transfer as requested if the requirements of the
Delaware Uniform Commercial Code are met. To permit transfer and exchanges of the
type provided for in Section 6.05, an Officer shall authenticate Notes at the registrar's
request. The Company may charge a reasonable fee for any transfer, but not for any
exchange pursuant to Section 6.05.

ARTICLE 3

Trustee

Section 3.01 Acceptance of Trust.

The Trustee hereby accepts the appointment as Trustee under the terms and
conditions hereof.

Section 3.02 Duties of Trustee.

(a) Upon the occurrence of an Event of Default, the Trustee shall hold the
Collateral under the Security Agreement in trust for the benefit of the Note Holders and
exercise any rights granted to it under the Security Agreement.

(b) If an Event of Default has occurred and is continuing, the Trustee shall exercise
its rights and powers and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the conduct of his own
affairs.

(1) The Trustee shall perform only those duties that are specifically set forth in
this Indenture and no others.

(2) In the absence of bad faith on its part, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the statements expressed therein,
upon certificates and opinions furnished to the Trustee and confirming to the
requirements of this Indenture.

(d) The Trustee may not be relieved from liability for his own negligent action, his
own negligent failure to act, or his own willful misconduct, except that:

(1) This paragraph does not limit the effect of Paragraph (c) of this Section.

(2) The Trustee shall not be liable for any error of judgment made in good faith
unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

(3) The Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section 5.05.

(e) Every provision of this Indenture that in any way relates to the Trustee is subject
to Paragraphs (b), (c),and (d) of this Section.

(f) The Trustee may refuse to perform any duty or exercise any right or power unless
it receives indemnity satisfactory to it against any loss, liability, or expense.

(g) The Trustee shall not be liable for interest on any money received by it except as
otherwise agreed with the Company.

(h) The Trustee shall execute and deliver to the Company the satisfactions of
Security Documents as provided for in Section 4.01(b).

(i) The Trustee is authorized and directed to enter into the Security Agreement on
behalf of the Note Holders solely in its capacity as Trustee under the Indenture.

Section 3.03 Rights of Trustee.

(a) The Trustee may rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officer's
Certificate or an opinion of counsel. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on the Officer's Certificate or opinion.
The Trustee may consult with counsel and any advice or opinion of counsel shall be full
and complete protection in respect of any action taken or not taken by it hereunder in
reliance upon such advice or opinion of counsel.

(c) The Trustee may act through agents and attorneys and shall not be responsible
for the misconduct or negligence of any agent or attorney appointed with due care.

(d) The Trustee shall not liable for any action it takes or omits to take in good faith
which it believes to be authorized or within its rights or powers.

(e) The Trustee shall have no duty or obligation to monitor the actions of any
services of the Collateral under the Security Documents or act as successor servicer for
such Collateral.

Section 3.04 Trustee`s Disclaimer.

The Trustee makes no representation as to the validity or adequacy of this Indenture,
the Security Agreement or the Notes. The recitals contained herein and in the Notes
shall be taken as statements of the Company and the Trustee assumes no responsibility
for their correctness. The Trustee shall not be accountable for the Company's use of
the proceeds from the Notes, and it shall not be responsible for any statement in the
Notes or in any prospectus used in the sale of the Notes.

Section 3.05 Individual Rights of Trustee, Etc.

The Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Company with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, or Co-registrar may do the same with
like rights. The Trustee, however, must comply with Sections 3.11 and 3.12.

Section 3.06 Notice of Defaults.

If an Event of Default occurs and is continuing and if it is known to the Trustee, the
Trustee shall mail as provided in Section 7.02 notice of the Event of Default to the Note
Holders within 90 days after it occurs. Except in the case of a default in payment of any
Note, the Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interests of the
Note Holders.

Section 3.07 Reports by Trustee to Holders.

If required under the provisions of TIA Section 313(a), within 60 days after each
December 31st beginning with the December 31st following the date of this Indenture,
the Trustee shall provide to the Note Holders specified in TIA Section 313(c) a brief
report dated as of such December 31st that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b).

Within the time period provided for in TIA Section 313(b), the Trustee shall provide
to those Note Holders specified in TIA Section 313(c) the brief reports required by TIA
Section 313(b).

A copy of each report at the time of its mailing to Note Holders shall be filed with
the SEC and each stock exchange on which the Securities are listed. The Company shall
notify the Trustee if the Securities are listed on any stock exchange.

Section 3.08. Compensation and Indemnity.

The Company agrees:

(a) to pay the Trustee from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by a provision of law
in regard to the compensation of the trustee of an express trust);

(b) to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee (including the reasonable
compensation, disbursements and expenses of its agents and counsel), except any such
expenses of disbursements as may be attributable to its negligence or bad faith; and

(c) to indemnify the Trustee for, and to hold it harmless against any loss, cost,
liability, claim or expense incurred without negligence or bad faith on its part related to
or arising out of the acceptance of and administration of the duties of the Trustee
hereunder, including, without limitation, the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The Company shall reimburse the Trustee upon its request
for any legal expenses in connection with the foregoing.

To secure the Company's payment obligations in this Section, the Trustee shall have a
lien prior to the Notes on all money or property held or collected by the Trustee. The
obligations of the Company in this Section shall survive the discharge of this Indenture
or resignation or removal of the Trustee.

Section 3.09 Replacement of Trustee.

The Trustee may resign by so notifying the Company, but such resignation shall not
be effective until the date set forth in this Section 3.09 below. The Holders of a majority
in principal amount of the Notes may remove the Trustee by so notifying the removed
Trustee and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:

(a) the Trustee fails to comply with Section 3.11;

(b) the Trustee is adjudged a bankrupt or an insolvent;

(d) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for
any reason, the Company shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Company. Immediately after that the retiring Trustee shall
transfer all property held by it as Trustee to the successor Trustee, the resignation or
removal of the retiring Trustee shall become effective, and the successor Trustee shall
have the rights, powers, and duties of the Trustee under this Indenture. A successor
Trustee shall give notice of its succession to each Note Holder as provided in Section
7.02.

If a successor Trustee does not take office within 60 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company, or the Holders of a majority in
principal amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

If the Trustee fails to comply with Section 3.11, any Note Holder may petition any
court of competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.

Section 3.10 Successor Trustee by Merger, Etc.

If the Trustee consolidates with, mergers or converts into, or transfers all or
substantially all of its corporate trust business to another corporation, the resulting,
surviving, or transferee corporation without any further act shall be the successor
Trustee.

Section 3.11 Eligibility; Disqualification.

This Indenture shall always have a Trustee who satisfies the requirements of TIA
Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least
$150,000 as set forth in its most recent published annual report of condition. The
Trustee shall comply with TIA Section 310(b).

Section 3.12 Preferential Collection of Claims Against Corporation.

The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship
listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated therein.

Section 3.13 Co-Trustee.

At any time for the purpose of meeting any legal requirements of any jurisdiction,
including in case of the exercise of any rights or remedies of the Trustee upon an Event
of Default hereunder, the Company and the Trustee acting jointly shall have the power
to appoint an additional institution or individual as a separate or co-trustee and to vest
in such separate or co-trustee such powers, duties, obligations and rights as the Trustee
and the Company may consider necessary or desirable. If the Company shall not join in
such appointment within fifteen days after receipt of a request of the Trustee to do so,
or if an Event of Default shall have occurred and be continuing, the Trustee alone shall
have the power to make such appointment.

Upon the appointment of a separate or co-trustee, all rights, powers, duties and
obligations conferred or imposed upon the Trustee may be exercised and performed by
the Trustee and such separate or co-trustee jointly except to the extent that under any
law in any jurisdiction in which any act or acts are to be performed the Trustee shall not
be permitted or qualified to perform such act or acts in which event such act or acts shall
be exercised and performed by the separate or co-trustee at the written direction of the
Trustee.

ARTICLE 4

Covenants

Section 4.01 Payment of Notes.

(a) The Company shall promptly pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes.

(b) Simultaneously with the mailing of monthly interest payments to the Note
Holders, the Company shall deliver to the Trustee an Officer's Certificate stating that
such payment has been made. The same procedure shall be followed with respect to the
payment of the principal on the Notes. Upon the receipt by the Trustee of an Officer's
Certificate that any Notes have been paid in full and compliance with the requirements
of TIA Section 314(d), the Trustee shall execute and deliver to the Company a partial
satisfaction of the Security Agreement in recordable form furnished to it by the
Company, which the Company may record in the Public Records and upon such delivery
to the Trustee of an Officer's Certificate that all Notes have been paid in full and
compliance with the requirements of TIA Section 314(d) (together will all accrued
interest), the Trustee shall execute and deliver to the Company a full satisfaction of the
Security Agreement to the extent furnished to it by the Company and the Trustee and
the Company shall be relieved of all further obligations hereunder except as provided in
Section 3.08 hereof.

Section 4.02 Compliance Certificate.

The Company shall deliver to the Trustee within 120 days after the end of each fiscal
year of the Company an Officer's Certificate stating whether or not the signers know of
any default by the Company in performing its covenants in Article 4. If they do know of
such default, the Officer's Certificate shall describe the default. The Officer's Certificate
need not comply with Section 7.06. The first Officer's Certificate shall be delivered to
the Trustee by
.

Section 4.03 SEC Reports.

The Company shall file with the Trustee within 15 days after it files them with the
SEC copies of the annual reports and of the information, documents, and other reports
(for copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. The Company also shall
comply with the other provisions of TIA Section 314(a).

ARTICLE 5

Defaults and Remedies

Section 5.01 Events of Default.

