FORM 10-KSB

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

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

For the Fiscal Year Ended December 31, 2003

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

For the Transition Period from  ________ to ________

Commission File #0-11078

THE AMERICAN EDUCATION CORPORATION
----------------------------------
(Name of Small Business issuer in its charter)

Colorado
--------
(State or other jurisdiction of incorporation or
organization)

84-0838184
----------
(I.R.S. Employer Identification No.)

7506 N. Broadway Extension, Suite 505, Oklahoma City, OK  73116
---------------------------------------------------------------
(Address of principal executive offices )

(405) 840-6031
--------------
(Registrant's telephone number)

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.025 per share

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

YES  X     NO ____

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

     Revenues for the year ended December 31, 2003:    $8,598,868

State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked price of
such common equity, as of a specified date within the past sixty
days: $2,988,051 based on 7,470,127 shares at $.40 per share, the last
sale price of the common stock on March 12, 2004. (For purposes of
calculating this amount only, all the directors and executive officers
of the issuer have been treated as affiliates.)

Number of shares of the issuer's common stock outstanding as of March
12, 2004: 14,133,461

Transitional Small Business Disclosure Format    YES ____  NO  X




TABLE OF CONTENTS TO FORM 10-KSB


PART I


                                                       Page Number


Item 1     Description of Business                           3
Item 2     Description of Property                          12
Item 3     Legal Proceedings                                12
Item 4     Submission of Matters to a Vote
            of Security Holders                             12


PART II


Item 5     Market for Common Stock and
            Related Stockholder Matters                     13
Item 6     Management's Discussion and Analysis
            or Plan of Operation                            14
Item 7     Financial Statements                             17
Item 8     Changes In and Disagreements with
            Accountants on Accounting and
            Financial Disclosure                            17
Item 8A     Controls and Procedures                         17



PART III


Item 9     Directors, Executive Officers, Promoters,
            and Control Persons; Compliance with
            Section 16(a) of the Exchange Act              18
Item 10    Executive Compensation                          19
Item 11    Security Ownership of Certain Beneficial
            Owners and Management                          21
Item 12    Certain Relationships and Related
            Transactions                                   22
Item 13    Exhibits and Reports on Form 8-K                23
Item 14    Principal Accounting Fees and Services          24


THE AMERICAN EDUCATION CORPORATION


FORM 10-KSB


PART I
------

Item 1.  Description of Business.
------   ------------------------

General
-------

The American Education Corporation, formerly Plasmedics, Inc., (the
"Company" or "AEC"), was incorporated under the laws of the State of
Colorado on February 23, 1981.

On January 8, 1991, the Company completed the purchase of substantially
all of the operating assets of American Educational Computer, Inc.
("AECI"), an Oklahoma City-based company.  The sale was consummated
pursuant to an asset purchase agreement between the Company and AECI
dated December 31, 1990.  The purchase price for the assets was
approximately $1,163,000.

In August 1991, the Company changed its name from Plasmedics, Inc. to
The American Education Corporation.  Since that time, the Company has
concentrated on the development of instructional software, assessment
and testing technology, and primary, secondary and post secondary
content.

Effective January 1, 2004,  the Company changed its state of
incorporation from Colorado to Nevada through a merger into AEC Nevada.
This change in domicile was previously and unanimously approved by the
Company's shareholders and was undertaken to reduce the overall cost of
corporate governance.


The Company's Business
----------------------

The Company's primary business is the development and marketing of
educational software to elementary, middle and secondary schools, adult
literacy centers and vocational, junior and community colleges. The
Company develops software for Windows, registered, Macintosh, registered,
Unix, registered, and Linux, registered, operating systems.  From 1995 to
2001, the Company's revenues primarily have been derived from the sale of
its principal product family, the A+dvanced Learning System, registered,
Version 2.15, a comprehensive courseware offering developed by the
Company.  In early 2001, the Company released the A+nyWhere Learning
System, registered, V 3.0 ("A+LS", trademark), a Java, trademark, based
program designed to be the Company's future delivery platform for its
extensive grade level 1-12 educational content and assessment tools.  The
new A+nyWhere Learning System, registered, V 3.0, and the browser-based
version, A+nyWhere Learning System, registered, V 4.0, now provides in
excess of eighty percent of total revenues at the close of fiscal 2003,
while the A+dvanced Learning System Version 2.15 has declined with
respect to its relative contribution to total revenues to less than
twenty percent.  A significant body of historically generated data
demonstrates the educational effectiveness of the Company's products and
their instructional design.  In accordance with the No Child Left Behind
Act of 2001, further studies, independently reviewed and validated, have
established the link between the Company's instructional design and that
proven effective in independent scientifically-based research studies.
The Company is currently engaged in a variety of scientifically-based
research studies to directly gather and assess data regarding the
effectiveness of the Company's products.

The Company acquired two businesses in 1998, Projected Learning
Programs, Inc. ("PLP") and Learning Pathways, Limited ("LPL").  In
2001, management elected to wind down and ultimately discontinue the
catalog selling operations of the PLP subsidiary as a result of the
marketplace moving to increasing use of the Internet and the cash use
intensity of this type of business.  LPL, the Company's Derby, United
Kingdom subsidiary was acquired in late 1998.  In the latter part of
2000, LPL substantially completed the process of converting the
Company's A+LS curriculum content to a product presentation that is
suitable for British educators and schools.  LPL also undertook the
development of new UK-specific content that was focused on the UK's new
literacy and numeracy instructional requirements during 2001 and
significant portions of this new product offering were completed during
the 2001 fiscal year.  LPL's revised and expanded product family
was substantially released to the UK school market during the 2001
fiscal year.  The Company purchased Dolphin, Inc., ("Dolphin") in
December 1999.  Dolphin is an established, 14 year-old developer of
educational software for many of the world's leading textbook and
electronic publishers.  Dolphin was purchased to provide additional
depth to the Company's development activities and, through its ongoing
industry contacts, to assist the Company in initiating partnering
opportunities in the areas of content development, marketing and
business development with major textbook and assessment testing
publishers.

The Company internally develops and licenses, to a limited extent,
software or content from third parties for inclusion in its products
for the school market. The Company utilizes an in-house programming
staff for the development of its software technology and limited,
external contract services to develop these products.  The Company is
the primary developer of its curriculum content and employs full-time
educational professionals in this electronic publishing effort.  The
Company makes extensive use of contract services to secure the
specialized educator skills that are necessary to publish the wide
range of subject matter and grade level content required by the
Company's comprehensive product offering, and to ensure their alignment
to state and other educational standards.

The Company's products are sold through school dealers, an in-house
employee sales force and through direct mail programs. The Company's
products are sold for use in elementary, middle and high schools,
libraries, adult learning centers, correctional institutions, community
colleges, universities, private industry, and to a limited extent, for
home-based schooling.

The use of computers, software and the Internet as educational and
instructional aids in the nation's schools is the major focus of the
Company's marketing strategy.  The Company's marketing plan calls for
separate promotional efforts to be directed toward the various segments
of the school market and channels of distribution that provide
specialized market access.  Currently, the Company utilizes an in-house
employee sales force and a national network of independent school
dealers to market its products to schools.  Each independent school
dealer generally covers a geographically limited territory such as a
single state.  Other marketing efforts are executed through
business partners as well as direct mail to the school and library
markets.  Selling efforts in the U.K. are effected by a direct company-
employed sales force and independent representatives.

The Company is a technology-based business and is an active developer
of diagnostic and prescriptive assessment testing and curriculum
software applications to facilitate the delivery of its assessment
testing and instructional content in a networked environment, which
includes the Internet.  A significant percentage of the Company's
current revenues are derived from product sales to schools that deliver
curriculum content on a local area network ("LAN") within a single
school site.  The rapid adoption of wide-area networks ("WAN")
topology, and increased Internet usage, or online delivery of the
Company's products, are growing as a percentage of the Company's
revenues.  In late 2000, the Company began the testing and delivery of
its content online.  As a result of the availability of the browser-
based version, A+nyWhere Learning System V4.0, the Company, at December
31, 2003, had 149 schools in 31 states using online curriculum content
for both school and home-based students.  Online delivery of content is
a rapidly growing element of the Company's business and the number of
institutions under contract to the Company grew from 27 schools in 2001
to 149 schools in 2003, a 452% increase. These users are largely
supported by company-maintained server facilities in Oklahoma City at
the Perimeter Technology Center, Inc., and at the Vericenter, Inc.,
facility in Dallas, TX.  Management believes that it has in place the
development technology and programs to allow it to capitalize on
these rapidly-developing changes in the structure of the delivery of
electronic-based instruction that will be required by school districts
in future years.

Principal Products
------------------

Educational Software
--------------------

The Company engages in extensive efforts to develop new programming
technology as well as new instructional content and academic skills
assessment tools.  As a result of this effort, the Company now supports
all contemporary Macintosh, Windows, Novell, Unix and Linux operating
systems with one of the largest curriculum offerings in the core
subject areas for grade levels 1-12.  The Company now publishes under
its various A+, registered, brands 173 separate software
titles with approximately another 16 titles in revision or development
for release in 2004.  The currently released products all carry
2001 or later copyrights reflecting the Company's commitment not only
to development of content, but maintaining the currency of its
products.

There is a growing use of LAN, WAN and Internet technologies in
schools and school districts and the Company provides versions that are
designed to perform in these environments. The Company's educational
software for the elementary, middle and high school markets is designed
for use in classroom instruction and provides an array of educator
tools and resources to assist schools in meeting performance
improvement objectives.  The Company's products for schools are
designed for the professional educator and feature a management
function, which records assessment and student activity data for
both individual student and class performance measurement.  This
management function also provides for a wide range of performance
reports, lesson materials, tests and assignments that are required to
meet the No Child Left Behind Act of 2001 initiative of the Federal
Government.  A hallmark feature of the Company's products is a unique
authoring tool, which allows the educator to add, modify and expand the
graphics, text and the use of the Internet content to the curriculum
coursework provided by the Company.  The Company's software is
correlated to over 96 major national and state standards so that
educators can develop specific lesson plans to assist students with a
course of study that is directly related to specific state or national
learner objectives, or to correct individual student skill
deficiencies.  The Company's computer software products are carefully
designed to be utilized without extensive user experience with computer
operations.

In an industry where there are in excess of 300 educational software
publishers, the Company has developed a distinctive niche in the form
of its content, delivery, instructional design and assessment tools.
This approach features high educational value and extensive content
that is highly correlated to the leading states' desired learning
outcomes, national educational objectives and major, adopted textbook
series.  The Company has concentrated on a design of its products that
offers educational content substance that is highly specific to grade
and age level.  These are delivered to the student by a Learning
Management System ("LMS") and allow full educator control of the
content delivery rather than an approach that is controlled by the
software.  Various software tools, such as the Company's products for
assessment and instruction, allow the use of the Internet as a source of
content at the school or individual teachers option.  It also provides
educators with the means to effectively utilize the Company's products
as a comprehensive supplemental instructional solution designed to
address individual student skill deficiencies that may be identified
by the Company's assessment tools.  In addition, the Company's product
design is modular so that each title sold by the Company has an
integral LMS function.  This management function is shared so that new
software titles purchased by a customer utilize preexisting A+LS class
and student records that have been previously established.  This
feature allows schools to add additional content and titles or updated
versions simply and easily.

The No Child Left Behind Act of 2001 initiative places significant
emphasis on spending federal funds on programs that have been shown to
work using "scientifically-based" research. The Company's A+ brands in
various versions are supported by a body of research that validates the
Company's instructional design. In 2003, the Company amplified its
ongoing efforts to establish programs to document through, rigorous,
systematic and objective procedures the educational effectiveness of
its products.  The Company has published various white papers to
document completed studies of product performance in schools and has
engaged the Institute for the Advancement of Research in Education at
Appalachian Educational Laboratory, ("AEL"), Charleston, WV to assist
the Company in continuing to refine its design for future product
effectiveness research and the publication of the results of these
efforts.

The majority of the Company's installed base is deployed in a LAN
environment as a LMS.  The LMS allows teachers and school
administrators to monitor and analyze student performance, which is
increasingly important in a national environment where school
accountability is a prominent trend as a result of the No Child Left
Behind Act of 2001 initiative.  This approach provides complete
district, school and educator control of class and student lesson
assignments, individualized paths of study, skills assessment,
authoring, testing, reporting and the integration of third-party and
Internet-based content.  The ALS product family's range of reporting, and
documentation of individual student performance and progress assist the
educator in directing the use, and understanding the effectiveness, of
the software while improving the efficiency of the learning process.
Management believes that fewer than six companies in the educational
software industry provide a comprehensive, fully-managed instructional
LMS software solution that is comparable to the products provided by
the Company.

