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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended November 30, 2003.o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  to


Commission file number: 0-4957

EDUCATIONAL DEVELOPMENT CORPORATION

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of
incorporation or organization)
    
    73-0750007
(I.R.S. Employer
Identification No.)


10302 East 55th Place, Tulsa Oklahoma 74146-6515
(Address of principal executive offices)

Registrants telephone number: (918) 622-4522

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

Yes x        No o

As of November 30, 2003 there were 3,970,654 shares of Educational
Development Corporation Common Stock, $0.20 par value outstanding.





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|                                           |                                                                                              |  |  |  |  |  |  | 
|------------------------------------------ | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION             
|                                           | ITEM 1 CONDENSED BALANCE SHEETS                                                             
|                                           | ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                           | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                           | Item 4.  CONTROLS AND PROCEDURES                                                           
|PART II OTHER INFORMATION                 
|                                           | Item 6  EXHIBITS AND REPORTS ON FORM 8-K                                                   
|SIGNATURES                                
|EXHIBIT INDEX                             
|EX-31.1 Certification of Randall W. White 
|EX-31.2 Certification of W. Curtis Fossett
|EX-32.1 Certification of Randall W. White 
|EX-32.2 Certification of W. Curtis Fossett



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EDUCATIONAL DEVELOPMENT CORPORATION

PART I. FINANCIAL INFORMATION

ITEM 1

CONDENSED BALANCE SHEETS

November 30, 2003(unaudited)
    
    February 28, 2003ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    597,900
    
    
    $
    1,433,000Accounts receivable  (less
allowances for doubtful accounts
and returns: 11/30/03 - $203,600
2/28/03 - $190,000)
    
    
    2,800,300
    
    
    
    2,137,400Inventories  Net
    
    
    13,543,800
    
    
    
    11,413,700Prepaid expenses and other assets
    
    
    74,300
    
    
    
    162,700Deferred income taxes
    
    
    49,500
    
    
    
    72,100Total current assets
    
    
    17,065,800
    
    
    
    15,218,900INVENTORIES  Net
    
    
    419,400
    
    
    
    341,900PROPERTY AND EQUIPMENTat cost (less accumulated depreciation:11/30/03 - $1,660,400; 2/28/03 - $1,559,500)
    
    
    1,896,500
    
    
    
    1,941,200DEFERRED INCOME TAXES
    
    
    59,700
    
    
    
    59,700$
    19,441,400
    
    
    $
    17,561,700LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    4,286,200
    
    
    $
    4,997,300Accrued salaries and commissions
    
    
    722,500
    
    
    
    435,700Income taxes
    
    
    249,500
    
    
    
    160,300Other current liabilities
    
    
    472,000
    
    
    
    251,800Total current liabilities
    
    
    5,730,200
    
    
    
    5,845,100COMMITMENTSSHAREHOLDERS EQUITY:Common Stock, $.20 par value (Authorized
8,000,000 shares; Issued 5,525,340
and 5,441,640 shares; Outstanding
3,970,654 and 3,827,620 shares)
    
    
    1,105,100
    
    
    
    1,088,300Capital in excess of par value
    
    
    5,049,600
    
    
    
    4,619,400Retained earnings
    
    
    13,053,100
    
    
    
    11,455,70019,207,800
    
    
    
    17,163,400Less treasury shares, at cost
    
    
    (5,496,600
    )
    
    
    (5,446,800
    )13,711,200
    
    
    
    11,716,600$
    19,441,400
    
    
    $
    17,561,700


See notes to financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)

Three Months Ended November 30,
    
    Nine Months Ended November 30,2003
    
    2002
    
    2003
    
    2002REVENUES:Gross sales
    
    $
    12,420,300
    
    
    $
    10,555,600
    
    
    $
    31,897,900
    
    
    $
    28,422,400Less discounts & allowances
    
    
    (2,994,100
    )
    
    
    (2,728,200
    )
    
    
    (9,033,300
    )
    
    
    (8,860,600
    )Transportation revenue
    
    
    550,500
    
    
    
