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 September 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
November 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
           September 30, 2004 and December 31, 2003                 3

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

           For the Nine Months Ended September 30, 2004
           and for the Nine Months Ended September 30, 2003         5

           Consolidated Statements of Cash Flows
           For the Nine Months Ended September 30, 2004
           and for the Nine Months Ended September 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



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

ASSETS
Current assets:
  Cash and cash equivalents                  $   356,991     $   216,676
  Accounts receivable, net of allowance
   for returns and uncollectible accounts
   of $357,014 and $225,000                    3,111,363       2,790,327
  Inventory                                       12,360          16,451
  Prepaid expenses and deposits                  434,915         174,482
  Deferred tax asset                              95,323          95,323
                                             -----------     -----------
     Total current assets                      4,010,952       3,293,259

Property and equipment, at cost                1,284,927       1,287,338

Less accumulated depreciation and
 amortization                                 (1,116,125)     (1,064,640)
                                             -----------     -----------
     Net property and equipment                  168,802         222,698

Other assets:
  Capitalized software costs, net of
   accumulated amortization of $6,813,882
   and $5,641,359                              4,239,833       4,454,143
  Goodwill, net of accumulated amortization
   of $369,097 and $369,097                    1,840,446       1,840,446
                                             -----------     -----------
     Total other assets                        6,080,279       6,294,589
                                             -----------     -----------
     Total assets                            $10,260,033     $ 9,810,546
                                             ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable trade                     $   305,425     $   374,822
  Accrued liabilities                            876,131       1,213,566
  Deferred revenue                               876,535         609,700
  Notes payable and current portion of
   long-term debt                                487,910         312,188
                                             -----------     -----------
     Total current liabilities                 2,546,001       2,510,276

Other long-term accrued liabilities              399,975         236,475
Deferred income tax liability - Long-term      1,056,323         613,763
Long-term debt                                   300,000         738,745
                                             -----------     -----------
     Total liabilities                         4,302,299       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                   6,703,204       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                          217,373              -
                                             -----------     -----------
     Total stockholders' equity                5,957,734       5,711,287
                                             -----------     -----------
     Total liabilities and stockholders'
      equity                                 $10,260,033     $ 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 SEPTEMBER 30, 2004 AND 2003
(unaudited)

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

Sales                                        $ 2,644,459   $ 2,290,305
Cost of goods sold                               351,667       336,706
                                             -----------   -----------
Gross profit                                   2,292,792     1,953,599

Operating expenses:
 Selling and marketing                           822,912       606,222
 Operations                                      124,911        98,302
 General and administrative                      735,884       582,007
 Amortization of capitalized software costs      402,192       371,084
                                             -----------   -----------
Total operating expenses                       2,085,899     1,657,615
                                             -----------   -----------
Operating income                                 206,893       295,984

Other income (expense):
 Interest expense                                (19,615)      (17,682)
                                             -----------   -----------
Net income before income taxes                   187,278       278,302

 Deferred income taxes                           165,886       160,155
                                             -----------   -----------

Net Income                                   $    21,392   $   118,147
                                             ===========   ===========

Basic                                         14,133,461    14,367,461

Earnings per share                           $     0.002   $     0.008

Diluted                                       15,668,711    15,329,630

Earnings per share                           $     0.001   $     0.008


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



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

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

Sales                                         $8,028,201   $ 6,638,259
Cost of goods sold                             1,029,538     1,000,960
                                             -----------   -----------
Gross profit                                   6,998,663     5,637,299

Operating expenses:
 Selling and marketing                         2,796,383     1,594,872
 Operations                                      372,638       294,361
 General and administrative                    1,908,491     1,835,927
 Amortization of capitalized software costs    1,159,094     1,069,057
                                             -----------   -----------
Total operating expenses                       6,236,606     4,794,217
                                             -----------   -----------
Operating income                                 762,057       843,082

Other income (expense):
 Interest expense                                (50,039)      (51,695)
                                             -----------   -----------

Net income before income taxes                   712,018       791,387

 Deferred income taxes                           494,645       389,021
                                             -----------   -----------
Net Income                                   $   217,373   $   402,366
                                             ===========   ===========


