FORM 10-QSB

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

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

For the Quarterly Period Ended June 30, 2004

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

For the Transition Period from ________ to ________

Commission File #0-11078

THE AMERICAN EDUCATION CORPORATION
(Exact name of small business issuer as specified in its charter)

            Nevada                                   73-1621446
-------------------------------          ---------------------------------
(State or other jurisdiction of          (IRS Employer Identification No.)
 incorporation or organization)

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


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

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the 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 Exchange 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_

Number of shares of the issuer's common stock outstanding as of August
1, 2004:                 14,133,461

Transitional Small Business Disclosure Format        YES       NO X



THE AMERICAN EDUCATION CORPORATION

                                INDEX
                                -----
                                                                Page No.
                                                                --------

PART I - FINANCIAL INFORMATION


Item 1     Consolidated Balance Sheets
           June 30, 2004 and December 31, 2003                      3

           Consolidated Statements of Income
           For the Three Months Ended June 30, 2004                 4
           and for the Three Months Ended June 30, 2003

           For the Six Months Ended June 30, 2004
           and for the Six Months Ended June 30, 2003               5

          Consolidated Statements of Cash Flows
          For the Six Months Ended June 30, 2004
          and for the Six Months Ended June 30, 2003                6

          Notes to Interim Consolidated Financial
          Statements                                                7


Item 2    Management's Discussion and Analysis
          Of Financial Condition and Results of
          Operations                                               10

Item 3    Controls and Procedures                                  13


PART II - OTHER INFORMATION                                        15

SIGNATURE PAGES                                                    17




PART I - FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED BALANCE SHEETS

THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS

                                               June 30      December 31
                                                 2004            2003
                                            ------------     -----------
                                             (unaudited)      (audited)

ASSETS
Current assets:
  Cash and cash equivalents                  $  236,089      $  216,676
  Accounts receivable, net of allowance
   for returns and uncollectible accounts
   of $271,300 and $225,000                   3,205,281       2,790,327
  Inventory                                      11,655          16,451
  Prepaid expenses and deposits                 123,362         174,482
  Deferred tax asset                             95,323          95,323
                                             ----------      ----------
     Total current assets                     3,671,710       3,293,259

Property and equipment, at cost               1,261,872       1,287,338
  Less accumulated depreciation and
   amortization                              (1,085,746)     (1,064,640)
                                             ----------      ----------
     Net property and equipment                 176,126         222,698

Other assets:
  Capitalized software costs, net of
   accumulated amortization of $6,409,384
   and $5,641,359                             4,298,572       4,454,143
  Goodwill, net of accumulated
   amortization of $369,097 and $369,097      1,840,446       1,840,446
                                             ----------      ----------
     Total other assets                       6,139,018       6,294,589
                                             ----------      ----------
     Total assets                            $9,986,854      $9,810,546
                                             ==========      ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable trade                     $  387,969      $  374,822
  Accrued liabilities                         1,007,479       1,213,566
  Deferred revenue                              373,536         609,700
  Notes payable and current portion of
   long-term debt                             1,056,677         312,188
                                             ----------      ----------
     Total current liabilities                2,825,661       2,510,276

Other long-term accrued liabilities             329,475         236,475
Deferred income tax liability - Long-term       914,241         613,763
Long-term debt                                       -          738,745
                                             ----------      ----------
     Total liabilities                        4,069,377       4,099,259
                                             ----------      ----------
Commitments and contingencies                        -               -
Stockholders' Equity:
  Preferred Stock, $.001 par value;
   Authorized - 50,000,000 shares-issued
    and outstanding-none                             -               -
  Common Stock, $.025 par value
   Authorized 30,000,000 shares
   Issued and outstanding - 14,133,461
    shares                                      359,186         359,186
  Additional paid in capital                  6,684,339       6,674,130
  Treasury stock, at cost, 234,000 shares      (319,125)       (319,125)
  Retained deficit                           (1,002,904)     (1,002,904)
  Year-to-date earnings                         195,981              -
                                             ----------      ----------
     Total stockholders' equity               5,917,477       5,711,287
                                             ----------      ----------
     Total liabilities and stockholders'
      equity                                 $9,986,854      $9,810,546
                                             ==========      ==========


The accompanying notes are an integral part of the financial statements.