    461,800
    
    
    
    1,269,600
    
    
    
    1,069,200Net revenues
    
    
    9,976,700
    
    
    
    8,289,200
    
    
    
    24,134,200
    
    
    
    20,631,000COST OF SALES
    
    
    3,274,200
    
    
    
    2,802,200
    
    
    
    8,416,500
    
    
    
    7,545,200Gross margin
    
    
    6,702,500
    
    
    
    5,487,000
    
    
    
    15,717,700
    
    
    
    13,085,800OPERATING EXPENSES:Operating & selling
    
    
    2,016,000
    
    
    
    1,624,000
    
    
    
    5,012,100
    
    
    
    4,142,800Sales commissions
    
    
    2,792,300
    
    
    
    2,253,900
    
    
    
    6,152,300
    
    
    
    4,965,900General & administrative
    
    
    482,800
    
    
    
    384,300
    
    
    
    1,353,800
    
    
    
    1,160,200Interest
    
    
    5,000
    
    
    
    
    
    
    
    7,800
    
    
    
    9005,296,100
    
    
    
    4,262,200
    
    
    
    12,526,000
    
    
    
    10,269,800OTHER INCOME
    
    
    9,200
    
    
    
    8,100
    
    
    
    23,700
    
    
    
    29,900EARNINGS BEFORE INCOME TAXES
    
    
    1,415,600
    
    
    
    1,232,900
    
    
    
    3,215,400
    
    
    
    2,845,900INCOME TAXES
    
    
    544,500
    
    
    
    468,000
    
    
    
    1,224,000
    
    
    
    1,079,300NET EARNINGS
    
    $
    871,100
    
    
    $
    764,900
    
    
    $
    1,991,400
    
    
    $
    1,766,600BASIC AND DILUTED EARNINGSPER SHARE:Basic
    
    $
    0.22
    
    
    $
    0.20
    
    
    $
    0.51
    
    
    $
    0.46Diluted
    
    $
    0.20
    
    
    $
    0.18
    
    
    $
    0.46
    
    
    $
    0.43WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:Basic
    
    
    3,974,715
    
    
    
    3,836,345
    
    
    
    3,933,728
    
    
    
    3,836,331Diluted
    
    
    4,322,308
    
    
    
    4,136,271
    
    
    
    4,292,120
    
    
    
    4,146,051DIVIDENDS DECLARED PER
COMMON SHARE
    
    $
    
    
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.06


See notes to financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (UNAUDITED)

Common Stock(par value$.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury StockNumber of
    
    
    
    
    
    Capital in
    
    
    
    
    
    NumberShares
    
    
    
    
    
    Excess of
    
    Retained
    
    of
    
    
    
    
    
    Shareholders'Issued
    
    Amount
    
    Par Value
    
    Earnings
    
    Shares
    
    Amount
    
    EquityBALANCE, MAR. 1, 2003
    
    
    5,441,640
    
    
    $
    1,088,300
    
    
    $
    4,619,400
    
    
    $
    11,455,700
    
    
    
    1,614,020
    
    
    $
    (5,446,800
    )
    
    $
    11,716,600Purchases of treasury
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,735
    
    
    
    (376,300
    )
    
    
    (376,300
    )Sales of treasury stock
    
    
    
    
    
    
    
    
    
    
    275,600
    
    
    
    
    
    
    
    (95,069
    )
    
    
    326,500
    
    
    
    602,100Stock option transactions,
including tax benefit
    
    
    83,700
    
    
    
    16,800
    
    
    
    154,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171,400Dividends paid ($0.10/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (394,000
    )
    
    
    
    
    
    
    
    
    
    
    (394,000
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,991,400
    
    
    
    
    
    
    
    
    
    
    
    1,991,400BALANCE, NOV. 30, 2003
    
    
    5,525,340
    
    
    $
    1,105,100
    
    
    $
    5,049,600
    
    
    $
    13,053,100
    
    
    
    1,554,686
    
    
    $
    (5,496,600
    )
    
    $
    13,711,200


See notes to financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended November 302003
    