Subject to the limitations set forth in this Article 5, an Event of Default occurs if:

(1) the Company receives written notice from a Note Holder of a default in the
payment of interest on any Note when the same becomes due and payable;

(2) the Company receives written notice from a Note Holder of a default in the
payment of the principal of any Note when the same becomes due and payable;

(3) the Company fails to comply with any of its other agreements in the Notes, the
Security Agreement, or this Indenture and the default continues for the period and after
the notice specified below;

(4) the Company pursuant to or within the meaning of any Bankruptcy Law:

(a) commences a voluntary case,

(b) consents to the entry of an order for relief against it in any involuntary case,

(d) makes a general assignment for the benefit of its creditors, or

(e) fails generally to pay its debts as they become due; or

(5) a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:

(a) is for relief against the Company in an involuntary case,

(b) appoints a Receiver of the Company or for any substantial part of its
property, or

A default under section (3) is not an Event of Default until the Trustee or the
Holders of at least a majority in principal amount of the Notes notify the Company of
the default and the Company does not cure the default within 90 days after receipt of
the notice. The notice must specify the default, demand that it be remedied, and state
that the notice is a "Notice of Default."

Section 5.02 Acceleration.

If an Event of Default occurs and is continuing either: (a) the Trustee, by written
notice to the Company or (b) the Holder of any Note, by written notice to the Company
and the Trustee, may declare the principal of and accrued interest on all the Notes to be
due and payable immediately. After a declaration such principal and interest shall be
due and payable immediately.

Section 5.03 Other Remedies; Limitation.

Subject to the provisions of the preceding paragraph, if an Event of Default occurs
and is continuing, the Trustee or any Note Holder with respect to an Event of Default
under Sections 5.01(1) and (2) may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal and interest on the Notes or to enforce the
performance of any provision of the Notes, the Security Agreement or this Indenture.

Notwithstanding anything to the contrary in this Agreement, the Trustee is required
to proceed against and liquidate all Collateral before looking to any other assets of the
Debtor.

Section 5.04 Postponement of Interest Payment; Waiver of Defaults.

The Holders of not less than 75 per centrum in Notes at the time outstanding may
consent on behalf of the holders of such Notes to the postponement of any interest
payment for a period not exceeding three years from its due date. This is an exception
to the rights of Note Holders under Section 316(b) of the TIA. The Holders of a
majority of the Notes may consent to the waiver of any past default and its
consequences, except a default in payment of principal and interest or any other waiver
prohibited under Section 6.02.

Section 5.05 Control by Majority.

The Holders of a majority in principal amount of the Notes may direct the time,
method, and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture, that is unduly prejudicial to
the rights of other Note Holders, or that may involve the Trustee in personal liability.

Section 5.06 Limitation on Suits.

A Note Holder may not use this Indenture to prejudice the rights of another Note
Holder or to obtain a preference or priority over the other Note Holders.

A Note Holder may not institute any suit, if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under applicable law, result
in the surrender, impairment, waiver, or loss of the lien of the Indenture upon any
property subject to such lien.

Section 5.07 Priorities.

If the Trustee collects any money pursuant to this Article, it shall pay out the money
in the following order:

First: to the Trustee for amount due under Section 3.08;

Second: to Note Holders for amounts due and unpaid on the Notes for interest,
the principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal and interest; and

Third: to the Company.

The Trustee may fix a record date and payment date for any payment to the Note
Holders.

ARTICLE 6

Amendments, Supplements, and Waivers

Section 6.01 Without Consent of Holders.

The Company may amend or supplement this Indenture or the Notes without notice
to or consent of any Note Holder to cure any ambiguity, omission, defect, or
inconsistency; or to make any change that does not adversely affect the rights of any
Note Holder.

Section 6.02 With Consent of Holders.

The Company may amend or supplement this Indenture, the Security Agreement, or
the Notes without notice to any Note Holder but with the written consent of the Holders
of not less than a majority in principal amount of the Notes. The Holders of a majority
in principal amount of the Notes may waive compliance by the Company with any
provision of this Indenture, the Security Agreement, or the Notes without notice to any
Note Holder. Without the consent of each Note Holder affected, however, an
amendment, supplement, or waiver, except the waiver pursuant to Section 5.04, may not:

(1) reduce the amount of Notes whose Holders must consent to an amendment,
supplement or waiver;

(2) reduce the rate or extend the time for payment of interest on any Note;

(3) reduce the principal of or extend the fixed maturity of any Note;

(4) make any Note payable in money other than that stated in the Note;

(5) waive a default on payment of principal or of interest on any Note; or

(6) impair the right to institute suit to enforce payments due on any Note on or after
the respective due dates.

Section 6.03 Compliance with Trust Indenture Act.

Every amendment to or supplement of this Indenture, the Security Agreement, or the
Notes shall comply with the TIA as then in effect.

Section 6.04 Revocation and Effect of Consents.

A consent to an amendment, supplement, or waiver by a Holder of a Note shall bind
the Holder and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. Any such Holder or subsequent Holder, however, may revoke the
consent as to his Note or portion of the Note. The Trustee must receive the notice of
revocation before the date the amendment, supplement, or waiver becomes effective.

After an amendment, supplement, or waiver becomes effective, it shall bind every
Note Holder unless it makes a change described in Sections 6.02(2) through (5). In that
case the amendment, supplement, or waiver shall bind each Holder of a Note who has
consented to it and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note.

Section 6.05 Notation on or Exchange of Securities.

If an amendment, supplement, or waiver changes the terms of a Note, the Company
may require the Holder of the Note to deliver it to the Company. The Company may
place an appropriate notation on the Note about the changed terms and return it to the
Holder. Alternatively, if the Company so determines, the Company in exchange for the
Note shall issue and the Company shall authenticate a new Note that reflects the
changed terms.

Section 6.06 Trustee to Sign Amendments, Etc.

The Trustee shall sign any amendment, supplement, or waiver authorized pursuant to
this Article if the amendment, supplement, or waiver does not adversely affect the rights
of the Trustee. If it does, the Trustee may but need not sign it.

The Trustee may rely upon an Officer's Certificate and an opinion of counsel as
conclusive evidence that any amendment, supplement or waiver complies with the
provisions of this Indenture.

ARTICLE 7

Miscellaneous

Section 7.01 Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies, or conflicts with another provision
which is required to be included in this Indenture by the TIA, the required provision
shall control.

Section 7.02 Notices.

Any notice or communication shall be sufficiently given if in writing and delivered in
person or mailed by first-class mail addressed as follows:

If to the Company: American Equities Income Fund, Inc.
East 80 Route 4, Suite 202
Paramus, NJ 07652

If to the Trustee:

The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.

Any notice or communication to Note Holders shall be sufficiently given if mailed by
first-class mail to each Registered Note Holder.

Any notice or communication mailed to a Note Holder shall be mailed to him at his
address as it appears on the lists or registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.

Failure to give notice or communication to a Note Holder or any defect in it shall not
affect its sufficiency with respect to other Note Holders. If a notice or communication is
mailed, it is duly given, whether or not the Note Holder receives or reads it.

Section 7.03 Communication by Holders with Other Holders.

Within five business days after the receipt by the Trustee of a written application by
any three or more Note Holders stating that the applicants desire to communicate with
other Note Holders with respect to their rights under this Indenture or under the Notes,
and accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, and by reasonable proof that each such applicant has
owned a Note for a period of at least six months preceding the date of such application,
the Trustee shall, at its election, either (1) afford to such applicants access to all
information so furnished to or received by the Trustee, or (2) inform such applicants as
to the approximate number of Note Holders according to the most recent information so
furnished to or received by the Trustee, and as to the approximate cost of mailing to
such Note Holders the form of proxy or other communication, if any, specified in such
application. If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants, mail to all
such Note Holders copies of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the Trustee of
the material to be mailed and of payment, or provision for payment, of the reasonable
expenses of such mailing, unless within five days after such tender, the Trustee shall mail
to such applicants, and file with the SEC together with a copy of the material to be
mailed, a written statement to the effect that, in the opinion of Trustee, such mailing
would be contrary to the best interests of the Note Holders or would be in violation of
applicable law. Such written statement shall specify the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement so filed,
the SEC may, and if demanded by the Trustee or by such applicants shall, enter an order
either sustaining one or more of such objections or refusing to sustain any of them. If
the SEC shall enter an order refusing to sustain any of such objections, or if, after the
entry of an order sustaining one or more of such objections, the SEC shall find, after
notice and opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Trustee shall mail copies of such material to all
such Note Holders with reasonable promptness after the entry of such order and the
renewal of such tender.

Section 7.04 Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee an Officer's Certificate
stating that, in the opinion of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with.

Section 7.05 Certificates of Fair Value.

The Company shall furnish to the Trustee a certificate or opinion of an appraiser or
other expert as to the fair value of any property or securities to be released from the lien
of the Security Agreement, which certificate or opinion shall state that in the opinion of
the person making the same the proposed release will not impair the security under the
Security Agreement in contravention of the provisions thereof, and requiring further that
such certificate or opinion shall be made by an independent appraiser, or other expert, if
the fair value of such property or securities and of all other property or securities
released since the commencement of the then current calendar year, as set forth in the
certificates or opinions required by this Section 7.05, is 10% or more of the aggregate
principal amount of the Notes at the time outstanding; but such a certificate or opinion
of an independent appraiser or other expert shall not be required in the case of any
release of property or securities, if the fair value thereof as set forth in the certificate or
opinion required by this paragraph is less than $25,000 or less than 1% of the aggregate
principal amount of the Notes at the time outstanding.

Any such certificate or opinion may be made by an officer or employee of the
Company who is duly authorized to make such certificate or opinion by the Company
from time to time except in cases in which this Section requires that such certificate or
opinion be made by an independent person, in which case, the certificate of opinions
shall be made by an independent appraiser, or other expert selected or approved by the
Trustee in the exercise of reasonable care. The Trustee shall not be liable for any such
expense or for the actions or omissions of such independent appraiser or other expert.