A+dvanced Learning System, registered, Version 3.0, Version 4.0
---------------------------------------------------------------

The A+nyWhere Learning System makes use of standardized Structured
Query Language ("SQL") and Open Database Connectivity ("ODBC")
technology to ensure transferability of student data between the system
and existing customer databases.  The powerful class and student
management features of this product provide the means to link and
transfer student performance data to most school and district central
records.  These features also include the ability to dynamically assess
student capabilities against specific individual state standards, and
to prescribe individualized instructional plans based on such assessments.
The system can be an important element in providing the data needed to
measure Adequate Yearly Progress (AYP) as required by No Child Left
Behind.

A+LS, Version 3.0 has, from an educational content perspective, been
designed as a comprehensive grade level 1-12 core curriculum solution.
It is a product family comprised of 173 subject titles that provide for
an interactive multimedia instructional environment with extensive
sound and graphics.  Major subject areas covered are: reading, writing,
mathematics, science, history, geography and language arts.  Each
ascending grade level subject title of the Company's content presents
increasingly more complex concepts that provide overlapping subject
matter reinforcement by grade level.  As a body of published work, it
is one of the most extensive in the industry for the elementary, middle
and secondary grade levels.  A+LS's content is divided into subject
titles, each containing a number of lessons; each lesson containing a
number of activities such as study, practice exercises, test and essay.

These instructional activities are further supported by computer
adaptive skill assessment tests for all subject areas and lesson-
related activities.  This design facilitates the use of the advanced
A+LS class and student management system to pretest, posttest and to
record academic gains, to maintain this academic performance data and
to report on individual student and class activities.  This capability
is required by schools to simplify and assist in the management and
reporting of student academic performance data to comply with certain
aspects of the No Child Left Behind Act of 2001.  Using tools embedded
in the Company's software, educators may select a series of specific
lessons across all subject areas to create a curriculum plan for a
specific time period, while specifying independent mastery levels for
each lesson for a class, group or an individual student.  They may
also integrate third-party publishers' materials into a specified
course of study for enrichment or remediation activities.  The product
design also permits the development of individualized courses of study
as a result of diagnostic testing and prescriptive capabilities designed
into A+LS for the at-risk or special education student, which might
require specific emphasis to correct skill deficiencies. Approximately
11,000 public and private schools, centers of adult literacy and
correctional institutions have adopted appropriate title and subject
area components of this product family since its introduction in
mid-1995.

During 2003 the Company continued to receive excellent marketplace
acceptance of A+nyWhere Learning System Version 4.0, the browser-based
version of Version 3.0.  This version has most of the features of
Version 3.0, but is designed to be delivered in standard Internet
browsers.  Importantly, Version 4.0 utilizes all of the assessment testing
resources of Version 3.0.  Further, the browser-based delivery can be used
as an independent, stand alone solution as well as in combination with a
Version 3.0 installation.  This design approach is a major selling feature
allowing schools to deploy as single, common instructional resource from a
single vendor throughout a community or campus, thereby simplifying use,
training and data collection processes.  In addition, the ability to deploy
in LAN, WAN and Internet configurations provides the school with a long-term
solution to effectively utilize computer and bandwidth resources as these are
upgraded over time.

Throughout 2003, the Company has maintained active development efforts
in updating and expanding both its technology and curriculum offerings
for the A+LS product family.  During the year, approximately 50
individual titles, reflecting offerings in both English and Spanish
languages, were developed and or updated.  This expanded, updated
curriculum offering should provide for additional revenue opportunities
with its existing and future school customers.  In addition, during
fiscal 2003 significant portions of the Company's current assessments
and standards database was expanded, updated and realigned to meet new
or revised state and national academic standards.

These ongoing investments in new technology provides the Company with the
means to deliver its products in the highly connected, future
marketplace.  This capability should increase and enhance the Company's
competitive ability to expand its delivery alternatives to customers
and to secure new marketing and strategic business relationships.

A+ University, trademark
------------------------

A+ University is a product training and staff development product line,
which is designed to instruct school administrators, curriculum specialists
and teachers in the use of the Company's various products.  Initial release
of this new product family occurred in the second quarter of 2002 and
revisions and updates were made throughout 2003.  It is believed that this
product family should become an important source of incremental revenue
from existing and new customers in future years.

A+dvancer Learning System, trademark
------------------------------------

In mid-2003, the Company completed the development of A+dvancer
Learning System, an online assessment and course of remedial
study, which is aligned to the College Board's ACCUPLACER, registered
trademark, post secondary test.  ACCUPLACER is utilized by two and
four-year institutions to screen incoming, first-year students and
their capabilities to be successful in college-level studies.
ACCUPLACER tests are widely used by the nation's post secondary
institutions for admissions screening and is thought to be the market
leading admissions test in mathematics, reading, writing,, language
comprehension and algebra.  ACCUPLACER is designed to render a
single score grade and provides the admissions department with little
additional information should the student fail to achieve the college's
minimum  ACCUPLACER score.  A+dvancer's assessment test identifies for
admissions personnel the specific undeveloped skills that caused the
student to fail the ACCUPLACER test, while providing diagnostic guidance
and a prescriptive recommendation for a course of study to build college-
level skills.  In addition to the diagnostic/prescriptive test element,
A+dvancer provides for comprehensive online coursework to assist the
student in a highly focused course of study to develop or refresh the
skills necessary to retake the ACCUPLACER test.  Controlled pilot studies
on the effectiveness of this product offering indicates that A+dvancer
provides both the post-secondary admissions department and students
seeking entry to these institutions an important new online resource to
simply and effectively deal with the needs of developmental testing and
instruction.  A significant percentage of the graduating high school
seniors seeking admission, or individuals in the work force who are
returning to post-secondary institutions require remedial education
programs to secure entry into post-secondary institutions.

Third Party Publishing, Marketing Affiliations and Partnerships
---------------------------------------------------------------

The Company is actively pursuing and is being pursued by third-party
publishing and marketing companies, which have curriculum content that
is complementary to the publications of the Company or access to
specialized segments of the market.  Many of these companies do not
have the software management technology or distribution resources of
the Company.  These relationships are generally sought by the Company
to supplement and complement the content of existing and planned A+LS
subject matter or to enter new markets.   Management also believes
continued expansion of these types of relationships enhances the value
of the Company's products to educators and strengthens the business
relationships with its distributors and other business partners.

In 2003, the Company licensed its proprietary database of state
academic standards and the associated intermediate skill sets necessary
to align content to the various state and national standards for
assessment testing to Educational Testing Services (ETS), Princeton,
NJ.  The term of this license is for two years and includes company
maintenance and updates of these standards. The Company views this as
an important relationship as ETS is an established and internationally
recognized organization in the field of student testing and assessment.

During 2003, the Company entered into agreements with Educational
Testing Service ("ETS") and GoKnow, Inc. to significantly enhance its
content offerings and these product enhancements were integrated into
the Company's products offerings in 2003. The agreement with ETS makes
the E-Rater online essay grading service available through the managed
A+LS system, and the Company released three new subject titles based on
E-Rater technology. GoKnow provides A+LS with access to its Artemis,
registered, service, which makes controlled access to pre-
screened, educationally sound web sites available, and provides
technologies for efficiently using them. The Company subsequently
released three new science subject titles using the Artemis technology
in early 2004. These titles feature research-oriented science projects
and will help the Company round out its current award winning offerings
for science instruction to meet the national science standards.

During 2002, the Company entered into a number of discussions with US
and UK-based publishers, hardware suppliers, and other organizations
associated with the educational marketplace.  The purpose of these
discussions is to license company technology, strengthen or to develop
new channels of access to the marketplace utilizing the Company's
content and technology.  A number of these arrangements were
consummated in 2003 and have been announced in company or subsidiary
press releases or literature. Several other strategic partnering
projects initiated in 2003 are still under development, or are
currently subject to confidential disclosure restrictions.

The Market For Educational Software Products
--------------------------------------------

The Company addresses five major market segments for its products; the
K-12 school, adult literacy, corrections, post-secondary  and the home
markets.

The U.S. School Market
----------------------

The U.S. school market for educational software in calendar 2003 showed
indications of recovery and that the market segment for the Company's
products evidenced a return to growth. Leading market research
organizations are forecasting continued growth of the educational
technology market segment through 2005.  The principal reason for this
growth is thought to be increased availability of federal funding to
schools, a recovery or adjustment by individual states to their
budget difficulties and a growing priority of schools to purchase
software with the assessment data management capabilities similar to
those offered by the Company to permit them to deal with reporting
requirements of the No Child Left Behind initiative. In the United
States, future market growth is also expected to be driven by record
student enrollments in primary through secondary schools projected
through the year 2008.  The U.S. market is currently comprised of
15,000 school districts that control 111,000 schools.  Many states in
the South and Southwest with high population growth projections are
expected to have expansion of student populations exceeding 20% during
the next several years.

This market is well documented by industry sources to be moving to
wider use of technology, access to the Internet and the increasing use
of online services, including.  The U.S. school market is closing on
the mark that 100% of the schools in the U.S. are connected to the
Internet.  Access to the Internet is expected to increase in schools as
more connections and greater bandwidth access are effected throughout
the nation's school buildings.  Importantly, it is believed that
increased home access to the Internet will open up the potential for
distributed learning and "e-learning" with the local school functioning
as the hub of a community-wide network to access educational resources.

Market growth is also expected to effect significant changes in the use
and increased adoption of technology to cope with teacher and physical
facility shortages in an attempt to gain increasing efficiency and to
secure more accountability for academic performance at the individual
school and district level.  To meet the future challenges, schools are
expected to embrace the increased use of a range of technologies
including the areas of database management, e-learning through the
Internet and its capabilities.  In addition the federal government's
initiatives such as the 21st Century and Reading First grant programs,
combined with the No Child Left Behind initiative is expected to
provide additional impetus to market growth in 2004-2005 school years.

The International School Market
-------------------------------

LPL is the Company's access to the UK school market and to other
countries in the world community, particularly those having historical
ties to Great Britain.  Many former British Commonwealth nations
utilize the UK's instructional model and Company management believes
that additional international opportunities will emerge as a result of
the Company's presence in the UK marketplace.  The market is
approximately 20% the size of the U.S. market, however, like the U.S.
marketplace, the UK market for educational technology products also
experienced declines in available funding to schools in the 2001 to
2003 period for technology products.  Recently it was announced that UK
spending would increase at a rate of approximately 3.5% for 2004, while
per pupil spending would increase from approximately $1,800 to $9,900
based on current currency conversion rates in the 2004 to 2008 school
years.  In addition the Curriculum Online initiative, within which LPL
is strongly placed with all of their UK products that are tagged and
listed on the Curriculum Online website, www.curriculumonline.gov.uk,
is to be fully funded for the next two years at an additional funding
level of $180M per year.  These funds can only be spent on electronic
learning resources using Elearning credits.  Accordingly, the UK market
should experience rates of growth in funding for educational technology
at the individual student level similar to those forecasted for the
U.S. school market.

The Adult Literacy/Lifelong Learning Market
-------------------------------------------

The Company believes it has designed its curriculum content delivery so
that it is both appealing and engaging to children and not offensive to
adult learners.  As a result, in 2003 the Company continued to have
success in this segment of the market.  The Company has established
installations in state and municipal centers of literacy and the
juvenile and adult corrections market segments, including a state wide
deployment of content in Kansas, Utah and Oklahoma in both the prison
system and a number of regional adult literacy centers.  Preliminary
information from these installations is that the Company's products are
highly effective in preparing adults for high school equivalency tests
and other recognized measurements of literacy.  The adult literacy and
related market segments are believed to be growing in excess of 20% per
annum according to industry sources.  In some cases, these market
segments are served by specialized distribution and the Company is
seeking to secure additional dealers to support its expansion efforts
in this area.

The Home Market
---------------

The Company has not focused significant resources in marketing its
products to this market segment, which is believed to offer future
opportunities for growth and additional financial returns on the
Company's investment into educational content.   Management believes
that there is an opportunity to move into this segment of the market
with its current products and training materials that should be of
value to home educators utilizing online access.  The home education is
growing at rates exceeding 15% per year according to industry sources.
Many families are choosing to educate their children at home versus the
traditional school education channels or to be actively involved in
providing additional academic emphasis through home-supervised study.
Management believes that the Company's products are designed in a
manner to appeal to the home educator who is seriously involved in the
educational process of their children.  In addition, the Company has
invested heavily in the correlation of its products to most national
and state instructional objectives.  These correlations should provide
additional value-added support to the use of its products by the home
educator. The Company has and will continue to attempt to identify
marketing partners who have access to this market segment and the
financial and related resources to successfully penetrate this
marketplace.