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(unaudited)

                                                 2004          2003
                                             -----------   -----------

Sales                                         $2,770,205   $ 2,450,636
Cost of goods sold                               334,996       337,097
                                             -----------   -----------
Gross profit                                   2,435,209     2,113,539

Operating expenses:
 Selling and marketing                           821,556       445,665
 Operations                                      138,769       118,463
 General and administrative                      638,127       650,653
 Amortization of capitalized software costs      384,756       357,598
                                             -----------   -----------
Total operating expenses                       1,983,208     1,572,379
                                             -----------   -----------

Operating income                                 452,001       541,160

Other income (expense):
 Interest expense                                (15,143)      (23,000)
                                             -----------   -----------
Net income before income taxes                   436,858       518,160

 Deferred income taxes                           261,882       248,153
                                             -----------   -----------
Net Income                                   $   174,976   $   270,007
                                             ===========   ===========

Basic                                         14,133,461    14,367,461

Earnings per share                           $     0.012   $     0.019

Diluted                                       15,427,021    14,453,861

Earnings per share                           $     0.011   $     0.019


The accompanying notes are an integral part of the financial statements.



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(unaudited)

                                                 2004          2003
                                             -----------   -----------

Sales                                         $5,383,742   $ 4,347,954
Cost of goods sold                               677,871       664,253
                                             -----------   -----------
Gross profit                                   4,705,871     3,683,701

Operating expenses:
 Selling and marketing                         1,973,471       988,651
 Operations                                      247,727       196,059
 General and administrative                    1,172,607     1,253,920
 Amortization of capitalized software costs      756,902       697,973
                                             -----------   -----------
Total operating expenses                       4,150,707     3,136,603
                                             -----------   -----------
Operating income                                 555,164       547,098

Other income (expense):
 Interest expense                                (30,424)      (34,013)
                                             -----------   -----------
Net income before income taxes                   524,740       513,085

 Deferred income taxes                           328,759       228,866
                                             -----------   -----------
Net Income                                   $   195,981   $   284,219
                                             ===========   ===========

Basic                                         14,133,461    14,350,928

Earnings per share                           $     0.014   $      0.02

Diluted                                       15,427,021    14,437,328

Earnings per share                           $     0.013   $      0.02


The accompanying notes are an integral part of the financial statements.



THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(unaudited)


                                                    2004          2003
                                                -----------   -----------

Cash flows from operating activities:
Net income                                      $   195,981   $   284,219
 Adjustments to reconcile net income to
  net cash provided by (used in) operating
  activities:
 Depreciation and amortization                      820,999       777,650
 Reserve for bad debts                               46,300       107,010
 Services rendered for common stock                      --         3,675
 Deferred compensation                               93,000        32,461
 Other                                               10,208        16,966

Changes in assets and liabilities:
 Accounts receivable                               (461,254)     (950,801)
 Inventories                                          4,796       (10,245)
 Prepaid expenses and other                          51,120       (14,399)
 Accounts payable and accrued liabilities          (192,940)       45,979
 Accounts payable - Affiliate                            --       (60,000)
 Deferred revenue                                  (236,164)      203,116
 Deferred income taxes                              300,478       230,215
                                                -----------   -----------
Net cash provided by operating activities           632,524       665,846

Cash flow from investing activities:
 Software development costs capitalized            (612,454)     (671,634)
 Purchase of property and equipment                  (6,401)      (18,420)
                                                -----------   -----------
 Net cash used in investing activities             (618,855)     (690,054)

Cash flows from financing activities:
 Proceeds received from issuance of debt            142,234       300,000
 Principal payments on notes payable               (136,490)     (256,249)
                                                -----------   -----------
 Net cash provided by financing activities            5,744        43,751
                                                -----------   -----------
Net increase in cash                                 19,413        19,543

Cash at beginning of the period                     216,676        74,405
                                                -----------   -----------
Cash at end of the period                        $  236,089    $   93,948
                                                ===========   ===========


The accompanying notes are an integral part of the financial statements.