    2002CASH FLOWS FROM OPERATING ACTIVITIES
    
    $
    (782,200
    )
    
    $
    1,652,700CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment
    
    
    (56,100
    )
    
    
    (137,000
    )Net cash used in investing activities
    
    
    (56,100
    )
    
    
    (137,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under revolving credit agreement
    
    
    6,790,000
    
    
    
    1,317,000Payments under revolving credit agreement
    
    
    (6,790,000
    )
    
    
    (1,317,000
    )Cash received from exercise of stock option
    
    
    171,400
    
    
    
    56,600Cash received from sale of treasury stock
    
    
    602,100
    
    
    
    407,700Cash paid to acquire treasury stock
    
    
    (376,300
    )
    
    
    (549,700
    )Dividends paid
    
    
    (394,000
    )
    
    
    (230,100
    )Net cash provided by (used in) financing activities
    
    
    3,200
    
    
    
    (315,500
    )Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (835,100
    )
    
    
    1,200,200Cash and Cash Equivalents, Beginning of Period
    
    
    1,433,000
    
    
    
    906,900Cash and Cash Equivalents, End of Period
    
    $
    597,900
    
    
    $
    2,107,100Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    6,700
    
    
    $
    900Cash paid for income taxes
    
    $
    1,081,500
    
    
    $
    941,200


See notes to financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS

Note 1  The information shown with respect to the three months and nine months
ended November 30, 2003 and 2002, which is unaudited, includes all adjustments
which in the opinion of Management are considered to be necessary for a fair
presentation of earnings for such periods. The adjustments reflected in the
financial statements represent normal recurring accruals. The results of
operations for the three months and nine months ended November 30, 2003 and
2002, respectively, are not necessarily indicative of the results to be
expected at year end due to seasonality of the product sales.

These financial statements and notes are prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting and
should be read in conjunction with the Financial Statements and accompanying
notes contained in the Companys Annual Report to Shareholders for the Fiscal
Year ended February 28, 2003.

Note 2  Effective June 30, 2003 the Company signed a Fourth Amendment to the
Credit and Security Agreement with Arvest Bank which provides a $3,500,000 line
of credit. This line of credit is evidenced by a promissory note in the amount
of $3,500,000 payable June 30, 2004. This note bears interest, payable
monthly, at the Wall Street Journal prime floating rate minus 0.25% (3.75% at
November 30, 2003). The note is collateralized by substantially all the assets
of the Company. Available credit under the loan was $3,500,000 at November 30,
2003.

Note 3  Inventories consist of the following:

November 30, 2003
    
    February 28, 2003Current:Book Inventory
    
    $
    13,573,900
    
    
    $
    11,460,100Reserve for Obsolescence
    
    
    (30,100
    )
    
    
    (46,400
    )Inventories net  current
    
    $
    13,543,800
    
    
    $
    11,413,700Non-current:Book Inventory
    
    $
    666,200
    
    
    $
    511,500Reserve for Obsolescence
    
    
    (246,800
    )
    
    
    (169,600
    )Inventories  non-current
    
    $
    419,400
    
    
    $
    341,900


The Company occasionally purchases book inventory in quantities in
excess of what will be sold within the normal operating cycle due to
minimum order requirements of the Companys primary supplier. These
amounts are included in non-current inventory.

Significant portions of inventory purchases by the Company are
concentrated with an England based publishing company. Purchases
from this England based publishing company were approximately $10.0
million and $7.2 million for the nine months ended November 30, 2003
and 2002, respectively. Total inventory purchases from all suppliers
were approximately $12.3 million and $9.2 million for the nine months
ended November 30, 2003 and 2002, respectively.

Note 4- Basic earnings per share (EPS) is computed by dividing net earnings
by the weighted average number of common shares outstanding during the period.
Diluted EPS is based on the combined weighted average number of common shares
outstanding and dilutive potential common shares issuable which include, where
appropriate, the assumed exercise of options. In computing diluted EPS the
Company has utilized the treasury stock method.

