<PAGE>


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

                                   FORM 10-QSB

[X]   Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2003

[ ]   Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from _______________ to _______________.

                          Commission File No. 2-86551C

                       Peoples Educational Holdings, Inc.
                       -----------------------------------
                 (Name of small business issuer in its charter)

           Delaware                                      41-1368898
-------------------------------                     --------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                    299 Market Street, Saddle Brook, NJ 07663
                    -----------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (201) 712-0090
                                 --------------
                (Issuer's telephone number, including area code)


      Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 [ ]

      Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practical date: 3,531,421 shares of Common
Stock (par value $0.02 per share) outstanding on May 12, 2003.
<PAGE>
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                              (Unaudited)
                                                               March 31,     December 31,
                                                                  2003          2002
                                                               ----------    ------------
<S>                                                           <C>            <C>
ASSETS

Current Assets

Cash and Cash Equivalents                                      $  438,850     $  312,470
Accounts Receivable Net of Allowance for Doubtful Accounts
  of $51,000 and Allowance for Returns                          1,134,332      1,124,874
Inventory                                                       1,441,521        984,669
Advance Royalties                                                 260,560        290,196
Prepaid Catalog Expenses and Other Current Assets                 267,470        111,534
Refundable Income Taxes                                            61,735             --
Deferred Income Taxes                                             132,000        132,000
                                                               ----------     ----------
     Total Current Assets                                       3,736,468      2,955,743
                                                               ----------     ----------

Equipment - At Cost, Less Accumulated Depreciation of
$514,000 in 2003 and $422,000 in 2002                             485,376        500,698
                                                               ----------     ----------

Other Assets

Deferred Prepublication Costs, net                              5,120,427      4,596,460
Deposits and Other                                                 61,254         44,384
                                                               ----------     ----------
     Total Other Assets                                         5,181,681      4,640,844
                                                               ----------     ----------

Total Assets                                                   $9,403,525     $8,097,285
                                                               ==========     ==========
</TABLE>
<PAGE>
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                            (Unaudited)
                                                                             March 31,       December 31,
                                                                               2003             2002
                                                                            -----------      -----------
<S>                                                                         <C>              <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Current Maturities of Long Term Debt                                        $    79,852      $    78,953
Accounts Payable                                                              1,906,531        1,840,135
Accrued Expenses                                                                303,740          527,297
Income Taxes Payable                                                                 --           33,965
                                                                            -----------      -----------
     Total Current Liabilities                                                2,290,123        2,480,350
                                                                            -----------      -----------

Long Term Debt, less current maturities                                       2,468,967          807,544
Convertible Note Payable to Stockholder                                              --        1,000,000
Accrued Royalty Payable                                                              --           61,000
Deferred Income Taxes                                                             5,000            5,000
                                                                            -----------      -----------


Total Liabilities                                                             4,764,090        4,353,894
                                                                            -----------      -----------

Stockholders' Equity

Common stock, $0.02 par value; authorized 8,500,000 shares;
  issued and outstanding 3,531,421 in 2003 and 3,216,933 shares in 2002          70,628           64,338

Additional Paid In Capital                                                    3,801,438        2,787,690
Retained Earnings                                                               927,394        1,049,513

Less: Note Receivable from issuance of Stock                                   (160,025)        (158,150)
                                                                            -----------      -----------

Total Stockholders' Equity                                                    4,639,435        3,743,391
                                                                            -----------      -----------

Total Liabilities and Stockholders' Equity                                  $ 9,403,525      $ 8,097,285
                                                                            ===========      ===========
</TABLE>
<PAGE>
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                   March 31
                                                         ----------------------------
                                                            2003             2002
                                                         -----------      -----------
<S>                                                      <C>              <C>
Revenue:
     Product Line                                        $ 3,484,843      $ 2,241,152
     Delivery                                                292,837          198,539
                                                         -----------      -----------
  TOTAL REVENUE                                            3,777,680        2,439,691

Cost of Revenue                                            1,857,549        1,219,495
                                                         -----------      -----------
  GROSS PROFIT                                             1,920,131        1,220,196

