<PAGE>

                      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 1934

     For the quarterly period ended May 31, 1999.

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the transition period from ___________ to ____________.

                         Commission file number: 0-4957

                      EDUCATIONAL DEVELOPMENT CORPORATION
             (Exact name of registrant as specified in its charter)

              Delaware                                   73-0750007
   (State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                     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 ___________
                             ---------

     As of May 31, 1999 there were 4,446,195 shares of Educational Development
Corporation Common Stock, $0.20 par value outstanding.
<PAGE>

PART I.  FINANCIAL INFORMATION
---------------------------------------------------

<TABLE>
<CAPTION>
ITEM 1

BALANCE SHEETS
                                                 May 31, 1999       February 28, 1999
                                                                    -----------------
                                                 (unaudited)
                                                  ---------
ASSETS
<S>                                              <C>                <C>
CURRENT ASSETS:
 Cash and cash equivalents                        $     74,300      $    210,900
 Accounts receivable - (less
  allowances for doubtful accounts
  and sales returns: 5/31/99 - $199,400
  2/28/99 - $189,600)                                2,138,600         1,842,600
 Inventories - Net                                   9,272,700         9,546,700
 Prepaid expenses and other assets                     196,000           220,000
 Income taxes receivable                                    --            55,100
 Deferred income taxes                                 119,000           121,800
                                                  ------------      ------------
   Total current assets                             11,800,600        11,997,100

 PROPERTY AND EQUIPMENT
  at cost (less accumulated
  depreciation:  05/31/99 - $1,104,400
  2/28/99 - $1,033,200)                                282,600           342,500
                                                  ------------      ------------

                                                  $ 12,083,200      $ 12,339,600
                                                  ============      ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
 Note payable to bank                             $    701,000      $    756,000
 Accounts payable                                    1,584,800         1,095,800
 Accrued salaries and commissions                      215,600           242,600
 Income taxes                                          131,000                --
 Dividend payable                                       86,000                --
 Other current liabilities                             161,900           149,500
                                                  ------------      ------------
   Total current liabilities                         2,880,300         2,243,900

DEFERRED INCOME TAXES                                   47,100            56,300

COMMITMENTS

SHAREHOLDERS' EQUITY:
 Common Stock, $.20 par value (Authorized
  6,000,000 shares; Issued 5,429,240
  shares; Outstanding 4,446,195
  and 4,873,254 shares)                              1,085,800         1,085,800
 Capital in excess of par value                      4,410,100         4,410,100
 Retained earnings                                   6,470,700         6,266,400
                                                  ------------      ------------
                                                    11,966,600        11,762,300
Less treasury shares, at cost                       (2,810,800)       (1,722,900)
                                                  ------------      ------------
                                                     9,155,800        10,039,400
                                                  ------------      ------------
                                                  $ 12,083,200      $ 12,339,600
                                                  ============      ============
</TABLE>

See notes to financial statements.

                                       2
<PAGE>

STATEMENTS OF EARNINGS (UNAUDITED)

<TABLE>
<CAPTION>
                                  Three Months Ended May 31
                                 ----------------------------
                                     1999           1998
                                 -------------  -------------
<S>                              <C>            <C>
GROSS SALES                      $  6,556,600   $  6,501,400
 Less discounts & allowances       (2,434,500)    (2,340,700)
                                 ------------   ------------
  Net sales                         4,122,100      4,160,700
COST OF SALES                       1,726,500      1,676,500
                                 ------------   ------------
  Gross margin                      2,395,600      2,484,200
OPERATING EXPENSES:
 Operating & selling                  785,300        802,700
 Sales commissions                    741,800        734,100
 General & administrative             401,400        364,600
 Interest                              13,000         23,900
                                 ------------   ------------
                                      454,100        558,900
OTHER INCOME                           15,800         19,700
                                 ------------   ------------

EARNINGS BEFORE INCOME TAXES          469,900        578,600

INCOME TAXES                          179,600        228,600
                                 ------------   ------------