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EDUCATIONAL DEVELOPMENT CORPORATION

The computation of weighted average common and common equivalent shares used in
the calculation of basic and diluted earnings per share (EPS) is shown below.

Three Months Ended November 30,
    
    Nine Months Ended November 30,2003
    
    2002
    
    2003
    
    2002Net Earnings
    
    $
    871,100
    
    
    $
    764,900
    
    
    $
    1,991,400
    
    
    $
    1,766,600Basic EPS:Weighted Average Shares Outstanding
    
    
    3,974,715
    
    
    
    3,836,345
    
    
    
    3,933,728
    
    
    
    3,836,331Basic EPS
    
    $
    0.22
    
    
    $
    0.20
    
    
    $
    0.51
    
    
    $
    0.46Diluted EPS:Weighted Average Shares Outstanding
    
    
    3,974,715
    
    
    
    3,836,345
    
    
    
    3,933,728
    
    
    
    3,836,331Assumed Exercise of Options
    
    
    347,593
    
    
    
    299,926
    
    
    
    358,392
    
    
    
    309,720Shares Applicable to Diluted Earnings
    
    
    4,322,308
    
    
    
    4,136,271
    
    
    
    4,292,120
    
    
    
    4,146,051Diluted EPS
    
    $
    0.20
    
    
    $
    0.18
    
    
    $
    0.46
    
    
    $
    0.43


Since March 1, 1998, when the Company began its stock repurchase program,
1,823,007 shares of the Companys common stock at a total cost of $6,425,883
have been acquired. The Board of Directors previously authorized purchasing up
to 2,000,000 shares as market conditions warrant.

Note 5  The Company applies APB Opinion No. 25 and related interpretations in
accounting for its Incentive Plan. Accordingly, no stock-based employee
compensation cost is reflected in net earnings, as all options granted had an
exercise price equal to the market value of the underlying common stock on the
date of grant. There were no options granted in the three-month period or
nine-month period ended November 30, 2003 and 2002.

Note 6  Freight costs and handling costs incurred are included in operating &
selling expenses and were $607,900 and $1,522,100, respectively, for the three
months and nine months ended November 30, 2003 and $490,800 and $1,235,100,
respectively, for the three months and nine months ended November 30, 2002.

Note 7  The Company has two reportable segments: Publishing and Usborne Books
at Home (UBAH). These reportable segments are business units that offer
different methods of distribution to different types of customers. They are
managed separately based on the fundamental differences in their operations.
The Publishing Division markets its products to retail accounts, which include
book, school supply, toy and gift stores and museums, through commissioned
sales representatives, trade and specialty wholesalers and an internal
telesales group. The UBAH Division markets its product line through a network
of independent sales consultants through a combination of direct sales, home
shows and book fairs.

The accounting policies of the segments are the same as those of the Company.
The Company evaluates segment performance based on operating profits of the
segments which is defined as segment net sales reduced by direct cost of sales
and direct expenses. Corporate expenses, including interest and depreciation,
and income taxes are not allocated to the segments. The Companys assets are
not allocated on a segment basis.

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EDUCATIONAL DEVELOPMENT CORPORATION

Information by industry segment for the three months and nine months ended
November 30, 2003 and 2002 is set forth below:

Publishing
    
    UBAH
    
    Other
    
    TotalNine months Ended November 30, 2003Net revenues from external customers
    
    $
    5,919,900
    
    
    $
    18,214,300
    
    
    $
    
    
    
    
    24,134,200Earnings before income taxes
    
    $
    2,047,900
    
    
    $
    3,868,000
    
    
    $
    (2,700,500
    )
    
    $
    3,215,400Three Months Ended November 30, 2003Net revenues from external customers
    
    $
    1,776,400
    
    
    $
    8,200,300
    
    
    $
    
    
    
    $
    9,976,700Earnings before income taxes
    
    $
    619,100
    
    
    $
    1,778,400
    
    
    $
    (981,900
    )
    
    $
    1,415,600Nine Months Ended November 30, 2002Net revenues from external customers
    