Selling, General and Administrative Expenses               2,077,823        1,419,450
                                                         -----------      -----------
  LOSS FROM OPERATIONS                                      (157,692)        (199,254)

Interest Expense                                             (45,436)         (25,226)
                                                         -----------      -----------
  LOSS BEFORE INCOME TAXES                                  (203,128)        (224,480)

Federal and State Income Tax Benefit                         (81,009)         (90,000)
                                                         -----------      -----------
  NET LOSS                                               $  (122,119)     $  (134,480)
                                                         ===========      ===========

Net Loss per Common Share
  Basic and Diluted                                      $     (0.04)     $     (0.04)
                                                         ===========      ===========
Weighted-average Number of Common Shares Outstanding
  Basic and Diluted                                        3,339,386        3,216,933
                                                         ===========      ===========
</TABLE>
<PAGE>
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)


<TABLE>
<CAPTION>
                                                       Additional
                                        Common           Paid-In          Retained          Notes
                                         Stock           Capital          Earnings        Receivable         Total
                                      -----------      -----------      -----------      -----------      -----------
<S>                                   <C>              <C>              <C>              <C>              <C>
Balance, December 31, 2002                 64,338        2,787,690        1,049,513         (158,150)       3,743,391

Sale of Common Stock                          799           56,516                                             57,315
Repurchase of Common Stock                   (224)         (38,928)                                           (39,152)
Conversion of Notes Payable                 5,715          994,285                                          1,000,000
Interest on Notes Receivable from
   issuance of Common Stock                                  1,875                            (1,875)              --
Net Loss                                                                   (122,119)                         (122,119)
                                      -----------      -----------      -----------      -----------      -----------

Balance, March 31, 2003               $    70,628      $ 3,801,438      $   927,394      $  (160,025)     $ 4,639,435
                                      ===========      ===========      ===========      ===========      ===========
</TABLE>
<PAGE>
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                           ----------------------------
                                                                             March 31,        March 31,
                                                                               2003             2002
                                                                            -----------      -----------
<S>                                                                         <C>              <C>
Cash Flows From Operating Activities

Net Loss                                                                     $  (122,119)     $  (134,480)
Adjustments to Reconcile Net Loss to Net Cash
   Provided by (Used in) Operating Activities

     Depreciation                                                                 44,446           33,467
     Amortization of Prepublication Costs                                        412,041          251,976
Changes in Assets and Liabilities
     Accounts Receivable                                                          (9,458)         485,465
     Inventory                                                                  (456,852)         196,514
     Prepaid Catalog Expense and Other current assets                           (155,936)         (19,226)
     Advance Royalties                                                            29,636          154,454
     Deposits and Other                                                          (16,870)         (28,551)
     Accounts Payable and Accrued Expenses                                      (157,161)        (625,818)
     Accrued Royalty Payable                                                     (61,000)              --
     Income Taxes Payable or Refundable                                          (95,700)        (228,801)
                                                                             -----------      -----------
       Net Cash Provided By (Used In) Operating Activities                      (588,973)          85,000
                                                                             -----------      -----------

Cash Flows From Investing Activities

     Purchases of Equipment                                                      (29,124)         (54,968)
     Expenditures for Prepublication Costs                                      (936,008)        (700,309)
                                                                             -----------      -----------
       Net Cash Used in Investing Activities                                    (965,132)        (755,277)
                                                                             -----------      -----------

Cash Flows From Financing Activities

     Net Borrowings Under Line of Credit                                       1,682,250          150,000
     Principal Payments on Long Term Debt                                        (19,928)          (8,430)
     Proceeds from the Sale of Common Stock                                       57,315               --
     Repurchase of Common Stock                                                  (39,152)              --
                                                                             -----------      -----------
       Net Cash Provided By Financing Activities                               1,680,485          141,570
                                                                             -----------      -----------

       Net Increase (Decrease) in Cash and Cash Equivalents                      126,380         (528,707)

Cash and Cash Equivalents

     Beginning of Period                                                         312,470          784,540
                                                                             -----------      -----------
     End of Period                                                           $   438,850      $   255,833
                                                                             ===========      ===========