Section 7.06 Statements Required in Certificate and Opinion.

Each certificate or opinion with respect to compliance with a condition or covenants
in this Indenture shall include:

(1) a statement the person making such certificate has read such covenant or
condition;

(2) a brief statement as to the nature and scope of the examination or investigation
upon which the statements contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such person, such condition
or covenant has been complied with.

Section 7.07 When Treasury Securities Disregarded.

In determining whether the Holders of the required principal amount of Notes have
concurred in any direction, waiver, or consent, Notes owned by the Company or by any
person directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such direction,
waiver, or consent, only Notes which the Trustee knows are so owned shall be
disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be
considered in any such determination.

Section 7.08 Action by Note Holders.

Whenever in this Indenture it is provided that the Holders of a specified percentage
in aggregate principal amount of the Notes may take any action (including the making of
any demand or request, the giving of any notice, consent, or waiver, or the taking of any
other action), the fact that at the time of taking any such action the Holders of such
specified percentage have joined therein may be evidenced by any instrument or any
number of instruments of similar tenor executed by Note Holders in person or by agent
or proxy appointed in writing.

Section 7.09 Legal Holidays.

A "Legal Holiday" is a Saturday, a Sunday, a legal holiday, or a day on which banking
institutions are not required to be open. If a payment date is a Legal Holiday at a place
of payment, payment may be made at that place on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period.

Section 7.10 Governing Law.

This Indenture, the Security Documents, and the Notes shall be governed by the laws
of the State of New Jersey provided the duties and responsibilities of the Trustee shall
be construed under the laws of the jurisdiction of its organization or incorporation
applied without giving effect to any conflicts-of-law principles.

Section 7.11 No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan, or debt
agreement of the Company. Any such indenture, loan, or debt agreement may not be
used to interpret this Indenture.

Section 7.12 No Recourse Against Others.

All liability of any director, officer, employee, or stockholder, as such, of the
Company is waived and released.

Section 7.13 Successors.

All agreements of the Company in this Indenture, the Security Documents, and the
Notes shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.

Section 7.14 Duplicate Originals.

The parties may sign any number of copies of this Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement.

IN WITNESS WHEREOF, the parties have signed this Indenture as of the day and
year first above written.

COMPANY:

AMERICAN EQUITIES INCOME FUND, INC.,
a Delaware corporation

By:
David S. Goldberg,
Chairman and CEO

TRUSTEE:

STATE OF )
)ss.:
COUNTY OF )

The foregoing Indenture of Trust was acknowledged before me this day of
, 199 , by David S. Goldberg, as Chairman and CEO of AMERICAN
EQUITIES INCOME FUND, INC., a Delaware corporation, on behalf of the
corporation. He [is personally known to me] [has produced as
identification] and [did] [did not] take an oath.

Notary Public

My Commission Expires: Print Name:

STATE OF )
)ss.:
COUNTY OF )

The foregoing Indenture of Trust was acknowledged before me this day of
, 199 , by , as Trustee of AMERICAN EQUITIES
INCOME FUND, INC. He [is personally known to me] [has produced
as identification] and [did] [did not] take an oath.

Notary Public

My Commission Expires: Print Name:<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
INVESTOR QUESTIONNAIRE

__ INITIAL SUBSCRIPTION
__ ADDITIONAL INVESTMENT: Account Number Previously Assigned
______________________________________________________________________________

INVESTMENT
I desire to purchase ___________ Units for a total investment of $__________________in
American Equities Income Fund, Inc.
MAKE CHECKS PAYABLE TO: Republic National Bank - AEIF
______________________________________________________________________________
SUBSCRIBER INFORMATION: Please print name(s) in which Units are to be
acquired. All checks and correspondence will go to this address unless another address
is listed in the Investor Mailing or Direct Deposit Address sections.

Name (1st)____________________________________ Mailing address (if different)

Name (2nd)____________________________________ Name ________________________

Address ______________________________________ Address ______________________

City _________________________________________ City _________________________

State_________________ Zip Code______________ State________ Zip Code __________

Custodian Account No._______________ Daytime Telephone Number (___) - ___ -____

Occupation_______________________________________________
___ U.S. Citizen ___ Resident Alien ___ Foreign Resident
Country___________________________
___ Check if the Subscriber is a U.S. citizen residing outside the U.S. State in which
taxes are paid_______________
ALL SUBSCRIBERS: State of Residence of Subscriber/ (required)
___________________
Enter the taxpayer identification number below. For most individual taxpayers, it is their
Social Security number. Note: If the purchase is in more than one name, the number
should be that of the first person listed. For IRA's, Keoghs, and qualified plans, enter
both the Social Security number and the taxpayer identification number for that plan.

Taxpayer ID #___-___________ and/or Social Security # ________-________-________

DIRECT DEPOSIT ADDRESS: Investors requesting direct deposit of distribution
checks to another financial institution or mutual fund, please complete below. In no
event will the Company or Affiliates be responsible for any adverse consequences of
direct deposit. IRA accounts must have a custodian.

Company/Custodian___________________________________________________________

Account No.___________________________________________________________________

Address_______________________________________________________________________

City _________________________ State__________ Zip Code______-_______________

FORM OF OWNERSHIP: (Select only one)
__ INDIVIDUAL __ JOINT TENANTS WITH RIGHT OF
SURVIVORSHIP- all parties must sign
__ HUSBAND AND WIFE, __ A MARRIED PERSON/
AS COMMUNITY PROPERTY- SEPARATEPROPERTY
two signatures required - one signature required
__ KEOGH (H.R.10)-trustee signature required
__ TENANTS IN COMMON __ CUSTODIAN-custodian
signature required
__ TENANTS BY THE ENTIRETY-two signatures required __ PARTNERSHIP
(authorization required)
__ CORPORATIONS __ NON-PROFIT
ORGANIZATION
__ S-Corporation __ PENSION PLAN-trustee signature(s)
required
__ C-Corporation __ PROFIT SHARING PLAN-trustee
signature(s)
required
__ IRA- custodian signature required __ CUSTODIAN
UGMA-STATE of _______ - custodian signature required
__ SEP- custodian signature required __ CUSTODIAN UTMA-STATE of
_______ -
custodian signature required
__ TAXABLE TRUST __ ESTATE-Personal Representative
signature required

__ TAX-EXEMPT TRUST __ REVOCABLE GRANTOR
TRUST-grantor
signature required
__ IRREVOCABLE TRUST - trustee signature required

BROKER/DEALER REGISTERED REPRESENTATIVE INFORMATION (To be
completed by Registered Representative.)
PLEASE PRINT
Broker/Dealer Firm
Name:________________________________________________________________________
Name of Selling
Representative:_______________________________________________________________

Representative's
Office:_______________________________________________________________________
(Street) (City)
______________________________________________________________________________
(State) (Zip) (Office Phone)

Sales Representative Signature:
______________________________________________________________________

INTEREST DISTRIBUTION: Please check the method below which describes your
desired plan of interest distribution.
__ Monthly beginning on the first day of the fourth month from the date of issuance of
the Notes.
__ Annually on the 31st day of December, of each year the Notes are outstanding,
compounded on a monthly basis.
__ Upon Maturity - interest may be compounded on monthly basis and paid with
principal at maturity.

SUBSCRIBER SIGNATURES: (The undersigned has the authority to enter into this
subscription agreement on behalf of the person(s) or entity registered above.
I (We) certify under penalty of perjury that this is my (our) correct Social Security
Number (or Tax Identification Number) and that interest income on this
account should be reported on this number. I acknowledge and agree to the statement
on the reverse side hereof.)

X__________________________________________ Date___________
Authorized Signature of 1st Subscriber
X__________________________________________ Date___________
Authorized Signature of 2nd Subscriber

COMPANY'S ACCEPTANCE (To be completed only by an authorized representative of
the Company.)

The Foregoing subscription accepted this_____________________________________day
of ________________________________, 19_____________.

______________________________________________
Authorized Representative of the Company

SUBSCRIPTION AGREEMENT
AMERICAN EQUITIES INCOME FUND, INC.

The undersigned hereby subscribes to acquire Units in American Equities Income
Fund, Inc. (the "Company") pursuant to the terms set forth in the Company's Prospectus
dated _________________ (the "Prospectus").

By signing and returning this Subscription Agreement, you are acknowledging that:

- You have received a copy of the Prospectus of American Equities Income Fund,
Inc. and you have assented to all the terms and conditions of the Company's Fund
Agreement.

- You are at least 21 years old and reside in the state indicated by you on the reverse
side of this Subscription Agreement.

- You confirm that you have either (i) annual gross income of at least $35,000 and a
net worth of at least $50,000 (exclusive of home, home furnishings and automobiles) or
(ii) a net worth of at least $75,000 (exclusive of home, home furnishings, and
automobiles).

- You confirm that you satisfy the particular suitability standard of your state
residence as set forth in the Prospectus under "SUITABILITY STANDARDS - WHO
CAN INVEST?"

<PAGE>
EXHIBIT E

June 19, 1996

American Equities Income Fund, Inc.
c/o American Equities Group, Inc.
East 80 Route 4, Suite 202
Paramus, NJ 07652

Gentlemen:

We have acted as legal counsel in connection with the organization of, and offering of
promissory notes (the "Notes") in denominations of $1,000 each in American Equities
Income Fund, Inc., a Delaware corporation. You have asked us to advise you with
respect to certain tax issues relating to the Company.

For purposes of this letter, any capitalized term not otherwise defined herein shall
have the meaning given to it in the Registration Statement, as defined below. For
purposes of this letter, we have examined the following documents:

(a) A copy of the Company's Registration Statement on Form SB-2, as amended,
as filed with the Securities and Exchange Commission on March 28, 1996 (the
"Registration Statement").

