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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

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

                 FOR THE TRANSITION PERIOD FROM _____ TO ______

                          COMMISSION FILE NO. 000-50916

                       PEOPLES EDUCATIONAL HOLDINGS, INC.
           (NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

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<S>                                         <C>
                DELAWARE                                 41-1368898
    (STATE OR OTHER JURISDICTION OF         (I.R.S. EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)
</TABLE>

<TABLE>
<S>                                                      <C>
  299 MARKET STREET, SADDLE BROOK, NJ                       07663
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)
</TABLE>

                                 (201) 712-0090
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                         COMMON STOCK, $0.02 PAR VALUE

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past twelve months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES [X] No [ ]

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

State issuer's revenues for its most recent fiscal year: $32,487,170

The aggregate market value of the voting and non-voting common equity held by
non-affiliates, based on the average of the bid and asked price of such common
equity on March 11, 2005, was $1,246,263.

The number of shares outstanding of the issuer's common stock on March 11, 2005
was 3,809,198.

Documents incorporated by reference: NONE.

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                                TABLE OF CONTENTS

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                                                                        PAGE NO.
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PART I
   Item 1.    DESCRIPTION OF BUSINESS                                       1
   Item 2.    DESCRIPTION OF PROPERTY                                       6
   Item 3.    LEGAL PROCEEDINGS                                             6
   Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           6

PART II
   Item 5.    MARKET FOR COMMON EQUITY AND
              RELATED STOCKHOLDER MATTERS                                   6
   Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR
              PLAN OF OPERATIONS                                            7
   Item 7.    FINANCIAL STATEMENTS                                         12
   Item 8.    CHANGES IN AND DISAGREEMENTS WITH
              ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE
   Item 8A.   CONTROLS AND PROCEDURES                                      12
   Item 8B    OTHER INFORMATION                                            12

PART III
   Item 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
              AND CONTROL PERSONS; COMPLIANCE WITH
              SECTION 16(a) OF THE EXCHANGE ACT                            13
   Item 10.   EXECUTIVE COMPENSATION                                       16
   Item 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
              OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
              MATTERS                                                      19
   Item 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS               20
   Item 13.   EXHIBITS                                                     21
   Item 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES                       22

SIGNATURES                                                                 23
</TABLE>




<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW AND COMPANY HISTORY

The Peoples Publishing Group, Inc. ("PPG") publishes, distributes, and markets
supplementary books, technology, classroom assessment, and professional
development materials for the K-12 market. Supplemental instructional materials
come in many forms including print, electronic, and instructional software. As
used here, the term supplemental refers to all instructional materials other
than school supplies and basal textbooks. Teachers use supplemental materials to
enhance or enrich textbooks and to provide different approaches to help students
learn. Supplementary educational materials are predominantly soft cover books
that can be sold efficiently through catalogs, direct mail, inside sales, and
sales representatives to the schools.

PPG was founded in 1989 by James J. Peoples, the current Chairperson, and by
Diane M. Miller, the current Executive Vice President. It began operations in
1990 with the acquisition of a small supplementary product line aimed at the
high school remedial population. Effective November 1, 1998, PPG merged into a
subsidiary of Peoples Educational Holdings, Inc., a Minnesota corporation (the
"Company"). As a result of the merger, PPG became a wholly owned subsidiary of
the Company. All of the Company's operations are currently conducted through
PPG. In November 2001, the Company reincorporated in Delaware.

PPG develops and sells its own proprietary products and distributes other
publishers' products. PPG's current proprietary product line consists of
supplementary educational materials in four market niches:

     -    Test Preparation and Assessment: PPG creates and sells print and
          Internet materials for use by schools to help prepare students for
          required state proficiency tests, grades 2-12.

     -    College Preparation: PPG has the exclusive high school distribution
          rights for college textbooks, and related instruction materials
          published by two major college publishers. In 2004, the Company began
          publishing proprietary supplemental products for the college prep
          market with the release of six proprietary products and expanded its
          distribution efforts by adding four new clients.

     -    Instruction: PPG develops and distributes remedial and multicultural
          texts and related materials that focus on remedial instruction and
          multicultural education. The Company published its first
          standards-based reading, mathematics, and language arts supplemental
          materials for this market niche in late 2004.

     -    Professional Development: In late December 2004, the Highly Qualified
          Teacher or HQT(TM) group released the Company's first print based
          professional development product. These HQT(TM) modules meet the No
          Child Left Behind Act's requirements that professional development
          should meet state content and highly qualified teacher standards.
          Along with proprietary publishing, the Company has a nonexclusive
          agreement with the largest and most prestigious professional
          development association.

The Company and PPG are located at 299 Market Street, Saddle Brook, NJ 07663.
The telephone number is (201) 712-0090; the website is
www.peoplespublishing.com. The contents of the Company's website are not part
of, or incorporated into, this report.

INDUSTRY BACKGROUND

School Enrollment

The National Center for Education Statistics ("NCES") forecasts record public
school enrollment through 2013. The projected fall 2004 public school enrollment
of 48.2 million students sets a high point and new records are expected every
year through 2013. Public school pre-kindergarten through Grade 8 is projected
to decline slowly between 2003 and 2005, and then rise so that the fall 2013
enrollment is 5% higher than the 2003 enrollment. Public secondary schools
grades 9 through 12 are expected to increase through 2007 and then decrease.
Rising immigration and the baby boom echo that began in the mid-1970s and peaked
in 1990 are boosting school enrollments. As school enrollment continues to grow,
schools require additional funds to hire and train teachers, build schools, and
purchase instructional materials.


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NCES has projected 2004 K-12 private school enrollment at 6.1 million students.
Private school enrollments will remain flat between 2004 and 2008.

Educational Funding

The K-12 instructional materials industry experienced a 10.8% annual compound
growth rate for the period 1995-2001. In 2002-2004 the lingering impact of a
poor economy had a significant impact on spending, resulting in an annual
compound growth rate of 0.8%. During the three-year period when the industry
growth was only 0.8%, PPG produced a 24.0% annual compound growth.

The relationship between state and local school funding has been shifting over
the last 30 years with local funding decreasing to 42.0% and state funding
rising to 50.0%. Federal funds for school have grown to 8.0%. In fiscal
year 2004, state finances began to improve as revenues exceeded projections.
After two years of unprecedented, nearly zero growth, state expenditures in
fiscal year 2004 increased 3.0% and the 2005 estimate is for 4.5%. As an example
of the improved fiscal environment, three states estimated negative 2005 fiscal
year growth rates down from 21 states in fiscal 2003. The improvement in state
revenue and expenditures is an encouraging sign for the schools and the
instructional material industry.

In 2002, the Congress passed and the President signed the revised Elementary and
Secondary Education Act (ESEA). The 2002 ESEA, also called the "No Child Left
Behind Act," (NCLB) provided the largest dollar increase ever in federal funding
for education. In 2001, the federal education expenditure on programs covered by
the prior ESEA was $14.8 billion. In 2004, ESEA spending increased 64% to $24.3
billion. Federal funds flow to hundreds of school programs most of which have
only a small impact on the purchase of instructional materials.

Under NCLB, the states have revised their assessment programs to comply with the
new federal mandates requiring states to administer reading and mathematics
tests to all students in grades 3-8 by 2005-2006. NCLB also requires that
states test at least once in grades 10-12 in reading and mathematics. Also by
2007-2008, the states will be required to test science at least once in grades
3-5, 6-9, and 10-12. States that fail to meet the new testing requirements stand
to lose federal funding and assistance. The new legislation has impacted every
public school in the country. Standards-based products like those created by
PPG, play an important role in preparing students for the new tests. The current
accountability and pressure to prepare students for the state tests is a primary
driver of funding for test preparation, assessment, and professional
development.

Supplementary Materials Market

PPG operates in the $2.8-$3.0 billion supplementary materials market, which is
a subset of the larger instructional materials markets. All PPG products are
considered supplementary materials. According to the Association of Educational
Publishers, (AEP), supplemental materials sales increased 4.6% in 2002 and 3.8%
in 2003. A short list of supplementary materials includes consumable workbooks,
instructional software, teacher resource materials, professional development,
manipulatives, and assessment products.

Test Preparation and Assessment Market

The accountability pressure created by high stake testing ignited the market
demand for quality test preparation and classroom assessment materials. A recent
survey of the K-12 assessment market by Education Market Research reported that
90.0% of the respondents use test preparation materials and that virtually all
respondents maintain that these products definitely improve student test scores.
Educators obtain test preparation materials from the state, school districts,
and publishers. The Company believes that test preparation and assessment
materials are among the fastest growing niches in the supplementary materials
market. As such, schools and school districts are expected to aggressively
purchase these materials.