NET EARNINGS                     $    290,300   $    350,000
                                 ============   ============

BASIC AND DILUTED EARNINGS
 PER SHARE                       $        .06   $        .07
                                 ============   ============

WEIGHTED AVERAGE NUMBER OF
 COMMON AND COMMON EQUIVALENT
 SHARES OUTSTANDING:
  Basic                             4,624,517      5,217,436
                                 ============   ============
  Diluted                           4,659,489      5,338,533
                                 ============   ============

DIVIDENDS DECLARED PER
 COMMON SHARE                    $        .02   $        .02
                                 ============   ============
</TABLE>

See notes to financial statements.

                                       3
<PAGE>

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>

                                 Common Stock
                          (par value $.20 per share)                                    Treasury Stock
                           ------------------------                                   ----------------------
                                 Number of                  Capital in                 Number
                                  Shares                    Excess of     Retained       of                   Shareholders'
                                  Issued        Amount      Par Value     Earnings     Shares      Amount         Equity
                                 ---------    ----------    ----------  ------------  --------  ------------  --------------
<S>                              <C>          <C>           <C>         <C>           <C>       <C>           <C>
BALANCE, MAR. 1, 1999            5,429,240    $1,085,800    $4,410,100   $6,266,400   555,986   $(1,722,900)    $10,039,400

Issuance of treasury stock             ---           ---           ---          ---     ( 100)          300             300
Purchases of treasury
 stock                                 ---           ---           ---          ---   427,159    (1,088,200)     (1,088,200)

Dividend declared                      ---           ---           ---     ( 86,000)      ---           ---        ( 86,000)

Net earnings                           ---           ---           ---      290,300       ---           ---         290,300
                                 ---------    ----------    ----------   ----------   -------   -----------     -----------
BALANCE, MAY 31, 1999            5,429,240    $1,085,800    $4,410,100   $6,470,700   983,045   $(2,810,800)    $ 9,155,800
                                 =========    ==========    ==========   ==========   =======   ===========     ===========
</TABLE>

See notes to financial statements.

                                       4
<PAGE>

STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 Three Months Ended May 31
                                                              ------------------------------
                                                                   1999            1998
                                                              --------------  --------------
<S>                                                           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES                           $  1,103,900    $    217,300

CASH FLOWS FROM INVESTING ACTIVITIES -
 Purchases of property and equipment                                (11,300)        (17,000)
                                                               ------------    ------------

  Net cash used in investing activities                             (11,300)        (17,000)
                                                               ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings under revolving credit agreement                      1,569,000       2,478,000
 Payments under revolving credit agreement                       (1,624,000)     (1,986,000)
 Cash received from exercise of stock options                            --           7,500
 Cash received from sale of treasury stock                               --           6,300
 Cash paid to acquire treasury stock                             (1,088,200)       (698,100)
                                                               ------------    ------------

  Net cash used in financing activities                          (1,143,200)       (192,300)
                                                               ------------    ------------

Net Decrease in Cash and Cash Equivalents                          (136,600)        (93,800)
Cash and Cash Equivalents, Beginning of Period                      210,900         171,600
                                                               ------------    ------------
Cash and Cash Equivalents, End of Period                       $     74,300    $     77,800
                                                               ============    ============

Supplemental Disclosure of Cash Flow Information:
 Cash paid for interest                                        $     10,900    $     21,200
                                                               ============    ============
 Cash paid for income taxes                                    $         --    $     25,000
                                                               ============    ============

Supplemental Disclosure of Non Cash Operating Activities -
 Dividend declared                                             $     86,000    $    101,800
                                                               ============    ============
</TABLE>

See notes to financial statements.

                                       5
<PAGE>

NOTES TO FINANCIAL STATEMENTS

Note 1 - The information shown with respect to the three months ended May 31,
------
1999 and 1998, 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.  There were no adjustments, other than normal recurring
accruals, entering into the determination of the results shown except as noted
in this report.  The results of operations for the three months ended May 31,
1999 and 1998, 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, 1999.