(b) Copy of the Certificate of Incorporation of the Company as filed with the
Secretary of State of Delaware on March 11, 1996 (the "Certificate of Incorporation")
and amendments thereto.

(c) Copies of the By-laws, Resolutions and Stock Ledger of the Company (the
Corporate Books and Records") as of the date hereof.

(d) A Representation Certificate of the Chief Executive Officer of the Company.

Please be advised that we have relied upon all representations made and factual
matters stated in the foregoing documents and have not assumed any responsibility for
making any independent investigation or verification of (i) any factual matter stated in or
represented by any of the foregoing documents or (ii) any other factual matter, except to
obtain, where we deemed appropriate, written representations or certificates (including
the Representation Certificate referenced above) of officers of the Company or other
persons.

In rendering our advice, we have examined the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the existing and proposed
Treasury Regulations interpreting the pertinent provisions of the Code, the existing
published rulings by the Internal Revenue Service (the "Service"), reported judicial and
administrative decisions, present administrative practices and other relevant authorities
and interpretations, all through the date hereof, which we consider appropriate for
purposes of this letter. Because all of such Code provisions, regulations, rulings,
decisions and other interpretations are subject to change, our conclusions are specifically
based upon the Code provisions, regulations, rulings, decisions and other interpretations
as in effect on the date of this letter.

In giving this opinion, we have considered and followed the guidelines of Formal
Opinion 346 (revised) of the American Bar Association Standing Committee on Ethics
and Professional Responsibility, issued January 29, 1982, as well as the regulations
governing practice before the Service, issued by the U.S. Department of the Treasury on
February 23, 1984.

Our opinion is expressly conditioned upon both the initial and the continuing
fulfillment at all times during the existence of the Company of the following
requirements stated in certain Regulations and Revenue Procedures published by the
Service: (1) the Company is organized and will be operated at all times during its
existence in accordance with state statutes concerning corporate powers and corporate
actions; and (2) the Company will not undertake any action inconsistent with the
representations made to us as of the date of this letter.

ASSUMPTIONS

For purposes of this letter, we have assumed the following:

(a) The Company is organized as a C corporation and has only one authorized
class of stock;

(b) All Note holders will be either citizens or residents of the United States;

(d) Certain other assumptions set forth in the section of the Registration
Statement captioned "Tax Aspect" are true as of the date of this letter.

OPINION

Based upon and subject to the qualifications set forth in this letter, we advise you
as follows:

1. Subject to the assumptions, qualifications and limitations set forth in this letter
and in the section of the Registration Statement captioned "Tax Aspects," it is more
likely than not that the Company would prevail on the merits of each material Federal
tax issue (other than those Federal tax issues which involve inherently factual questions,
as to which we express no conclusion), if challenged and litigated before a court of
competent jurisdiction, to the same extent as concluded in the section of the Registration
Statement captioned "Income Tax Considerations."

2. The issue of whether or not the Company's Notes issued to investors would be
categorized as debt or equity under the Code and Regulations is basically a factual issue
on which the courts have differed. There are no simple tests for the resolution of
debt-equity questions. The Courts have stated that each debt-equity case must be judged
on its own unique fact situation. Tomlinson v. The 1661 Corporation, 377 F.2d 291 (5th
Cir. 1967). Some of the determining factors as to whether an investment would be
considered debt or equity utilized by the courts are as follows:

(1) the names given to the certificates evidencing the indebtedness; (2) the
presence or absence of a maturity date; (3) the source of the payments; (4) the right to
enforce the payment of principal and interest; (5) participation in management; (6) a
status equal to or inferior to that of regular corporate creditors; (7) the intent of the
parties; (8) 'thin' or adequate capitalization; (9) identity of interest between creditor and
stockholder; (10) payment of interest only out of 'dividend' money; (11) the ability of the
corporation to obtain loans from outside lending institutions. Montclair, Inc. v.
Commissioner, 318 F.2d 38 (5th Cir. 1963)); (12) the extent to which the initial advances
were used to acquire capital (Janeway v. Commissioner, 147 F.2d 602 (2d Cir. 1945);
and (13) the failure of the debtor to pay on the due date or to seek a postponement
(Commissioner v. Meridian & Thirteenth Realty Co., 132 F.2d 182 (7th Cir. 1942).

Applying these tests to the Company we note that the "certificates" to be received by
the investors are recourse promissory notes, payable by the Company (payment is
expected to be made from revenues), the Notes may be enforced as valid promissory
note obligations, the investors have no participation in management, the investors will be
senior debtors and the Company will have no other debt (other than junior and
subordinate debt arising in the ordinary course of business such as minor accruals or
trade payables), the Company will have an equity capitalization of at least .2% of the
amount of debt which should increase over time as the Company makes profits, the
creditors are not stockholders and are unrelated to the stockholders, interest is payable
from all sources not just funds available for dividends, the Company is forbidden by its
Certificate of Incorporation from obtaining commercial loans for its business purposes,
the proceeds of the Notes will not be used to acquire capital assets and whether or not
the debtor will seek a postponement of the due date of the obligation can not be
presently determined.

The courts have emphasized the concept of "thin capitalization" as strong evidence of
a capital contribution where (1) the debt to equity ratio was high, (2) the parties
understand that it would go higher and (3) substantial portions of these funds were used
for the purchase of capital assets and for meeting expenses needed to commence
operations. United States v. Henderson, 5 Cir. 1967, 375 F.2d 40. Thin capitalization is
also of significance when combined with subordination to other indebtedness. Rowan v.
United States, 219 F. 2d 55 (5th Cir. 1955). In the case of the Company the debt to
equity ratio is high; however, it is expected to decrease overtime and these funds will be
predominately utilized to factor or finance accounts receivable and not for the
acquisition of capital assets or for meeting expenses, which will be borne by the
Company's parent American Equities Group., Inc. ("AEG").

Section 385 of the Internal Revenue Code which was promulgated in an attempt to
add some certainty to this area, states that

the regulations prescribed under this Section shall set forth factors
which are to be taken into account in determining with respect to
a particular factual situation whether a debtor creditor relationship
exists or a corporation-shareholder relationship exists. The factors
so set forth in the regulations may include, among other factors:

1) whether there is a written unconditional promise to pay on
demand or on a specified date a sum certain in money in return
for an adequate consideration in money or money's worth, and to
pay a fixed rate of interest,

2) whether there is subordination to or preference over any
indebtedness of the corporation,

3) the ratio of debt to equity of the corporation,

4) whether there is convertability into the stock of the
corporation, and

5) the relationship between holdings of stock in the
corporation and holdings of the interest in question.

Applying these tests to the Company: (1) there is a written unconditional promise to
pay evidenced by the promissory note; (2) there is no subordination of the debt; (3) the
ratio of debt to equity is very high; however, based upon AEG's obligation to fund
operating costs and the financial forecasts which demonstrate an ability of the Company
to pay, the equity is sufficient to operate the Company; (4) the debt is not convertible to
stock; and (5) the debt holders will not be stockholders, officers or directors of the
Company.

The service promulgated regulations under this Section in 1980 which regulations
were withdrawn in 1983 and at the present time there are no viable regulations
implementing Code Section 385. Accordingly, the Code offers little additional guidance
on this issue.

In the event the Notes are characterized as equity by the service, the Company's
deduction for interest paid on the Notes would be disallowed. Accordingly, the funds
available to the Company to be utilized for its business purposes would be lower than
forecasted and its profits less than forecasted.

Based upon the application of the tests above, and assuming that the financial
forecasts are substantially achieved, it is our view that it is more likely than not
that the Notes will be treated as debt for tax purposes.

CONCLUSION

The Federal income tax consequences to the Company cannot be predicted with
absolute certainty. No assurance can be given that the interpretation of current law will
not be changed by the courts, or that the Service will not alter its present views with
regard to any of the matters discussed herein, nor can any assurance be given that the
Service will not audit or question the treatment given to the various items on the
Company's Federal income tax returns. However, it is our opinion that it is more likely
than not that the material Federal income tax aspects as discussed will be realized as the
Company has anticipated. Finally, it must be recognized that this opinion represents our
views as to the interpretation of existing law and can in no way be taken as an assurance
that the Service will agree with these views.

This letter is limited to those issues discussed in this letter. This letter is not
intended to be, and should not be, relied upon by persons other than the Company and
the Investors. This letter may not be quoted in whole or in part or otherwise used in a
reference to any document to be filed with any governmental or other administrative
agency or other person without our prior written consent, except that we have consented
to this letter being included as an exhibit to the Registration Statement.

Very truly yours,

BRONSON & MIGLIACCIO<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Certificate of Incorporation of the Registrant specifically provides that no
director of the Registrant shall be personally liable to the Registrant or any of its
shareholders for damages for any breach of duty in such capacity except if a judgment or
other final adjudication adverse to him establishes that his acts or omissions were in bad
faith or involved intentional misconduct or a knowing violation of the law, or that he
personally gained in fact a financial profit or other advantage to which he was not legally
entitled, or that his acts violated specific provisions of the Delaware General Corporation
Law.

The Dealer Manager Agreement contains, among other things, provisions whereby the
Dealer Manager agrees to indemnify the Corporation, each officer and director of the
Corporation who has signed the Registration Statement and each person who controls
the Corporation within the meaning of Section 15 of the Securities Act of 1933, as
amended, against any losses, liabilities, claims or damages arising out of alleged untrue
statements or alleged omissions of material facts with respect to information furnished to
the Corporation by the Dealer Manager for use in the Registration Statement or
Prospectus. See Item 28 "Undertakings."