Trade Names, Service Marks and Logo Types
-----------------------------------------

The Company's service mark for the A+ products was registered with the
United States Patent and Trademark Office on the Principal Register,
registration number 1,345,712, on July 2, 1985.  On April 18, 1989, the
A+ trademark, for use with educational software, was registered with
the United States Patent and Trademark Office.  The Company was
notified that, as of May 12, 1997, the use of the A+ symbol is deemed
incontestable for use on educational software.  Other various
trademarks and logos associated with the Company's software products
have also been registered.

On June 16, 1995, the Company filed for the separate and expanded use
of its A+ registered mark as A+dvanced Learning System with its A+ logo
design to describe and identify this extensive family of educational
software products released in the latter part of fiscal 1995.  This
mark was registered with the United States Patent and Trademark Office
on Principal Register, registration number 2,038,215, on February 18,
1997.  On December 29, 1999, the Company filed for the trademark
A+Datalink which has been approved for registration by the United
States Patent and Trademark Office.

The Company filed for additional separate and expanded use of its A+
registered mark for use as A+nyWhere Learning System and Adult Learning
System in the second quarter of 1999 and continued registration efforts
on these marks during 2000.  In 2001, the Company was notified of
the registration of the A+nyWhere trade mark.  In addition, the Company
continued actions to file necessary documents in the United Kingdom to
ensure protection and preservation of its A+ brand in that country.
The A+LS mark was registered with the United Kingdom's Trade Marks
Office, registration number 2,194,275, on April 12, 1999.  The A+
design and A+dvanced Learning System has been approved for registration
in the United Kingdom.

In 2003 the Company filed for additional separate and expanded use of
it's A+ registered mark as A+dvancer Learning System to describe this
new product family of educational software products for the post-
secondary marketplace.

The use of the Company's distinctive A+ logo is viewed as an integral,
distinctive brand element to the Company's product families and is
important to corporate recognition.

Production and Manufacturing
----------------------------

The Company purchases CD-ROM blanks from various sources.  The Company
owns commercial quality, high-speed software duplication equipment and
duplicates its software internally.  The Company develops, with outside
packaging developers, materials and packaging concepts, and internally
authors necessary product instructional manuals.  The Company maintains
duplication equipment that is suitable for production of catalogs and
manuals.  The Company secures product packaging from external sources
and performs quality control, final assembly, inventory and distribution
on most orders received.  Large production runs of catalogs and sales
literature are contracted to outside printers.  The Company has no
dependence on any individual supplier.

The Company, with its release to schools of the A+nyWhere Learning System,
Version 3.0 in 2001 and version 4.0 in 2002 has the capability to
electronically deliver and install its products at customer locations.
This capability should serve to further reduce the Company's cost of
publication of its products commencing in the year as it reduces the need
to produce its products and their extensive documentation on CD-ROM discs.

Research and Development
------------------------

At December 31, 2003, the Company employed twelve (12) full-time
development and support personnel in its product development efforts.
These individuals are responsible for the development of new versions
of the Company's software technology and the support of current
versions of its software offerings.

The Company employs a staff of professional educators who are
responsible for the development and support of its curriculum content.
The Company also utilizes part-time educational consultants in the
design of its curriculum-based product offering.  These individuals
provide the curriculum design support on the development and
enhancement of Company products.  These consultants allow the Company
to effectively and efficiently address the specialized grade level and
diverse content needs of its A+LS product family.  Management believes
that it will continue to rely upon external sources for a portion of
its new product content.  However, the growing sophistication and
complexity of the interactive design of company products will require
continued expansion of in-house curriculum and graphics development
personnel resources.

At December 31, 2003, the Company employed eight (8) full-time
education professionals in support of this effort.  These individuals
plan, manage and coordinate the efforts of up to twenty independent
educational consultants and graphic designers.

Research and Development Costs
------------------------------

Costs incurred with product development are charged to research and
development expense until technological feasibility of a product is
established.  Thereafter, all software development costs are
capitalized and amortized on a straight-line basis over the product's
estimated economic life.  The Company capitalized $1,289,693 in
software research and development costs in 2003.  Amortization of
product development costs for the year ended December 31, 2003, was
$1,446,373.

Distribution and Sales Programs
-------------------------------

In marketing its products, the Company utilizes approximately 40
independent school dealers and four educational catalog houses to reach
its school-based customers.  During 2003, the Company hired and
employed both field and in-house sales forces to provide support to its
dealers and to improve its access to school customers in rural areas
not easily reached by its dealers.  This sales team was comprised of
four individuals at December 31, 2003.

Internet Marketing and e-commerce
---------------------------------

The Company views the Internet as a channel for future sales growth and
means to develop new customer service and support programs.  In
addition, the Internet has become a valuable adjunct for improved
customer service and support on product use and technical matters.
During 2003, the Company invested substantial resources in improving
and expanding its Internet presence and e-commerce capabilities for all
business units. The Company employs full time personnel to update,
functionally and graphically, its www.amered.com, www.dolphinsoft.com,
www.learnpath.com, www.aplusuniversity.com, www.apluslearn.com,
www.aplusanywhere.com, and www.advancerlearning.com URL's. At the end of
2003,the Company has five active Internet site facilities.

Backlog
-------

The Company's software products are normally shipped within five days
of receipt of the order.  The Company believes that a level of backlog
at any particular date may not be a meaningful indicator of future
performance, unless technical difficulties delay the fulfillment of
orders related to the release of new products.

Seasonality
-----------

Decisions by schools and individual consumers to purchase educational
software have most frequently been made at the beginning or near the
end of school periods.  The months of January and December generally
represent the lowest new order booking months for the Company and the
school market industry segment.  This seasonal cycle can directly
affect the Company's total revenues and earnings levels in both the
first and fourth quarterly reporting periods.

Significant Customers
---------------------

The Company sells its A+LS product family almost exclusively to schools
through various school dealers of educational materials.  No individual
customer accounted for more than 10% of total revenues in 2002 or 2003.

Competition
-----------

The educational software industry is highly competitive and subject to
rapid change. An increasing number of new publicly financed and
privately funded organizations have been identified that are
potentially competitive to the Company's current business and future
plans for electronically delivered content.  Many of these companies
are better known and have substantially greater financial, marketing
and technical resources than the Company.  Such participants are
textbook publishing companies and their software divisions and other
larger independent educational software and content developers, which
may compete directly with the Company.

The primary competitive factors applicable to the educational software
industry are product features (such as subject areas, graphics and
color), price, ease of use, suitability of the product offering for
Internet delivery, educational content, product reliability, sales
support and customer service.  Management believes through constant
analysis of its competitors and ongoing surveys that it sponsors at the
customer level that the Company is currently competitive and enjoys a
reputation as a quality organization and publisher of educational
material.

The Internet and the delivery of curriculum by electronic means may
have the capacity to alter the competitive environment and the current
means to content access for both the school and home customer.  The
Company, in the judgment of management, has the necessary programs
underway or planned to develop the technology to remain competitive in
the future marketplace environment.  Business development programs to
identify future partners and the means to exploit the Company's
investment in both technology and content are an ongoing process with a
number of companies that have a focus on the Internet, the education
marketplace and are seeking content partners.

Employees
---------

As of December 31, 2003, the Company had 58 full-time employees in its
domestic operations and 7 full-time employees in its UK subsidiary.
The Company believes that its relationship with employees is
satisfactory.

Risk Factors Associated With the Business
-----------------------------------------

The Company faces a number of risks associated with the successful
continuation its business and its future  competitiveness.  These
principally include, but are not limited to:  Increased competition
in a market segment where the Company competes with other organizations
with substantially more financial and organizational resources, a
change in general economic conditions which may defer or delay funding
to schools, the general financial condition of the Company to permit it
to continue to invest in maintaining and expanding its products, the
ability of the Company to secure additional debt or equity capital, the
ability of the Company to provide statistical or scientifically-based
research to support its claims of its products educational
effectiveness to meet the demands of the No Child Left Behind Act of
2001, retention of key personnel and the ability to secure experienced
industry managerial and technical talent.

Investors should consider the risk associated with ownership of the
Company's common stock which has a history of price volatility, limited
trading volume activity and liquidity associated with the OTCBB market
status of these securities. Considering these factors, the value of the
Company's securities, as well as their liquidity, may be adversely
affected by  the risk factors cited above as well as general market
conditions.


Item 2.  Description of Property.
-------  ------------------------

The Company leases approximately 17,600 sq. ft. of contiguous office
and light warehouse space in Oklahoma City, Oklahoma, under an
agreement that expires in December 2005. The monthly rent under this
lease is $12,587.

Dolphin, Inc., a wholly owned subsidiary, leases 6,584 sq. ft. of
office space in Gibbsboro, New Jersey, under a lease agreement expiring
May 31, 2004.  Monthly lease expense is $9,941.

Learning Pathways, Limited, a wholly owned subsidiary, leases
approximately 3,500 sq. ft. of office space in Derby, United Kingdom.
The monthly lease expense approximates $1,580. The lease renews each month
for a period of ninety days.

Total corporate cost of leased facilities was $280,363 for 2003 for the
Company's Oklahoma, New Jersey and Derby, UK facilities.  Cost of
leased facilities for 2002 was $278,103.


Item 3.  Legal Proceedings.
-------  ------------------

The Company may be the subject of various legal proceedings that could
arise during the normal course of business.  However, management knows
of no pending or threatened litigation involving the Company that is
considered material to the ongoing operations and viability of the
Company.


Item 4.  Submission of Matters to a Vote of Security Holders.
-------  ----------------------------------------------------

There were no matters submitted for a vote of the security holders
during 2003.



PART II


Item 5.  Market for Common Equity and Related Stockholder Matters.
-------  ---------------------------------------------------------

As of December 31, 2003, there were approximately 2,300 record holders
of the Company's common stock. Since its initial public offering in
1982, the Company's securities have been traded in the over-the-counter
market. The following is a summary of the high and low price for each
of the 2003 and 2002 quarters.


                                        2003               2002
                                  HIGH        LOW    HIGH        LOW
                                  ---------------    ---------------

Quarter Ending March 31          $0.20      $0.07    $0.48     $0.26

Quarter Ending June 30           $0.45      $0.10    $0.40     $0.24

Quarter Ending September 30      $0.51      $0.22    $0.35     $0.18

Quarter Ending December 31       $0.70      $0.35    $0.22     $0.07

The above information was obtained from the National Association of
Securities Dealers. The quotations reflect inter-dealer prices, without
retail mark-up, markdown, or commission and may not represent actual
transactions.

Dividends
---------

The Company has never declared a cash dividend on the Common Stock and
does not anticipate declaring any dividends on the Common Stock in the
foreseeable future. The Company intends, at this point, to retain any
future earnings to support the Company's growth.  Any payment of cash
dividends in the future will be dependent upon the amount of funds
legally available and is contingent upon the Company's earnings,
financial condition, capital requirements, and other factors which the
Board of Directors deem relevant.

Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------

                                 (a)             (b)            (c)
                                                               Number of
                                                              securities
                                                               remaining
                              Number of        Weighted-    available for
                            securities to       average    future issuance
                           be issued upon      exercise      under equity
                             exercise of       price of      compensation
                             outstanding     outstanding   plans (excluding
                              options,         options,        securities
                              warrants        warrants        reflected in
    Plan Category            and rights      and rights       column (a))
------------------------- --------------- --------------- ---------------
Equity compensation plans
 approved by security
 holders (1)                   2,299,332         $   .29         369,698
Equity compensation plans
 not approved by security
 holders (2)                   1,364,576         $   .43               0
                               ---------         -------         -------
Total                          3,663,908         $   .34         369,698
                               =========         =======         =======

(1) Consists of the 1998 Employee Stock Option Plan and the Director Stock
Option Plan.

(2) Consists of the 1996 Non-Qualified Stock Option Plan.


Item 6.  Management's Discussion and Analysis or Plan of Operation
-------  ---------------------------------------------------------

Overview
--------

The American Education Corporation is a developer of instructional
content, computer adaptive testing software, and software management
technology specifically designed to manage the delivery of and record
the results of student progress in schools and other institutions.
Java-based technology, the A+nyWhere Learning System Versions 3.0 and
4.0 of educational software products, provides a research-based,
integrated curriculum offering of software for grade levels 1-12 for
Reading, Mathematics, Language Arts, Science, Writing, History,
Government, Economics and Geography.  In addition, the Company provides
assessment testing and instructional content for the General
Educational Development (GED) test.  All company products are designed
to provide for LAN, WAN and Internet delivery options. The Company
has developed computer adaptive, companion academic skill assessment
testing tools to provide educators with the resources to more
effectively use the Company's curriculum content, which is aligned to
important state and national academic standards.  Spanish-language
versions are available for Mathematics and Language Arts for grade
levels 1-8.  The Company's curriculum content is aligned to the other
third party digital resources such as the World Book Multimedia
Encyclopedia, ETS's e-rater online essay grading technology and
GoKnow's scientifically based, Internet accessible curriculum and
reference materials, which may be accessed directly from A+LS lessons.