    $
    6,054,000
    
    
    $
    14,577,000
    
    
    $
    
    
    
    $
    20,631,000Earnings before income taxes
    
    $
    2,112,400
    
    
    $
    3,129,000
    
    
    $
    (2,395,500
    )
    
    $
    2,845,900Three Months Ended November 30, 2002Net revenues from external customers
    
    $
    1,636,400
    
    
    $
    6,652,800
    
    
    $
    
    
    
    $
    8,289,200Earnings before income taxes
    
    $
    569,700
    
    
    $
    1,520,900
    
    
    $
    (857,700
    )
    
    $
    1,232,900








ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Certain statements contained in this Management Discussion and Analysis are not
based on historical facts, but are forward-looking statements that are based
upon numerous assumptions about future conditions that may ultimately prove to
be inaccurate. Actual events and results may materially differ from anticipated
results described in such statements. The Companys ability to achieve such
results is subject to certain risks and uncertainties. Such risks and
uncertainties include but are not limited to, product prices, continued
availability of capital and financing, and other factors affecting the
Companys business that may be beyond its control.

FINANCIAL CONDITION

Working capital at November 30, 2003 was $11,335,600 compared with $9,373,800
at the end of fiscal year 2003. Accounts receivable increased 29.1% during the
first nine months of fiscal year 2004. The Companys fall special began
during the second quarter and contributed to the increase in accounts
receivable. This fall special offered extended payment terms of 90 days or a
December 15 due date, depending upon the size of the order. Inventory levels
increased 18.9% over inventory at fiscal year end 2003. Contributing to the
increase in inventory was the addition of 168 new titles to the product line.
The level of inventory will fluctuate depending upon sales and the timing of
shipments from the Companys principal supplier. The Company continuously
monitors inventory to assure it has adequate supplies on hand to meet sales
requirements. Accounts payable decreased 14.2% during the first nine months of
fiscal year 2004. A major component of accounts payable is the amount due to
the Companys principal supplier. Increases and decreases in inventory levels
as well as the timing of purchases of inventory and the payment terms offered
by various suppliers affect the levels of accounts payable. Cash generated by
increased sales in the Home Business Division enabled the Company to conclude
the quarter ended November 30, 2003 with no short-term bank debt.

The Company paid a divided of $0.10 per share on June 11, 2003.

Cash flows used in operating activities was $782,200 for the nine months ended
November 30, 2003. Cash flows provided by operating activities was $1,652,700
for the nine months ended November 30, 2002. Contributing to this was a
decline in accounts payable as the Company paid its principal supplier for
inventory received in the previous quarter. Also affecting cash flow were
increases in accounts receivable, inventories, accrued salaries and commissions
and income taxes payable.

Capital expenditures for the nine months ended November 30, 2003 were $56,100,
a decrease of 59.1% from capital expenditures of $137,000 for the same period a
year ago. Capital expenditures in the current nine months were primarily for
improvements to the Companys warehouse facilities.

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EDUCATIONAL DEVELOPMENT CORPORATION

The Company believes that its cash on hand and the available line of credit
(see note 2) is sufficient to meet its foreseeable cash requirements.

RESULTS OF OPERATIONS
Revenues  Net revenues from the Home Business Division were $18,214,300 for
the nine months ended November 30, 2003 compared with $14,577,000 for the nine
months ended November 30, 2002, an increase of 25.0%. Net revenues for the
three-month period ending November 30, 2003 were $8,200,300, an increase of
23.3% over net sales of $6,652,800 for the same three month period last year.
The Company attributes these increases to the addition of new sales consultants
and the retention of existing sales consultants. The Company continues to
offer new incentive programs, travel contests and regional seminars to help
stimulate sales and recruiting. The Company also continues to offer its
leadership skills program for supervisors. Management believes that the Home
Business Division will continue to grow.