College Preparation Market

College Preparation materials, which are largely supplemental materials, are
used in high school advanced placement, honors, and college prep courses.
Several factors support optimistic funding predictions for the growth of college
prep instruction materials including the increased emphasis on state standards,
accountability, testing, competitive college entrance requirements, and an
annual double-digit growth in the number of students taking the Advance
Placement(R) examinations. According to the College Board, 1,101,802 students
took Advanced Placement(R) courses in 2004. From school year 2001 to school year
2004, the number of Advanced Placement(R) students increased by 31.1%. High
scores on the Advanced Placement(R) examination add to a school's prestige and


                                       2

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recognition as a quality school. As a result, most colleges and universities
in the United States, as well as in 30 countries, recognize AP(R) exam results
in the admission process as a sign of a student's ability to succeed in
rigorous curricula.

In the proposed fiscal year 2006 President's budget, $1.5 billion in new funds
has been identified to extend high school testing and accountability. The
administration is proposing to increase high school assessment from one year to
all four years by adding high stake test requirements in grades 9 through 11 and
requiring students to take the National Assessment of Educational Progress test
in their senior year. If implemented, the changes would start in 2009-2010. The
administration's budget also includes $51.5 million in funding, a $28.0 million
increase, for Advanced Placement(R) courses. How all of this will work out in
the congressional budget deliberations is unknown, but what is significant is
that, in addition to the President's agenda to introduce academic rigor into
U.S. high schools, other voices such as state governors and the College Board
are supporting similar proposals. The emerging interest can only be considered
as a positive for publishers focused on the high school Advanced Placement(R),
honors, and college preparation market.

Professional Development Market

NCLB places a major emphasis on teacher quality as a significant factor in
increasing student achievement and requires that all teachers must be highly
qualified in the core academic subjects they teach by 2005-2006. The law
provides local school districts and states the opportunity to define minimum
content knowledge and teaching skills for highly qualified teachers as long as
states define highly qualified requirements consistent with NCLB.

School districts utilize a considerable portion, 60% or more, of professional
development funding to pay salaries for mentors, coaches, and professional
development staff, and to provide substitute teachers for teachers in training.
However, industry sources estimate that $800.0 million is spent annually on
outside consultants, materials (books, videos, journals), for profit
professional development companies, and conference registration (not including
travel expenses).

Under NCLB, Title II Part A provided $2.93 billion to improve the quality of
teaching and learning in 2004. This initiative advocates the alignment of school
curricula with state standards and the integration of technology into the
classroom. Title II also supports school district efforts to conduct higher
order professional development training.

Instruction Market

The instruction market is the print portion, often softcover consumable books,
of the larger supplemental materials market. Supplemental instruction materials
are used by teachers to address a wide-range of student abilities and learning
requirements. Teachers feel comfortable using instruction products and value the
flexibility and breadth of available materials to challenge, enrich, expand or
remediate student learning. Supplemental instruction materials are often chosen
over textbooks as less expensive or more effective teaching alternatives.

The NCLB assessment requirements have produced a powerful record and growing
understanding of student achievement and learning requirements. School report
cards are available to the public and administrators and teachers are under
increasing pressure to meet "adequate yearly progress" (AYPS). We fully expect
that educators will increasingly turn to supplemental instruction to address
NCLB requirements and that quality products will be in demand.

PRODUCTS

PPG develops and sells proprietary products and distributes other publishers
products including books, videos, software, and Internet materials. The
Company's products consist of supplementary materials in four distinct market
niches.

Test Preparation and Assessment

PPG creates and sells print and Internet materials targeted to grades 2-12, to
help students prepare for state proficiency tests. The Measuring Up(R) Test
Preparation and assessment print products are sold in 11 states. Measuring Up(R)
is positioned as standards based, state customized instruction and classroom
assessment, designed to be an integral part of a school's instructional program
throughout the school year.

In 2004, the Company introduced Measuring Up e-Path(TM), an Internet assessment
product in one state. E-Path, developed in conjunction with Cisco Learning
Systems, provides schools and districts the ability to provide formative
classroom level assessments, which, in turn, allows for informed instruction
relative to state standards. E-Path delivers a detailed prescriptive
instructional path for individual students tied into PPG's rapidly expanding
instructional materials or to other products in use within a school or district.
The strategy is to help educators assess a child's strengths and weaknesses
relative to the state standards and then provide a Personal Prescriptive
Path(TM) for remediation. The assessment data can be aggregated, using NCLB
compliant reporting at the class, school and district level and can be used to
drive not only student learning, but teacher professional development as well.

In the fall of 2004, PPG introduced into three states a new test preparation
product in language arts, (Step Up to Success). This new product is positioned
to fill a market niche for schools looking for pretest refresher materials, as
well as products for after school and summer programs. Revenue from the Test
Preparation and Assessment product line represented 63.4% of the Company's total
2004 revenue.

Instruction

Historically, PPG had developed and distributed remedial and multicultural texts
and related materials that focus on remedial instruction and multicultural
education. PPG is not investing in any new development for these legacy products
and is currently selling from its backlist for these titles. Late in 2003, the
Company installed a highly experienced editorial team in Austin, Texas. This
group develops standards-based reading, mathematics and language arts


                                       3

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supplemental materials for this market niche. The first products from this
group were published late in the fall of 2004. Revenue from the Instruction
product line represented 2.5% of the Company's 2004 total revenue.

College Preparation

PPG has the exclusive high school distribution rights for college textbooks, and
related instruction materials published by two major college publishers. The
texts are sold to senior high schools for honors, college preparation, and
Advanced Placement(R) courses. In 2004, the Company began publishing proprietary
supplemental product for the college preparation market with the release of six
proprietary products and expanded its distribution efforts by adding four new
clients. College Preparation revenue represented 34.1% of the Company's 2004
total revenue.

Professional Development

In late December 2004 the Highly Qualified Teacher or HQT(TM) group released the
Company's first print based professional development products. The initial
release was in one state, but additional states and products will be added in
2005. HQT(TM) modules meet the NCLB requirements that professional development
should meet state content standards and HQT(TM) standards. The Company has hired
a well-known, highly experienced professional development publisher to lead
PPG's efforts in this area. Along with beginning proprietary publishing, the
Company closed a nonexclusive school distribution agreement with the largest and
most prestigious professional development association. As the first of these
products was only just published and the distribution agreements were completed
in late December, there was no revenue from this line in 2004.

PRODUCT DEVELOPMENT

PPG combines its internal product development resources with outside freelance
talent to develop and design its proprietary products in a cost-effective
manner. PPG utilizes a variety of authors, writers, editors, and development
houses to develop products.

PPG's editorial department has the responsibility for maintaining editorial
quality, schedules, and budgets. PPG's book production is carried out by a
combination of in-house staff and contracted personnel with tight in-house
control. PPG maintains an in-house system of computer-based technology that
makes it possible to complete nearly the entire production cycle in-house,
resulting in digitized material.

Once conceived, a book proposal is circulated to the management group for input.
Depending on their input and additional market research, the proposal will go
forward or be terminated. A pro forma financial statement is prepared to aid in
determining if the new title is desirable for publication. If there is a
favorable decision, PPG will contract with an appropriate author or writer. PPG
believes it has excellent relationships with its authors, including many
well-known names in the education field.

All printing is contracted to outside vendors by competitive bidding. All
printers utilized by PPG are located in the United States. The Company does not
rely on the services of any one printer.

PPG's products require varying periods of development time depending on the
complexity of the graphics and design and the writing and editing process. Most
of PPG's multi-book programs can be developed in a period that ranges from six
to twelve months. The Company believes that PPG's use of outside authors,
illustrators, and freelancers for writing, editing, some artwork, some design,
and copy editing allows PPG to produce the budgeted number of books per year
with a relatively small staff and allows the flexibility needed for PPG to
continue to produce and expand its product lines and retain flexibility to enter
niches with new product lines quickly.

See also "Management's Discussion and Analysis or Plan of Operations-Product
Development."

CUSTOMER BASE

No customer during 2004 or 2003 represented more than 10% of total revenue.


                                       4

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SALES, MARKETING, AND DISTRIBUTION

Overview

PPG conducts its sales activities through inside and outside sales groups (both
salaried and independent), direct mail, conventions, and workshops. The Company
believes this system is well suited to the supplementary educational material
market where purchasing decisions are typically made at the local or school
level. As the Company grows, its sales and marketing infrastructure will expand
along with increases in the numbers of inside and outside sales representatives.
PPG also increased marketing spending for teacher workshops and staff
development, sample books, exhibits, direct mail and marketing support that
includes web initiatives.