The A+LS comprehensive family of educational software is now in use in
over 10,000 schools, centers of adult literacy, colleges and
universities, and correctional institutions in the U.S., UK and other
international locations.  A+dvancer, the Company's new diagnostic,
prescriptive test and online developmental curriculum offering, is
aligned to ACCUPLACER OnLine, the leading college admissions test for
students requiring developmental support to enroll in full credit
secondary coursework in mathematics, reading, algebra and writing.

The Company is a technology-based publishing enterprise.  To remain
competitive it must constantly invest in the development of programming
technology to maintain currency of its product offering and ensure that
its products maintain compatibility with constantly changing and
revised database and operating system platforms sold to schools by
other developers.  The Company must also maintain the currency of its
content and underwrite content revisions and its realignment to new,
or updated state and national educational standards to remain competitive.
To accomplish this essential, ongoing corporate function requires
retention and recruitment a highly skilled professional workforce.  These
investments are essential, recurring cost of doing business and impact
the Company's operating cost and margin structures.

The Company is subject to risks or uncertainties associated with the
business that it is engaged in.  Among these uncertainties are a
dependency on funding for school technology purchases, lengthy
sales cycles, seasonal demand cycles and a dependency on retention of
key personnel.   Certain matters discussed herein (including the
documents incorporated herein by reference) may contain forward-looking
statements intended to qualify for the safe harbors from liabilities
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such
because the context of the statement will include words such as the
Company "believes," "plans," "intends," "anticipates," "expects," or
words of similar import.  Similarly, statements that describe the
Company's future plans, objectives, estimates, or goals are also
forward-looking statements.  Such statements address future events and
conditions concerning capital expenditures, earnings, litigation,
liquidity, capital resources and accounting matters. Actual results in
each case could differ materially from those currently anticipated in
such statements as a result of factors such as future economic
conditions, changes in customer demands, future legislative, regulatory
and competitive developments in markets in which the Company operates
and other circumstances affecting anticipated revenues and costs.
Accordingly, investors should be alert to the possibility that factors
beyond the control of management may have impact on the short or long-
term operations of the business.


Results of Operations
---------------------

Fiscal Year Ended December 31, 2003 Compared to Fiscal Year Ended
December 31, 2002
-----------------------------------------------------------------

Net consolidated revenues for the twelve months ended December 31,
2003, totaled $8,598,868 compared to net revenues of $8,483,160 for the
year ended 2002. This represents an increase of 1% in net consolidated
revenues over the prior fiscal year, but is attributable to a
combination of a substantial increase of 28% in orders at AEC, offset
by planned sales decreases at the LPL and Dolphin subsidiaries.  A
decline in the subsidiaries' revenues is a result of downsizing
operations and a refocusing of these business units to achieve a return
to profitable operations. AEC's revenue increase over 2002 is a result
of sales increases in geographic areas where state, federal or local
district funds have become available after over a year of spending
delays or deferment as a result of general economic conditions.  Recent
market research data for the type of products offered by the Company
are indicating that this trend should continue.

During 2002, it became evident at both the LPL and Dolphin subsidiaries
that their cost structures were too high based upon the revenue generated
and immediate prospects for increase in revenues, resulting in losses at
both subsidiaries. At LPL a decision was made to reduce the staff from 24
employees to 7 employees in the last half of 2002.   Due to severance
and benefit rules in the UK, the effects of this reduction, along with
the corresponding reduction in benefits and other associated
administrative costs, did not fully impact LPL until after the
beginning of 2003. At Dolphin, changes were implemented in the third
quarter of 2002 and personnel levels were reduced from 23 to 13
employees. Total cost savings realized from these actions approximated
$1,400,000 in 2003.

Cost of goods sold as a percentage of sales revenue for the year ended
December 31, 2003 decreased to 16% from 24% of net revenues for the
same period in 2002. This major improvement is attributed to a
reduction in cost of goods sold at LPL as a result of lower sales
and discontinuance of the resale of low margin computer hardware and
other products.  In addition, there was a decrease at Dolphin, primarily
due to the reduction in personnel costs noted above and a smaller
contribution of Dolphin-related revenues to consolidated corporate net
revenues. The Company's principal product families, A+nyWhere Learning
System, registered, and A+dvanced Learning System, registered trademark,
("A+LS"), provided gross profit margins of 96 % in 2003.  Cost of goods
sold represents the actual cost to produce the software products and
includes certain allocated overhead costs.

Total operating expenses recorded for the year ended December 31, 2003,
were $6,692,057 or 78% of net revenues, compared to $7,241,112 or 85%,
for the previous fiscal year. The decrease in operating expenses as a
percentage of net revenues is primarily due to the cost reductions at the
Company's subsidiaries, partially offset by the increase in the amortization
of product development costs. As a component of total operating expenses,
selling and marketing costs decreased from $2,628,639 in fiscal 2002 to
$2,390,498 in fiscal 2003. This decrease is due to a lower percentage of
sales being subject to distributor commissions and reductions in travel
and trade show expenses due to the personnel reductions noted. Operations
expense increased to $435,999 in fiscal 2003, compared to $397,725 in 2002,
as a result of an increase in costs for essential technical support for
the Company's customers.  General and administrative expenses decreased 21%
to $2,419,187 in 2003 compared to $3,054,031 in 2002 primarily as a result
of the significant reductions in personnel and related costs at the
subsidiary companies discussed earlier.

Costs incurred in conjunction with product development are charged to
research and development expense until technological feasibility is
established.  During fiscal 2003, the Company capitalized $1,289,693 of
product development costs, and net of accumulated amortization had
capitalized software costs of $4,454,143 at December 31, 2003.
Amortization of product development costs was $1,446,373 for 2003, a
25% increase over the $1,160,717 amortized in 2002. During 2003, the
Company made substantial progress in development efforts on revised,
updated and expanded curriculum offerings. The increase in amortization
expense is a result of this increase in capitalized development costs
associated with these essential investments in the Company's future and
competitive position.

Interest expense was $68,797 in 2003 compared to $81,263 in 2002
reflecting the lower amount of debt in 2003. The Company had net income
of $173,577 in 2003 compared to a net loss of $(761,884) in 2002 as a
result of the increase in revenue at AEC and the reductions in net
costs at the Company's subsidiaries noted above. Earnings per share
were $.01 in 2003 compared to a loss of $(.05) in 2002.


Liquidity and Capital Resources
-------------------------------

The Company has invested significantly in the development of new
products and the acquisition and licensing of new products to improve
the ability of the organization and its published products to meet the
needs of the marketplace.  These changes were required to update,
expand and keep current the Company's extensive curriculum product
offerings and to position the Company for long-term growth.  To finance
the business, management has utilized secured bank revolving credit
lines, bank financed equipment loans and lease financing sources.

As of December 31, 2003 the Company's principal sources of liquidity
included cash and cash equivalents of $216,676, net accounts receivable
of $2,790,327 and inventory of $16,451. The Company's net cash provided
by operating activities during the year ended December 31, 2003 was
$1,613,460 compared to $1,887,086 for the same period in 2002. Net cash
used in investing activities for the year ended December 31 decreased
by 13% from $1,543,107 in 2002 to $1,346,872 in 2003, and was comprised
primarily of investment in capitalized software development costs.
During the year ended December 31, 2003, debt due to financial
institutions was reduced by $424,317, or 36%, reflecting bank
indebtedness of $750,933 at December 31, 2003.  In April 2003, the
Company borrowed $300,000 from major shareholder affiliates, which is
subordinated to the debt owed the Company's senior lender. The debt is
convertible into the Company's common stock at $.6037 per share. The
proceeds from the subordinated debt were used to reduce accounts
payable and accrued liabilities.

At December 31, 2003, the Company had working capital of $782,983
compared to $(571,256) at December 31, 2002.  The Company and its
lender recently agreed to extend the maturity of its bank lines of
credit until March and November of 2005. Therefore, a portion of the
bank debt under its lines of credit is classified as long-term debt.
The Company is continuing to discuss future borrowing arrangements with
its current lender and several other financing sources.

With the expansion of the Company's product lines, the addition of new
products and markets and the increase in school spending that the
Company expects to see in 2004, management believes that the Company
will return to a pattern of growth similar to that demonstrated in
prior years. Management believes that it can undertake this expansion
with most of the Company's working capital requirements secured from
its operating cash flows.  If successful, the Company should be able to
enhance the liquidity of the business and the overall strength of the
Company's balance sheet and financial position.

Additional working capital beyond that available within the Company has
been and may be required to expand operations.  Management has and will
consider options available in providing such funding, including debt
and equity financing.

Off-Balance Sheet Arrangements
------------------------------

The Company does not have any off-balance sheet arrangements.

Contractual Cash Obligations
----------------------------

The following is a summary of the Company's significant contractual
cash obligations for the periods indicated that existed as of December
31, 2003 and is more fully disclosed in Notes 4 and 5 of the Notes to
Consolidated Financial Statements (amounts in thousands of dollars):

                                        Year ended December 31
                                2004    2005    2006    2007    2008
                                ----    ----    ----    ----    ----

Long and short term debt        $312    $739    $ --    $ --    $ --
Operating leases                 304     209      47      22      --
                                ----    ----    ----    ----    ----
Total contractual obligations   $616    $948    $ 47    $ 22    $ --
                                ====    ====    ====    ====    ====

Critical Accounting Policies
----------------------------

Management is responsible for the integrity of the financial information
presented herein.  The Company's financial statements have been prepared
in accordance with the accounting principles generally accepted in the
United States of America.  Where necessary, they reflect estimates based on
management's judgment.  Significant accounting policies that are important
to the portrayal of the Company's financial condition and results, which in
some cases require management's judgment, are summarized in the Notes to
Financial Statements which are included herein in Item 7.

Item 7.  Financial Statements.
-------  ---------------------

Financial Statements and Financial Statement Schedules - See Index to
Consolidated Financial Statements and Schedules immediately following
the signature page of this report.


Item 8.  Changes In and Disagreements With Accountants on Accounting
         and Financial Disclosure.
-------  -----------------------------------------------------------

Steakley, Gilbert & Morgan, P.C. has audited the Company's financial
statements for the years ending December 31, 1994 through 2003.  There
are no disputes with the independent accountants regarding matters of
accounting or reporting.


Item 8A.  Controls and Procedures
--------  -----------------------

It is the responsibility of the Chief Executive Officer and the Chief
Financial Officer to ensure that the Company maintains disclosure controls
and procedures designed to provide reasonable assurance that material
information, both financial and non-financial, and other information
required under the securities laws to be disclosed is identified and
communicated to senior management on a timely basis.  The Company's
disclosure controls and procedures include mandatory communication of
material events, automated accounting processing and reporting,
management review of monthly results and an established system of
internal controls.

As of December 31, 2003, management, including the Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14
as of the end of the period covered by this report.  Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded the disclosure controls and procedures currently in place are
adequate to ensure material information and other information requiring
disclosure are identified and communicated in a timely fashion.  There
have been no significant changes in internal controls, or in factors that
could significantly affect internal controls, subsequent to the date the
Chief Executive Officer and Chief Financial Officer completed their
evaluation.


PART III
--------

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16 (a) of the Exchange Act.
-------  -------------------------------------------------------------

The directors and executive officers of the Company are set forth
below.  All directors hold office until the next annual meeting of
stockholders, or until their death, resignation, retirement, removal,
disqualification, and until their successors have been elected and
qualified. Vacancies in the existing board are filled by a majority
vote of the remaining directors.

Name                  Age     Position            Director Since
-----------------------------------------------------------------
Jeffrey E. Butler     62      President, Director,           1989
                              Chief Executive Officer

Thomas A. Shively     50      Executive Vice President and
                              Chief Operating Officer

Neil R. Johnson       53      Vice President and
                              Chief Financial Officer

Monty C. McCurry      58      Director                       1989

Newton W. Fink        67      Director                       1991

Stephen E. Prust      59      Director                       1992

Business Experience
-------------------

JEFFREY E. BUTLER  became a director of the Company in August 1989 and
was elected Chief Executive Officer and President in March, 1990. From
1985 to 1990, Mr. Butler was a management consultant to businesses in
the biotechnology, computer science, software, educational and
entertainment video industries. Mr. Butler served as a director of
Video Professor Industries, Inc., a publicly held corporation, from
February 1, 1989 to October 31, 1990.  Prior to establishing his
management consulting business, Mr. Butler was the Chief Executive
Officer and President of Infomed Corporation, which provided computer
diagnostic equipment and management services to hospitals, corporations
and physicians.  Prior to 1985, Mr. Butler was employed by Sandoz,
Ltd., Corning, Inc. and Becton Dickinson Corporation in middle and
senior management positions.