                 THE AMERICAN EDUCATION CORPORATION
                              Part I
         NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE PERIODS ENDED JUNE 30, 2004 AND 2003


NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------

1.  Description of Business:
    -----------------------

The American Education Corporation's ("the Company") business is the
development and marketing of educational software to elementary,
middle and secondary schools, adult literacy centers and vocational,
junior and community colleges.  In addition, the Company has two
subsidiaries, Learning Pathways, Ltd. ("LPL"), Derby, UK, and Dolphin,
Inc. ("Dolphin"), Voorhees, NJ. LPL modifies the Company's U.S.
curriculum offering to conform to the UK's educational system and
markets these products directly to UK and other international markets.
Dolphin is a developer of educational software for many of the
nation's leading textbook and electronic publishers.


2.  Basis of Presentation:
    ---------------------

The summary of significant accounting policies of 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.

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

The interim consolidated financial statements at June 30, 2004, and
for the three and six month periods ended June 30, 2004 and 2003 are
unaudited, but include all adjustments that the Company considers
necessary for a fair presentation. The December 31, 2003 balance sheet
was derived from the Company's audited financial statements.

The accompanying unaudited financial statements are for the interim
periods and do not include all disclosures normally provided in annual
financial statements.  They should be read in conjunction with the
Company's audited financial statements included in the Company's Form
10-KSB for the year ended December 31, 2003.  The accompanying
unaudited interim financial statements for the three and six month
periods ending June 30, 2004 are not necessarily indicative of the
results that can be expected for the entire year.

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


3.  Revenue Recognition:
    -------------------

The Company recognizes revenue in accordance with the American
Institute of Certified Public Accountant's Statement of Position 97-2,
98-9 and modifications thereto on software revenue recognition.
Revenue for software design services at Dolphin is recognized on the
percentage-of-completion method.


4.  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.  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.


5.  Goodwill:
    --------

Goodwill relates to the acquisitions in 1998 of LPL and in 1999 of
Dolphin. Through 2001, goodwill was amortized with a fifteen year
life. Beginning January 1, 2002, goodwill is no longer amortized.
Impairment evaluations are made annually and any necessary expense
recognized.


6.  Inventories:
    -----------

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


7.  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.

8.  Debt:
    ----

The Company had the following indebtedness under notes and loan
agreements. The Company has a lockbox arrangement with its bank and
therefore all bank loans are treated as current regardless of the stated
terms.

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

Line of credit with bank, matures
November 30, 2005; payments of
$24,000 per month plus interest at
the bank's prime rate plus 2%
(6.00% at June 30, 2004)                   $399,761    $     --  $  399,761

Line of credit with bank, matures
March 31, 2005; maximum line - $450,000,
interest at the bank's prime rate plus
2.5% (6.50% at June 30, 2004)               345,889          --     345,889

Installment notes payable to bank            11,027          --      11,027

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
                                          ---------   ---------  ----------
                                          $1,056,677  $      --  $1,056,677
                                          ==========  =========  ==========


9.  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.
1123 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 of
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 and earnings 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 per share are as follows for
the six months ended June 30:



                                                    2004          2003
                                                 --------      --------
Net income - as reported                         $195,981      $284,219
Stock -based employee compensation
 expense - pro forma                               13,580             -
                                                 --------      --------
Net income - pro forma                            182,401       284,219

Basic earnings per common share-as reported          $.01          $.02
Diluted earnings per common share as reported         .01           .02
Basic earnings per common share -
 pro forma                                           $.01          $.02
Diluted earnings per common share-
 pro forma                                            .01           .02


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


11. Income Taxes:
    ------------

The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109").  SFAS 109 requires recognition of deferred tax liabilities and
assets 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.