Integrated Catalog/Inside and Outside Sales Model

In the 2003-2004 school year, approximately 360,000 copies of five catalogs and
other promotional pieces reached PPG's various market niches and included both
proprietary and distributed products. Catalogs are mailed to house lists and
other appropriate contact individuals at K-12 school sites throughout the United
States. Catalogs are generally produced and mailed for each product line two to
three times per year and other direct mail efforts take place throughout the
year. Inside and outside sales representatives work collaboratively to close
sales to PPG's customers and prospects. The sales activities are supported by a
computerized contact management and database system.

Website

The PPG website (located at www.peoplespublishing.com) is a sales and marketing
tool that provides information regarding all of the Company's product lines.
This site also links to two college publishers who have materials that PPG
distributes. The website includes additional resources for teachers including
state specific links, sample lessons and research information. PPG is the main
site but there are state specific links (from www.standardshelp.com). At the end
of 2004, PPG launched www.stepuppublishing.com to support its newest line in
test preparation - Step Up to Success. This website provides product information
as well as the e-commerce functionality. Contents of these websites are not
incorporated into, or part of, this report.

Sales Representatives

PPG utilizes the services of outside representatives to sell PPG's products. PPG
ended 2004 with 40 independent sales representatives and seven salaried
representatives in the field. Additionally, PPG employs 23 inside sales
representatives, who sell primarily through telemarketing. The Company plans to
continue utilization of a sales organization with a mix of independent and
salaried sales representatives.

Warehouse and Distribution

PPG has outsourced warehousing and distribution/shipping services to a third
party warehouse and distribution company located in Brooklyn, NY. This company
warehouses and ships all Instruction, and proprietary products from the Test
Preparation and Assessment, and College Preparation product lines. PPG
operates and maintains its own internal data processing system, however, the
services that this warehouse and distribution company provides are material to
PPG. Orders for College Preparation materials are billed by PPG and drop shipped
by the college publishers to PPG's customers.

COMPETITION

The top six print-based supplementary publishers account for approximately 80.0%
of the reported supplemental sales. These publishers produce a wide variety of
print products, including workbooks, magazines, and library/trade books
(non-textbooks) used in schools. The leading supplemental publishers are
McGraw-Hill, School Specialty, Scholastic, Harcourt Achieve, WPC Media, and
Pearson Learning. There are also numerous other companies, and divisions of the
large companies noted above, that are competitors of PPG. These publishers
include Great Source (instruction), Triumph Learning (test preparation), Pearson
Learning, (instructional software), and Heineman (professional development). In
addition, the Company competes with major college publishers who sell their
textbooks and other products in the high school Advanced Placement(R) market.
Many of the Company's competitors are well established, significantly larger,
and have substantially greater financial and marketing resources than the
Company.

PROTECTION OF PROPRIETARY RIGHTS

All of PPG's books have been copyrighted in the United States with United States
rights, most in the name of PPG. On the few titles that are copyrighted by the
author, PPG has secured unlimited exclusive rights to sell and update the
titles. Therefore, PPG owns the exclusive rights to exploit the copyright in the
marketplace. On books created in-house by PPG, PPG has registered United States


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rights for all markets, including first and second serialization, commercial
rights, electronic rights, foreign and translation rights, reprint rights, and
rights to any means yet to be developed for transmitting information in any
form. There are a limited number of books for which foreign rights and
electronic rights will revert to the author if PPG does not exploit them in a
given period of time, usually within two years after publication. Foreign
rights are not usually lucrative for supplementary materials, but opportunities
are considered on a one-by-one basis. PPG believes it has adequately protected
its copyrights, but the loss of copyrights or failure of copyright protection
could have a material adverse effect on the Company.

EMPLOYEES

As of December 31, 2004, the Company had approximately 158 employees. The
Company has never experienced a work stoppage and its employees are not covered
by a collective bargaining agreement. The Company believes its relations with
its employees are good.

ITEM 2. DESCRIPTION OF PROPERTY

The Company and PPG own no real property. The Company and PPG primarily conduct
their operations out of their Saddle Brook, New Jersey facility. PPG leases
approximately 18,800 square feet of office space at a current rental of $427,000
per year. This lease expires in October 2009. In December 2004, PPG entered into
a new lease for expansion of its Austin office. The new lease covers
approximately 4,300 square feet of office space at a current rental of $61,000
per year. This lease expires February 2008. In November 2004, PPG leased 1,008
square feet of office space in Columbus, Ohio at a current rental of $13,000 per
year. This lease expires in November 2007.

ITEM 3. LEGAL PROCEEDINGS

The Company is not currently a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has been traded on the OTC Bulletin Board under the symbol
"PEDH" since November 1, 2004. Before that date, there was no established public
trading market for our common stock but our common stock was traded from time to
time on the Pink Sheets. The following table sets forth, for the period
indicated, the available high and low closing bid quotations for the common
stock, as reported on the OTC Bulletin Board. Quotations reflect inter-dealer
prices, without retail mark-up, markdown or commissions and may not represent
actual transactions.

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                                               HIGH    LOW
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2004
Fourth Quarter (beginning November 1, 2004)   $8.00   $3.00
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There were approximately 171 shareholders of record as of February 10, 2005,
including the Depository Trust Company, which held 60,690 shares. The Company
has not paid any dividends on its common shares in the past two years and
anticipates retaining future earnings, if any, to finance operations of the
Company.

Under the terms of the bank credit facility, the Company is prohibited from
paying any dividends without the consent of the bank.


                                       6

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Information concerning securities authorized for issuance under equity
compensation plans is included in Part III, Item 11 of this report.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Form 10-KSB contains forward-looking statements regarding the Company and
its markets as defined in section 21E of the Securities Exchange Act of 1934.
These forward-looking statements involve a number of risks and uncertainties,
including (1) demand from major customers, (2) effects of competition, (3)
changes in product or customer mix or revenues and in the level of operating
expenses, (4) rapidly changing technologies and the Company's ability to respond
thereto, (5) the impact of competitive products and pricing, (6) local and state
levels of educational spending, (7) ability to retain qualified personnel, (8)
ability to retain its distribution agreements with its major college publishers
in the College Preparation market, (9) the sufficiency of the Company's
copyright protection, and (10) ability to continue to rely on the services of a
third party warehouse, and other factors as discussed in the Company's filings
with the SEC. The actual results that the Company achieves may differ materially
from any forward-looking statements due to such risks and uncertainties. The
Company undertakes no obligation to revise any forward-looking statements in
order to reflect events or circumstances that may arise after the date of this
report. Readers are urged to carefully review and consider the various
disclosures made by the Company in this press release and the reports the
Company files with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect the Company's
business and results of operations.

INTRODUCTION

PPG was founded in 1989 by James J. Peoples, the current Chairperson, and by
Diane M. Miller, the current Executive Vice President. It began operations in
1990 with the acquisition of a small supplementary product line aimed at the
high school remedial population. Effective November 1, 1998, PPG merged into a
subsidiary of Peoples Educational Holdings, Inc., a Minnesota corporation (the
"Company"). As a result of the merger, PPG became a wholly owned subsidiary of
the Company. All of the Company's operations are currently conducted through
PPG. In November 2001, the Company reincorporated in Delaware.

Critical Accounting Policies and Significant Estimates

Our significant accounting policies and significant estimates are summarized in
the footnotes to our consolidated financial statements. Some of our accounting
policies require management to exercise significant judgment in selecting the
appropriate assumptions for calculating financial estimates. These judgments are
subject to an inherent degree of uncertainty. These judgments are based on our
historical experience, known trends in our industry, terms of existing contracts
and other information from outside sources, as appropriate. Actual results may
differ from these estimates under different assumptions and conditions. Certain
of the most critical policies that require significant judgment are as follows:

Revenue Recognition

The Company recognizes revenue upon shipment and estimates returns, if the right
of return exists. The allowances for returns are recorded as a reduction of
accounts receivable and are determined based on the Company's historical returns
experience, which is monitored on a monthly and annual basis. The Company
recognizes its subscription based revenue from its Measuring Up e-Path(TM)
prorata over the life of the agreement.

Deferred Prepublication Costs

Deferred prepublication costs are recorded at their original cost and amortized
over a three or five year period, based on the estimated lives of the related
publications. The net carrying value of the deferred prepublication costs is
periodically reviewed and compared to an estimate of future sales. If future
sales are not sufficient to realize the net carrying value of the asset, an
impairment charge is recognized.


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Allowance for Doubtful Accounts

The Company provides credit to its customers on a customer-by-customer basis.
The Company reviews the accounts receivable aging on a monthly basis along with
historical loss experience to estimate its allowance for doubtful accounts. The
allowance for doubtful accounts of $40,000 is believed to be adequate for any
exposure to loss at December 31, 2004.