Supplemental Cash Flow Information
     Cash Payments for:

       Interest                                                              $    45,436      $    25,226
       Income Taxes                                                                   --          132,000
                                                                             ===========      ===========

Supplemental Schedule of Noncash Investing and Financing Activities

  Conversion of Note Payable and Accrued Interest to Common Stock            $ 1,000,000      $        --
                                                                             ===========      ===========
</TABLE>
<PAGE>
Peoples Educational Holdings, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
by The Company without audit and in accordance with the instructions to Form
10-QSB and therefore do not include all information and disclosures necessary
for a fair presentation of financial position, results of operations, and cash
flows in conformity with accounting principles generally accepted in the United
States of America. These unaudited financial statements contain, in the opinion
of management, all adjustments (consisting of normal accruals and other
recurring adjustments) necessary for a fair presentation of the consolidated
financial position, results of operations, and cash flows for the periods
presented. The operating results for the period ended March 31, 2003, are not
necessarily indicative of the operating results to be expected for the full
fiscal year.

NOTE 2 - Revenue Recognition and Accounts Receivable

The Company recognizes revenue upon shipment and estimates returns if the right
of return exists. The allowances for returns as of March 31, 2003 and December
31, 2002, were $401,000 and $489,000 respectively. These allowances are recorded
as a reduction of accounts receivable.

NOTE 3 - Basic And Diluted Per Share Amounts

Basic per share amounts are computed, generally, by dividing net income or loss
by the weighted average number of common shares outstanding. Diluted per share
amounts assume the conversion, exercise or issuance of all potential common
stock instruments, unless their effect is anti-dilutive thereby reducing the
loss or increasing the income per common share.

NOTE 4 - Conversion of Note Payable

The $1,000,000 subordinated convertible note payable to its largest stockholder
along with accrued interest was converted to 289,785 shares of common stock at a
conversion price of $3.50 per share in February 2003.

NOTE 5 -  Deferred Prepublication Costs

The activity in deferred prepublication costs and the balances as of March 31,
2003 and 2002, are as follows:


<TABLE>
<CAPTION>
                                        2003            2002
                                    -----------     -----------
<S>                                 <C>             <C>
Balances, January 1                 $ 4,596,460     $ 2,402,852
  Prepublication Cost Additions         936,008         700,309
  Amortization Expense                 (412,041)       (251,976)
                                    -----------     -----------
Balances, March 31                  $ 5,120,427     $ 2,851,185
                                    ===========     ===========
</TABLE>


The estimated amortization expense related to deferred prepublication costs over
the next five years is as follows:


<TABLE>
<S>                                                            <C>
For the remainder of 2003                                      $1,445,000
For the year ended December 31, 2004                           $2,023,000
For the year ended December 31, 2005                           $1,624,000
For the year ended December 31, 2006                           $  826,000
For the year ended December 31, 2007                           $       --
</TABLE>


NOTE 6 - Stock-Based Compensation

The Company grants options to its employees under its 1998 Stock Option Plan. As
permitted under accounting principles generally accepted in the United States of
America, these grants are accounted for following APB Opinion No. 25 and related
interpretations. Accordingly, compensation cost is recognized for those grants
whose exercise price is less than the fair market value of the stock on the date
of grant. There was no compensation expense recorded for employee grants for the
quarters ended March 31, 2003 and 2002.
<PAGE>
Had compensation cost for all of the stock-based compensation grants and
warrants issued been determined based on the fair values at the grant date
consistent with the provisions of Statement No. 123, the Company's net loss and
net loss per basic and diluted common share would have been as indicated below.