12. Computation of Earnings Per Share:
    ---------------------------------

The Company has adopted Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" ("SFAS 128").  SFAS 128 requires
presentation of basic and diluted earnings per share.  Basic earnings
per share are calculated based only upon the weighted average number
of common shares outstanding during the period.  Diluted earnings per
share are calculated based upon the weighted average number of common
and, where dilutive, potential common shares outstanding during the
period, utilizing the treasury stock method.  Potential common shares
include options to purchase common stock.


13. Stockholders' Equity:
    --------------------

At June 30, 2004, paid-in capital includes $7,930 of foreign currency
translation adjustments.


14. Commitments and Contingencies:
    -----------------------------

The Company amortizes capitalized software costs over the product's
estimated useful life.  Due to inherent technological changes in the
software development industry, the period over which such capitalized
software cost is being amortized may have to be accelerated.



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------

Overview
--------

The American Education Corporation is a developer of instructional
content, computer adaptive assessment 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,
registered, ("A+LS") 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 11,000 schools, centers of adult literacy, colleges and
universities, and correctional institutions in the U.S., UK and other
international locations.  A+dvancer, trademark, Online Courseware, 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 and, more recently, to investigate and publish information
which provides school customers scientifically-based research on the
effectiveness of company products to remain competitive.  This
requirement is to allow the Company's products to comply with certain
research-based product effectiveness standards of The No Child Left
Behind Act of 2001.  The necessity to support these requirements
represent a new cost of doing business and introduces additional
complexity into the Company's development processes.  The necessity to
accomplish these essential, ongoing corporate functions requires
retention and recruitment of a highly skilled professional workforce.
These investments are an 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 - THREE MONTHS ENDED JUNE 30, 2004
AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2003
--------------------------------------------------------

Net consolidated sales for the three months ended June 30, 2004
totaled $2,770,205 compared to $2,450,636 for the same period in 2003.
This represents an increase of 13% over the comparable 2003 quarter
and is attributable to a combination of a substantial increase in
orders at AEC, offset by sales decreases at the LPL and Dolphin
subsidiaries. AEC's revenue increase over the same quarter in 2003 is
a result of the continuation of increases in governmental educational
funding and as of a result of billing more schools directly as a
condition of certain contract awards.

Cost of goods sold as a percentage of sales revenue for the three
months ending June 30, 2004 decreased to 12% from 14% of net revenues
for the same period in 2003. This improvement is attributed to a
larger portion of consolidated sales contributed by the core AEC
operating unit. The Company's principal product family, A+nyWhere
Learning System, registered, provided gross profit margins of 97% in
the second quarter of 2004, consistent with prior quarters.  Cost of
goods sold represents the actual cost to produce the software products
and includes certain allocated overhead costs.

Total operating expenses, which include selling and marketing, general
and administrative, operations, and amortization of product
development costs, increased to $1,983,208 for the three months ended
June 30, 2004, compared to $1,572,379 for the same 2003 quarter, an
increase of 26%.  As a percentage of sales revenue, operating expenses
increased from 64% in 2003 to 72% in 2004. The increase in total
operating expenses is primarily due to an increase in amortization of
product development costs and increased marketing and selling
expenditures. During the second quarter of 2004, the Company continued
to make substantial progress in development efforts on revised,
updated and expanded curriculum offerings for its A+nyWhere Learning
System, registered, product family as well as continuing its
investment into A+dvancer, trademark, the Company's post-secondary
testing and online curriculum offering.

As a component of total operating expenses, selling and marketing
costs increased by 84%, from $445,665 for the three months ended June
30, 2003, to $821,556 for the current period.  The increase in the
second quarter 2004 selling expenses is largely attributable to
changes in sales mix, which resulted in increased sales commissions
paid as the Company billed direct to school customers a higher
percentage of orders. In addition, the Company initiated programs to
substantially expand sales coverage in new geographical territories,
as well as expanded trade show activities during the quarter, which
increased planned quarterly spending.  General and administrative
expenses, including operations, remained virtually unchanged at
$776,896 compared to $769,116 for the same 2003 quarter.