Allowance for Excess and Slow-Moving Inventory

The Company continuously monitors its inventory on hand for salability. This
monitoring includes review of historical sales experience, projected sales
activity by title, and any planned changes to a title that is known by
management. Any slow-moving or non-salable inventory identified is reserved or
written down at that time. The reserve of $70,000 at December 31, 2004 is
believed to be adequate to cover inventory loss exposure.

REVENUE

Overview

Revenue, net of returns, increased 16.8% for 2004 over 2003. The increase was
led by a 26.5% growth in Test Preparation and Assessment revenue, as reflected
in the following table.

<TABLE>
<CAPTION>
                                      2004          2003       Variance    % Variance
                                  -----------   -----------   ----------   ----------
<S>                               <C>           <C>           <C>          <C>
Net Revenue
Test Preparation and Assessment   $20,611,000   $16,299,000   $4,312,000      26.5%
College Preparation                11,065,000    10,134,000      931,000       9.2%
Instruction                           811,000     1,382,000     (571,000)    (41.3%)
                                  -----------   -----------   ----------     -----
   Total Net Revenue              $32,487,000   $27,815,000   $4,672,000      16.8%
                                  ===========   ===========   ==========     =====
</TABLE>

Test Preparation and Assessment

Test Preparation and Assessment product line revenue was $20.6 million in 2004
compared to $16.3 million in 2003, representing a 26.5% increase. The revenue
growth can be attributed primarily to increased market penetration, the release
of new products into existing states, and, to a lesser extent, the publication
of new products into a new state and the release of Measuring Up e-Path(TM). As
of December 31, 2004, the Company had state-specific products published for
eleven states compared to ten at the end of 2003. All Test Preparation and
Assessment products are proprietary, and management believes this niche will
continue to be the Company's fastest growth area in the future. This expansion
is not without major competitors, and similar efforts by other publishers will
make this arena a hotly contested environment.

College Preparation

PPG has exclusive sales and marketing agreements with two major college
publishers who do not have school divisions to sell their books into the high
school market. The distribution agreements cover all sales made to the K-12
market, including each publisher's college products and certain trade and
professional products. The Company has entered into additional exclusive and
semi-exclusive distribution agreements with several other publishers. The
Company has also created a publishing program to produce proprietary college
preparation supplements and ancillary materials. The first of these products was
published late in the third quarter of 2004. These products will not compete
with any existing publisher agreements and will be crafted as supplements to
help teachers and students with their college preparation studies. The loss of
either major college publisher agreement would have a material adverse effect on
PPG's revenue and net income. One of the agreements has been in place for
fourteen years and has an expiration date of September 2006. The other agreement
has been in place for eight years and was renewed in November 2004. The new
agreement has an expiration date of September 2007.

College Preparation product line revenue increased 9.2% to $11.1 million from
$10.1 million in 2003. The increase is a result of the Company's expanded sales
and marketing efforts into the growing private and parochial school markets, and
the revenue generated from the new distribution agreements with several
publishers. The Company continues to be optimistic about the opportunities for
growth in the high school College Preparation market.

Instruction

Instruction products include two revenue sources, referred to as remedial and
multicultural. Both include a mix of proprietary and distributed titles. PPG's
sales and marketing emphasis is on proprietary products, and PPG uses
distributed products to round out or fill in a full catalog of product offerings
for PPG's customers. Revenue for this product line decreased $571,000 from 2003
to 2004. A decrease in revenue for this product line was anticipated as the



                                       8

<PAGE>
Company has shifted its strategic focus away from the Student-at-Risk and
Multicultural titles within this product line. The Company has no plans at this
time to update any Student-at-Risk or Multicultural backlist titles, and will
not seek new title development in these two areas. The Company is investing in
new instructional products that align with state standards in mathematics,
reading, and language arts for grades 2-12. The Company published the first of
these new products early in the fourth quarter of 2004.

GROSS PROFIT AND COST OF REVENUE

Gross Profit increased from $12.5 million in 2003 to $15.2 million in 2004. The
increase is a result of increased revenue growth and improvement in gross profit
percentage. Gross Profit percentage increased from 45.0% in 2003 to 46.7% in
2004. The increase as a percentage of revenue is primarily due to increased Test
Preparation and Assessment revenue as a percent of total revenue. This product
line consists exclusively of proprietary titles, which have a significantly
higher gross profit than the distributed College Preparation titles. This
increase in gross profit percentage is offset by an increase in prepublication
amortization expense from 8.1% of revenue in 2003 to 10.3% of revenue in 2004
due to an increase in the number of books published.

Cost of Revenue consists of two components, Direct Costs and Amortization of
prepublication costs for proprietary products. Direct Costs consist of (1)
product cost, which includes paper, printing and binding for proprietary
products and product purchases for distributed products, (2) author royalties on
proprietary products, and (3) warehousing and shipping costs for all products.

Product cost decreased from 37.9% of revenue in 2003 to 34.7% in 2004. The
fluctuation is due to product mix. Revenue for the Test Preparation and
Assessment product line increased $4.3 million from 58.6% of revenue in 2003 to
63.4% in 2004. This product lines product cost is significantly lower than the
College Preparation product line.

Prepublication costs include one-time expenses associated with developing and
producing new or revised proprietary products, which include all editorial
expenses, writing, page design and makeup, art and other permissions, prepress,
and any other costs incurred up to the print/bind stage of the books. These
prepublication costs also include expenses incurred for other forms of product
development, such as expert reviews. Such product development usually involves
creating sample lessons for each content area of a prospective title; PPG then
obtains feedback on these samples, which it applies to the creation of the rest
of the book. Prepublication costs are capitalized and expensed over a three or
five year period beginning on the in-stock date of new and revised products. PPG
believes its amortizations policy is in line with industry practice. For 2004,
PPG amortized $3.3 million of prepublication costs as compared to $2.2 million
in 2003. Prepublication expenditures serve as an important financial indicator
of a Company's commitment to new product development. For 2004, PPG's
prepublication expenditures increased 74.5% and was $8.0 million compared to
$4.6 million in 2003.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                         2004          2003       Variance    % Variance
                                     -----------   -----------   ----------   ----------
<S>                                  <C>           <C>           <C>          <C>
Selling, General and Administrative  $12,785,000   $10,441,000   $2,344,000      22.4%
</TABLE>

Selling, General and Administrative expenses increased by $2.3 million from 2003
to 2004. As a percent of total revenues, these expenses increased from 37.5% to
39.4% of revenue.

The selling and marketing expenditures portion of the total was $8.8 million, an
increase from $7.0 million from 2003. As a percent of revenue it increased to
26.9% from 25.6%. The 1.3% point increase is primarily related to a increase in
the commission expense paid to third party sales representatives (1.1%).

The general and administrative expenditures portion of the total was $3.4
million in 2003 and $4.0 million in 2004, representing a $600,000 increase.
Salaries, benefits, and taxes increased $300,000 from 2003 to 2004. The balance
of the increase was related to general office and computer expense and to
increased consulting expense related to the new product launches.


                                       9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for 2004 was $4.8 million. Cash was
primarily provided by the predepreciation and amortization profitability of the
Company, and an increase in accounts payable, offset primarily by an increase in
accounts receivable, inventory and prepaid catalog expenses.

Accounts receivable and accounts payable increased as a result of increased
revenues and the costs associated with those revenues. Inventory increased due
to expanded product offerings.

Net cash used in investing activities was $8.5 million, consisting primarily of
prepublication expenditures of $8.0 million and equipment purchases of $387,000.

Net cash provided by financing activities was $3.3 million, consisting primarily
of net borrowings under the Company's line of credit and proceeds from issuance
of new capital leases, offset by repayments on long term debt.

The Company has a $6,500,000 financing arrangement with a financial institution.
The arrangement includes three separate revolving lines of credit. The
arrangement provides for advances up to $4,000,000, subject to borrowing base
restrictions limited to 80 percent of eligible accounts receivable and 35
percent of inventory. The second line of credit is for up to $2,000,000 and the
third line of credit is for $500,000. These lines of credit expire in February
2006. All three lines of credit bear interest at LIBOR plus 2.25 percent. At
December 31, 2004 $2.6 million was outstanding under this arrangement, and $2.6
million was still available under the facility.

The Company also has an arrangement for a five-year reducing revolver, which
expires in November 2008, in the amount of $500,000 at an interest rate of LIBOR
plus 2.25 percent. At December 31, 2004, $433,000 was outstanding under this
arrangement. Total borrowings are secured by substantially all assets of the
Company and are subject to certain financial covenants.