THOMAS A. SHIVELY  joined the Company as Executive Vice President in
September 1991.  From 1990 to 1991, Mr. Shively was Vice President and
General Manager of AVID Home Entertainment,  a division of LIVE Inc.,
with headquarters in Denver, Colorado.  From 1989 to 1990, he was Vice
President and General Manager of the Richie Resource Group with
headquarters in Minneapolis, Minnesota.  From 1978 to 1988, he was
employed by Gelco Corporation, Minneapolis, Minnesota, a $2 billion
NYSE firm that was purchased by General Electric Corporation in 1988.
During the first five years of his career with Gelco, he was Director
of Corporate Planning and from 1983, he served as a staff Vice
President and as a Vice President of various Gelco operating divisions.
Upon graduation from the Wharton School of Finance and Commerce in
1976, Mr. Shively began his business career with the 3M Corporation,
Minneapolis, Minnesota.

NEIL R. JOHNSON  has been employed by the Company since August 1998.
Immediately prior to being employed by the Company, Mr. Johnson was an
independent business consultant. From 1994 to 1997, Mr. Johnson was
Chief Financial Officer and Treasurer for Unit Parts, Inc., an
Oklahoma City based remanufacturer of automotive parts. From 1985 to
1994, Mr. Johnson was Vice President of Corporate Finance and Treasurer
of Doskocil Companies, Inc., a diversified food products manufacturer.
Prior to those positions, Mr. Johnson spent twelve years with the
public accounting firm of Coopers & Lybrand. Mr. Johnson graduated from
Valparaiso University in 1972 with a BS in Business Administration.

MONTY C. McCURRY  was elected to the Board of Directors in April 1989.
Since 1985, Mr. McCurry has been the President of Executive Resource
Management, an executive search firm headquartered in Aurora, Colorado.
From 1969 to 1985, Mr. McCurry was employed by Paul M. Riggins and
Associates, an executive search firm where he was associate general
manager.

NEWTON W. FINK, Ed.D. was elected to the Board of Directors in January
1991. Dr. Fink is currently an Adjunct Professor of Educational Leadership
at National Louis University, Tampa, Florida.  From 1998 to 2003 Dr. Fink
was the Superintendent of Schools in Manteno, IL. From 1994 to 1998 he was
Superintendent of the VIT Schools in Table Grove, IL. Prior to 1994, Dr.
Fink was the President of Computer Instructional Services, Inc., a privately
held corporation providing computer educational services to individuals,
schools, corporations and institutions. Additionally, he has been employed as
a teacher and an elementary/middle school principal earlier in his career.
Dr. Fink has also published and lectured extensively on the use of computers
in education.

STEPHEN E. PRUST was elected to the Board of Directors in April 1992.
Since 1992, Mr. Prust has provided business consulting services,
including advice on equity and debt transactions, mergers and
acquisitions, to a variety of companies, ranging from entertainment
concerns, Internet start-ups and industry consolidators.  From 1990
to 1992, Mr. Prust was the President of AVID Home Entertainment, a
division of LIVE Entertainment, Inc.  From 1981 to 1990, Mr. Prust was
a consultant to companies in the entertainment industry.  In 1975, Mr.
Prust founded Dominion Music, Inc., a joint venture with K-Tel Records,
Inc.  He served as President of Dominion Music until 1981.

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of
more than 10% of the Common Stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes
in ownership of the Common Stock.  Based solely upon a review of Forms
3, 4 and 5 furnished to the Company with respect to the year ended
December 31, 2003, to the best of the Company's knowledge, the
Company's directors, executive officers and holders of more than 10% of
its Common Stock timely filed the reports required by Section 16(a).

Code of Ethics
--------------

The Company has adopted a written Code of Ethics that applies to the
Company's principal executive officer, principal financial officer,
principal accounting officer or controller and any persons performing
similar functions. The Company will provide a copy of its Code of
Ethics to any person without charge upon written request addressed to
The American Education Corporation, 7506 N. Broadway Ext. Suite 505,
Oklahoma City, Oklahoma 73116, Attention:  Shareholder Relations.


Item 10.  Executive Compensation.
--------  -----------------------

Cash Compensation
-----------------

The following table shows the cash compensation of the Company's
executive officers.

                         Summary Compensation Table
                                                                Long-Term
                                 Annual Compensation          Compensation
                            ------------------------------ ----------------
                                                Other
Name and Principal                             Annual       Stock     Stock
    Position         Year   Salary  Bonus  Compensation(1) Options   Awards
----------------------------------------------------------------------------
Jeffrey E. Butler,   2003  $132,000 $ 2,060    $      0    360,000      --
President and Chief  2002   120,462       0           0    100,000      --
Executive Officer    2001   120,000  18,480       2,700(2)       0      --

Thomas A. Shively,   2003  $126,500 $     0    $      0    260,000      --
Executive Vice       2002   115,442       0           0     60,000      --
President            2001   115,000   1,467       2,700(2)       0      --

Neil R. Johnson,     2003  $108,350 $     0    $      0    125,000      --
Vice President and   2002    98,879       0           0     60,000      --
Chief Financial      2001    98,500   1,256       2,025(2)       0      --
Officer

(1) The executive officers did not receive any perquisites or other
benefits, the aggregate amount of which exceeded the lesser of $50,000
or 10% of their compensation.

(2) In 2001, Mr. Butler was awarded 10,000 shares of Common Stock, Mr.
Shively was awarded 10,000 shares of Common Stock and Mr. Johnson was
awarded 7,500 shares of Common Stock for services rendered.


Employment Agreements
---------------------

In December, 1998, the Company entered into an employment agreement
with Jeffrey E. Butler providing for a base salary and benefits as
determined by the Board of Directors, including incentive bonuses based
on profitability, that are provided to all employees of the Company. If
Mr. Butler is terminated without cause, his compensation will continue
for one year. In the event of a change in control, Mr. Butler may
require the Company to purchase up to 50% of his beneficial stock
ownership.  In addition, Mr. Butler has a deferred retirement benefit
as disclosed in Note 10 of the Notes to Consolidated Financial Statements.

Messrs. Thomas A. Shively, and Neil R. Johnson also have employment
agreements with the Company.  These agreements also provide for
severance payments and repurchase of a portion of their beneficial
stock ownership in the event of a change in control.

Stock Incentive Plans
---------------------

The shareholders approved an Incentive Stock Option Plan for employees,
including officers, during 1998, and approved amendments to the plan in
1999, 2000 and 2001 to increase the number of shares available. The
total common shares issuable under this plan are 2,650,000 shares. The
Board of Directors acts as the Compensation Committee ("Committee").
The Committee of this Plan determines the employees who will receive
options to purchase common shares and the number granted. Option prices
will be the fair market value at date of grant. Options are exercisable
as deemed by the Committee and terminate within ninety days of
employment termination, or as designated by the Committee. In no event
shall an option be exercisable more than ten years from the date it is
granted. No options may be issued under this plan after March 31, 2008.
Since its inception, 3,902,000 options have been granted, 1,621,696
have expired, and 180,970 options have been exercised. At December 31,
2003, there were 2,099,334 options outstanding under this Plan.

In March 1996, a Non-Qualified Stock Option Plan was approved by the
Board of Directors. Since its inception non-qualified stock options to
purchase a total of 2,206,195 shares of restricted common stock  have
been issued, 645,919 have expired and 195,700 have been exercised. At
December 31, 2003, there were 1,364,576 options outstanding.

Stock Option Grants In 2003
---------------------------


                   Options   Percentage of Total  Exercise
                   Granted    Options Granted to    Price    Expiration
Name               (Shares)    Employees in 2003(Per share)     Date
--------------------------------------------------------------------------
Jeffrey E. Butler  360,000          21.5%          $.30      July 31, 2006
Thomas A. Shively  260,000          15.6%          $.30      July 31, 2006
Neil R. Johnson    125,000           7.5%          $.30      July 31, 2006


Option Exercises and Fiscal Year-End Values
-------------------------------------------

No executive officer exercised options during 2003. The following table
sets forth, for the executive officers named in the Summary
Compensation Table above, the year-end value of unexercised stock
options:

                         Number of Securities        Value of Unexercised
                        Underlying Unexercised          In-the-Money
                          Options at Year-End         Options at Year-End
Name                  Exercisable/Unexercisable    Exercisable/Unexercisable
----------------------------------------------------------------------------
Jeffrey E. Butler         576,800/240,000              $24,800/$21,600
Thomas A. Shively         419,944/173,332              $16,200/$15,600
Neil R. Johnson           126,667/83,333               $12,150/$7,500


Directors' Compensation
-----------------------

In 2003 the Company's non-employee directors each received 10,000
shares of the Company's common stock, qualified options to purchase
12,666 shares of the Company's common stock and non-qualified options
to purchase 30,000 shares of the Company's common stock at $.30 per
share. The directors received no compensation, other than the stock and
options, for services in such capacity.

The shareholders  approved a Director's Stock Option Plan during 1998
and approved an amendment to the Plan in 2001 to increase the number of
shares available. The total common shares issuable under this Plan are
200,000 shares.  Each outside director initially elected or appointed
after March 27, 1998, shall be granted options to purchase 5,000
shares of common stock at the fair market value at the date of the
grant. Additionally, each outside director shall automatically be
granted an option to purchase 3,000 shares  of common stock in each
succeeding calendar year through termination of the Plan on March 31,
2008. Options granted are exercisable immediately and for a period of
three years after the date of the grant or, if earlier, ninety days
after the date when the participant ceases to be a director of the
Company. Since its inception options to purchase a total of 229,998
shares of restricted common stock have been issued and 30,000 have
expired. At December 31, 2003, there were 199,998 options outstanding.

Item 11.  Security Ownership of Certain Beneficial Owners and
          Management.
--------  ---------------------------------------------------

The following table sets forth ownership of the common stock of each
director and officer, all officers and directors as a group, and each
person known or believed by the Company to have beneficially owned five
percent or more of the Company's outstanding common stock as of March
12, 2004 . Unless otherwise indicated, the beneficial owner has sole
voting and investment power over the common stock listed below:

                                                    Shares Beneficially
                                                           Owned
                                                    --------------------
 Name/Address of Beneficial Owner  Title of Class   Number       Percent
------------------------------------------------------------------------
Jeffrey E. Butler (1)                Common       1,358,375       9.2%
7506 N. Broadway Ext.,
Oklahoma City, OK 73116

Thomas A. Shively (2)                Common         656,332       4.5%
7506 N. Broadway Ext.,
Oklahoma City, OK 73116

Neil R. Johnson (3)                  Common         139,167       1.0%
7506 N. Broadway Ext.,
Oklahoma City, OK 73116

Monty C. McCurry (4)                 Common         253,566       1.8%
2134 S. Eagle Ct.,
Aurora, CO 80014

Newton W. Fink (5)                   Common        218,066        1.5%
1143 Corinth Greene Dr.,
Sun City Center, FL 33573

Stephen E. Prust (6)                 Common         572,434       4.0%
9025 East Kenyon Avenue,
Denver, CO 80237

John D. Garber (7)                   Common       3,672,286      26.0%
7323 Linden Terrace,
Carlsbad, CA 92009

Robert Schoolfield (8)              Common       1,536,517       10.9%
5 Pleasant Cove,
Austin, TX 78746

The Pennsylvania State              Common         750,000        5.3%
University (9)
University Park, PA 16802

Officers and Directors              Common       3,197,940       20.1%
as a Group (6 persons)
(1) (2) (3) (4) (5) (6)


(1)  The amount and percentage figures include the possible exercise of
356,800 common stock options with an exercise price of $.50 per share,
100,000 common stock options at $.25 per share, and 120,000 common
stock options at $.30 per share exercisable within 60 days.
(2)  The amount and percentage figures include the possible exercise of
273,276 common stock options with an exercise price of $.50 per share,
60,000 common stock options at $.25 per share, and 86,668 common stock
options at $.30 per share exercisable within 60 days.
(3)  The amount and percentage figures include the possible exercise of
25,000 common stock options with an exercise price of $.50 per share,
60,000 common stock options at $.25 per share and 41,667 common stock
options at $.30 per share exercisable within 60 days.
(4)  The amount and percentage figures include the possible exercise of
81,000 common stock options with an exercise price of $.50 per share,
3,000 common stock options at $.73 per share, 60,000 common stock
options at $.13 per share, and 42,666 common stock options at $.30 per
share exercisable within 60 days.
(5)  The amount and percentage figures include the possible exercise of
81,000 common stock options with an exercise price of $.50 per share
3,000 common stock options at $.73 per share, 60,000 common stock
options at $.13 per share, and 42,666 common stock options at $.30 per
share exercisable within 60 days.
(6)  The amount and percentage figures include the possible exercise of
126,000 common stock options with an exercise price of $.50 per share,
3,000 common stock options at $.73 per share, 60,000 common stock
options at $.13 per share, and 42,666 common stock options at $.30 per
share exercisable within 60 days.
(7)  The amount and percentage figures include 3,192,286 shares of
common stock held by John D. Garber and Clare C. Garber as trustees of
the John D. Garber and Clare C. Garber Trust for which Mr. Garber is
the beneficiary; 440,000 shares of common stock held by John D. Garber
and Clare C. Garber, as trustees of the John D. Garber and Clare C.
Garber defined benefit plan and 40,000 owned personally by Mr. Garber.
(8)   The amount and percentage figures include 737,528 shares of
common stock owned by the Schoolfield 1994 Charitable Unitrust for
which Mr. Schoolfield is the trustee; 614,607 shares of common stock
owned by Mr. Schoolfield individually; and 184,382 shares of common
stock owned by the Schoolfield Grandchildren's Trust for which Mr.
Schoolfield is the trustee.
(9)  In 1999, the John D. Garber and Clare C. Garber Trust donated
750,000 shares of the Company's common stock to The Pennsylvania State
University.