Interest expense was $15,143 for the three months ended June 30, 2004
compared to $23,000 for the same 2003 quarter, reflecting the lower
amount of bank debt outstanding on an average daily basis. The
provision for income taxes differs from the amount that would normally
be expected because the pre-tax loss at LPL does not qualify for tax
benefit under UK accounting rules. Net income was $174,976 for the
three months ended June 30, 2004, compared to net income of $270,007
for the same period in 2003.


RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2004
AS COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003
------------------------------------------------------

Net sales for the six months ended June 30, 2004, totaled $5,383,742
compared to $4,347,954 for the same period in 2003.  This represents
an increase of 24% over the comparable 2003 period. This increase
is attributable to substantial increases in sales at AEC offset
somewhat by decreases in sales at LPL and Dolphin during the period.

Cost of goods sold as a percentage of sales revenue for the six months
ending June 30, 2004 decreased to 13% compared to 15% for the same
period in 2003. As noted for the quarterly results, this improvement
is attributed to the increase in the portion of sales contributed by
the core AEC operating unit that has much lower cost of sales than the
Company's subsidiaries. The Company's principal product families,
A+dvanced Learning System and the A+nyWhere Learning System, provided
gross profit margins of 97% in the first six months of 2004.

Total operating expenses, which include selling and marketing, general
and administrative, operations, and amortization of product
development costs, were $4,150,707 for the six months ended June 30,
2004, compared to $3,136,603 for the same 2003 fiscal period.  As a
percentage of sales revenue, operating expenses increased to 77% in
2004 from 72% in 2003. The increase in the second quarter 2004
operating expenses is largely attributable to an increase in selling
and marketing expenses caused by changes in sales mix, which resulted
in increased sales commissions paid as the Company billed direct to
school customers a higher percentage of period orders. General and
administrative expenses, including operations, decreased from
$1,449,979 to $1,420,334 or by 2%.  This improvement is primarily
attributable to decreases in bad debt expense.

Interest expense for the six months ended June 30, decreased from
$34,013 in 2003 to $30,424 in 2004 reflecting the reduction in average
daily debt levels in 2004 compared to the prior year. Net income was
$195,981 for the six months ended June 30, 2004, compared to a net
income of $284,219 for the same period in 2003.  The decrease results
from increased losses at Learning Pathways and Dolphin.


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 June 30, 2004 the Company's principal sources of liquidity
included cash and cash equivalents of $236,089, net accounts
receivable of $3,205,281 and inventory of $11,655. The Company's net
cash provided by operating activities during the six months was
$632,524 in 2004 compared to $665,846 in 2003. Net cash used in
investing activities for the same period decreased by 10% from
$690,054 in 2003 to $618,855 in 2004, and was comprised primarily of
investment in capitalized software development costs. During the six
months ended June 30, 2004 total bank term debt decreased by $136,490,
or 25%. Total bank indebtedness increased by 1%, or by $5,744, as a
result of expanded use of available bank revolving credit facilities.

At June 30, 2004, the Company had working capital of $846,049 compared
to $782,983 at December 31, 2003.  The Company's commercial bank has
extended the maturity of its bank lines of credit until March and November
of 2005 as well as provided additional corporate credit facilities.  The
Company is continuing to discuss future borrowing arrangements with its
current lender and several other financing sources with respect to its
long-term credit facilities.

It is believed that the Company can continue to achieve improved
performance in financial results in the foreseeable future.  This
belief is as a result of the following factors:  expansion of the
Company's product lines; addition of new products; expanded
geographical sales coverage; and, the forecasted improvement
in governmental funding in fiscal 2004 and 2005 for certain school
market segments. Management believes that it can undertake necessary
expansion of marketing and product development efforts with the
Company's working capital requirements secured primarily from its
operating cash flows and available bank credit facilities.  If
successful, the Company should be able to continue to enhance corporate
liquidity and continue to strengthen the Company's balance sheet and
financial position.

Additional working capital beyond that available to the Company as a
result of internally generated cash flows has been and may be required
to expand operations.  Management has and will consider options
available to access such funding, including expanded debt and new
equity financing as dictated by the needs of the business.