In December 2002, the Company borrowed $1,000,000 under a subordinated
convertible note payable to its largest stockholder. The terms of this note
provided for quarterly interest payments at a rate of 10 percent with principal
due December 30, 2004, and conversion into common stock if the Company secured a
certain level of debt financing. As a result of the aforementioned new financing
agreement in February 2003, this note, plus accrued interest, was converted into
289,785 shares of common stock at a conversion price of $3.50 per share.

In November 2003, the Company sold 277,778 shares of its Common Stock at $3.60
per share pursuant to exemptions provided under Section 4(2) of the Securities
Act of 1933.

A summary of the Company's contractual cash obligations at December 31, 2004,
are as follows:

<TABLE>
<CAPTION>
                                                                    PAYMENTS DUE BY PERIOD
                                              -----------------------------------------------------------------
CONTRACTUAL CASH OBLIGATIONS                     TOTAL       2005       2006       2007       2008       2009
----------------------------                  ----------   --------   --------   --------   --------   --------
<S>                                           <C>          <C>        <C>        <C>        <C>        <C>
Capital Leases (including interest portion)   $  570,000   $306,000   $185,000   $ 79,000   $     --   $     --
Operating Leases                               2,528,000    535,000    573,000    559,000    474,000    387,000
                                              ----------   --------   --------   --------   --------   --------
Total                                         $3,098,000   $841,000   $758,000   $638,000   $474,000   $387,000
                                              ==========   ========   ========   ========   ========   ========
</TABLE>

The Company believes that its cash and borrowing availability under its lines of
credit, together with cash generated from operations will be sufficient to meet
its normal cash needs in 2005. The Company intends to continue investing in
prepublication costs for its proprietary products to the extent cash flow
allows. As the Company develops these products for more states, additional
working capital investments will be required.

PRODUCT DEVELOPMENT

The Company was active in product development in 2004. Expenditures were at a
record level of $8.0 million, an increase of 74.5% from the prior year. The
Company entered one new state with Test Preparation and Assessment materials and
supplemented existing states with revisions of older titles and additional
books. In addition, product development costs were incurred in connection with
the development of the Company's new Instruction and College Preparation
proprietary products.

The state test preparation market continues to grow, as the states demand higher
academic performance from students. Most states have high-stakes testing
requirements, which means that students, teachers, and administrators are


                                       10

<PAGE>

rewarded for positive test performance or penalized for poor performance. The
support for state standards and testing has been enhanced considerably by the
mandated testing of all grade 3-8 students in the ESEA federal legislation.
Presently, the Company publishes Test Preparation and Assessment products for
various grades in eleven states.

During 2005, the Company intends to enter additional states and continue to
supplement existing states with additional products. The Company also plans to
expand its offering of Measuring Up e-Path(TM), the Company's first proprietary
technology product. Measuring Up e-Path(TM) is an electronic, internet-based
assessment and scoring product.

The Company has implemented its strategy to develop new supplemental instruction
products that align with state standards in mathematics, reading, and language
arts for grades 2-12. Late in 2003, an editorial office was opened in Austin,
Texas and their focus will be to develop and publish supplemental products in
more traditional market niches outside test preparation. Essential to this
strategy is the market alignment of the Instruction and Test Preparation and
Assessment products so that both product lines are suitable for sale to an
identical customer base. The first of these products was published late in the
fourth quarter of 2004.

The Company has no plans at this time to update any student-at-risk or
multicultural backlist titles, and will not seek new title development in these
two areas.

The Company has created a publishing program to produce proprietary college
preparation supplements and ancillary materials. The first of these products was
published late in the third quarter of 2004. These products will not compete
with any existing publisher agreements and will be crafted as supplements to
help teachers and students with their college preparation studies.

The strategic growth plan for the Company calls for an emphasis on the internal
development of Test Preparation and Assessment and standards based supplemental
Instruction product lines. Under favorable circumstances, the Company would
consider an acquisition to supplement its growth plan.

OFF-BALANCE SHEET ARRANGEMENTS

NONE

SEASONALITY

The supplementary school publishing business is seasonal, cycling around the
school year that runs from September through May. Typically, the major marketing
campaigns, including mailings of new catalogs and focused sales efforts, begin
in September when schools reopen. This is the period when sample books are
provided free-of-charge for review to teachers for their purchase consideration.
General marketing efforts, including additional sales and marketing campaigns,
catalog mailings, and complimentary copies, continue throughout the school year.
Teachers and districts generally review and consider books throughout the school
year, make their decisions in the winter and spring, and place their purchase
orders with the district office or other administrative units at that time.
During spring and summer, the district offices process purchase orders and send
them to publishers.

For PPG, approximately 52-56% of purchase orders have historically been received
from July through September. The remainder of the year is slower for sales of
most product lines. An exception is the Test Preparation and Assessment product
line, with purchases occurring near the time the state tests are administrated,
as well as during the summer months for summer programs that add extra test
preparation for students who are behind in their performance, and for the
upcoming school year.

This natural seasonality of the supplementary educational materials market means
that PPG's fiscal year (calendar year) does not coincide with the school
purchase year, so new product development and launch, as well as expenses, must
be planned around the school year. PPG receives and fulfills customer orders
throughout the year. The seasonality of the College Preparation product line is
significantly different than that of the Instruction and Test Preparation and
Assessment product lines. In 2004, for College Preparation, revenue by quarter
in 2004 was approximately as follows: 1st quarter 7%, 2nd quarter 26%, 3rd
quarter 57% and 4th quarter 10%. In 2004, for Instruction and Test Preparation
and Assessment, revenue by quarter in 2004 was approximately as follows: 1st
quarter 21%, 2nd quarter 27%, 3rd quarter 28% and 4th quarter 24%.


                                       11

<PAGE>

ITEM 7. FINANCIAL STATEMENTS

The information required under this heading is contained in Exhibit 99.1 filed
with this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

NONE

ITEM 8A. CONTROLS AND PROCEDURES

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

There have been no changes in internal control over financial reporting during
the fiscal quarter ended December 31, 2004 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.

ITEM 8B. OTHER INFORMATION

NONE


                                       12

<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

The following individuals constitute the current directors and executive
officers of the Company:

<TABLE>
<CAPTION>
                                                                                                 Director
Name and Age                Principal Occupation                                                   Since
------------                --------------------                                                 --------
<S>                         <C>                                                                  <C>
Brian T. Beckwith (49)      President and Chief Executive Officer of the Company and PPG since     2001
                            December 2001, Mr. Beckwith has over 25 years of publishing
                            industry experience, including positions in market research,
                            consumer marketing, operations, business development, and general
                            management. Prior to joining the Company and PPG, he was a
                            principal in Beckwith & Associates, a publishing advisory firm
                            specializing in start-ups, acquisitions, and Internet business
                            development. From 1998 to 2000, he was President and Chief
                            Operating Officer of Grolier, Inc., a $450 million publisher and
                            direct marketer of children's books and other educational
                            products. From 1991 to 1997, Mr. Beckwith served in various senior
                            management positions with K-III (Primedia) including President and
                            Chief Executive Officer of the Special Interest Magazine Group.
                            Mr. Beckwith has also held management positions with Murdoch
                            Magazines, CBS Magazines, and Ziff-Davis Publishing. He holds a
                            B.A. summa cum laude from New England College and an M.B.A. from
                            Fordham University's Graduate School of Business.

John C. Bergstrom (44)      Partner in RiverPoint Investments, Inc., a St. Paul, MN-based          1998
                            business and financial advisory firm since 1995. John is also a
                            director of Dolan Media Co., Tecmark, Inc., Mall Marketing Media,
                            LLC, Instrumental, Inc., Linkup, Inc., and MakeMusic, Inc.
                            (NASDAQ:MMUS). Mr. Bergstrom is also an adjunct faculty member in
                            Finance at the University of Minnesota. Mr. Bergstrom is a
                            graduate of Gustavus Adolphus College, B.A., and the University of
                            Minnesota, M.B.A.

Richard J. Casabonne (60)   Richard J. Casabonne has been a director of the Company since          2002
                            2002. He is the founder and has been the President of Casabonne
                            Associates, Inc., an educational research, strategy and
                            development firm, since 1986. Since 2003, Mr. Casabonne has also
                            served as a principal at MarketingWorks, a full service
                            consulting firm. From October 2003 to May 2004, he served as
                            Chief Executive Officer of TestU, an instructional assessment
                            company based in New York City. From July 2001 to April 2002,
                            Mr. Casabonne also served as the President and a director of the
                            Education and Training Group of Leapfrog Enterprises, Inc.