Net sales for the Publishing Division were $5,919,900 for the nine months ended
November 30, 2003 compared with net sales of $6,054,000 for the nine months
ended November 30, 2002, a decrease of 2.2%. Net sales for the three months
ended November 30, 2003 were $1,776,400, an increase of 8.6% over net sales of
$1,636,400 for the same three-month period last year. The juvenile paperback
market is highly competitive. Industry sales of juvenile paperbacks approach
$876 million annually, down 1.3% from the previous year. The Publishing
Divisions annual sales are approximately 0.9% of industry sales. The major
retail chains continue to suffer lower sales because of the slump in our
national economy. This resulted in a 9.7% decline in the Publishing Divisions
sales to these chains during the nine months ended November 30, 2003. Sales to
national chains continue to be of major importance to the Publishing Division.
To insure that the Company remains competitive in selling to the major chains,
the Company plans to continue to actively target the national chains through
cooperative advertising, joint promotional efforts and institutional
advertising in trade publications. These activities have improved our
relationship with the national chains and we anticipate further positive
development in this important area. We feel that we have an edge in the
competitive factors of product quality, price and deliverability.

Transportation revenues were $1,269,600 for the nine months ended November 30,
2003, an increase of 18.7% over transportation revenues of $1,069,200 for the
nine months ended November 30, 2002. Transportation revenues for the three
months ended November 30, 2003 were $550,500 and for the three months ended
November 30, 2002 were $461,800, an increase of 19.2%. These increases in
transportation revenue were the result of increases in sales. The related
freight costs are included in operating and selling expenses. Freight costs
were $1,522,100 for the nine months ended November 30, 2003 and $1,235,100 for
the nine months ended November 30, 2002, an increase of 23.2%. Freight costs
for the three months ended November 30, 2003 were $607,900 compared to $490,800
for the three months ended November 30, 2002, an increase of 23.9%. These
increases in freight costs were the result of increases in sales.

Cost of Sales  The Companys cost of sales for the nine months ended November
30, 2003 was $8,416,500, an increase of 11.5% over cost of sales of $7,545,200
for the nine months ended November 30, 2002. Cost of sales expressed as a
percentage of gross sales was 26.4% for the nine months ended November 30, 2003
and 26.5% for the same nine-month period a year ago. Cost of sales for the
three months ended November 30, 2003 was $3,274,200 compared with $2,802,200
for the same three months ended November 30, 2002, an increase of 16.8%. Cost
of sales expressed as a percentage of gross sales was 26.4% and 26.5% for the
three months ended November 30, 2003 and 2002 respectively. Cost of sales as a
percentage of gross sales will fluctuate depending upon the product mix sold.

Operating and Selling Expenses  Operating and selling expenses increased 21.0%
to $5,012,100 for the nine months ended November 30, 2003 when compared with
$4,142,800 for the nine months ended November 30, 2002. Expressed as a
percentage of gross sales, operating and selling expenses were 15.7% for the
nine months ended November 30, 2003 and 14.6% for the same nine month period
last year. Operating and selling expenses for the three months ended November
30, 2003 and 2002 were $2,016,000 and $1,624,000, respectively, an increase of
24.1%. These costs expressed as a percentage of gross sales were 16.2% for the
three months ended November 30, 2003 and 15.4% for the three months ended
November 30, 2002. Contributing to the increased operating and selling costs
were increased credit card fees, higher freight costs, increased payroll costs
and increased marketing costs. These increased costs are attributed to the
overall increase in sales in the first nine months of fiscal year 2004 when
compared with the first nine months of fiscal year 2003.

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EDUCATIONAL DEVELOPMENT CORPORATION