Reclassifications were made to 1998 balances to conform with 1999 presentation.

Note 2 - Effective June 30, 1998 the Company signed a Second Amendment to
------
Restated Credit and Security Agreement with State Bank which provided a
$3,500,000 line of credit.  The line of credit was evidenced by a promissory
note in the amount of $3,500,000 payable June 30, 1999.  The note bore interest
at the Wall Street Journal prime floating rate payable monthly (7.75% at May 31,
1999).  The note was collateralized by substantially all of the assets of the
Company.  At May 31 1999, the Company had $701,000 in borrowings and a $50,000
letter of credit issued under the revolving credit agreement.  Available credit
under the revolving credit agreement was $2,749,000 at May 31, 1999.

Effective June 30, 1999 the Company signed a Credit and Security Agreement with
State 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,
2000.  This note bears interest at the Wall Street Journal prime floating rate
payable monthly.  The note is collateralized by substantially all of the assets
of the Company.

Note 3 - Inventories consist of the following:
------

<TABLE>
<CAPTION>
                                        May 31, 1999    February 28, 1999
                                      ----------------  ------------------
          <S>                         <C>               <C>

          Book Inventory                   $9,396,400          $9,670,400
          Reserve for Obsolescence           (123,700)           (123,700)
                                           ----------          ----------
                                           $9,272,700          $9,546,700
                                           ==========          ==========
</TABLE>

Note 4 - Basic earnings per share is computed by dividing net earnings by the
------
weighted average number of common shares outstanding during the period.  Diluted
earnings per share is based on the combined weighted average number of common
shares outstanding increased, when appropriate, for the number of common shares
issuable upon exercise of stock options, computed using the treasury stock
method.

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.
<TABLE>
<CAPTION>

                                              Three Months Ended May 31,
                                              --------------------------
                                                  1999          1998
                                              ------------  ------------
<S>                                           <C>           <C>
     Net Earnings                               $  290,300    $  350,000
                                                ==========    ==========

     Basic EPS:
       Weighted Average Shares Outstanding       4,624,517     5,217,436
                                                ==========    ==========
       Basic EPS                                $      .06    $      .07
                                                ==========    ==========

     Diluted EPS:
       Weighted Average Shares Outstanding       4,624,517     5,217,436
       Assumed Exercise of Options                  34,972       121,097
                                                ----------    ----------
     Shares Applicable to Diluted Earnings       4,659,489     5,338,533
                                                ==========    ==========
     Diluted EPS                                $      .06    $      .07
                                                ==========    ==========
</TABLE>

                                       6
<PAGE>

Since March 1, 1998, when the Company began its stock repurchase program,
803,991 shares of the Company's common stock at a total cost of $2,365,400 have
been acquired.  The Board of Directors has authorized purchasing up to 2,000,000
shares as market conditions warrant.

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
-------------------

The financial condition of the Company remains strong.   Working capital at May
31, 1999 was $8,920,300 compared to working capital of $9,753,200 at fiscal
year-end February 28, 1999.  Accounts receivable increased 15% over year-ended
February 28, 1999.  Two sizable orders in the first quarter with payment due
during the second quarter contributed to the first quarter increase in accounts
receivable.  Inventory levels decreased 2.8% during the first quarter of fiscal
year 2000.  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.  The note payable to the bank declined 7.3% from the
balance at February 28, 1999, the result of improved cash flow during the first
three months of fiscal year 2000. Accounts payable increased 44.6% over year-end
February 28, 1999. The major component of accounts payable is the amount due to
the Company's principal supplier. Increases and decreases in inventory levels
directly affect the level of accounts payable. Also the timing of the purchases
and the payment terms offered by various suppliers affect the levels of accounts
payable.