</TABLE>


                                              13

<PAGE>

<TABLE>
<CAPTION>
                                                                                                 Director
Name and Age                Principal Occupation                                                   Since
------------                --------------------                                                 --------
<S>                         <C>                                                                  <C>
                            President of Planning and Business Development for Harcourt, Inc,
                            an educational publishing company comprised of over 20 divisions
                            that covered a range of educational needs. While at Harcourt, he
                            was active in acquiring the NEC Companies, which included
                            Steck-Vaughn, a leading publisher of supplementary education
                            materials for kindergarten through adult education, where he
                            served as President and CEO. Earlier, Casabonne held senior
                            management positions at Grolier, Inc., McGraw-Hill Educational
                            Resources, Random House School Division, and consulted with myriad
                            of educational and trade publishers. He also consulted for Apple
                            Computer's education initiatives for eight years. He serves on
                            numerous Boards for both companies and institutions. He has a
                            Bachelor of Arts degree from Brown University and a master of
                            education degree in instructional technology from Boston
                            University.

Anton J Christianson (52)   Chairman of Cherry Tree Companies, a firm involved in investment       1998
                            management and investment banking. Mr. Christianson is a General
                            Partner of School Power LP, an investor in Peoples Educational
                            Holdings and a Cherry Tree affiliate. He has been an active
                            investor in private equities and micro-cap public equities for 25
                            years. He serves as a director for several public and private
                            companies including Transport Corporation of America, Inc.;
                            AmeriPride Services, Inc.; Dolan Media Company; Fair Isaac
                            Corporation; and Capella Education Company. Mr. Christianson is a
                            graduate of St. John's University, Collegeville, MN and earned an
                            M.B.A. from Harvard Business School.

Michael L. DeMarco (40)     Chief Financial Officer of the Company and PPG since May 2002,          n/a
                            Vice-President of Finance and Operations of the Company and PPG
                            from May 1999 to April 2002. Mr. DeMarco has over 17 years of
                            experience in finance and accounting. Prior to joining PPG, Mr.
                            DeMarco was Controller for Health Tech, a health care products
                            company, from 1997 to 1999. He was also a Controller for Omnitech
                            Corporate Solutions, a computer integration and software
                            development company. Mr. DeMarco also spent four years as an
                            auditor with Ernst and Young. Mr. DeMarco is a graduate of Pace
                            University in New York and is a certified public accountant.

James P. Dolan (54)         Since 1993, Chairman, President and Chief Executive Officer and        1999
                            founder of Dolan Media Company, Minneapolis, a specialized
                            business information company that publishes daily and weekly
                            business newspapers in 21 U.S. markets; operates Counsel Press,
                            the nation's largest appellate legal services provider; and
                            operates Greene & Company, a leading business-to-business
                            teleservices provider. From 1989 to 1993, he was executive vice
                            president of the Jordan Group, New York City, an investment bank
                            specializing in media. He previously held executive positions with
                            News Corporation Ltd. in New York, Sun-Times Company of Chicago,
                            and Centel Corp., Chicago, and also was an award-winning reporter
                            and editor at newspapers in San Antonio,
</TABLE>


                                              14

<PAGE>

<TABLE>
<CAPTION>
                                                                                                 Director
Name and Age                Principal Occupation                                                   Since
------------                --------------------                                                 --------
<S>                         <C>                                                                  <C>
                            New York, Chicago, Sydney, and London. He serves as a director of
                            several private companies and is a journalism graduate of the
                            University of Oklahoma.

Diane M. Miller (52)        Co-founder and Executive Vice President of PPG since 1989, and         1998
                            Executive Vice President of Peoples Educational Holdings. Her
                            educational publishing experience encompasses general management,
                            product development, strategic planning, market research, writing,
                            curriculum development, editorial, marketing, production, and
                            professional development. Prior to forming PPG, Ms. Miller was
                            publisher of Globe Books, a remedial, supplementary education
                            publisher owned by Simon and Schuster. Prior to joining Globe
                            Books, she was Senior Editor of Reading for Harcourt Brace
                            Jovanovich. Ms. Miller has classroom and research experience, as
                            well, and is a graduate with honors of Centre College of Kentucky.

James J. Peoples (67)       Co-founder, Chairman, and Senior Advisor to the Company. Effective     1998
                            December 2001, Mr. Peoples resigned as CEO and President of PPG
                            and the Company and remains Chairman of the Board. He has 41 years
                            of experience in schoolbook publishing, including positions in
                            sales, sales management, corporate staff assignments, and general
                            management. Prior to forming PPG, Mr. Peoples was President of the
                            Prentice Hall School Group for seven years and served three years
                            as Group President of the $350 million Simon and Schuster
                            Educational Group. Mr. Peoples is a graduate of Oregon State
                            University.

Matti A. Prima (50)         Senior Vice President of Business Development since August 1999,        n/a
                            and also responsible for all sales marketing of the state specific
                            standards materials and assessment published by PPG. Mr. Prima
                            also serves as President, Education Development Division. Mr.
                            Prima has over 20 years of experience in finance, communications,
                            and publishing. Prior to joining PPG, Mr. Prima was VP Finance
                            with Siegel Gale, an interactive brand management company, from
                            1998 to 1999, where he was responsible for all divisional budget
                            decisions, funding decisions relating to commercial credit,
                            investment banking, corporate finance, acquisitions, and risk
                            management. Prior to that, Mr. Prima's work experience included
                            KPMG Peat Marwick, Corporate Transactions; and Henry Ansbacher as
                            Senior Managing Director. Mr. Prima is a graduate of Bloomsburg
                            State University and has an M.B.A. from Pepperdine University.
</TABLE>

Board Committees. The Board of Directors has established an Audit Committee and
a Compensation Committee. The Audit Committee is currently composed of Messrs.
Bergstrom, Christianson and Dolan. The Audit Committee meets with the Company's
independent registered public accounting firm and representatives of management
to review the internal and external financial reporting of the Company,
considers comments by the auditors regarding internal controls and accounting
procedures and management's response to these comments, and approves any
material non-audit services to be provided by the Company's independent
registered public accounting firm.


                                       15

<PAGE>

The Company's Board of Directors has determined that Mr. Bergstrom is an audit
committee financial expert as defined in Item 401(e)(2) of Regulation S-B. He is
independent pursuant to the independence standards promulgated by the Nasdaq
Stock Market. The Company is currently listed on OTC Bulletin Board (PEDH) and,
as permitted by the applicable rules, has elected to provide the foregoing
independence disclosure with reference to the rules of the Nasdaq Stock Market.

The Compensation Committee is currently composed of Messrs. Bergstrom,
Christianson, and Dolan. The Compensation Committee reviews and makes
recommendations to the Board of Directors regarding salaries, compensation,
stock options, and benefits of officers and employees.

The Governance Committee is currently composed of Messrs. Christianson
(Chairman), Bergstrom, Casabonne, and Dolan. The Governance Committee reviews
and makes recommendations to the Board regarding corporate governance polices
and procedures, reviews the Company's Code of Conduct and compliance thereof,
identifies and makes recommendations to the Board regarding candidates for
election as directors, and evaluates the Board of Directors.

Director Compensation. Each non-employee member of the Board of Directors
receives $2,000 per quarter, plus $1,000 for attending each regular quarterly
Board meeting, as compensation for his services. Non-employee directors are also
reimbursed for certain expenses in connection with attendance at Board and
committee meetings. In addition, each non-employee director will receive
annually, on the date of election or reelection as a director, a nonqualified
option to purchase 4,000 shares of the Company's common stock at an option price
equal to the fair market value of the Company's common stock on the date that
the option is granted. All such options are exercisable in increments of 25%
each over a four-year period during the eight-year term of such options. In May
2004, all non-employee directors received options to purchase 4,000 shares each
at $3.60 per share upon the terms described above. In 2004, Mr. Bergstrom was
paid $8,000 for his additional duties as a director. Mr. Bergstrom serves as a
lead director for Board committees, coordinates committee meetings, acts as an
interface between the committees and management, and drafts committee minutes.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Since August 26, 2004, the Company's directors, its executive officers and any
persons holding more than 10% of outstanding common stock have been required to
file reports with the Securities and Exchange Commission concerning their
initial ownership of common stock and any subsequent changes in that ownership.
The Company believes that each person satisfied the filing requirements for the
last fiscal year on a timely basis. In making the above disclosure, the Company
has relied on the written representations of its directors, executive officers
and beneficial owners of more than 10% of common stock and copies of the reports
that they have filed with the Securities and Exchange Commission.

ITEM 10. EXECUTIVE COMPENSATION

The following table shows, for fiscal years 2004, 2003, and 2002, the cash
compensation paid by the Company, as well as certain other compensation paid or
accrued for those years, to Brian T. Beckwith, the Company's President and Chief
Executive Officer, and to the other executive officers of the Company whose
annual salary and bonus exceeded $100,000 during 2004 (together with Mr.
Beckwith, the "Named Executives"). Compensation to the Named Executives is paid
by the Company's wholly-owned subsidiary, PPG.