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 June 30,
2004 (amounts in thousands of dollars):

                               Less than    1 to 3    4 to 5    Over 5
                                 1 year      years     years     years
                               ---------    ------    ------    ------

Long and short term debt          $  945      $112      $ --      $ --
Operating leases                     322       321       154        --
                                  ------      ----      ----      ----

Total contractual obligations     $1,267      $433      $154      $ --
                                  ======      ====      ====      ====


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 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 Interim
Consolidated Financial Statements, which are included herein.


ITEM 3 - 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 June 30, 2004, 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.



                  THE AMERICAN EDUCATION CORPORATION

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


Item 1.  Legal Proceedings
         -----------------

         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.


Item 2.  Changes in Securities
         ---------------------

         None.

Item 3.  Default Upon Senior Securities
         ------------------------------

         Omitted from this report as inapplicable.

Item 4.  Submission of Matters to Vote of Securities Holders
         ---------------------------------------------------

         None.

Item 5.  Other Information
         -----------------

         Omitted from this report as inapplicable.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

The following exhibits have been filed as a part of this report:

Exhibit
  No.                   Description of Exhibits
-------     ---------------------------------------------------------------
 3.1        Articles of Incorporation of The American Education
            Corporation (incorporated by reference Annex B to the
            Definitive Proxy Statement filed with the Securities and
            Exchange Commission on October 12, 2001)

 3.2        Bylaws of The American Education Corporation (incorporated
            by reference to Annex C to the Definitive Proxy Statement
            filed with the Securities and Exchange Commission on
            October 12, 2001)

 4.1        Form of Stock Certificate (incorporated by reference to
            Form 8-A12G/A filed with the Securities and Exchange
            Commission on January 20, 2004)

 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)

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 June 7, 2004, the Company filed Form 8-K under Item 5, Other
     Events, filing a press release announcing the Company had received
     textbook provider status awards in Idaho and Oklahoma.

     On June 2, 2004, the Company filed Form 8-K under Item 5, Other
     Events, filing a press release announcing the Company had entered
     into technology partnerships with CLEARVIEW/eav, Inc. and CS&C.

     On May 21, 2004, the Company filed Form 8-K under Item 5, Other
     Events, filing a press release announcing that the Company's products
     are featured in a North Carolina Department of Instruction best
     practices video.

     On May 13, 2004, the Company filed Form 8-K under Item 5, Other
     Events, filing a press release announcing the Company's financial
     results for the quarter ended March 31, 2004.


                                    SIGNATURES


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

                                    /s/ Jeffrey E. Butler
                                    ---------------------
                                    Jeffrey E. Butler,
                                    Chief Executive Officer
                                    Chairman of the Board
                                    Treasurer



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


Date: August 12, 2004


                             Exhibit 31.1

               CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                      PURSUANT TO SECTION 302
                 OF THE SARBANES-OXLEY ACT OF 2002


I, Jeffrey E. Butler, certify that:

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

2.  Based on my knowledge, this 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 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-15(e) and 15d-15(e)) 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, as of the end of the period covered by this
     report based upon such evaluation; and

  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
     fiscal 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 reasonably 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:  August 12, 2004

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



                          Exhibit 31.2

               CERTIFICATION OF CHIEF FINANCIAL OFFICER
                      PURSUANT TO SECTION 302
                 OF THE SARBANES-OXLEY ACT OF 2002


I, Neil R. Johnson, certify that:

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

2.  Based on my knowledge, this 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 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-15(e) and 15d-15(e)) 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, as of the end of the period covered by this
     report based upon such evaluation; and

  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
     fiscal 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 reasonably 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:  August 12, 2004

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





                              Exhibit 32.1




                 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 Quarterly Report on Form 10-QSB of The
American Education Corporation (the "Company") for the period ended
June 30, 2004 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 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

August 12, 2004



                              Exhibit 32.2




                 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 Quarterly Report on Form 10-QSB of The
American Education Corporation (the "Company") for the period ended
June 30, 2004 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 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

August 12, 2004