Item 12.  Certain Relationships and Related Transactions.
--------  -----------------------------------------------

The Company had a note receivable due from its Chief Executive Officer,
Jeffrey E. Butler, in the amount of $300,000 that was advanced in
October 2000 and due in 2003. In 2003 the Board of Directors approved a
transaction whereby the note would be paid in full in exchange for
200,000 shares of the Company's common stock owned by Mr. Butler.
The stock has been recorded as treasury stock at this cost.

The Company is indebted to two major shareholder affiliates, John D. Garber
and Janis L. Butler, for convertible subordinated debt in the amount of
$300,000, which was advanced in April, 2003. The debt bears interest at 8%
and the interest is payable quarterly. Principal is due in one payment on
April 1, 2005. The debt is subordinated to the debt owed the Company's
senior lender and is convertible into the Company's common stock at $.6037
per share.


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

(a) The following documents have been filed as a part of this annual
report:

Exhibit
  No.                         Description of Exhibits
-----------------------------------------------------------------------

  3.1      Amended and Restated Articles of Incorporation of The
           American Education Corporation (incorporated by reference to
           the exhibit in the Current Report on Form 8-K filed with the
           Securities and Exchange Commission on June 25, 1998)

  3.2      Bylaws of The American Education Corporation (incorporated
           by reference to the Company's registration statement on Form
           S-8 filed with the Securities and Exchange Commission on
           October 22, 1999)

  4.1      Form of Stock Certificate (incorporated by reference to the
           Company's registration statement on Form S-8 filed with the
           Securities and Exchange Commission on October 22, 1999)

  4.2      Directors' Stock Option Plan (incorporated by reference to
           Exhibit B to the Definitive Proxy Statement filed with the
           Securities and Exchange Commission on April 24, 1998)

  4.3      First Amendment to the Directors' Stock Option Plan
           (incorporated by reference to the Company's registration
           statement on Form S-8 filed with the Securities and Exchange
           Commission on October 22, 1999)

  4.4      Stock Option Plan for Employees (incorporated by reference
           to Exhibit C to the Definitive Proxy Statement filed with
           the Securities and Exchange Commission on April 24, 1998)

  4.5      First Amendment to the Stock Option Plan for Employees
           (incorporated by reference to the Company's registration
           statement on Form S-8 filed with the Securities and Exchange
           Commission on October 22, 1999)

  4.6      Second Amendment to the Stock Option Plan for Employees
           (incorporated by reference to Exhibit 4.7 to the Company's
           registration statement on Form S-8 filed with the Securities
           and Exchange Commission on September 29, 2000)

 10.1      Purchase Agreement for the acquisition by the Company of
           Learning Pathways, Limited (incorporated by reference to the
           exhibit in the Current Report on Form 8-K filed with the
           Securities and Exchange Commission on December 15, 1998)

 10.2      Stock Purchase Agreement for the acquisition by the Company
           of Dolphin, Inc. (incorporated by reference to the exhibit
           in the Current Report on Form 8-K filed with the Securities
           and Exchange Commission on January 10, 2000)

 11        Statement re: computation of per share earnings (filed
           herewith)

 21        Subsidiaries of The American Education Corporation (filed
           herewith)

 23.1      Consent of Steakley, Gilbert and Morgan

 31.1      Certification of Chief Executive Officer pursuant to Section
           302 of the Sarbanes-Oxley Act of 2002.

 31.2      Certification of Chief Financial Officer pursuant to Section
           302 of the Sarbanes-Oxley Act of 2002.

 32.1      Certification of the Chief Executive Officer pursuant to 18
           U.S.C. Section 1350, as adopted pursuant to Section 906 of the
           Sarbanes-Oxley Act of 2002.

 32.2      Certification of the Chief Financial Officer pursuant to 18
           U.S.C. Section 1350, as adopted pursuant to Section 906 of the
           Sarbanes-Oxley Act of 2002.


(b)  Reports on Form 8-K

     On October 29, 2003, the Company filed a Form 8-K under Item 5,
     Other Events, Item 9, Regulation FD Disclosure and Item 12,
     Results of Operations and Financial Condition, filing its press
     release announcing the company's financial results for the quarter
     ended September 30, 2003.

     On October 21, 2003, the Company filed a Form 8-K under Item 5,
     Other Events, filing a press release announcing it had been
     awarded a statewide contract for software by New Mexico.


Item 14.  Principal Accounting Fees and Services
--------  --------------------------------------

Audit Fees. The aggregate fees of Steakley, Gilbert, & Morgan, P.C. for
professional services rendered for the audit of the Company's annual
financial statements for the years ended December 31, 2003 and 2002, and
the review of the financial statements included in the Company's Forms
10-QSB totaled $24,000 and $28,850, respectively.

Audit-Related Fees. The aggregate fees billed by Steakley, Gilbert, &
Morgan, P.C. for audit related services for the years ended December
31, 2003 and 2002, and are not disclosed in "Audit Fees" above, were $-
0- and $-0-, respectively.

Tax Fees. The aggregate fees billed by Steakley, Gilbert, & Morgan,
P.C. for tax compliance for the years ended December 31, 2003 and 2002
were $7,800 and $9,075, respectively.

All Other Fees. The aggregate fees billed by Steakley, Gilbert, &
Morgan, P.C. for services, other than those described above, for the
years ended December 31, 2003 and 2002 were $-0- and $-0-,
respectively.



SIGNATURES
----------


Pursuant to the  requirements of Section 13 or 15(d) 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.

March 30, 2004                          By:  /s/Jeffrey E. Butler
                                         ------------------------
                                         Jeffrey E. Butler,
                                         Chief Executive Officer
                                         Chairman of the Board
                                         Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

Name                          Title                       Date
-----------------     -------------------------     ---------------
Jeffrey E. Butler     /s/Jeffrey E. Butler          March 30, 2004
                      Chief Executive Officer
                      Chairman of the Board
                      Treasurer

Neil R. Johnson       /s/Neil R. Johnson            March 30, 2004
                      Chief Financial Officer

Monty C. McCurry      /s/Monty C. McCurry           March 30, 2004
                      Director

Newton W. Fink        /s/Newton W. Fink             March 30, 2004
                      Director

Stephen E. Prust      /s/Stephen E. Prust           March 30, 2004
                      Director



The American Education Corporation

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES


             Item                                          Page No.
-----------------------------------------------            --------

Independent Auditors' Report                                  F-1

Financial Statements:

  Consolidated Balance Sheet, December 31, 2003               F-2

  Consolidated Statements of Income for the
    years ended December 31, 2003 and 2002                    F-3

  Consolidated Statements of Changes In
    Stockholders' Equity for the years ended
    December 31, 2003 and 2002                                F-4

  Consolidated Statements of Cash Flows for
    the years ended December 31, 2003 and 2002                F-5

  Notes to Consolidated Financial Statements                  F-7



All schedules are omitted as the required information is included in
the financial statements or notes thereto or is not present in
sufficient amounts.



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


INDEPENDENT AUDITORS' REPORT


To Board of Directors and Stockholders
The American Education Corporation
Oklahoma City, Oklahoma


We have audited the consolidated balance sheet of The American
Education Corporation as of December 31, 2003 and the related
consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the two years in the period ended December 31,
2003.  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 audits in accordance with U.S. generally accepted
auditing standards.  Those standards require that we plan and perform
the audits 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 statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of The American Education Corporation as of December 31, 2003 and the
consolidated results of its operations and cash flows for each of the
two years in the period ended December 31, 2003, in conformity with
U.S. generally accepted accounting principles.





STEAKLEY, GILBERT & MORGAN


Oklahoma City, Oklahoma
March 25, 2004



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, 2003

ASSETS
Current assets:
Cash and cash equivalents                                 $   216,676
Accounts receivable, net of allowance for
 returns and uncollectible accounts of
 $225,000 (Note 1)                                          2,790,327
Inventory (Note 1)                                             16,451
Prepaid expenses and deposits                                 174,482
Deferred tax asset (Note 6)                                    95,323
                                                          -----------
     Total current assets                                   3,293,259

Property and equipment, at cost (Note 1)                    1,287,338
Less accumulated depreciation and amortization             (1,064,640)
                                                          -----------
Net property and equipment                                    222,698

Other assets:
Capitalized software costs, net of accumulated
  amortization of $5,641,359 (Note 1)                       4,454,143
Goodwill, net of accumulated amortization of
  $369,097 (Note 1)                                         1,840,446
                                                          -----------
     Total other assets                                     6,294,589
                                                          -----------
     Total assets                                         $ 9,810,546
                                                          ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable trade                                  $   374,822
  Accrued liabilities (Note 11)                             1,213,566
  Deferred revenue                                            609,700
  Notes payable and current portion of
   long-term debt (Note 4)                                    312,188
                                                          -----------
     Total current liabilities                              2,510,276

Other long-term accrued liabilities (Note 10)                 236,475
Deferred income tax liability - Long-term (Note 6)            613,763
Long-term debt  (Note 4)                                      738,745
                                                          -----------
     Total liabilities                                      4,099,259
                                                          -----------

Commitments and contingencies (Notes 5, 7, 10 and 12)             --
Stockholders' Equity  (Note 3)
  Preferred Stock $.001 par value;
    Authorized-50,000,000 shares, issued and
    outstanding-none; liquidation preference-$.02
    per share                                                     --
Common Stock, $.025 par value;
  Authorized 30,000,000 shares; issued and outstanding-
  14,133,461 shares                                           359,186
Additional paid in capital                                  6,674,130
Treasury stock, at cost, 234,000 shares                      (319,125)
Retained deficit                                           (1,002,904)
                                                          -----------
     Total stockholders' equity                             5,711,287
                                                          -----------

     Total liabilities and stockholders' equity           $ 9,810,546
                                                          ===========

See accompanying notes and accountants' report.



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2003 and 2002



                                    2003                   2002
                                 ------------        --------------


Sales (Note 1)                  $ 8,598,868            $ 8,483,160

Cost of goods sold                1,370,910              2,034,903
                                -----------            -----------
Gross Profit                      7,227,958              6,448,257
                                -----------            -----------

Operating expenses:
  Selling and marketing (Note 1)  2,390,498              2,628,639
  Operations                        435,999                397,725
  General and administrative      2,419,187              3,054,031
  Amortization of capitalized
   software costs                 1,446,373              1,160,717
                                -----------            -----------

  Total operating expenses        6,692,057              7,241,112
                                -----------            -----------

  Operating income (loss)           535,901               (792,855)

Other income (expense):
  Interest income                       241                  5,188
  Interest expense                  (68,797)               (81,263)
                                -----------            -----------

Income (loss) before income taxes   467,345               (868,930)

  Current income tax benefit        (72,338)               (16,016)
  Deferred income tax expense
   (benefit)                        366,106                (91,030)
                                -----------            -----------
                                    293,768               (107,046)
                                -----------            -----------

Net income (loss)               $   173,577            $  (761,884)
                                ===========            ===========

Earnings per share: (Note 13)
  Basic                         $       .01            $      (.05)
  Fully diluted                 $       .01            $      (.05)


See accompanying notes and accountants' report.



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 2003 and 2002


                                           Additional               Retained
                         Common Stock        paid in    Treasury    Earnings
                       Shares      Amount    Capital      Stock    (Deficit)
                     --------------------  ---------- ----------  -----------
Balance at
December 31, 2001    14,238,461  $356,811  $6,626,578  $ (19,125) $ (414,597)

Issuance of common
  stock for cash and
  services               42,500     1,063       7,437


Net loss                                                             (761,884)


Comprehensive Income
 adjustment:
  Foreign currency
    translation                                15,225
                     ----------  --------  ----------  ---------  -----------

Balance at
  December 31, 2002  14,280,961   357,874   6,649,240    (19,125) $(1,176,481)

Issuance of common
  stock for cash
  and services           52,500     1,312       2,363

Repurchase common
  stock, at cost
  (Note 8)             (200,000)                        (300,000)

Net income                                                            173,577

Comprehensive Income
 adjustment:
  Foreign currency
   Translation                                 22,527
                      ----------  -------- ----------  ---------  -----------
Balance at
 December 31, 2003    14,133,461  $359,186 $6,674,130  $(319,125) $(1,002,904)
                      ==========  ======== ==========  ========== ===========


See accompanying notes and accountants' report.




THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2003 and 2002


                                              2003            2002
                                          -----------     -----------

Cash flows from operating activities:
Net income (loss)                        $   173,577     $ (761,884)

Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
    Depreciation and amortization          1,617,405      1,354,088
    Increase (decrease) in reserve for
     bad debts                               122,691        (70,084)
    Services rendered for common stock         3,675          8,500
    Deferred compensation                     64,920         64,920

Foreign currency translation                  22,527         15,225


Changes in assets and liabilities:
  Accounts receivable                       (911,999)       621,663
  Inventories                                 19,993         39,448
  Prepaid expenses and deposits             (111,724)        74,755
  Accounts payable and accrued liabilities   (65,333)       595,707
  Accounts payable - Affiliate               (60,000)        60,000
  Deferred revenue                           371,620         89,991
  Income tax payable                              --       (106,746)
  Deferred income taxes                      366,108        (98,497)
                                         -----------    -----------
  Net cash provided by operating
   activities                              1,613,460      1,887,086
                                         -----------    -----------

Cash flows from investing activities:
  Purchase of property and equipment         (57,179)       (49,807)
  Software development costs capitalized  (1,289,693)    (1,493,300)
                                         -----------    -----------
  Net cash used in investing activities   (1,346,872)    (1,543,107)

Cash flows from financing activities:
  Proceeds received from issuance of debt    300,000             --
  Principal payments on notes payable       (424,317)      (881,626)
                                          ----------    -----------
  Net cash used in financing activities     (124,317)      (881,626)
                                          ----------    -----------

Net increase (decrease) in cash              142,271       (537,647)

Cash at beginning of year                     74,405        612,052
                                          ----------    -----------

Cash at end of year                      $   216,676    $    74,405
                                         ===========    ===========

Interest paid in cash                    $    70,121    $    83,929
                                         ===========    ===========

Income taxes paid                        $        --    $        --
                                         ===========    ===========


See accompanying notes and accounts' report.





THE AMERICAN EDUCATION CORPORATION
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Years Ended December 31, 2003 and 2002



During 2003 the Company issued 52,500 shares of common stock valued at
$3,675 for services provided by outside directors and distributors.
During 2002 the Company issued 42,500 shares of common stock valued at
$8,500 for services provided by distributors.


See accompanying notes and accounts' report.





THE AMERICAN EDUCATION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003

1.    Summary of significant accounting policies
      ------------------------------------------

The summary of significant accounting policies of The American
Education Corporation ("the Company") is presented to assist in
understanding the Company's financial statements.  These accounting
policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial
statements.

Principles of consolidation

The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated.

History and business activity

The American Education Corporation (formerly Plasmedics, Inc.) was
incorporated under the laws of the State of Colorado on February 23,
1981.  Through 1986, the Company's principal purpose was to
manufacture and market medical devices and medical technology.  The
Company's activities from inception through 1984 were directed toward
raising equity capital, acquisition of license and patent rights and
research and development.  From 1986 through 1990, the Company was
essentially inactive and seeking acquisition or merger candidates.

On January 8, 1991, the Company purchased substantially all of the
assets of American Educational Computer, Inc., and assumed specific
trade accounts payable and other accrued liabilities related to that
business.

On August 15, 1991, Plasmedics, Inc., changed its name to The American
Education Corporation ("AEC").  AEC's principal business is the
development of educational computer software and its distribution to
retail outlets and school districts nationally.

On November 25, 1998, effective October 1, 1998, the Company purchased
the business of Learning Pathways, Limited, ("LPL"), an entity
organized under the laws of the United Kingdom, pursuant to an
Agreement between the Company and the stockholders of LPL. The
transaction was accounted for as a purchase. Pursuant to the Agreement,
the Company paid the sellers 510,030 shares of the Company's $.025
par value common stock and cash of $165,760. The Agreement further
provided that if LPL met or exceeded certain financial goals set forth
in the Agreement, then the Company would pay the sellers additional
shares of the Company's common stock. During 2000, an additional 63,754
shares were issued to the sellers. The business of LPL principally is
to distribute the Anywhere Learning System in the United Kingdom. The
results of operations of LPL are included in the consolidated
statements of income for the two years ended December 31, 2003.

On December 24, 1999, the Company entered into a stock purchase
agreement to acquire 100% of the capital stock of Dolphin, Inc.,
("Dolphin") a New Jersey corporation. The transaction's effective date
was October 1, 1999. The purchase price was $1,800,000 consisting of
cash payments totaling $1,752,000 and 35,148 shares of the Company's
common stock valued at $48,000. The acquisition has been accounted for
as a purchase. Results of Dolphin's operations are included in the
consolidated income statements for the two years ended December 31,
2003. Dolphin provides software design services for unaffiliated
customers.

During 2003 and 2002 net losses from foreign operations totaled
$(258,681) and $(557,642), respectively. No dividends were received
from the foreign entity.

Revenue recognition

The Company recognizes revenue in accordance with the American
Institute of Certified Public Accountant's Statement of Position 97-2
and 98-9 on software revenue recognition.  The Company has recognized
revenue and a like amount of expense on products traded for
advertising and promotional services.  Sales revenue and selling and
marketing expense include approximately $244,445 and $153,465 of
such non-monetary transactions for the years ended December 31, 2003
and 2002, respectively. Revenue for software design services at Dolphin
is recognized on the percentage-of-completion method.

The Company has adopted revenue recognition policies regarding sales
with multiple deliverables which comply with Emerging Issues Task Force
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables," which
became effective July 1, 2003.

Capitalized software costs

Capitalized software costs consist of licenses for the rights to
produce and market computer software, salaries and other direct costs
incurred in the production of computer software and costs to defend the
Company's trademark.  Costs incurred in conjunction with product
development are charged to research and development expense until
technological feasibility is established.  Thereafter, all software
development costs are capitalized and amortized on a straight-line
basis over the product's estimated economic life of between three and
five years.  Capitalized software costs at January 1, 2003 were
$8,805,809 with $1,289,693 additional costs capitalized during 2003.
Amortization expense totaled $1,446,373 in 2003 and $1,160,717 in
2002.

Goodwill

Goodwill represents the excess of the cost of purchased companies over
the fair value of their net assets at dates of acquisition.

                                                  Accumulated
                                  Goodwill       Amortization
                                 ----------      ------------

Learning Pathways, Ltd.            780,399          (154,968)
Dolphin, Inc.                    1,429,144          (214,129)
                                ----------         ----------
                                $2,209,543         $(369,097)
                                ==========         ==========

Through 2001, goodwill was amortized with a fifteen year life.
Beginning January 1, 2002, goodwill is no longer amortized. Impairment
evaluations are made annually. There were no impairment costs or
amortization expense in 2003 and 2002.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of packaging and educational software materials.

Property and equipment

Property and equipment is stated at cost.  Depreciation is provided on
the straight-line basis over the estimated useful life of the assets,
which is five years.  Depreciation expense totaled $171,032 and
$193,177 for 2003 and 2002, respectively.  The components of property
and equipment at December 31, 2003, are as follows:

     Furniture, fixtures and office equipment          $  668,508
     Computers and software                               551,708
     Leasehold improvements                                33,283
     Vehicles                                              33,839
                                                       ----------
                                                        1,287,338
     Less: accumulated depreciation                    (1,064,640)
                                                       ----------
     Net property and equipment                        $  222,698
                                                       ==========

Stock Options

The Company has historically measured compensation from issuing
employee stock options under the accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees," which is an
intrinsic value method.  Subsequent accounting pronouncements SFAS
No. 123 and SFAS No. 148, "Accounting for Stock Based Compensation,"
establish financial accounting and reporting standards for stock-
based employee compensation plans.  SFAS No. 123 defines a fair
value based method of accounting for an employee stock option.
SFAS No. 148 amends SFAS No. 123 to provide alternative methods
of transition for an entity that voluntarily changes to the fair
value based method accounting for stock-based employee compensation.
The Company plans to continue to use the intrinsic value method for
stock-based compensation.  Accordingly, the compensation cost for
stock options has been measured as the excess, if any, of the quoted
market price of Company stock at the date of the grant over the amount
the employee must pay to acquire the stock.  The compensation cost is
recognized over the vesting period of the options.  Hence, no
compensation is incurred unless the market value is greater than the
option exercise price.

Pro forma information regarding net income (loss) and earnings (loss)
per share is required by SFAS No. 123, and has been determined as if
the Company had accounted for its employee stock options under the fair
value method of that Statement.  The Company is continuing to utilize
the intrinsic value-based method for accounting for employee stock
options or similar equity instruments; therefore, the Company has not
recorded any compensation cost in the statements of operations for
stock-based employee compensation awards.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.  The
Company's pro forma income and earnings/(loss) per share are as follows
for the year ended:

                                                  2003        2002
                                                --------   ----------

    Net income/(loss) - as reported             $173,577   $(761,884)
    Stock-based employee compensation
      expense - pro forma                         13,125      12,500
                                                --------   ---------
    Net income/(loss) - pro forma               $160,452   $(774,384)
    Basic earnings/(loss) per common
      share-as reported                         $    .01        (.05)
    Diluted earnings/(loss) per common
      share-as reported                              .01        (.05)
    Basic earnings/(loss) per common
      share-pro forma                           $    .01   $    (.05)
    Diluted earnings/(loss) per common
      share-pro forma                                .01        (.05)


Statements of cash flows

In the consolidated statements of cash flows, cash and cash equivalents
may include currency on hand, demand deposits with banks or other
financial institutions, treasury bills, commercial paper, mutual funds
or other investments with original maturities of three months or less.

Use of estimates

The preparation of the financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
could differ from those estimates.

Fair value of financial instruments

The carrying values of the Company's assets and liabilities approximate
fair value due to their short-term nature.


2.   Options to purchase common stock
     --------------------------------

The shareholders approved an Incentive Stock Option Plan for employees
during 1998 and approved amendments to the plan in 1999, 2000 and 2001
to increase the number of shares available.  The total shares issuable
under this plan are 2,650,000. The Committee of this Plan determines
the employees who will receive options to purchase common shares and
the number granted. Option prices will be the fair market value at
date of grant. Options are exercisable as deemed by the Committee and
terminate within ninety days of  employment termination, or as
designated by the Committee. In no event shall an option be exercisable
more than ten years from the date it is granted. No options may be
issued under this Plan after March 31, 2008.

The shareholders also approved a Director's Stock Option Plan during
1998 and approved an amendment to the Plan in 2001 to increase the
number of shares available. The total shares issuable under this Plan
are 200,000. Each outside director initially elected or appointed shall
be granted an option to purchase 5,000 shares of common stock at the
fair market value at the date of the grant. Additionally, each outside
director shall automatically be granted an option to purchase 3,000
shares of common stock as of January 1 of each succeeding calendar
year, if options are available, through termination of the Plan on
March 31, 2008. Options granted are exercisable immediately and for a
period of three years after the date of the grant or, if earlier,
ninety days after the date when the participant ceases to be a director
of the Company.