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses (other than selling
commissions and other fees paid to the underwriter) which will be paid by the Registrant
in connection with the issuance and distribution of the securities being registered.

Registration fee . . . . . . . . . . . . . . . . . . . . . .$ 5,174.41
NASD filing fee. . . . . . . . . . . . . . . . . . . . . . . 2,000.00
Blue sky fees and expenses (including legal and filing fees) 25,000.00
Printing expenses. . . . . . . . . . . . . . . . . . . . . . 40,000.00
Legal fees and expenses (other than Blue sky). . . . . . . . . 125,000.00
Accounting fees and expenses . . . . . . . . . . . . . . . . . 100,000.00
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . 2,825.59
Total. . . . . . . . . . . . . . . . . . . . . . . . $300,000.00

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

During the last three years, the Corporation has made no sales of unregistered
securities other than the issuance of 1,000 shares of common stock to AEG for an
aggregate of $40,000 in connection with its organization. <PAGE>
ITEM 27. EXHIBITS AND FINANCIAL SCHEDULES.

A. Exhibits.

NUMBER DESCRIPTION OF EXHIBIT

1.1 Form of Dealer Manager Agreement between the Corporation and Merrill
Weber & Co., Inc.

1.2 Form of Selected Dealers Agreement, by and among Merrill Weber & Co., Inc.
and the Selected Dealers.

3.1 Certificate of Incorporation of the Corporation.(2)

3.2 By-Laws of the Corporation.(2)

4.1 Form of 12% Promissory Note.(1)

4.2 Form of Security Agreement by and between the Corporation and Sheldon
Drobny ("Drobny").(1)

4.3 Form of Indenture of Trust, by and between the Corporation and Drobny.(1)

4.4 Form of Escrow Agreement by and between the Corporation and Republic
National Bank of New York, NY.(2)

5.1 Opinion of Bronson & Migliaccio, counsel to the Corporation. (4)

8.1 Opinion of Bronson & Migliaccio, counsel to the Corporation, relating to certain
tax issues.(1)

10.1 Management Agreement, dated as of June __, 1996, by and among the
Corporation and AEG.(2)

10.2 Form of Short Term Receivables Purchase Agreement utilized by AEG to
acquire Receivables. (3)

10.3 Form of Short Term Issue Purchase Agreement utilized by AEG to acquire
receivables.(3)

23.1 Consent of Rothenberg & Corporation.

23.2 Consent of Bronson & Migliaccio, contained in Exhibit 5.1.(4)

25 Form T-2, Statement of Eligibility under the Trust Indenture Act of 1939 of an
Individual Designated to Act as Trustee. (3)

27 Financial Data Schedule (4)

- ---------------
(1) Incorporated by reference, filed as an exhibit to the Corporation's Prospectus filed as
a part of this Registration Statement.

(2) Incorporated by reference, filed as an exhibit to the Corporation's Registration
Statement as filed with the Securities and Exchange Commission on March 29,
1996.

(3) Incorporated by reference, filed as an exhibit to Amendment No. 1 to the
Corporation's Registration Statement as filed with the Securities and Exchange
Commission on May 31, 1996.

(4) Incorporated by reference, filed as an exhibit to Amendment No. 2 to the
Corporation's Registration Statement as filed with the Securities and Exchange
Commission on June 19, 1996.

ITEM 28. UNDERTAKINGS.

1. The undersigned Registrant hereby undertakes:

(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(1) To include any prospectus required by Section 10(a)(3) of the Securities
Act;

(2) To reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement; and

(3) To include any additional or changed material information with respect
to the plan of distribution not previously disclosed in the registration
statement;

(b) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and

(c) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

2. Insofar as indemnification for liabilities arising under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

3. The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof. <PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements for filing
on Form SB-2 and has fully caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Paramus, State of New
Jersey, on the 1st day of August, 1996.

AMERICAN EQUITIES INCOME FUND, INC.

By: DAVID S. GOLDBERG
David S. Goldberg, Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the dates
indicated. AMERICAN EQUITIES INCOME FUND, INC. and each of the persons
whose signature appears below hereby constitutes and appoints DAVID S. GOLDBERG
AND STEPHEN A. SOCHA and each of them singly, such person's true and lawful
attorneys-in-fact, with full power to them and each of them to sign for such person and
in such person's name, in the capacities indicated below, any and all amendments to this
Registration statement, hereby ratifying and confirming such person's signature as it may
be signed by said attorney-in-fact to any and all amendments to said Registration
Statement.

SIGNATURE TITLE DATE

Phillip C. Goldstick Chairman of the Board August 1, 1996
and Director

David S. Goldberg Chief Executive Officer, Secretary August 1, 1996
Treasurer and Director

Stephen A. Socha President and Director August 1, 1996
</TABLE>

<TABLE>
<S><C>
AMERICAN EQUITIES INCOME FUND, INC.
$15,000,000 In
12% Notes, Due September 30, 2006
Minimum Purchase: $2,000

DEALER MANAGER AGREEMENT

THIS AGREEMENT is entered into as of the 1st day of August, 1996 by and
between AMERICAN EQUITIES INCOME FUND, INC., a Delaware corporation (the
"Company") and MERRILL WEBER & CO, INC. (the "Dealer Manager").

Background

A. The Company proposes to offer and sell a Maximum of $15,000,000
aggregate principal amount of its 12% Notes in $1,000 denominations, or any integral
multiple thereof (the "Notes"). The minimum subscription is for $2,000.

B. The Dealer Manager desires on a "best-efforts basis" to act as a
non-exclusive agent in the offer and sale of the Notes (the "Offering") subject to the
terms of this Agreement and the Company's offering document pursuant to which the
Offering is to be conducted (the "Prospectus").

C. In consideration of the mutual promises and covenants set forth herein,
the parties agree as follows:

1. Non-Exclusive Appointment of Dealer Manager.

(a) Subject to the terms and conditions set forth herein, the Company
hereby appoints the Dealer Manager on a non-exclusive basis as its agent to solicit
written subscriptions from prospective investors to purchase the Notes. The Dealer
Manager hereby accepts said appointment and agrees to use its best efforts from the
date hereof through , as the Company shall determine in its sole
discretion, to secure offers from qualified investors to acquire Notes pursuant to the
terms of this Agreement. Prior to such time, either party shall have the right, by giving
notice as provided in Section 13 of this Agreement, to terminate this Agreement
immediately. In the event of such termination, all of the obligations of the parties
hereto which are required to be performed pursuant to this Agreement shall be
performed with respect to any sales which are made pursuant to this Agreement. The
Dealer Manager may in its sole discretion utilize the services of other securities dealers
selected by you who are members of the National Association of Securities Dealers, Inc.
(the "Selected Dealers") in connection with the offering and sale of the Notes under an
Agreement with each of the other Selected Dealers substantially in the form as attached
hereto as Exhibit A.

(b) This Agreement shall terminate, and the Dealer Manager shall not be
entitled to any compensation hereunder, unless subscriptions acceptable to the Company
with respect to a Minimum of $500,000 of Notes are sold, and the checks for the
requisite capital contributions with respect thereto have cleared normal banking
channels, on or before February __, 1997 (the "Termination Date").

(c) The Company and the Dealer Manager jointly may determine to reduce the
capital contribution required of investors who subscribe for and purchase multiple Notes;
provided, that any such reduction shall only be reflected in the sales commission payable
with respect to such Notes, and shall not reduce the net proceeds to the Company from
the sale of such Notes. In addition, under certain circumstances described in the
Prospectus, the required capital contributions may be reduced with respect to all Notes;
in such event, the compensation payable to Dealer Manager pursuant to section 6 hereof
shall be reduced proportionately.

(d) Upon the delivery of a subscription agreement, each subscriber will be
required to provide a check in the amount of the total subscription price of Notes
subscribed. The minimum purchase is $2,000. However, the Company reserves the
right, in its sole discretion, to offer and sell less than $2,000 of Notes to any investor.

It is understood that financing options may be made available by the Company
and the payment terms for Notes may vary; however, no commissions will be due until
the full purchase price is paid to the Company.

(e) It is understood and agreed that Dealer Manager's relationship with
the Company is that of an independent contractor and that nothing herein shall be
construed as creating a relationship of partners, joint venture, or employer and
employees, between the Dealer Manager and the Company. The Dealer Manager is not
authorized to make any placement of the Notes to any person unless and until that
person complies with the suitability standards contained in the Prospectus, nor is the
Dealer Manager authorized to deliver a Prospectus or any other information or
documents, or make any representations to any person concerning the Offering except as
provided in this Agreement. No additional material, documents or information may be
delivered to any person unless expressly authorized in writing by the Company.

2. Representations and Warranties of Company.

The Company represents and warrants to the Dealer Manager as follows:

(a) The Prospectus does not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that this
representation and warranty shall not apply to statements in or omissions from the
Prospectus made in reliance upon and in conformity with information furnished in
writing to the Company by the Dealer Manager or on its behalf for use in connection
with the Prospectus.

(b) The Company has been duly formed under the laws of the State of
Delaware, with the power to enter into this Agreement and to own properties and
conduct the business as described in the Prospectus;

(c) The Company is authorized to issue up to $15,000,000 aggregate principal
amount of Notes requiring capital contributions as described herein. Following the
completion of the Offering, each person whose subscription for a Note is accepted in
writing by the Company, will be duly admitted as a note holder;

(d) This Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a valid and binding obligation thereof;

(e) The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, the Certificate of Incorporation and
By-Laws, or any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by which it may be bound;
and

(f) Neither the Company, nor any officer, director or beneficial owner of ten
percent or more of any class of the equity securities of the Company falls within any of
the "bad boy" provisions of Rule 252(c), (d), (e) or (f), as applicable, of SEC Regulation
A.