In May 1999 the Company declared a cash dividend of $0.02 per share to
shareholders of record August 1, 1999, to be paid August 13, 1999.  Also, in May
1999 the Board of Directors authorized the Company to purchase an additional
1,000,000 shares of the Company's common stock as market conditions warrant,
bringing the total authorized amount the Company may repurchase to 2,000,000
shares.  Through the end of the first quarter of fiscal year 2000 the Company
has acquired 803,991 shares at a price of $2,365,400.

Pre-tax margins were 11.4% for the three months ended May 31, 1999 compared with
13.9% for the three months ended May 31, 1998.  Contributing to the decline in
pre-tax margins was an increase in sales discounts given during the first
quarter of fiscal year 2000 as special promotions were offered to increase
sales.

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

Revenues - Net sales from the Home Business Division were $2,024,500 for the
--------
three months ended May 31, 1999 compared with net sales of $1,990,900 for the
three months ended May 31, 1998, an increase of 1.7%.  The Company believes this
increase is the result of an increase in the number of new recruits and the
retention of existing recruits, both the result of increases in advertising
expenditures and other promotions designed to attract and retain new
consultants.  A 5% increase in the per-show sales average also contributed to
the increase in net sales.  The Company continues to offer new and exciting
incentive programs, travel contests and regional seminars to help stimulate
sales growth and recruiting.  Management is hopeful that the two-year decline in
net sales has been halted.

Net sales from the Publishing Division were $2,097,600 for the three months
ended May 31, 1999 compared with net sales of $2,169,800 for the three months
ended May 31, 1998, a decrease of 3.3%.  The Company attributes this decrease in
net sales to changing market conditions.  National chains increasingly dominate
the bookstore market, resulting in fewer independent bookstores.  The closings
of these independent bookstores, an important market segment to the Company,
contributed to the decline in net sales.  Independent retail toy stores have
also experienced increased competition from national discount stores, resulting
in lower sales in this market area.  The Company has restructured sales and
marketing coverage on the national chains in order to increase market share.
The gift market offers considerable potential for the Company and the Company
has been exploring this opportunity by attending more gift trade shows.  The
Company also attends several national trade shows throughout the country to
further promote its products. For these reasons Management is optimistic that
the Publishing Division will maintain its market share in the highly competitive
publishing market.

                                       7
<PAGE>

Operating Expenses - The Company's cost of sales for the three months ended May
------------------
31, 1999 was $1,726,500, an increase of 3.0% over the cost of sales of
$1,676,500 for the three months ended May 31, 1998.  Cost of sales expressed as
a percentage of gross sales was 26.3% versus 25.8% for the three months ended
May 31, 1999 and 1998 respectively.  Cost of sales as a percentage of gross
sales will fluctuate depending upon the product mix sold.

Operating and selling expenses decreased 2.2% to $785,300 for the three months
ended May 31, 1999 compared with $802,700 for the three months ended May 31,
1998.  These expenses expressed as a percentage of gross sales were 12.0% for
the three months ended May 31, 1999 and 12.3% for the three months ended May 31,
1998.  A decrease in advertising expenditures in the Publishing Division
contributed to the decline in operating and selling expenses.

Sales commissions increased 1.0% during the quarter ended May 31, 1999 to
$741,800 compared with $734,100 for the quarter ended May 31, 1998.  Sales
commissions expressed as a percentage of gross sales were 11.3% for both
quarters ended May 31, 1999 and 1998.  Sales commissions will vary with the
product being sold and the Division making the sale.  The Home Business Division
and the Publishing Division have separate and different commission programs and
rates.  The increase in sales for the Home Business Division offset by lower
sales in the Publishing Division resulted in a net 1.0% increase in commission
expenses for the first quarter of fiscal year 2000.

General and administrative expenses were $401,400 for the three months ended May
31, 1999, an increase of 10.1% over the $364,600 for the three months ended May
31, 1998.  These expenses expressed as a percentage of gross sales were 6.1% for
the three months ended May 31, 1999 versus 5.6% for the three months ended May
31, 1998.  General and administrative expenses are not always directly affected
by sales, thus comparison of these expenses as a percentage of gross sales can
be misleading.  Increases in salaries and benefits, primarily to existing
employees, contributed to the increase in general and administrative expenses.