<TABLE>
<CAPTION>
                                                            Quarter Ended
                                                              March 31,
                                                    ----------------------------
                                                        2003             2002
                                                    -----------      -----------
<S>                                                 <C>              <C>
Net Loss, as reported                               $  (122,119)     $  (134,480)
Deduct total stock-based employee compensation
  expense determined under the fair value-based
  method for all rewards                                (31,898)         (36,277)
                                                    -----------      -----------
Net Loss, proforma                                  $  (154,017)     $  (170,757)

Basic Net Loss per Common Share, as reported        $     (0.04)     $     (0.04)
Basic Net Loss per Common Share, proforma                 (0.05)           (0.05)
Diluted Net Loss per Common Share, as reported            (0.04)           (0.04)
Diluted Net Loss per Common Share, proforma               (0.05)           (0.05)
</TABLE>


The above pro forma effects on net loss and net loss per basic and diluted
common share are not likely to be representative of the effects on reported net
income or net income per common share for future years because options vest over
several years and additional awards are generally made each year.

Recently Issued Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement 144, Accounting for Impairment or Disposal of Long-Lived Assets.
Statement 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and will be effective for the Company's fiscal
year ending December 2003. The Company does not believe that the adoption of
this pronouncement will have a material effect on its consolidated financial
statements.

In June 2002, the FASB issued Statement 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement requires the recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred versus the date the Company commits to an exit plan. In
addition, this Statement states the liability should be initially measured at
fair value. The Statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company does not believe that the
adoption of this pronouncement will have a material effect on its financial
statements.

In January 2003, the FASB issued Statement 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure. This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, Statement 148
also amends the disclosure requirements of Statement 123 to require more
prominent and frequent disclosures in the financials statements about the
effects of stock-based compensation. The transitional guidance and annual
disclosure provisions of Statement 148 were effective for the December 31, 2002
financial statements and the interim reporting disclosures requirements are
effective for the Company's March 31, 2003 10-QSB. Because the Company continues
to account for employee stock-based compensation under APB opinion No. 25, the
transitional guidance of Statement 148 has no effect on the financial statements
at this time. As such, the financial statements presented have incorporated the
enhanced disclosure requirements of Statement 148.

In January 2003, the FASB issued Interpretation No. 45 (FIN 45), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing certain guarantees. It also
elaborates on the disclosures in FASB Statement No. 5, Accounting for
Contingencies, which are to be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees that it has
issued, even when the likelihood of making any payments under the guarantees is
remote. The Company does not believe that the adoption of this pronouncement
will have a material effect on its consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation
of Variable Interest Entities. This
<PAGE>
interpretation establishes standards for identifying a variable interest entity
and for determining under what circumstances a variable interest entity should
be consolidated with its primary beneficiary. Until now, a company generally has
included another entity in its consolidated financial statements only if it
controlled the entity through voting interests. FIN 46 changes that by requiring
a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or is entitled to receive a majority of the entity's residual returns
or both. The requirements of FIN 46 will apply to the Company for its quarter
ended September 30, 2004. The Company does not believe that the adoption of this
pronouncement will have a material effect on its consolidated financial
statements.

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

FORWARD - LOOKING STATEMENTS

This Form 10-QSB contains forward-looking statements regarding Peoples
Educational Holdings, Inc. (the "Company"), The Peoples Publishing Group, Inc.
("PPG") and their markets as defined in section 21E of the Securities Exchange
Act of 1934. These forward-looking statements involve a number of risks and
uncertainties, including (1) demand from major customers, (2) effects of
competition, (3) changes in product or customer mix or revenues and in the level
of operating expenses, (4) rapidly changing technologies and the Company's
ability to respond thereto, (5) the impact of competitive products and pricing,
(6) local and state levels of educational spending, (7) the Company's and PPG's
ability to retain qualified personnel, (8) PPG's ability to retain its
distribution agreements in the Advanced Placement market, (9) the sufficiency of
PPG's copyright protection, (10) PPG's ability to continue to rely on the
services of Mercedes Distribution Center, and (11) the Company's and PPG's
ability to retain and increase market acceptance of its Test Preparation
products in existing and new states, and other factors disclosed below and
throughout this report. The actual results that the Company or PPG achieve may
differ materially from any forward-looking statements due to such risks and
uncertainties. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this report. Readers are urged to carefully review and
consider the various disclosures made by the Company in this report, including
the discussion set forth below and in the Company's other reports filed with the
Securities and Exchange Commission from time to time that attempt to advise
interested parties of the risks and factors that may affect the Company's
business and results of operations.