3. Representations and Warranties of the Dealer Manager. The Dealer
Manager represents and warrants to the Company as follows:

(a) The Dealer Manager is a corporation duly organized and validly existing in
good standing under the laws of the State of Illinois, with power and authority to enter
into this Agreement and to carry out its obligations hereunder.

(b) The Dealer Manager is duly registered pursuant to the provisions of the
Securities Exchange Act of 1934, as amended (the "1934 Act") as a broker-dealer and is
a member of good standing of the NASD and is duly registered as a broker-dealer in
those states in which it is required to be so registered in order to carry out the Offering
pursuant to this Agreement.

(c) Neither the Dealer Manager nor any director or officer thereof falls within
any of the "bad boy" provisions of Rule 252(c), (d), (e) or (f), as applicable, of SEC
Regulation A.

(d) This Agreement has been duly authorized, executed and delivered by the
Dealer Manager and constitutes a valid and binding obligation thereof.

4. Manner of Offering Notes. The Dealer Manager covenants and agrees with
the Company as follows:

(a) Dealer Manager will offer the Notes pursuant to the Prospectus and only
in such a manner as to assure that the offer and sale thereof will meet the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the "1933 Act"),
and will be exempt from or comply with any registration requirements applicable for
qualifying the Notes for offering and sale under the laws of any state in which they may
be offered. Moreover, Dealer Manager agrees to indemnify the Company and the
directors, officers and agents of the Company against any liability, damage, cost, loss or
expense to any of them arising out of its failure to so offer the Notes;

(b) Immediately prior to making any offer of any Note to any offeree, Dealer
Manager shall have reasonable grounds to believe and shall believe that the offeree is a
person who is able to bear the economic risk of the investment and who otherwise meets
the applicable suitability standards set forth in the Prospectus and the subscription
documents in the form prescribed by the Company;

(c) Dealer Manager will deliver to each offeree, prior to any submission by
him of a written subscription to buy any Note, a copy of the Prospectus, together with
any supplements or amendments thereto, and will keep records of to whom, by what
manner, and on what date Dealer Manager delivered each such copy;

(d) Dealer Manager will not offer the Notes by means of any letter, circular,
notice or written communication other than the Prospectus, and other written
communications expressly approved in writing by the Company;

(e) Dealer Manager will make reasonable inquiry to determine whether a
prospective purchaser is acquiring the Notes for his own account or on behalf of other
persons;

(f) Dealer Manager will abide by, and take reasonable precautions to ensure that
others comply with all provisions contained in this Agreement or Prospectus regulating
the terms and manner of offering the Notes;

(g) Dealer Manager will take other action or refrain from taking action in
accordance with the reasonable requests of the Company, in order to comply with all
applicable laws, including, among other things, requiring offerees and purchasers to
execute and deliver such documents and instruments as the Company may require;

(h) All funds will immediately be placed in an escrow account to be maintained
by the Company pursuant to an Escrow Agreement with Republic National Bank of New
York, New York. Upon the closing or other termination of the Offering, the proceeds
therefrom shall be distributed to the Company or returned to subscribers as provided in
such Escrow Agreement;

(i) It is understood that the acceptance of subscriptions for Notes is in the
sole discretion of the Company. In the event subscriptions acceptable to the Company
with respect to all of the Notes are not received prior to the Termination Date, this
Agreement shall terminate and all funds shall be returned to subscribers. In such event,
neither party shall have any liability to the other; and

(j) The Notes shall be offered only in such states in which the Dealer Manager
has been advised by the Company that the offer and sale of Notes has been approved.
Dealer Manager shall advise the Company in advance and in writing of the states in
which it desires to offer the Notes, and shall conduct the Offering in any such state only
after the Company, upon consultation with legal counsel, has had an opportunity to
review the applicable securities laws of such state and to effect any required filings.

5. Further Agreements of the Company. The Company covenants and agrees
with the Dealer Manager as follows:

(a) If at any time any event shall occur as a result of which it becomes necessary
to supplement the Prospectus so that it does not include any untrue statement of any
material fact or omit to state any material fact necessary in order to make the statements
made not misleading, the Company will promptly notify Dealer Manager and will supply
it with amendments or supplements correcting such statement or omission;

(b) The Company will make such filings with the Securities and Exchange
Commission and state and other governmental agencies as may be necessary to comply
with the registration requirements of the 1933 Act and of the securities laws of any state
or other jurisdiction in which the Notes may be offered, provided that the Company shall
not be required in any event to register as a broker/dealer in any jurisdiction; and

(c) The Company will pay all expenses in connection with the preparation and
duplication of the Prospectus and any amendments or supplements thereto, legal fees
related thereto, and all other fees and expenses of the offering of the Notes except
wages, salaries and commissions of the Dealer Manager's employees engaged in the
Offering and related administrative and overhead costs.

6. Compensation.

(a) Subject to adjustment as provided in section 1(c) hereof, in consideration of
Dealer Manager's services as the Company's agent hereunder, the Company hereby
agrees to compensate the Dealer Manager as set forth in section 6(b) below. All sales
commissions and other compensation shall be payable in full upon acceptance by the
Company of subscriptions for Notes and release of subscription proceeds from escrow.
The Dealer Manager shall be entitled to no compensation with respect to subscriptions
rejected by the Company or if the Company terminates the Offering and refunds
subscription payments to investors.

(b) The Dealer Manager shall be entitled to (i) sales commissions of 7% of the
gross proceeds from the sale of each Note; (ii) 1% of the gross proceeds of the sale of
each Note as a due diligence and investor services fee; and (iii) .50% of the gross
proceeds of the sale of each Note as a Dealer Manger fee. Fees will only be payable
upon receipt by the Company of the full price for Notes sold in accordance with the
Prospectus.

(c) In the event the Minimum amount of Notes is not sold by the
Termination Date, the Dealer Manager shall be reimbursed only for its actual
accountable out-of-pocket expenses.

7. Non-Circumvention Covenants.

(a) In the course of business between the Dealer Manager and the Company,
the Dealer Manager will learn the identity of and gain access to certain clientele, agents
and sources of projects of the Company, and the Company will likewise learn the identity
of and gain access to certain clientele, agents and contacts of the Dealer Manager. In
consideration of the agreement of each party to make certain business opportunities and
contacts available to the other party and to work together in evaluating and carrying out
business opportunities, the Dealer Manager agrees to preserve the integrity of the
proprietary relationship between the Company and each of its respective clientele,
agents, employees, project sources, or contacts in general that may become known to the
Dealer Manager, and the Company agrees to preserve the integrity of the proprietary
relationship between the Dealer Manager and each of its respective clientele, agents,
employees, project sources, or contacts in general that may become known to the
Company.

(b) The Dealer Manager agrees not to contact or otherwise communicate with
any clients or contacts of the Company (including but not limited to banks, financing
sources, broker-dealers, marketing or sales entities, developers or others) with whom the
Dealer Manager does not have a pre-existing relationship, without the prior knowledge
and approval of the Company as appropriate, nor shall any business transactions be
conducted by the Dealer Manager with any clients or contacts of the Company without
appropriate compensation arrangements to the Company being agreed upon in advance.
The Dealer Manager further agrees that the non-circumvention covenants set out herein
shall apply equally to its agents, employees, directors, officers and affiliates. The
Company agrees not to contact or otherwise communicate with any clients or contacts of
the Dealer Manager, with whom the Company did not have a pre-existing relationship,
without the prior knowledge and approval of the Dealer Manager as appropriate, nor
shall any business transactions be conducted by the Company with any clients or contacts
of the Dealer Manager without appropriate compensation arrangements to the Dealer
Manager being agreed upon in advance. The Company further agrees that the
non-circumvention covenants set out herein shall apply equally to its agents, employees,
directors, officers and affiliates.

(c) All parties agree that they will not utilize any third party to make any
contacts or disclosures that would violate the intent of this provision. The
non-circumvention covenants set forth herein shall apply to past and any future business
dealings between the parties hereto and is not limited to dealings with the Company.
The covenants shall stand for a period of three years from the date of execution of this
contract and are to be applied to any and all transactions/proposals submitted to the
Dealer Manager by the Company or to the Company by the Dealer Manager, and
regardless of the success of any such project.

8. Indemnification.

(a) The Company shall indemnify and hold harmless the Dealer Manager and
the Selected Dealers, each of their directors, officers, employees, agents and each person,
if any, who controls (within the meaning of the 1933 Act or the 1934 Act) the Dealer
Manager and the Selected Dealers from and against any loss, claim, damage or liability,
joint or several, and any action in respect thereof, to which the Dealer Manager and the
Selected Dealers or such director, officer, employee, agent or controlling person may
become subject, under the 1933 Act, 1934 Act, any state securities laws or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus, as amended or supplemented, or any Federal or state securities filing, or
arises out of, or is based upon, the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse the Dealer Manager and Selected Dealers and each of their
directors, officers, or controlling persons for any legal and other expenses reasonably
incurred by such persons in investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action; provided, however, that the Partnership and
the Company shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in the Prospectus, as
amended or supplemented, regarding the Dealer Manager or in conformity with
information furnished by the Dealer Manager or its agent for inclusion therein or in
conformity with any direction of the Dealer Manager or its agents.

(b) The Dealer Manager shall jointly and severally indemnify and hold harmless
the Company, and each of its directors, officers, employees, agents and each person, if
any, who controls (within the meaning of the 1933 Act or the 1934 Act) the from and
against any loss, claim, damage or liability, joint or several, and any action in respect
thereof, to which the Company or any of its directors, officers, employees, agents or
controlling persons may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus, as amended or supplemented, or any federal or state securities filing, or
arises out of, or is based upon, the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue statement
or omission or alleged omission regards the Dealer Manager, the Selected Dealers or
their agents or was in conformity with information provided by the Dealer Manager, the
Selected Dealers or their agents for inclusion therein or was in conformity with any
direction of the Dealer Manager or its agents, and shall reimburse the Company and its
directors, officers or controlling persons for any legal and other expenses reasonably
incurred by such persons in investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action.