Interest expense declined 45.6% for the first quarter of fiscal year 2000 when
compared with the first quarter of fiscal year 1999. The average amount borrowed
during the first quarter ended May 31, 1999 was $657,600 compared with
$1,102,300 for the first quarter ended May 31, 1998, a decrease of 40.3%.  The
rate of interest was  3/4 of 1% lower during the first quarter of fiscal year
2000 than the interest rate in the first quarter a year ago.  The decline in the
average amount borrowed and a lower interest rate resulted in lower interest
expenses for the quarter ended May 31, 1999 when compared with the quarter ended
May 31, 1998. The reduction in average bank borrowings can be attributed to the
continuing efforts of the Company to manage its inventory levels through
improved efficiencies in purchasing policies.

BUSINESS SEGMENTS
-----------------

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.

Information by industry segment for the three months ended May 31, 1999 and 1998
is set forth below:
<TABLE>
<CAPTION>

                                       Publishing     UBAH        Other       Total
                                       ----------  ----------  -----------  ----------
<S>                                    <C>         <C>         <C>          <C>
Three months Ended May 31, 1999

  Net sales from external customers    $2,097,600  $2,024,500  $       --   $4,122,100
  Earnings before income taxes         $  770,500  $  500,900  $( 801,500)  $  469,900

Three Months Ended May 31, 1998

  Net sales from external customers    $2,169,800  $1,990,900  $       --   $4,160,700
  Earnings before income taxes         $  816,800  $  571,600  $( 809,800)  $  578,600
</TABLE>

                                       8
<PAGE>

YEAR 2000 MATTERS

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

The Company has evaluated its software applications, systems software,
information technology ("IT") system and its non-IT systems.  Management has
determined that the various computer programs the Company uses in its operations
are Year 2000 compliant.  These programs include the following: inventory;
accounts receivable; accounts payable; general ledger; shipping; order entry.
The Informix database engine, which runs these programs, is not Year 2000
compliant.  The Company has acquired the necessary programs to bring the
Informix database engine to Year 2000 compliance and has installed and tested
these programs in its test environment.  The Company is presently installing the
programs on the Company's main system and expects to have this completed by
October 1999.  The Company's ("IT") system and its non-IT system should be fully
compliant by October 1999. Y2K costs are estimated to be less than $50,000.

The Company has received assurances from its primary supplier, Usborne
Publishing LTD, that Usborne Publishing LTD will be year 2000 compliant before
the end of 1999.

The Company relies on third-party suppliers for products and services, including
telecommunications and shipping. The Company will be adversely impacted if these
suppliers of products and services do not make necessary changes to their own
systems in a timely and successful manner.  There could be circumstances in
which the Company would be unable to receive customer orders, ship product,
invoice customers or collect payments.

The Company has communicated with others with whom it does significant business
to determine their Year 2000 compliance readiness and the extent to which the
Company is vulnerable to any third-party Year 2000 issue.  However, there can be
no guarantee that the systems of these other third-party companies will be
timely converted.

The Company is unable to determine the financial impact, if any, to the Company
should some or all of its third-party suppliers be unable to become Year 2000
compliant in a timely manner.  The Company relies highly on the
telecommunications industry and the transportation (shipping) industry.  It is
highly unlikely that all the major service providers in these two industries
would fail to become Year 2000 compliant in a timely manner.  However, should
this worst case scenario occur, the Company would be unable to receive orders or
ship product.

The Company has developed an informal contingency plan to address the potential
adverse effects of the Year 2000 problem.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------  ----------------------------------------------------------

     The Company does not have any material market risk.

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

     None

                                       9
<PAGE>

                                   SIGNATURES
                                   ----------


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


                      EDUCATIONAL DEVELOPMENT CORPORATION
                                  (Registrant)



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


Date: July 8, 1999
     ---------------

                                      10