Basic                                         14,133,461    14,356,499

Earnings per share                           $     0.015   $     0.028

Diluted                                       15,668,711    15,318,668

Earnings per share                           $     0.014   $     0.026


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



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


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

Cash flows from operating activities:
Net income                                      $   217,373   $   402,366
 Adjustments to reconcile net income to net
  cash provided by (used in) operating
  activities:
 Depreciation and amortization                    1,255,875    1,193,114
 Reserve for bad debts                              132,014      122,691
 Services rendered for common stock                      --        3,675
 Deferred compensation                              163,500       48,690
 Other                                               29,074       (7,003)

Changes in assets and liabilities:
 Accounts receivable                               (453,050)    (976,833)
 Inventories                                          4,091      (10,145)
 Prepaid expenses and other                        (260,433)    (100,270)
 Accounts payable and accrued liabilities          (406,832)    (251,548)
 Accounts payable - Affiliate                            --      (60,000)
 Deferred revenue                                   266,835      444,437
 Deferred income taxes                              442,560      389,020
                                                -----------   -----------
 Net cash provided by operating activities        1,391,007    1,198,194
                                                -----------   -----------
Cash flow from investing activities:
 Software development costs capitalized            (958,213)  (1,005,117)
 Purchase of property and equipment                 (29,456)     (28,531)
                                                -----------   -----------

Net cash used in investing activities              (987,669)  (1,033,648)
                                                -----------   -----------

Cash flows from financing activities:
 Proceeds received from issuance of debt                 --      300,000
 Principal payments on notes payable               (263,023)    (392,745)
                                                -----------   -----------
 Net cash used in financing activities             (263,023)     (92,745)
                                                -----------   -----------
Net increase in cash                                140,315       71,801

Cash at beginning of the period                     216,676       74,405
                                                -----------   -----------
Cash at end of the period                       $   356,991   $   146,206
                                                ===========   ===========


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 SEPTEMBER 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, U.K., and Dolphin, Inc.
("Dolphin"), Voorhees, NJ. LPL modifies the Company's U.S. curriculum
offering to conform to the U.K.'s educational system and markets these
products directly to U.K. 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 September 30, 2004,
and for the three- and nine-month periods ended September 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 nine-month
periods ending September 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%
(6.50% at September 30, 2004)              $327,761    $     --  $327,761

Line of credit with bank, matures
March 31, 2005; maximum line - $450,000,
interest at the bank's prime rate plus
2.5% (7.00% at September 30, 2004)          153,665          --   153,665

Installment notes payable to bank             6,484          --     6,484

Subordinated debt due to shareholder
affiliates, originated April 1, 2003,
matures September 30, 2006; interest
at 8% payable quarterly, principal due
at maturity, convertible into the
Company's common stock at $.40 per share         --     300,000   300,000
                                           --------    --------  --------
                                           $487,910    $300,000  $787,910
                                           ========    ========  ========


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.
123 and SFAS No. 148, "Accounting for Stock-Based Compensation,"
establish financial accounting and reporting standards for stock-based
employee compensation plans.  SFAS No. 123 defines a fair value-based
method of accounting for an employee stock option.  SFAS No. 148 amends
SFAS No. 123 to provide alternative methods of transition for an entity
that voluntarily changes to the fair value-based method 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 nine months ended September 30:




                                                    2004          2003
                                                 --------      --------
Net income - as reported                         $217,373      $402,366
Stock -based employee compensation expense -
pro forma                                          46,485         6,125
                                                 --------      --------
Net income - pro forma                            170,888       396,241

Basic earnings per common share - as reported        $.02          $.03
Diluted earnings per common share - as reported       .01           .03
Basic earnings per common share - pro forma          $.01          $.03
Diluted earnings per common share - pro forma         .01           .03


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 September 30, 2004, paid-in capital includes $26,795 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., U.K. 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 represents 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 SEPTEMBER 30, 2004
AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2003
--------------------------------------------------------

Net consolidated sales for the three months ended September 30, 2004
totaled $2,644,459 compared to $2,290,305 for the same period in 2003.
This represents an increase of 15% over the comparable 2003 quarter and
is attributable to a combination of increases in orders at all of AEC's
operating units, including 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 a
result of billing more schools directly as a condition of certain
contract awards.  Management believes that AEC's sales for the third
quarter were adversely impacted by severe weather conditions in the
important Gulf Coast states, which was disruptive to both the selling
efforts and school purchasing processes in several key states.