SEASONALITY

This natural seasonality of the supplementary educational materials market means
that PPG's fiscal year (calendar year) does not coincide with the school
purchase year, so new product development and launch, as well as expenses, must
be planned around the school year. PPG receives and fulfills customer orders
throughout the year. The seasonality of the Advanced Placement product line is
significantly different than that of the Instruction and Test Preparation
product lines. For Advanced Placement, revenue on a historical basis by quarter
is approximately as follows: 1st quarter 6%, 2nd quarter 24%, 3rd quarter 61%
and 4th quarter 9%. For Instruction and Test Preparation, revenue on a
historical basis by quarter is approximately as follows: 1st quarter 26%, 2nd
quarter 18%, 3rd quarter 30% and 4th quarter 26%.

REVENUE AND NET LOSS

Overview

Total revenue increased 54.8%, and Product Line revenue increased 55.4% for the
first quarter of 2003 compared to the same period in 2002. This was led by a
78.0% increase in Test Preparation revenue. The Net Loss for the three months
ended March 31, 2003 was $122,000, a decrease of 9.0% from the same period in
the prior year.
<PAGE>
<TABLE>
<CAPTION>
                                           Three Months Ended
                                                March 31,
                                      ----------------------------
                                         2003             2002           Variance       % Variance
                                      -----------      -----------      -----------     ----------
<S>                                   <C>              <C>              <C>             <C>
Product Line Revenue

Test Preparation                      $ 2,705,000      $ 1,520,000      $ 1,185,000           78.0%
Advanced Placement                        579,000          550,000           29,000           5.3%
Instruction                               201,000          172,000           29,000           16.9%
                                      -----------      -----------      -----------     ----------
       Total Product Line Revenue       3,485,000        2,242,000        1,243,000           55.4%
Shipping and Handling Revenue             293,000          198,000           95,000           48.0%
                                      -----------      -----------      -----------     ----------
             Total Revenue            $ 3,778,000      $ 2,440,000      $ 1,338,000           54.8%
                                      ===========      ===========      ===========     ==========

Net Loss                              $  (122,000)     $  (134,000)     $    12,000            9.0%
</TABLE>


Test Preparation Product Revenue

Test Preparation product line revenue was $2,705,000 for the first quarter in
2003 compared to $1,520,000 in 2002, representing a 78.0% increase. The revenue
growth can be attributed to increased market penetration within existing states,
the release of new products into a new state, and an increase in the number of
inside and outside salespersons. During the first quarter of 2003, the Company
had state-specific products published for eight states compared to seven states
in the prior year. All Test Preparation products are proprietary, and management
believes this niche will continue to be the Company's fastest growth area in the
future. This expansion is not without major competitors and similar efforts by
other publishers will make this arena a hotly contested environment.

Advanced Placement Product Revenue

Advanced Placement product line revenue for the first quarter in 2003 was
$579,000 compared to $550,000 during the same period in 2002, representing an
increase of 5.3%. The increase is primarily related to expanded marketing
efforts and an increase in the number of inside and outside salespersons.

Instruction Product Revenue

The Instruction product line includes Student-At-Risk and Multicultural
products. Both include a mix of proprietary and nonproprietary titles. PPG's
emphasis is on proprietary products, and PPG uses nonproprietary products to
round out its catalog of product offerings to customers. Instruction revenue
increased 16.9% for the first quarter in 2003 compared to the same period in
2002. This increase is material in relation to total revenue and is not expected
to continue for the balance of the year, as the Company has shifted its
strategic focus from this product line to its Test Preparation product line. The
twelve-month revenue expectations for this product line in 2003 will be in line
with 2002 levels or slightly below.

Shipping and Handling Revenue

Shipping and Handling revenue has decreased as a percent of product line revenue
from 8.8% of revenue to 8.4% of revenue. Decrease is not significant and is due
to product revenue mix.

GROSS PROFIT AND COST OF REVENUE

Gross Profit increased $700,000 for the first quarter of 2003 as compared to the
same period in 2002 due to increased revenue, and increased as a percent of
total revenue from 50.0% to 50.8%. The percentage increase was partially a
result of a shift in product revenue mix, offset by increases in amortization on
Prepublication Costs.