(c) The provisions of this Section 8 are in addition to any and all remedies
or rights any of the parties hereto may have, including the right to sue and recover
damages for any breach of any representation, warranty or covenant made or given by
one party to the other party.

10. Rights Cumulative. All rights and remedies with respect to the subject
matter hereof, whether evidenced hereby or by any other agreement, instrument, or
paper, will be cumulative, and may be exercised separately or concurrently.

11. Entire Agreement. The parties have not made any representations,
warranties, or covenants not set forth herein with respect to the subject matter hereof,
and this Agreement constitutes the entire Agreement between them with respect to the
subject matter.

12. Further Instruments. The parties agree to execute any and all such
other and further instruments and documents, and to take any and all such further
actions reasonably required to effectuate this Agreement and the intent and purpose
hereof.

13. Notice. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by First Class, Registered or Certified
Mail, Return Receipt Requested, postage prepaid, as follows:

To the Company:

American Equities Income Fund, Inc.
East 80 Route 4, Suite 202
Paramus, NJ 07652
Attn: S. David Goldberg

To the Dealer Manager:

Merrill Weber & Co, Inc.
95 Revere Drive, Suite A
Northbrook, IL 60062-1585
Attn: Merrill Weber

or in each case to such other address as shall have last been furnished by like
notice. If mailing by Registered or Certified Mail is impossible due to an absence of
postal service, notice shall be in writing and personally delivered to the aforesaid address.
Each notice or communication shall be deemed to have been given as of the date so
mailed or delivered, as the case may be.

14. Jurisdiction and Venue. This Agreement was negotiated in New York and
the parties agree that with respect to any legal or equitable action, suit, or other
proceeding arising under, or in any way connected with, this Agreement, the parties
hereto consent to the in personam jurisdiction of the Federal and State courts in New
York, waive any forum non convenience and any venue objections they might otherwise
have, and agreed to accept service of process upon them by certified mail, return receipt
requested.

15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all together shall constitute
one and the same Agreement.

16. Captions. The descriptive headings in this Agreement are for
convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.

17. Further Dealings. Any dealing by or between the parties after the
date of expiration or prior termination of this Agreement shall not constitute a renewal
of this Agreement or the creation of a new agreement, but shall nevertheless be
controlled by the terms hereof.

<PAGE>
THE COMPANY: THE DEALER MANAGER:

AMERICAN EQUITIES MERRILL WEBER & CO., INC.
INCOME FUND, INC.

By:
Title:
By:
Title:
Dealer Firm CRD Number:

States in which Firm is Registered

</TABLE>

<TABLE>
<S><C>
AMERICAN EQUITIES INCOME FUND, INC.
$15,000,000 In
12% Promissory Notes
Minimum Purchase: $2,000

SELECTED DEALER'S AGREEMENT

THIS AGREEMENT is entered into as of the day of , 1996 by
and between MERRILL WEBER & CO., INC., a _________ corporation (the "Dealer")
and you, the undersigned, as Selected Dealer (the "Agent").

Background

A. The Dealer has entered into an agreement dated as of August 1, 1996 to offer
12% promissory notes (the "Notes") in American Equities Income Fund, Inc. (the
"Company") for a maximum aggregate offering price of $15,000,000. The Notes are to
be 1,000 denominations, or any integral multiples thereof, with a minimum subscription
of $2,000.

B. The Agent desires on a "best-efforts basis" to act as a non-exclusive agent in
the offer and sale of the Notes (the "Offering") subject to the terms of this Agreement
and the Company's prospectus, as filed with the Securities and Exchange Commission,
pursuant to which the Offering is to be conducted (the "Prospectus").

C. In consideration of the mutual promises and covenants set forth herein, the
parties agree as follows:

1. Non-Exclusive Appointment of Agent.

(a) Subject to the terms and conditions set forth herein, the Dealer hereby
appoints the Agent on a non-exclusive basis as a Selected Dealer to solicit written
subscriptions from prospective investors to purchase the Notes. The Agent hereby
accepts said appointment and agrees to use its best efforts from the date hereof through
August __, 1998, to secure offers from qualified investors to acquire Notes pursuant to
the terms of this Agreement. Prior to such time, either party shall have the right, by
giving notice as provided in section 13 of this Agreement, to terminate this Agreement
immediately. In the event of such termination, all of the obligations of the parties
hereto which are required to be performed pursuant to this Agreement shall be
performed with respect to any sales which are made pursuant to this Agreement. Except
with the written consent of the Dealer the Agent will not employ any person or other
entity as its agent or subagent or utilize the services of any other broker/dealer in
connection with the Offering.

(b) The Company will close upon the receipt of subscriptions acceptable to
the Company with respect to at least $500,000 aggregate principal amount of Notes.
This Agreement shall terminate, and the Agent shall not be entitled to any compensation
hereunder, unless subscriptions acceptable to the Company with respect to at least
$500,000 aggregate principal amount of Notes have been received, and the checks for the
requisite capital contributions with respect thereto have cleared normal banking
channels, on or before the February __, 1997 (the "Termination Date").

(c) Upon the delivery of a subscription agreement, each subscriber will be
required to deliver a check in the amount of the total subscription price.

(d) It is understood and agreed that Agent's relationship with the Dealer,
the Company is that of an independent contractor and that nothing herein shall be
construed as creating a relationship of partners, joint venture, or employer and
employees, between the Agent and the Dealer or, the Company. The Agent is not
authorized to make any placement of the Notes to any person unless and until that
person complies with the suitability standards contained in the Prospectus, nor is the
Agent authorized to deliver a Prospectus or any other information or documents, or
make any representations to any person concerning the Offering except as provided in
this Agreement. No additional material, documents or information may be delivered to
any person unless expressly authorized in writing by the Dealer or the Company.

2. Representations and Warranties of Dealer.

The Dealer represents and warrants to the Agent based upon the representations
and warranties of the Company as follows:

(a) The Prospectus does not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained therein, in
light of the circumstances under which they are made, not misleading; provided, however,
that this representation and warranty shall not apply to statements in or omissions from
the Prospectus made in reliance upon and in conformity with information furnished in
writing to the Company by the Agent or on its behalf for use in connection with the
Prospectus;

(c) The Company is authorized to issue up to an aggregate of $15,000,000
principal amount of Notes requiring capital contributions as described herein. Following
the completion of the Offering, each person whose subscription for an Interest is
accepted in writing by the Company will, be duly admitted as a preferred stockholder;

(d) This Agreement has been duly authorized, executed and delivered by the
Dealer, and constitutes the valid and binding obligation thereof; and

(e) The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, the Certificate of Incorporation or
By-laws, or any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by which it may be bound.

3. Representations and Warranties of the Agent. The Agent represents and warrants
to the Dealer as follows:

(a) The Agent is a corporation duly organized and validly existing in good
standing under its state of incorporation and all states in which it does business, with
power and authority to enter into this Agreement and to carry out its obligations
hereunder;

(b) The Agent is duly registered pursuant to the provisions of the Securities
Exchange Act of 1934, as amended (the "1934 Act") as a broker-dealer and is a member
of good standing of the NASD and is duly registered as a broker-dealer in those states in
which it is required to be so registered in order to carry out the Offering pursuant to this
Agreement;

(c) This Agreement has been duly authorized, executed and delivered by the
Agent and constitutes a valid and binding obligation thereof.

4. Manner of Offering Notes. The Agent covenants and agrees with the Company
as follows:

(a) Agent will offer the Notes pursuant to the Prospectus and only in such
a manner as to assure that the offer and sale thereof will be exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the "1933 Act"),
and will be exempt from or comply with any registration requirements applicable for
qualifying the Notes for offering and sale under the laws of any state in which they may
be offered. Moreover, Agent agrees to indemnify the Dealer, the Company and the
directors, officers and agents of the Dealer, and the Company against any liability,
damage, cost, loss or expense to any of them arising out of its failure to so offer the
Notes;

(b) Immediately prior to making any offer of any Note to any offeree, Agent
shall have reasonable grounds to believe and shall believe that the offeree is a person
who is able to bear the economic risk of the investment and who otherwise meets the
applicable suitability standards set forth in the Prospectus and the subscription
documents in the form prescribed by the Company;

(c) Agent will deliver to each offeree, prior to any submission by him of a
written subscription to buy any Interest, a numbered copy of the Prospectus, together
with any supplements or amendments thereto, and will keep records of to whom, by what
manner, and on what date Agent delivered each such copy;

(d) Agent will not offer the Notes by means of any letter, circular, notice or
written communication other than the Prospectus, and other written communications
expressly approved in writing by the Company;

(e) Agent will make reasonable inquiry to determine whether a prospective
purchaser is acquiring the Notes for his own account or on behalf of other persons;

(f) Agent will abide by, and take reasonable precautions to ensure that others
comply with all provisions contained in this Agreement or Prospectus regulating the
terms and manner of offering the Notes;

(g) Agent will take other action or refrain from taking action in accordance with
the reasonable requests of the Company, in order to comply with all applicable laws,
including, among other things, requiring offerees and purchasers to execute and deliver
such documents and instruments as the Company may require;

(h) All funds will immediately be placed in an escrow account to be maintained
by the Company pursuant to an Escrow Agreement with Republic National Bank of New
York, NY. Upon the closing or other termination of the Offering, the proceeds
therefrom shall be distributed to the Company or returned to subscribers as provided in
such Escrow Agreement;

(i) It is understood that the acceptance of subscriptions for Notes is in the
sole discretion of the Company. In the event subscriptions acceptable to Company with
respect to all Notes are not received prior to the Termination Date, this Agreement shall
terminate and all funds shall be returned to subscribers. In such event, neither party
shall have any liability to the other; and

(j) The Notes shall be offered only in such states in which the Agent has been
advised by the Dealer that the offer and sale of Notes has been approved. Agent shall
advise the Company in advance and in writing of the states in which it desires to offer
the Notes, and shall conduct the Offering in any such state only after the Company, upon
consultation with legal counsel, has had an opportunity to review the applicable securities
laws of such state and to effect any required pre-sale filings. Agent shall immediately
advise the Company in writing of the receipt of all checks or subscriptions for Notes in
order to permit the Company, upon consultation with legal counsel, to effect any
required post-sale filings on a timely basis.