The Company's former non-qualified stock option plan originated in
1996. The following table summarizes stock option plan activity:



                                      (In Shares)
                              --------------------------

                                  1998            1998

                   1996 Plan  Directors Plan  Employee Plan    Total
                   ---------  --------------  -------------  ---------

Number of shares under
options outstanding as of:

December 31, 2002    922,076     162,000        1,391,170    2,475,246
Shares granted       486,500      37,998        1,184,500    1,708,998
Shares exercised          --          --               --           --
Shares expired       (44,000)         --         (476,336)    (520,336)
                   ---------     -------        ---------    ---------
December 31, 2003  1,364,576     199,998        2,099,334    3,663,908
                   =========     =======        =========    =========
Option price
 range per share $.13 - $.50   $.13 - $.73    $.25 - $.50


3.    Common and preferred stock
      --------------------------

The following is a summary of common stock transactions during 2003:

                                       Shares Issued      Per Share
                                       -------------      ---------

    Stock issued for cash and
     services totaling $3,675             52,500              $.07


4.    Notes Payable and Long-term debt
      --------------------------------

The Company had the following indebtedness under notes and loan
agreements:

                                    Current    Long-term       Total
                                    -------    ---------    ----------

Line of credit with bank,
originated December 23, 1999,
matures November 30, 2005;
initial line - $1,145,000,
payments of $24,000 per month
plus interest at the bank's
prime rate plus 2%  (6.00% at
December 31, 2003), remaining
principal due at maturity,
secured by accounts receivable
and inventory                      $288,000     $231,761    $  519,761

Lines of credit with bank,
originated April 30, 1999, to
December 23,1999, matures
March 31, 2005; maximum line -
$450,000, interest at the bank's
prime rate plus 3% (7.00% at
December 31, 2003), payable
monthly, principal due at
maturity, secured by accounts
receivable and  inventory               --       203,655       203,655

Installment notes payable to
bank, originated July 12, 2000,
through December 4, 2001 ,
matures May 12, 2004, through
June 4, 2005; principal and
interest due in monthly payments
of $3,149, interest at bank's
prime rate plus .25%, (4.25% at
December 31, 2003); secured by
equipment                            24,188        3,329        27,517

Subordinated debt due to
shareholder affiliates,
originated April 1, 2003,
matures April 1, 2005; interest
at 8% payable quarterly, principal
due at maturity, convertible into
the Company's common stock at
$.6037 per share                         --      300,000       300,000
                                   --------     --------    ----------
                                   $312,188     $738,745    $1,050,933
                                   ========     ========    ==========

Aggregate maturities of notes payable are as follows:

     2004              $  312,188
     2005                 738,745
                       ----------
                       $1,050,933
                       ==========


5.    Operating leases
      ----------------

The Company leases office space in Oklahoma City, Oklahoma, under an
agreement renewed December  31, 2002 at $12,587 a month.  The agreement
expires December 31, 2005.

The Company leases automobiles and certain office equipment with lease
payments totaling  $8,229 per month. The agreements expire in August
2004 to October 2007.

Dolphin, Inc., a wholly owned subsidiary leases office space in
Gibbsboro, New Jersey, for $9,941 a month under a lease agreement
expiring May 31, 2004. Dolphin, Inc. leases equipment for $530 a month
until February  2005.

Learning Pathways, Limited, a wholly owned subsidiary, leases office
space in the United Kingdom. Monthly rent approximates $1,580. The
lease renews each month for a period of ninety days.

Total lease expense was $372,948 for 2003 and $299,690 for 2002.

Future rental commitments under lease agreements are as follows:

     2004             $  303,558
     2005                208,939
     2006                 46,565
     2007                 22,024
     2008                    451


6.    Income taxes
      ------------

Deferred tax liabilities and assets are recognized for the expected
future tax consequences of events that have been included in the
financial statements or tax returns, determined by using the enacted
tax rates in effect for the year in which the differences are expected
to reverse.

The following is a reconciliation of the statutory federal income tax
rate to the Company's effective income tax rate:

                                                 2003        2002
                                               -------     -------
Statutory federal income tax rate                34.0%      (34.0%)
State income taxes                                6.0%       (6.0%)
Nondeductible expenses                            6.4%        3.0%
Foreign loss taxed at different rate             16.9%       22.3%
Other, net                                       (0.4%)       2.4%
                                                 -----       -----
Effective income tax rate                        62.9%      (12.3%)
                                                 =====       =====

Deferred tax liabilities and assets at December 31, 2003 are comprised
of the following:

Deferred tax liabilities:
Capitalized software                                $1,572,425
Plant and equipment and related depreciation             8,478
                                                    ----------
Total deferred tax liabilities                       1,580,903
                                                    ----------

Deferred tax assets:
Receivables allowance                                   90,000
Net operating loss carryforward                        872,550
Vacation accrual and deferred compensation              99,913
                                                    ----------
  Total deferred tax assets                          1,062,463
                                                    ----------
    Net liability                                   $ (518,440)
                                                    ==========

Net deferred tax asset                              $   95,323
Net deferred tax liability                            (613,763)
                                                    ----------

  Net liability                                     $ (518,440)
                                                    ==========

A deferred tax asset has been recorded for the tax benefit of the net
operating loss carryforward.  No valuation allowance has been recorded
against the deferred tax asset.

The Company has available U.S. net regular tax and alternative minimum
tax operating loss carryforwards of approximately $2,181,000 and
$2,242,000, respectively, expiring between the years 2004 and 2021.


7.    Royalty agreements
      ------------------

Several of the Company's software titles are authored by independent
consultants for which royalty agreements exist.  These agreements call
for quarterly payments based upon a percentage of the net sales of
the particular titles.  These agreements expire in the years 2004 to
2010. Royalty expense totaled $87,231 and $201,785 in 2003 and 2002,
respectively.

8.    Related party transactions
      --------------------------

The Company had a note receivable due from its Chief Executive Officer,
Jeffrey E. Butler, in the amount of $300,000 that was advanced in
October 2000 and due in 2003. In 2003 the Board of Directors approved a
transaction whereby the note would be paid in full in exchange for
200,000 shares of the Company's common stock owned by Mr. Butler. The
stock has been recorded as treasury stock at this cost.

The Company is indebted to two major shareholder affiliates for
convertible subordinated debt in the amount of $300,000, which was
advanced in April, 2003. The debt bears interest at 8% and the interest
is payable quarterly. Principal is due in one payment on April 1, 2005.
The debt is subordinated to the debt owed the Company's senior lender
and is convertible into the Company's common stock at $.6037 per share.


9.    Significant customers and concentration of credit risk
      ------------------------------------------------------

The Company sells its products almost exclusively to schools through
various distributors of educational materials.

No individual customer accounted for more than 10% of sales in 2003 or
2002.

The Company reserves for returns and bad debts in the normal course of
its operations. Management feels the allowance is sufficient to cover
any losses from uncollectible trade receivables.


10.    Commitments and contingencies
       -----------------------------

The Company amortizes capitalized software costs over the products
estimated useful life.  Due to inherent technological changes in the
software development industry, the period over which such capitalized
software costs are being amortized may have to be accelerated. Software
costs are carried in the accompanying balance sheet net of amortization.

The Company has employment agreements with its officers which include
salary terms and severance benefits.  The Company has a deferred retirement
benefit agreement with its President and has accrued $236,475 as of
December 31, 2003.  Deferred benefit expense was $64,920 in 2003 and 2002,
respectfully.


11.    Accrued liabilities
       -------------------

Accrued liabilities are comprised of the following at December 31,
2003:

    Accrued interest                              $    3,614
    Accrued payroll, taxes and benefits              339,883
    Accrued commissions and royalties                788,801
    Accrued professional fees                         28,500
    Accrued - other                                   52,768
                                                  ----------

                                                  $1,213,566
                                                  ==========


12.   Litigation
      ----------

The Company may be the subject of various legal proceedings that could
arise during the normal course of business.  However, management knows
of no pending or threatened litigation involving the Company that
is considered material to the on-going operations and  viability of the
Company.


13.   Earnings per share
      ------------------

Basic earnings per share are computed by dividing earnings available to
common stockholders by the weighted average number of common shares
outstanding during the period.  Diluted earnings per share reflect per
share amounts that would have resulted if dilutive potential common
stock had been converted to common stock.

The weighted average number of basic and diluted common shares
outstanding is as follows:

                                            2003        2002
                                         ----------   ----------

          Basic                          14,324,714   14,306,228
          Diluted                        15,628,899   14,306,228

Employee stock options are included in the number of diluted common
shaares using the treasury stock method.


14.   Employee benefit plans
      ----------------------

The Company adopted a 401(k) Plan effective January 1, 1999. The Plan
allows eligible employees to defer part of their income on a tax-
favored basis into the Plan. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA). The
Company may make contributions to the Plan as a matching percentage or
as a lump sum amount determined annually.


15.   Foreign assets, liabilities and income
      --------------------------------------

The consolidated financial statements include the assets, liabilities
and income of its foreign subsidiary Learning Pathways Ltd. (LPL). The
following is a summary of LPL's financial condition at December 31,
2003 and the results of its operations for the year then ended stated
in U.S. currency:

     Total assets                   $1,104,556
     Total liabilities              $1,278,629

     Revenues                       $  368,583
     Net loss                       $ (258,681)
     Foreign income tax benefit     $  (72,338)





Exhibit 11

Statement re: computation of per share earnings

Basic earnings per share are computed by dividing earnings available to
common stockholders by the weighted average number of common shares
outstanding during the period.  Diluted earnings per share
reflect per share amounts that would have resulted if dilutive
potential common stock had been converted to common stock.

The weighted average number of basic and diluted common shares
outstanding is as follows:

                                       2002            2001
                                   ----------       ----------
     Basic                         14,324,714       14,306,228
     Diluted                       15,628,899       14,306,228

Employee stock options are included in the number of diluted common
shares using the treasury stock method.



Exhibit 21

Subsidiaries of The American Education Corporation


Projected Learning Programs, Inc., an Oklahoma corporation (Inactive)

Learning Pathways, Limited, a United Kingdom corporation

Dolphin, Inc., a New Jersey corporation



Exhibit 23.1

Consent of Independent Auditors


We consent to the incorporation by reference in the Registration
Statement (Form S-8) filed October 22, 1999, pertaining to The American
Education Corporation Stock Option Plan for Employees and The American
Education Corporation Directors' Stock Option Plans of our report dated
March 25, 2004, with respect to the consolidated financial statement of
The American Education Corporation included in its Annual Report (Form
10-KSB) for the year ended December 31, 2003, filed with the Securities
and Exchange Commission.

Steakley, Gilbert, & Morgan, P.C.


March 30, 2004
Oklahoma City, Oklahoma





Exhibit 31.1

CERTIFICATIONS


I, Jeffrey E. Butler, certify that:

1.  I have reviewed this annual report on Form 10-KSB of The American
Education Corporation;

2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;

4.  The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

  a)  designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our
      supervision, to ensure that material information relating to the
      registrant, including its consolidated subsidiaries, is made
      known to us by others within those entities, particularly during
      the period in which this report is being prepared;

  b)  evaluated the effectiveness of the registrant's disclosure
      controls and procedures and presented in this report our
      conclusions about the effectiveness of the disclosure controls
      and procedures based on our evaluation as of the Evaluation Date;

  c)  disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the
      registrant's most recent fiscal quarter (the registrant's fourth
      quarter in the case of an annual report) that has materially
      affected, or is reasonably likely to materially affect, the
      registrant's internal control over financial reporting;

5.  The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

  a)  all significant deficiencies and material weaknesses in the
      design or operation of internal control over financial reporting
      which are likely to adversely affect the registrant's ability to
      record, process, summarize and report financial information; and

  b)  any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's
      internal controls over financial reporting.

Date:  March  30, 2004

/s/  Jeffrey E. Butler
----------------------
Signature
Title:  Chief Executive Officer



Exhibit 31.2

CERTIFICATIONS


I, Neil R. Johnson, certify that:

1.  I have reviewed this annual report on Form 10-KSB of The American
Education Corporation;

2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;

4.  The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

  a)  designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our
      supervision, to ensure that material information relating to the
      registrant, including its consolidated subsidiaries, is made known
      to us by others within those entities, particularly during the
      period in which this report is being prepared;

  b)  evaluated the effectiveness of the registrant's disclosure controls
      and procedures and presented in this report our conclusions about
      the effectiveness of the disclosure controls and procedures based
      on our evaluation as of the Evaluation Date;

  c)  disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the
      registrant's most recent fiscal quarter (the registrant's fourth
      quarter in the case of an annual report) that has materially
      affected, or is reasonably likely to materially affect, the
      registrant's internal control over financial reporting;

5.  The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

  a)  all significant deficiencies and material weaknesses in the design
      or operation of internal control over financial reporting which are
      likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

  b)  any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's
      internal controls over financial reporting.

Date:  March 30, 2004

/s/  Neil R. Johnson
--------------------
Signature
Title:  Chief Financial Officer




Exhibit 32.1

THE AMERICAN EDUCATION CORPORATION



Certification by Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002



     In connection with the Annual Report on Form 10-KSB of The American
Education Corporation (the "Company") for the year ended December 31,
2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Jeffrey E. Butler, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of my knowledge:

    (1)  The Report fully complies with the requirements of section 13(a)
  or 15(d) of the Securities Exchange Act of 1934; and

    (2)  The information contained in the Report fairly presents, in all
  material respects, the financial condition and result of the operations
  of the Company.



By:  /s/ Jeffrey E. Butler
     ---------------------
     Jeffrey E. Butler
     Chief Executive Officer



Exhibit 32.2

THE AMERICAN EDUCATION CORPORATION



Certification by Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002



     In connection with the Annual Report on Form 10-KSB of The American
Education Corporation (the "Company") for the year ended December 31,
2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Neil R. Johnson, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:

    (1)  The Report fully complies with the requirements of section 13(a)
  or 15(d) of the Securities Exchange Act of 1934; and

    (2)  The information contained in the Report fairly presents, in all
  material respects, the financial condition and result of the operations
  of the Company.



By:  /s/ Neil R. Johnson
     -------------------
     Neil R. Johnson
     Chief Financial Officer