Cost of Revenue consists of (1) product cost, which includes paper, printing,
binding, and prepress costs for proprietary products and product purchases for
non-proprietary products, (2) amortization of prepublication costs for
proprietary products, (3) royalty for proprietary products, and (4) warehousing
and shipping costs for proprietary and distributed products.
<PAGE>
Product cost decreased as a percent of revenue from 28.9% to 26.6% due to
product mix. Advanced Placement revenue, which has the highest product cost
decreased from 22.5% of total revenue in 2002 to 15.3% in 2003.

Royalty, warehousing and shipping costs, as a percent of total revenue remained
consistent between periods.

Prepublication costs include all the one-time expenses associated with
developing and producing new or revised proprietary products. Prepublication
costs include all editorial expenses, writing, page design and makeup, art
permissions and other permissions, prepress, and any other costs incurred up to
the print/bind stage of the books. These prepublication costs also include
expenses incurred for other forms of product development, such as expert
reviews. Such product development usually involves creating sample lessons for
each content area of a prospective title; PPG then obtains feedback on these
samples, which it applies to the creation of the rest of the book.
Prepublication costs are capitalized and expensed over a three-year period
beginning on the in-stock date of new and revised products. PPG believes its
policy for a three-year amortization schedule is conservative and in line with
industry practice. For the three months ended March 31, 2003, PPG amortized
$412,000 of prepublication costs as compared to $252,000 for the same period in
2002. In book publishing, prepublication cost expenditures serves as an
important financial indicator of new product commitment. For the quarter ended
March 31, 2003, PPG's prepublication cost expenditures increased 33.7% to
$936,000, from the same period in 2002.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


<TABLE>
<CAPTION>
                                             Three Months Ended
                                                  March 31,
                                       ------------------------------
                                           2003              2002            Variance        % Variance
                                       ------------      ------------      ------------     ------------
<S>                                    <C>               <C>               <C>              <C>
Selling, General and Administrative    $  2,078,000      $  1,419,000          $659,000             46.4%
            % of Total Revenue                 55.0%             58.2%
</TABLE>


Selling, General and Administrative expense for the three months ended March 31,
2003 increased in dollars, but decreased as a percent of revenue.

The general and administrative expenditures portion of the total increased to
$734,000 for the three months ended March 31, 2003 from $698,000 from the same
period in the 2002 but decreased as a percent of total revenue. The 5.2%
increase in dollars is a result of an increase in the Company's infrastructure
cost needed to support the Company's revenue growth. The marketing and selling
expense portion of the total increased by $623,000 and from 29.6% to 35.6% of
total revenue for the first quarter of 2003 compared to 2002. The increase is
due to increases in salaries, commissions, and marketing expenses relating to
the Company's increased revenue, market penetration, and brand recognition.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the three months ended March 31, 2003
was $589,000. Cash was primarily provided by the predepreciation and
amortization profitability of the Company, offset by an increase in inventory,
prepaid catalog and other current assets, and a decrease in accounts payable and
accrued expenses, and income taxes payable.

Inventory increased in order to maintain sufficient quantities to meet growing
customer demands. Prepaid catalog and other current assets increased primarily
due to promotional mailings to take place in the second quarter of 2003.
Accounts payable and accrued expenses, and income taxes payable decreased due to
payments made in the ordinary business cycle.

Net cash used in investing activities was $965,000, consisting of prepublication
expenditures of $936,000, and equipment purchases of $29,000.

Net cash provided by financing activities was $1,680,000, consisting primarily
of repayment of borrowings under the Company's line of credit of $1,682,000,
proceeds from the sale of common stock in the amount of $57,000 offset by the
repurchase of common stock of $39,000 and principal payments under capital
leases of $20,000.