Cost of goods sold as a percentage of sales revenue for the three
months ending September 30, 2004 decreased to 13% from 15% 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 third 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 $2,085,899 for the three months ended September 30,
2004, compared to $1,657,615 for the same 2003 quarter, an increase of
26%.  As a percentage of sales revenue, operating expenses increased
from 72% in 2003 to 79% in 2004. The increase in total operating
expenses is primarily due to increased marketing and selling
expenditures and increases in general and administrative costs as
detailed below. During the third 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 36%, from $606,222 for the three months ended September
30, 2003, to $822,912 for the current period.  The increase in the
third 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 continued 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, increased from $680,309 in 2003 to $860,795 in
2004 or 27%. This increase resulted from increased costs of providing
online, Company hosted product to a larger number of customers and
increases in bad debt expense at LPL.

Interest expense was $19,615 for the three months ended September 30,
2004 compared to $17,682 for the same 2003 quarter, reflecting higher
interest rates in effect in 2004.  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 U.K.
accounting rules.  Net income was $21,392 for the three months ended
September 30, 2004, compared to net income of $118,147 for the same
period in 2003.


RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2004
AS COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2003
-------------------------------------------------------

Net sales for the nine months ended September 30, 2004, totaled
$8,028,201 compared to $6,638,259 for the same period in 2003.  This
represents an increase of 21% 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.  The nine-month period was, in management's judgment, impacted
by adverse weather conditions discussed in the Review of Operations for
the third quarter.

Cost of goods sold as a percentage of sales revenue for the nine months
ending September 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 nine months of 2004.

Total operating expenses, which include selling and marketing, general
and administrative, operations, and amortization of product development
costs, were $6,236,606 for the nine months ended September 30, 2004,
compared to $4,794,217 for the same 2003 fiscal period.  As a
percentage of sales revenue, operating expenses increased to 78% in
2004 from 72% in 2003. The increase in the 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, increased from $2,130,288 to $2,281,129
or by 7%.  This increase is attributable to increased internet costs
resulting from a larger amount of the Company's sales being delivered
online and the increases in bad debt expense at the Company's U.K.
subsidiary noted above.

Interest expense for the nine months ended September 30, decreased from
$51,695 in 2003 to $50,039 in 2004 reflecting the reduction in average
daily debt levels in 2004 compared to the prior year, offset somewhat by
the higher interest rates in effect in 2004. Net income was $217,373
for the nine months ended September 30, 2004, compared to a net income
of $402,366 for the same period in 2003. The decrease results from
continued operating losses at the Learning Pathways and Dolphin
subsidiary business units.


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 September 30, 2004 the Company's principal sources of liquidity
included cash and cash equivalents of $356,991, net accounts receivable
of $3,111,363 and inventory of $12,360. The Company's net cash provided
by operating activities during the nine months was $1,391,007 in 2004
compared to $1,198,194 in 2003. Net cash used in investing activities
for the same period decreased by 4% from $1,033,648 in 2003 to $987,669
in 2004, and was comprised primarily of investment in capitalized
software development costs. During the nine months ended September 30,
2004 total bank debt decreased by $263,023, or 35%.

At September 30, 2004, the Company had working capital of $1,464,951
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 September
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          $448        $340      $ --      $ --
Operating leases                   321         275       123        --
                                  ----        ----      ----      ----
Total contractual obligations     $769        $615      $123      $ --
                                  ====        ====      ====      ====


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 September 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 August 26, 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 and six months ended June 30, 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: November 15, 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:  November 15, 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:  November 15, 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
September 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

November 15, 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
September 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

November 15, 2004