                                       16

<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                              Long-Term Compensation
                                                        Annual Compensation           Awards
                                                       --------------------         Securities             All Other
Name                 Position                   Year    Salary    Bonus (1)     Underlying Options     Compensation (2)
----                 --------                   ----   --------   ---------   ----------------------   ----------------
<S>                  <C>                        <C>    <C>        <C>         <C>                      <C>
Brian T. Beckwith    President and CEO          2004   $280,663    $122,544            48,000               $  204
                                                2003   $272,115    $162,415                --               $  192
                                                2002   $250,000    $ 60,025           125,000               $  192

James J. Peoples     Chairman                   2004   $111,923    $ 36,763                                 $1,191
                                                2003   $139,423    $ 64,966                --               $1,179
                                                2002   $145,000    $ 30,012                --               $1,178

Diane M. Miller      Executive                  2004   $154,215    $ 53,897                                 $  204
                     Vice President             2003   $152,896    $ 54,530                --               $  192
                                                2002   $140,662    $ 22,800                --               $  192

Matti A. Prima       Senior Vice President of   2004   $139,884    $103,377                                 $  204
                     Business Development       2003   $139,128    $160,194                --               $  192
                                                2002   $125,000    $ 53,137                --               $  192

Michael L. DeMarco   Chief Financial Officer    2004   $138,779    $ 42,814                                 $  204
                                                2003   $137,135    $ 40,898            15,000               $  192
                                                2002   $123,813    $ 17,100            30,000               $  192
</TABLE>

(1)  Represents bonuses earned in the year set forth in the table.

(2)  Represents premiums paid by PPG for life insurance.

The following table contains information concerning individual grants of stock
options to each of the Named Executives during the last fiscal year.

                        OPTION GRANTS IN LAST FISCAL YEAR
                               (INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
                           Number of          Percent of Total
                     Securities Underlying   Options Granted to
                            Options             Employees in       Exercise   Expiration
Name                      Granted (#)            Fiscal Year      Price ($)      Date
----                 ---------------------   ------------------   ---------   ----------
<S>                  <C>                     <C>                  <C>         <C>
Brian Beckwith (1)           48,000                  66%            $4.50      7/30/2012
</TABLE>

(1)  Becomes exercisable with respect to 11,109, 22,222 and 14,669 shares on
     January 1, 2008, 2009, and 2010 respectively.

The following table sets forth information with respect to the Named Executives
concerning exercised and unexercised options held as of December 31, 2004.


                                       17

<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
                                                 Number of Unexercised
                                                 Securities Underlying          Value of Unexercised
                                                  Unexercised Options           In-The-Money Options
                        Shares                     At Fiscal Year End         At Fiscal Year End $ (1)
                       Acquired      Value    ---------------------------   ---------------------------
Name                 on Exercise   Realized   Exercisable   Unexercisable   Exercisable   Unexercisable
----                 -----------   --------   -----------   -------------   -----------   -------------
<S>                  <C>           <C>        <C>           <C>             <C>           <C>
Brian T. Beckwith         --          $--       133,332        164,668        $433,329       $463,171
Diane M. Miller           --          $--        61,250         13,750        $199,063       $ 44,688
Matti A. Prima            --          $--       100,000             --        $325,000       $     --
Michael L. DeMarco        --          $--        52,000         15,000        $159,500       $ 44,250
</TABLE>

(1). The values in the table have been calculated assuming a per share price of
     $6.25 which reflects the closing price of the Company's stock at December
     31, 2004.

EMPLOYMENT AGREEMENTS

In July 2004, the Company and PPG amended the employment agreement with Brian T.
Beckwith, the Company's President and Chief Executive Officer, originally
entered into in 2001. The amended agreement terminates in December 2008 and will
continue thereafter from year to year unless terminated by either party by 180
days' prior notice before the end of each contract year. The agreement contains
non-competition and non-solicitation covenants which continue in effect for a
period ending one year after Mr. Beckwith ceases to be employed. If Mr. Beckwith
is terminated by the Company without cause or if Mr. Beckwith resigns for good
reason, Mr. Beckwith is entitled to 18 months of severance. If the Company
provides Mr. Beckwith notice of non-renewal, Mr. Beckwith is entitled to 12
months of severance. The agreement also provides for the Company's repurchase
right and Mr. Beckwith's put right to the Company with respect to Company stock
owned by Mr. Beckwith following termination of his employment which he has
acquired upon exercise of stock options and held for at least one year. Pursuant
to this agreement, which was entered into prior to the enactment of the
Sarbanes-Oxley Act of 2002, Mr. Beckwith is also entitled to pay the exercise
price for his options pursuant to a five-year recourse note.

The Company and PPG entered into a new employment agreement with Mr. Peoples,
Chairman of the Board of Directors in June 2003, with a term of 5 years. The
agreement contains non-competition and non-solicitation covenants which continue
in effect for a period ending one year after Mr. Peoples ceases to be employed.
If Mr. Peoples is terminated without cause or if Mr. Peoples resigns for good
reason, the Company shall pay Mr. Peoples his salary, benefits, and incentive
compensation through July 31, 2008.

In November 2004, the Company and PPG amended and restated the employment
agreement with Diane M. Miller, originally entered into in 1990. The agreement
has an initial term of three years and will continue thereafter for successive
one-year periods unless terminated by either party at least 180 days prior to
the end of the contract year. The agreement contains non-competition and
non-solicitation covenants which continue in effect for a period ending one year
after Ms. Miller ceases to be employed. If Ms. Miller is terminated without
cause or if Ms. Miller resigns for good reason, Ms. Miller is entitled to 12
months of severance. The Company has a right of first refusal with respect to
any share transfers of Company stock by Ms. Miller to a competitor.

In May 2002, the Company entered into an employment agreement with Michael L.
DeMarco, the Company's Chief Financial Officer. The agreement provides for an
initial term of three years ending May 2005, and for automatic renewals
thereafter for successive one-year periods unless terminated by either party at
least 90 days prior to the end of the contract year. Pursuant to these
provisions, the term of the agreement has been extended to May 2006. The
agreement contains non-competition and non-solicitation covenants which continue
in effect for a period ending one year after Mr. DeMarco ceases to be employed
by the Company. If Mr. DeMarco is terminated without cause or resigns for good
reason, Mr. DeMarco is entitled to the lesser of 12 months or the remainder of
his contract as severance.

In July 2004, the Company entered into an eighteen month employment agreement
with Matti A. Prima, the Company's Senior Vice President - Business Development.
After the expiration of the initial term, the agreement will continue


                                       18

<PAGE>

thereafter for successive one-year periods unless terminated by either party at
least 90 days prior to the end of the contract year. The agreement contains
non-competition and non-solicitation covenants which continue in effect for a
period ending one year after Mr. Prima ceases to be employed. If Mr. Prima is
terminated without cause or resigns for good reason, Mr. Prima is entitled to
100% of his salary for the lesser of 12 months or the remainder of his contract
as severance.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

                              SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information provided to the Company as to the
beneficial ownership of the Company's Common Stock as of March 9, 2005 by (i)
the only stockholders known to the Company to hold 5% or more of such stock, and
(ii) each of the directors, the Named Executives set forth in the table on the
next page, and directors and officers as a group.

<TABLE>
<CAPTION>
                                                           COMMON STOCK
BENEFICIAL OWNER                                        BENEFICIALLY OWNED   TOTAL (%)
----------------                                        ------------------   ---------
<S>                                                     <C>                  <C>
Brian T. Beckwith (1)                                          166,665          4.2%
John C. Bergstrom (1)                                           72,816          1.9%
Richard Casabonne (1)                                           18,500             *
Anton J. Christianson (1) (2)                                1,825,863         47.8%
Michael L. DeMarco (1)                                          52,000          1.3%
James P. Dolan (1)                                              45,000          1.2%
Dolphin Offshore Partners, Inc.                                361,887          9.5%
Diane M. Miller (1)                                            312,266          8.1%
NAP & CO - c/o Delaware State Pension Fund                     603,151         15.8%
James J. Peoples (1)                                           571,581         15.0%
Matti A. Prima (1)                                             102,857          2.6%
Directors and Officers as a group (9 persons) (1) (2)        3,167,548         73.1%
</TABLE>

*    Less than 1%

(1)  Includes shares of Common Stock subject to outstanding stock options
     exercisable within 60 days as follows: Mr. Beckwith, 166,665 shares; Mr.
     Bergstrom, 66,875 shares; Mr. Casabonne, 18,500 shares; Mr. Christianson,
     12,500 shares; Mr. DeMarco, 52,000 shares; Mr. Dolan, 45,000 shares; Ms.
     Miller, 61,250 shares; Mr. Prima, 100,000 shares; and directors and
     officers as a group, 522,790 shares.