In February 2003, the Company closed a new $6,500,000 financing agreement with a
financial institution. The arrangement includes three separate revolving lines
of credit. The main line of credit provides for advances up to
<PAGE>
$4,000,000 for a two-year period, subject to borrowing base restrictions limited
to 80 percent of eligible accounts receivable and 35 percent of inventory. The
second line of credit is for $2,000,000 for a two-year period, and the third
$500,000 line of credit is for a one-year period. All three lines of credit bear
interest at LIBOR plus 2.25 percent. Total borrowings are secured by
substantially all assets of the Company and are subject to certain financial
covenants. Total borrowings under the lines as of March 31, 2003 are classified
as long-term and amount to $2,282,000.

The Company believes that its cash and line of credit, together with cash
generated from anticipated revenue and gross profit, will be sufficient to meet
its normal cash needs for the remainder of 2003. The Company intends to continue
investing in prepublication costs for its proprietary, Test Preparation
products, to the extent cash flow allows. As the Company develops these products
for more states, additional investment in inventory will be required.

For the remainder of fiscal year 2003, the Company has contractual cash
obligations, under operating and capital leases in the amount of $259,000. All
outstanding borrowings under the Company's line of credit are long-term and are
payable in February, 2005.

CRITICAL ACCOUNTING POLICIES

The Company's significant accounting policies are summarized in the footnotes to
our financial statements as reported at December 31, 2002. Some of the most
critical policies are as follows. As a matter of policy, the Company reviews its
major assets for impairment. The Company's major operating assets are accounts
receivable, inventories, prepublication assets, and property and equipment. The
Company established reserves for doubtful accounts and returns based upon
management's review of accounts and historical analysis. The Company also
establishes reserves for slow moving and obsolete inventory based on sales
history and market conditions. The Company depreciates its property and
equipment and amortizes its prepublication assets over their estimated useful
lives.

ITEM 3. CONTROLS AND PROCEDURES.

      The Company's management, including the Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Rule 15d-15 under the Securities Exchange Act of 1934 (the "1934
Act") within 90 days prior to the filing date of this quarterly report. Based on
that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in ensuring that information required to be disclosed by the Company
in the reports it files or submits under the 1934 Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.

      There have been no significant changes in internal controls, or in other
factors that could significantly affect internal controls, subsequent to the
date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.
<PAGE>
                                     PART II
                                OTHER INFORMATION


ITEM 2. CHANGES IN SECURITIES

During the first quarter of 2003, a director and excecutive officer of the
Company exercised an option to purchase 32,625 shares of the Company's Common
Stock at $1.20 per share. In addition, two employees exercised options to
purchase an aggregate of 3,264 shares at an exercise price of $1.20 per share.
The shares of Common Stock were issued pursuant to exemptions provided under
Section 4(2) of the Securities Act and Rule 701, as the options had been issued
prior to the Company becoming a reporting company.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number            Description
------            -----------
<S>               <C>
99.1              Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

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

      (b)   Reports on Form 8-K. No reports on Form 8-K were filed during the
            three months ended March 31, 2003.
<PAGE>
                                   SIGNATURES

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

      Dated:     May 12, 2003                 PEOPLES EDUCATIONAL HOLDINGS, INC.


                                              By: /s/ Brian T. Beckwith
                                              ----------------------------------
                                              Brian T. Beckwith, President and
                                              Chief Executive Officer
<PAGE>
                                 CERTIFICATIONS

I, Brian T. Beckwith, certify that:

1.    I have reviewed this quarterly report on Form 10-QSB of Peoples
Educational Holdings, Inc.;

2.    Based on my knowledge, this quarterly 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 quarterly
report;

3.    Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 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 quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; 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; and

6.    The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

                                        /s/ Brian T. Beckwith
                                        -----------------------
                                        Brian T. Beckwith
                                        Chief Executive Officer
<PAGE>
I, Michael L. DeMarco, certify that:

1.    I have reviewed this quarterly report on Form 10-QSB of Peoples
Educational Holdings, Inc.;

2.    Based on my knowledge, this quarterly 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 quarterly
report;

3.    Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 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 quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; 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; and

6.    The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

                                        /s/ Michael L. DeMarco
                                        -----------------------
                                        Michael L. DeMarco
                                        Chief Financial Officer