5. Further Agreements of the Company. The Company covenants and agrees with
the Agent as follows:

(a) If at any time any event shall occur as a result of which it becomes necessary
to supplement the Prospectus so that it does not include any untrue statement of any
material fact or omit to state any material fact necessary in order to make the statements
made not misleading, the Company will promptly notify Agent and will supply it with
amendments or supplements correcting such statement or omission;

(b) The Company will make such filings with the Securities and Exchange
Commission and state and other governmental agencies as may be necessary to assure or
confirm the exemption of the offer in and sale of the Notes from the registration
requirements of the 1933 Act, and of the securities laws of any state or other jurisdiction
in which the Notes may be offered, provided that the Company shall not be required in
any event to register as a broker/dealer in any jurisdiction; and

(c) The Company will pay all expenses in connection with the preparation and
duplication of the Prospectus and any amendments or supplements thereto, legal fees
related thereto, and all other fees and expenses of the offering of the Notes except
wages, salaries and commissions of the Agent's employees engaged in the Offering and
related administrative and overhead costs.

6. Compensation.

(a) Subject to adjustment as provided in section 1(c) hereof, in consideration of
Agent's services as the Company's agent hereunder, the Company hereby agrees to
compensate the Agent as set forth in section 6(b) below. All sales commissions and
other compensation shall be payable in full upon acceptance by the Company of
subscriptions for Notes and release of subscription proceeds from escrow. The Agent
shall be entitled to no compensation with respect to subscriptions rejected by the
Company or if the Company terminates the Offering and refunds subscription payments
to investors. At the discretion of the Dealer, the Note may be sold for an amount less
than the Note price; provided, Agent waives its commissions to the extent of the price
reduction.

(b) The Agent shall be entitled to (i) sales commissions of 7% of the gross
proceeds from the sale of each Note and (ii) 1% of the gross proceeds of the sale of
each Note as a due diligence fee and non-accountable expense allowance. Fees will only
be payable upon receipt by the Company of the full price for Notes sold or financed in
accordance with the Prospectus.

7. Non-Circumvention Covenants.

(a) In the course of business between the Agent and the Dealer, the Agent will
learn the identity of and gain access to certain clientele, agents and sources of projects of
the Dealer, and the Dealer will likewise learn the identity of and gain access to certain
clientele, agents and contacts of the Agent. In consideration of the agreement of each
party to make certain business opportunities and contacts available to the other party
and to work together in evaluating and carrying out business opportunities, the Agent
agrees to preserve the integrity of the proprietary relationship between the Dealer and
each of its respective clientele, agents, employees, project sources, or contacts in general
that may become known to the Agent, and the Dealer agrees to preserve the integrity of
the proprietary relationship between the Agent and each of its respective clientele,
agents, employees, project sources, or contacts in general that may become known to the
Dealer.

(b) The Agent agrees not to contact or otherwise communicate with any clients
or contacts of the Dealer (including but not limited to banks, financing sources,
broker-dealers, marketing or sales entities, developers or others) with whom the Agent
does not have a pre-existing relationship, without the prior knowledge and approval of
the Dealer as appropriate, nor shall any business transactions be conducted by the Agent
with any clients or contacts of the Dealer without appropriate compensation
arrangements to the Dealer being agreed upon in advance. The Agent further agrees
that the non-circumvention covenants set out herein shall apply equally to its agents,
employees, directors, officers and affiliates. The Dealer agrees not to contact or
otherwise communicate with any clients or contacts of the Agent, with whom the Dealer
did not have a pre-existing relationship, without the prior knowledge and approval of the
Agent as appropriate, nor shall any business transactions be conducted by the Dealer
with any clients or contacts of the Agent without appropriate compensation arrangements
to the Agent being agreed upon in advance. The Dealer further agrees that the
non-circumvention covenants set out herein shall apply equally to its agents, employees,
directors, officers and affiliates.

(c) All parties agree that they will not utilize any third party to make any
contacts or disclosures that would violate the intent of this provision. The
non-circumvention covenants set forth herein shall apply to past and any future business
dealings between the parties hereto and is not limited to dealings with the Company.
The covenants shall stand for a period of three years from the date of execution of this
contract and are to be applied to any and all transactions/proposals submitted to the
Agent by the Dealer or to the Dealer by the Agent, and regardless of the success of any
such project.

8. Indemnification.

(a) The Dealer shall indemnify and hold harmless the Agent, each of its
directors, officers, employees, agents and each person, if any, who controls (within the
meaning of the 1933 Act or the 1934 Act) the Agent from and against any loss, claim,
damage or liability, joint or several, and any action in respect thereof, to which the
Agent or such director, officer, employee, agent or controlling person may become
subject, under the 1933 Act, 1934 Act, any state securities laws or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in the Prospectus as
amended or supplemented, or any Federal or state securities filing, or arises out of, or is
based upon, the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and shall
reimburse the Agent and each director, officer, or controlling person for any legal and
other expenses reasonably incurred by such persons in investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action; provided,
however, that the Dealer, the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission made in
the Prospectus, as amended or supplemented, regarding the Agent or in conformity with
information furnished by the Agent or its agent for inclusion therein or in conformity
with any direction of the Agent or its agents.

(b) The Agent shall indemnify and hold harmless the Dealer, the Company and
its directors, officers, employees, agents and each person, if any, who controls (within the
meaning of the 1933 Act or the 1934 Act) them from and against any loss, claim, damage
or liability, joint or several, and any action in respect thereof, to which the Company
and/or the Dealer or any of their directors, officers, employees, agents or controlling
persons who may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such loss, claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in the Prospectus, as
amended or supplemented, or any federal or state securities filing, or arises out of, or is
based upon, the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission regards the Agent or its agents or was in conformity with
information provided by the Agent or its agents for inclusion therein or was in
conformity with any direction of the Agent or its agents, and shall reimburse the Dealer,
the Company and each of their directors, officers or controlling persons for any legal and
other expenses reasonably incurred by such persons in investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action.

9. Miscellaneous. This Agreement is made for the benefit of the parties hereto,
their successors and assigns and any director, officer or controlling person of the parties,
but not for the benefit of any other person, including any offeree or purchaser of the
Notes, except that the provisions of Section 5(c) hereof shall be for the benefit of and
enforceable by each offeree and purchaser representative. This Agreement is formed
under and shall be construed in accordance with the laws of the State of New York and
may not be amended except in writing signed by the parties hereto.

10. Rights Cumulative. All rights and remedies with respect to the subject matter
hereof, whether evidenced hereby or by any other agreement, instrument, or paper, will
be cumulative, and may be exercised separately or concurrently.

11. Entire Agreement. The parties have not made any representations, warranties,
or covenants not set forth herein with respect to the subject matter hereof, and this
Agreement constitutes the entire Agreement between them with respect to the subject
matter.

12. Further Instruments. The parties agree to execute any and all such other and
further instruments and documents, and to take any and all such further actions
reasonably required to effectuate this Agreement and the intent and purpose hereof.

13. Notice. All notices or other communications required or permitted hereunder
shall be in writing and shall be mailed by First Class, Registered or Certified Mail,
Return Receipt Requested, postage prepaid, as follows:

To Dealer:

Merrill Weber & Co., Inc.
95 Revere Drive
Suite A
Northbrook, IL 60062-1585

To the Agent:

To the Principal
at the address shown on the last page hereof;

14. Jurisdiction and Venue. This Agreement was negotiated in New York and the
parties agree that with respect to any legal or equitable action, suit, or other proceeding
arising under, or in any way connected with, this Agreement, the parties hereto consent
to the in personam jurisdiction of the Federal and State courts in New York, waive any
forum non convenience and any venue objections they might otherwise have, and agreed
to accept service of process upon them by certified mail, return receipt requested.

15. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all together shall constitute one and the
same Agreement.

16. Captions. The descriptive headings in this Agreement are for convenience of
reference only and shall not be deemed to affect the meaning or construction of any of
the provisions hereof.

17. Further Dealings. Any dealing by or between the parties after the date of
expiration or prior termination of this Agreement shall not constitute a renewal of this
Agreement or the creation of a new agreement, but shall nevertheless be controlled by
the terms hereof.

DEALER: THE AGENT:

MERRILL WEBER & CO, INC.

(NAME OF AGENT)

By: By:
Its: Title:

Address:

Telephone Number: ( )

Dealer Firm CRD Number:

States in which Firm is Registered

</TABLE>

<TABLE>
<S><C>
ROTHENBERG & COMPANY
Certified Public Accountants
1979 Marcus Avenue
Lake Success, N.Y. 11042
TEL NO. (516) 437-3800 AND (212) 986-2626
FAX NO. (516) 437-2235

We consent to the reference to our firm under the caption "Experts" and to the use of
our report dated March 22, 1996, in the Registration Statement (Form SB-2, No.
333-2856) and the related Prospectus of American Equities Income Fund, Inc.

Rothenberg & Company

Lake Success, New York
August 1, 1996
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