Sales commissions for the nine months ended November 30, 2003 were $6,152,300,
an increase of 23.9% over sales commissions of $4,965,900 for the nine months
ended November 30, 2002. These expenses expressed as a percentage of gross
sales were 19.3% for the nine months ended November 30, 2003 and 17.5% for the
nine months ended November 30, 2002. Sales commissions for the three months
ended November 30, 2003 and 2002 were $2,792,300 and $2,253,900, respectively,
an increase of 23.9%. Sales commissions expressed as a percentage of gross
sales were 22.5% for the three months ended November 30, 2003 and 21.4% for the
three months ended November 30, 2002. Sales commissions as a percentage of
gross sales is determined by the product mix sold and the division which makes
the sale. The Home Business Division and the Publishing Division have separate
and distinct commission programs and rates. Sales commissions in the Home
Business Division increased 24.0% and 24.2% for the three months and nine
months ended November 30, 2003, the result of increased sales in that division.
Sales in the Publishing Division increased in the three-month period but
decreased for the nine-month period ended November 30, 2003. Sales commissions
in the Publishing Division increased 13.4% for the three months ended November
30, 2003 and increased 4.3% for the nine months ended November 30, 2003. Sales
commissions will fluctuate depending upon the amount of sales made to the
Companys house accounts, which are the Publishing Divisions largest
customers and do not have any commission expense associated with them, and
sales made by the Companys outside sales representatives.

General and administrative expenses for the nine months ended November 30, 2003
were $1,353,800, an increase of 16.7% over $1,160,200 for the same nine month
period last year. These expenses expressed as a percentage of gross sales were
4.2% for the nine months ended November 30, 2003 and 4.1% for the nine months
ended November 30, 2002. General and administrative expenses for the three
months ended November 30, 2003 were $482,800 versus $384,300 for the same three
months last year, an increase of 25.6%. These costs expressed as a percentage
of gross sales were 3.9% and 3.6% for the three months ended November 30, 2003
and 2002, respectively. The Company in the third quarter of FY2004 recorded a
one-time adjustment of $59,100 to the long term inventory reserve for
obsolescence. Also contributing to the increases in general and administrative
expenses were increases in payroll costs, materials and supplies and property
taxes.

Interest expense was $7,800 for the nine months ended November 30, 2003
compared with $900 for the same nine months a year ago. Interest expense for
the three months ended November 30, 2003 was $5,000. No interest expense was
incurred for the three months ended November 30, 2002. An increase in
occasional borrowings contributed to the increase in interest expense.

Pre-tax margins were 14.2% and 13.3% for the three months and nine months ended
November 30, 2003, respectively, compared with 14.9% and 13.8% for the same
comparable periods last year.







Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any material market risk.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosures of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related to our
valuation of inventory, allowance for uncollectable accounts receivable,
allowance for sales returns, long-lived assets and deferred income taxes. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may materially differ from these estimates under different assumptions
or conditions. Historically, however, actual results have not differed
materially from those determined using required estimates. The Companys
significant accounting policies are described in the notes accompanying the
financial statements included in the Companys annual report filed on Form
10-K. However, the Company considers the following accounting policies to be
significant and more dependent on the use of estimates and assumptions

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EDUCATIONAL DEVELOPMENT CORPORATION

Revenue Recognition

Revenue from merchandise sales is net of returns and allowances. The
provisions of the SEC Staff Accounting Bulletin No.101, Revenue Recognition in
Financial Statements, have been applied, and as a result, a reserve is
provided for estimated future sales returns. The Companys sales return policy
allows the customer to return all purchases for an exchange or refund for up to
30 days after the customer receives the item. Management has estimated and
included a reserve for sales returns of $101,000 as of November 30, 2003 and
February 28, 2003. The reserve for sales returns is estimated by management
using historical sales returns data.

Allowance for Doubtful Accounts

The Company maintains an allowance for estimated losses resulting from the
inability of its customers to make required payments. An estimate of
uncollectable amounts is made by management based upon historical bad debts,
current customer receivable balances, age of customer receivable balances, the
customers financial condition and current economic trends. If the actual
uncollected amounts significantly exceed the estimated allowance, then the
Companys operating results would be significantly adversely affected.
Management has estimated allowance for doubtful accounts of $102,600 and
$89,000 as of November 30, 2003 and February 28, 2003, respectively

Inventory

Management continually estimates and calculates the amount of noncurrent
inventory. The inventory arises due to the Company occasionally purchasing
book inventory in quantities in excess of what will be sold within the normal
operating cycle due to minimum order requirements of the Companys primary
supplier. Noncurrent inventory was estimated by management using the current
year turnover ratio by title. All inventory in excess of 2 1/2 years of
anticipated sales was classified as noncurrent inventory. Noncurrent inventory
balances were $666,200 and $511,500 at November 30, 2003 and February 28,2003,
respectively.