(2)  Includes ownership of 1,813,363 shares owned by School Power Limited
     Partnership, of which Mr. Christianson is Managing General Partner.


                                       19

<PAGE>

EQUITY COMPENSATION PLAN TABLE

The following table sets forth aggregate information regarding the Company's
equity compensation plans as of December 31, 2004.

<TABLE>
<CAPTION>
                                                                                     NUMBER OF SECURITIES
                                                                                    REMAINING AVAILABLE FOR
                                  NUMBER OF SECURITIES TO                            FUTURE ISSUANCE UNDER
                                      BE ISSUED UPON          WEIGHTED-AVERAGE        EQUITY COMPENSATION
                                        EXERCISE OF           EXERCISE PRICE OF        PLANS (EXCLUDING
                                   OUTSTANDING OPTIONS,     OUTSTANDING OPTIONS,   SECURITIES REFLECTED IN
                                    WARRANTS AND RIGHTS      WARRANTS AND RIGHTS          COLUMN (A))
        PLAN CATEGORY                       (A)                      (B)                      (C)
        -------------             -----------------------   --------------------   ------------------------
<S>                               <C>                       <C>                    <C>
Equity compensation plans
   approved by security holders           779,675                   $3.09                   135,498

Equity compensation plans not
   approved by security holders            37,500                   $3.00                         0

   Total                                  817,175                   $3.09                   135,498
</TABLE>

With respect to the equity compensation plan not approved by shareholders, Mr.
Prima received a non-qualified stock option to purchase 37,500 shares of the
Company's common Stock in 1999 upon his joining the Company outside of the
Company's 1998 Stock Option Plan. The exercise price of this option is $3.00 per
share and it has a 10-year term. The option is exercisable in 6,750-share
installments over a five-year period, except in the case of certain acquisitions
by the Company, whereupon a maximum of 1,875 shares are subject to accelerated
vesting.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In July 1998, prior to PPG becoming a wholly-owned subsidiary of the Company,
Mr. Peoples and Ms. Miller each exercised a stock option to purchase 50,000
shares of PPG stock at $1.25 per share. These options had been granted to Mr.
Peoples and Ms. Miller in 1993. PPG loaned Mr. Peoples and Ms. Miller each
$62,500 to exercise such options. These nonrecourse promissory notes accrued
interest at 6% per annum and were repaid in full in 2003.

In December 2002, the Company borrowed $1,000,000 under a subordinated
convertible note payable to School Power Limited Partnership in which Mr.
Christianson serves as Managing General Partner. The terms of this note provided
for quarterly interest payments at a rate of 10 percent with principal due
December 30, 2004, and conversion into common stock if the Company secures a
certain level of debt financing. This note, plus accrued interest, was in
February 2003 converted to 289,785 shares of common stock at a conversion price
of $3.50 per share.

In November 2003, The Company sold 277,778 shares of common stock to School
Power Limited Partnership at a price of $3.60 per share.

In 2004, the Company paid $37,000 to Casabonne Associates for business
consulting and $53,000 to Marketing Works in which Mr. Casabonne is a principal,
for market research services.


                                       20

<PAGE>

ITEM 13. EXHIBITS

The following exhibits are included with this Annual Report on Form 10-KSB (or
incorporated by reference) as required by Item 601 of Regulation S-B.

<TABLE>
<CAPTION>
EXHIBIT
  NO.     DESCRIPTION
-------   -----------
<S>       <C>
3.1       Certificate of Incorporation of the Registrant (incorporated by
          reference to Exhibit 3.1 to the Registrant's Form 10-KSB for the year
          ended December 31, 2001).

3.2       Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to
          the Registrant's Form 10-KSB for the year ended December 31, 2001).

10.1      Registrant's 1998 Stock Plan (incorporated by reference to Exhibit
          10.1 to the Registrant's Form 10-KSB for the year ending December 31,
          1998).

10.2      Employment Agreement between The Peoples Publishing Group, Inc. and
          James J. Peoples, dated June 30, 2003 (incorporated by reference to
          Exhibit 10 to the Registrant's Form 10-QSB for the quarter ended June
          30, 2003).

10.3      Amended and Restated Employment Agreement between The Peoples
          Publishing Group, Inc. and Diane M. Miller dated July 1, 2001
          (incorporated by reference to Exhibit 10.8 to the Registrant's Form
          10-KSB for the year ended December 31, 2001), as amended by Amendment
          to Employment Agreement dated November 19, 2004 (incorporated by
          reference to Exhibit 10.1 to the Registrant's Form 8-K dated November
          22, 2004).

10.4      Second Amended and Restated Employment Agreement between the Company
          and Matti A. Prima dated July 1, 2004 (incorporated by reference to
          Exhibit 10.2 to the Registrant's Form 10-QSB for the quarter ended
          June 30, 2004).

10.5      Amended and Restated Employment Agreement between the Company and
          Michael L. DeMarco dated May 17, 2002 (incorporated by reference to
          Exhibit 10 to the Registrant's Form 10-QSB for the quarter ended June
          30, 2002).

10.6      Employment Agreement between the Company and Brian T. Beckwith dated
          December 18, 2001 (incorporated by reference to Exhibit 10.7 to the
          Registrant's Form 10-KSB for the year ended December 31, 2001), as
          amended by Amendment to Employment Agreement dated July 30, 2004
          (incorporated by reference to Exhibit 10.1 to the Registrant's Form
          10-QSB for the quarter ended June 30, 2004).

14        Code of Ethics (incorporated by reference to Exhibit 14 to the
          Registrant's Form 10-KSB for the year ended December 31, 2003.)

21        Subsidiaries of the Registrant: The Peoples Publishing Group, Inc., a
          Delaware corporation.

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

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

32.1      Certification of the Chief Executive Officer Pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002.
</TABLE>


                                       21

<PAGE>

<TABLE>
<S>       <C>
32.2      Certification of the Chief Financial Officer Pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002.

99.1      The Registrant's Audited Financial Statements for the Years Ended
          December 31, 2004 and 2003, with notes thereto and the independent
          registered public accounting firm's report thereon.
</TABLE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

During the period covering the fiscal years ended December 31, 2004 and 2003,
McGladrey & Pullen, LLP and its related entity RSM McGladrey, Inc. performed the
following professional services:

<TABLE>
<CAPTION>
Description                2004     2003
-----------              -------   -------
<S>                      <C>       <C>
Audit Fees (1)           $64,500   $48,300
Audit-Related Fees (2)     4,900     3,200
Tax Fees (3)              14,500     8,800
All Other Fees                --        --
</TABLE>

(1)  Audit fees consist of fees for professional services rendered in connection
     with the audit of the Company's year end consolidated financial statements,
     quarterly reviews of consolidated financial statement included in the
     Company's quarterly reports, services rendered relative to regulatory
     filings, and attendance at Audit Committee meetings.

(2)  Audit-related fees are fees principally for technical research related to
     accounting treatment for various matters.

(3)  Tax services consist of compliance fees for the preparation of income tax
     returns, tax research and various state tax matters.

The Company's Audit Committee's practice is to pre-approve annually all audit
and tax services and fees, and on a case-by-case basis all other permitted
services to be provided by its independent certified public accountants. The
Audit Committee reviews each service provided and assesses the impact of the
service on the independence of the auditor.

PRE-APPROVAL POLICY

All services provided by the Company's independent registered public accounting
firm are pre-approved by the Audit Committee.


                                       22

<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        PEOPLES EDUCATIONAL HOLDINGS, INC.
Date: March 25, 2005

                                        /s/ Brian T. Beckwith
                                        ----------------------------------------
                                        Brian T. Beckwith, Chief Executive
                                        Officer and President
                                        (principal executive officer)

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on March
25, 2005.


                                        /s/ Brian T. Beckwith
                                        ----------------------------------------
                                        Brian T. Beckwith,
                                        Chief Executive Officer and President


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


                                        /s/ James J. Peoples
                                        ----------------------------------------
                                        James J. Peoples, Chairman


                                        /s/ Diane M. Miller
                                        ----------------------------------------
                                        Diane M. Miller, Director


                                        /s/ John C. Bergstrom
                                        ----------------------------------------
                                        John C. Bergstrom, Director


                                        /s/ Richard J. Casabonne
                                        ----------------------------------------
                                        Richard J. Casabonne, Director


                                        /s/ Anton J. Christianson
                                        ----------------------------------------
                                        Anton J. Christianson, Director


                                        /s/ James P. Dolan
                                        ----------------------------------------
                                        James P. Dolan, Director


                                       23