Inventories are presented net of a reserve for obsolete inventory. Management
has estimated and included a reserve for obsolescence for both current and
noncurrent inventory. This reserve is based on managements identification of
obsolete inventory on hand at November 30, 2003 and February 28,2003.
Management has estimated reserves for both current and noncurrent inventory of
$276,900 and $216,000 as of November 30, 2003 and February 28,2003,
respectively.

Deferred Tax Assets

The Company does not currently have a valuation allowance recorded against its
deferred tax assets. If management determines it is more likely than not that
its deferred tax assets would not be realizable in the future, a valuation
allowance would be recorded to reduce the deferred tax asset to its net
realizable value.

Long-lived Assets

In evaluating the impairment of long-lived assets, we recognize an impairment
loss only if the carrying amount of a long-lived asset is not recoverable from
its undiscounted cash flows. The impairment loss is calculated as the
difference between the carrying amount and the fair value of asset. We believe
at this time that the long-lived assets carrying values and useful lives
continues to be appropriate.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any material market risk.







Item 4.  CONTROLS AND PROCEDURES

Within the 90-day period prior to filing of this report, under the supervision
and with the participation of the Companys management, including the Companys
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-14(c) under the Securities
Exchange Act of 1934) was performed. Based upon this evaluation, the CEO and
CFO have concluded that the design and operation of these disclosure controls
and procedures were effective.

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EDUCATIONAL DEVELOPMENT CORPORATION

Subsequent to this evaluation on December 17, 2003 through the date of this
filing on Form 10-Q for the quarterly period ended November 30, 2003, there
have been no significant changes in the Companys internal controls or in other
factors that could significantly affect these controls, including any
significant deficiencies or material weaknesses of internal controls that would
require corrective action.













PART II OTHER INFORMATION

Item 6  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

31.1
    
    Certification of Randall W. White, President and Chief Executive Officer
of Educational Development Corporation, dated January 12, 2004 pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 furnished herewith.31.2
    
    Certification of W. Curtis Fossett, Chief Financial Officer of
Educational Development Corporation, dated January 12, 2004, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 furnished herewith.32.1
    
    Certification of Randall W. White, President and Chief Executive Officer
of Educational Development Corporation, dated January 12, 2004, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.32.2
    
    Certification of W. Curtis Fossett, Chief Financial Officer of
Educational Development Corporation, dated January 12, 2004, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.


(b) Reports on Form 8-K

A Form 8-K was filed on September 25, 2003 to submit to the Securities and
Exchange Commission a press release announcing earnings and sales for the
second quarter of fiscal year 2004. The press release contained the following
financial information for the three months and six months ended August 31, 2003
and August 31, 2002: (1) net sales; (2) pre tax earnings; (3) income taxes; (4)
net earnings; (5) earnings per share.

A Form 8-K was filed on October 1, 2003 to submit to the Securities and
Exchange Commission a press release announcing record September 2003 sales.







SIGNATURES

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

EDUCATIONAL DEVELOPMENT CORPORATION
(Registrant)

By
    
    /s/ Randall W. WhiteRandall W. White
President


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EDUCATIONAL DEVELOPMENT CORPORATION







EXHIBIT INDEX

Exhibit No.
    
    Description31.1
    
    Certification of Randall W. White, President and Chief Executive Officer
of Educational Development Corporation, dated January 12, 2004, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 furnished herewith.31.2
    
    Certification of W. Curtis Fossett, Chief Financial Officer of
Educational Development Corporation, dated January 12, 2004, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 furnished herewith.32.1
    
    Certification of Randall W. White, President and Chief Executive Officer
of Educational Development Corporation, dated January 12, 2004, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.32.2
    
    Certification of W. Curtis Fossett, Chief Financial Officer of
Educational Development Corporation, dated January 12, 2004, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.


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